Donegal Group Inc. Announces Third Quarter and First Nine

MARIETTA, Pa., Oct. 27, 2022 (GLOBE NEWSWIRE) — Donegal Group Inc. (NASDAQ:DGICA) and (NASDAQ:DGICB) right this moment reported its monetary outcomes for the third quarter and first 9 months of 2022.

Significant objects for third quarter of 2022 (all comparisons to 3rd quarter of 2021):

• Net lack of $10.4 million, or 33 cents per Class A share, in comparison with $6.7 million, or 22 cents per Class A share
• Net premiums earned elevated 5.0% to $206.1 million
• Net premiums written¹ elevated 4.7% to $206.2 million
• Combined ratio of 109.6%, in comparison with 107.7%, largely as a result of elevated weather-related and hearth loss exercise
• Net loss included after-tax internet funding losses of $1.9 million, or 6 cents per Class A share, in comparison with $1.2 million, or 4 cents per Class A share
• Book worth per share of $14.85 at September 30, 2022, in comparison with $17.21

¹The “Definitions of Non-GAAP and Financial Measures” part of this launch defines knowledge that we put together on an accounting foundation apart from U.S. usually accepted accounting ideas (“GAAP”) and reconciles GAAP measures to such knowledge.

²Not significant.

Management Commentary

Kevin G. Burke, President and Chief Executive Officer of Donegal Group Inc., famous, “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 firm whose insurance subsidiaries and associates provide property and casualty strains 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 4 Southwestern states (Colorado, New Mexico, Texas and Utah). Donegal Mutual Insurance Company and the insurance subsidiaries of Donegal Group conduct business collectively because the Donegal Insurance Group.

Net Premiums Written

The 4.7% enhance in internet premiums written for the third quarter of 2022 in comparison with the third quarter of 2021, as proven within the desk above, represents 2.0% progress in business strains internet premiums written and 8.5% progress in private strains internet premiums written. The $9.2 million enhance in internet premiums written for the third quarter of 2022 in comparison with the third quarter of 2021 included:

• Commercial Lines: $2.3 million enhance that we attribute primarily to modest new business writings, robust premium retention and a continuation of renewal premium will increase in strains apart from staff’ compensation, offset partially by deliberate attrition in areas we’ve got focused for revenue enchancment.
• Personal Lines: $6.9 million enhance that we attribute to premium price will increase our insurance subsidiaries have applied over the previous 4 quarters, robust coverage retention and new business writings in sure states the place we’ve got launched an up to date suite of merchandise.

Underwriting Performance

We consider the efficiency of our business strains and private strains segments based upon the underwriting outcomes of our insurance subsidiaries as decided beneath statutory accounting practices. The following desk presents comparative particulars with respect to the GAAP and statutory mixed ratios¹ for the three and 9 months ended September 30, 2022 and 2021:

Loss Ratio

For the third quarter of 2022, the loss ratio elevated to 75.6%, in comparison with 75.5% for the third quarter of 2021. Weather-related losses of roughly $19.4 million, or 9.4 share factors of the loss ratio, for the third quarter of 2022, elevated from $18.0 million, or 9.2 share factors of the loss ratio, for the third quarter of 2021. The influence of weather-related loss exercise to the loss ratio for the third quarter of 2022 was in step with our earlier five-year common of 9.4 share factors for third quarter weather-related losses. We count on a minimal loss influence from the inland remnants of Hurricane Ian in late September 2022.

Large hearth losses, which we outline as particular person hearth losses in extra of $50,000, for the third quarter of 2022 had been $17.4 million, or 8.4 share factors of the loss ratio. That quantity represented a major enhance in comparison with the massive hearth losses of $12.7 million, or 6.5 share factors of the loss ratio, for the third quarter of 2021. We skilled a $4.8 million enhance in business property hearth losses in comparison with the prior-year quarter.

Net favorable improvement 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 share factors, in comparison with $4.3 million that decreased the loss ratio for the third quarter of 2021 by 2.2 share factors. Our insurance subsidiaries skilled favorable improvement primarily regarding reserves for accident years 2021 and 2020 within the business multi-peril, business automobile and private automobile strains of business.

Expense Ratio

The expense ratio was 33.4% for the third quarter of 2022, in comparison with 31.5% for the third quarter of 2021. The enhance within the expense ratio primarily mirrored increased know-how prices associated to our ongoing techniques modernization initiatives.

Investment Operations

Donegal Group’s funding technique is to generate an acceptable quantity of after-tax revenue on its invested property whereas minimizing credit score danger by way of funding in high-quality securities. As a end result, we had invested 93.5% of our consolidated funding portfolio in diversified, extremely rated and marketable fixed-maturity securities at September 30, 2022.

Total investments at September 30, 2022 elevated by $3.9 million in comparison with December 31, 2021, as new funds invested had been largely offset by $64.0 million of unrealized losses inside our available-for-sale fixed-maturity portfolio as a result of a considerable enhance in market rates of interest through the first 9 months of 2022.

Net funding revenue of $8.6 million for the third quarter of 2022 elevated 10.4% in comparison with $7.8 million in internet funding revenue for the third quarter of 2021. The enhance in internet funding revenue mirrored a rise in common invested property and a rise within the common funding yield relative to the prior-year third quarter.

Net funding losses had been $2.4 million for the third quarter of 2022, in comparison with $1.6 million for the third quarter of 2021. Net funding losses for each quarterly intervals had been primarily associated to the online change in unrealized features or losses within the truthful worth of fairness securities held on the finish of the respective intervals.

Our e-book worth per share was $14.85 at September 30, 2022, in comparison with $16.95 at December 31, 2021, with the lower primarily associated to after-tax unrealized losses inside our available-for-sale fixed-maturity portfolio through the first 9 months of 2022 that decreased our e-book worth by $1.55 per share.

Definitions of Non-GAAP Financial Measures

We put together our consolidated monetary statements on the premise of GAAP. Our insurance subsidiaries additionally put together monetary statements based mostly on statutory accounting ideas state insurance regulators prescribe or allow (“SAP”). In addition to utilizing GAAP-based efficiency measurements, we additionally make the most of sure non-GAAP monetary measures that we consider present worth in managing our business and for comparability to the monetary outcomes of our friends. These non-GAAP measures are internet premiums written, working revenue or loss and statutory mixed ratio.

Net premiums written and working revenue or loss are non-GAAP monetary measures traders in insurance firms generally use. We outline internet premiums written as the quantity of full-term premiums our insurance subsidiaries document for insurance policies efficient inside a given interval much less premiums our insurance subsidiaries cede to reinsurers. We outline working revenue or loss as internet revenue or loss excluding after-tax internet funding features or losses, after-tax restructuring prices and different important non-recurring objects. Because our calculation of working revenue or loss might differ from comparable measures different firms use, traders ought to train warning when evaluating our measure of working revenue or loss to the measure of different firms.

The following desk gives a reconciliation of internet premiums earned to internet premiums written for the intervals indicated:

The following desk gives a reconciliation of internet (loss) revenue to working (loss) revenue for the intervals indicated:

The statutory mixed ratio is a non-GAAP normal measurement of underwriting profitability that’s based mostly upon quantities decided beneath SAP. The statutory mixed ratio is the sum of:

• the statutory loss ratio, which is the ratio of calendar-year incurred losses and loss bills, excluding anticipated salvage and subrogation recoveries, to premiums earned;
• the statutory expense ratio, which is the ratio of bills incurred for internet commissions, premium taxes and underwriting bills to premiums written; and
• the statutory dividend ratio, which is the ratio of dividends to holders of staff’ compensation insurance policies to premiums earned.

The statutory mixed ratio doesn’t replicate funding revenue, federal revenue taxes or different non-operating revenue or expense. A statutory mixed ratio of lower than 100% usually signifies underwriting profitability.

Dividend Information

On October 20, 2022, we declared an everyday quarterly money dividend of $0.165 per share for our Class A standard inventory and $0.1475 per share for our Class B frequent inventory, that are payable on November 15, 2022 to stockholders of document as of the shut of business on November 1, 2022.

Pre-Recorded Webcast

At roughly 8:30 am EDT on Thursday, October 27, 2022, we are going to make obtainable within the Investors part of our web site a pre-recorded audio webcast that includes administration commentary and a query and reply session. You might take heed to the pre-recorded webcast by accessing the hyperlink on our web site at http://investors.donegalgroup.com. A supplemental investor presentation can also be obtainable through our web site.

About the Company

Donegal Group Inc. is an insurance holding firm whose insurance subsidiaries and associates provide property and casualty strains of insurance in sure Mid-Atlantic, Midwestern, New England, Southern and Southwestern states. Donegal Mutual Insurance Company and the insurance subsidiaries of Donegal Group Inc. conduct business collectively because the Donegal Insurance Group. The Donegal Insurance Group has an A.M. Best score of A (Excellent).

The Class A standard inventory and Class B frequent inventory of Donegal Group Inc. commerce on the NASDAQ Global Select Market beneath the symbols DGICA and DGICB, respectively. We are targeted on a number of main methods, together with reaching sustained glorious monetary efficiency, strategically modernizing our operations and processes to remodel our business, capitalizing on alternatives to develop profitably and delivering a superior expertise to our brokers and clients.

Safe Harbor

We base all statements contained on this launch that aren’t historic information on our present expectations. Such statements are forward-looking in nature (as outlined within the Private Securities Litigation Reform Act of 1995) and essentially contain dangers and uncertainties. Forward-looking statements we make could also be recognized by our use of phrases corresponding to “will,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “seek,” “estimate” and comparable expressions. Our precise outcomes may fluctuate materially from our forward-looking statements. The elements that might trigger our precise outcomes to fluctuate materially from the forward-looking statements we’ve got beforehand made embody, however should not restricted to, extended financial challenges ensuing from the COVID-19 pandemic, antagonistic litigation and different developments that might enhance our loss prices (together with labor shortages and escalating medical, automobile and property restore prices), antagonistic and catastrophic climate occasions, our means to keep up worthwhile operations (together with our means to underwrite dangers successfully and cost sufficient premium charges), the adequacy of the loss and loss expense reserves of our insurance subsidiaries, the provision and profitable operation of the knowledge know-how techniques our insurance subsidiaries make the most of, the profitable improvement of latest info know-how techniques to permit our insurance subsidiaries to compete successfully, business and financial circumstances within the areas wherein we and our insurance subsidiaries function, rates of interest, competitors from varied insurance and different monetary companies, terrorism, the provision and value of reinsurance, authorized and judicial developments together with these associated to COVID-19 business interruption protection exclusions, adjustments in regulatory necessities, our means to draw and retain unbiased insurance brokers, adjustments in our A.M. Best score and the opposite dangers that we describe every now and then in our filings with the Securities and Exchange Commission. We disclaim any obligation to replace such statements or to announce publicly the outcomes of any revisions that we might make to any forward-looking statements to replicate the prevalence of anticipated or unanticipated occasions 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: [email protected]

Jeffrey D. Miller, Executive Vice President & Chief Financial Officer
Phone: (717) 426-1931
E-mail: [email protected]

Financial Supplement