3
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): February 20, 2004
-----------------
Donegal Group Inc.
---------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-15341 23-2424711
------------------ ------------------------- ----------------
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
1195 River Road, Marietta, Pennsylvania 17547
----------------------------------------------
(Address of principal executive offices(Zip code)
Registrant's telephone number, including area code: (888) 877-0600
--------------
N/A
------------------------------------ ----
(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 February 20, 2004
Item 12. Results of Operations and Financial Condition.
On February 20, 2004, the Company issued a press release regarding the
Company's financial results for its fourth quarter ended December 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: February 24, 2004 By: /s/ Ralph G. Spontak
------------------------------------
Ralph G. Spontak, Senior Vice
President, Chief Financial Officer
and Secretary
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
99.1 Press release dated February 20, 2004 issued by the Company.
EXHIBIT 99.1
DONEGAL GROUP INC. ANNOUNCES RECORD EARNINGS IN 2003
Ralph G. Spontak
Senior Vice President and Chief Financial Officer
Phone (717) 426-1931
Fax (717) 426-7009
For Immediate Release
---------------------
Marietta, Pennsylvania, February 20, 2004 - Donegal Group Inc. (Nasdaq:
DGICA and DGICB) today reported its results of operations for the quarter and
year ended December 31, 2003.
The Company completed the year with another strong quarter, posting net
income for the fourth quarter of 2003 of $5,179,206, or $.47 per share on a
diluted basis, compared to $3,627,496, or $.39 per share on a diluted basis, for
the fourth quarter of 2002.
For the full year ended December 31, 2003 the Company posted record net
income of $18,293,976, or $1.85 per share on a diluted basis and a return on
average equity of 12.2%, compared to $12,002,722, or $1.31 per share on a
diluted basis and a return on average equity of 9.4%, in 2002.
"We are pleased with our quarterly and year 2003 results that reflect the
emphasis that the Company has placed on premium adequacy, underwriting
discipline and expense control over the last several years together with a
profitable growth strategy" stated Donald H. Nikolaus, President and Chief
Executive Officer of Donegal Group.
The Company continued its strong underwriting results through the end of
the year, achieving a combined ratio for the fourth quarter of 93.8%, compared
to 97.9% for the fourth quarter of 2002. The Company's loss ratio showed marked
improvement from a year earlier at 63.1% for the fourth quarter of 2003,
compared to 70.4% for the fourth quarter of 2002.
The strong financial results resulted in an increase in the Company's book
value per common share to $16.29 as of December 31, 2003, compared to $14.52 as
of December 31, 2002.
Revenues for the fourth quarter of 2003 were $55,694,338, an increase of
7.2% over a year earlier, with net premiums earned for the fourth quarter of
$50,710,542, a 6.8% increase over the fourth quarter of 2002. The lower interest
rate environment continued to impact investment income, which decreased 5.9% to
$3,309,105 for the fourth quarter of 2003, compared to $3,517,404 for the fourth
quarter of 2002, despite an increase in average invested assets.
Revenues for the full year 2003 were $214,992,328, an increase of 5.5% over
a year earlier, with net premiums earned for the year of $196,792,696, a 5.9%
increase over 2002. The Company's combined ratio for the year ended December 31,
2003 was 95.0%, compared to 99.6% for the year ended December 31, 2002, with
both personal and commercial lines showing improvement over the prior year.
The Company will hold a conference call and webcast on Friday February 20,
beginning at 11:00 A. M. Eastern Standard Time. You may participate in the
conference call by calling 1-800-901-5241 (International 617-786-2963) Passcode
I. D. 26608347. An instant replay of the conference call will be available for
10 days by calling 1-888-286-8010 (Passcode I. D. 25593999).
Donegal Group Inc. is a property and casualty insurance holding company
whose insurance subsidiaries offer personal and commercial lines of insurance to
businesses and individuals in six Mid-Atlantic states (Connecticut, Delaware,
Maryland, New York, Ohio and Pennsylvania), eight Southeastern states (Alabama,
Arkansas, Georgia, Louisiana, North Carolina, South Carolina, Tennessee and
Virginia) and four Midwestern states (Iowa, Nebraska, Oklahoma and South
Dakota).
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 could vary materially. Among
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 adjustment expenses, business and
economic conditions in the Company's primary operating areas, competition from
various insurance and non-insurance businesses, terrorism, legal and judicial
developments, changes in regulatory requirements and other risks that are
described from time to time in the periodic reports the Company files with the
Securities and Exchange Commission. Undue reliance should not be placed on any
such forward-looking statements.
(Tables Follow)
Fourth Quarter Ended
--------------------------------
December 31, December 31,
2003 2002
----------- -----------
Net premiums earned $50,710,542 $47,485,673
Investment income,
net of investment expenses 3,309,105 3,517,404
Realized investment gains 873,268 158,121
Total revenues 55,694,338 51,947,295
Net income $ 5,179,206 $ 3,627,496
Net income per common share
Basic $ 0.49 $ 0.40
Diluted $ 0.47 $ 0.39
Year Ended
--------------------------------
December 31, December 31,
2003 2002
------------ ------------
Net premiums earned $196,792,696 $185,841,193
Investment income,
net of investment expenses 13,315,936 14,581,252
Realized investment gains 1,368,031 144,190
Total revenues 214,992,328 203,803,561
Net income $ 18,293,976 $ 12,002,722
Income per common share
Basic $ 1.91 $ 1.32
Diluted $ 1.85 $ 1.31
Consolidated Statements of Income
(unaudited; in thousands, except share data)
Fourth Quarter Ended
-------------------------------
December 31, December 31,
2003 2002
----------- -----------
Net premiums earned $ 50,711 $ 47,486
Investment income,
net of investment expenses 3,309 3,517
Realized investment gains 873 158
Lease income 216 200
Service charge income 585 586
----------- -----------
Total revenues 55,694 51,947
----------- -----------
Losses and loss expenses 31,975 33,410
Amortization of deferred policy
acquisition costs 7,978 7,378
Other underwriting expenses 7,155 5,519
Other expenses 360 189
Policyholder dividends 443 205
Interest 408 249
----------- -----------
Total expenses 48,319 46,950
----------- -----------
Income before income taxes 7,375 4,997
Income tax expense 2,196 1,370
----------- -----------
Net income $ 5,179 $ 3,627
=========== ===========
Net income per common share
Basic $ 0.49 $ 0.40
----------- -----------
Diluted $ 0.47 $ 0.39
----------- -----------
Supplementary Financial Analysts' Data
Weighted average number of
shares outstanding
Basic 10,477,603 9,153,585
----------- -----------
Diluted 11,065,320 9,272,763
----------- -----------
Net written premiums $ 50,448 $ 45,706
----------- -----------
Book value per common share $ 16.29 $ 14.52
----------- -----------
Year Ended
--------------------------------
December 31, December 31,
2003 2002
(unaudited)
------------ ------------
Net premiums earned $ 196,793 $ 185,841
Investment income,
net of investment expenses 13,316 14,582
Realized investment gains 1,368 144
Lease income 845 790
Service charge income 2,464 2,447
Other income 206 --
---------- ----------
214,992 203,804
---------- ----------
Total revenues
Losses and loss expenses 126,243 129,268
Amortization of deferred policy
acquisition costs 30,839 29,473
Other underwriting expenses 28,687 25,332
Other expenses 1,345 1,060
Policyholder dividends 1,155 1,057
Interest 1,287 1,119
---------- ----------
Total expenses 189,556 187,309
---------- ----------
Income before income taxes 25,436 16,495
Income tax expense 7,142 4,492
---------- ----------
Net income $ 18,294 $ 12,003
========== ==========
Net income per common share
Basic $ 1.91 $ 1.32
---------- ----------
Diluted $ 1.85 $ 1.31
---------- ----------
Supplementary Financial Analysts' Data
Net written premiums $ 206,981 $ 194,504
---------- ----------
Weighted average number of
shares outstanding
Basic 9,570,872 9,085,914
---------- ----------
Diluted 9,894,844 9,193,113
---------- ----------
Consolidated Balance Sheet
(in thousands, except share data)
December 31, December 31,
2003 2002
----------- -----------
(unaudited)
ASSETS
Investments:
Fixed maturities:
Held to maturity, at amortized
cost $ 113,051 $ 86,702
Available for sale, at fair value 198,433 194,732
Equity securities, at fair value 31,448 21,836
Short-term investments, at
cost, which approximates fair
value 78,344 29,029
--------- ---------
Total investments 421,276 332,299
Cash 5,909 1,125
Premiums in course of collection 29,017 26,287
Reinsurance receivable 81,009 83,207
Accrued investment income 3,752 3,815
Deferred policy acquisition costs 16,224 14,567
Prepaid reinsurance premiums 30,692 27,854
Property and equipment, net 4,152 4,430
Deferred income taxes 7,032 6,956
Other assets 2,973 678
--------- ---------
Total assets $ 602,036 $ 501,218
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss
adjustment expenses $ 217,914 $ 210,692
Unearned premiums 134,028 121,002
Accounts payable and accrued
expenses 7,770 6,584
Debt 25,774 19,800
Due to affiliates 905 4,080
Other liabilities 6,996 5,877
--------- ---------
Total liabilities 393,387 368,035
Stockholders' Equity
Preferred stock $1.00 par value;
authorized 2,000,000 shares,
none issued
Class A common stock, $.01 par
value, authorized 30,000,000
shares, issued 9,880,506 and
6,269,093 shares and
outstanding 9,798,982 and
6,187,569 shares 99 63
Class B common stock, $.01 par
value, authorized 10,000,000
shares, issued 3,051,811 and
3,024,742 shares and
outstanding 3,011,049 and
2,983,980 shares 30 30
Additional paid-in capital 122,745 60,652
Accumulated other comprehensive income 5,291 4,912
Retained earnings 81,376 68,418
Treasury stock, at cost (892) (892)
--------- ---------
Total stockholders' equity 208,649 133,183
--------- ---------
Total liabilities and stockholders' equity $ 602,036 $ 501,218
========= =========