Donegal Group Inc. (NASDAQ:DGICA) and (NASDAQ:DGICB) today reported
its financial results for the third quarter and first nine months
of 2022.
Significant items for third quarter of 2022 (all
comparisons to third quarter of 2021):
- Net loss of
$10.4 million, or 33 cents per Class A share, compared to $6.7
million, or 22 cents per Class A share
- Net premiums
earned increased 5.0% to $206.1 million
- Net premiums
written1 increased 4.7% to $206.2 million
- Combined ratio
of 109.6%, compared to 107.7%, largely due to elevated
weather-related and fire loss activity
- Net loss
included after-tax net investment losses of $1.9 million, or 6
cents per Class A share, compared to $1.2 million, or 4 cents per
Class A share
- Book value per
share of $14.85 at September 30, 2022, compared to $17.21
|
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Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
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|
2021 |
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|
% Change |
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2022 |
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|
2021 |
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|
% Change |
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(dollars in thousands, except per share amounts) |
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Income Statement Data |
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Net premiums earned |
$ |
206,122 |
|
|
$ |
196,235 |
|
|
|
5.0 |
% |
|
$ |
609,499 |
|
|
$ |
575,975 |
|
|
|
5.8 |
% |
Investment income, net |
|
8,569 |
|
|
|
7,764 |
|
|
|
10.4 |
|
|
|
24,631 |
|
|
|
22,926 |
|
|
|
7.4 |
|
Net investment (losses) gains |
|
(2,358 |
) |
|
|
(1,570 |
) |
|
|
50.2 |
|
|
|
(10,811 |
) |
|
|
5,140 |
|
|
NM2 |
Total revenues |
|
212,838 |
|
|
|
203,106 |
|
|
|
4.8 |
|
|
|
624,776 |
|
|
|
606,222 |
|
|
|
3.1 |
|
Net (loss) income |
|
(10,376 |
) |
|
|
(6,712 |
) |
|
|
54.6 |
|
|
|
(5,439 |
) |
|
|
19,982 |
|
|
NM |
Non-GAAP operating (loss) income1 |
|
(8,513 |
) |
|
|
(5,471 |
) |
|
|
55.6 |
|
|
|
3,102 |
|
|
|
15,922 |
|
|
|
-80.5 |
|
Annualized (loss) return on average equity |
|
-8.4 |
% |
|
|
-4.9 |
% |
|
|
-3.5 |
pts |
|
|
-1.4 |
% |
|
|
5.0 |
% |
|
|
-6.4 |
pts |
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Per Share Data |
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Net (loss) income – Class A (diluted) |
$ |
(0.33 |
) |
|
$ |
(0.22 |
) |
|
|
50.0 |
% |
|
$ |
(0.17 |
) |
|
$ |
0.66 |
|
|
NM |
Net (loss) income – Class B |
|
(0.30 |
) |
|
|
(0.20 |
) |
|
|
50.0 |
|
|
|
(0.16 |
) |
|
|
0.59 |
|
|
NM |
Non-GAAP operating (loss) income – Class A (diluted) |
|
(0.27 |
) |
|
|
(0.18 |
) |
|
|
50.0 |
|
|
|
0.10 |
|
|
|
0.52 |
|
|
|
-80.8 |
% |
Non-GAAP operating (loss) income – Class B |
|
(0.25 |
) |
|
|
(0.16 |
) |
|
|
56.3 |
|
|
|
0.08 |
|
|
|
0.47 |
|
|
|
-83.0 |
|
Book value |
|
14.85 |
|
|
|
17.21 |
|
|
|
-13.7 |
|
|
|
14.85 |
|
|
|
17.21 |
|
|
|
-13.7 |
|
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|
1The “Definitions of Non-GAAP and Financial
Measures” section of this release defines data that we prepare on
an accounting basis other than U.S. generally accepted accounting
principles (“GAAP”) and reconciles GAAP measures to such data.
2Not meaningful.
Management Commentary
Kevin G. Burke, President and Chief Executive
Officer of Donegal Group Inc., noted, “We are strategically
managing premium growth in the challenging current economic
environment and continue to focus on strategies and tactics that we
believe will yield long-term profit improvement. Weather-related
loss activity for the third quarter of 2022 was in line with our
historical run rate for the third quarter. Large fire losses had a
significant adverse impact on our commercial segment quarterly
results. While we did not identify any commonality among the
locations or causes of the large fire losses, the increased average
severity of these losses compared to the prior-year quarter
reflects in part ongoing inflationary increases in the costs of
labor and materials. We and other insurance carriers have
experienced higher impact from fire losses in recent years compared
to historical norms, and we are increasing our utilization of
internal and third-party data to analytically identify underlying
or emerging risk characteristics we should be considering in our
new business and renewal underwriting decisions.”
Mr. Burke continued, “Overall, we remain
encouraged by strong premium retention levels that were bolstered
by substantial rate increases we have taken across the majority of
our lines of business throughout 2022. In light of ongoing
inflation impact on loss trends, we expect to continue implementing
premium rate increases in the fourth quarter of 2022 and in 2023.
The execution of individual state strategies during 2022 has led to
higher-than-average premium growth in well-performing states and
reduced exposures in underperforming states. We are refining
further our state strategies for 2023 to focus on specific
geographies and classes of business we have identified as most
promising for profitable future growth. As earned premiums reflect
higher premium rates and loss costs stabilize in future periods, we
believe the ongoing execution of our strategic plan will lead to
improved results. We are also making significant strides in our
ongoing modernization initiatives, which we believe are positioning
us well to excel in the years ahead.”
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), 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.
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Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
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|
2021 |
|
|
% Change |
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|
2022 |
|
|
|
2021 |
|
|
% Change |
|
(dollars in thousands) |
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Net Premiums Earned |
|
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|
Commercial lines |
$ |
127,497 |
|
|
$ |
119,709 |
|
|
|
6.5 |
% |
|
$ |
378,680 |
|
|
$ |
344,234 |
|
|
|
10.0 |
% |
Personal lines |
|
78,625 |
|
|
|
76,526 |
|
|
|
2.7 |
|
|
|
230,819 |
|
|
|
231,741 |
|
|
|
-0.4 |
|
Total net premiums earned |
$ |
206,122 |
|
|
$ |
196,235 |
|
|
|
5.0 |
% |
|
$ |
609,499 |
|
|
$ |
575,975 |
|
|
|
5.8 |
% |
|
|
|
|
|
|
|
|
|
|
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|
Net Premiums Written |
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Commercial lines: |
|
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|
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|
|
|
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|
Automobile |
$ |
37,330 |
|
|
$ |
36,604 |
|
|
|
2.0 |
% |
|
$ |
129,546 |
|
|
$ |
126,417 |
|
|
|
2.5 |
% |
Workers' compensation |
|
24,633 |
|
|
|
26,265 |
|
|
|
-6.2 |
|
|
|
86,873 |
|
|
|
89,773 |
|
|
|
-3.2 |
|
Commercial multi-peril |
|
46,864 |
|
|
|
43,869 |
|
|
|
6.8 |
|
|
|
152,178 |
|
|
|
143,584 |
|
|
|
6.0 |
|
Other |
|
9,357 |
|
|
|
9,157 |
|
|
|
2.2 |
|
|
|
30,964 |
|
|
|
29,578 |
|
|
|
4.7 |
|
Total commercial lines |
|
118,184 |
|
|
|
115,895 |
|
|
|
2.0 |
|
|
|
399,561 |
|
|
|
389,352 |
|
|
|
2.6 |
|
Personal lines: |
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
48,472 |
|
|
|
44,711 |
|
|
|
8.4 |
|
|
|
135,700 |
|
|
|
132,014 |
|
|
|
2.8 |
|
Homeowners |
|
34,082 |
|
|
|
30,978 |
|
|
|
10.0 |
|
|
|
90,382 |
|
|
|
84,035 |
|
|
|
7.6 |
|
Other |
|
5,491 |
|
|
|
5,431 |
|
|
|
1.1 |
|
|
|
17,474 |
|
|
|
17,081 |
|
|
|
2.3 |
|
Total personal lines |
|
88,045 |
|
|
|
81,120 |
|
|
|
8.5 |
|
|
|
243,556 |
|
|
|
233,130 |
|
|
|
4.5 |
|
Total net premiums written |
$ |
206,229 |
|
|
$ |
197,015 |
|
|
|
4.7 |
% |
|
$ |
643,117 |
|
|
$ |
622,482 |
|
|
|
3.3 |
% |
|
|
|
|
|
|
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|
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|
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Net Premiums Written
The 4.7% increase in net premiums written for
the third quarter of 2022 compared to the third quarter of 2021, as
shown in the table above, represents 2.0% growth in commercial
lines net premiums written and 8.5% growth in personal lines net
premiums written. The $9.2 million increase in net premiums written
for the third quarter of 2022 compared to the third quarter of 2021
included:
- Commercial
Lines: $2.3 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:
$6.9 million increase that we attribute to premium rate increases
our insurance subsidiaries have implemented over the past four
quarters, strong policy retention and 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 nine months ended September 30, 2022 and
2021:
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
GAAP Combined Ratios (Total Lines) |
|
|
|
|
Loss ratio (non-weather) |
66.2 |
% |
|
66.3 |
% |
|
60.4 |
% |
|
59.8 |
% |
Loss ratio (weather-related) |
9.4 |
|
|
9.2 |
|
|
7.7 |
|
|
6.4 |
|
Expense ratio |
33.4 |
|
|
31.5 |
|
|
34.7 |
|
|
33.9 |
|
Dividend ratio |
0.6 |
|
|
0.7 |
|
|
0.7 |
|
|
0.7 |
|
Combined ratio |
109.6 |
% |
|
107.7 |
% |
|
103.5 |
% |
|
100.8 |
% |
|
|
|
|
|
|
|
|
Statutory Combined Ratios |
|
|
|
|
|
Commercial lines: |
|
|
|
|
|
|
Automobile |
107.0 |
% |
|
111.9 |
% |
|
98.7 |
% |
|
106.7 |
% |
Workers' compensation |
105.9 |
|
|
109.0 |
|
|
93.9 |
|
|
96.0 |
|
Commercial multi-peril |
125.0 |
|
|
116.9 |
|
|
114.9 |
|
|
106.5 |
|
Other |
85.9 |
|
|
64.0 |
|
|
81.9 |
|
|
67.2 |
|
Total commercial lines |
112.1 |
|
|
109.4 |
|
|
102.4 |
|
|
101.1 |
|
Personal lines: |
|
|
|
|
|
|
Automobile |
103.1 |
|
|
102.0 |
|
|
100.2 |
|
|
95.4 |
|
Homeowners |
125.0 |
|
|
117.5 |
|
|
118.8 |
|
|
107.4 |
|
Other |
54.6 |
|
|
65.4 |
|
|
49.9 |
|
|
72.2 |
|
Total personal lines |
107.8 |
|
|
105.2 |
|
|
103.4 |
|
|
98.2 |
|
Total lines |
110.1 |
% |
|
107.7 |
% |
|
102.8 |
% |
|
100.0 |
% |
|
|
|
|
|
|
|
|
Loss Ratio
For the third quarter of 2022, the loss ratio
increased to 75.6%, compared to 75.5% for the third quarter of
2021. Weather-related losses of approximately $19.4 million, or 9.4
percentage points of the loss ratio, for the third quarter of 2022,
increased from $18.0 million, or 9.2 percentage points of the loss
ratio, for the third quarter of 2021. The impact of weather-related
loss activity to the loss ratio for the third quarter of 2022 was
in line with our previous five-year average of 9.4 percentage
points for third quarter weather-related losses. We expect a
minimal loss impact from the inland remnants of Hurricane Ian in
late September 2022.
Large fire losses, which we define as individual
fire losses in excess of $50,000, for the third quarter of 2022
were $17.4 million, or 8.4 percentage points of the loss ratio.
That amount represented a significant increase compared to the
large fire losses of $12.7 million, or 6.5 percentage points of the
loss ratio, for the third quarter of 2021. We experienced a $4.8
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 $6.2 million decreased the loss
ratio for the third quarter of 2022 by 3.0 percentage points,
compared to $4.3 million that decreased the loss ratio for the
third quarter of 2021 by 2.2 percentage points. Our insurance
subsidiaries experienced favorable development primarily relating
to reserves for accident years 2021 and 2020 in the commercial
multi-peril, commercial automobile and personal automobile lines of
business.
Expense Ratio
The expense ratio was 33.4% for the third
quarter of 2022, compared to 31.5% for the third quarter of 2021.
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 93.5% of our
consolidated investment portfolio in diversified, highly rated and
marketable fixed-maturity securities at September 30, 2022.
|
September 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 |
$ |
146,782 |
|
|
11.5 |
% |
|
$ |
121,453 |
|
|
9.5 |
% |
Obligations of states and political subdivisions |
|
433,740 |
|
|
33.9 |
|
|
|
428,814 |
|
|
33.6 |
|
Corporate securities |
|
400,811 |
|
|
31.3 |
|
|
|
412,758 |
|
|
32.3 |
|
Mortgage-backed securities |
|
215,955 |
|
|
16.8 |
|
|
|
237,709 |
|
|
18.6 |
|
Total fixed maturities |
|
1,197,288 |
|
|
93.5 |
|
|
|
1,200,734 |
|
|
94.0 |
|
Equity securities, at fair value |
|
46,776 |
|
|
3.6 |
|
|
|
63,420 |
|
|
5.0 |
|
Short-term investments, at cost |
|
36,660 |
|
|
2.9 |
|
|
|
12,692 |
|
|
1.0 |
|
Total investments |
$ |
1,280,724 |
|
|
100.0 |
% |
|
$ |
1,276,846 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
Average investment yield |
|
2.6 |
% |
|
|
|
|
2.5 |
% |
|
|
Average tax-equivalent investment yield |
|
2.7 |
% |
|
|
|
|
2.6 |
% |
|
|
Average fixed-maturity duration (years) |
|
6.1 |
|
|
|
|
|
4.7 |
|
|
|
|
|
|
|
|
|
|
|
Total investments at September 30, 2022
increased by $3.9 million compared to December 31, 2021, as new
funds invested were largely offset by $64.0 million of unrealized
losses within our available-for-sale fixed-maturity portfolio due
to a substantial increase in market interest rates during the first
nine months of 2022.
Net investment income of $8.6 million for the
third quarter of 2022 increased 10.4% compared to $7.8 million in
net investment income for the third quarter of 2021. The increase
in net investment income reflected an increase in average invested
assets and an increase in the average investment yield relative to
the prior-year third quarter.
Net investment losses were $2.4 million for the
third quarter of 2022, compared to $1.6 million for the third
quarter of 2021. 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 $14.85 at September
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
nine months of 2022 that reduced our book value by $1.55 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, |
|
|
2022 |
|
|
2021 |
|
% Change |
|
|
2022 |
|
|
2021 |
|
% Change |
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Premiums |
|
|
|
|
|
|
|
|
Earned to Net Premiums Written |
|
|
|
|
|
|
|
|
Net premiums earned |
$ |
206,122 |
|
$ |
196,235 |
|
5.0 |
% |
|
$ |
609,499 |
|
$ |
575,975 |
|
5.8 |
% |
Change in net unearned premiums |
|
107 |
|
|
780 |
|
-86.3 |
|
|
|
33,618 |
|
|
46,507 |
|
-27.7 |
|
Net premiums written |
$ |
206,229 |
|
$ |
197,015 |
|
4.7 |
% |
|
$ |
643,117 |
|
$ |
622,482 |
|
3.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a reconciliation of
net (loss) income to operating (loss) income for the periods
indicated:
|
Three Months Ended September 30, |
|
Nine Months Ended September 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 |
$ |
(10,376 |
) |
|
$ |
(6,712 |
) |
|
54.6 |
% |
|
$ |
(5,439 |
) |
|
$ |
19,982 |
|
NM |
Investment losses (gains) (after tax) |
1,863 |
|
|
1,241 |
|
|
50.1 |
|
|
8,541 |
|
|
(4,060 |
) |
NM |
Non-GAAP operating (loss) income |
$ |
(8,513 |
) |
|
$ |
(5,471 |
) |
|
55.6 |
% |
|
$ |
3,102 |
|
|
$ |
15,922 |
|
-80.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Reconciliation of Net (loss) Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Non-GAAP Operating (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income – Class A (diluted) |
$ |
(0.33 |
) |
|
$ |
(0.22 |
) |
|
50.0 |
% |
|
$ |
(0.17 |
) |
|
$ |
0.66 |
|
NM |
Investment losses (gains) (after tax) |
0.06 |
|
|
0.04 |
|
|
50.0 |
|
|
0.27 |
|
|
(0.14 |
) |
NM |
Non-GAAP
operating (loss) income – Class A |
$ |
(0.27 |
) |
|
$ |
(0.18 |
) |
|
50.0 |
% |
|
$ |
0.10 |
|
|
$ |
0.52 |
|
-80.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income – Class B |
$ |
(0.30 |
) |
|
$ |
(0.20 |
) |
|
50.0 |
% |
|
$ |
(0.16 |
) |
|
$ |
0.59 |
|
NM |
Investment losses (gains) (after tax) |
0.05 |
|
|
0.04 |
|
|
25.0 |
|
|
0.24 |
|
|
(0.12 |
) |
NM |
Non-GAAP
operating (loss) income – Class B |
$ |
(0.25 |
) |
|
$ |
(0.16 |
) |
|
56.3 |
% |
|
$ |
0.08 |
|
|
$ |
0.47 |
|
-83.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 20, 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 are
payable on November 15, 2022 to stockholders of record as of the
close of business on November 1, 2022.
Pre-Recorded Webcast
At approximately 8:30 am EDT on Thursday,
October 27, 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 |
(unaudited; in
thousands, except share data) |
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
Net premiums earned |
$ |
206,122 |
|
|
$ |
196,235 |
|
Investment income, net of expenses |
|
8,569 |
|
|
|
7,764 |
|
Net investment losses |
|
(2,358 |
) |
|
|
(1,570 |
) |
Lease income |
|
92 |
|
|
|
108 |
|
Installment payment fees |
|
414 |
|
|
|
569 |
|
|
Total revenues |
|
212,839 |
|
|
|
203,106 |
|
|
|
|
|
|
|
Net losses and loss expenses |
|
155,754 |
|
|
|
148,142 |
|
Amortization of deferred acquisition costs |
|
35,513 |
|
|
|
31,778 |
|
Other underwriting expenses |
|
33,412 |
|
|
|
30,102 |
|
Policyholder dividends |
|
1,239 |
|
|
|
1,287 |
|
Interest |
|
|
71 |
|
|
|
210 |
|
Other expenses, net |
|
219 |
|
|
|
217 |
|
|
Total expenses |
|
226,208 |
|
|
|
211,736 |
|
|
|
|
|
|
|
Loss before income tax benefit |
|
(13,369 |
) |
|
|
(8,630 |
) |
Income tax benefit |
|
(2,993 |
) |
|
|
(1,918 |
) |
|
|
|
|
|
|
Net loss |
|
$ |
(10,376 |
) |
|
$ |
(6,712 |
) |
|
|
|
|
|
|
Loss per common share: |
|
|
|
|
Class A - basic and diluted |
$ |
(0.33 |
) |
|
$ |
(0.22 |
) |
|
Class B - basic and diluted |
$ |
(0.30 |
) |
|
$ |
(0.20 |
) |
|
|
|
|
|
|
Supplementary Financial Analysts' Data |
|
|
|
|
|
|
|
|
|
Weighted-average number of shares |
|
|
|
|
outstanding: |
|
|
|
|
Class A - basic |
|
26,781,374 |
|
|
|
25,676,313 |
|
|
Class A - diluted |
|
26,974,506 |
|
|
|
25,831,343 |
|
|
Class B - basic and diluted |
|
5,576,775 |
|
|
|
5,576,775 |
|
|
|
|
|
|
|
Net premiums written |
$ |
206,229 |
|
|
$ |
197,015 |
|
|
|
|
|
|
|
Book value per common share at end of period |
$ |
14.85 |
|
|
$ |
17.21 |
|
|
|
|
|
|
|
Donegal Group Inc. |
|
Consolidated Statements of (Loss) Income |
|
(unaudited; in thousands, except share data) |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
Net premiums
earned |
$ |
609,499 |
|
|
$ |
575,975 |
Investment income,
net of expenses |
24,631 |
|
|
22,926 |
Net investment (losses) gains |
(10,811 |
) |
|
5,140 |
Lease income |
295 |
|
|
324 |
Installment
payment fees |
1,162 |
|
|
1,857 |
|
Total
revenues |
624,776 |
|
|
606,222 |
|
|
|
|
|
|
Net losses and
loss expenses |
415,246 |
|
|
381,319 |
Amortization of
deferred acquisition costs |
104,867 |
|
|
95,060 |
Other underwriting
expenses |
106,753 |
|
|
100,113 |
Policyholder
dividends |
4,177 |
|
|
4,211 |
Interest |
464 |
|
|
739 |
Other expenses,
net |
991 |
|
|
962 |
|
Total
expenses |
632,498 |
|
|
582,404 |
|
|
|
|
|
|
(Loss) income
before income tax (benefit) expense |
(7,722 |
) |
|
23,818 |
Income tax
(benefit) expense |
(2,283 |
) |
|
3,836 |
|
|
|
|
|
|
Net (loss)
income |
$ |
(5,439 |
) |
|
$ |
19,982 |
|
|
|
|
|
|
Net (loss) income
per common share: |
|
|
|
|
|
Class A - basic and diluted |
$ |
(0.17 |
) |
|
$ |
0.66 |
|
Class B - basic
and diluted |
$ |
(0.16 |
) |
|
$ |
0.59 |
|
|
|
|
|
|
Supplementary
Financial Analysts' Data |
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares outstanding: |
|
|
|
|
|
Class A -
basic |
26,216,215 |
|
|
25,265,448 |
|
Class A -
diluted |
26,362,723 |
|
|
25,443,911 |
|
Class B - basic
and diluted |
5,576,775 |
|
|
5,576,775 |
|
|
|
|
|
|
Net premiums
written |
$ |
643,117 |
|
|
$ |
622,482 |
|
|
|
|
|
|
Book value per
common share at end of period |
$ |
14.85 |
|
|
$ |
17.21 |
|
|
|
|
|
|
Donegal Group
Inc. |
Consolidated Balance
Sheets |
(in thousands) |
|
|
|
|
|
|
|
|
|
September 30, |
December 31, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
ASSETS |
Investments: |
|
|
|
|
Fixed maturities: |
|
|
|
|
|
Held to
maturity, at amortized cost |
$ |
696,392 |
|
|
$ |
668,105 |
|
|
|
Available
for sale, at fair value |
|
500,896 |
|
|
|
532,629 |
|
|
Equity securities, at fair value |
|
46,776 |
|
|
|
63,420 |
|
|
Short-term investments, at cost |
|
36,660 |
|
|
|
12,692 |
|
|
|
Total investments |
|
1,280,724 |
|
|
|
1,276,846 |
|
Cash |
|
|
26,661 |
|
|
|
57,709 |
|
Premiums receivable |
|
181,745 |
|
|
|
168,863 |
|
Reinsurance receivable |
|
451,847 |
|
|
|
455,411 |
|
Deferred policy acquisition costs |
|
74,384 |
|
|
|
68,028 |
|
Prepaid reinsurance premiums |
|
165,713 |
|
|
|
176,936 |
|
Receivable from Michigan Catastrophic Claims Association |
|
- |
|
|
|
18,113 |
|
Other assets |
|
55,778 |
|
|
|
33,269 |
|
|
|
Total
assets |
$ |
2,236,852 |
|
|
$ |
2,255,175 |
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
Liabilities: |
|
|
|
|
Losses and loss expenses |
$ |
1,108,126 |
|
|
$ |
1,077,620 |
|
|
Unearned premiums |
|
595,353 |
|
|
|
572,958 |
|
|
Accrued expenses |
|
4,311 |
|
|
|
4,029 |
|
|
Borrowings under lines of credit |
|
35,000 |
|
|
|
35,000 |
|
|
Cash refunds due to Michigan policyholders |
|
- |
|
|
|
18,113 |
|
|
Other liabilities |
|
12,859 |
|
|
|
16,419 |
|
|
|
Total
liabilities |
|
1,755,649 |
|
|
|
1,724,139 |
|
Stockholders' equity: |
|
|
|
|
Class A common stock |
|
298 |
|
|
|
288 |
|
|
Class B common stock |
|
56 |
|
|
|
56 |
|
|
Additional paid-in capital |
|
321,364 |
|
|
|
304,889 |
|
|
Accumulated other comprehensive (loss) income |
|
(46,971 |
) |
|
|
3,284 |
|
|
Retained earnings |
|
247,682 |
|
|
|
263,745 |
|
|
Treasury stock |
|
(41,226 |
) |
|
|
(41,226 |
) |
|
|
Total
stockholders' equity |
|
481,203 |
|
|
|
531,036 |
|
|
|
Total
liabilities and stockholders' equity |
$ |
2,236,852 |
|
|
$ |
2,255,175 |
|
|
|
|
|
|
|
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