UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

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, 2004

Donegal Group Inc.

Registrant’s telephone number, including area code: (888) 877-0600

N/A

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:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))

o 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, 2004, the Company issued a press release regarding the Company’s financial results for its third quarter ended September 30, 2004. The press release is attached as Exhibit 99.1 to this Form 8-K Current Report. The information in this report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference in any filing under the Securities Act of 1933.

Item 9.01. Financial Statements and Exhibits.

     (c) Exhibits.

     The following exhibit is filed herewith:

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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EXHIBIT INDEX

EXHIBIT 99.1

DONEGAL GROUP INC. ANNOUNCES EARNINGS FOR THIRD QUARTER

Ralph G. Spontak
Senior Vice President and Chief Financial Officer
Phone (717) 426-1931
Fax (717) 426-7009

For Immediate Release

     MARIETTA, Pennsylvania, October 22, 2004 – Donegal Group Inc. (Nasdaq: DGICA and DGICB) today reported net income for the quarter and nine months ended September 30, 2004.

     Net income for the quarter ended September 30, 2004 was $5,886,886, or $.43 per share on a diluted basis, compared to $4,001,385, or $.40 per share on a diluted basis, for the third quarter of 2003. Results for the third quarter 2004 included previously announced property losses from severe weather of approximately $3.2 million that reduced net income by approximately $2.1 million, or $.15 per share on a diluted basis. Results for the third quarter of 2003 included losses of $1 million from Hurricane Isabel that reduced net income in that quarter by $650,000, or $.07 per share on a diluted basis.

     Net income for the nine months ended September 30, 2004 was $24,389,379, or $1.79 per share on a diluted basis, compared to $13,114,770, or $1.37 per share on a diluted basis, for the nine months ended September 30, 2003. Net income for the first nine months of 2004 includes an extraordinary gain of $5,445,670, or $.40 per share on a diluted basis, related to an acquisition in the first quarter of 2004.

     Even with the claims from the unprecedented number of storms in the current quarter, the Company achieved excellent underwriting results, posting a combined ratio of 95.0% for the third quarter of 2004 compared to a combined ratio of 96.8% for the comparable period in 2003. Excluding claims from the third quarter storms, the

Company’s combined ratios would have been 90.4% and 94.8% for the third quarter of 2004 and 2003, respectively.

     “Our disciplined underwriting approach, including the careful management of catastrophe exposures, has helped Donegal limit the impact from this unusual series of storms and still achieve solid results for the quarter,” stated Donald H. Nikolaus, President and Chief Executive Officer of the Donegal Companies.

     The storm losses occurred primarily in the Mid-Atlantic and Southeastern regions of the Company’s operations and were non-coastal in nature. The losses are comprised of approximately $60,000 in net losses from Hurricane Charley, $360,000 from Hurricane Frances, $1.3 million from Hurricane Ivan, $800,000 from Hurricane Jeanne and $650,000 from a July tornado.

     Revenues for the third quarter of 2004 were $73,613,653, an increase of 35.6% over a year earlier, with premiums earned for the third quarter of $67,958,382, a 36.7% increase over the third quarter of 2003. Premiums earned in the third quarter, excluding premiums earned by the companies acquired in January 2004, increased $4.8 million, or 9.6%, to $54,511,192.

     Investment income continued to increase notwithstanding as the Company’s shift towards greater levels of tax-exempt securities. Investment income for the third quarter of 2004 was $4,017,915, an increase of $175,341, or 4.6%, over investment income in the second quarter of 2004. This increase was accomplished despite the shift towards tax-exempt investment income, with tax-exempt interest representing 45.1% of total investment income in the third quarter of 2004 compared to 37.0% in the second quarter of 2004.

     The Company’s combined ratio for the first nine months of 2004 was 93.2% compared to a combined ratio of 95.4% for the comparable period in 2003. The Company’s loss ratio for the first nine months of 2004 improved to 62.5% compared to 64.5% for the first nine months of 2003. The Company’s expense ratio improved slightly to 30.3% for the first nine months of 2004 compared to 30.4% for the same period in 2003.

     These results helped the Company increase its book value per common share to $17.79 per share as of September 30, 2004, compared to $16.29 per share at December 31, 2003.

     The Company’s per share results were impacted by the Company’s offering of 3,450,000 shares of Class A Common Stock that was completed in December 2003. The offering was the principal reason for the increase in the weighted average number of shares outstanding during the third quarter of 2004 to 13,654,781 shares compared to 9,905,492 shares in the third quarter of 2003.

     The extraordinary gain of $5,445,670 in the first quarter of 2004 resulted from GAAP purchase accounting for unallocated negative goodwill from the Le Mars Insurance Company acquisition completed in early January 2004. The acquisitions of Le Mars Insurance Company, The Peninsula Insurance Company and Peninsula Indemnity Company were effective January 1, 2004.

     The Company also reported that at yesterday meeting its Board of Directors declared a regular cash dividend of 10.5 cents per share for the Company’s Class B Common Stock and 12 cents per share for the Company’s Class A Common Stock, payable November 15, 2004 to shareholders of record as of the close of business on November 1, 2004.

     The Company will hold a conference call on Friday October 22, 2004, beginning at 11:00 A. M. Eastern Time. You may participate in the conference call by calling 1-800-261-3417 (Passcode 92272027). An instant replay of the conference call will be available until November 2, by calling 1-888-286-8010 (Passcode 70579112).

     Donegal Group Inc. is a property and casualty insurance holding company whose insurance subsidiaries offer personal and commercial lines of insurance to businesses and individuals in six Mid-Atlantic states (Connecticut, Delaware, Maryland, New 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 release that are not historic facts are based on current expectations. Such statements are forward-looking (as defined in the Private Securities Litigation Reform Act of 1995) in nature and involve a number of risks and uncertainties. Actual results could vary materially. Among the factors that could cause actual results to vary materially include: the ability of the Company to maintain profitable operations, the adequacy of the Company’s reserves for losses and loss adjustment expenses, severe weather, business and economic conditions in the Company’s primary operating areas, competition from various insurance and non-insurance businesses, terrorism, legal and judicial developments, changes in regulatory

requirements and other risks that are described from time to time in the periodic reports that the Company files with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such statements should not be regarded as a representation by the Company or any other person. The Company disclaims any obligation to update such statements or to announce publicly the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.

(Tables Follow)

Consolidated Statements of Income
(unaudited; in thousands, except share data)

Consolidated Statements of Income
(unaudited; in thousands, except per share data)

Consolidated Balance Sheet
(unaudited; in thousands)