Ownership and Structure - Donegal Mutual holds approximately 44% of the outstanding Class A common stock and 84% of the outstanding Class B common stock, providing it with about 71% of the combined voting power[229]. - The pooling agreement between Donegal Mutual and Atlantic States allocates 80% of the pooled business to Atlantic States, allowing both companies to share underwriting results proportionately[230]. - Donegal Mutual completed the merger with Mountain States Mutual Casualty Company on May 25, 2017, integrating its insurance subsidiaries into the Donegal Insurance Group[232]. - The underwriting pool aims to produce more uniform and stable underwriting results for both Donegal Mutual and Atlantic States compared to individual operations[244]. - The company maintains a coordinating committee to evaluate the fairness of transactions between Donegal Mutual and its insurance subsidiaries[380]. Financial Performance - Net premiums written for 2023 reached $895,697,000, up from $843,530,000 in 2022, representing a growth of 6.2%[255]. - The combined ratio for 2023 was 104.4%, compared to 103.3% in 2022, indicating a decline in underwriting profitability[255]. - Net income for 2023 was $4.4 million, or $0.14 per share of Class A common stock, compared to a net loss of $2.0 million in 2022[276]. - Total revenues for 2023 increased to $927.34 million, up 9.34% from $848.22 million in 2022[321]. - The company reported a comprehensive income of $10.44 million for 2023, recovering from a comprehensive loss of $46.95 million in 2022[321]. Claims and Losses - The average claim outstanding has gradually increased due to rising property and automobile repair costs, medical loss costs, and increased litigation trends[243]. - The company maintains liabilities for both reported and unreported claims, with estimates based on historical information and trends[238]. - Total liability for losses and loss expenses increased to $1,126,157,000 in 2023 from $1,121,046,000 in 2022, reflecting a growth of 0.5%[246]. - The loss ratio for 2023 was 69.1%, slightly increasing from 68.6% in 2022, while the expense ratio rose to 34.7% from 34.1%[255]. - The company has observed an increase in the time between the occurrence of a casualty loss event and the notice of a liability claim, impacting the accuracy of loss frequency predictions[410]. Investment Performance - Net investment income increased to $40,853,000 in 2023 from $34,016,000 in 2022, marking a growth of 20.9%[255]. - The investment portfolio totaled $1.3 billion at December 31, 2023, representing 58.6% of total assets, with fixed maturities accounting for 95.6% of total investments[297]. - The company recorded net unrealized losses of $1.3 million in accumulated other comprehensive loss as of December 31, 2023, down from $4.7 million in 2022[386]. - The total available for sale securities amounted to $629.7 million with an estimated fair value of $589.3 million as of December 31, 2023[388]. - The company’s investment expenses for 2023 were $2.9 million, compared to $2.7 million in 2022[391]. Stockholder Equity and Dividends - Stockholders' equity decreased by $47.4 million in 2022, leading to a book value per share of $14.79, down from $16.95 the previous year[291]. - Cash dividends declared to stockholders were $22.2 million in 2023, up from $20.9 million in 2022 and $19.6 million in 2021[296]. - Book value per share decreased to $14.39 at December 31, 2023, down from $14.79 a year earlier[277]. - The company anticipates approximately $39.6 million available for distribution as dividends from its insurance subsidiaries in 2024[296]. Reserves and Estimates - The selected point estimate for loss and loss expense reserves in 2023 is $689.1 million, compared to $669.9 million in 2022, indicating an increase of 2.9%[248]. - Estimates for unpaid losses and loss expenses are critical, with potential significant differences from actual results due to various factors including claims severity and external environment changes[340]. - Liabilities for losses and loss expenses are based on estimates that may change due to new information and trends, including those influenced by the COVID-19 pandemic[356]. - The company establishes an allowance for expected credit losses based on ongoing reviews and utilizes a probability-of-default methodology for estimates[364]. Claims Management - The company continues to focus on managing incurred claims effectively to maintain financial stability and support future growth initiatives[420][423][426]. - The overall trend in cumulative paid claims indicates a consistent increase in claims management efficiency across all segments[421][425][427]. - The actuaries utilize multiple methods, such as paid loss development and incurred loss development, to estimate ultimate loss costs[408]. - Total incurred claims for Personal Automobile amounted to $1,431,995 thousand, with a cumulative number of reported claims reaching 27,416[414].
Donegal (DGICB) - 2023 Q4 - Annual Report