MARIETTA, Pa., July 27, 2023 (GLOBE NEWSWIRE) -- Donegal Group Inc. ( DGICA) and ( DGICB) today reported its financial results for the second quarter and first half of 2023.
Significant Items for Second Quarter of 2023 (all comparisons to second quarter of 2022):
- Net income of $2.0 million, or 6 cents per diluted Class A share, compared to net loss of $8.2 million, or 26 cents per Class A share
- Net premiums earned increased 5.9% to $216.3 million
- Net premiums written1 increased 3.7% to $226.5 million
- Combined ratio of 104.7%, compared to 105.0%
- Net income included after-tax net investment gains of $2.0 million, or 6 cents per diluted Class A share, compared to after-tax net investment losses of $6.6 million, or 21 cents per Class A share
- Book value per share of $14.68 at June 30, 2023
Financial Summary
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
| 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||||||||
| (dollars in thousands, except per share amounts) | |||||||||||||||||||||
| Income Statement Data | |||||||||||||||||||||
| Net premiums earned | $ | 216,260 | $ | 204,128 | 5.9 | % | $ | 431,493 | $ | 403,377 | 7.0 | % | |||||||||
| Investment income, net | 10,157 | 8,204 | 23.8 | 19,607 | 16,063 | 22.1 | |||||||||||||||
| Net investment gains (losses) | 2,504 | (8,377 | ) | NM2 | 2,173 | (8,453 | ) | NM | |||||||||||||
| Total revenues | 229,196 | 204,311 | 12.2 | 453,942 | 411,938 | 10.2 | |||||||||||||||
| Net income (loss) | 1,997 | (8,208 | ) | NM | 7,201 | 4,937 | 45.9 | ||||||||||||||
| Non-GAAP operating income (loss)1 | 19 | (1,590 | ) | NM | 5,484 | 11,615 | -52.8 | ||||||||||||||
| Annualized return (loss) on average equity | 1.6 | % | -6.3 | % | NM | 3.0 | % | 1.9 | % | 1.1 pts | |||||||||||
| Per Share Data | |||||||||||||||||||||
| Net income (loss) – Class A (diluted) | $ | 0.06 | $ | (0.26 | ) | NM | $ | 0.22 | $ | 0.16 | 37.5 | % | |||||||||
| Net income (loss) – Class B | 0.05 | (0.24 | ) | NM | 0.20 | 0.14 | 42.9 | ||||||||||||||
| Non-GAAP operating income (loss) – Class A (diluted) | - | (0.05 | ) | NM | 0.17 | 0.37 | -54.1 | ||||||||||||||
| Non-GAAP operating income (loss) – Class B | - | (0.05 | ) | NM | 0.15 | 0.34 | -55.9 | ||||||||||||||
| Book value | 14.68 | 15.87 | -7.5 | % | 14.68 | 15.87 | -7.5 | ||||||||||||||
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
“We are continuing to navigate through a challenging time for the insurance industry as we respond to the ongoing effects of elevated loss cost inflation. During the quarter, we intentionally slowed our new business growth in personal lines, a strategic decision due to the ongoing inflationary increases in the cost and duration of automobile and property repairs seen across the industry. Personal lines premium growth of 14.8% was primarily driven by rating actions, with average renewal rate increases of 13.6% for the second quarter. For our commercial lines segment, we have continued the rollout of modernized commercial automobile, umbrella and businessowners products with enhanced straight-through processing capabilities for our agents. After a successful initial rollout in three states in the first quarter of 2023, we have launched the enhanced products and agency portal in the remaining 19 states where we offer commercial lines for policies effective beginning August 1. Commercial premium retention and rate increases remained strong during the second quarter, but they were more than offset by policy attrition in several states we are exiting or have targeted for profit improvement and the effect of reinsurance reinstatement premiums resulting from utilization of reinsurance for several large property losses. Renewal rate increases averaged 10.1% for commercial lines other than workers’ compensation for the second quarter of 2023. We remain confident in our ability to grow our business profitably as we continue to execute numerous strategies over the next few years,” said Kevin G. Burke, President and Chief Executive Officer.
He continued, “We saw modest improvement in profitability, as expected, in the second quarter of 2023. While no large catastrophe weather event impacted the quarterly loss ratio, the frequency of losses from smaller weather-related events across our footprint increased. We remain committed to implementing rate increases across our operating regions and taking specific data-driven underwriting actions to improve our geographic spread of risk in response to the uptick in the frequency of weather events. We are committed to enhancing our operational efficiency, profitability and long-term value creation for the benefit of our policyholders, agents and stockholders.”
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 June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||||
| (dollars in thousands) | |||||||||||||||||
| Net Premiums Earned | |||||||||||||||||
| Commercial lines | $ | 128,092 | $ | 126,854 | 1.0 | % | $ | 258,558 | $ | 251,183 | 2.9 | % | |||||
| Personal lines | 88,168 | 77,274 | 14.1 | 172,935 | 152,194 | 13.6 | |||||||||||
| Total net premiums earned | $ | 216,260 | $ | 204,128 | 5.9 | % | $ | 431,493 | $ | 403,377 | 7.0 | % | |||||
| Net Premiums Written | |||||||||||||||||
| Commercial lines: | |||||||||||||||||
| Automobile | $ | 45,249 | $ | 43,588 | 3.8 | % | $ | 97,318 | $ | 92,216 | 5.5 | % | |||||
| Workers' compensation | 27,743 | 29,343 | -5.5 | 60,944 | 62,240 | -2.1 | |||||||||||
| Commercial multi-peril | 46,823 | 51,117 | -8.4 | 102,673 | 105,314 | -2.5 | |||||||||||
| Other | 10,379 | 10,496 | -1.1 | 22,269 | 21,607 | 3.1 | |||||||||||
| Total commercial lines | 130,194 | 134,544 | -3.2 | 283,204 | 281,377 | 0.6 | |||||||||||
| Personal lines: | |||||||||||||||||
| Automobile | 53,329 | 44,988 | 18.5 | 103,310 | 87,228 | 18.4 | |||||||||||
| Homeowners | 37,213 | 32,785 | 13.5 | 65,402 | 56,300 | 16.2 | |||||||||||
| Other | 5,776 | 6,129 | -5.8 | 11,900 | 11,983 | -0.7 | |||||||||||
| Total personal lines | 96,318 | 83,902 | 14.8 | 180,612 | 155,511 | 16.1 | |||||||||||
| Total net premiums written | $ | 226,512 | $ | 218,446 | 3.7 | % | $ | 463,816 | $ | 436,888 | 6.2 | % | |||||
Net Premiums Written
The 3.7% increase in net premiums written for the second quarter of 2023 compared to the second quarter of 2022, as shown in the table above, represents a 3.2% decline in commercial lines net premiums written and 14.8% growth in personal lines net premiums written. The $8.1 million increase in net premiums written for the second quarter of 2023 compared to the second quarter of 2022 included:
- Commercial Lines: $4.3 million decrease that we attribute primarily to planned attrition in states we are exiting or have targeted for profit improvement, lower new business writings and reinsurance reinstatement premiums on our property excess of loss reinsurance program, offset partially by strong premium retention and a continuation of renewal premium increases in lines other than workers’ compensation.
- Personal Lines: $12.4 million increase that we attribute to a continuation of renewal premium increases and strong premium 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 six months ended June 30, 2023 and 2022:
| Three Months Ended | Six Months Ended | ||||||||||
| June 30, | June 30, | ||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||
