Donegal Group has reported a net income of $5.2 million in its Q1 financial results, down from $13.1 million in the previous year.
Donegal Group’s combined ratio for Q1 2023 stood at 101.2%, compared with 95.8% in 2022. Annualized return on average equity was 4.3%, down from 10.0% last year.
However, the firm saw net premiums earned increase 8.0% to $215.2 million, while net premiums written increased 8.6% to $237.3 million, representing 4.2% growth in commercial lines and 17.7% growth in personal lines.
Meanwhile, a net investment income in Q1 2023 of $9.4 million marked an increase of 20.2% compared to $7.9 million in Q1 of 2022.
Donegal Group notes that the increase in net investment income reflected primarily an increase in average investment yield.
The firm’s loss ratio increased to 64.2% in Q1, up from 59.2% in the same period last year.
Weather-related losses were $14.1 million, or 6.5 percentage points of the loss ratio, for Q1 of 2023, compared to $8.0 million, or 4.0 percentage points of the loss ratio, for Q1 of 2022.
Q1 2023 weather-related losses included $3.8 million related to the impact of significant wind activity on the last day of the quarter, the firm suggests.
Donegal Group writes, “The weather-related loss impact for the first quarter of 2023 was higher than our previous five-year first-quarter average of $9.0 million, or 4.8 percentage points of the loss ratio.
“Large fire losses, which we define as individual fire losses in excess of $50,000, for the first quarter of 2023 were $10.9 million, or 5.1 percentage points of the loss ratio.
“That amount was modestly higher than the large fire losses of $9.6 million, or 4.8 percentage points of the loss ratio, for the first quarter of 2022.
“A $4.6 million increase in commercial property fire losses was partially offset by a $3.2 million decrease in homeowner fire losses.”
Kevin G. Burke, President and Chief Executive Officer of Donegal Group said, “We believe our solid premium growth in the first quarter of 2023 is a testament to the successful launch of our new personal lines product suite in 2022, solid independent agency relationships and superior claims handling capabilities and reputation.
“We remain cautious of the current macro-economic environment and ongoing impact of inflation. For our personal lines segment, we are taking actions to moderate our growth until we have better clarity on rate adequacy and stabilization of loss costs.
“For our commercial lines segment, we successfully deployed the next major release within our systems modernization project, which will add three commercial lines to our modernized operating platform for policies effective beginning in June 2023 in three states.
“The new lines include a new businessowners product as well as modernized commercial automobile and commercial umbrella products.
“We expect to roll out these new products in our remaining 21 states in the third quarter of 2023 and further expect that our enhanced capability to compete for small commercial accounts will generate additional premium growth as the year progresses.”
He continued, “From a profitability standpoint, weather and large fire losses were elevated when compared to the prior-year quarter, but we experienced incremental improvement from prior consecutive quarters in 2022.
“While weather conditions within our operating region were close to average for the majority of the first quarter of 2023, claim activity from significant winds on the final day of the quarter pushed the weather impact above our previous five-year first quarter average.
“To combat ongoing inflationary pressures, we continue to implement substantial premium rate increases in nearly every line of business.
“We also believe that our ongoing strategic and transformational implementations, which are already yielding positive impact, will gain momentum and enhance long-term shareholder value creation.”
