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) October 22, 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 October 22, 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 October 22, 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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October 22, 2008
(Date) |
/s/ JEFFREY D. MILLER
Jeffrey D. Miller Senior Vice President and Chief Financial Officer |
| Exhibit Index | ||
| 99.1 | Press release dated October 22, 2008 | |
EXHIBIT 99.1
Donegal Group Inc. Announces Third Quarter Earnings
MARIETTA, Pa., Oct. 22, 2008 (GLOBE NEWSWIRE) -- Donegal Group Inc. (Nasdaq:DGICA) (Nasdaq:DGICB) today reported that its net income for the third quarter ended September 30, 2008 was $7,223,080, or $.29 per share of Class A common stock on a diluted basis, compared to $11,212,428, or $.45 per share of Class A common stock on a diluted basis, reported for the third quarter of 2007. The Company's net income for the third quarter of 2008 reflected realized investment losses related to its equity securities and increased weather claim activity.
The Company incurred net realized investment losses of $2,811,264, or $0.07 per Class A share on an after-tax basis, for the third quarter of 2008, compared to net realized investment gains of $488,226, or $0.01 per Class A share on an after-tax basis, for the third quarter of 2007. The third quarter of 2008 investment losses included approximately $1.4 million net realized losses upon the sale of investments and approximately $1.4 million from other than temporary impairment and other fair value adjustments to the Company's equity investments. Equity securities represented approximately 2% of the Company's investment portfolio at September 30, 2008.
Revenues for the third quarter of 2008 were $92,708,575, an increase of 8.5% over the third quarter of 2007, with net premiums earned of $88,170,757, a 13.6% increase over the year-earlier period. Net premiums written for the third quarter of 2008 were $92,177,442, an increase of 15.3% over net premiums written for the third quarter of 2007. This increase reflected organic premium growth during the third quarter of 2008 of approximately 3.8%. Net premiums written and earned in the 2008 period also reflected an increased allocation of approximately $7.5 million related to the pooling change effective March 1, 2008, as well as reinsurance savings that were largely due to the Company's decision to increase its per loss retention effective January 1, 2008.
The Company's combined ratio was 93.8% for the third quarter of 2008, compared to 88.3% for the third quarter of 2007. The Company's loss ratio for the third quarter of 2008 was 60.4%, compared to 52.8% for the third quarter of 2007, reflecting increased weather claim activity and less favorable prior-accident-year reserve development. The Company's expense ratio was 33.0% for the third quarter of 2008, compared to 35.0% for the third quarter of 2007, reflecting decreased underwriting-based incentive compensation costs.
Net investment income was $5,801,750 for the third quarter of 2008, relatively unchanged from the $5,812,669 reported for the third quarter of 2007, reflecting a shift to short-term investments in lower-yielding U.S. Government securities during the third quarter of 2008. The voluntary redemption of $15.5 million subordinated debentures on August 15, 2008 reflects management's confidence in the strength of the Company's capital position, with related interest expense savings more than offsetting the related decrease in investment income for the third quarter of 2008.
Net income for the nine months ended September 30, 2008 was $20,840,981, compared to $27,483,322 reported for the nine months ended September 30, 2007. On a diluted basis, net income per share of Class A common stock for the nine months ended September 30, 2008 was $0.83, compared to $1.10 for the year-earlier period. The Company's combined ratio for the first nine months of 2008 was 95.9%, compared to the combined ratio of 91.5% posted for the comparable period in 2007. The Company's loss ratio was 62.9% for the first nine months of 2008, compared to 57.0% for the first nine months of 2007, with the increase reflecting increased weather-related claim activity and less favorable prior-accident-year reserve development in the first nine months of 2008. The Company's expense ratio was 32.6% for the first nine months of 2008, compared to 34.2% for the first nine months of 2007, with the decrease representing decreased underwriting-based incentive compensation costs.
"We are pleased to report an increase in quarterly net income, exclusive of realized investment gains and losses, compared to the first two quarters of 2008. We are also pleased to report that our realized investment losses appear to be modest relative to those being reported by many of our peers. We continue to strive for prudent premium growth and underwriting profitability, while focusing on minimizing risk in our investment portfolio," stated Donald H. Nikolaus, President and Chief Executive Officer of Donegal Group Inc.
The Company's book value increased to $13.95 per common share at September 30, 2008, compared to $13.66 per common share at September 30, 2007.
On October 16, 2008, the Company's board of directors approved a quarterly cash dividend payable on November 17, 2008 of $.105 per share of Class A common stock and $.0925 per share of Class B common stock to stockholders of record as of the close of business on November 3, 2008.
The Company will hold a conference call and webcast on Wednesday, October 22, 2008, beginning at 11:00 A.M. Eastern Daylight Time. You may listen via the Internet by accessing the webcast link in the Investors area of the Company's web site at www.donegalgroup.com. A replay of the conference call will also be available via the Company's web site.
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)
Quarter Ended
September 30
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2008 2007
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Net premiums earned $ 88,170,757 $ 77,609,940
Investment income, net of investment
expenses 5,801,750 5,812,669
Net realized investment gains (losses) (2,811,264) 488,226
Total revenues 92,708,575 85,440,831
Net income $ 7,223,080 $ 11,212,428
Net income per common share:
Class A common stock - basic $ 0.29 $ 0.45
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Class A common stock - diluted $ 0.29 $ 0.45
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Class B common stock - basic and
diluted $ 0.26 $ 0.41
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Nine Months Ended
September 30
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2008 2007
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Net premiums earned $ 257,507,718 $ 231,882,586
Investment income, net of investment
expenses 17,287,476 16,878,913
Net realized investment gains (losses) (2,789,535) 653,656
Total revenues 276,471,625 253,728,023
Net income $ 20,840,981 $ 27,483,322
Net income per common share:
Class A common stock - basic $ 0.84 $ 1.11
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Class A common stock - diluted $ 0.83 $ 1.10
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Class B common stock - basic and
diluted $ 0.76 $ 1.00
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Donegal Group Inc.
Consolidated Statements of Income
(unaudited; in thousands, except share data)
Quarter Ended
September 30
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2008 2007
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Net premiums earned $ 88,171 $ 77,610
Investment income, net of investment
expenses 5,801 5,813
Net realized investment gains (losses) (2,811) 488
Lease income 231 268
Installment payment fees 1,316 1,262
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Total revenues 92,708 85,441
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Net losses and loss expenses 53,234 41,011
Amortization of deferred policy
acquisition costs 14,818 12,940
Other underwriting expenses 14,241 14,218
Other expenses 315 484
Policyholder dividends 437 361
Interest 399 734
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Total expenses 83,444 69,748
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Income before income tax expense 9,264 15,693
Income tax expense 2,041 4,481
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Net income $ 7,223 $ 11,212
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Net income per common share:
Class A common stock - basic $ 0.29 $ 0.45
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Class A common stock - diluted $ 0.29 $ 0.45
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Class B common stock - basic and diluted $ 0.26 $ 0.41
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Supplementary Financial Analysts' Data
Weighted-average number of shares
outstanding:
Class A common stock - basic 19,882,405 19,628,405
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Class A common stock - diluted 20,015,192 19,850,016
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Class B common stock - basic and diluted 5,576,775 5,576,775
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Net written premiums $ 92,177 $ 79,930
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Book value per common share at end of
period $ 13.95 $ 13.66
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Donegal Group Inc.
Consolidated Statements of Income
(unaudited; in thousands, except share data)
Nine Months Ended
September 30
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2008 2007
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Net premiums earned $ 257,508 $ 231,882
Investment income, net of investment
expenses 17,288 16,879
Net realized investment gains (losses) (2,790) 654
Lease income 705 791
Installment payment fees 3,761 3,522
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Total revenues 276,472 253,728
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Net losses and loss expenses 162,244 132,155
Amortization of deferred policy
acquisition costs 43,109 37,890
Other underwriting expenses 40,712 41,330
Other expenses 1,211 1,497
Policyholder dividends 925 868
Interest 1,546 2,160
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Total expenses 249,747 215,900
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Income before income tax expense 26,725 37,828
Income tax expense 5,884 10,345
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Net income $ 20,841 $ 27,483
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Net income per common share:
Class A common stock - basic $ 0.84 $ 1.11
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Class A common stock - diluted $ 0.83 $ 1.10
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Class B common stock - basic and diluted $ 0.76 $ 1.00
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Supplementary Financial Analysts' Data
Weighted-average number of shares
outstanding:
Class A common stock - basic 19,849,971 19,674,869
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Class A common stock - diluted 20,026,429 19,967,126
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Class B common stock - basic and diluted 5,576,775 5,576,775
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Net written premiums $ 286,341 $ 242,909
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Book value per common share at end of
period $ 13.95 $ 13.66
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Donegal Group Inc.
Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2008 2007
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(unaudited)
ASSETS
Investments:
Fixed maturities:
Held to maturity, at amortized cost $ 104,156 $ 154,290
Available for sale, at fair value 414,296 336,318
Equity securities, at fair value 14,758 36,361
Investments in affiliates 8,120 8,649
Short-term investments, at cost 82,814 70,252
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Total investments 624,144 605,870
Cash 6,467 4,289
Premiums receivable 59,259 51,038
Reinsurance receivable 86,509 78,897
Accrued investment income 5,899 5,875
Deferred policy acquisition costs 30,872 26,235
Prepaid reinsurance premiums 54,902 47,286
Property and equipment, net 5,774 5,608
Deferred tax asset, net 16,236 7,026
Other assets 4,009 1,972
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Total assets $ 894,071 $ 834,096
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Donegal Group Inc.
Consolidated Balance Sheets (continued)
(in thousands)
September 30, December 31,
2008 2007
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(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss expenses $ 242,148 $ 226,432
Unearned premiums 239,880 203,431
Accrued expenses 11,248 12,313
Subordinated debentures 15,465 30,929
Due to affiliate 459 242
Accounts payable - securities 24,071 1,820
Other liabilities 5,143 6,239
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Total liabilities 538,414 481,406
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Stockholders' equity:
Preferred stock -- --
Class A common stock 205 202
Class B common stock 56 56
Additional paid-in capital 162,632 156,851
Accumulated other comprehensive
income (loss) (7,278) 6,974
Retained earnings 207,692 193,807
Treasury stock, at cost (7,650) (5,200)
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Total stockholders' equity 355,657 352,690
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Total liabilities and stockholders'
equity $ 894,071 $ 834,096
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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