US primary holding company Donegal Group has reported a net loss of $0.8 million in its third quarter of 2023 results, an improved figure when compared to the $10.4 million net loss from the same period last year.
Donegal Group’s combined ratio for Q3 2023 improved to 104.5%, compared to 109.6% reported in Q3 2022.
The firm also reported increased net premiums earned of $224.4 million, compared to the $206.2 million seen in Q3 2022. At $219.2 million, net premiums written also saw growth, compared to the $206.2 million reported in the prior year quarter.
According to the Group, the 6.3% increase in net premiums written for this year’s Q3 represents a 1.8% decline in commercial lines net premiums written and 17.7% growth in personal lines net premiums written.
Commercial Lines saw around a $2.1 million decrease this quarter, from $120.6 million in Q3 2022 to $118.5 million. This was attributed primarily to planned attrition in states the Donegal Group are exiting or have targeted for profit improvement and lower new business writings.
It was offset partially by strong premium retention and a continuation of renewal premium increases in lines other than workers’ compensation, the firm noted.
On the other hand, Personal Lines increase of around $15.1 million, from $85.5 million in Q3 2022 to $100.7 million, was primarily due to a continuation of renewal premium rate increases and strong policy retention.
Donegal Group also noted that the net loss in Q3 2023 included after-tax net investment losses of $1.0 million, compared to $1.9 million in the prior year quarter.
Kevin G. Burke, President and Chief Executive Officer of Donegal Group Inc., said: “We remain focused on the ongoing execution of our strategic plan to build a solid foundation for future growth and consistent profitability, while we continue to navigate significant headwinds impacting the insurance industry. During the third quarter of 2023, we experienced significant improvement in our commercial lines underwriting results compared to the prior-year third quarter.
“We attribute that improvement in part to a decrease in large commercial property fire losses. On the other hand, our personal lines underwriting results reflected elevated weather-related losses resulting from a substantial increase in the frequency of severe weather events throughout our operating regions that generated the highest quarterly weather-related loss ratio we have recorded in recent years.”
In its financial results for the third quarter of 2023, the firm reported a loss ratio decrease, to 69.8% compared to 75.6% for the third quarter of 2022.
Weather-related losses of $25.7 million for Q3 2023, increased from $19.4 million in Q3 2022. The impact of weather-related loss activity to the loss ratio for this quarter was well above the firm’s previous five-year average of 9.3 percentage points for third quarter weather-related losses.
Large fire losses – which the Donegal Group defines as individual fire losses in excess of $50,000 – for Q3 2023 were $11.0 million. That amount compared favourably to the large fire losses of $17.4 million for Q3 2022, according to the firm.
The reduction was driven by a $6.5 million decrease in commercial property fire losses compared to the prior-year quarter.
Net favourable development of reserves for losses incurred in prior accident years of $7.3 million decreased the loss ratio for this year’s Q3, compared to $6.2 million that decreased the loss ratio for the third quarter of 2022.
The core loss ratio, which excludes the impacts of weather-related losses, large fire losses and net development of reserves for losses incurred in prior accident years, decreased to 56.7% for the third quarter of 2023, compared to 60.8% for the third quarter of 2022.
The commercial lines core loss ratio for Q3 2023 decreased to 53.7%, compared to 62.1% for Q3 2022, with improvements across all major commercial lines of business.
The personal lines core loss ratio for Q3 2023 increased to 61.8%, compared to 58.4% for the same period last year, primarily related to continuing inflationary impacts on personal automobile repair and replacement costs.
Burke continued: “During the third quarter of 2023, we completed our deployment of enhanced products and a new agency portal across our 22-state commercial lines geographical footprint as well as additional service capabilities to allow us to compete more effectively for quality small commercial accounts through our independent agents. Conversely, as previously announced, we began to non-renew all commercial policies in Georgia and Alabama.
“We have also accelerated commercial lines renewal premium increases and other underwriting refinements as part of our ongoing profit improvement initiatives in other regions where we have not achieved targeted profitability levels. Within our personal lines business segment, we continued to implement significant premium rate increases along with other actions to slow the pace of new business writings.
He concluded: “We expect to continue to take significant rate increases through the balance of 2023 and into 2024 to ensure that we achieve rate adequacy in this segment. Excluding the markets we are exiting, retention levels in both segments remained consistently high despite the premium rate increases and other underwriting actions we implemented.”
