US primary holding company Donegal Group has announced its financial results for the fourth quarter of 2023, reporting a net loss of $2.0 million, compared to net income of $3.5 million a year earlier.
Donegal Group’s combined ratio for Q4 2023 was 106.8%, compared to 102.8% reported in the prior year quarter. Loss ratio increased to 72.1%, as well as expense ratio, to 34.1%
The firm saw its net premiums written for the quarter increase 6.1%, to $212.6m, an improvement compared to the $200.4m reported in Q4 2022
According to Donegal, this improved figure represents the combination of a 1.5% decrease in commercial lines net premiums written and 18.1% growth in personal lines net premiums written.
The $12.3 million increase in net premiums written for the fourth quarter of 2023 compared to the fourth quarter of 2022 included a $1.8 million decrease from Commercial Lines.
This decrease was attributed primarily to planned attrition in states we are exiting or have targeted for profit improvement and lower new business writings, offset partially by strong premium retention and a continuation of renewal premium increases in lines other than workers’ compensation.
From personal lines, the total net written premiums included a $14.1 million increase that we attribute primarily to a continuation of renewal premium rate increases and strong policy retention.
For the commercial lines segment, the core loss ratio of 59.6% for Q4 2023 improved from 63.9% for the same period last year, primarily as the result of ongoing premium rate increases in all lines except workers’ compensation and reduced exposures in underperforming states over the past several years.
For the personal lines segment, the core loss ratio of 65.1% increased from 60.7% for the Q4 of 2022, due largely to higher average personal automobile liability claim severity and ongoing inflationary impacts on automobile repair and replacement costs.
Weather-related losses of $13.4 million in Q4 2023 decreased from $16.5 million for Q4 2022. While large fire losses, which the firm defines as individual fire losses in excess of $50,000, were $10.8 million, for Q4 2023, compared to $13.1 million reported in the same period the year prior.
Kevin G. Burke, President and Chief Executive Officer of Donegal Group Inc., stated: “As we closed out 2023 and shifted our focus to 2024, we have continued to execute on our numerous strategic initiatives, particularly focusing on action items related to individual state strategies and profit improvement measures.
“Our independent agents are responding favourably to our new and modernised small commercial products and agency portal, and we are employing our advanced capabilities to attract growth within that profitable market segment. During the fourth quarter, we saw a continuation of improvement within our commercial lines underwriting results, partly due to the lowest quarterly impact of weather-related losses we have experienced since the first quarter of 2022, coupled with lower-than-average large fire loss severity.
“Our personal lines underwriting results continued to reflect the impact of increased claim severity and residual inflationary impacts on loss trends. We are implementing various measures to reduce our operating expenses incrementally over the next several years, noting that the expense ratio impact from costs associated with our major systems modernization project will peak in 2024 before beginning to subside gradually.
He concluded: “Actions related to our strategic decision to non-renew commercial accounts in geographies and classes we targeted for exit or profit improvement continued to progress and contributed to the modest decrease in commercial lines net premiums earned. While attrition from this effort more than offset strong renewal and retention rates, we expect the removal of those underperforming accounts will accelerate our return to target profitability levels in future periods.
“As planned, we slowed new business growth in our personal lines and implemented significant rate increases for retained policies throughout 2023. We will continue to take significant rate increases through 2024 to achieve and maintain rate adequacy in our personal lines segment. While the insurance landscape continues to evolve, our dedicated team remains keenly focused on execution as we navigate both the current and future environment with the ultimate goal of achieving sustained excellent financial performance.”
