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): July 18, 2003
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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 jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
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
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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
July 18, 2003
Item 12. Results of Operations and Financial Condition.
On July 18, 2003, the Company issued a press release regarding the
Company's financial results for its second quarter ended June 30, 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: July 18, 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 July 18, 2003 issued by the Company.
EXHIBIT 99.1
DONEGAL GROUP INC. ANNOUNCES RECORD EARNINGS FOR SECOND QUARTER
Ralph G. Spontak
Senior Vice President and Chief Financial Officer
Phone (717) 426-1931
Fax (717) 426-7009
For Immediate Release
MARIETTA, Pennsylvania, July 18, 2003 - Donegal Group Inc.
(Nasdaq: DGICA and DGICB) today reported record operating results for the
quarter and six months ended June 30, 2003.
The Company's excellent underwriting results continued through the
second quarter of this year with the Company posting record quarterly net income
of $5,268,953, or $.56 per share on a diluted basis, compared to $3,178,834, or
$.35 per share on a diluted basis, in the second quarter of 2002.
The Company's combined ratio continued to improve from the strong
results posted for the first quarter ending up the second quarter at an
exceptional 92.3%, compared to 99.3% for the second quarter of 2002. The
Company's loss ratio was an outstanding 61.2% for the second quarter 2003
compared to 69.7% for the second quarter of 2002, with both commercial and
personal lines showing improvement. The Company's expense ratio increased
slightly, due to higher underwriting based incentives, resulting in a ratio of
30.6% for the second quarter of 2003 compared to 29.4% for the second quarter of
2002. The Company's workers' compensation policy dividend ratio increased
slightly from 0.2% in the second quarter of 2002 to 0.5% in the second quarter
of 2003.
The strong operational results helped the Company increase its book
value per common share to $15.49 as of June 30, 2003.
"We are delighted that our expense control and underwriting efforts
have resulted in improvements in the results of both our personal and commercial
lines", stated Donald H. Nikolaus, President and Chief Executive Officer of
Donegal Group, "and even more pleased those improvements have resulted in our
annualized return on equity improving to 13 percent through the first half of
this year."
Net income of $9,113,385, or $.97 per share on a diluted basis, for the
first six month of 2003 represented the highest first half earnings in the
Company's history, compared to $5,359,550, or $.59 per share on a diluted basis
for the first six months of 2002. The Company's combined ratio for the six
months ended June 30, 2003 was 94.7%, compared to 100.5% for the six months
ended June 30, 2002, with all major lines of business showing improvement over
the prior year.
Revenues for the second quarter of 2003 were $52,826,818, an increase
of 4.1% over a year earlier, with premiums earned for the second quarter of
$48,433,689, a 5.0% increase over the second quarter of 2002. The lower interest
rate environment impacted investment income which was down 10.6% to $3,315,710
compared to $3,710,282 for the second quarter of 2002 despite an increase in
average invested assets.
Yesterday the Company's Board of Directors declared a regular quarterly
cash dividend of 11 cents per share of Class A Common Stock and 10 cents per
share of Class B Common Stock payable August 15, 2003 to shareholders of record
as of the close of business on August 1, 2003.
The Company will hold a conference call and webcast on Friday July 18,
2003, beginning at 11:00 A. M. Eastern Time. You may participate in the
conference call by calling 1-800-901-5213 (International 617-786-2962) Passcode
I. D. 53873373. An instant replay of the conference call will be available for
10 days by calling 1-888-286-8010 (Passcode I. D. 71251761).
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 reserve 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, changes in regulatory requirements, and
other risks that may be described from time to time in the reports Donegal is
required to file 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)
Second Quarter Ended
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June 30, June 30,
2003 2002
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Net premiums earned $48,433,689 $46,110,512
Investment income,
net of expenses 3,315,710 3,710,282
Realized investment gains 216,370 60,481
Total revenues 52,826,818 50,736,803
Net income $5,268,953 $3,178,834
Net income per common share
Basic $ 0.57 $ 0.35
Diluted $ 0.56 $ 0.35
Six Months Ended
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June 30, June 30,
2003 2002
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Net premiums earned $ 96,362,570 $ 91,562,772
Investment income,
net of expenses 6,680,228 7,440,586
Realized investment gains 85,890 187,259
Total revenues 105,012,237 100,770,849
Net income $9,113,385 $ 5,359,550
Net income per common share
Basic $ 0.99 $ 0.59
Diluted $ 0.97 $ 0.59
Consolidated Statements of Income
(unaudited; in thousands, except share data)
Second Quarter Ended
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June 30, June 30,
2003 2002
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Net premiums earned $ 48,434 $ 46,111
Investment income,
net of investment expenses 3,316 3,710
Realized investment gains 216 61
Lease income 211 194
Service charge income 650 661
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Total revenues 52,827 50,737
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Losses and loss expenses 29,658 32,136
Amortization of deferred policy
acquisition costs 7,545 7,345
Other underwriting expenses 7,269 6,189
Other expenses 345 211
Dividends 228 105
Interest 307 296
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Total expenses 45,352 46,282
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Income before income taxes 7,475 4,455
Income tax expense 2,206 1,276
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Net income $ 5,269 $ 3,179
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Net income per common share
Basic $ 0.57 $ 0.35
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Diluted $ 0. 56 $ 0.35
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Supplementary Financial Analysts' Data
Weighted average number of
shares outstanding
Basic 9,269,029 9,059,477
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Diluted 9,424,050 9,175,729
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Net written premiums $ 53,184 $ 51,652
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Book value per common share $ 15.49 $ 13.94
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Six Months Ended
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June 30, June 30,
2003 2002
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Net premiums earned $ 96,363 $ 91,563
Investment income,
net of investment expenses 6,680 7,626
Realized investment gains 86 187
Lease income 413 389
Service charge income 1,264 1,191
Other Income 206 -
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105,012 100,956
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Total revenues
Losses and loss expenses 61,509 63,434
Amortization of deferred policy
acquisition costs 14,987 14,730
Other underwriting expenses 14,292 13,515
Other expenses 675 714
Dividends 469 571
Interest 522 621
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Total expenses 92,454 93,585
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Income before income taxes 12,558 7,371
Income tax expense 3,445 2,024
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Net income $ 9,113 $ 5,347
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Net income per common share
Basic $ 0.99 $ 0.59
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Diluted $ 0.97 $ 0.58
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Supplementary Financial Analysts' Data
Net written premiums $ 103,524 $ 99,967
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Weighted average number of
shares outstanding
Basic 9,239,878 9,044,899
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Diluted 9,377,614 9,150,208
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Consolidated Balance Sheet
(unaudited; in thousands, except share data)
June 30, 2003 December 31, 2002
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ASSETS
Investments:
Fixed Maturities:
Held to maturity, at amortized
cost $ 106,781 $ 86,702
Available for sale, at fair value 186,685 194,732
Equity securities, at fair value 22,638 21,836
Short-term investments, at
cost, which approximates fair
value 45,352 29,029
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Total investments 361,456 332,299
Cash 2,326 1,125
Premiums in course of collection 29,154 26,287
Reinsurance receivable 78,865 83,207
Accrued investment income 3,598 3,815
Deferred policy acquisition costs 15,521 14,567
Prepaid reinsurance premiums 31,803 27,854
Property and equipment, net 4,264 4,430
Deferred income taxes 6,511 6,956
Other assets 2,935 678
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Total assets $ 536,433 $ 501,218
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss
settlement expenses $ 209,650 $ 210,692
Unearned premiums 132,113 121,002
Accounts payable and accrued expenses 6,195 6,584
Debt 12,800 19,800
Due to affiliates 4,441 4,080
Other liabilities 12,362 5,877
Subordinate Debt 15,000 0
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Total liabilities 392,561 368,035
Shareholders' Equity
Preferred stock $1 par value;
authorized 2,000,000 shares,
none issued
Class A common stock, $.01 par
Value, Authorized 30,000,000
shares, issued 6,369,829 and
6,269,093 shares and
outstanding 6,288,305 and 64 63
6,187,569 shares Class B common stock,
$.01 par Value Authorized 10,000,000
shares, issued 3,037,549 and 30 30
3,024,742 shares and outstanding
2,996,787 and 2,983,980 shares
Additional paid-in capital 62,748 60,652
Accumulated other comprehensive 6,322 4,912
income
Retained earnings 75,600 68,418
Treasury stock, at cost (892) (892)
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Total stockholders' equity 143,872 133,183
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Total liabilities and shareholders' equity $ 536,433 $ 501,218
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