Table of Contents
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): July 22, 2005
Donegal Group Inc.
| Delaware | 0-15341 | 23-2424711 | ||
| (State or other jurisdiction of incorporation) |
(Commission file number ) |
(IRS employer identification no.) |
| 1195 River Road, Marietta, Pennsylvania | 17547 | |
| (Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code: (717)426-1931
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)) |
Table of Contents
Item 2.02 Results of Operations.
On July 22, 2005, the Registrant issued a press release regarding the Company’s financial results for its second quarter ended June 30, 2005. The press release is exhibit 99.1 to this Form 8-K. 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
| Exhibit No. | Description | |
99.1
|
Press release issued by Donegal Group Inc. (the “Company”) dated July 22, 2005 |
2
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DONEGAL GROUP INC. |
||||
| Date: July 22, 2005 | By: | /s/ Jeffrey D. Miller | ||
| Jeffrey D. Miller, Senior Vice President | ||||
| and Chief Financial Officer | ||||
3
Table of Contents
EXHIBIT INDEX
| Exhibit | ||
| Number | Description | |
99.1
|
Press release dated July 22, 2005 issued by the Company. |
EXHIBIT 99.1
DONEGAL GROUP INC. ANNOUNCES EARNINGS FOR SECOND QUARTER
Ralph G. Spontak
Senior Vice President
Phone (717) 426-1931
Fax (717) 426-7009
For Immediate Release
MARIETTA, Pennsylvania, July 22, 2005 – Donegal Group Inc. (Nasdaq: DGICA and DGICB) today reported that its net income for the second quarter ended June 30, 2005 climbed 31.5% to $8,903,275, or $.48 per share on a diluted basis, compared to $6,770,187, or $.37 per share on a diluted basis, for the second quarter of 2004.
The second quarter earnings were a result of excellent underwriting results, the absence of significant weather events and by a continuation of solid revenue growth. Revenues for the second quarter of 2005 were $79,492,080, an increase of 12.4% over a year earlier, with premiums earned for the second quarter of $73,438,090, a 12.1% increase over the second quarter of 2004. Investment income increased 13.4% to $4,356,628 for the second quarter of 2005 compared to $3,842,574 for the second quarter of 2004.
The Company’s loss ratio for the second quarter of 2005 improved to a record low of 54.2% and compared to a loss ratio of 61.0% for the second quarter of 2004. Net losses in the second quarter of 2004 included property claims from a severe weather event in the Midwest of approximately $1 million, net of reinsurance, that added 1.5 percentage points to the loss ratio in that quarter. The Company’s GAAP expense ratio increased to 35.0% for the second quarter of 2005 compared to 30.7% for the second quarter of 2004, continuing to reflect higher levels of incentive compensation resulting from the excellent claim results.
Net income for the six months ended June 30, 2005 was $17,320,363, or $.94 per share on a diluted basis, compared to $13,056,823, or $.72 per share on a diluted basis, before extraordinary item, for the six months ended June 30, 2004. Including the extraordinary item, a gain of $5,445,670, or $.30 per share on a diluted basis related to an acquisition, net income in the first six months of 2004 was $18,502,493, or $1.02 per share on a diluted basis.
“The continuation of solid premium growth and strong underwriting results in both the personal lines and commercial lines sectors reflects the effectiveness of our underwriting and marketing strategy,” stated Donald H. Nikolaus, President and Chief Executive Officer of Donegal Group Inc.
The Company’s combined ratio for the first six months of 2005 was 90.1% compared to a combined ratio of 92.2% for the comparable period in 2004. The Company’s loss ratio for the first six months of 2005 improved to 56.0% compared to 62.7% for the first six months of 2004.
These strong results helped the Company increase its book value to $14.37 per common share as of June 30, 2005, compared to $13.53 per common share at December 31, 2004.
All 2004 per share information has been restated to reflect a 4-for-3 stock split effected in the form of a 33 1/3% stock dividend issued on March 28, 2005.
The Company announced yesterday that its Board of Directors approved a quarterly cash dividend payable August 15, 2005 of $.10 per share of Class A Common Stock and $.085 per share of Class B Common Stock to stockholders of record as of August 1, 2005.
The Company will hold a conference call on Friday, July 22, 2005, beginning at 11:00 A. M. Eastern Daylight Time. You may participate in the conference call by calling 1-800-901-5217 (Passcode 29091666). An instant replay of the conference call will be available until July 29, 2005, by calling 1-888-286-8010 (Passcode 51583063).
Donegal Group Inc. is an insurance holding company whose insurance subsidiaries offer personal and commercial property and casualty lines of insurance 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 press 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 necessarily involve a number of 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, 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 Company’s filings with the Securities and Exchange Commission. The Company disclaims any obligation to update such statements or 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.
(Tables Follow)
Consolidated Statements of Income
(unaudited; in thousands, except share data)
| Second Quarter Ended | ||||||||
| June 30, | June 30, | |||||||
| 2005 | 2004* | |||||||
Net premiums earned |
$ | 73,438,090 | $ | 65,498,402 | ||||
Investment income,
net of investment expenses |
4,356,628 | 3,842,574 | ||||||
Realized investment gains |
420,061 | 175,555 | ||||||
Total revenues |
79,492,080 | 70,692,422 | ||||||
Net income |
$ | 8,903,275 | $ | 6,770,187 | ||||
Net income per common share |
||||||||
Basic |
$ | 0.50 | $ | 0.39 | ||||
Diluted |
$ | 0.48 | $ | 0.37 | ||||
| Six Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2005 | 2004* | |||||||
Net premiums earned |
$ | 145,200,613 | $ | 128,197,880 | ||||
Investment income,
net of investment expenses |
8,764,096 | 7,622,591 | ||||||
Realized investment gains |
1,110,352 | 643,998 | ||||||
Total revenues |
157,571,138 | 138,694,083 | ||||||
Net income before extraordinary
item |
$ | 17,320,363 | $ | 13,056,823 | ||||
Net income after extraordinary
item |
$ | 17,320,363 | $ | 18,502,493 | ||||
Net income per common share
before extraordinary item |
||||||||
Basic |
$ | 0.96 | $ | 0.76 | ||||
Diluted |
$ | 0.94 | $ | 0.72 | ||||
| Six Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2005 | 2004* | |||||||
Net income per common share
after extraordinary item |
||||||||
Basic |
$ | 0.96 | $ | 1.07 | ||||
Diluted |
$ | 0.94 | $ | 1.02 | ||||
| *Per share information restated for 4-for-3 stock split |
Consolidated Statements of Income
(unaudited; in thousands, except share data)
| Quarter Ended | ||||||||
| June 30, | June 30, | |||||||
| 2005 | 2004* | |||||||
Net premiums earned |
$ | 73,438 | $ | 65,498 | ||||
Investment income,
net of investment expenses |
4,357 | 3,843 | ||||||
Realized investment gains |
420 | 176 | ||||||
Lease income |
236 | 219 | ||||||
Service charge income |
1,041 | 956 | ||||||
Total revenues |
79,492 | 70,692 | ||||||
Losses and loss expenses |
39,808 | 39,961 | ||||||
Amortization of deferred policy
acquisition costs |
11,736 | 9,942 | ||||||
Other underwriting expenses |
13,991 | 10,099 | ||||||
Other expenses |
460 | 498 | ||||||
Policyholder dividends |
256 | 94 | ||||||
Interest |
543 | 360 | ||||||
Total expenses |
66,794 | 60,954 | ||||||
Income before income taxes |
12,698 | 9,738 | ||||||
Income tax expense |
3,795 | 2,968 | ||||||
Net income |
$ | 8,903 | $ | 6,770 | ||||
Net income per common share |
||||||||
Basic |
$ | 0.50 | $ | 0.39 | ||||
Diluted |
$ | 0.48 | $ | 0.37 | ||||
Supplementary Financial
Analysts’ Data |
||||||||
Weighted average number of
shares outstanding |
||||||||
Basic |
17,974,820 | 17,516,244 | ||||||
Diluted |
18,536,772 | 18,161,540 | ||||||
| Quarter Ended | ||||||||
| June 30, | June 30, | |||||||
| 2005 | 2004* | |||||||
Net written premiums |
$ | 80,309 | $ | 73,775 | ||||
Book value per common share |
$ | 14.37 | $ | 12.92 | ||||
| * | Per share information restated for 4-for-3 stock split |
Consolidated Statements of Income
(unaudited; in thousands, except per share data)
| Six Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2005 | 2004* | |||||||
Net premiums earned |
$ | 145,201 | $ | 128,198 | ||||
Investment income,
net of investment expenses |
8,764 | 7,623 | ||||||
Realized investment gains |
1,110 | 644 | ||||||
Lease income |
465 | 439 | ||||||
Service fees |
2,031 | 1,790 | ||||||
Total revenues |
157,571 | 138,694 | ||||||
Losses and loss expenses |
81,346 | 80,332 | ||||||
Amortization of deferred policy
acquisition costs |
23,222 | 18,287 | ||||||
Other underwriting expenses |
25,645 | 19,157 | ||||||
Other expenses |
890 | 1,081 | ||||||
Dividends |
608 | 462 | ||||||
Interest |
1,041 | 697 | ||||||
Total expenses |
132,752 | 120,016 | ||||||
Income before income taxes and
extraordinary item |
24,819 | 18,678 | ||||||
Income tax expense |
7,499 | 5,621 | ||||||
Net income before extraordinary
item |
17,320 | 13,057 | ||||||
Extraordinary item |
— | 5,445 | ||||||
Net income after extraordinary
item |
$ | 17,320 | $ | 18,502 | ||||
Net income per common share
before extraordinary item |
||||||||
Basic |
$ | 0.96 | $ | 0.76 | ||||
Diluted |
$ | 0.94 | $ | 0.72 | ||||
| Six Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2005 | 2004* | |||||||
Net income per common share
after extraordinary item |
||||||||
Basic |
$ | 0.96 | $ | 1.07 | ||||
Diluted |
$ | 0.94 | $ | 1.02 | ||||
Supplementary Financial
Analysts’ Data |
||||||||
Weighted average number of
shares outstanding |
||||||||
Basic |
17,960,945 | 17,351,337 | ||||||
Diluted |
18,505,153 | 18,086,456 | ||||||
Net written premiums |
$ | 154,807 | $ | 142,191 | ||||
| * | Per share information restated for 4-for-3 stock split |
Consolidated Balance Sheet
(in thousands)
| June 30, 2005 | December 31, 2004 | |||||||
| (unaudited) | ||||||||
ASSETS |
||||||||
Investments: |
||||||||
Fixed Maturities: |
||||||||
Held to maturity, at amortized cost |
$ | 185,069 | $ | 182,574 | ||||
Available for sale, at fair value |
276,496 | 226,757 | ||||||
Equity securities, at fair value |
35,912 | 33,505 | ||||||
Investments in affiliates |
8,638 | 8,865 | ||||||
Short-term investments, at
cost, which approximates fair
value |
21,655 | 47,368 | ||||||
Total investments |
527,770 | 499,069 | ||||||
Cash |
5,657 | 7,350 | ||||||
Premiums in course of collection |
48,651 | 44,267 | ||||||
Reinsurance receivable |
98,505 | 98,479 | ||||||
Accrued investment income |
5,110 | 4,961 | ||||||
Deferred policy acquisition costs |
23,596 | 22,258 | ||||||
Prepaid reinsurance premiums |
41,500 | 35,907 | ||||||
Property and equipment, net |
5,502 | 5,509 | ||||||
Deferred income taxes |
11,793 | 10,922 | ||||||
Other assets |
2,300 | 6,693 | ||||||
Total assets |
$ | 770,384 | $ | 735,415 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Liabilities: |
||||||||
Unpaid losses and loss
settlement expenses |
$ | 267,223 | $ | 267,190 | ||||
Unearned premiums |
189,657 | 174,458 | ||||||
Accounts payable and accrued
expenses |
12,186 | 13,414 | ||||||
| June 30, 2005 | December 31, 2004 | |||||||
| (unaudited) | ||||||||
Debt |
30,929 | 30,929 | ||||||
Due to affiliates |
— | 241 | ||||||
Other liabilities |
11,937 | 6,479 | ||||||
Total liabilities |
511,932 | 492,711 | ||||||
Stockholders’ equity: |
||||||||
Preferred stock |
— | — | ||||||
Class A common stock |
139 | 139 | ||||||
Class B common stock |
42 | 42 | ||||||
Additional paid-in capital |
132,790 | 131,980 | ||||||
Accumulated other
comprehensive income |
4,174 | 4,750 | ||||||
Retained earnings |
122,199 | 106,685 | ||||||
Treasury stock, at cost |
(892 | ) | (892 | ) | ||||
Total stockholders’ equity |
258,452 | 242,704 | ||||||
Total liabilities and stockholders’
equity |
$ | 770,384 | $ | 735,415 | ||||