UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 16, 2003
Donegal Group Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-15341 23-2424711
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(State or other (Commission file number) (IRS employer
jurisdiction of identification no.)
incorporation)
1195 River Road, Marietta, Pennsylvania 17547
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (888) 877-0600
N/A
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(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
The following exhibit is filed herewith:
Exhibit No. Description
99.1 Press release issued by Donegal
Group Inc. (the "Company") dated
April 15, 2003
Item 12. Results of Operations and Financial Condition.
On April 15, 2003, the Company issued a press release regarding the
Company's financial results for its first quarter ended March 31, 2003. The
press release is attached as Exhibit 99.1 to this Form 8-K Current Report. The
information in this report shall not be deemed to be filed for purposes of
Section 18 of the Securities Exchange Act of 1934 or incorporated by reference
in any filing under the Securities Act of 1933.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DONEGAL GROUP INC.
Date: April 16, 2003 By:/s/ Ralph G. Spontak
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Ralph G. Spontak, Senior Vice President,
Chief Financial Officer and Secretary
EXHIBIT INDEX
Exhibit
Number Description
99.1 Press release dated April 15, 2003 issued by the
Company.
DONEGAL GROUP INC. ANNOUNCES FIRST QUARTER RESULTS
Ralph G. Spontak
Senior Vice President and Chief Financial Officer
Phone (717) 426-1931
Fax (717) 426-7009
For Immediate Release
MARIETTA, Pennsylvania, April 16, 2003 - Donegal Group Inc. (Nasdaq:
DGICA and DGICB ) today reported its operating results for the quarter ended
March 31, 2003.
The Company continued its strong underwriting results during the first
quarter of 2003 with the Company posting net income of $3,844,432, or $.41 per
share on a diluted basis, compared to $2,180,716, or $.24 per share on a diluted
basis, in the first quarter of 2002.
The Company's combined ratio for the first quarter of 2003 was a strong
97.2%, compared to 101.8% for the first quarter of 2002. The Company's loss
ratio for the first quarter 2003 improved to 66.5% compared to 68.9% for the
first quarter of 2002, despite the impact of a more severe winter in the
Northeast during the first quarter of 2003. The Company's expense ratio improved
to 30.2% for the first quarter of 2003 compared to 31.9% for the first quarter
of 2002. The Company's workers' compensation policy dividend ratio decreased
from 1.0% in the first quarter of 2002 to 0.5% in the first quarter of 2003 due
to the implementation of more stringent qualification requirements.
"Despite the effects of more severe weather in the Northeast this
winter, the Company was able to continue its string of very strong underwriting
quarters" stated Donald H. Nikolaus, President and Chief Executive Officer of
Donegal Group Inc. "The rate increases taken over the past two years, coupled
with our rededication to underwriting principles and our ongoing expense control
initiative have made it possible to absorb moderate weather-related events while
still generating an annualized return on equity of over 11% in the first
quarter" stated Nikolaus.
Operating income, which excludes after tax realized investment gains
(losses) of ($84,812) in 2003 and $83,673 in 2002, for the first quarter of 2003
was $3,929,244, or $.42 per share on a diluted basis, compared to $2,097,043, or
$.23 per share on a diluted basis, for the first quarter of 2002. These strong
results helped the Company increase its book value per common share to $14.91 as
of March 31, 2003.
Revenues for the first quarter of 2003 were $52,185,419, an increase of
4.3% over a year earlier, with premiums earned for the first quarter of
$47,928,881, a 5.4% increase over the first quarter of 2002. The lower interest
rate environment impacted investment income which was down 9.8% to $3,364,518
compared to $3,730,304 for the first quarter of 2002 despite an increase in
average invested assets. The annualized average return on investments was 4.0%
for the first quarter of 2003 compared to 4.9% for the first quarter of 2002.
Service fees for the first quarter were $614,033, an increase of 15.9% over the
year earlier total of $529,742, reflecting increases in premium installment plan
service fees.
The Company will hold a conference call on Wednesday April 16, 2003,
beginning at 11:00 A. M. Eastern Time. You may participate in the conference
call by calling 1-800-915-4836. An instant replay of the conference call will be
available until April 23, 2003, by calling 1-800-428-6051 (Passcode I. D. #
289227).
All statements contained in this release that are not historic facts
are based on current expectations. Such statements are forward-looking (as
defined in the Private Securities Litigation Reform Act of 1995) in nature and
involve a number of risks and uncertainties. Actual results may vary materially.
The factors that could cause actual results to vary materially include: The
ability of the Company to maintain profitable operations, the adequacy of the
Company's reserves for losses and loss adjusting expenses, business and economic
conditions in the Company's primary operating areas, competition from various
insurance and non-insurance businesses, the effects of terrorism, changes in
regulatory requirements, and other risks that may be described from time to time
in the reports the Company files with the Securities and Exchange Commission.
Undue reliance should not be placed on any such forward-looking statements.
Donegal Group Inc. is a regional property-casualty insurance holding
company doing business in 14 Mid-Atlantic and Southern states through its
insurance subsidiaries Atlantic States Insurance Company and Southern Insurance
Company of Virginia.
(Tables Follow)
Quarter Ended March 31
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2003 2002
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Net premiums earned $47,928,881 $45,452,260
Investment income,
net of investment expenses 3,364,518 3,730,304
Realized investment gains (losses) (130,480) 126,778
Total revenues 52,185,419 50,034,046
Net income $3,844,432 $2,180,716
Net income per common share
Basic $ 0.42 $ 0.24
Diluted $ 0.41 $ 0.24
Consolidated Statements of Income
(unaudited; in thousands, except per share data)
Quarter Ended March 31
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2003 2002
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Net premiums earned $ 47,929 $ 45,452
Investment income,
net of investment expenses 3,364 3,730
Realized investment gains (losses) (131) 127
Lease income 203 195
Service fees 614 530
Other income 206 -
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Total revenues $ 52,185 $ 50,034
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Losses and loss expenses 31,850 31,298
Amortization of deferred policy
acquisition costs 7,442 7,385
Other underwriting expenses 7,023 7,112
Other expenses 331 502
Dividends 242 466
Interest 215 325
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Total expenses 47,103 47,088
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Income before income taxes 5,082 2 ,946
Income tax expense 1,238 765
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Net income $ 3,844 $ 2,181
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Net income per common share
Basic $ 0.42 $ 0.24
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Diluted $ 0.41 $ 0.24
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Supplementary Financial Analysts' Data
Weighted average number of
shares outstanding
Basic 9,210,402 9,030,160
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Diluted 9,330,855 9,124,525
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Net written premiums $ 50,340 $ 48,315
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Book value per common share $ 14.91 $ 13.51
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Consolidated Balance Sheet
(unaudited; in thousands)
March 31, December 31, 2002
2003 -----------------
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ASSETS
Investments:
Fixed Maturities:
Held to maturity, at amortized
cost $ 91,675 $ 86,702
Available for sale, at fair value 195,274 194,732
Equity securities, at fair value 23,550 21,836
Short-term investments, at
cost, which approximates fair
value 32,107 29,029
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Total investments 342,606 332,299
Cash 4,924 1,125
Premiums in course of collection 27,725 26,287
Reinsurance receivable 77,539 83,207
Accrued investment income 3,579 3,815
Deferred policy acquisition costs 14,736 14,567
Prepaid reinsurance premiums 29,307 27,854
Property and equipment, net 4,250 4,430
Deferred income taxes 7,276 6,956
Other assets 1,612 678
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Total assets $ 513,554 $ 501,218
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss
settlement expenses $ 210,708 $ 210,692
Unearned premiums 124,867 121,002
Accounts payable and accrued 6,152 6,584
expenses
Debt 19,800 19,800
Due to affiliates 4,441
4,080
Other liabilities 9,974
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5,877
Total liabilities 375,942 368,035
Shareholders' equity:
Preferred stock
Class A common stock 63 63
Class B common stock 30 30
Additional paid-in capital 61,254 60,652
Accumulated other comprehensive 4,896 4,912
Income
Retained earnings 72,261 68,418
Treasury stock, at cost (892) (892)
Total shareholders' equity 137,612 133,183
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Total liabilities and shareholders' equity $ 513,554 $ 501,218
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