UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 2008
Donegal Group Inc.
(Exact name of registrant as specified in its charter)
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DE |
0-15341 |
23-2424711 |
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(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
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1195 RIVER RD MARIETTA, PA |
17547 |
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| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: 717-426-1931
________________________________________________________________________________
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 2.02. Results of Operations and Financial Condition.
On February 20, 2008 the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1. Press release dated February 20, 2008
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Donegal Group Inc.
(Registrant) |
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February 20, 2008
(Date) |
/s/ JEFFREY D. MILLER
Jeffrey D. Miller Senior Vice President and Chief Financial Officer |
| Exhibit Index | ||
| 99.1 | Press release dated February 20, 2008 | |
EXHIBIT 99.1
Donegal Group Inc. Announces Fourth Quarter and Full Year Earnings
MARIETTA, Pa., Feb. 20, 2008 (PRIME NEWSWIRE) -- Donegal Group Inc. (Nasdaq:DGICA) (Nasdaq:DGICB) today reported that its net income for the fourth quarter of 2007 was $10,796,583, or $.43 per share of Class A common stock on a diluted basis, compared to $11,045,651, or $.44 per share of Class A common stock on a diluted basis, reported for the fourth quarter of 2006.
The Company's net income reflected a continuation of the favorable underwriting results experienced in the prior two quarterly periods, with a modest increase in weather-related claims and a moderation in favorable prior accident year reserve development compared to the year-earlier period.
Revenues for the fourth quarter of 2007 were $86,890,271, an increase of 3.2% over the fourth quarter of 2006, with net premiums earned of $78,188,948, a 2.6% increase over the year-earlier period. Net premiums written for the fourth quarter of 2007 were relatively unchanged from net premiums written for the fourth quarter of 2006.
The Company's combined ratio was 90.5% for the fourth quarter of 2007, compared to 88.2% for the fourth quarter of 2006. The Company's loss ratio for the fourth quarter of 2007 was 58.4%, compared to 54.9% for the fourth quarter of 2006, reflecting the impact of the aforementioned weather and reserve development. The Company's expense ratio was 31.6% for the fourth quarter of 2007, compared to 32.8% for the fourth quarter of 2006, reflecting adjustments to the expected payout for underwriting-based incentive compensation costs and guaranty fund liabilities.
Net investment income increased slightly to $5,906,339 for the fourth quarter of 2007, compared to $5,895,564 reported for the fourth quarter of 2006. The Company continued to increase its tax-exempt municipal bond holdings throughout 2007 to obtain favorable after-tax yields.
Revenues for the full year 2007 were $340,618,294, an increase of 3.2% over the full year 2006, with net premiums earned of $310,071,534, a 2.9% increase over the year-earlier period. Net premiums written for the full year 2007 increased 2.0% over net premiums written for the full year 2006.
Net income for the year ended December 31, 2007 was $38,279,905, compared to $40,214,722 reported for the year ended December 31, 2006. On a diluted basis, net income per share of Class A common stock for the year ended December 31, 2007 was $1.53, compared to $1.60 for the year-earlier period. The Company's combined ratio for the full year 2007 was 91.3%, compared to the combined ratio of 89.0% posted for the full year 2006. The Company's loss ratio was 57.4% for the full year 2007, compared to 55.8% for the full year 2006, with the increase reflecting increased weather-related claim activity in the first quarter of 2007. The Company's expense ratio was 33.5% for the full year 2007, compared to 32.7% for the full year 2006, with the increase representing increased costs for the acquisition of new business and increased underwriting-based incentive compensation costs.
"We are pleased to report solid earnings for the fourth quarter, which contributed to 2007 being an excellent year for Donegal Group. Although current insurance market conditions are challenging, we are pleased that our underwriting focus has enabled us to deliver consistent underwriting profitability," stated Donald H. Nikolaus, President and Chief Executive Officer of Donegal Group Inc.
The Company's book value increased to $13.92 per common share at December 31, 2007, representing an increase of 9.6% over the Company's book value of $12.70 per common share at December 31, 2006.
The Company announced on January 29, 2008 that its board of directors and the board of directors of Donegal Mutual Insurance Company had each approved an amendment to the intercompany pooling between Donegal Mutual and Atlantic States Insurance Company, the Company's largest insurance subsidiary. Under the terms of the amendment, Atlantic State's share of the pooled business will increase from 70% to 80% effective March 1, 2008.
The Company will hold a conference call and webcast on Wednesday, February 20, 2008, beginning at 11:00 A.M. Eastern Time. You may participate in the conference call by calling 1-866-383-8009 (Passcode 71968128) or listen via the Internet by accessing the webcast link in the Investors area of the Company's web site at www.donegalgroup.com. An instant replay of the conference call will be available until February 27, 2008 by calling 1-888-286-8010 (Passcode 82473678).
Donegal Group Inc. is an insurance holding company whose insurance subsidiaries offer personal and commercial property and casualty lines of insurance in five Mid-Atlantic states (Delaware, Maryland, New Hampshire, New York and Pennsylvania), eight Southeastern states (Alabama, Georgia, Louisiana, North Carolina, South Carolina, Tennessee, Virginia and West Virginia) and five Midwestern states (Iowa, Nebraska, Ohio, Oklahoma and South Dakota).
All statements contained in this press release that are not historic facts are based on current expectations. Such statements are forward-looking in nature (as defined in the Private Securities Litigation Reform Act of 1995) and necessarily involve risks and uncertainties. Actual results could vary materially. The factors that could cause actual results to vary materially include, but are not limited to, 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 areas in which the Company operates, severe weather events, competition from various insurance and non-insurance businesses, terrorism, the availability and cost of reinsurance, legal and judicial developments, changes in regulatory requirements and other risks that are described from time to time in the Company's filings with the Securities and Exchange Commission. The Company disclaims any obligation to update such statements o r to announce publicly the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
Donegal Group Inc.
Financial Highlights
(unaudited)
Three Months Ended
December 31
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2007 2006
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Net premiums earned $78,188,948 $76,197,821
Investment income, net of investment
expenses 5,906,339 5,895,564
Net realized investment gains 1,397,394 794,798
Total revenues 86,890,271 84,203,995
Net income $10,796,583 $11,045,651
Net income per common share:
Class A common stock - basic $ 0.44 $ 0.45
Class A common stock - diluted $ 0.43 $ 0.44
Class B common stock - basic and diluted $ 0.39 $ 0.40
Year Ended December 31
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2007 2006
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Net premiums earned $310,071,534 $301,478,162
Investment income, net of investment
expenses 22,785,252 21,320,081
Net realized investment gains 2,051,050 1,829,539
Total revenues 340,618,294 329,967,034
Net income $ 38,279,905 $ 40,214,722
Net income per common share:
Class A common stock - basic $ 1.55 $ 1.65
Class A common stock - diluted $ 1.53 $ 1.60
Class B common stock - basic and diluted $ 1.39 $ 1.48
Donegal Group Inc.
Consolidated Statements of Income
(unaudited; in thousands, except share data)
Quarter Ended
December 31
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2007 2006
----------- -----------
Net premiums earned $ 78,189 $ 76,198
Investment income, net of investment
expenses 5,906 5,895
Net realized investment gains 1,397 795
Lease income 269 254
Installment payment fees 1,129 1,062
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Total revenues 86,890 84,204
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Net losses and loss expenses 45,628 41,793
Amortization of deferred policy acquisition
costs 13,315 12,575
Other underwriting expenses 11,397 12,404
Other expenses 400 564
Policyholder dividends 405 396
Interest 724 740
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Total expenses 71,869 68,472
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Income before income tax expense 15,021 15,732
Income tax expense 4,225 4,686
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Net income $ 10,796 $ 11,046
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Net income per common share:
Class A common stock - basic $ 0.44 $ 0.45
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Class A common stock - diluted $ 0.43 $ 0.44
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Class B common stock - basic and diluted $ 0.39 $ 0.40
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Supplementary Financial Analysts' Data
Weighted-average number of shares
outstanding:
Class A common stock - basic 19,717,747 19,618,252
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Class A common stock - diluted 19,949,711 20,169,418
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Class B common stock - basic and diluted 5,576,775 5,576,775
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Net written premiums $ 70,781 $ 70,745
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Book value per common share at end of
period $ 13.92 $ 12.70
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Donegal Group Inc.
Consolidated Statements of Income
(unaudited; in thousands, except share data)
Year Ended December 31
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2007 2006
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Net premiums earned $ 310,072 $ 301,478
Investment income, net of investment
expenses 22,785 21,320
Net realized investment gains 2,051 1,830
Lease income 1,060 982
Installment payment fees 4,650 4,357
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Total revenues 340,618 329,967
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Net losses and loss expenses 177,784 168,421
Amortization of deferred policy acquisition
costs 51,205 48,595
Other underwriting expenses 52,726 49,971
Other expenses 1,896 2,118
Policyholder dividends 1,273 1,438
Interest 2,885 2,802
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Total expenses 287,769 273,345
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Income before income tax expense 52,849 56,622
Income tax expense 14,569 16,407
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Net income $ 38,280 $ 40,215
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Net income per common share:
Class A common stock - basic $ 1.55 $ 1.65
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Class A common stock - diluted $ 1.53 $ 1.60
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Class B common stock - basic and diluted $ 1.39 $ 1.48
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Supplementary Financial Analysts' Data
Weighted-average number of shares
outstanding:
Class A common stock - basic 19,685,674 19,391,664
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Class A common stock - diluted 19,962,858 19,995,706
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Class B common stock - basic and diluted 5,576,775 5,576,775
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Net written premiums $ 313,690 $ 307,407
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Book value per common share at end of
period $ 13.92 $ 12.70
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Donegal Group Inc.
Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2007 2006
------------ ------------
(unaudited)
ASSETS:
Investments:
Fixed maturities:
Held to maturity, at amortized cost $ 154,290 $ 169,178
Available for sale, at fair value 336,318 331,670
Equity securities, at fair value 36,361 36,812
Investments in affiliates 8,649 8,463
Short-term investments, at cost, which
approximates fair value 70,252 45,214
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Total investments 605,870 591,338
Cash 4,289 532
Premiums receivable 51,038 49,948
Reinsurance receivable 78,897 97,677
Accrued investment income 5,875 5,769
Deferred policy acquisition costs 26,235 24,739
Prepaid reinsurance premiums 47,286 44,377
Property and equipment, net 5,608 5,146
Deferred tax asset, net 7,026 9,086
Other assets 1,972 3,086
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Total assets $ 834,096 $ 831,698
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Donegal Group Inc.
Consolidated Balance Sheets (continued)
(in thousands)
December 31, December 31,
2007 2006
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(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss expenses $ 226,432 $ 259,022
Unearned premiums 203,431 196,903
Accrued expenses 12,313 12,754
Subordinated debentures 30,929 30,929
Due to affiliate 242 1,567
Other liabilities 8,059 9,721
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Total liabilities 481,406 510,896
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Stockholders' equity:
Preferred stock -- --
Class A common stock 202 198
Class B common stock 56 56
Additional paid-in capital 156,851 152,392
Accumulated other comprehensive income 6,974 5,061
Retained earnings 193,807 163,987
Treasury stock, at cost (5,200) (892)
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Total stockholders' equity 352,690 320,802
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Total liabilities and stockholders'
equity $ 834,096 $ 831,698
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CONTACT: Donegal Group Inc.
Jeffrey D. Miller, Senior Vice President & Chief Financial
Officer
(717) 426-1931
Fax: (717) 426-7009
jeffmiller@donegalgroup.com