Donegal Group Inc. (NASDAQ:DGICA) and (NASDAQ:DGICB) today reported
its financial results for the third quarter and first nine months
of 2018. The Company will hold a live conference call on Wednesday,
October 31, 2018 at 11:00AM Eastern Time to discuss these results.
You may listen to the webcast of this conference call by accessing
the event link at http://investors.donegalgroup.com.
Significant items included:
- Net income of $1.2 million, or 4 cents per diluted Class A
share, for the third quarter of 2018, compared to $7.1 million, or
26 cents per diluted Class A share, for the third quarter of 2017,
with both periods reflecting higher-than-average weather-related
losses
- Net premiums earned of $187.7 million for the third quarter of
2018 increased 5.9% compared to the prior-year third quarter
- Net premiums written1 of $184.5 million for the third quarter
of 2018 increased 1.1% compared to the prior-year third
quarter
- Combined ratio of 105.2% for the third quarter of 2018,
compared to 99.6% for the prior-year third quarter
- Book value per share of $14.68 at September 30, 2018, compared
to $15.95 at year-end 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2018 |
|
|
|
2017 |
|
% Change |
|
|
2018 |
|
|
|
2017 |
|
% Change |
|
|
|
(dollars in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Data |
|
|
|
|
|
|
|
|
|
|
|
Net premiums
earned |
$ |
187,662 |
|
|
$ |
177,284 |
|
5.9 |
% |
|
$ |
555,140 |
|
|
$ |
521,455 |
|
6.5 |
% |
Investment income, net |
|
6,620 |
|
|
|
5,980 |
|
10.7 |
|
|
|
19,341 |
|
|
|
17,385 |
|
11.3 |
|
Net realized investment gains |
|
3,464 |
|
|
|
561 |
|
517.5 |
|
|
|
4,062 |
|
|
|
4,208 |
|
(3.5 |
) |
Total revenues |
|
199,904 |
|
|
|
185,716 |
|
7.6 |
|
|
|
585,022 |
|
|
|
548,268 |
|
6.7 |
|
Net income (loss) |
|
1,206 |
|
|
|
7,109 |
|
(83.0 |
) |
|
|
(17,762 |
) |
|
|
9,895 |
|
NM2 |
Non-GAAP operating (loss) income1 |
|
(917 |
) |
|
|
6,744 |
|
NM |
|
|
(19,025 |
) |
|
|
7,160 |
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) – Class A (diluted) |
$ |
0.04 |
|
|
$ |
0.26 |
|
(84.6 |
%) |
|
$ |
(0.64 |
) |
|
$ |
0.36 |
|
NM % |
Net income (loss) – Class B |
|
0.04 |
|
|
|
0.24 |
|
(83.3 |
) |
|
|
(0.59 |
) |
|
|
0.33 |
|
NM |
Non-GAAP operating (loss) income – Class A (diluted) |
|
(0.03 |
) |
|
|
0.25 |
|
NM |
|
|
(0.68 |
) |
|
|
0.26 |
|
NM |
Non-GAAP operating (loss) income – Class B |
|
(0.03 |
) |
|
|
0.23 |
|
NM |
|
|
(0.63 |
) |
|
|
0.24 |
|
NM |
Book value |
|
14.68 |
|
|
|
16.39 |
|
(10.4 |
) |
|
|
14.68 |
|
|
|
16.39 |
|
(10.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1The “Definitions of Non-GAAP Financial Measures” section of
this release defines and reconciles data that the Company prepares
on an accounting basis other than U.S. generally accepted
accounting principles (“GAAP”).
2Not meaningful.
Management Commentary
Kevin G. Burke, President and Chief Executive Officer of Donegal
Group Inc., noted, “In the third quarter of 2018, Donegal
Group continued to make considerable progress on key initiatives to
improve our underwriting performance and operating efficiency, and
we achieved strong gains in investment income. We are pleased to
report higher net premiums earned and a continuation of net
premiums written growth in our commercial lines of business. We
continue to leverage our relationships with larger commercially
focused independent insurance agencies, where we see our greatest
opportunities for profitable growth.”
Mr. Burke continued, “Donegal Group remains committed to
maintaining and expanding our personal lines of business in markets
where we have sufficient scale and spread of risk to achieve
profitability. After a thorough analysis of our experience and
future prospects, we decided to enter into an agreement to transfer
our personal lines book of business in seven states. Our personal
lines writings in these states represent a modest percentage of our
overall premiums, but our claims experience in these states has
contributed a disproportionately large percentage of our personal
lines underwriting losses in recent years. We expect this transfer
will expedite improvement of our personal lines underwriting
performance in future periods, as we begin to non-renew our
personal lines policies in these seven states beginning in February
2019.”
Jeffrey D. Miller, Executive Vice President and Chief
Financial Officer, commented, “Our workers’ compensation line of
business continued to perform well during the third quarter of
2018, as the statutory combined ratio1 of 83.6% in this line of
business indicates. We are also pleased that our commercial lines
segment of business generated an underwriting profit, achieving a
97.5% statutory combined ratio for the third quarter of 2018.”
Mr. Miller continued, “Weather-related losses of approximately
$21.2 million impacted our underwriting performance for the third
quarter of 2018, compared to the $18.2 million of weather-related
losses for the third quarter of 2017. Weather-related losses for
the third quarter of 2018 were also considerably higher than our
previous five-year average for third quarter weather-related losses
of $13.0 million and were largely the result of a series of wind,
hail and heavy rain events across the Company’s operating regions
during the third quarter of 2018. None of the losses from weather
events exceeded the Company’s $5.0 million third-party catastrophe
reinsurance retention.”
Management Conclusion and Outlook
Mr. Burke concluded, “Our focus on optimizing our business mix
within our commercial and personal lines segments is gaining
traction. We expect that, for the remainder of 2018, net premiums
written will continue to shift toward favorable commercial growth
opportunities. We are in the process of extensively re-underwriting
commercial automobile policy renewals in several underperforming
states, and we have implemented commercial automobile rate
increases in all of our markets. Our previously announced
disposition of Donegal Financial Services Corporation (owner of
Union Community Bank) is proceeding as planned, with an expected
closing in the first quarter of 2019. We will utilize the proceeds
from this transaction to support our strategic goals as we focus on
our core property and casualty insurance business.”
Insurance Operations
Donegal Group is an insurance holding company
whose insurance subsidiaries offer property and casualty lines of
insurance in four Mid-Atlantic states (Delaware, Maryland, New York
and Pennsylvania), three New England states (Maine, New Hampshire
and Vermont), seven Southern states (Alabama, Georgia, North
Carolina, South Carolina, Tennessee, Virginia and West Virginia)
and eight Midwestern states (Illinois, Indiana, Iowa, Michigan,
Nebraska, Ohio, South Dakota and Wisconsin). Donegal Mutual
Insurance Company and the insurance subsidiaries of Donegal Group
conduct business together as the Donegal Insurance Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2018 |
|
|
2017 |
|
% Change |
|
|
2018 |
|
|
2017 |
|
% Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Earned |
|
|
|
|
|
|
|
|
|
|
|
Personal
lines |
$ |
103,410 |
|
$ |
96,560 |
|
7.1 |
% |
|
$ |
304,111 |
|
$ |
285,018 |
|
6.7 |
% |
Commercial lines |
|
84,252 |
|
|
80,724 |
|
4.4 |
|
|
|
251,029 |
|
|
236,437 |
|
6.2 |
|
Total net premiums earned |
$ |
187,662 |
|
$ |
177,284 |
|
5.9 |
% |
|
$ |
555,140 |
|
$ |
521,455 |
|
6.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written |
|
|
|
|
|
|
|
|
|
|
|
Personal lines: |
|
|
|
|
|
|
|
|
|
|
|
Automobile |
$ |
62,502 |
|
$ |
66,871 |
|
(6.5 |
%) |
|
$ |
193,919 |
|
$ |
193,862 |
|
0.0 |
% |
Homeowners |
|
34,562 |
|
|
34,248 |
|
0.9 |
|
|
|
96,149 |
|
|
95,150 |
|
1.0 |
|
Other |
|
5,678 |
|
|
4,801 |
|
18.3 |
|
|
|
15,599 |
|
|
14,907 |
|
4.6 |
|
Total personal lines |
|
102,742 |
|
|
105,920 |
|
(3.0 |
) |
|
|
305,667 |
|
|
303,919 |
|
0.6 |
|
Commercial lines: |
|
|
|
|
|
|
|
|
|
|
|
Automobile |
|
25,242 |
|
|
23,179 |
|
8.9 |
|
|
|
83,345 |
|
|
75,903 |
|
9.8 |
|
Workers' compensation |
|
25,039 |
|
|
24,760 |
|
1.1 |
|
|
|
84,735 |
|
|
85,993 |
|
(1.5 |
) |
Commercial multi-peril |
|
28,049 |
|
|
26,355 |
|
6.4 |
|
|
|
89,944 |
|
|
84,352 |
|
6.6 |
|
Other |
|
3,446 |
|
|
2,264 |
|
52.2 |
|
|
|
12,032 |
|
|
7,584 |
|
58.6 |
|
Total commercial lines |
|
81,776 |
|
|
76,558 |
|
6.8 |
|
|
|
270,056 |
|
|
253,832 |
|
6.4 |
|
Total net premiums written |
$ |
184,518 |
|
$ |
182,478 |
|
1.1 |
% |
|
$ |
575,723 |
|
$ |
557,751 |
|
3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written
The 1.1% increase in the Company’s net premiums
written for the third quarter of 2018 compared to the third quarter
of 2017, as shown in the table above, represents the combination of
6.8% growth in commercial lines net premiums written and a 3.0%
decrease in personal lines net premiums written. The $2.0 million
growth in net premiums written for the third quarter of 2018
compared to the third quarter of 2017 included:
- $5.2 million in commercial lines premiums that the Company
attributes to a combination of new policy growth and a continuation
of modest renewal premium increases. In addition, the increase in
other commercial lines net premiums written reflects a modification
to third-party reinsurance coverage related to umbrella liability
policies effective March 1, 2018.
- $3.2 million decrease in personal lines premiums that the
Company attributes to net attrition as a result of underwriting
measures the Company’s insurance subsidiaries implemented to slow
new policy growth and to increase pricing on renewal policies,
partially offset by premium rate increases the Company has
implemented over the past four quarters.
Underwriting Performance
The Company evaluates the performance of its
commercial lines and personal lines segments primarily based upon
the underwriting results of its insurance subsidiaries as
determined under statutory accounting practices. The following
table presents comparative details with respect to the Company’s
GAAP and statutory combined ratios for the three and nine months
ended September 30, 2018 and 2017:
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September
30, |
|
September
30, |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
GAAP Combined Ratios (Total
Lines) |
|
|
|
|
|
|
|
Loss ratio (non-weather) |
63.7 |
% |
|
54.2 |
% |
|
68.5 |
% |
|
58.2 |
% |
Loss ratio (weather-related) |
11.3 |
|
|
10.3 |
|
|
9.5 |
|
|
10.2 |
|
Expense ratio |
29.6 |
|
|
34.3 |
|
|
31.3 |
|
|
33.3 |
|
Dividend ratio |
0.6 |
|
|
0.8 |
|
|
0.6 |
|
|
0.7 |
|
Combined ratio |
105.2 |
% |
|
99.6 |
% |
|
109.9 |
% |
|
102.4 |
% |
|
|
|
|
|
|
|
|
Statutory Combined
Ratios |
|
|
|
|
|
|
|
Personal lines: |
|
|
|
|
|
|
|
Automobile |
115.8 |
% |
|
103.8 |
% |
|
114.5 |
% |
|
105.8 |
% |
Homeowners |
110.3 |
|
|
117.0 |
|
|
112.0 |
|
|
115.2 |
|
Other |
74.3 |
|
|
94.2 |
|
|
94.2 |
|
|
94.7 |
|
Total personal lines |
111.4 |
|
|
107.5 |
|
|
112.6 |
|
|
108.2 |
|
Commercial lines: |
|
|
|
|
|
|
|
Automobile |
114.6 |
|
|
116.6 |
|
|
133.7 |
|
|
110.5 |
|
Workers' compensation |
83.6 |
|
|
67.6 |
|
|
86.6 |
|
|
78.5 |
|
Commercial multi-peril |
96.0 |
|
|
86.7 |
|
|
101.2 |
|
|
96.6 |
|
Other |
88.8 |
|
|
8.2 |
|
|
48.7 |
|
|
5.7 |
|
Total commercial lines |
97.5 |
|
|
86.9 |
|
|
104.8 |
|
|
91.8 |
|
Total lines |
105.2 |
% |
|
98.2 |
% |
|
109.0 |
% |
|
100.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Ratio
The loss ratio for the third quarter of 2018 was
75.0%, compared to 64.5% for the third quarter of 2017.
Weather-related losses contributed 11.3 percentage points to the
Company’s loss ratio for the third quarter of 2018, compared to
10.3 percentage points of the Company’s loss ratio for the third
quarter of 2017. Workers’ compensation losses in excess of $50,000
were $7.2 million for the third quarter of 2018, or 3.8 percentage
points of the Company’s loss ratio, compared to $4.7 million for
the third quarter of 2017, or 2.7 percentage points of the
Company’s loss ratio.
Large fire losses, which the Company defines as
individual fire losses in excess of $50,000, were $4.7 million for
the third quarter of 2018, or 2.5 percentage points of the
Company’s loss ratio. That amount was favorable compared to the
large fire losses of $7.9 million for the third quarter of 2017, or
4.4 percentage points of the Company’s loss ratio. Both homeowners
and commercial fire losses decreased in the third quarter of
2018.
Development of reserves for losses incurred in
prior accident years added 1.4 percentage points to the Company’s
loss ratio for the third quarter of 2018, compared to favorable
development that reduced the Company’s loss ratio for the third
quarter of 2017 by 1.9 percentage points. Primarily as a result of
reserve strengthening actions in the first quarter of 2018,
development of reserves for losses incurred in prior accident years
added 5.2 percentage points to the Company’s loss ratio for the
first nine months of 2018. Net development of reserves for losses
incurred in prior accident years did not have a material impact on
the Company's loss ratio for the nine months ended September 30,
2017.
The Company’s expense ratio was 29.6% for the
third quarter of 2018, compared to 34.3% for the third quarter of
2017. The Company attributes this decrease to a reduction in
underwriting-based incentive costs for the third quarter of 2018
compared to the prior-year quarter, as well as savings associated
with the consolidation of certain operations of The Peninsula
Insurance Company in July 2018. The Company has entered into a
definitive purchase arrangement for the sale of Peninsula’s branch
office real estate, and expects to receive net proceeds of $1.2
million during the fourth quarter of 2018. The Company recorded an
impairment charge of $1.0 million in the third quarter of 2018
related to this real estate transaction.
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, the Company had invested
90.0% of its consolidated investment portfolio in diversified,
highly rated and marketable fixed-maturity securities at September
30, 2018.
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
December 31, 2017 |
|
Amount |
|
% |
|
Amount |
|
% |
|
|
|
(dollars in thousands) |
Fixed maturities, at carrying value: |
|
|
|
|
|
|
|
U.S. Treasury securities and obligations of U.S. |
|
|
|
|
|
|
|
government
corporations and agencies |
$ |
118,607 |
|
|
11.5 |
% |
|
$ |
115,786 |
|
|
11.5 |
% |
Obligations of states and political subdivisions |
|
238,729 |
|
|
23.2 |
|
|
|
269,698 |
|
|
26.8 |
|
Corporate securities |
|
258,660 |
|
|
25.2 |
|
|
|
213,764 |
|
|
21.2 |
|
Mortgage-backed securities |
|
309,264 |
|
|
30.1 |
|
|
|
306,353 |
|
|
30.5 |
|
Total fixed maturities |
|
925,260 |
|
|
90.0 |
|
|
|
905,601 |
|
|
90.0 |
|
Equity securities, at fair value |
|
57,973 |
|
|
5.6 |
|
|
|
50,445 |
|
|
5.0 |
|
Investments in affiliates |
|
39,961 |
|
|
3.9 |
|
|
|
38,774 |
|
|
3.9 |
|
Short-term investments, at cost |
|
5,096 |
|
|
0.5 |
|
|
|
11,050 |
|
|
1.1 |
|
Total investments |
$ |
1,028,290 |
|
|
100.0 |
% |
|
$ |
1,005,870 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
Average investment yield |
|
2.5 |
% |
|
|
|
|
2.4 |
% |
|
|
Average tax-equivalent investment yield |
|
2.7 |
% |
|
|
|
|
2.9 |
% |
|
|
Average fixed-maturity duration (years) |
|
5.4 |
|
|
|
|
|
5.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income of $6.6 million for the
third quarter of 2018 increased 10.7% compared to $6.0 million in
net investment income for the third quarter of 2017. The increase
in net investment income primarily reflected an increase in average
invested assets compared to the prior-year third quarter.
Net realized investment gains were $3.5
million for the third quarter of 2018, compared to $561,000 for the
third quarter of 2017. The Company attributes the increase in net
realized investment gains to an increase in the market value of the
equity securities it held at September 30, 2018.
The Company owns 48.2% of the outstanding stock
of Donegal Financial Services Corporation (“DFSC”). DFSC owns all
of the outstanding stock of Union Community Bank (“UCB”). The
Company accounts for its investment in DFSC using the equity method
of accounting. Donegal Mutual Insurance Company (“DMIC”) owns the
remaining 51.8% of the outstanding stock of DFSC. On June 12, 2018,
the Company and DMIC reported that the Company and DMIC had entered
into an agreement whereby DFSC will merge with and into Northwest
Bancshares, Inc. (“Northwest”). Immediately prior to the closing of
the transaction, DFSC will pay a dividend of approximately $30.0
million to the Company and DMIC. As the owner of 48.2% of DFSC’s
common stock, the Company will receive a dividend payment from DFSC
of approximately $14.5 million and consideration from Northwest
that will range in value from $38.9 million to $43.0 million. The
Company currently anticipates that it will realize an after-tax
gain, net of transaction-related expenses, within a range of $9.5
million and $13.0 million, or approximately $.32 to $.47 per Class
A common share, upon closing of the transaction expected in the
first quarter of 2019.
Definitions of Non-GAAP Financial
Measures
The Company prepares its consolidated financial
statements on the basis of GAAP. The Company’s 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, the Company also utilizes certain non-GAAP financial
measures that it believes provide value in managing its business
and for comparison to the financial results of its 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 commonly used by investors in
insurance companies. The Company defines net premiums written as
the amount of full-term premiums the Company records for policies
effective within a given period less premiums the Company cedes to
reinsurers. The Company defines operating income or loss as net
income or loss excluding after-tax net realized investment gains or
losses and after-tax restructuring charges. Because the Company’s
calculation of operating income or loss may differ from similar
measures other companies use, investors should exercise caution
when comparing the Company’s measure of operating income or loss to
the measure other companies use.
The following table provides a reconciliation of
the Company's net premiums earned to the Company's net premiums
written for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2018 |
|
|
|
2017 |
|
% Change |
|
|
2018 |
|
|
2017 |
|
% Change |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Premiums |
|
|
|
|
|
|
|
|
|
|
|
Earned to Net Premiums Written |
|
|
|
|
|
|
|
|
|
|
|
Net premiums
earned |
$ |
187,662 |
|
|
$ |
177,284 |
|
5.9 |
% |
|
$ |
555,140 |
|
$ |
521,455 |
|
6.5 |
% |
Change in net unearned premiums |
|
(3,144 |
) |
|
|
5,194 |
|
NM |
|
|
20,583 |
|
|
36,296 |
|
(43.3 |
) |
Net premiums written |
$ |
184,518 |
|
|
$ |
182,478 |
|
1.1 |
% |
|
$ |
575,723 |
|
$ |
557,751 |
|
3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides a reconciliation of
the Company's net income (loss) to the Company's operating (loss)
income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2018 |
|
|
|
2017 |
|
|
% Change |
|
|
2018 |
|
|
|
2017 |
|
|
% Change |
|
|
|
(dollars in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
to Non-GAAP Operating (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
1,206 |
|
|
$ |
7,109 |
|
|
(83.0 |
%) |
|
$ |
(17,762 |
) |
|
$ |
9,895 |
|
|
NM |
Realized gains
(after tax) |
|
(2,286 |
) |
|
|
(365 |
) |
|
526.3 |
|
|
|
(2,681 |
) |
|
|
(2,735 |
) |
|
(2.0 |
%) |
Restructuring charge (after tax) |
|
- |
|
|
|
- |
|
|
- |
|
|
|
1,255 |
|
|
|
- |
|
|
100.0 |
|
Other, net |
|
163 |
|
|
|
- |
|
|
100.0 |
|
|
|
163 |
|
|
|
- |
|
|
100.0 |
|
Non-GAAP operating (loss) income |
$ |
(917 |
) |
|
$ |
6,744 |
|
|
NM |
|
$ |
(19,025 |
) |
|
$ |
7,160 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Reconciliation of Net Income |
|
|
|
|
|
|
|
|
|
|
|
(Loss) to Non-GAAP Operating (Loss) Income |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) – Class A (diluted) |
$ |
0.04 |
|
|
$ |
0.26 |
|
|
(84.6 |
%) |
|
$ |
(0.64 |
) |
|
$ |
0.36 |
|
|
NM |
Realized gains (after tax) |
|
(0.08 |
) |
|
|
(0.01 |
) |
|
700.0 |
|
|
|
(0.09 |
) |
|
|
(0.10 |
) |
|
(10.0 |
%) |
Restructuring charge (after tax) |
|
- |
|
|
|
- |
|
|
- |
|
|
|
0.04 |
|
|
|
- |
|
|
100.0 |
|
Other, net |
|
0.01 |
|
|
|
- |
|
|
NM |
|
|
0.01 |
|
|
|
- |
|
|
100.0 |
|
Non-GAAP operating (loss) income – Class A |
$ |
(0.03 |
) |
|
$ |
0.25 |
|
|
NM |
|
$ |
(0.68 |
) |
|
$ |
0.26 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) – Class B |
$ |
0.04 |
|
|
$ |
0.24 |
|
|
(83.3 |
%) |
|
$ |
(0.59 |
) |
|
$ |
0.33 |
|
|
NM |
Realized gains (after tax) |
|
(0.07 |
) |
|
|
(0.01 |
) |
|
600.0 |
|
|
|
(0.08 |
) |
|
|
(0.09 |
) |
|
(11.1 |
%) |
Restructuring charge (after tax) |
|
- |
|
|
|
- |
|
|
- |
|
|
|
0.04 |
|
|
|
- |
|
|
100.0 |
|
Non-GAAP operating (loss) income – Class B |
$ |
(0.03 |
) |
|
$ |
0.23 |
|
|
NM |
|
$ |
(0.63 |
) |
|
$ |
0.24 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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.
Conference Call and Webcast
The Company will hold a conference call and
webcast on Wednesday, October 31, 2018, beginning at 11:00 A.M.
Eastern Time. You may listen via the Internet by accessing the
webcast link on the Company’s website at
http://investors.donegalgroup.com. A replay of the conference call
will also be available via the Company’s website.
About the Company
Donegal Group is an insurance holding company.
The Company’s Class A common stock and Class B common stock trade
on the NASDAQ Global Select Market under the symbols DGICA and
DGICB, respectively. The Company seeks opportunities for growth
while striving to achieve its longstanding goal of outperforming
the property and casualty insurance industry in terms of service,
profitability and book value growth.
Safe Harbor
We base all statements contained in this release
that are not historic facts on our current expectations. These
statements are forward-looking in nature (as defined in the Private
Securities Litigation Reform Act of 1995) and involve a number of
risks and uncertainties. Actual results could vary materially.
Factors that could cause actual results to vary materially include:
adverse and catastrophic weather events, our ability to maintain
profitable operations, the adequacy of the loss and loss expense
reserves of our insurance subsidiaries, business and economic
conditions in the areas in which 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, changes in regulatory
requirements, our ability to integrate and manage successfully the
insurance companies we may acquire from time to time and other
risks we describe in the periodic reports we file with the
Securities and Exchange Commission. You should not place undue
reliance on any such forward-looking statements. 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.
|
Donegal Group Inc. |
Consolidated Statements of Income |
(unaudited; in thousands, except share data) |
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, |
|
|
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
Net
premiums earned |
$ |
187,662 |
|
$ |
177,284 |
Investment
income, net of expenses |
|
6,620 |
|
|
5,980 |
Net
realized investment gains |
|
3,464 |
|
|
561 |
Lease
income |
|
120 |
|
|
113 |
Installment
payment fees |
|
1,305 |
|
|
1,374 |
Equity in
earnings of DFSC |
|
733 |
|
|
404 |
|
Total
revenues |
|
199,904 |
|
|
185,716 |
|
|
|
|
|
|
Net losses
and loss expenses |
|
140,726 |
|
|
114,386 |
Amortization of deferred acquisition costs |
|
31,110 |
|
|
29,008 |
Other
underwriting expenses |
|
24,529 |
|
|
31,790 |
Policyholder dividends |
|
1,050 |
|
|
1,376 |
Interest |
|
|
652 |
|
|
466 |
Other
expenses, net |
|
560 |
|
|
178 |
|
Total
expenses |
|
198,627 |
|
|
177,204 |
|
|
|
|
|
|
Income
before income tax expense |
|
1,277 |
|
|
8,512 |
Income tax
expense |
|
71 |
|
|
1,403 |
|
|
|
|
|
|
Net
income |
$ |
1,206 |
|
$ |
7,109 |
|
|
|
|
|
|
Net income
per common share: |
|
|
|
|
Class A -
basic |
$ |
0.04 |
|
$ |
0.27 |
|
Class A -
diluted |
$ |
0.04 |
|
$ |
0.26 |
|
Class B -
basic and diluted |
$ |
0.04 |
|
$ |
0.24 |
|
|
|
|
|
|
Supplementary Financial Analysts' Data |
|
|
|
|
|
|
|
|
|
Weighted-average number of shares |
|
|
|
|
outstanding: |
|
|
|
|
Class A -
basic |
|
22,717,333 |
|
|
21,755,862 |
|
Class A -
diluted |
|
22,894,773 |
|
|
22,217,011 |
|
Class B -
basic and diluted |
|
5,576,775 |
|
|
5,576,775 |
|
|
|
|
|
|
Net
premiums written |
$ |
184,518 |
|
$ |
182,478 |
|
|
|
|
|
|
Book value
per common share |
|
|
|
|
at end of
period |
$ |
14.68 |
|
$ |
16.39 |
|
|
|
|
|
|
Donegal Group Inc. |
Consolidated Statements of Income |
(unaudited; in thousands, except share data) |
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30 |
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
Net
premiums earned |
$ |
555,140 |
|
|
$ |
521,455 |
Investment
income, net of expenses |
|
19,341 |
|
|
|
17,385 |
Net
realized investment gains |
|
4,062 |
|
|
|
4,208 |
Lease
income |
|
366 |
|
|
|
383 |
Installment
payment fees |
|
3,960 |
|
|
|
3,814 |
Equity in
earnings of DFSC |
|
2,153 |
|
|
|
1,023 |
|
Total
revenues |
|
585,022 |
|
|
|
548,268 |
|
|
|
|
|
|
Net losses
and loss expenses |
|
433,063 |
|
|
|
356,826 |
Amortization of deferred acquisition costs |
|
91,354 |
|
|
|
85,391 |
Other
underwriting expenses |
|
82,344 |
|
|
|
88,539 |
Policyholder dividends |
|
3,566 |
|
|
|
3,423 |
Interest |
|
|
1,682 |
|
|
|
1,213 |
Other
expenses |
|
1,604 |
|
|
|
1,035 |
|
Total
expenses |
|
613,613 |
|
|
|
536,427 |
|
|
|
|
|
|
(Loss)
income before income tax (benefit) expense |
|
(28,591 |
) |
|
|
11,841 |
Income tax
(benefit) expense |
|
(10,829 |
) |
|
|
1,946 |
|
|
|
|
|
|
Net (loss)
income |
$ |
(17,762 |
) |
|
$ |
9,895 |
|
|
|
|
|
|
Net (loss)
income per common share: |
|
|
|
|
Class A -
basic |
$ |
(0.64 |
) |
|
$ |
0.37 |
|
Class A -
diluted |
$ |
(0.64 |
) |
|
$ |
0.36 |
|
Class B -
basic and diluted |
$ |
(0.59 |
) |
|
$ |
0.33 |
|
|
|
|
|
|
Supplementary Financial Analysts' Data |
|
|
|
|
|
|
|
|
|
Weighted-average number of shares |
|
|
|
|
outstanding: |
|
|
|
|
Class A -
basic |
|
22,673,287 |
|
|
|
21,669,259 |
|
Class A -
diluted |
|
23,057,629 |
|
|
|
22,447,134 |
|
Class B -
basic and diluted |
|
5,576,775 |
|
|
|
5,576,775 |
|
|
|
|
|
|
Net
premiums written |
$ |
575,723 |
|
|
$ |
557,751 |
|
|
|
|
|
|
Book value
per common share |
|
|
|
|
at end of
period |
$ |
14.68 |
|
|
$ |
16.39 |
|
|
|
|
|
|
Donegal Group Inc. |
Consolidated Balance Sheets |
(in thousands) |
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
ASSETS |
Investments: |
|
|
|
|
Fixed
maturities: |
|
|
|
|
|
Held to maturity, at
amortized cost |
$ |
400,233 |
|
|
$ |
366,655 |
|
|
|
Available for sale, at
fair value |
|
525,027 |
|
|
|
538,946 |
|
|
Equity
securities, at fair value |
|
57,973 |
|
|
|
50,445 |
|
|
Investments
in affiliates |
|
39,961 |
|
|
|
38,774 |
|
|
Short-term
investments, at cost |
|
5,096 |
|
|
|
11,050 |
|
|
|
Total
investments |
|
1,028,290 |
|
|
|
1,005,870 |
|
Cash |
|
|
55,259 |
|
|
|
37,833 |
|
Premiums
receivable |
|
160,319 |
|
|
|
160,406 |
|
Reinsurance
receivable |
|
322,468 |
|
|
|
298,343 |
|
Deferred
policy acquisition costs |
|
64,567 |
|
|
|
60,290 |
|
Prepaid
reinsurance premiums |
|
141,537 |
|
|
|
135,033 |
|
Other
assets |
|
51,807 |
|
|
|
40,145 |
|
|
|
Total assets |
$ |
1,824,247 |
|
|
$ |
1,737,920 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
Liabilities: |
|
|
|
|
|
Losses and
loss expenses |
$ |
779,980 |
|
|
$ |
676,672 |
|
|
Unearned
premiums |
|
530,544 |
|
|
|
503,457 |
|
|
Accrued
expenses |
|
24,382 |
|
|
|
28,034 |
|
|
Borrowings
under lines of credit |
|
60,000 |
|
|
|
59,000 |
|
|
Subordinated debentures |
|
5,000 |
|
|
|
5,000 |
|
|
Other
liabilities |
|
8,801 |
|
|
|
17,061 |
|
|
|
Total liabilities |
|
1,408,707 |
|
|
|
1,289,224 |
|
Stockholders' equity: |
|
|
|
|
Class A
common stock |
|
257 |
|
|
|
256 |
|
|
Class B
common stock |
|
56 |
|
|
|
56 |
|
|
Additional
paid-in capital |
|
259,667 |
|
|
|
255,401 |
|
|
Accumulated
other comprehensive loss |
|
(18,944 |
) |
|
|
(2,684 |
) |
|
Retained
earnings |
|
215,730 |
|
|
|
236,893 |
|
|
Treasury
stock |
|
(41,226 |
) |
|
|
(41,226 |
) |
|
|
Total stockholders'
equity |
|
415,540 |
|
|
|
448,696 |
|
|
|
Total liabilities and
stockholders' equity |
$ |
1,824,247 |
|
|
$ |
1,737,920 |
|
|
|
|
|
|
|
For Further Information:Jeffrey D. Miller, Executive Vice
President & Chief Financial Officer Phone: (717) 426-1931
E-mail: investors@donegalgroup.com
Donegal (NASDAQ:DGICA)
Historical Stock Chart
From Apr 2024 to May 2024
Donegal (NASDAQ:DGICA)
Historical Stock Chart
From May 2023 to May 2024