UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 29, 1999
DONEGAL GROUP INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-15341 23-2424711
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1195 River Road, Marietta, Pennsylvania 17547
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717) 426-1931
N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On September 29, 1999, the registrant announced a corporate restructuring
plan, which is described in the registrant's press release dated September 29,
1999. Such press release is filed as Exhibit 99 to this Form 8-K and is
incorporated herein by this reference.
As previously announced, Donegal Mutual Insurance Company, the owner of
approximately 60% of registrant's outstanding common stock, from time to time
purchases shares of registrant's common stock in open market transactions
pursuant to Rule 10b-18 or in private transactions at prevailing prices.
Item 7. Financial Statements and Exhibits.
Exhibits:
Reference is made to the Exhibit Index contained on page 4 of this Form 8-K
Report.
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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.
DONEGAL GROUP INC.
By: /s/ Donald H. Nikolaus
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Donald H. Nikolaus, President
and Chief Executive Officer
Date: September 29, 1999
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
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99 Press Release of Donegal Group Inc. dated September 29, 1999.
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EXHIBIT 99
Contact: Ralph G. Spontak
Senior Vice President and Chief Financial Officer
Phone (717) 426-1931
Fax (717) 426-7009
MARIETTA, Pennsylvania, September 29 -- Donegal Group Inc. (Nasdaq: DGIC)
today announced a corporate restructuring plan that will result in annualized
expense savings of $6.1 million in 2000. This plan includes the elimination of
approximately 10% of the Company's employees, changes in employee benefits and
cost reductions designed to reduce expenses and improve efficiency and
profitability significantly. The Company-wide restructuring plan includes
streamlining of operations, reengineering of work flows and team approaches to
marketing and underwriting functions to increase sales and reduce costs, the
closing of the Company's office in Delaware and consolidation of support
functions from several subsidiaries into the Marietta, Pennsylvania home office.
As a result, the Company will incur a one time pre-tax charge of approximately
$2.2 million in the third quarter of 1999, primarily for severance as well as
equipment and facilities no longer required. The Company has begun to implement
the plan and anticipates that the plan will be substantially completed by year
end 1999.
The Company announced that its third quarter results of operation also will
be impacted by the effect of claims resulting from the winds and rains
associated with Hurricane Floyd and other tropical storm losses and the transfer
of Southern Heritage's remaining Florida exposures to another insurance carrier
and other expenses incurred, outside of the restructuring charge, related to the
transfer of various subsidiaries' support functions to Marietta. The Company
estimates that its results of operation for the third quarter of 1999, including
the restructuring charge, will be a net loss of approximately 28 to 30 cents per
share, on a diluted basis.
The Company anticipates the restructuring will result in a substantial
reduction in its expense ratio as a result of the staff reductions, reductions
in its acquisition costs and savings from the elimination of systems and
equipment no longer required at subsidiary locations. The Company is also taking
steps to implement rate increases in various personal and commercial lines of
business as well as increases in installment charges and other related fee
income items.
Donald H. Nikolaus, President of the Donegal Group, stated that "The
restructuring plan is a necessary component of a multi-faceted program designed
to enable Donegal to be a leader among regional insurance companies in the
marketplace. The plan also enables Donegal Group to be an efficient and
competitive provider of insurance products and enhance profitability for our
company and its shareholders. The plan is much more than an expense ratio
reduction program. We will be much more customer focused in the sale and
delivery of insurance products with greater emphasis on cross selling our
insurance products." Nikolaus further stated, "Our company has initiated the
cost reduction program only after extensive analysis and we believe it is a
required step to
reduce our combined ratio and return our organization to higher levels of
profitability. Donegal continues to be a dynamic, well capitalized and
financially sound organization with a viable business strategy. The Company
continues to grow with premium revenues for the third quarter 1999 increasing an
estimated 27% over the same period in 1998, reflecting continued internal growth
and the benefits from the Southern Heritage acquisi tion. The restructuring plan
is being implemented to maintain and enhance this financial strength and
growth."
Donegal also announced it has retained the investment banking firm of
Wasserstein Perella & Co., Inc. to provide strategic advice regarding Donegal's
plans to position itself as a dynamic growing financial services holding company
focused in the property and casualty insurance industry with an acquisition
strategy targeted to independent profitable growth.
Donegal Group Inc. is a regional property-casualty insurance holding
company doing business in 19 Mid-Atlantic and Southern states through its five
insurance subsidiar ies, Atlantic States Insurance Company, Southern Heritage
Insurance Company, Southern Insurance Company of Virginia, Delaware Atlantic
Insurance Company and Pioneer Insurance Company.
The statements and estimates made in this press release constitute
forward-looking statements under the Private Securities Litigation Reform Act of
1995 and, as such, involve significant risks and uncertainties. Actual results
in the future may differ materially from those contained in this press release
for many reasons including the future mix of business written, the types and
amounts of claims reported in the future, insurance industry price competition,
state regulatory actions and the occurrence or severity of natural catastrophes.