View Filing Data

Document and Entity Information - USD ($)	6 Months Ended
Document and Entity Information - USD ($)	Jun. 30, 2011	Jul. 29, 2011	Jun. 30, 2010
Entity Registrant Name	DONEGAL GROUP INC
Entity Central Index Key	0000800457
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 157,257,918
Class A Shares
Entity Common Stock, Shares Outstanding		20,004,315
Class B Shares
Entity Common Stock, Shares Outstanding		5,576,775

Consolidated Balance Sheets - USD ($)	Jun. 30, 2011	Dec. 31, 2010
Fixed maturities
Held to maturity, at amortized cost	$ 62,862,624	$ 64,766,429
Available for sale, at fair value	630,545,678	603,846,201
Equity securities, available for sale, at fair value	14,501,261	10,161,614
Investments in affiliates	29,971,736	8,991,577
Short-term investments, at cost, which approximates fair value	33,560,242	40,775,993
Total investments	771,441,541	728,541,814
Cash	3,687,405	16,342,212
Accrued investment income	7,038,680	7,365,171
Premiums receivable	107,100,320	96,467,949
Reinsurance receivable	189,975,735	173,836,746
Deferred policy acquisition costs	36,360,264	34,445,579
Deferred tax asset, net	10,586,934	11,988,169
Prepaid reinsurance premiums	106,382,310	89,365,771
Property and equipment, net	6,477,407	7,069,086
Accounts receivable - securities	0	428,983
Federal income taxes recoverable	920,226	948,325
Goodwill	5,625,354	5,493,316
Other intangible assets	958,010	958,010
Other	1,439,122	1,368,392
Total assets	1,247,993,308	1,174,619,523
Liabilities
Unpaid losses and loss expenses	402,741,902	383,318,672
Unearned premiums	335,637,737	297,272,161
Accrued expenses	21,431,558	21,287,406
Reinsurance balances payable	21,081,236	19,140,322
Borrowings under line of credit	54,500,000	35,617,371
Cash dividends declared to stockholders	0	2,870,955
Subordinated debentures	20,465,000	20,465,000
Accounts payable - securities	3,238,320	0
Payable for the purchase of Michigan Insurance Company	0	7,207,471
Due to affiliate	2,641,815	2,926,104
Drafts payable	1,854,144	1,304,779
Other	1,733,806	3,106,472
Total liabilities	865,325,518	794,516,713
Stockholders' Equity
Preferred stock, $1.00 par value, authorized 2,000,000 shares; none issued	0	0
Additional paid-in capital	167,803,221	167,093,504
Accumulated other comprehensive income	13,619,827	8,561,086
Retained earnings	210,905,634	213,435,095
Treasury stock	(9,924,438)	(9,249,933)
Total stockholders' equity	382,667,790	380,102,810
Total liabilities and stockholders' equity	1,247,993,308	1,174,619,523
Class A Shares
Stockholders' Equity
Common stock value	207,054	206,566
Total stockholders' equity	207,054	206,566
Class B Shares
Stockholders' Equity
Common stock value	56,492	56,492
Total stockholders' equity	$ 56,492	$ 56,492

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2011	Dec. 31, 2010
Stockholders' Equity
Preferred stock, par value	$ 1.00	$ 1.00
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Class A Shares
Stockholders' Equity
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	20,705,303	20,656,527
Common stock, shares outstanding	19,992,944	19,994,226
Class B Shares
Stockholders' Equity
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	5,649,240	5,649,240
Common stock, shares outstanding	5,576,775	5,576,775

Consolidated Statements of Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
Consolidated Statements of Income (Unaudited) - USD ($)	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Revenues:
Net premiums earned	$ 104,991,401	$ 93,002,409	$ 208,786,680	$ 184,374,505
Investment income, net of investment expenses	5,420,992	4,968,490	10,651,136	9,898,981
Net realized investment gains	4,316,021	1,965,091	4,689,094	1,986,603
Lease income	234,861	229,490	466,543	455,997
Installment payment fees	1,872,672	1,359,874	3,706,536	2,660,116
Other income	218,551		337,951
Total revenues	117,054,498	101,525,354	228,637,940	199,376,202
Expenses:
Net losses and loss expenses	84,195,796	68,509,616	157,275,361	136,491,102
Amortization of deferred policy acquisition costs	16,628,000	16,146,000	33,620,000	32,161,000
Other underwriting expenses	17,092,478	14,182,695	34,539,390	26,815,711
Policyholder dividends	98,915	65,482	305,929	244,783
Interest	558,842	168,935	1,002,312	353,693
Other expenses	552,066	581,750	1,370,412	1,163,499
Total expenses	119,126,097	99,654,478	228,113,404	197,229,788
(Loss) income before income tax (benefit) expense	(2,071,599)	1,870,876	524,536	2,146,414
Income tax (benefit) expense	(377,610)	131,148	12,589	171,928
Net (loss) income	$ (1,693,989)	$ 1,739,728	$ 511,947	$ 1,974,486
Class A Shares
(Loss) earnings per common share:
Common stock - basic and diluted	$ (0.07)	$ 0.07	$ 0.02	$ 0.08
Class B Shares
(Loss) earnings per common share:
Common stock - basic and diluted	$ (0.06)	$ 0.06	$ 0.02	$ 0.07

Consolidated Statements of Comprehensive Income - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Consolidated Statements of Comprehensive Income [Abstract]
Net (loss) income	$ (1,693,989)	$ 1,739,728	$ 511,947	$ 1,974,486
Unrealized gain on securities:
Unrealized holding income during the period, net of income tax	7,692,542	4,383,766	8,153,543	3,932,612
Reclassification adjustment, net of income tax	(2,848,574)	(1,296,960)	(3,094,802)	(1,311,158)
Other comprehensive income	4,843,968	3,086,806	5,058,741	2,621,454
Comprehensive income	$ 3,149,979	$ 4,826,534	$ 5,570,688	$ 4,595,940

- Definition

The change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources which are attributable to the reporting entity. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners, but excludes any and all transactions which are directly or indirectly attributable to that ownership interest in subsidiary equity which is not attributable to the parent.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
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+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

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+ Details

- Definition

Gross appreciation or the gross loss in value of the total unsold securities. While for technical reasons this element has no balance attribute, the default assumption is a credit balance consistent with its label.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
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+ Details

- Definition

Appreciation or loss in value (before reclassification adjustment) of the total of unsold securities during the period being reported on, net of tax. Reclassification adjustments include: (1) the unrealized holding gain (loss), net of tax, at the date of the transfer for a debt security from the held-to-maturity category transferred into the available-for-sale category. Also includes the unrealized gain (loss) at the date of transfer for a debt security from the available-for-sale category transferred into the held-to-maturity category; (2) the unrealized gains (losses) realized upon the sale of securities, after tax; and (3) the unrealized gains (losses) realized upon the write-down of securities, after tax.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 13
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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+ Details

Consolidated Statement of Stockholders' Equity (Unaudited) - 6 months ended Jun. 30, 2011 - USD ($)	Total	Additional Paid-In Capital	Accumulated Other Comprehensive Income	Retained Earnings	Treasury Stock	Common Class A [Member]	Common Class B [Member]
Beginning balance at Dec. 31, 2010	$ 380,102,810	$ 167,093,504	$ 8,561,086	$ 213,435,095	$ (9,249,933)	$ 206,566	$ 56,492
Beginning balance, shares at Dec. 31, 2010						20,656,527	5,649,240
Issuance of common stock (stock compensation plans)	675,631	675,143				$ 488
Issuance of common stock (stock compensation plans), shares						48,776
Net income	511,947			511,947
Cash dividends declared	(3,006,834)			(3,006,834)
Grant of stock options		34,574		(34,574)
Repurchase of treasury stock	(674,505)				(674,505)
Other comprehensive income	5,058,741		5,058,741
Ending balance at Jun. 30, 2011	$ 382,667,790	$ 167,803,221	$ 13,619,827	$ 210,905,634	$ (9,249,933)	$ 207,054	$ 56,492
Ending balance, shares at Jun. 30, 2011						20,705,303	5,649,240

- Definition

This element represents the amount of recognized equity-based compensation during the period, that is, the amount recognized as expense in the income statement (or as asset if compensation is capitalized). Alternate captions include the words "stock-based compensation".

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
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+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

Number of shares (or other type of equity) issued during the period as a result of any equity-based compensation plan other than an employee stock ownership plan (ESOP), net of any shares forfeited. Shares issued could result from the issuance of restricted stock, the exercise of stock options, stock issued under employee stock purchase plans, and/or other employee benefit plans.

+ References + Details

- Definition

Value of stock (or other type of equity) issued during the period as a result of any equity-based compensation plan other than an employee stock ownership plan (ESOP), net of stock value of such awards forfeited. Stock issued could result from the issuance of restricted stock, the exercise of stock options, stock issued under employee stock purchase plans, and/or other employee benefit plans.

+ References + Details

Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
Consolidated Statements of Cash Flows - USD ($)	Jun. 30, 2011	Jun. 30, 2010
Cash Flows from Operating Activities:
Net (loss) income	$ 511,947	$ 1,974,486
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,925,467	1,257,660
Net realized investment gains	(4,689,094)	(1,986,603)
Equity (income) loss	(337,951)	197,545
Changes in assets and liabilities:
Losses and loss expenses	19,423,230	12,631,578
Unearned premiums	38,365,576	17,016,015
Premiums receivable	(10,632,371)	(8,923,708)
Deferred acquisition costs	(1,914,685)	(1,028,946)
Deferred income taxes	(1,251,607)	(579,005)
Reinsurance receivable	(16,138,989)	(9,125,388)
Prepaid reinsurance premiums	(17,016,539)	(6,100,772)
Accrued investment income	326,491	(233,132)
Due to affiliate	(284,289)	(1,769,359)
Reinsurance balances payable	1,940,914	694,923
Current income taxes	28,099	1,318,713
Accrued expenses	144,152	(1,299,672)
Other, net	(894,038)	297,926
Net adjustments	8,994,366	2,367,775
Net cash provided by operating activities	9,506,313	4,342,261
Purchases of fixed maturities:
Available for sale	(71,799,322)	(80,020,763)
Purchases of equity securities, available for sale	(14,261,819)	(11,014,460)
Maturity of fixed maturities:
Held to maturity	1,709,495	5,612,123
Available for sale	26,504,947	39,093,985
Sales of fixed maturities:
Available for sale	32,233,706	26,454,158
Sales of equity securities, available for sale	11,007,627	6,765,783
Purchase of Michigan Insurance Company	(7,207,471)
Net purchases of property and equipment		(390,737)
Net increase in investment in affiliates	(20,570,000)
Net sales of short-term investments	7,215,751	11,378,590
Net cash used in investing activities	(35,167,086)	(2,121,321)
Cash Flows from Financing Activities:
Cash dividends paid	(5,877,789)	(5,666,605)
Issuance of common stock	675,631	790,633
Repurchase of treasury stock	(674,505)	(145,687)
Payments on line of credit	(3,617,371)
Borrowings under line of credit	22,500,000
Net cash provided by (used in) financing activities	13,005,966	(5,021,659)
Net decrease in cash	(12,654,807)	(2,800,719)
Cash at beginning of period	16,342,212	12,923,898
Cash at end of period	3,687,405	10,123,179
Cash paid during period - Interest	788,976	337,677
Net cash paid (received) during period - Taxes	$ 1,110,000	$ (600,000)

Organization	6 Months Ended
Organization	Jun. 30, 2011
Organization [Abstract]
Organization	1 — Organization Donegal Mutual Insurance Company (“Donegal Mutual”) organized us as an insurance holding company on August 26, 1986. Our insurance subsidiaries, Atlantic States Insurance Company (“Atlantic States”), Southern Insurance Company of Virginia (“Southern”), Le Mars Insurance Company (“Le Mars”), the Peninsula Insurance Group (“Peninsula”), which consists of Peninsula Indemnity Company and The Peninsula Insurance Company, Sheboygan Falls Insurance Company (“Sheboygan”) and Michigan Insurance Company (“Michigan”), write personal and commercial lines of property and casualty coverages exclusively through a network of independent insurance agents in certain Mid-Atlantic, Midwestern, New England and Southern states. We acquired Michigan on December 1, 2010, and we have included Michigan’s results of operations in our consolidated results of operations since that date. We have three operating segments: our investment function, our personal lines of insurance and our commercial lines of insurance. The personal lines products of our insurance subsidiaries consist primarily of homeowners and private passenger automobile policies. The commercial lines products of our insurance subsidiaries consist primarily of commercial automobile, commercial multi-peril and workers’ compensation policies. We also own 48.2% of the outstanding stock of Donegal Financial Services Corporation (“DFSC”), a thrift holding company that owns Union Community Bank FSB (“UCB”). Donegal Mutual owns the remaining 51.8% of the outstanding stock of DFSC. At June 30, 2011, Donegal Mutual held approximately 39% of our outstanding Class A common stock and approximately 75% of our outstanding Class B common stock. This ownership provides Donegal Mutual with 66% of the total voting power of our outstanding common stock. Our insurance subsidiaries and Donegal Mutual have interrelated operations. While each company maintains its separate corporate existence, our insurance subsidiaries and Donegal Mutual conduct business together as the Donegal Insurance Group. As such, Donegal Mutual and our insurance subsidiaries share the same business philosophy, the same management, the same employees and the same facilities and offer the same types of insurance products. Atlantic States, our largest subsidiary, participates in a pooling agreement with Donegal Mutual. Under the pooling agreement, the two companies pool their insurance business, and each company receives an allocated percentage of the pooled business. Atlantic States has an 80% share of the results of the pooled business, and Donegal Mutual has a 20% share of the results of the pooled business. On February 23, 2009, our board of directors authorized a share repurchase program pursuant to which we may purchase up to 300,000 shares of our Class A common stock at prices prevailing from time to time in the open market subject to the provisions of applicable SEC rules and in privately negotiated transactions. We purchased 50,058 shares of our Class A common stock under this program during the three months ended June 30, 2011. We purchased 50,058 and 9,702 shares of our Class A common stock under this program during the six months ended June 30, 2011 and 2010. We have purchased a total of 67,429 shares of our Class A common stock under this program from its inception through June 30, 2011. In May 2011, DFSC and Union National Financial Corporation (“UNNF”) merged, with DFSC as the surviving company in the merger. Province Bank FSB and Union National Community Bank, which UNNF owned, also merged and now operate as UCB.

Basis of Presentation	6 Months Ended
Basis of Presentation	Jun. 30, 2011
Organization [Abstract]
Basis of Presentation	2 — Basis of Presentation Our financial information for the interim periods included in this Form 10-Q Report is unaudited; however, such information reflects all adjustments, consisting only of normal recurring adjustments that, in the opinion of our management, are necessary for a fair presentation of our financial position, results of operations and cash flows for those interim periods. Our results of operations for the six months ended June 30, 2011 are not necessarily indicative of the results of operations we expect for the year ending December 31, 2011. You should read these interim financial statements in conjunction with the financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2010.

- Definition

The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 2-6
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Name Statement of Position (SOP)
-Publisher AICPA
-Number 94-6
-Paragraph 10
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Name FASB Interpretation (FIN)
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-Number 46R
-Paragraph 4, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
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+ Details

Earnings Per Share

6 Months Ended

Jun. 30, 2011

Earnings Per Share [Abstract]

Earnings Per Share

3 — Earnings Per Share

We have two classes of common stock, which we refer to as our Class A common stock and our Class B common stock. Our certificate of incorporation provides that whenever our board of directors declares a dividend on our Class B common stock, our board of directors must also declare a dividend on our Class A common stock that is payable at the same time to holders as of the same record date at a rate that is at least 10% greater than the rate at which our board of directors declared a dividend on our Class B common stock. Accordingly, we use the two-class method to compute our earnings per common share. The two-class method is an earnings allocation formula that determines earnings per share separately for each class of common stock based on dividends we have declared and an allocation of our remaining undistributed earnings using a participation percentage that reflects the dividend rights of each class. The table below presents for the periods indicated a reconciliation of the numerators and denominators we used to compute basic and diluted net (loss) income per share for each class of our common stock:

For the Three Months Ended June 30:


	2011						2010
	Class A			Class B			Class A		Class B
	(in thousands, except per share data)
Basic and diluted net (loss) income per share:
Numerator:
Allocation of net (loss) income	$	(1,344	)	$	(350	)	$	1,396	$	343

Denominator:
Weighted-average shares outstanding		20,026,238			5,576,775			19,953,539		5,576,775

Basic and diluted net (loss) income per share	$	(0.07	)	$	(0.06	)	$	0.07	$	0.06

For the Six Months Ended June 30:


	2011				2010
	Class A		Class B		Class A		Class B
	(in thousands, except per share data)
Basic and diluted net income per share:
Numerator:
Allocation of net income	$	417	$	95	$	1,584	$	390

Denominator:
Weighted-average shares outstanding		20,019,481		5,576,775		19,942,153		5,576,775

Basic and diluted net income per share	$	0.02	$	0.02	$	0.08	$	0.07

We did not include outstanding options to purchase the following number of shares of Class A common stock in our computation of diluted earnings per share because the exercise price of the options was greater than the average market price of our Class A common stock during the period:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Number of shares excluded		4,021,667		3,290,099		4,021,667		3,290,099

Reinsurance

6 Months Ended

Jun. 30, 2011

Reinsurance [Abstract]

Reinsurance

4 — Reinsurance

Atlantic States and Donegal Mutual have participated in a pooling agreement since 1986 under which each company places all of its direct written business into the pool, and Atlantic States and Donegal Mutual then share the underwriting results of the pool in accordance with the terms of the pooling agreement. Atlantic States has an 80% share of the results of the pool, and Donegal Mutual has a 20% share of the results of the pool.

Our insurance subsidiaries and Donegal Mutual purchase certain third-party reinsurance on a combined basis. Le Mars, Michigan, Peninsula and Sheboygan also purchase separate third-party reinsurance that provides coverage that is commensurate with their relative size and risk exposures. Our insurance subsidiaries place reinsurance with various reinsurers, all of which, consistent with Donegal Insurance Group’s requirements, have an A.M. Best rating of A- (Excellent) or better or, with respect to foreign reinsurers, have a financial condition that, in the opinion of our management, is equivalent to a company with at least an A- rating. The following information describes the external reinsurance our insurance subsidiaries have in place during 2011 and 2010:

	•		excess of loss reinsurance, under which losses are automatically reinsured, through a series of reinsurance agreements, over a set retention (generally $750,000), and

	•		catastrophe reinsurance, under which Donegal Mutual, Atlantic States and Southern recover, through a series of reinsurance agreements, 100% of an accumulation of many losses resulting from a single event, including natural disasters, over a set retention ($5.0 million for 2011 and $3.0 million for 2010).

Our insurance subsidiaries and Donegal Mutual also purchase facultative reinsurance to cover exposures from losses that exceed the limits provided by their reinsurance agreements with third parties.

In addition to the pooling agreement and third-party reinsurance, our insurance subsidiaries have various reinsurance agreements with Donegal Mutual.

Upon the recovery of losses under the terms of our insurance subsidiaries’ catastrophe reinsurance agreements with third parties and Donegal Mutual, the agreements require our insurance subsidiaries to pay reinstatement premiums to reinstate coverage for additional events that may occur during the term of the agreements. Payment of a reinstatement premium entitles our insurance subsidiaries to the same amount of coverage under the same terms in place prior to their utilization of coverage. Our insurance subsidiaries recognize the cost of the original prepaid reinsurance premiums ratably over the term of the agreements and immediately recognize the cost of reinstatement premiums upon recovery of losses that give rise to an obligation to pay such reinstatement premiums. Our insurance subsidiaries recorded reinstatement premiums of $3.2 million and $1.2 million during the three months ended June 30, 2011 and 2010, respectively. Our insurance subsidiaries recorded reinstatement premiums of $3.2 million and $1.8 million during the six months ended June 30, 2011 and 2010, respectively.

Other than a change in the set retention under our catastrophe reinsurance we discuss above, we made no significant changes to our third-party reinsurance or the reinsurance agreements between our insurance subsidiaries and Donegal Mutual during the six months ended June 30, 2011.

- Definition

The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 113
-Paragraph 27
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Article 7
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-Publisher AICPA
-Name Statement of Position (SOP)
-Number 92-5
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
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Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

Investments

6 Months Ended

Jun. 30, 2011

Investment [Abstract]

Investments

5 — Investments

The amortized cost and estimated fair values of our fixed maturities and equity securities at June 30, 2011 are as follows:


			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
			(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	1,000	$	73	$	—	$	1,073
Obligations of states and political subdivisions		58,159		2,960		—		61,119
Corporate securities		3,249		32		—		3,281
Residential mortgage-backed securities		455		31		—		486

Totals	$	62,863	$	3,096	$	—	$	65,959


			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
			(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	81,984	$	1,100	$	159	$	82,925
Obligations of states and political subdivisions		360,334		12,119		844		371,609
Corporate securities		67,568		673		594		67,647
Residential mortgage-backed securities		106,193		2,433		261		108,365

Fixed maturities		616,079		16,325		1,858		630,546
Equity securities		11,056		4,322		877		14,501

Totals	$	627,135	$	20,647	$	2,735	$	645,047

The amortized cost and estimated fair values of our fixed maturities and equity securities at December 31, 2010 are as follows:


			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
			(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	1,000	$	84	$	—	$	1,084
Obligations of states and political subdivisions		59,852		2,894		—		62,746
Corporate securities		3,247		25		—		3,272
Residential mortgage-backed securities		667		40		—		707

Totals	$	64,766	$	3,043	$	—	$	67,809


			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
			(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	57,284	$	484	$	452	$	57,316
Obligations of states and political subdivisions		388,091		6,838		5,300		389,629
Corporate securities		67,518		650		1,074		67,094
Residential mortgage-backed securities		88,410		1,851		454		89,807

Fixed maturities		601,303		9,823		7,280		603,846
Equity securities		2,504		7,693		35		10,162

Totals	$	603,807	$	17,516	$	7,315	$	614,008

The amortized cost and estimated fair value of our fixed maturities at June 30, 2011, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


			Estimated
	Amortized		Fair
	Cost		Value
	(in thousands)
Held to maturity
Due in one year or less	$	3,749	$	3,782
Due after one year through five years		34,459		36,291
Due after five years through ten years		24,200		25,400
Due after ten years		—		—
Residential mortgage-backed securities		455		486

Total held to maturity	$	62,863	$	65,959


Available for sale
Due in one year or less	$	23,703	$	24,086
Due after one year through five years		88,085		89,947
Due after five years through ten years		180,942		185,450
Due after ten years		217,156		222,698
Residential mortgage-backed securities		106,193		108,365

Total available for sale	$	616,079	$	630,546

Gross realized gains and losses from investments before applicable income taxes are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(in thousands)				(in thousands)
Gross realized gains:
Fixed maturities	$	—	$	1,547	$	441	$	1,631
Equity securities		4,416		501		4,505		613

	$	4,416	$	2,048	$	4,946	$	2,244


Gross realized losses:
Fixed maturities	$	—	$	5	$	102	$	179
Equity securities		100		78		155		78

		100		83		257		257

Net realized gains	$	4,316	$	1,965	$	4,689	$	1,987

We held fixed maturities and equity securities with unrealized losses representing declines that we considered temporary at June 30, 2011 as follows:


	Less than 12 months				More than 12 months
	Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses
			(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	16,846	$	159	$	—	$	—
Obligations of states and political subdivisions		41,891		839		1,493		5
Corporate securities		28,184		594		—		—
Residential mortgage-backed securities		31,995		261		—		—
Equity securites		5,529		877		—		—

Totals	$	124,445	$	2,730	$	1,493	$	5

We held fixed maturities and equity securities with unrealized losses representing declines that we considered temporary at December 31, 2010 as follows:


	Less than 12 months				More than 12 months
	Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses
			(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	23,901	$	452	$	—	$	—
Obligations of states and political subdivisions		171,610		5,209		1,407		91
Corporate securities		44,101		1,062		491		12
Residential mortgage-backed securities		35,930		454		—		—
Equity securites		314		35		—		—

Totals	$	275,856	$	7,212	$	1,898	$	103

Of our total fixed maturity securities with an unrealized loss at June 30, 2011, we classified 115 securities with a fair value of $120.4 million and an unrealized loss of $1.9 million as available-for-sale and carried them at fair value on our balance sheet.

Of our total fixed maturity securities with an unrealized loss at December 31, 2010, we classified 301 securities with a fair value of $277.4 million and an unrealized loss of $7.3 million as available-for-sale and carried them at fair value on our balance sheet.

We have no direct exposure to sub-prime residential mortgage-backed securities and hold no collateralized debt obligations. Substantially all of the unrealized losses in our fixed maturity investment portfolio have resulted from general market conditions and the related impact on our fixed maturity investment valuations. We make estimates concerning the valuation of our investments and the recognition of other-than-temporary declines in the value of our investments. For equity securities, when we consider the decline in value of an individual investment to be other than temporary, we write the investment down to its fair value, and we reflect the amount of the write-down as a realized loss in our results of operations. We individually monitor all investments for other-than-temporary declines in value. Generally, if an individual equity security has depreciated in value by more than 20% of original cost, and has been in such an unrealized loss position for more than six months, we assume there has been an other-than-temporary decline in value. We held 11 equity securities that were in an unrealized loss position at June 30, 2011. Based upon our analysis of general market conditions and underlying factors impacting these equity securities, we consider these declines in value to be temporary. With respect to a debt security that is in an unrealized loss position, we first assess if we intend to sell the debt security. If we intend to sell the debt security, we recognize the impairment loss in our results of operations. If we do not intend to sell the debt security, we determine whether it is more likely than not that we will be required to sell the security prior to recovery. If it is more likely than not that we will be required to sell the debt security prior to recovery, we recognize an impairment loss in our results of operations. If it is more likely than not that we will not be required to sell the debt security prior to recovery, we then evaluate whether a credit loss has occurred. To determine whether a credit loss has occurred, we compare the amortized cost of the debt security to the present value of the cash flows we expect to collect. If we expect a cash flow shortfall, we consider a credit loss to have occurred. If we consider a credit loss to have occurred, we consider the impairment to be other than temporary. We then recognize the amount of the impairment loss related to the credit loss in our results of operations, and we recognize the remaining portion of the impairment loss in our other comprehensive income, net of applicable taxes. In addition, we may write down securities in an unrealized loss position based on a number of other factors, including the fair value of the investment being significantly below its cost, whether the financial condition of the issuer of the security has deteriorated, the occurrence of industry, company and geographic events that have negatively impacted the value of the security and rating agency downgrades. We determined that no investments with fair values below cost had declined on an other-than-temporary basis during the first six months of 2011 and 2010, respectively.

We amortize premiums and discounts on debt securities over the life of the security as an adjustment to yield using the effective interest method. We compute realized investment gains and losses using the specific identification method.

We amortize premiums and discounts for mortgage-backed debt securities using anticipated prepayments.

We account for investments in our affiliates using the equity method of accounting. Under this method, we record our investment at cost, with adjustments for our share of our affiliates’ earnings and losses as well as changes in our affiliates’ equity due to unrealized gains and losses. Our investments in affiliates include our 48.2% ownership interest in DFSC. We have compiled the following summary financial information for DFSC at June 30, 2011 and December 31, 2010 and for the three and six months ended June 30, 2011 and 2010, respectively, from the financial statements of DFSC.


	June 30,		December 31,
	2011		2010
	(in thousands)
Balance sheets:
Total assets	$	558,019	$	99,118

Total liabilities	$	496,896	$	81,510
Stockholders equity		61,123		17,608

Total liabilities and stockholders equity	$	558,019	$	99,118


	Three Months Ended June 30,					Six Months Ended June 30,
	2011		2010			2011		2010
			(in thousands)
Income statements:
Net income (loss)	$	453	$	(410	)	$	701	$	(277	)

- Definition

Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 3, 19, 20, 21, 22, 137
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 30
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-Paragraph 2
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Reference 4: http://www.xbrl.org/2003/role/presentationRef
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Debt Security
-URI http://asc.fasb.org/extlink&oid=6509901
-Topic 320

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Equity Security
-URI http://asc.fasb.org/extlink&oid=6511694
-Topic 320

+ Details

Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information [Abstract]

Segment Information

6 — Segment Information

We evaluate the performance of our personal lines and commercial lines segments based upon the underwriting results of our insurance subsidiaries using statutory accounting principles (“SAP”) that various state insurance departments prescribe or permit. Our management uses SAP to measure the performance of our insurance subsidiaries instead of GAAP. Financial data by segment is as follows:


	Three Months Ended
	June 30,
	2011			2010
	(in thousands)
Revenues:
Premiums earned
Commercial lines	$	37,039		$	28,903
Personal lines		68,956			64,099

Net premiums earned		105,995			93,002
GAAP adjustments		(1,003	)		—

GAAP premiums earned		104,992			93,002
Net investment income		5,421			4,968
Realized investment gains		4,316			1,965
Other		2,325			1,590

Total revenues	$	117,054		$	101,525


(Loss) income before income taxes:
Underwriting income (loss):
Commercial lines	$	302		$	1,830
Personal lines		(14,821	)		(9,430	)

SAP underwriting loss		(14,519	)		(7,600	)
GAAP adjustments		1,495			1,699

GAAP underwriting loss		(13,024	)		(5,901	)
Net investment income		5,421			4,968
Realized investment gains		4,316			1,965
Other		1,215			839

(Loss) income before income taxes		($2,072	)	$	1,871


	Six Months Ended
	June 30,
	2011			2010
	(in thousands)
Revenues:
Premiums earned
Commercial lines	$	71,943		$	56,591
Personal lines		139,632			127,811

Net premiums earned		211,575			184,402
GAAP adjustments		(2,788	)		(28	)

GAAP premiums earned		208,787			184,374
Net investment income		10,651			9,899
Realized investment gains		4,689			1,987
Other		4,511			3,116

Total revenues	$	228,638		$	199,376

Income before income taxes:
Underwriting income (loss):
Commercial lines	$	428			( $761	)
Personal lines		(17,812	)		(12,267	)

SAP underwriting loss		(17,384	)		(13,028	)
GAAP adjustments		430			1,690

GAAP underwriting loss		(16,954	)		(11,338	)
Net investment income		10,651			9,899
Realized investment gains		4,689			1,987
Other		2,139			1,598

Income before income taxes	$	525		$	2,146

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 131
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
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-Paragraph 34
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+ Details

Borrowings	6 Months Ended
Borrowings	Jun. 30, 2011
Borrowings [Abstract]
Borrowings	7 — Borrowings Line of Credit In June 2011, we renewed our existing credit agreement with Manufacturers and Traders Trust Company (“M&T”) relating to a $60.0 million unsecured, revolving line of credit that expires in July 2014. We have the right to request a one-year extension of the credit agreement as of each anniversary date of the agreement. In December 2010 and March 2011, we borrowed $35.0 million and $3.5 million, respectively, in connection with our acquisition of Michigan. In May 2011, we borrowed $19.0 million in connection with the merger of UNNF with and into DFSC. As of June 30, 2011, we had $54.5 million in outstanding borrowings and had the ability to borrow an additional $5.5 million at interest rates equal to M&T’s current prime rate or the then current LIBOR rate plus between 1.75% and 2.25%, depending on our leverage ratio. We pay a fee of 0.2% per annum on the loan commitment amount regardless of usage. The credit agreement requires our compliance with certain covenants, which include minimum levels of our net worth, leverage ratio and statutory surplus and the A.M. Best ratings of our insurance subsidiaries. We complied with all requirements of the credit agreement during the six months ended June 30, 2011. Subordinated Debentures On October 29, 2003, we received $10.0 million in net proceeds from the issuance of subordinated debentures. The debentures mature on October 29, 2033 and are callable at our option, at par. The debentures carry an interest rate equal to the three-month LIBOR rate plus 4.10%, which is adjustable quarterly. At June 30, 2011, the interest rate on these debentures was 4.12% and was next subject to adjustment on July 29, 2011. On May 24, 2004, we received $5.0 million in net proceeds from the issuance of subordinated debentures. The debentures mature on May 24, 2034 and are callable at our option, at par. The debentures carry an interest rate equal to the three-month LIBOR rate plus 3.85%, which is adjustable quarterly. At June 30, 2011, the interest rate on these debentures was 4.11% and was next subject to adjustment on August 24, 2011. In January 2002, West Bend Mutual Insurance Company (“West Bend”) purchased a surplus note from Michigan for $5.0 million to increase Michigan’s statutory surplus. On December 1, 2010, Donegal Mutual purchased the surplus note from West Bend at face value. The surplus note carries an interest rate of 5.00%, and any repayment of principal or interest requires prior insurance regulatory approval.

Share-Based Compensation	6 Months Ended
Share-Based Compensation	Jun. 30, 2011
Share-Based Compensation [Abstract]
Share-Based Compensation	8 — Share–Based Compensation We measure all share-based payments to employees, including grants of stock options, using a fair-value-based method and the recording of such expense in our consolidated statements of income. In determining the expense we record for stock options granted to directors and employees of our subsidiaries and affiliates other than Donegal Mutual, we estimate the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The significant assumptions we utilize in applying the Black-Scholes option pricing model are the risk-free interest rate, expected term, dividend yield and expected volatility. We charged compensation expense for our stock compensation plans against income before income taxes of $29,104 and $60,824 for the three months ended June 30, 2011 and 2010, respectively, with a corresponding income tax benefit of $9,895 and $20,680, respectively. We charged compensation expense for our stock compensation plans against income before income taxes of $69,486 and $120,985 for the six months ended June 30, 2011 and 2010, respectively, with a corresponding income tax benefit of $23,625 and $41,135, respectively. As of June 30, 2011, our total unrecognized compensation cost related to nonvested share-based compensation granted under our stock compensation plans was $208,471. We expect to recognize this cost over a weighted average period of 4.1 years. We account for share-based compensation to employees and directors of Donegal Mutual as share-based compensation to employees of a controlling entity. As such, we measure the fair value of the award at the grant date and recognize the fair value as a dividend to Donegal Mutual. This accounting applies to options we grant to employees and directors of Donegal Mutual, the employer of a majority of the employees that provide services to us. We recorded no implied dividends for the three months ended June 30, 2011 and 2010, respectively. We recorded implied dividends of $34,574 and $23,072 for the six months ended June 30, 2011 and 2010, respectively. We received no cash from option exercises under all stock option compensation plans for the six months ended June 30, 2011 and 2010. We realized no tax benefits for tax deductions from option exercises for the six months ended June 30, 2011 and 2010.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 123R
-Paragraph 64, 65, A240
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 93-6
-Paragraph 53
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 14

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 50
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666

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-Name Accounting Standards Codification
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-Paragraph 1
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-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901

Reference 8: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 718
-SubTopic 40
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929

+ Details

Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

9 — Fair Value Measurements

We account for financial assets using a framework that establishes a hierarchy that ranks the quality and reliability of inputs, or assumptions, used in the determination of fair value, and we classify financial assets and liabilities carried at fair value in one of the following three categories:

Level 1 – quoted prices in active markets for identical assets and liabilities;

Level 2 – directly or indirectly observable inputs other than Level 1 quoted prices; and

Level 3 – unobservable inputs not corroborated by market data.

For investments that have quoted market prices in active markets, we use the quoted market price as fair value and include these investments in Level 1 of the fair value hierarchy. We classify publicly traded equity securities as Level 1. When quoted market prices in active markets are not available, we base fair values on quoted market prices of comparable instruments or broker quotes we obtain from independent pricing services through a bank trustee. We classify our fixed maturity investments as Level 2. Our fixed maturity investments consist of U.S. Treasury securities and obligations of U.S, government corporations and agencies, obligations of states and political subdivisions, corporate securities and residential mortgage-backed securities. During the first six months of 2010, we classified one equity security as Level 3. The terms of an initial public offering included a restriction from selling that security for a specified period. During the six months ended June 30, 2011, the restriction period expired for a portion of our holdings, and we transferred this portion from Level 3 to Level 1. We utilized a fair value model that incorporated significant other unobservable inputs, such as estimated volatility, to estimate the fair value of the remaining portion of our holdings in this security that remain subject to the selling restriction. The fair value we determined as of June 30, 2011 reflects this restriction, and we continue to classify this portion of our holdings in this security as Level 3.

We present our investments in available-for-sale fixed maturity and equity securities at estimated fair value. The estimated fair value of a security may differ from the amount we could realize if we sold the security in a forced transaction. In addition, the valuation of fixed maturity investments is more subjective when markets are less liquid, increasing the potential that the estimated fair value does not reflect the price at which an actual transaction would occur. We utilize nationally recognized independent pricing services to estimate fair values for our fixed maturity and equity investments. The pricing services utilize market quotations for fixed maturity and equity securities that have quoted prices in active markets. For fixed maturity securities that generally do not trade on a daily basis, the pricing services prepare estimates of fair value measurements using proprietary pricing applications, which include available relevant market information, benchmark yields, sector curves and matrix pricing. The pricing services do not use broker quotes in determining the fair values of our investments. We review the estimates of fair value the pricing services provide to determine if the estimates we obtain are representative of fair values based upon our general knowledge of the market, our research findings related to unusual fluctuations in value and our comparison of such values to execution prices for similar securities. As of June 30, 2011 and December 31, 2010, we received one estimate per security from one of the pricing services, and we priced all but an insignificant amount of our Level 1 and Level 2 investments using those prices. In our review of the estimates the pricing services provided to us as of June 30, 2011 and December 31, 2010, we did not identify any discrepancies, and we did not make any adjustments to the estimates the pricing services provided to us.

We present our cash and short-term investments at estimated fair value. The carrying values in the balance sheet for premium receivables and reinsurance receivables and payables for premiums and paid losses and loss expenses approximate their fair values. The carrying amounts reported in the balance sheet for our subordinated debentures and borrowings under line of credit approximate their fair values.

We evaluate our assets and liabilities on a recurring basis to determine the appropriate level at which to classify them for each reporting period.

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities as of June 30, 2011:


			Fair Value Measurements Using
			Quoted
			Prices in Active Markets		Significant Other		Significant
			for Identical Assets		Observable Inputs		Unobservable Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)

	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	82,925	$	—	$	82,925	$	—
Obligations of states and political subdivisions		371,609		—		371,609		—
Corporate securities		67,647		—		67,647		—
Residential mortgage-backed securities		108,365		—		108,365		—
Equity securities		14,501		9,086		1,391		4,024

Totals	$	645,047	$	9,086	$	631,937	$	4,024

We did not have any transfers between Levels 1 and 2 during the quarter ended June 30, 2011.

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities as of December 31, 2010:


			Fair Value Measurements Using
			Quoted
			Prices in Active Markets		Significant Other		Significant
			for Identical Assets		Observable Inputs		Unobservable Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)

	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	57,316	$	—	$	57,316	$	—
Obligations of states and political subdivisions		389,629		—		389,629		—
Corporate securities		67,094		—		67,094		—
Residential mortgage-backed securities		89,807		—		89,807		—
Equity securities		10,162		1,152		1,437		7,573

Totals	$	614,008	$	1,152	$	605,283	$	7,573

The following table presents a roll forward of the significant unobservable inputs for our Level 3 securities for the three and six months ended June 30, 2011 and 2010, respectively:


	Three Months Ended June 30,
	2011		2010
	(in thousands)
Balance, March 31	$	3,628	$	5,852
Transfer to level 1	$	—	$	—
Net unrealized gain		396		474

Balance, June 30	$	4,024	$	6,326


	Six Months Ended June 30,
	2011			2010
	(in thousands)
Balance, January 1	$	7,573		$	6,232
Transfer to level 1	$	(3,966	)	$	—
Net unrealized gain		417			94

Balance, June 30	$	4,024		$	6,326

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44A, 44B
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15C, 15D
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15A
-Subparagraph a-d
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15B
-Subparagraph a, b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 3, 10, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 32, 33, 34
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 159
-Paragraph 17-22, 27, 28
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-Section 50
-Paragraph 21
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-Name Accounting Standards Codification
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-SubTopic 10
-Section 50
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Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
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Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
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Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258

+ Details

Income Taxes	6 Months Ended
Income Taxes	Jun. 30, 2011
Income Taxes [Abstract]
Income Taxes	10 – Income Taxes As of June 30, 2011 and December 31, 2010, respectively, we had no material unrecognized tax benefits or accrued interest and penalties. Tax years 2007 through 2010 remained open for examination as of June 30, 2011.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph h
-Article 4

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 136, 172
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 43, 44, 45, 46, 47, 48, 49
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(h))
-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
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-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
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-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

+ Details

Business Combinations	6 Months Ended
Business Combinations	Jun. 30, 2011
Business Combinations [Abstract]
Business Combinations	11 – Business Combinations In December 2010, we acquired Michigan, which had been a majority-owned subsidiary of West Bend. Michigan writes various lines of property and casualty insurance and had direct written premiums of $105.4 million and net written premiums of $27.1 million for the year ended December 31, 2010. Effective on December 1, 2010, Michigan entered into a 50% quota-share agreement with third-party reinsurers and a 25% quota-share reinsurance agreement with Donegal Mutual to replace the 75% quota-share reinsurance agreement Michigan maintained with West Bend through November 30, 2010. The final purchase price for the acquisition was $42.3 million in cash. During the first quarter of 2011, we completed our analysis of the estimated acquisition date fair value of the assets we acquired and the liabilities we assumed. Based on the finalized analysis of our valuation specialist, we decreased the fair value of other assets acquired by $132,000 and recorded a corresponding increase to goodwill. As part of our acquisition accounting for Michigan in 2010, we eliminated Michigan’s deferred policy acquisition costs and unearned commission income and recorded Michigan’s obligations and rights under unexpired insurance and reinsurance contracts at their estimated fair value. We estimated the fair value adjustments by applying a market ceding commission rate to Michigan’s unearned premiums and prepaid reinsurance premiums that resulted in a net reduction of Michigan’s obligations. We are amortizing the ceding commission component of the fair value adjustments over the estimated remaining term of Michigan’s policies in force as of the acquisition date and recording the amortization as a reduction in net premiums earned. For the six months ended June 30 2011, we recorded a reduction in net premiums earned of $2.8 million related to this amortization. We will amortize the remaining fair value adjustments of $493,000 throughout the remainder of 2011.

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Emerging Issues Task Force (EITF)
-Number 88-16
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141
-Paragraph 51, 52
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141R
-Appendix F
-Paragraph F4
-Subparagraph e

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 141R
-Paragraph 67-73
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 1
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
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-URI http://asc.fasb.org/extlink&oid=6972119&loc=d3e1490-128463

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
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Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
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Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
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-Publisher FASB
-Name Accounting Standards Codification
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-Publisher FASB
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-Publisher FASB
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-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
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-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
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-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
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-URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4934-128472

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6972119&loc=d3e1497-128463

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
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-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
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-URI http://asc.fasb.org/extlink&oid=6972119&loc=d3e1383-128463

+ Details

Impact of New Accounting Standards	6 Months Ended
Impact of New Accounting Standards	Jun. 30, 2011
Impact of New Accounting Standards [Abstract]
Impact of New Accounting Standards	12 – Impact of New Accounting Standards In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Improving Disclosures about Fair Value Measurements.” ASU 2010-06 amends ASC subtopic 820-10 by requiring new, and clarifying existing, fair value disclosures. We have included herein the disclosures ASU 2010-06 requires for the first six months of 2011. In October 2010, the FASB issued updated guidance to address the diversity in practice for the accounting for costs associated with acquiring or renewing insurance contracts. This guidance modifies the definition of acquisition costs to specify that a cost must relate directly to the successful acquisition of a new or renewal insurance contract to qualify for deferral. If application of this guidance would result in the capitalization of acquisition costs that a reporting entity had not previously capitalized, the entity may elect not to capitalize those costs. The updated guidance is effective for periods ending after December 15, 2011. We do not expect the adoption of this guidance to have a material impact on our financial position or results of operations.

- Definition

The entire disclosure for reporting accounting changes and error corrections. It includes the conveyance of information necessary for a user of the Company's financial information to understand all aspects and required disclosure information concerning all changes and error corrections reported in the Company's financial statements for the period.

+ References + Details