Donegal Group Inc. Announces First Quarter 2024 Results
- Net premiums earned increased by 5.8% to $227.7 million compared to the first quarter of 2023.
- Net premiums written increased by 6.0% to $251.4 million compared to the first quarter of 2023.
- Net income rose to $6.0 million, or $0.18 per diluted Class A share, compared to $5.2 million, or $0.16 per diluted Class A share in the first quarter of 2023.
- Annualized return on average equity improved to 4.9% from 4.3% in the first quarter of 2023.
- Book value per share was $14.53 at March 31, 2024, compared to $15.01 in the first quarter of 2023.
- Management focused on strategies for new business growth, underwriting performance enhancement, and expense management.
- Challenges included weather-related losses, large fire losses, and workers' compensation reserve development impacting underwriting profitability.
- Despite challenges, the company remains committed to achieving sustained financial performance and profitable growth.
- Increase in loss ratio to 66.3% for the first quarter of 2024 compared to 64.2% in the first quarter of 2023.
- Core loss ratio increased to 58.7% for the first quarter of 2024 from 56.5% in the first quarter of 2023.
- Atypical workers' compensation reserve development related to prior-year losses impacted underwriting profitability.
- Expense ratio decreased to 35.7% for the first quarter of 2024 from 36.4% in the first quarter of 2023.
- Net investment income increased by 16.1% to $11.0 million in the first quarter of 2024.
- Net investment gains of $2.1 million were reported in the first quarter of 2024, compared to net losses of $0.3 million in the first quarter of 2023.
Insights
Donegal Group Inc.'s reported increase in net premiums earned by
Donegal's net income rose to
In Donegal's investment operations, a
The shift in net premiums written with commercial lines seeing a minor decrease of
MARIETTA, Pa., April 25, 2024 (GLOBE NEWSWIRE) -- Donegal Group Inc. (NASDAQ: DGICA) and (NASDAQ: DGICB) today reported its financial results for the first quarter of 2024.
Significant Items for First Quarter of 2024 (all comparisons to first quarter of 2023):
- Net premiums earned increased
5.8% to$227.7 million - Net premiums written1 increased
6.0% to$251.4 million - Combined ratio of
102.4% , compared to101.2% - Net income of
$6.0 million , or$0.18 per diluted Class A share, compared to$5.2 million , or$0.16 per diluted Class A share - Annualized return on average equity of
4.9% , compared to4.3% - Book value per share of
$14.53 at March 31, 2024, compared to$15.01
Financial Summary
| Three Months Ended March 31, | ||||||||||
| 2024 | 2023 | % Change | ||||||||
| (dollars in thousands, except per share amounts) | ||||||||||
| Income Statement Data | ||||||||||
| Net premiums earned | $ | 227,749 | $ | 215,233 | 5.8 | % | ||||
| Investment income, net | 10,972 | 9,449 | 16.1 | |||||||
| Net investment gains (losses) | 2,113 | (331 | ) | NM2 | ||||||
| Total revenues | 241,141 | 224,746 | 7.3 | |||||||
| Net income | 5,956 | 5,204 | 14.5 | |||||||
| Non-GAAP operating income1 | 4,286 | 5,465 | -21.6 | |||||||
| Annualized return on average equity | 4.9 | % | 4.3 | % | 0.6 pts | |||||
| Per Share Data | ||||||||||
| Net income – Class A (diluted) | $ | 0.18 | $ | 0.16 | 12.5 | % | ||||
| Net income – Class B | 0.16 | 0.15 | 6.7 | |||||||
| Non-GAAP operating income – Class A (diluted) | 0.13 | 0.17 | -23.5 | |||||||
| Non-GAAP operating income – Class B | 0.12 | 0.15 | -20.0 | |||||||
| Book value | 14.53 | 15.01 | -3.2 | |||||||
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 entered 2024 with a renewed emphasis on executing on clearly defined strategies that include targeted new business growth, multiple initiatives to enhance our underwriting performance and further modernization of our operations for greater effectiveness and efficiency. Additionally, we committed to a multi-year expense management initiative that is strategically designed to mitigate the 2024 peak impact of allocated expenses associated with the technology advancements Donegal Mutual Insurance Company has implemented in recent years,” said Kevin G. Burke, President and Chief Executive Officer.
“Our net premium growth in the first quarter of 2024 was predominantly fueled by ongoing renewal premium increases that were supported by commercial lines new business acquisitions that fit within the framework of our refined underwriting criteria. While the increase in commercial new business writings is notable, it was largely offset by planned attrition from regions earmarked for exit or profit enhancement pursuant to our state-specific strategies.”
He continued, “In the first quarter of 2024, our underwriting profitability reflected the impact of average weather-related losses, higher severity of large fire losses than we experienced in recent quarterly periods and atypical workers’ compensation reserve development related to prior-year losses. We expect that the underwriting enhancements actively underway, in conjunction with an accelerating earned premium impact of rate increases we implemented over the past year will result in further improvement in our underwriting results as the year progresses. We remain steadfast in our commitments to achieve sustained excellent financial performance and to capitalize on opportunities for profitable growth as the means of creating long-term shareholder value.”
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 March 31, | ||||||||
| 2024 | 2023 | % Change | ||||||
| (dollars in thousands) | ||||||||
| Net Premiums Earned | ||||||||
| Commercial lines | $ | 132,092 | $ | 133,187 | -0.8 | % | ||
| Personal lines | 95,657 | 82,046 | 16.6 | |||||
| Total net premiums earned | $ | 227,749 | $ | 215,233 | 5.8 | % | ||
| Net Premiums Written | ||||||||
| Commercial lines: | ||||||||
| Automobile | $ | 53,514 | $ | 52,069 | 2.8 | % | ||
| Workers' compensation | 31,074 | 33,201 | -6.4 | |||||
| Commercial multi-peril | 57,503 | 55,850 | 3.0 | |||||
| Other | 13,403 | 15,213 | -11.9 | |||||
| Total commercial lines | 155,494 | 156,333 | -0.5 | |||||
| Personal lines: | ||||||||
| Automobile | 61,381 | 49,981 | 22.8 | |||||
| Homeowners | 31,759 | 28,189 | 12.7 | |||||
| Other | 2,808 | 2,801 | 0.2 | |||||
| Total personal lines | 95,948 | 80,971 | 18.5 | |||||
| Total net premiums written | $ | 251,442 | $ | 237,304 | 6.0 | % | ||
Net Premiums Written
The
- Commercial Lines:
$0.9 million decrease that we attribute primarily to planned attrition in regions we are exiting or executing ongoing profit improvement initiatives as part of our state-specific strategies, offset partially by modest new business writings, strong premium retention, and a continuation of renewal premium increases in lines other than workers’ compensation. - Personal Lines:
$15.0 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 months ended March 31, 2024 and 2023:
| Three Months Ended | |||||
| March 31, | |||||
| 2024 | 2023 | ||||
| GAAP Combined Ratios (Total Lines) | |||||
| Loss ratio - core losses | 58.7 | % | 56.5 | % | |
| Loss ratio - weather-related losses | 4.7 | 6.5 | |||
| Loss ratio - large fire losses | 6.6 | 5.1 | |||
| Loss ratio - net prior-year reserve development | -3.7 | -3.9 | |||
| Loss ratio | 66.3 | 64.2 | |||
| Expense ratio | 35.7 | 36.4 | |||
| Dividend ratio | 0.4 | 0.6 | |||
| Combined ratio | 102.4 | % | 101.2 | % | |
| Statutory Combined Ratios | |||||
| Commercial lines: | |||||
| Automobile | 99.6 | % | 96.2 | % | |
| Workers' compensation | 111.2 | 86.2 | |||
| Commercial multi-peril | 102.7 | 114.8 | |||
| Other | 82.2 | 79.7 | |||
| Total commercial lines | 101.6 | 99.8 | |||
| Personal lines: | |||||
| Automobile | 99.8 | 103.9 | |||
| Homeowners | 102.9 | 100.6 | |||
| Other | 85.2 | 49.3 | |||
| Total personal lines | 100.3 | 98.9 | |||
| Total lines | 101.2 | % | 99.6 | % | |
Loss Ratio
For the first quarter of 2024, the loss ratio increased to
Weather-related losses were
Large fire losses, which we define as individual fire losses in excess of
Net favorable development of reserves for losses incurred in prior accident years of
Expense Ratio
The expense ratio was
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 96.4% of our consolidated investment portfolio in diversified, highly rated and marketable fixed-maturity securities at March 31, 2024.
| March 31, 2024 | December 31, 2023 | ||||||||||||
| Amount | % | Amount | % | ||||||||||
| (dollars in thousands) | |||||||||||||
| Fixed maturities, at carrying value: | |||||||||||||
| U.S. Treasury securities and obligations of U.S. government corporations and agencies | $ | 178,661 | 13.4 | % | $ | 176,991 | 13.3 | % | |||||
| Obligations of states and political subdivisions | 414,574 | 31.1 | 415,280 | 31.3 | |||||||||
| Corporate securities | 398,265 | 29.9 | 399,640 | 30.1 | |||||||||
| Mortgage-backed securities | 293,990 | 22.1 | 278,260 | 21.0 | |||||||||
| Allowance for expected credit losses | (1,329 | ) | -0.1 | (1,326 | ) | -0.1 | |||||||
| Total fixed maturities | 1,284,161 | 96.4 | 1,268,845 | 95.6 | |||||||||
| Equity securities, at fair value | 28,883 | 2.2 | 25,903 | 2.0 | |||||||||
| Short-term investments, at cost | 18,860 | 1.4 | 32,306 | 2.4 | |||||||||
| Total investments | $ | 1,331,904 | 100.0 | % | $ | 1,327,054 | 100.0 | % | |||||
| Average investment yield | 3.3 | % | 3.1 | % | |||||||||
| Average tax-equivalent investment yield | 3.4 | % | 3.2 | % | |||||||||
| Average fixed-maturity duration (years) | 5.1 | 4.3 | |||||||||||
Net investment income of
Net investment gains were
Our book value per share was
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 March 31, | ||||||||
| 2024 | 2023 | % Change | ||||||
| (dollars in thousands) | ||||||||
| Reconciliation of Net Premiums | ||||||||
| Earned to Net Premiums Written | ||||||||
| Net premiums earned | $ | 227,749 | $ | 215,233 | 5.8 | % | ||
| Change in net unearned premiums | 23,693 | 22,071 | 7.3 | |||||
| Net premiums written | $ | 251,442 | $ | 237,304 | 6.0 | % | ||
The following table provides a reconciliation of net income to operating income for the periods indicated:
| Three Months Ended March 31, | |||||||||
| 2024 | 2023 | % Change | |||||||
| (dollars in thousands, except per share amounts) | |||||||||
| Reconciliation of Net Income | |||||||||
| to Non-GAAP Operating Income | |||||||||
| Net income | $ | 5,956 | $ | 5,204 | 14.5 | % | |||
| Investment (gains) losses (after tax) | (1,670 | ) | 261 | NM | |||||
| Non-GAAP operating income | $ | 4,286 | $ | 5,465 | -21.6 | % | |||
| Per Share Reconciliation of Net Income | |||||||||
| to Non-GAAP Operating Income | |||||||||
| Net income – Class A (diluted) | $ | 0.18 | $ | 0.16 | 12.5 | % | |||
| Investment (gains) losses (after tax) | (0.05 | ) | 0.01 | NM | |||||
| Non-GAAP operating income – Class A | $ | 0.13 | $ | 0.17 | -23.5 | % | |||
| Net income – Class B | $ | 0.16 | $ | 0.15 | 6.7 | % | |||
| Investment (gains) losses (after tax) | (0.04 | ) | - | NM | |||||
| Non-GAAP operating income – Class B | $ | 0.12 | $ | 0.15 | -20.0 | % | |||
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
Dividend Information
On April 18, 2024, we declared regular quarterly cash dividends of
Pre-Recorded Webcast
At approximately 8:30 am EST on Thursday, April 25, 2024, 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, 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) 836-9623
E-mail: kdaly@equityny.com
Jeffrey D. Miller, Executive Vice President & Chief Financial Officer
Phone: (717) 426-1931
E-mail: investors@donegalgroup.com
Financial Supplement
| Donegal Group Inc. | |||||||||
| Consolidated Statements of Income | |||||||||
| (unaudited; in thousands, except share data) | |||||||||
| Quarter Ended March 31, | |||||||||
| 2024 | 2023 | ||||||||
| Net premiums earned | $ | 227,749 | $ | 215,233 | |||||
| Investment income, net of expenses | 10,972 | 9,449 | |||||||
| Net investment gains (losses) | 2,113 | (331 | ) | ||||||
| Lease income | 82 | 89 | |||||||
| Installment payment fees | 225 | 306 | |||||||
| Total revenues | 241,141 | 224,746 | |||||||
| Net losses and loss expenses | 150,896 | 138,106 | |||||||
| Amortization of deferred acquisition costs | 39,602 | 37,798 | |||||||
| Other underwriting expenses | 41,740 | 40,611 | |||||||
| Policyholder dividends | 1,055 | 1,343 | |||||||
| Interest | 155 | 153 | |||||||
| Other expenses, net | 445 | 438 | |||||||
| Total expenses | 233,893 | 218,449 | |||||||
| Income before income tax expense | 7,248 | 6,297 | |||||||
| Income tax expense | 1,292 | 1,093 | |||||||
| Net income | $ | 5,956 | $ | 5,204 | |||||
| Net income per common share: | |||||||||
| Class A - basic and diluted | $ | 0.18 | $ | 0.16 | |||||
| Class B - basic and diluted | $ | 0.16 | $ | 0.15 | |||||
| Supplementary Financial Analysts' Data | |||||||||
| Weighted-average number of shares outstanding: | |||||||||
| Class A - basic | 27,811,312 | 27,192,992 | |||||||
| Class A - diluted | 27,846,313 | 27,366,358 | |||||||
| Class B - basic and diluted | 5,576,775 | 5,576,775 | |||||||
| Net premiums written | $ | 251,442 | $ | 237,304 | |||||
| Book value per common share at end of period | $ | 14.53 | $ | 15.01 | |||||
| Donegal Group Inc. | |||||||||
| Consolidated Balance Sheets | |||||||||
| (in thousands) | |||||||||
| March 31, | December 31, | ||||||||
| 2024 | 2023 | ||||||||
| (unaudited) | |||||||||
| ASSETS | |||||||||
| Investments: | |||||||||
| Fixed maturities: | |||||||||
| Held to maturity, at amortized cost | $ | 683,399 | $ | 679,497 | |||||
| Available for sale, at fair value | 600,762 | 589,348 | |||||||
| Equity securities, at fair value | 28,883 | 25,903 | |||||||
| Short-term investments, at cost | 18,860 | 32,306 | |||||||
| Total investments | 1,331,904 | 1,327,054 | |||||||
| Cash | 19,805 | 23,792 | |||||||
| Premiums receivable | 193,160 | 179,592 | |||||||
| Reinsurance receivable | 435,505 | 441,431 | |||||||
| Deferred policy acquisition costs | 78,857 | 75,043 | |||||||
| Prepaid reinsurance premiums | 179,758 | 168,724 | |||||||
| Other assets | 55,319 | 50,658 | |||||||
| Total assets | $ | 2,294,308 | $ | 2,266,294 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Liabilities: | |||||||||
| Losses and loss expenses | $ | 1,124,452 | $ | 1,126,157 | |||||
| Unearned premiums | 634,137 | 599,411 | |||||||
| Accrued expenses | 3,686 | 3,947 | |||||||
| Borrowings under lines of credit | 35,000 | 35,000 | |||||||
| Other liabilities | 11,947 | 22,034 | |||||||
| Total liabilities | 1,809,222 | 1,786,549 | |||||||
| Stockholders' equity: | |||||||||
| Class A common stock | 308 | 308 | |||||||
| Class B common stock | 56 | 56 | |||||||
| Additional paid-in capital | 336,818 | 335,694 | |||||||
| Accumulated other comprehensive loss | (34,483 | ) | (32,882 | ) | |||||
| Retained earnings | 223,613 | 217,795 | |||||||
| Treasury stock | (41,226 | ) | (41,226 | ) | |||||
| Total stockholders' equity | 485,086 | 479,745 | |||||||
| Total liabilities and stockholders' equity | $ | 2,294,308 | $ | 2,266,294 | |||||
FAQ
What were Donegal Group Inc.'s net premiums earned for the first quarter of 2024?
How did Donegal Group Inc.'s net income change in the first quarter of 2024 compared to the first quarter of 2023?
What was the annualized return on average equity for Donegal Group Inc. in the first quarter of 2024?
How did Donegal Group Inc.'s book value per share change from the first quarter of 2023 to March 31, 2024?
