Donegal Group Inc. (NASDAQ:DGICA) and (NASDAQ:DGICB) today reported
its financial results for the fourth quarter and full year of 2018.
Significant items included:
Fourth Quarter of 2018:
- Net loss was $15.0 million, or 54 cents per Class A share, for
the fourth quarter of 2018, compared to a net loss of $2.8 million,
or 10 cents per Class A share, for the fourth quarter of 2017
- Net loss for the fourth quarter of 2018 included after-tax net
investment losses of $6.9 million, or 25 cents per Class A share,
primarily related to a decrease in the market value of the equity
securities the Company held at December 31, 2018
- Net loss for the fourth quarter of 2018 included approximately
$4.1 million of losses incurred from Hurricane Michael, with
overall weather-related losses of $12.5 million exceeding the
previous five-year average for fourth quarter weather-related
losses of $5.2 million
- Net premiums earned of $186.2 million for the fourth quarter of
2018 increased 2.8% compared to the fourth quarter of 2017,
including a 6.0% increase in commercial lines premiums earned
- Net premiums written1 of $168.3 million for the fourth quarter
of 2018 decreased 1.8% compared to the fourth quarter of 2017 as a
result of reductions in personal lines new business premiums and
higher reinsurance reinstatement premiums, partially offset by
commercial lines organic growth
- Combined ratio of 110.5% for the fourth quarter of 2018,
compared to 104.8% for the prior-year fourth quarter
- Income tax expense for the fourth quarter of 2017 included $4.8
million, or 17 cents per Class A share, related to the Company’s
revaluation of its net deferred tax assets pursuant to the
provisions of the Tax Cuts and Jobs Act (the “TCJA”) that was
enacted in December of 2017
Full Year of 2018:
- Net loss of $32.8 million, or $1.18 per Class A share, for the
full year of 2018, compared to net income of $7.1 million, or 26
cents per diluted Class A share, for the full year of 2017
- Net premiums earned of $741.3 million for the full year of 2018
increased 5.5% compared to the full year of 2017
- Net premiums written of $744.0 million for the full year of
2018 increased 2.0% compared to the full year of 2017, with a
continued shift in mix toward commercial lines
- Combined ratio of 110.1% for the full year of 2018, compared to
103.0% for the full year of 2017
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2018 |
|
2017 |
|
% Change |
|
2018 |
|
2017 |
|
% Change |
|
|
|
(dollars in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Data |
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned |
$
186,150 |
|
$
181,060 |
|
2.8% |
|
$
741,291 |
|
$
702,515 |
|
5.5% |
Investment income, net |
7,567 |
|
6,142 |
|
23.2 |
|
26,908 |
|
23,527 |
|
14.4 |
Net investment (losses) gains |
(8,864) |
|
1,498 |
|
NM2 |
|
(4,802) |
|
5,705 |
|
NM |
Total revenues |
186,806 |
|
190,759 |
|
(2.1) |
|
771,828 |
|
739,027 |
|
4.4 |
Net (loss) income |
(14,999) |
|
(2,779) |
|
439.7 |
|
(32,760) |
|
7,116 |
|
NM |
Non-GAAP operating (loss) income1 |
(8,279) |
|
986 |
|
NM |
|
(27,959) |
|
8,103 |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class A (diluted) |
$
(0.54) |
|
$
(0.10) |
|
440.0% |
|
$
(1.18) |
|
$
0.26 |
|
NM |
Net (loss) income – Class B |
(0.50) |
|
(0.10) |
|
400.0 |
|
(1.09) |
|
0.22 |
|
NM |
Non-GAAP operating (loss) income – Class A (diluted) |
(0.30) |
|
0.04 |
|
NM |
|
(1.00) |
|
0.30 |
|
NM |
Non-GAAP operating (loss) income – Class B |
(0.28) |
|
0.03 |
|
NM |
|
(0.93) |
|
0.26 |
|
NM |
Book value |
14.05 |
|
15.95 |
|
(11.9) |
|
14.05 |
|
15.95 |
|
(11.9%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1See the “Definitions of Non-GAAP and Operating
Measures” section of this release, which defines data that the
Company prepares on an accounting basis other than U.S. generally
accepted accounting principles (“GAAP”) and reconciles such data to
GAAP measures.
2Not meaningful.
Management Commentary
Kevin G. Burke, President and Chief Executive
Officer of Donegal Group Inc., stated, “During the second half of
2018, we focused on driving key initiatives, including gradually
shifting our business mix to better-performing commercial lines,
preparing to implement new technology throughout our organization
and the continuation of actions designed to improve our overall
underwriting performance in 2019 and beyond.”
Jeffrey D. Miller, Executive Vice President and
Chief Financial Officer, commented, “The fourth quarter of 2018 net
loss reflected weather-related losses that were considerably higher
than our historical experience for the fourth quarter of the year,
as well as net investment losses within our equity portfolio under
mark-to-market accounting guidance that became effective in 2018.
Our commercial multi-peril and workers’ compensation lines of
business performed well during the fourth quarter of 2018, with
both lines generating a statutory combined ratio1 in the 85-90%
range. Our overall underwriting performance was impacted by
weather-related losses that totaled approximately $12.5 million for
the fourth quarter of 2018, including $4.1 million of losses from
Hurricane Michael in October 2018. That impact primarily
affected our homeowners lines of business and represented a
substantial increase over the $5.4 million of weather-related
losses for the fourth quarter of 2017. While Donegal Group has
historically maintained a consistently small percentage of its
overall investments in equity securities, we incurred $8.9 million
of pre-tax net investment losses due to a general downturn in
equity markets during the fourth quarter of 2018.”
Mr. Burke continued, “Over the past year, we
continued our efforts to expand our commercial business, and those
efforts are gaining traction as higher levels of new business
premiums throughout many of our regions demonstrate. Proactive
measures to address adverse trends impacting our commercial auto
line of business will continue into 2019. In addition to rate
increases and definitive underwriting and new business pricing
actions in all of our operating regions, we have performed a
comprehensive re-underwriting of policy renewals in several
underperforming states, primarily based on predictive model scoring
of each renewal policy. As account writers, we are committed
to taking the necessary actions to improve our commercial
automobile profitability over time as a critical component in
maintaining the overall profitability of our commercial business
segment.”
Mr. Burke concluded, “Our personal lines did not
achieve our profitability targets, but we expect our personal lines
performance will improve as we gradually shift our geographical
exposures throughout 2019. We performed an in-depth evaluation of
our personal lines book of business during 2018 and implemented
significant rate increases and underwriting refinements throughout
our regions. As we announced previously, we decided to enter into a
book transfer agreement to facilitate an orderly exit from seven
states that accounted for a disproportionate share of our personal
lines underwriting losses in recent years and where we did not
project acceptable improvement within a reasonable timeframe. The
transfer began with policies effective in February 2019, and we
expect this action will further accelerate the recovery of our
personal lines business.”
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 December 31, |
|
Year Ended December 31, |
|
2018 |
|
2017 |
|
% Change |
|
2018 |
|
2017 |
|
% Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Earned |
|
|
|
|
|
|
|
|
|
|
|
Personal lines |
$
99,255 |
|
$
99,106 |
|
0.2% |
|
$
403,367 |
|
$
384,124 |
|
5.0% |
Commercial lines |
86,895 |
|
81,954 |
|
6.0 |
|
337,924 |
|
318,391 |
|
6.1 |
Total net premiums earned |
$ 186,150 |
|
$ 181,060 |
|
2.8% |
|
$ 741,291 |
|
$ 702,515 |
|
5.5% |
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written |
|
|
|
|
|
|
|
|
|
|
|
Personal lines: |
|
|
|
|
|
|
|
|
|
|
|
Automobile |
$
55,356 |
|
$
61,435 |
|
(9.9%) |
|
$
249,275 |
|
$
255,297 |
|
(2.4%) |
Homeowners |
27,633 |
|
29,904 |
|
(7.6) |
|
123,782 |
|
125,054 |
|
(1.0) |
Other |
5,465 |
|
4,765 |
|
14.7 |
|
21,064 |
|
19,672 |
|
7.1 |
Total personal lines |
88,454 |
|
96,104 |
|
(8.0) |
|
394,121 |
|
400,023 |
|
(1.5) |
Commercial lines: |
|
|
|
|
|
|
|
|
|
|
|
Automobile |
24,778 |
|
23,430 |
|
5.8 |
|
108,123 |
|
99,333 |
|
8.8 |
Workers' compensation |
24,287 |
|
23,891 |
|
1.7 |
|
109,022 |
|
109,884 |
|
(0.8) |
Commercial multi-peril |
27,565 |
|
25,961 |
|
6.2 |
|
117,509 |
|
110,313 |
|
6.5 |
Other |
3,209 |
|
2,002 |
|
60.3 |
|
15,241 |
|
9,586 |
|
59.0 |
Total commercial lines |
79,839 |
|
75,284 |
|
6.1 |
|
349,895 |
|
329,116 |
|
6.3 |
Total net premiums written |
$ 168,293 |
|
$ 171,388 |
|
(1.8%) |
|
$ 744,016 |
|
$ 729,139 |
|
2.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 1.8% decrease in the Company’s net premiums
written for the fourth quarter of 2018 compared to the fourth
quarter of 2017, as shown in the table above, represents the
combination of 6.1% growth in commercial lines net premiums written
and an 8.0% decline in personal lines net premiums written.
The $3.1 million decrease in net premiums
written for the fourth quarter of 2018 compared to the fourth
quarter of 2017 included:
- $4.6 million growth in commercial lines premiums that the
Company attributes primarily to new commercial accounts the
Company’s insurance subsidiaries have written throughout their
operating regions and a continuation of renewal premium
increases.
- $7.7 million decline in personal lines premiums that the
Company attributes to 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,
partially offset by premium rate increases the Company has
implemented over the past four quarters. The decline also included
$1.4 million in reinsurance reinstatement premiums for the fourth
quarter of 2018 related to recoveries of reinsured losses that
developed during the fourth quarter of 2018 from catastrophic
weather events that occurred earlier in 2018.
For the full year of 2018, the Company's net premiums written
increased 2.0% compared to the full year of 2017.
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 months and full
years ended December 31, 2018 and 2017:
|
Three Months Ended |
|
Year Ended |
|
December 31, |
|
December 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
GAAP Combined Ratios (Total Lines) |
|
|
|
|
|
|
|
Loss
ratio (non-weather) |
70.3% |
|
69.0% |
|
69.0% |
|
61.1% |
Loss
ratio (weather-related) |
6.7 |
|
3.0 |
|
8.8 |
|
8.3 |
Expense ratio |
32.5 |
|
31.9 |
|
31.6 |
|
32.9 |
Dividend ratio |
1.0 |
|
0.9 |
|
0.7 |
|
0.7 |
Combined ratio |
110.5% |
|
104.8% |
|
110.1% |
|
103.0% |
|
|
|
|
|
|
|
|
Statutory Combined Ratios |
|
|
|
|
|
|
|
Personal lines: |
|
|
|
|
|
|
|
Automobile |
126.7% |
|
119.2% |
|
117.4% |
|
109.3% |
Homeowners |
106.1 |
|
94.2 |
|
110.5 |
|
109.9 |
Other |
103.0 |
|
79.4 |
|
96.4 |
|
90.8 |
Total personal lines |
118.9 |
|
109.3 |
|
114.1 |
|
108.5 |
Commercial lines: |
|
|
|
|
|
|
|
Automobile |
132.3 |
|
127.7 |
|
133.3 |
|
115.0 |
Workers' compensation |
86.9 |
|
80.7 |
|
86.6 |
|
79.0 |
Commercial multi-peril |
89.6 |
|
96.9 |
|
98.1 |
|
96.7 |
Other |
70.0 |
|
23.1 |
|
54.6 |
|
10.2 |
Total commercial lines |
101.3 |
|
98.8 |
|
103.8 |
|
93.6 |
Total lines |
110.7% |
|
104.6% |
|
109.4% |
|
101.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donegal Group’s combined ratio was 110.5% for
the fourth quarter of 2018, compared to 104.8% for the fourth
quarter of 2017. The increase related primarily to the impact of
weather-related losses in the Company’s homeowners line of business
and increases in loss severity in the Company’s casualty lines of
business.
For the fourth quarter of 2018, the Company’s
loss ratio increased to 77.0%, compared to 72.0% for the fourth
quarter of 2017. Weather-related losses for the fourth quarter of
2018 accounted for 6.7 percentage points of the Company’s loss
ratio, increasing from the $5.4 million of weather-related losses,
or 3.0 percentage points of the Company’s loss ratio, for the
fourth quarter of 2017. Due in part to losses incurred from
Hurricane Michael, weather-related losses of $12.5 million for the
fourth quarter of 2018 exceeded the previous five-year average for
fourth quarter weather-related losses of $5.2 million.
Large fire losses, which the Company defines as
individual fire losses in excess of $50,000, were $4.6 million for
the fourth quarter of 2018, compared to $7.7 million for the fourth
quarter of 2017, with the decrease primarily related to a lower
incidence of commercial property fires. Large fire losses
represented 2.5 percentage points of the Company’s loss ratio for
the fourth quarter of 2018, compared to 4.3 percentage points of
the Company’s loss ratio for the fourth quarter of 2017.
Net development of reserves for losses incurred
in prior accident years added 3.6 percentage points to the
Company’s loss ratio for the fourth quarter of 2018. Favorable
development of workers’ compensation loss reserves partially offset
unfavorable development of commercial multi-peril, personal
automobile and commercial automobile loss reserves. Development of
reserves for losses incurred in prior accident years added 4.8
percentage points to the Company’s loss ratio for the full year of
2018. The Company primarily attributes the prior-period loss
development to additional reserves the Company recorded during the
fourth quarter and full year of 2018 in respect of changing trends
in the reporting of casualty loss data and a deceleration in claim
closure rates. As a result of their recognition of these trends
during 2018, the Company’s actuaries selected higher expected
ultimate loss ratios in establishing the Company’s 2018 accident
year IBNR reserves.
The Company’s expense ratio was 32.5% for the
fourth quarter of 2018, compared to 31.9% for the fourth quarter of
2017. The increase in the Company's expense ratio reflected a
guaranty fund assessment of approximately $800,000 and a decrease
in deferred acquisition costs that resulted from comparatively
lower premium writings in the fourth quarter of 2018. The Company’s
expense ratio was 31.6% for the full year of 2018, compared to a
32.9% expense ratio for the full year of 2017, reflecting a
decrease in underwriting-based incentive costs for 2018 compared to
2017.
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
90.2% of its consolidated investment portfolio in diversified,
highly rated and marketable fixed-maturity securities at December
31, 2018.
|
December 31, 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 |
$
120,432 |
|
11.7% |
|
$
115,786 |
|
11.5% |
Obligations of states and political subdivisions |
234,508 |
|
22.8 |
|
269,698 |
|
26.8 |
Corporate securities |
264,843 |
|
25.7 |
|
213,764 |
|
21.2 |
Mortgage-backed securities |
309,574 |
|
30.0 |
|
306,353 |
|
30.5 |
Total fixed maturities |
929,357 |
|
90.2 |
|
905,601 |
|
90.0 |
Equity securities, at fair value |
43,667 |
|
4.2 |
|
50,445 |
|
5.0 |
Investments in affiliates |
41,026 |
|
4.0 |
|
38,774 |
|
3.9 |
Short-term investments, at cost |
16,749 |
|
1.6 |
|
11,050 |
|
1.1 |
Total investments |
$ 1,030,799 |
|
100.0% |
|
$ 1,005,870 |
|
100.0% |
|
|
|
|
|
|
|
|
Average investment yield |
2.6% |
|
|
|
2.4% |
|
|
Average tax-equivalent investment yield |
2.8% |
|
|
|
2.9% |
|
|
Average fixed-maturity duration (years) |
4.4 |
|
|
|
5.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income of $7.6 million for the
fourth quarter of 2018 increased 23.2% compared to $6.1 million in
net investment income for the fourth quarter of 2017. The change in
net investment income reflected primarily an increase in average
invested assets relative to the prior-year fourth quarter and a
decrease in expenses the Company allocated to the investment
function.
Net investment losses were $8.9 million,
compared to net investment gains of $1.5 million for the fourth
quarter of 2017. The Company attributes the change to a decrease in
the market value of the equity securities it held at December 31,
2018. The Company adopted accounting guidance effective January 1,
2018 that requires entities to measure equity investments at fair
value and recognize changes in fair value in their results of
operations.
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 and
statutory combined ratio.
Net premiums written and operating income 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 (loss) income as net
(loss) income excluding after-tax net investment gains or losses,
after-tax restructuring charges and other significant non-recurring
items. The Company also excluded from its calculation of non-GAAP
operating income for the fourth quarter and year ended December 31,
2017 the deferred income tax expense that resulted from the
December 2017 enactment of the TCJA. Because the Company’s
calculation of operating (loss) income may differ from similar
measures other companies use, investors should exercise caution
when comparing the Company’s measure of operating (loss) income to
the measure of other companies.
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 December 31, |
|
Year Ended December 31, |
|
2018 |
|
2017 |
|
%
Change |
|
2018 |
|
2017 |
|
%
Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Premiums |
|
|
|
|
|
|
|
|
|
|
|
Earned to Net Premiums Written |
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned |
$
186,150 |
|
$
181,060 |
|
2.8% |
|
$
741,291 |
|
$
702,515 |
|
5.5% |
Change in net unearned premiums |
(17,857) |
|
(9,672) |
|
84.6 |
|
2,725 |
|
26,624 |
|
(89.8) |
Net premiums written |
$ 168,293 |
|
$ 171,388 |
|
(1.8%) |
|
$ 744,016 |
|
$ 729,139 |
|
2.0% |
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, |
|
Year Ended December 31, |
|
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 |
$
(14,999) |
|
$
(2,779) |
|
439.7% |
|
$
(32,760) |
|
$
7,116 |
|
NM |
Investment losses (gains) (after tax) |
6,887 |
|
(988) |
|
NM |
|
3,423 |
|
(3,766) |
|
NM |
Effect of the TCJA at enactment |
- |
|
4,753 |
|
NM |
|
- |
|
4,753 |
|
NM |
Restructuring charge (after tax) |
- |
|
- |
|
- |
|
1,356 |
|
- |
|
NM |
Other, net |
(167) |
|
- |
|
NM |
|
22 |
|
- |
|
NM |
Non-GAAP operating (loss) income |
$ (8,279) |
|
$ 986 |
|
NM |
|
$ (27,959) |
|
$ 8,103 |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Reconciliation of Net (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
to Non-GAAP Operating (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class A (diluted) |
$
(0.54) |
|
$
(0.10) |
|
440.0% |
|
$
(1.18) |
|
$
0.26 |
|
NM |
Investment losses (gains) (after tax) |
0.25 |
|
(0.03) |
|
NM |
|
0.13 |
|
(0.13) |
|
NM |
Effect of the TCJA at enactment |
- |
|
0.17 |
|
NM |
|
- |
|
0.17 |
|
NM |
Restructuring charge (after tax) |
- |
|
- |
|
- |
|
0.05 |
|
- |
|
NM |
Other, net |
(0.01) |
|
- |
|
NM |
|
- |
|
- |
|
- |
Non-GAAP operating (loss) income – Class A |
$ (0.30) |
|
$ 0.04 |
|
NM |
|
$ (1.00) |
|
$ 0.30 |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class B |
$
(0.50) |
|
$
(0.10) |
|
400.0% |
|
$
(1.09) |
|
$
0.22 |
|
NM |
Investment losses (gains) (after tax) |
0.23 |
|
(0.03) |
|
NM |
|
0.11 |
|
(0.12) |
|
NM |
Effect of the TCJA at enactment |
- |
|
0.16 |
|
NM |
|
- |
|
0.16 |
|
NM |
Restructuring charge (after tax) |
- |
|
- |
|
- |
|
0.05 |
|
- |
|
NM |
Other, net |
(0.01) |
|
- |
|
NM |
|
- |
|
- |
|
- |
Non-GAAP operating (loss) income – Class B |
$ (0.27) |
|
$ 0.03 |
|
NM |
|
$ (0.93) |
|
$ 0.26 |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The statutory combined ratio is a standard
non-GAAP 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 Wednesday, February 20, 2019, 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. 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.
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 owns the remaining
51.8% of the outstanding stock of DFSC. On June 12, 2018, the
Company and Donegal Mutual Insurance Company entered into an
agreement to sell DFSC and UCB to Northwest Bancshares, Inc. The
parties anticipate that the transaction will close in March
2019.
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 December 31, |
|
|
|
2018 |
|
2017 |
|
|
|
|
|
|
Net
premiums earned |
$
186,150 |
|
$
181,060 |
Investment
income, net of expenses |
7,567 |
|
6,142 |
Net
investment (losses) gains |
(8,864) |
|
1,498 |
Lease
income |
115 |
|
117 |
Installment
payment fees |
1,297 |
|
1,344 |
Equity in
earnings of DFSC |
541 |
|
598 |
|
Total
revenues |
186,806 |
|
190,759 |
|
|
|
|
|
|
Net losses
and loss expenses |
143,395 |
|
130,442 |
Amortization of deferred acquisition costs |
29,610 |
|
29,674 |
Other
underwriting expenses |
30,926 |
|
28,000 |
Policyholder dividends |
1,787 |
|
1,592 |
Interest |
|
620 |
|
381 |
Other
expenses, net |
114 |
|
396 |
|
Total
expenses |
206,452 |
|
190,485 |
|
|
|
|
|
|
(Loss)
income before income tax (benefit) expense |
(19,646) |
|
274 |
Income tax
(benefit) expense |
(4,647) |
|
3,053 |
|
|
|
|
|
|
Net
loss |
|
$ (14,999) |
|
$ (2,779) |
|
|
|
|
|
|
Net loss
per common share: |
|
|
|
|
Class A -
basic and diluted |
$ (0.54) |
|
$ (0.10) |
|
Class B -
basic and diluted |
$ (0.50) |
|
$ (0.10) |
|
|
|
|
|
|
Supplementary Financial Analysts' Data |
|
|
|
|
|
|
|
|
|
Weighted-average number of shares |
|
|
|
|
outstanding: |
|
|
|
|
Class A -
basic |
22,800,974 |
|
22,183,787 |
|
Class A -
diluted |
22,923,147 |
|
23,224,404 |
|
Class B -
basic and diluted |
5,576,775 |
|
5,576,775 |
|
|
|
|
|
|
Net
premiums written |
$ 168,293 |
|
$ 171,388 |
|
|
|
|
|
|
Book value
per common share |
|
|
|
|
at end of
period |
$ 14.05 |
|
$ 15.95 |
|
|
|
|
|
|
Donegal Group Inc. |
Consolidated Statements of Income |
(unaudited; in thousands, except share data) |
|
|
|
|
|
|
|
|
|
Year Ended December 31 |
|
|
|
2018 |
|
2017 |
|
|
|
|
|
|
Net
premiums earned |
$
741,291 |
|
$
702,515 |
Investment
income, net of expenses |
26,908 |
|
23,527 |
Net
investment (losses) gains |
(4,802) |
|
5,705 |
Lease
income |
480 |
|
501 |
Installment
payment fees |
5,257 |
|
5,157 |
Equity in
earnings of DFSC |
2,694 |
|
1,622 |
|
Total
revenues |
771,828 |
|
739,027 |
|
|
|
|
|
|
Net losses
and loss expenses |
576,458 |
|
487,268 |
Amortization of deferred acquisition costs |
120,964 |
|
115,065 |
Other
underwriting expenses |
113,270 |
|
116,538 |
Policyholder dividends |
5,353 |
|
5,015 |
Interest |
|
2,302 |
|
1,594 |
Other
expenses |
1,718 |
|
1,433 |
|
Total
expenses |
820,065 |
|
726,913 |
|
|
|
|
|
|
(Loss)
income before income tax (benefit) expense |
(48,237) |
|
12,114 |
Income tax
(benefit) expense |
(15,477) |
|
4,998 |
|
|
|
|
|
|
Net (loss)
income |
$ (32,760) |
|
$ 7,116 |
|
|
|
|
|
|
Net (loss)
income per common share: |
|
|
|
|
Class A -
basic |
$ (1.18) |
|
$ 0.27 |
|
Class A -
diluted |
$ (1.18) |
|
$ 0.26 |
|
Class B -
basic and diluted |
$ (1.09) |
|
$ 0.22 |
|
|
|
|
|
|
Supplementary Financial Analysts' Data |
|
|
|
|
|
|
|
|
|
Weighted-average number of shares |
|
|
|
|
outstanding: |
|
|
|
|
Class A -
basic |
22,705,471 |
|
21,798,948 |
|
Class A -
diluted |
23,024,271 |
|
22,642,442 |
|
Class B -
basic and diluted |
5,576,775 |
|
5,576,775 |
|
|
|
|
|
|
Net
premiums written |
$ 744,016 |
|
$ 729,139 |
|
|
|
|
|
|
Book value
per common share |
|
|
|
|
at end of
period |
$ 14.05 |
|
$ 15.95 |
|
|
|
|
|
|
Donegal Group Inc. |
Consolidated Balance Sheets |
(in thousands) |
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
2018 |
|
2017 |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
ASSETS |
Investments: |
|
|
|
|
Fixed
maturities: |
|
|
|
|
|
Held to maturity, at
amortized cost |
$
402,799 |
|
$
366,655 |
|
|
Available for sale, at
fair value |
526,558 |
|
538,946 |
|
Equity
securities, at fair value |
43,667 |
|
50,445 |
|
Investments
in affiliates |
41,026 |
|
38,774 |
|
Short-term
investments, at cost |
16,749 |
|
11,050 |
|
|
Total investments |
1,030,799 |
|
1,005,870 |
Cash |
|
52,594 |
|
37,833 |
Premiums
receivable |
156,702 |
|
160,406 |
Reinsurance
receivable |
343,369 |
|
298,343 |
Deferred
policy acquisition costs |
60,615 |
|
60,290 |
Prepaid
reinsurance premiums |
135,380 |
|
135,033 |
Other
assets |
52,619 |
|
40,145 |
|
|
Total assets |
$ 1,832,078 |
|
$ 1,737,920 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
Liabilities: |
|
|
|
|
|
Losses and
loss expenses |
$
814,665 |
|
$
676,672 |
|
Unearned
premiums |
506,529 |
|
503,457 |
|
Accrued
expenses |
25,442 |
|
28,034 |
|
Borrowings
under lines of credit |
60,000 |
|
59,000 |
|
Subordinated debentures |
5,000 |
|
5,000 |
|
Other
liabilities |
21,572 |
|
17,061 |
|
|
Total liabilities |
1,433,208 |
|
1,289,224 |
Stockholders' equity: |
|
|
|
|
Class A
common stock |
258 |
|
256 |
|
Class B
common stock |
56 |
|
56 |
|
Additional
paid-in capital |
261,259 |
|
255,401 |
|
Accumulated
other comprehensive loss |
(14,228) |
|
(2,684) |
|
Retained
earnings |
192,751 |
|
236,893 |
|
Treasury
stock |
(41,226) |
|
(41,226) |
|
|
Total stockholders'
equity |
398,870 |
|
448,696 |
|
|
Total liabilities and
stockholders' equity |
$ 1,832,078 |
|
$ 1,737,920 |
|
|
|
|
|
|
For Further Information: Jeffrey D. Miller, Executive Vice
President & Chief Financial Officer Phone: (717) 426-1931
E-mail: investors@donegalgroup.com
Donegal (NASDAQ:DGICB)
Historical Stock Chart
From Mar 2024 to Apr 2024
Donegal (NASDAQ:DGICB)
Historical Stock Chart
From Apr 2023 to Apr 2024