Donegal Group Inc. (NASDAQ: DGICA) and (NASDAQ: DGICB) today
reported its financial results for the second quarter and first
half of 2022.
Significant Items for Second Quarter of 2022
(all comparisons to second quarter of 2021):
- Net loss of $8.2
million, or 26 cents per Class A share, compared to net income of
$16.2 million, or 53 cents per diluted Class A share
- Net premiums
earned increased 6.0% to $204.1 million
- Net premiums
written1 increased 4.2% to $218.4 million
- Combined ratio
of 105.0%, compared to 96.1%
- Net loss
included after-tax net investment losses of $6.6 million, or 21
cents per Class A share, compared to after-tax net investment gains
of $3.4 million, or 11 cents per diluted Class A share
- Book value per
share of $15.87 at June 30, 2022
Financial Summary
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
(dollars in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Data |
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
204,128 |
|
|
$ |
192,489 |
|
|
6.0 |
% |
|
$ |
403,377 |
|
|
$ |
379,740 |
|
|
6.2 |
% |
|
Investment income, net |
|
8,204 |
|
|
|
7,652 |
|
|
7.2 |
|
|
|
16,063 |
|
|
|
15,163 |
|
|
5.9 |
|
|
Net investment (losses) gains |
|
(8,377 |
) |
|
|
4,241 |
|
|
NM2 |
|
|
|
(8,453 |
) |
|
|
6,710 |
|
|
NM |
|
|
Total revenues |
|
204,311 |
|
|
|
205,146 |
|
|
-0.4 |
|
|
|
411,938 |
|
|
|
403,116 |
|
|
2.2 |
|
|
Net (loss) income |
|
(8,208 |
) |
|
|
16,164 |
|
|
NM |
|
|
|
4,937 |
|
|
|
26,694 |
|
|
-81.5 |
|
|
Non-GAAP operating (loss) income1 |
|
(1,590 |
) |
|
|
12,814 |
|
|
NM |
|
|
|
11,615 |
|
|
|
21,393 |
|
|
-45.7 |
|
|
Annualized (loss) return on average equity |
|
-6.3 |
% |
|
|
12.0 |
% |
|
NM |
|
|
|
1.9 |
% |
|
|
10.0 |
% |
|
-8.1 |
pts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class A (diluted) |
$ |
(0.26 |
) |
|
$ |
0.53 |
|
|
NM |
|
|
$ |
0.16 |
|
|
$ |
0.88 |
|
|
-81.8 |
% |
|
Net (loss) income – Class B |
|
(0.24 |
) |
|
|
0.48 |
|
|
NM |
|
|
|
0.14 |
|
|
|
0.80 |
|
|
-82.5 |
|
|
Non-GAAP operating (loss) income – Class A (diluted) |
|
(0.05 |
) |
|
|
0.42 |
|
|
NM |
|
|
|
0.37 |
|
|
|
0.71 |
|
|
-47.9 |
|
|
Non-GAAP operating (loss) income – Class B |
|
(0.05 |
) |
|
|
0.38 |
|
|
NM |
|
|
|
0.34 |
|
|
|
0.64 |
|
|
-46.9 |
|
|
Book value |
|
15.87 |
|
|
|
17.64 |
|
|
-10.0 |
% |
|
|
15.87 |
|
|
|
17.64 |
|
|
-10.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1The “Definitions of Non-GAAP Financial
Measures” section of this release 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, stated, “Our second quarter of 2022 results reflected a
number of factors, including after-tax investment losses of $6.6
million related to the market-driven decline in the value of our
equity investment holdings as well as elevated weather-related and
large fire losses during the quarter. The above-average
weather-related losses for the second quarter of 2022 resulted
primarily from multiple localized wind and hail events, with only
one event generating claims that exceeded our insurance
subsidiaries’ reinsurance retention amount. While claim frequency
levels generally remained consistent with historical trends,
inflationary pressures contributed to higher loss costs in our
homeowners, commercial multi-peril and automobile lines of
business. We expect the premium rate increases we have implemented
to date, and plan to implement during the remainder of 2022 and
2023 will lead to improved results as those increases are earned
over the terms of the underlying policies. In spite of the elevated
loss activity in the second quarter, our underwriting results for
the first half of 2022 largely met our expectations. We are making
excellent progress on our ongoing strategic and business
transformation initiatives. Maintaining a long-term view, we
believe that we are well-positioned to enhance our profitability
and achieve our operational and financial objectives over
time.”
Insurance Operations
Donegal Group is an insurance holding company
whose insurance subsidiaries and affiliates 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), eight Midwestern states (Illinois, Indiana, Iowa,
Michigan, Nebraska, Ohio, South Dakota and Wisconsin) and four
Southwestern states (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 June 30, |
|
Six Months Ended June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Earned |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial lines |
$ |
126,854 |
|
|
$ |
115,300 |
|
|
|
10.0 |
% |
|
$ |
251,183 |
|
|
$ |
224,525 |
|
|
11.9 |
% |
|
Personal lines |
|
77,274 |
|
|
|
77,189 |
|
|
|
0.1 |
|
|
|
152,194 |
|
|
|
155,215 |
|
|
-1.9 |
|
|
Total net premiums earned |
$ |
204,128 |
|
|
$ |
192,489 |
|
|
|
6.0 |
% |
|
$ |
403,377 |
|
|
$ |
379,740 |
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial lines: |
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
$ |
43,588 |
|
|
$ |
42,574 |
|
|
|
2.4 |
% |
|
$ |
92,216 |
|
|
$ |
89,813 |
|
|
2.7 |
% |
|
Workers' compensation |
|
29,343 |
|
|
|
28,567 |
|
|
|
2.7 |
|
|
|
62,240 |
|
|
|
63,508 |
|
|
-2.0 |
|
|
Commercial multi-peril |
|
51,117 |
|
|
|
47,912 |
|
|
|
6.7 |
|
|
|
105,314 |
|
|
|
99,715 |
|
|
5.6 |
|
|
Other |
|
10,496 |
|
|
|
9,970 |
|
|
|
5.3 |
|
|
|
21,607 |
|
|
|
20,421 |
|
|
5.8 |
|
|
Total commercial lines |
|
134,544 |
|
|
|
129,023 |
|
|
|
4.3 |
|
|
|
281,377 |
|
|
|
273,457 |
|
|
2.9 |
|
|
Personal lines: |
|
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
44,988 |
|
|
|
44,296 |
|
|
|
1.6 |
|
|
|
87,228 |
|
|
|
87,303 |
|
|
-0.1 |
|
|
Homeowners |
|
32,785 |
|
|
|
30,369 |
|
|
|
8.0 |
|
|
|
56,300 |
|
|
|
53,057 |
|
|
6.1 |
|
|
Other |
|
6,129 |
|
|
|
5,917 |
|
|
|
3.6 |
|
|
|
11,983 |
|
|
|
11,650 |
|
|
2.9 |
|
|
Total personal lines |
|
83,902 |
|
|
|
80,582 |
|
|
|
4.1 |
|
|
|
155,511 |
|
|
|
152,010 |
|
|
2.3 |
|
|
Total net premiums written |
$ |
218,446 |
|
|
$ |
209,605 |
|
|
|
4.2 |
% |
|
$ |
436,888 |
|
|
$ |
425,467 |
|
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written
The 4.2% increase in net premiums written for
the second quarter of 2022 compared to the second quarter of 2021,
as shown in the table above, represents 4.3% growth in commercial
lines net premiums written and 4.1% growth in personal lines net
premiums written. The $8.8 million increase in net premiums written
for the second quarter of 2022 compared to the second quarter of
2021 included:
- Commercial
Lines: $5.5 million increase that we attribute primarily to modest
new business writings, strong premium retention and a continuation
of renewal premium increases in lines other than workers’
compensation, offset partially by planned attrition in regions we
have targeted for profit improvement.
- Personal Lines:
$3.3 million increase that we attribute to premium rate increases
our insurance subsidiaries have implemented over the past four
quarters, strong policy retention and modest new business writings
in certain states where we have introduced an updated suite of
products.
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 six months ended June 30, 2022 and
2021:
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
GAAP Combined Ratios (Total Lines) |
|
|
|
|
|
|
|
|
Loss ratio (non-weather) |
|
59.8 |
% |
|
|
53.1 |
% |
|
|
57.5 |
% |
|
|
56.5 |
% |
|
Loss ratio (weather-related) |
|
9.6 |
|
|
|
6.1 |
|
|
|
6.8 |
|
|
|
4.9 |
|
|
Expense ratio |
|
35.0 |
|
|
|
36.0 |
|
|
|
35.4 |
|
|
|
35.1 |
|
|
Dividend ratio |
|
0.6 |
|
|
|
0.9 |
|
|
|
0.7 |
|
|
|
0.8 |
|
|
Combined ratio |
|
105.0 |
% |
|
|
96.1 |
% |
|
|
100.4 |
% |
|
|
97.3 |
% |
|
|
|
|
|
|
|
|
|
|
Statutory Combined Ratios |
|
|
|
|
|
|
|
|
Commercial lines: |
|
|
|
|
|
|
|
|
Automobile |
|
100.1 |
% |
|
|
105.5 |
% |
|
|
94.7 |
% |
|
|
103.9 |
% |
|
Workers' compensation |
|
78.7 |
|
|
|
84.0 |
|
|
|
87.8 |
|
|
|
89.3 |
|
|
Commercial multi-peril |
|
119.5 |
|
|
|
94.5 |
|
|
|
109.8 |
|
|
|
100.8 |
|
|
Other |
|
87.1 |
|
|
|
77.2 |
|
|
|
79.9 |
|
|
|
68.8 |
|
|
Total commercial lines |
|
101.6 |
|
|
|
94.3 |
|
|
|
97.6 |
|
|
|
96.6 |
|
|
Personal lines: |
|
|
|
|
|
|
|
|
Automobile |
|
104.0 |
|
|
|
91.1 |
|
|
|
98.9 |
|
|
|
92.2 |
|
|
Homeowners |
|
123.5 |
|
|
|
110.1 |
|
|
|
115.9 |
|
|
|
102.4 |
|
|
Other |
|
51.3 |
|
|
|
74.5 |
|
|
|
47.6 |
|
|
|
75.7 |
|
|
Total personal lines |
|
107.5 |
|
|
|
96.9 |
|
|
|
101.2 |
|
|
|
94.7 |
|
|
Total lines |
|
103.8 |
% |
|
|
95.4 |
% |
|
|
99.0 |
% |
|
|
95.9 |
% |
|
|
|
|
|
|
|
|
|
|
Loss Ratio
For the second quarter of 2022, the loss ratio
increased to 69.4%, compared to 59.2% for the second quarter of
2021. Weather-related losses were $19.6 million, or 9.6 percentage
points of the loss ratio, for the second quarter of 2022, compared
to $11.7 million, or 6.1 percentage points of the loss ratio, for
the second quarter of 2021. Weather-related loss activity for the
second quarter of 2022 was higher than our previous five-year
average of $17.1 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 2022
were $13.4 million, or 6.6 percentage points of the loss ratio.
That amount exceeded the large fire losses of $11.7 million, or 6.1
percentage points of the loss ratio, for the second quarter of
2021. We experienced a $1.5 million increase in
commercial property fire losses compared to the prior-year
quarter.
Net favorable development of reserves for losses
incurred in prior accident years of $7.9 million decreased the loss
ratio for the second quarter of 2022 by 3.9 percentage points,
compared to $13.4 million that decreased the loss ratio for the
second quarter of 2021 by 6.9 percentage points. Our insurance
subsidiaries experienced favorable development primarily relating
to reserves for accident years 2021 and 2020 in the commercial
automobile, personal automobile and workers’ compensation lines of
business.
Expense Ratio
The expense ratio was 35.0% for the second
quarter of 2022, compared to 36.0% for the second quarter of 2021.
The decrease in the expense ratio reflected lower
underwriting-based incentive costs for our agents and employees for
the second quarter of 2022 compared to the prior-year quarter.
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 92.9% of our
consolidated investment portfolio in diversified, highly rated and
marketable fixed-maturity securities at June 30, 2022.
|
June 30, 2022 |
|
December 31, 2021 |
|
|
Amount |
|
% |
|
Amount |
|
% |
|
|
(dollars in thousands) |
|
Fixed maturities, at carrying value: |
|
|
|
|
|
|
|
|
U.S. Treasury securities and obligations of U.S. government
corporations and agencies |
$ |
134,746 |
|
|
|
10.4 |
% |
|
$ |
121,453 |
|
|
|
9.5 |
% |
|
Obligations of states and political subdivisions |
|
448,206 |
|
|
|
34.5 |
|
|
|
428,814 |
|
|
|
33.6 |
|
|
Corporate securities |
|
398,017 |
|
|
|
30.6 |
|
|
|
412,758 |
|
|
|
32.3 |
|
|
Mortgage-backed securities |
|
226,412 |
|
|
|
17.4 |
|
|
|
237,709 |
|
|
|
18.6 |
|
|
Total fixed maturities |
|
1,207,381 |
|
|
|
92.9 |
|
|
|
1,200,734 |
|
|
|
94.0 |
|
|
Equity securities, at fair value |
|
45,261 |
|
|
|
3.5 |
|
|
|
63,420 |
|
|
|
5.0 |
|
|
Short-term investments, at cost |
|
46,685 |
|
|
|
3.6 |
|
|
|
12,692 |
|
|
|
1.0 |
|
|
Total investments |
$ |
1,299,327 |
|
|
|
100.0 |
% |
|
$ |
1,276,846 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
Average investment yield |
|
2.5 |
% |
|
|
|
|
2.6 |
% |
|
|
|
Average tax-equivalent investment yield |
|
2.6 |
% |
|
|
|
|
2.6 |
% |
|
|
|
Average fixed-maturity duration (years) |
|
6.1 |
|
|
|
|
|
4.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments at June 30, 2022 increased by
$22.5 million compared to December 31, 2021, as new funds invested
were largely offset by $41.5 million of unrealized losses within
our available-for-sale fixed-maturity portfolio due to a
substantial increase in market interest rates during the first half
of 2022.
Net investment income of $8.2 million for the
second quarter of 2022 increased 7.2% compared to $7.7 million for
the second quarter of 2021. The increase in net investment income
reflected primarily an increase in average invested assets relative
to the prior-year second quarter.
Net investment losses of $8.4 million for the
second quarter of 2022 were primarily related to unrealized losses
in the fair value of equity securities held at June 30, 2022. Net
investment gains of $4.2 million for the second quarter of 2021
were primarily related to unrealized gains in the fair value of
equity securities held at June 30, 2021.
Our book value per share was $15.87 at June 30, 2022, compared
to $16.95 at December 31, 2021, with the decrease primarily related
to after-tax unrealized losses within our available-for-sale
fixed-maturity portfolio during the first half of 2022 that reduced
our book value by $1.02 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 June 30, |
|
Six Months Ended June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Premiums |
|
|
|
|
|
|
|
|
|
|
|
|
Earned to Net Premiums Written |
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
204,128 |
|
|
$ |
192,489 |
|
|
6.0 |
% |
|
$ |
403,377 |
|
|
$ |
379,740 |
|
|
6.2 |
% |
|
Change in net unearned premiums |
|
14,318 |
|
|
|
17,116 |
|
|
-16.3 |
|
|
|
33,511 |
|
|
|
45,727 |
|
|
-26.7 |
|
|
Net premiums written |
$ |
218,446 |
|
|
$ |
209,605 |
|
|
4.2 |
% |
|
$ |
436,888 |
|
|
$ |
425,467 |
|
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a reconciliation of net (loss)
income to operating (loss) income for the periods indicated:
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
(dollars in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
|
to Non-GAAP Operating (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
$ |
(8,208 |
) |
|
$ |
16,164 |
|
|
NM |
|
|
$ |
4,937 |
|
|
$ |
26,694 |
|
|
-81.5 |
% |
|
Investment losses (gains) (after tax) |
|
6,618 |
|
|
|
(3,350 |
) |
|
NM |
|
|
|
6,678 |
|
|
|
(5,301 |
) |
|
NM |
|
|
Non-GAAP operating (loss) income |
$ |
(1,590 |
) |
|
$ |
12,814 |
|
|
NM |
|
|
$ |
11,615 |
|
|
$ |
21,393 |
|
|
-45.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Reconciliation of Net (loss) Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Non-GAAP Operating (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class A (diluted) |
$ |
(0.26 |
) |
|
$ |
0.53 |
|
|
NM |
|
|
$ |
0.16 |
|
|
$ |
0.88 |
|
|
-81.8 |
% |
|
Investment losses (gains) (after tax) |
|
0.21 |
|
|
|
(0.11 |
) |
|
NM |
|
|
|
0.21 |
|
|
|
(0.17 |
) |
|
NM |
|
|
Non-GAAP operating (loss) income – Class A |
$ |
(0.05 |
) |
|
$ |
0.42 |
|
|
NM |
|
|
$ |
0.37 |
|
|
$ |
0.71 |
|
|
-47.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income – Class B |
$ |
(0.24 |
) |
|
$ |
0.48 |
|
|
NM |
|
|
$ |
0.14 |
|
|
$ |
0.80 |
|
|
-82.5 |
% |
|
Investment losses (gains) (after tax) |
|
0.19 |
|
|
|
(0.10 |
) |
|
NM |
|
|
|
0.20 |
|
|
|
(0.16 |
) |
|
NM |
|
|
Non-GAAP operating (loss) income – Class B |
$ |
(0.05 |
) |
|
$ |
0.38 |
|
|
NM |
|
|
$ |
0.34 |
|
|
$ |
0.64 |
|
|
-46.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 July 21, 2022, we declared a regular
quarterly cash dividend of $0.165 per share for our Class A common
stock and $0.1475 per share for our Class B common stock, which is
payable on August 15, 2022 to stockholders of record as of the
close of business on August 1, 2022.
Pre-Recorded Webcast
At approximately 8:30 am EDT on Thursday, July
28, 2022, we will make available in the Investors section of our
website a pre-recorded audio webcast featuring management
commentary and a question and answer session. 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, prolonged
economic challenges resulting from the COVID-19 pandemic, 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,
our ability to maintain profitable operations (including our
ability to underwrite risks effectively and charge adequate premium
rates), 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 (Loss) Income |
(unaudited; in
thousands, except share data) |
|
|
|
|
|
Quarter Ended June 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
|
Net premiums earned |
$ |
204,128 |
|
|
$ |
192,489 |
Investment income, net of expenses |
|
8,204 |
|
|
|
7,652 |
Net investment (losses) gains |
|
(8,377 |
) |
|
|
4,241 |
Lease income |
|
98 |
|
|
|
108 |
Installment payment fees |
|
258 |
|
|
|
656 |
Total revenues |
|
204,311 |
|
|
|
205,146 |
|
|
|
|
Net losses and loss expenses |
|
141,608 |
|
|
|
113,957 |
Amortization of deferred acquisition costs |
|
35,172 |
|
|
|
33,103 |
Other underwriting expenses |
|
36,235 |
|
|
|
36,230 |
Policyholder dividends |
|
1,289 |
|
|
|
1,629 |
Interest |
|
240 |
|
|
|
217 |
Other expenses, net |
|
346 |
|
|
|
313 |
Total expenses |
|
214,890 |
|
|
|
185,449 |
|
|
|
|
(Loss) income before income tax (benefit) expense |
|
(10,579 |
) |
|
|
19,697 |
Income tax (benefit) expense |
|
(2,371 |
) |
|
|
3,533 |
|
|
|
|
Net (loss) income |
$ |
(8,208 |
) |
|
$ |
16,164 |
|
|
|
|
(Loss) earnings per common share: |
|
|
|
Class A - basic and diluted |
$ |
(0.26 |
) |
|
$ |
0.53 |
Class B - basic and diluted |
$ |
(0.24 |
) |
|
$ |
0.48 |
|
|
|
|
Supplementary Financial Analysts' Data |
|
|
|
|
|
|
|
Weighted-average number of shares outstanding: |
|
|
|
Class A - basic |
|
26,069,692 |
|
|
|
25,341,989 |
Class A - diluted |
|
26,294,147 |
|
|
|
25,594,024 |
Class B - basic and diluted |
|
5,576,775 |
|
|
|
5,576,775 |
|
|
|
|
Net premiums written |
$ |
218,446 |
|
|
$ |
209,605 |
|
|
|
|
Book value per common share at end of period |
$ |
15.87 |
|
|
$ |
17.64 |
|
|
|
|
Donegal Group
Inc. |
Consolidated
Statements of Income |
(unaudited; in
thousands, except share data) |
|
|
|
|
|
Six Months Ended June 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
|
Net premiums earned |
$ |
403,377 |
|
|
$ |
379,740 |
Investment income, net of expenses |
|
16,063 |
|
|
|
15,163 |
Net investment (losses) gains |
|
(8,453 |
) |
|
|
6,710 |
Lease income |
|
203 |
|
|
|
216 |
Installment payment fees |
|
748 |
|
|
|
1,287 |
Total revenues |
|
411,938 |
|
|
|
403,116 |
|
|
|
|
Net losses and loss expenses |
|
259,491 |
|
|
|
233,176 |
Amortization of deferred acquisition costs |
|
69,354 |
|
|
|
63,282 |
Other underwriting expenses |
|
73,342 |
|
|
|
70,012 |
Policyholder dividends |
|
2,937 |
|
|
|
2,924 |
Interest |
|
393 |
|
|
|
530 |
Other expenses, net |
|
774 |
|
|
|
744 |
Total expenses |
|
406,291 |
|
|
|
370,668 |
|
|
|
|
Income before income tax expense |
|
5,647 |
|
|
|
32,448 |
Income tax expense |
|
710 |
|
|
|
5,754 |
|
|
|
|
Net income |
$ |
4,937 |
|
|
$ |
26,694 |
|
|
|
|
Net income per common share: |
|
|
|
Class A - basic |
$ |
0.16 |
|
|
$ |
0.89 |
Class A - diluted |
$ |
0.16 |
|
|
$ |
0.88 |
Class B - basic and diluted |
$ |
0.14 |
|
|
$ |
0.80 |
|
|
|
|
Supplementary Financial Analysts' Data |
|
|
|
|
|
|
|
Weighted-average number of shares outstanding: |
|
|
|
Class A - basic |
|
25,928,952 |
|
|
|
25,056,610 |
Class A - diluted |
|
26,052,149 |
|
|
|
25,246,791 |
Class B - basic and diluted |
|
5,576,775 |
|
|
|
5,576,775 |
|
|
|
|
Net premiums written |
$ |
436,888 |
|
|
$ |
425,467 |
|
|
|
|
Book value per common share at end of period |
$ |
15.87 |
|
|
$ |
17.64 |
|
|
|
|
Donegal Group
Inc. |
Consolidated Balance
Sheets |
(in thousands) |
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2022 |
|
|
|
2021 |
|
|
(unaudited) |
|
|
|
|
|
|
ASSETS |
Investments: |
|
|
|
Fixed maturities: |
|
|
|
Held to maturity, at amortized cost |
$ |
700,335 |
|
|
$ |
668,105 |
|
Available for sale, at fair value |
|
507,046 |
|
|
|
532,629 |
|
Equity securities, at fair value |
|
45,261 |
|
|
|
63,420 |
|
Short-term investments, at cost |
|
46,685 |
|
|
|
12,692 |
|
Total investments |
|
1,299,327 |
|
|
|
1,276,846 |
|
Cash |
|
21,811 |
|
|
|
57,709 |
|
Premiums receivable |
|
190,324 |
|
|
|
168,863 |
|
Reinsurance receivable |
|
445,151 |
|
|
|
455,411 |
|
Deferred policy acquisition costs |
|
74,247 |
|
|
|
68,028 |
|
Prepaid reinsurance premiums |
|
172,406 |
|
|
|
176,936 |
|
Receivable from Michigan Catastrophic Claims Association |
|
- |
|
|
|
18,113 |
|
Other assets |
|
46,582 |
|
|
|
33,269 |
|
Total assets |
$ |
2,249,848 |
|
|
$ |
2,255,175 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
Liabilities: |
|
|
|
Losses and loss expenses |
$ |
1,083,354 |
|
|
$ |
1,077,620 |
|
Unearned premiums |
|
601,939 |
|
|
|
572,958 |
|
Accrued expenses |
|
4,797 |
|
|
|
4,029 |
|
Borrowings under lines of credit |
|
35,000 |
|
|
|
35,000 |
|
Cash refunds due to Michigan policyholders |
|
- |
|
|
|
18,113 |
|
Other liabilities |
|
13,736 |
|
|
|
16,419 |
|
Total liabilities |
|
1,738,826 |
|
|
|
1,724,139 |
|
Stockholders' equity: |
|
|
|
Class A common stock |
|
296 |
|
|
|
288 |
|
Class B common stock |
|
56 |
|
|
|
56 |
|
Additional paid-in capital |
|
317,940 |
|
|
|
304,889 |
|
Accumulated other comprehensive (loss) income |
|
(29,477 |
) |
|
|
3,284 |
|
Retained earnings |
|
263,433 |
|
|
|
263,745 |
|
Treasury stock |
|
(41,226 |
) |
|
|
(41,226 |
) |
Total stockholders' equity |
|
511,022 |
|
|
|
531,036 |
|
Total liabilities and stockholders' equity |
$ |
2,249,848 |
|
|
$ |
2,255,175 |
|
|
|
|
|
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