Donegal Group Inc. (NASDAQ:DGICA) and (NASDAQ:DGICB) today reported
its financial results for the third quarter and first nine months
of 2023.
Significant items for third quarter of 2023 (all
comparisons to third quarter of 2022):
- Net loss of $0.8
million, or 2 cents per Class A share, compared to net loss of
$10.4 million, or 33 cents per Class A share
- Net premiums
earned increased 8.9% to $224.4 million
- Net premiums
written1 increased 6.3% to $219.2 million
- Combined ratio
of 104.5%, compared to 109.6%, due to lower commercial lines
losses
- Net loss
included after-tax net investment losses of $1.0 million, or 3
cents per Class A share, compared to $1.9 million, or 6 cents per
Class A share
- Book value per
share of $14.26 at September 30, 2023, compared to $14.85
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
% Change |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
% Change |
|
|
(dollars in thousands, except per share amounts) |
Income Statement Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
premiums earned |
$ |
224,393 |
|
|
$ |
206,122 |
|
|
|
8.9 |
% |
|
$ |
655,886 |
|
|
$ |
609,499 |
|
|
|
7.6 |
% |
Investment income, net |
|
10,536 |
|
|
|
8,569 |
|
|
|
23.0 |
|
|
|
30,143 |
|
|
|
24,631 |
|
|
|
22.4 |
|
Net investment (losses) gains |
|
(1,243 |
) |
|
|
(2,358 |
) |
|
|
-47.3 |
|
|
|
930 |
|
|
|
(10,811 |
) |
|
|
NM2 |
Total
revenues |
|
233,928 |
|
|
|
212,838 |
|
|
|
9.9 |
|
|
|
687,870 |
|
|
|
624,776 |
|
|
|
10.1 |
|
Net (loss) income |
|
(805 |
) |
|
|
(10,376 |
) |
|
|
-92.2 |
|
|
|
6,396 |
|
|
|
(5,439 |
) |
|
|
NM |
|
Non-GAAP operating income (loss)1 |
|
176 |
|
|
|
(8,513 |
) |
|
|
NM |
|
|
|
5,661 |
|
|
|
3,102 |
|
|
|
82.5 |
|
Annualized (loss) return on average equity |
|
-0.7% |
|
|
|
-8.4% |
|
|
|
7.7 pts |
|
|
1.8% |
|
|
|
-1.4% |
|
|
|
3.2 pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class A (diluted) |
$ |
(0.02 |
) |
|
$ |
(0.33 |
) |
|
|
-93.9 |
% |
|
$ |
0.20 |
|
|
$ |
(0.17 |
) |
|
|
NM |
|
Net (loss) income – Class B |
|
(0.02 |
) |
|
|
(0.30 |
) |
|
|
-93.3 |
|
|
|
0.17 |
|
|
|
(0.16 |
) |
|
|
NM |
|
Non-GAAP operating income (loss) – Class A (diluted) |
|
0.01 |
|
|
|
(0.27 |
) |
|
|
NM |
|
|
|
0.17 |
|
|
|
0.10 |
|
|
|
70.0 |
% |
Non-GAAP operating income (loss) – Class B |
|
- |
|
|
|
(0.25 |
) |
|
|
NM |
|
|
|
0.15 |
|
|
|
0.08 |
|
|
|
87.5 |
|
Book
value |
|
14.26 |
|
|
|
14.85 |
|
|
|
-4.0 |
|
|
|
14.26 |
|
|
|
14.85 |
|
|
|
-4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1The “Definitions of Non-GAAP Financial
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 remain focused on the
ongoing execution of our strategic plan to build a solid foundation
for future growth and consistent profitability, while we continue
to navigate significant headwinds impacting the insurance industry.
During the third quarter of 2023, we experienced significant
improvement in our commercial lines underwriting results compared
to the prior-year third quarter. We attribute that improvement in
part to a decrease in large commercial property fire losses. On the
other hand, our personal lines underwriting results reflected
elevated weather-related losses resulting from a substantial
increase in the frequency of severe weather events throughout our
operating regions that generated the highest quarterly
weather-related loss ratio we have recorded in recent years.”
Mr. Burke continued, “During the third quarter
of 2023, we completed our deployment of enhanced products and a new
agency portal across our 22-state commercial lines geographical
footprint as well as additional service capabilities to allow us to
compete more effectively for quality small commercial accounts
through our independent agents. Conversely, as previously
announced, we began to non-renew all commercial policies in Georgia
and Alabama. We have also accelerated commercial lines renewal
premium increases and other underwriting refinements as part of our
ongoing profit improvement initiatives in other regions where we
have not achieved targeted profitability levels. Within our
personal lines business segment, we continued to implement
significant premium rate increases along with other actions to slow
the pace of new business writings. We expect to continue to take
significant rate increases through the balance of 2023 and into
2024 to ensure that we achieve rate adequacy in this segment.
Excluding the markets we are exiting, retention levels in both
segments remained consistently high despite the premium rate
increases and other underwriting actions we implemented.”
Insurance Operations
Donegal Group is an insurance holding company
whose insurance subsidiaries and affiliates offer property and
casualty lines of insurance in three Mid-Atlantic states (Delaware,
Maryland and Pennsylvania), two New England states (Maine and New
Hampshire), five Southern states (Georgia, North Carolina, South
Carolina, Tennessee and Virginia), eight Midwestern states
(Illinois, Indiana, Iowa, Michigan, Nebraska, Ohio, South Dakota
and Wisconsin) and five Southwestern states (Arizona, Colorado, New
Mexico, Texas and Utah). Donegal Mutual Insurance Company and the
insurance subsidiaries of Donegal Group conduct business together
as the Donegal Insurance Group.
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
% Change |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
% Change |
|
|
(dollars in thousands) |
Net Premiums Earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial lines |
$ |
135,432 |
|
|
$ |
130,279 |
|
|
|
4.0 |
% |
|
$ |
399,427 |
|
|
$ |
387,042 |
|
|
|
3.2 |
% |
Personal lines |
|
88,961 |
|
|
|
75,843 |
|
|
|
17.3 |
|
|
|
256,460 |
|
|
|
222,457 |
|
|
|
15.3 |
|
Total net premiums earned |
$ |
224,393 |
|
|
$ |
206,122 |
|
|
|
8.9 |
% |
|
$ |
655,887 |
|
|
$ |
609,499 |
|
|
|
7.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
$ |
37,535 |
|
|
$ |
37,330 |
|
|
|
0.5 |
% |
|
$ |
134,853 |
|
|
$ |
129,546 |
|
|
|
4.1 |
% |
Workers' compensation |
|
24,371 |
|
|
|
24,633 |
|
|
|
-1.1 |
|
|
|
85,315 |
|
|
|
86,873 |
|
|
|
-1.8 |
|
Commercial multi-peril |
|
44,949 |
|
|
|
46,864 |
|
|
|
-4.1 |
|
|
|
147,622 |
|
|
|
152,178 |
|
|
|
-3.0 |
|
Other |
|
11,639 |
|
|
|
11,839 |
|
|
|
-1.7 |
|
|
|
39,913 |
|
|
|
39,719 |
|
|
|
0.5 |
|
Total commercial lines |
|
118,494 |
|
|
|
120,666 |
|
|
|
-1.8 |
|
|
|
407,703 |
|
|
|
408,316 |
|
|
|
-0.2 |
|
Personal lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
58,038 |
|
|
|
48,472 |
|
|
|
19.7 |
|
|
|
161,348 |
|
|
|
135,700 |
|
|
|
18.9 |
|
Homeowners |
|
39,633 |
|
|
|
34,082 |
|
|
|
16.3 |
|
|
|
105,035 |
|
|
|
90,382 |
|
|
|
16.2 |
|
Other |
|
3,021 |
|
|
|
3,009 |
|
|
|
0.4 |
|
|
|
8,917 |
|
|
|
8,719 |
|
|
|
2.3 |
|
Total
personal lines |
|
100,692 |
|
|
|
85,563 |
|
|
|
17.7 |
|
|
|
275,300 |
|
|
|
234,801 |
|
|
|
17.2 |
|
Total net premiums written |
$ |
219,186 |
|
|
$ |
206,229 |
|
|
|
6.3 |
% |
|
$ |
683,003 |
|
|
$ |
643,117 |
|
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written
The 6.3% increase in net premiums written for
the third quarter of 2023 compared to the third quarter of 2022, as
shown in the table above, represents a 1.8% decline in commercial
lines net premiums written and 17.7% growth in personal lines net
premiums written. The $13.0 million increase in net premiums
written for the third quarter of 2023 compared to the third quarter
of 2022 included:
- Commercial
Lines: $2.1 million decrease that we attribute primarily to planned
attrition in states we are exiting or have targeted for profit
improvement and lower new business writings, offset partially by
strong premium retention and a continuation of renewal premium
increases in lines other than workers’ compensation.
- Personal Lines:
$15.1 million increase that we attribute primarily to a
continuation of renewal premium rate increases and strong policy
retention.
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
ratios1 for the three and nine months ended September 30, 2023 and
2022:
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Combined Ratios (Total Lines) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio - core losses |
|
56.7 |
% |
|
|
60.8 |
% |
|
|
56.0 |
% |
|
|
58.8 |
% |
Loss ratio - weather-related losses |
|
11.5 |
|
|
|
9.4 |
|
|
|
9.1 |
|
|
|
7.7 |
|
Loss ratio - large fire losses |
|
4.9 |
|
|
|
8.4 |
|
|
|
5.3 |
|
|
|
6.6 |
|
Loss ratio - net prior-year reserve development |
|
-3.3 |
|
|
|
-3.0 |
|
|
|
-2.4 |
|
|
|
-5.0 |
|
Loss ratio |
|
69.8 |
|
|
|
75.6 |
|
|
|
68.0 |
|
|
|
68.1 |
|
Expense ratio |
|
34.1 |
|
|
|
33.4 |
|
|
|
34.9 |
|
|
|
34.7 |
|
Dividend ratio |
|
0.6 |
|
|
|
0.6 |
|
|
|
0.6 |
|
|
|
0.7 |
|
Combined ratio |
|
104.5 |
% |
|
|
109.6 |
% |
|
|
103.5 |
% |
|
|
103.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory Combined Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
86.5 |
% |
|
|
107.0 |
% |
|
|
94.8 |
% |
|
|
98.7 |
% |
Workers' compensation |
|
97.7 |
|
|
|
105.9 |
|
|
|
93.1 |
|
|
|
93.9 |
|
Commercial multi-peril |
|
114.8 |
|
|
|
125.0 |
|
|
|
113.8 |
|
|
|
114.9 |
|
Other |
|
76.2 |
|
|
|
85.9 |
|
|
|
82.7 |
|
|
|
81.9 |
|
Total commercial lines |
|
97.5 |
|
|
|
112.1 |
|
|
|
100.2 |
|
|
|
102.4 |
|
Personal lines: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
109.8 |
|
|
|
103.1 |
|
|
|
106.1 |
|
|
|
100.2 |
|
Homeowners |
|
128.9 |
|
|
|
125.0 |
|
|
|
111.2 |
|
|
|
118.8 |
|
Other |
|
46.4 |
|
|
|
54.6 |
|
|
|
81.3 |
|
|
|
49.9 |
|
Total
personal lines |
|
119.4 |
|
|
|
107.8 |
|
|
|
107.2 |
|
|
|
103.4 |
|
Total lines |
|
105.2 |
% |
|
|
110.1 |
% |
|
|
102.9 |
% |
|
|
102.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Ratio
For the third quarter of 2023, the loss ratio
decreased to 69.8%, compared to 75.6% for the third quarter of
2022.
Weather-related losses of $25.7 million, or 11.5
percentage points of the loss ratio, for the third quarter of 2023,
increased from $19.4 million, or 9.4 percentage points of the loss
ratio, for the third quarter of 2022. The impact of weather-related
loss activity to the loss ratio for the third quarter of 2023 was
well above our previous five-year average of 9.3 percentage points
for third quarter weather-related losses.
Large fire losses, which we define as individual
fire losses in excess of $50,000, for the third quarter of 2023
were $11.0 million, or 4.9 percentage points of the loss ratio.
That amount compared favorably to the large fire losses of $17.4
million, or 8.4 percentage points of the loss ratio, for the third
quarter of 2022. The reduction was driven by a $6.5 million
decrease in commercial property fire losses compared to the
prior-year quarter.
Net favorable development of reserves for losses
incurred in prior accident years of $7.3 million decreased the loss
ratio for the third quarter of 2023 by 3.3 percentage points,
compared to $6.2 million that decreased the loss ratio for the
third quarter of 2022 by 3.0 percentage points. Our insurance
subsidiaries experienced favorable development primarily relating
to reserves for accident years 2019 through 2022 in the commercial
automobile, personal automobile and other commercial lines of
business.
The core loss ratio, which excludes the impacts
of weather-related losses, large fire losses and net development of
reserves for losses incurred in prior accident years, decreased to
56.7% for the third quarter of 2023, compared to 60.8% for the
third quarter of 2022. The commercial lines core loss ratio for the
third quarter of 2023 decreased to 53.7%, compared to 62.1% for the
third quarter of 2022, with improvements across all major
commercial lines of business. The personal lines core loss ratio
for the third quarter of 2023 increased to 61.8%, compared to 58.4%
for the third quarter of 2022, primarily related to continuing
inflationary impacts on personal automobile repair and replacement
costs.
Expense Ratio
The expense ratio was 34.1% for the third
quarter of 2023, compared to 33.4% for the third quarter of 2022.
The increase in the expense ratio primarily reflected higher
technology costs related to our ongoing systems modernization
initiatives.
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, we had invested 95.7% of our
consolidated investment portfolio in diversified, highly rated and
marketable fixed-maturity securities at September 30, 2023.
|
September 30, 2023 |
|
December 31, 2022 |
|
|
Amount |
|
|
|
% |
|
|
|
Amount |
|
|
|
% |
|
|
(dollars in thousands) |
Fixed maturities, at carrying value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and obligations of U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
government corporations and agencies |
$ |
173,690 |
|
|
|
13.3 |
% |
|
$ |
166,883 |
|
|
|
12.8 |
% |
Obligations of states and political subdivisions |
|
415,607 |
|
|
|
31.8 |
|
|
|
422,253 |
|
|
|
32.4 |
|
Corporate securities |
|
396,820 |
|
|
|
30.4 |
|
|
|
393,787 |
|
|
|
30.2 |
|
Mortgage-backed securities |
|
265,694 |
|
|
|
20.3 |
|
|
|
229,308 |
|
|
|
17.5 |
|
Allowance for expected credit losses |
|
(1,359 |
) |
|
|
-0.1 |
|
|
|
- |
|
|
|
0.0 |
|
Total
fixed maturities |
|
1,250,452 |
|
|
|
95.7 |
|
|
|
1,212,231 |
|
|
|
92.9 |
|
Equity
securities, at fair value |
|
35,464 |
|
|
|
2.7 |
|
|
|
35,105 |
|
|
|
2.7 |
|
Short-term investments, at cost |
|
20,370 |
|
|
|
1.6 |
|
|
|
57,321 |
|
|
|
4.4 |
|
Total
investments |
$ |
1,306,286 |
|
|
|
100.0 |
% |
|
$ |
1,304,657 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average investment yield |
|
3.1 |
% |
|
|
|
|
|
|
2.6 |
% |
|
|
|
|
Average tax-equivalent investment yield |
|
3.2 |
% |
|
|
|
|
|
|
2.7 |
% |
|
|
|
|
Average fixed-maturity duration (years) |
|
5.7 |
|
|
|
|
|
|
|
5.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income of $10.5 million for the
third quarter of 2023 increased 23.0% compared to $8.6 million in
net investment income for the third quarter of 2022. The increase
in net investment income primarily reflected an increase in the
average investment yield relative to the prior-year third
quarter.
Net investment losses were $1.2 million for the
third quarter of 2023, compared to $2.4 million for the third
quarter of 2022. Net investment losses for both quarterly periods
were primarily related to the net change in unrealized gains or
losses in the fair value of equity securities held at the end of
the respective periods.
Our book value per share was $14.26 at September
30, 2023, compared to $14.79 at December 31, 2022, with the
decrease due in part to after-tax unrealized losses within our
available-for-sale fixed-maturity portfolio during the first nine
months of 2023 that reduced our book value by $0.32 per share.
Definitions of Non-GAAP Financial Measures
We 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 September 30, |
Nine Months Ended September 30, |
|
2023 |
|
|
2022 |
|
|
% Change |
|
|
2023 |
|
2022 |
|
|
% Change |
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Premiums |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned to Net Premiums Written |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
premiums earned |
$ |
224,393 |
|
|
$ |
206,122 |
|
|
|
8.9 |
% |
|
$ |
655,886 |
|
|
$ |
609,499 |
|
|
|
7.6 |
% |
Change in
net unearned premiums |
|
(5,207 |
) |
|
|
107 |
|
|
|
NM |
|
|
|
27,117 |
|
|
|
33,618 |
|
|
|
-19.3 |
|
Net
premiums written |
$ |
219,186 |
|
|
$ |
206,229 |
|
|
|
6.3 |
% |
|
$ |
683,003 |
|
|
$ |
643,117 |
|
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a reconciliation of
net (loss) income to operating income (loss) for the periods
indicated:
|
Three Months Ended September
30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
% Change |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
% Change |
|
|
(dollars in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Non-GAAP Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(805 |
) |
|
$ |
(10,376 |
) |
|
|
-92.2 |
% |
|
$ |
6,396 |
|
|
$ |
(5,439 |
) |
|
|
NM |
|
Investment losses (gains) (after tax) |
|
981 |
|
|
|
1,863 |
|
|
|
-47.3 |
|
|
|
(735 |
) |
|
|
8,541 |
|
|
|
NM |
|
Non-GAAP operating income (loss) |
$ |
176 |
|
|
$ |
(8,513 |
) |
|
|
NM |
|
|
$ |
5,661 |
|
|
$ |
3,102 |
|
|
|
82.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Reconciliation of Net (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Non-GAAP Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class A (diluted) |
$ |
(0.02 |
) |
|
$ |
(0.33 |
) |
|
|
-93.9 |
% |
|
$ |
0.20 |
|
|
$ |
(0.17 |
) |
|
|
NM |
|
Investment losses (gains) (after tax) |
|
0.03 |
|
|
|
0.06 |
|
|
|
-50.0 |
|
|
|
(0.03 |
) |
|
|
0.27 |
|
|
|
NM |
|
Non-GAAP operating income (loss) – Class A |
$ |
0.01 |
|
|
$ |
(0.27 |
) |
|
|
NM |
|
|
$ |
0.17 |
|
|
$ |
0.10 |
|
|
|
70.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class B |
$ |
(0.02 |
) |
|
$ |
(0.30 |
) |
|
|
-93.3 |
% |
|
$ |
0.17 |
|
|
$ |
(0.16 |
) |
|
|
NM |
|
Investment losses (gains) (after tax) |
|
0.02 |
|
|
|
0.05 |
|
|
|
-60.0 |
|
|
|
(0.02 |
) |
|
|
0.24 |
|
|
|
NM |
|
Non-GAAP operating income (loss) – Class B |
$ |
- |
|
|
$ |
(0.25 |
) |
|
|
NM |
|
|
$ |
0.15 |
|
|
$ |
0.08 |
|
|
|
87.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
Dividend Information
On October 19, 2023, we declared a regular
quarterly cash dividend of $0.17 per share for our Class A common
stock and $0.1525 per share for our Class B common stock, which are
payable on November 15, 2023 to stockholders of record as of the
close of business on November 1, 2023.
Pre-Recorded Webcast
At approximately 8:30 am EDT on Thursday,
October 26, 2023, we will make available in the Investors section
of our website a pre-recorded audio webcast featuring management
commentary on our quarterly results and general business updates.
You may listen to the pre-recorded webcast by accessing the link on
our website at http://investors.donegalgroup.com. A supplemental
investor presentation is also available via our website.
About the Company
Donegal Group Inc. is an insurance holding
company whose insurance subsidiaries and affiliates offer property
and casualty lines of insurance in certain Mid-Atlantic,
Midwestern, New England, Southern and Southwestern states. Donegal
Mutual Insurance Company and the insurance subsidiaries of Donegal
Group Inc. conduct business together as the Donegal Insurance
Group. The Donegal Insurance Group has an A.M. Best rating of A
(Excellent).
The Class A common stock and Class B common
stock of Donegal Group Inc. trade on the NASDAQ Global Select
Market under the symbols DGICA and DGICB, respectively. We are
focused on several primary strategies, including achieving
sustained excellent financial performance, strategically
modernizing our operations and processes to transform our business,
capitalizing on opportunities to grow profitably and delivering a
superior experience to our agents and customers.
Safe Harbor
We base all statements contained in this release
that are not historic facts on our current expectations. Such
statements are forward-looking in nature (as defined in the Private
Securities Litigation Reform Act of 1995) and necessarily involve
risks and uncertainties. Forward-looking statements we make may be
identified by our use of words such as “will,” “expect,” “intend,”
“plan,” “anticipate,” “believe,” “seek,” “estimate” and similar
expressions. Our actual results could vary materially from our
forward-looking statements. The factors that could cause our actual
results to vary materially from the forward-looking statements we
have previously made include, but are not limited to, adverse
litigation and other trends that could increase our loss costs
(including labor shortages and escalating medical, automobile and
property repair costs), adverse and catastrophic weather events
(including from changing climate conditions), our ability to
maintain profitable operations (including our ability to underwrite
risks effectively and charge adequate premium rates), prolonged
economic challenges resulting from the COVID-19 pandemic, the
adequacy of the loss and loss expense reserves of our insurance
subsidiaries, the availability and successful operation of the
information technology systems our insurance subsidiaries utilize,
the successful development of new information technology systems to
allow our insurance subsidiaries to compete effectively, business
and economic conditions in the areas in which we and 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 (including those related to COVID-19 business
interruption coverage exclusions), changes in regulatory
requirements, our ability to attract and retain independent
insurance agents, changes in our A.M. Best rating and the other
risks that we describe from time to time in our filings with the
Securities and Exchange Commission. 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.
Investor Relations Contacts
Karin Daly, Vice President, The Equity Group Inc.
Phone: (212) 836-9623E-mail:
kdaly@equityny.com
Jeffrey D. Miller, Executive Vice President & Chief
Financial Officer Phone: (717) 426-1931E-mail:
investors@donegalgroup.com
Financial Supplement
Donegal Group Inc. |
Consolidated Statements of Income (Loss) |
(unaudited; in thousands, except share data) |
|
|
|
|
|
|
Quarter Ended September 30, |
|
|
2023 |
|
2022 |
|
|
|
|
|
|
Net premiums earned |
$ |
224,393 |
|
|
$ |
206,122 |
|
Investment income, net of
expenses |
|
10,536 |
|
|
|
8,569 |
|
Net investment losses |
|
(1,243 |
) |
|
|
(2,358 |
) |
Lease income |
|
86 |
|
|
|
92 |
|
Installment payment fees |
|
156 |
|
|
|
414 |
|
Total revenues |
|
233,928 |
|
|
|
212,839 |
|
|
|
|
|
|
|
|
|
Net losses and loss
expenses |
|
156,683 |
|
|
|
155,754 |
|
Amortization of deferred
acquisition costs |
|
39,332 |
|
|
|
35,513 |
|
Other underwriting
expenses |
|
37,155 |
|
|
|
33,412 |
|
Policyholder dividends |
|
1,399 |
|
|
|
1,239 |
|
Interest |
|
156 |
|
|
|
71 |
|
Other expenses, net |
|
208 |
|
|
|
219 |
|
Total expenses |
|
234,933 |
|
|
|
226,208 |
|
|
|
|
|
|
|
|
|
Loss before income tax benefit |
|
(1,005 |
) |
|
|
(13,369 |
) |
Income tax benefit |
|
(200 |
) |
|
|
(2,993 |
) |
|
|
|
|
|
|
|
|
Net loss |
$ |
(805 |
) |
|
$ |
(10,376 |
) |
|
|
|
|
|
|
|
|
Net loss per common share: |
|
|
|
|
|
|
|
Class A - basic and diluted |
$ |
(0.02 |
) |
|
$ |
(0.33 |
) |
Class B - basic and diluted |
$ |
(0.02 |
) |
|
$ |
(0.30 |
) |
|
|
|
|
|
|
|
|
Supplementary Financial
Analysts' Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
shares |
|
|
|
|
|
|
|
outstanding: |
|
|
|
|
|
|
|
Class A - basic |
|
27,594,973 |
|
|
|
26,781,374 |
|
Class A - diluted |
|
27,665,293 |
|
|
|
26,974,506 |
|
Class B - basic and diluted |
|
5,576,775 |
|
|
|
5,576,775 |
|
|
|
|
|
|
|
|
|
Net premiums written |
$ |
219,186 |
|
|
$ |
206,229 |
|
|
|
|
|
|
|
|
|
Book value per common
share |
|
|
|
|
|
|
|
at end of period |
$ |
14.26 |
|
|
$ |
14.85 |
|
Donegal Group Inc. |
|
Consolidated Statements of Income |
|
(unaudited; in thousands, except share data) |
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2023 |
|
2022 |
|
|
|
|
|
|
Net premiums earned |
$ |
655,886 |
|
|
$ |
609,499 |
|
Investment income, net of
expenses |
|
30,143 |
|
|
|
24,631 |
|
Net investment gains (losses) |
|
930 |
|
|
|
(10,811 |
) |
Lease income |
|
262 |
|
|
|
295 |
|
Installment payment fees |
|
649 |
|
|
|
1,162 |
|
Total revenues |
|
687,870 |
|
|
|
624,776 |
|
|
|
|
|
|
|
|
|
Net losses and loss
expenses |
|
446,024 |
|
|
|
415,246 |
|
Amortization of deferred
acquisition costs |
|
115,065 |
|
|
|
104,867 |
|
Other underwriting
expenses |
|
113,715 |
|
|
|
106,753 |
|
Policyholder dividends |
|
4,088 |
|
|
|
4,177 |
|
Interest |
|
464 |
|
|
|
464 |
|
Other expenses, net |
|
969 |
|
|
|
991 |
|
Total expenses |
|
680,325 |
|
|
|
632,498 |
|
|
|
|
|
|
|
|
|
Income (loss) before income tax expense (benefit) |
|
7,545 |
|
|
|
(7,722 |
) |
Income tax expense (benefit) |
|
1,149 |
|
|
|
(2,283 |
) |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
6,396 |
|
|
$ |
(5,439 |
) |
|
|
|
|
|
|
|
|
Net income (loss) per common share: |
|
|
|
|
|
|
|
Class A - basic and diluted |
$ |
0.20 |
|
|
$ |
(0.17 |
) |
Class B - basic and diluted |
$ |
0.17 |
|
|
$ |
(0.16 |
) |
|
|
|
|
|
|
|
|
Supplementary Financial
Analysts' Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
shares |
|
|
|
|
|
|
|
outstanding: |
|
|
|
|
|
|
|
Class A - basic |
|
27,390,883 |
|
|
|
26,216,215 |
|
Class A - diluted |
|
27,507,706 |
|
|
|
26,362,723 |
|
Class B - basic and diluted |
|
5,576,775 |
|
|
|
5,576,775 |
|
|
|
|
|
|
|
|
|
Net premiums written |
$ |
683,003 |
|
|
$ |
643,117 |
|
|
|
|
|
|
|
|
|
Book value per common
share |
|
|
|
|
|
|
|
at end of period |
$ |
14.26 |
|
|
$ |
14.85 |
|
Donegal Group Inc. |
Consolidated Balance Sheets |
(in thousands) |
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Investments: |
|
|
|
|
|
|
|
Fixed maturities: |
|
|
|
|
|
|
|
Held to maturity, at amortized cost |
$ |
683,912 |
|
|
$ |
688,439 |
|
Available for sale, at fair value |
|
566,540 |
|
|
|
523,792 |
|
Equity securities, at fair value |
|
35,464 |
|
|
|
35,105 |
|
Short-term investments, at cost |
|
20,370 |
|
|
|
57,321 |
|
Total investments |
|
1,306,286 |
|
|
|
1,304,657 |
|
Cash |
|
23,719 |
|
|
|
25,123 |
|
Premiums receivable |
|
188,634 |
|
|
|
173,846 |
|
Reinsurance receivable |
|
437,889 |
|
|
|
456,522 |
|
Deferred policy acquisition
costs |
|
77,921 |
|
|
|
73,170 |
|
Prepaid reinsurance
premiums |
|
173,147 |
|
|
|
160,591 |
|
Other assets |
|
52,681 |
|
|
|
49,440 |
|
Total assets |
$ |
2,260,277 |
|
|
$ |
2,243,349 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Losses and loss expenses |
$ |
1,113,354 |
|
|
$ |
1,121,046 |
|
Unearned premiums |
|
617,326 |
|
|
|
577,653 |
|
Accrued expenses |
|
4,107 |
|
|
|
4,226 |
|
Borrowings under lines of credit |
|
35,000 |
|
|
|
35,000 |
|
Other liabilities |
|
17,150 |
|
|
|
21,831 |
|
Total liabilities |
|
1,786,937 |
|
|
|
1,759,756 |
|
Stockholders' equity: |
|
|
|
|
|
|
|
Class A common stock |
|
306 |
|
|
|
301 |
|
Class B common stock |
|
56 |
|
|
|
56 |
|
Additional paid-in capital |
|
333,559 |
|
|
|
325,602 |
|
Accumulated other comprehensive loss |
|
(50,295 |
) |
|
|
(41,704 |
) |
Retained earnings |
|
230,940 |
|
|
|
240,564 |
|
Treasury stock |
|
(41,226 |
) |
|
|
(41,226 |
) |
Total stockholders' equity |
|
473,340 |
|
|
|
483,593 |
|
Total liabilities and stockholders' equity |
$ |
2,260,277 |
|
|
$ |
2,243,349 |
|
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