Donegal implements new reinsurance program, sees Q4 losses

|About: Donegal Group, Inc. (DGICA)|By:, SA News Editor

Donegal Group (DGICA +2.9%) implements a combined third-party reinsurance program effective Jan. 1, 2019.

Donegal expects the new program to outperform expiring reinsurance programs in terms of managing volatility and preserving capital.

Preliminary Q4 results: The company expects a Q4 net loss of 53 cents-55 cents per class A share (consensus estimate is EPS of 11 cents) as a result of increased claim activity and expected net investment losses of $6.9M, or 25 cents per class A share, primarily related to mark-to-market adjustment  of equity securities held at Dec. 31, 2018.

Sees weather-related losses of about $12.5M, including about $4.1M of losses from Hurricane Michael, in Q4, higher than Donegal's previous five-year average for Q4 weather-related losses of $5.2M.

Donegal also saw higher loss severity trends in personal and commercial automobile lines of business.

    Adds ~$6.5M to its loss and loss expense reserves for personal and commercial auto losses in accident years prior to 2018

    Expects Q4 combined ratio of 110.0%-111.0%.

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