MARIETTA, PA — Donegal Group Inc. (NASDAQ: DGICA) and (NASDAQ: DGICB), a leading insurance holding company, recently revealed its financial results for the fourth quarter and full year of 2023. Overall, the company showed an uptick in net premiums earned, offset by a higher combined ratio and a net loss for the fourth quarter.
For the fourth quarter, net premiums earned rose 6.2% to $226.2 million, compared to the same period in 2022. However, Donegal’s combined ratio, an important measure of insurer profitability, reached 106.8%, up from 102.8% the previous year. A ratio above 100% points to an underwriting loss, indicating that the company paid out more in claims and expenses than it received in premiums.
The company also reported a net loss of $2.0 million, or 6 cents per Class A share, in contrast to a net income of $3.5 million, or 11 cents per diluted Class A share, in the same quarter of the preceding year. However, there were some positive signs, with net investment gains (after tax) of $1.8 million, or 5 cents per Class A share, compared to $0.5 million, or 2 cents per diluted Class A share, in 2022.
Looking at the full year, Donegal’s net premiums earned increased by 7.2% to $882.1 million. However, the combined ratio rose slightly to 104.4%, compared to 103.3% in 2022. On a brighter note, the company reported a net income of $4.4 million, or 14 cents per diluted Class A share, a significant turnaround from a net loss of $2.0 million, or 6 cents per Class A share, in the previous year. Donegal also reported net investment gains (after tax) of $2.5 million, or 8 cents per diluted Class A share, a vast improvement from net investment losses (after tax) of $8.0 million, or 26 cents per Class A share, in 2022.
Donegal’s book value per share stood at $14.39 at the end of 2023, slightly down from $14.79 at the end of 2022.
Kevin G. Burke, President and CEO of Donegal Group, commented on the results, highlighting the company’s strategic initiatives, especially in individual state strategies and profit improvement measures. He noted that the company saw improved commercial lines underwriting results in the fourth quarter, thanks to the lowest quarterly impact of weather-related losses since the first quarter of 2022, and lower-than-average large fire loss severity.
However, Burke also pointed out that the company’s personal lines underwriting results continue to experience the effects of increased claim severity and inflationary impacts on loss trends. To address this, Donegal is implementing measures to reduce operating expenses over the next few years.
The company’s decision to non-renew commercial accounts in certain geographies and classes for profit improvement led to a decrease in commercial lines net premiums earned. Despite this, Burke expressed optimism that removing underperforming accounts would accelerate a return to target profitability levels. He also mentioned the company’s plan to continue taking significant rate increases through 2024 to achieve and maintain rate adequacy in its personal lines segment.
Despite the mixed financial results, Donegal remains focused on its ultimate goal of achieving sustained excellent financial performance. The company’s ability to navigate the evolving insurance landscape will be key to its success in the coming year.
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