Donegal Group Reports $11.8M Q1 Net Income

April 22, 2016

Donegal Group Inc. reported net income of $11.8 million for the first quarter of 2016, a 73 percent increase over $6.9 million for the first quarter of 2015.

The Marietta, Pennsylvania-based insurer said net premiums written for the 2016 first quarter were $170.1 million ($85.3 million in personal lines and $84.8 million in commercial lines). That’s up 8.6 percent from $156.6 million ($80.9 million in personal lines and $75.7 million in commercial lines) during the same period in 2015.

The company said the increase in net premiums written reflects organic growth in both personal and commercial lines.

The GAAP combined ratio for the 2016 first quarter was 94.0 percent, improving from 98.8 percent a year ago.

Net investment income for the quarter was $5.5 million, a 12 percent jump from $4.9 million a year ago.

Donegal Group Chief Financial Officer Jeff Miller said during Wednesday’s earnings conference call that both personal and commercial lines segments were profitable for the first quarter, as a result of decreased weather related claims, fewer large fire losses, and a general decline in the volume of the incoming casualty claims.

Miller said the major drivers of the premium growth were strong commercial lines in new business growth, an increase in personal lines policy count and modest premium rate increases in most business lines.

Further commenting on the weather, Miller said the company’s weather-related losses of $6.9 million for the first quarter were lower compared to $8.8 million losses one year ago, and also lower than the $8.5 million average for the first quarters of the previous five years.

“Our first quarter results have historically reflected the impact of winter weather claim activity and that was certainly the case last year when we experienced sub-freezing temperatures that contributed to frozen pipe claims,” Miller said.

“Fortunately, we did not experience a recurrence of such extreme temperatures in 2016.”

And while there was a significant snow event in January and a wind event in February, Donegal Group’s operating regions enjoyed relatively mild winter weather, he said.

Miller also said Donegal Group sustained very few large commercial fire losses during the first quarter. The company also saw a significant decline in the number of fire losses in its homeowners line.

“We attribute the decrease to comparatively warmer temperatures in 2016,” he said. “Combination of decreases in both weather and fire losses led to excellent combined ratios in our commercial multi-peril and homeowners lines.”

Commenting on pricing trends, Donegal Group President and CEO Kevin G. Burke said the company filed rate increases in the homeowners for the 2 percent-to-3.5 percent range, depending upon the state and subsidiary. Meanwhile, rate increases in personal auto ranged in the low single digits, depending upon the state and subsidiary.

And in commercial lines, renewal premium increases during the 2016 first quarter generally ranged from 3 percent to 5 percent. “We continue to see opportunities to obtain modest renewal premium increases,” Burke said, “but there is increased competition for quality accounts.”

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