Filed pursuant to Rules 424(b)(3) and 424(c)
Registration No. 333-06787
DONEGAL GROUP INC.
AGENCY STOCK PURCHASE PLAN
PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED AUGUST 22, 1996
On November 14, 1996, Donegal Group Inc. (the "Company") filed with the
Securities and Exchange Commission a Form 10-Q Quarterly Report for the quarter
ended September 30, 1996, a copy of which, without exhibits, is attached to this
Prospectus Supplement.
This Prospectus Supplement should be read in conjunction with the
Company's Prospectus dated August 22, 1996 and the Company's 1995 Annual Report
to Stockholders.
The date of this Prospectus Supplement is November 20, 1996.
<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 of the Securities Exchange
Act of 1934
For the Quarterly Period Ended September 30, 1996.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________________ to ___________________.
Commission File No. 0-15341
Donegal Group Inc.
(Exact name of registrant as specified in its charter)
Delaware 23-2424711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1195 River Road, P.O. Box 302, Marietta, PA 17547-0302
(Address of principal executive offices, including zip code)
(717) 426-1931
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X|. No. ___.
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years:
Indicate by check mark whether the registrant has filed all documents and
reports required by Sections 12, 13, or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes ____. No. ___.
Applicable Only to Corporate Issuers:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 4,467,521 shares of Common
Stock, $1.00 par value, outstanding on October 31, 1996.
<PAGE>
Part I. Financial Information
Item 1. Financial Statements.
Donegal Group Inc. And Subsidiaries
Consolidated Balance Sheet
<TABLE>
<CAPTION>
Assets September 30, 1996 December 31, 1995
------------------ -----------------
Investments (Unaudited)
<S> <C> <C>
Fixed maturities
Held to maturity, at amortized cost $105,309,169 $ 91,979,122
Available for sale, at market value 45,741,325 51,646,730
Equity securities, available for sale at market 3,891,787 3,263,878
Short-term investments, at cost, which
approximate market 18,073,121 14,498,579
------------ ------------
Total Investments 173,015,402 161,388,309
Cash 1,932,936 1,747,572
Accrued investment income 2,183,356 2,414,095
Premiums receivable 12,844,279 11,790,396
Reinsurance receivable 35,009,915 27,693,106
Federal income tax receivable 339,580 551,990
Deferred policy acquisition costs 7,910,127 6,902,218
Deferred federal income taxes 3,829,978 3,411,544
Prepaid reinsurance premiums 20,911,120 13,055,893
Property and equipment, net 2,211,973 2,282,570
Accounts receivable - securities 123,941 2,702,895
Due from affiliate 334,707 546,746
Other 1,496,075 1,217,032
------------ ------------
Total Assets $262,143,389 $235,704,366
============ ============
Liabilities and Stockholders' Equity
Liabilities
Losses and loss expenses $108,554,366 $ 97,733,851
Unearned premiums 67,872,999 54,377,239
Accrued expenses 1,814,352 2,373,142
Reinsurance balances payable 650,073 634,731
Cash dividend declared to stockholders -- 427,694
Line of credit 3,500,000 5,000,000
Accounts payable - securities -- 2,491,148
Other 122,328 181,426
Due to affiliate - Delaware Atlantic acquisition -- 202,243
------------ ------------
Total Liabilities 182,514,118 163,421,474
------------ ------------
Stockholders' Equity
Preferred stock, $1.00 par value, authorized
1,000,000 shares; none issued
Common stock, $1.00 par value, authorized
10,000,000 shares, issued 4,532,569 and 4,326,362
shares and outstanding 4,467,521
and 4,261,314 shares 4,532,569 4,326,362
Additional paid-in capital 37,222,019 35,017,965
Net unrealized gain (losses) on investments 98,186 819,213
Retained earnings 38,596,277 32,939,132
Treasury stock (819,780) (819,780)
------------ ------------
Total Stockholders' Equity 79,629,271 72,282,892
------------ ------------
Total Liabilities and
Stockholders' Equity $262,143,389 $235,704,366
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
<PAGE>
Donegal Group Inc. and Subsidiaries
Consolidated Statement of Income
(Unaudited)
For the three months ended September 30, 1996 and 1995
Three Months Ended September 30,
--------------------------------
1996 1995
------------- ------------
Revenues:
Premiums earned $ 36,338,876 $ 29,509,784
Premiums ceded (11,204,309) (7,483,756)
------------ ------------
Net premiums earned 25,134,567 22,026,028
Investment income, net of investment
expenses 2,507,883 2,350,064
Realized gain (loss) 16,780 151,444
Lease income 138,613 122,138
Service charge income 378,552 384,445
------------ ------------
Total Revenues 28,176,395 25,034,119
------------ ------------
Expenses:
Losses and loss expenses 23,657,291 19,744,175
Reinsurance recoveries (7,472,243) (5,503,977)
------------ ------------
Net losses and loss expenses 16,185,048 14,240,198
Amortization of deferred policy
acquisition costs 4,278,000 3,407,000
Other underwriting expenses 3,756,113 3,693,550
Policy dividends 282,956 285,890
Interest 81,513 6,757
Other expenses 350,108 324,654
------------ ------------
Total Expenses 24,933,738 21,958,049
------------ ------------
Income before income taxes 3,242,657 3,076,070
Income taxes 757,346 726,952
------------ ------------
Net income $ 2,485,311 $ 2,349,118
============ ============
Earnings per common share $ .56 $ .55
============ ============
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
Donegal Group Inc. and Subsidiaries
Consolidated Statement of Income
(Unaudited)
For the nine months ended September 30, 1996 and 1995
Nine Months Ended September 30,
-------------------------------
1996 1995
---- ----
Revenues:
Premiums earned $101,694,023 $ 85,016,287
Premiums ceded (27,029,106) (21,303,463)
------------ ------------
Net premiums earned 74,664,917 63,712,824
Investment income, net of investment
expenses 7,459,103 6,822,511
Realized gain (loss) 311,528 365,428
Lease income 404,970 363,412
Service charge income 1,092,645 1,090,612
------------ ------------
Total Revenues 83,933,163 72,354,787
------------ ------------
Expenses:
Losses and loss expenses 67,515,565 54,039,218
Reinsurance recoveries (17,389,526) (13,128,412)
------------ ------------
Net losses and loss expenses 50,126,039 40,910,806
Amortization of deferred policy
acquisition costs 12,576,000 10,005,000
Other underwriting expenses 10,567,085 10,022,842
Policy dividends 982,276 919,706
Interest 290,194 6,757
Other expenses 1,149,143 953,044
------------ ------------
Total Expenses 75,690,737 62,818,155
------------ ------------
Income before income taxes 8,242,426 9,536,632
Income taxes 1,625,754 2,256,689
------------ ------------
Net income $ 6,616,672 $ 7,279,943
============ ============
Earnings per common share $ 1.50 $ 1.72
============ ============
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
DONEGAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Common Stock
------------- Net Unreal- Total
Additional ized Gains Stock-
Paid-In (Losses) on Retained Treasury holders'
Shares Amount Capital Investments Earnings Stock Equity
------ ------ ------- ----------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1996 4,326,362 $4,326,362 $35,017,965 $ 819,213 $32,939,132 $(819,780) $72,282,892
Net Income 6,616,672 6,616,672
Unrealized loss
on investments (721,027) (721,027)
Issuance of
Common Stock 206,207 206,207 2,204,054 2,410,261
Cash Dividend (959,527) (959,527)
--------- ---------- ----------- --------- ----------- --------- -----------
Balance,
September 30, 1996 4,532,569 $4,532,569 $37,222,019 $ 98,186 $38,596,277 $(819,780) $79,629,271
========= ========== =========== ========= =========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
DONEGAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the nine months ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------------
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 6,616,672 $ 7,279,943
------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 287,106 221,716
Realized investment gain (loss) (331,528) (365,840)
Changes in Assets and Liabilities:
Losses and loss expenses 10,820,515 9,983,534
Unearned premiums 13,495,760 7,683,884
Premiums receivable (1,053,883) (1,523,115)
Deferred acquisition costs (1,007,909) (1,100,782)
Deferred income taxes (46,995) (361,061)
Reinsurance receivable (7,316,809) (4,261,827)
Prepaid reinsurance premiums (7,855,227) (2,100,251)
Accrued investment income (230,739) 79,595
Due from affiliate (212,039) (2,476,342)
Accounts payable reinsurance 15,342 156,058
Current income taxes payable (212,410) (300,252)
Other, net (896,931) 220,900
------------ ------------
Net adjustments 6,784,629 5,856,217
------------ ------------
Net cash provided by operating activities 13,401,301 13,136,160
------------ ------------
Cash flows from investing activities:
Purchase of fixed maturities
Held to maturity (22,071,161) (20,473,400)
Available for sale (11,613,410) (15,872,315)
Purchase of equity securities, available for sale (8,818,784) (5,186,741)
Maturity of fixed maturities
Held to maturity 6,528,676 9,018,252
Available for sale 15,219,295 1,533,334
Sale of fixed maturities - available for sale 3,603,517 2,649,343
Sale of equity securities - available for sale 8,396,561 5,427,065
Acquisition of Delaware Atlantic (202,243) 219,187
Purchase of property and equipment (206,886) (211,110)
Net sales of short-term investments (3,574,542) 9,324,117
------------ ------------
Net cash used in investing activities (12,738,977) (13,572,268)
------------ ------------
Cash flows from financing activities:
Repayment of bank borrowing (1,500,000)
Cash dividends paid (1,387,221) (1,199,319)
Issuance of common stock 2,410,261 1,280,214
------------ ------------
Net cash provided by (used in)
financing activities (476,960) 80,895
------------ ------------
Net decrease in cash 185,364 (355,213)
Cash at beginning of year 1,747,572 1,263,764
------------ ------------
Cash at end of quarter $ 1,932,936 $ 908,551
============ ============
Cash paid during period -Interest $ 287,997 6,757
-Income Taxes $ 1,255,000 $ 2,945,840
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
Donegal Group Inc. ("DGI" or the "Company") is a regional insurance holding
company doing business in Pennsylvania, Maryland, Delaware, Virginia and Ohio
through its three wholly owned property-casualty insurance subsidiaries,
Atlantic States Insurance Company ("Atlantic"), Southern Insurance Company of
Virginia ("Southern") and Delaware Atlantic Insurance Company ("Delaware"). The
Company's major lines of business in 1995 and their percentage of total net
earned premiums were Automobile Liability (28.2%), Workers' Compensation
(19.1%), Automobile Physical Damage (15.5%), Homeowners (16.4%), and Commercial
Multiple Peril (14.8%). The subsidiaries are subject to regulation by Insurance
Departments in those states in which they operate and undergo periodic
examination by those departments. The subsidiaries are also subject to
competition from other insurance carriers in their operating areas. DGI was
formed in September 1986 by Donegal Mutual Insurance Company (the "Mutual
Company"), which owns 59% of the outstanding common shares of the Company as of
September 30, 1996.
Atlantic States participates in an intercompany pooling arrangement with the
Mutual Company and assumes 65% of the pooled business, 60% prior to January 1,
1996. Southern cedes 50% of its business to the Mutual Company and Delaware
Atlantic cedes 70% of its Workers' Compensation business to the Mutual Company.
Because the Mutual Company places substantially all of the business assumed from
Southern and Delaware Atlantic into the pool, from which the Company has a 65%
allocation, the Company's results of operations include approximately 82% of the
business written by Southern and approximately 70% of the Workers' Compensation
business written by Delaware Atlantic.
On December 29, 1995, the Company acquired all of the outstanding stock of
Delaware Atlantic Insurance Company. This transaction was accounted for as if it
were a "Pooling of interest," and as such, the Company's financial statements
have been restated to include Delaware as a consolidated subsidiary from January
1, 1994 to the present.
In January 1994, the Company organized a new subsidiary, Atlantic Insurance
Services, Inc. ("AIS"), which began business in that same month. AIS is an
insurance services organization currently providing inspection and policy
auditing information on a fee for service basis to its affiliates and the
insurance industry.
-6-
<PAGE>
DONEGAL GROUP INC. AND SUBSIDIARIES
(Unaudited)
Summary Notes to Consolidated Financial Statements
1 - Organization
The Company was organized as a regional insurance holding company by
Donegal Mutual Insurance Company (the "Mutual Company") on August 26, 1986 and
operates in Pennsylvania, Maryland, Delaware, Virginia and Ohio through its
wholly owned stock insurance companies, Atlantic States Insurance Company
("Atlantic States"), Southern Insurance Company of Virginia ("Southern"),
Delaware Atlantic Insurance Company ("Delaware") and Atlantic Insurance
Services, Inc. ("AIS"). The Company's major lines of business are Automobile
Liability, Automobile Physical Damage, Homeowners, Commercial Multiple Peril and
Workers' Compensation. Atlantic, Southern and Delaware are subject to regulation
by Insurance Departments in those states in which they operate and undergo
periodic examination by those departments. They are also subject to competition
from other insurance carriers in their operating areas. Atlantic States engages
in the insurance business primarily through an intercompany pooling arrangement
with the Mutual Company. Southern was acquired by the Company on December 31,
1988 pursuant to a plan of conversion from a mutual to a stock company and cedes
50% of its business to the Mutual Company, 80% prior to 1991. On December 29,
1995, the Company acquired all of the outstanding stock of Delaware Atlantic
Insurance Company. This transaction was accounted for as if it were a "Pooling
of interest," and as such, the Company's financial statements have been restated
to include Delaware as a consolidated subsidiary from January 1, 1994 to the
present. At September 30, 1996, the Mutual Company held 59% of the outstanding
common stock of the Company.
2 - Basis of Presentation
The financial information for the interim period included herein is
unaudited; however, such information reflects all adjustments, consisting only
of normal recurring adjustments, which, in the opinion of management of
Registrant, are necessary to a fair presentation of Registrant's financial
position, results of operations and changes in financial position for the
interim period included herein. The results of operations for the nine months
ended September 30, 1996, are not necessarily indicative of results of
operations to be expected for the twelve months ended December 31, 1996.
These financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Registrant's Annual Report on Form
10-K for the year ended December 31, 1995.
-7-
<PAGE>
Results of Operations - Three Months Ended September 30, 1996
to Three Months Ended September 30, 1995
Revenues for the three months ended September 30, 1996 were $28,176,395, an
increase of $3,142,276, or 12.6%, over the same period of 1995. An increase in
net premiums earned of $3,108,539, or 14.1% represented most of this change. An
increase in Atlantic States' share of the pool with Donegal Mutual, from 60% to
65% effective January 1, 1996 accounted for $1,687,097, or 7.7% of this
increase. The Company's share of direct premiums written increased 3.6% over
1995 before giving effect to the change in the pooling agreement. The pooling
change added another 8.1% for a total increase in direct written premiums of
11.7%. Investment income for the third quarter of 1996 was $2,507,883 an
increase of $157,819, or 6.7%, over the third quarter of 1995. An increase in
the average invested assets of $17,342,381 or 11.2%, to $161,460,369 and a
decrease in the average return on investments to an annualized rate of 5.8% for
the third quarter of 1996 compared to 6.1% for the third quarter of 1995,
accounted for the change. Realized investment gains, which resulted from the
normal turnover of the Company's investment portfolio, decreased $134,664 for
the three months ended September 30, 1996 compared to the same period in 1995,
to $16,780.
The GAAP combined ratio of insurance operations in the third quarter of
1996 was 97.5% compared to 98.2% for the same period in 1995. The GAAP combined
ratio is the sum of the ratios of incurred losses and loss adjusting expenses to
premiums earned (loss ratio), policyholders dividends to premiums earned
(dividend ratio), and underwriting expenses to premiums earned (expense ratio).
The Company posted a loss ratio of 64.4% for the third quarter 1996 almost
identical to the 64.7% loss ratio it posted for the third quarter 1995. This
ratio was achieved despite the effects from hurricane Fran which added
approximately $300,000 in claims for the quarter. The expense ratio decreased
from 32.2% to 32.0% for the three months ended September 30, 1996 due primarily
to reductions in incentive expenses for employees and agents related to the
higher claims activity for the first quarter. The dividend ratio decreased
slightly from 1.3% for the third quarter of 1995 to 1.1% for the third quarter
of 1996, due primarily to more stringent qualification requirements within the
programs offset by higher levels of profitability in the workers' compensation
line.
Federal income taxes for the third quarter of 1996 represented 23.4% of
income before income taxes, compared to 23.6% for the same period of 1995.
-8-
<PAGE>
Results of Operations - Nine Months Ended September 30, 1996
to Nine Months Ended September 30, 1995
Revenues for the nine months ended September 30, 1996 were $83,933,163 an
increase of $11,578,376, or 16.0%, over the same period of 1995. An increase in
net premiums earned of $10,952,093 or 17.2%, represented most of this change. An
increase in Atlantic States' share of the pool with Donegal Mutual, from 60% to
65% effective January 1, 1996, accounted for $5,010,036, or 7.9% of this
increase. The Company's share of direct premiums written increased 4.8% over
1995 before giving effect to the change in the pooling agreement. The pooling
change added another 6.9% for a total increase in direct written premiums of
11.7%. Investment income for the first nine months of 1996 was $7,459,103, an
increase of $636,592, or 9.3% over the first nine months of 1995. An increase in
the average invested assets of $17,503,252 or 11.7%, to $167,201,855 accounted
for the entire change. Realized investment gains, which resulted from the normal
turnover of the Company's investment portfolio, decreased $53,900 for the first
nine months of this year to $311,528.
The GAAP combined ratio of insurance operations in the first three quarters
of 1996 was 99.4% compared to 97.1% for the same period in 1995. The GAAP
combined ratio is the sum of the ratios of incurred losses and loss adjusting
expenses to premiums earned (loss ratio), policyholders dividends to premiums
earned (dividend ratio), and underwriting expenses to premiums earned (expense
ratio). An increase in the loss ratio from 64.2% in the first nine months of
1995 to 67.2% in the first nine months of 1996, accounted for most of the
change. This rise in the loss ratio resulted from increased claim activity due
to record levels of snowfall in the primary operating areas of the Company
during the first quarter of 1996. This increase in claims activity affected both
the personal lines and commercial property business. The expense ratio decreased
from 31.4% to 31.0% for the nine months ended September 30, 1996 due primarily
to reductions in incentive expenses for employees and agents related to the
higher claims activity for the first quarter. The dividend ratio decreased
slightly from 1.4% for the first nine months of 1995 to 1.3% for the first nine
months of 1996, due primarily to more stringent qualification requirements
within the programs offset by higher levels of profitability in the workers'
compensation line.
Federal income taxes for the first nine months of 1996 represented 19.7% of
income before income taxes, compared to 23.7% for the same period of 1995. This
was due primarily to the increased loss activity in the first quarter 1996
resulting in tax free income from municipal bonds representing a much greater
percentage of income before income taxes. In the first quarter 1996 tax exempt
interest was 47% of pre tax income compared to approximately 25% in the first
quarter 1995. The company also benefited from tax deductions related to the
exercise of options during the second quarter of this year.
-9-
<PAGE>
Liquidity and Capital Resources
The Company generates sufficient funds from its operations and maintains a
high degree of liquidity in its investment portfolio. The primary source of
funds to meet the demands of claim settlements and operating expenses are
premium collections, investment earnings and maturing investments. As of
September 30, 1996, the Company had no material commitment for capital
expenditures.
In investing funds made available from operations, the Company maintains
securities maturities consistent with its projected cash needs for the payment
of claims and expenses. The Company maintains a portion of its investment
portfolio in relatively short-term and highly liquid assets to ensure the
availability of funds.
As of September 30, 1996, pursuant to a credit agreement dated December 29,
1995 with Fleet National Bank of Connecticut, the Company had unsecured
borrowings of $3.5 million. Such borrowings were made in connection with the
acquisition of Delaware Atlantic Insurance Company. Per the terms of the credit
agreement, the Company may borrow up to $20 million at interest rates equal to
the bank's then current prime rate or the then current London interbank
Eurodollar bank rate plus 1.70%. At September 30, 1996, the interest rate on the
outstanding balance was 7.5125%. In addition, the Company will pay a non-use fee
at a rate of 3/10 of 1% per annum on the average daily unused portion of the
Bank's commitment. On each December 29, commencing December 29, 1998, the credit
line will be reduced by $4 million. Any outstanding loan in excess of the
remaining credit line, after such reduction, will then be payable.
The Company's principal source of cash with which to pay stockholder
dividends is dividends from Atlantic States, Southern and Delaware, which are
required by law to maintain certain minimum surplus on a statutory basis and are
subject to regulations under which payment of dividends from statutory surplus
is restricted and may require prior approval of their domiciliary insurance
regulatory authorities. Atlantic States, Southern and Delaware are subject to
Risk Based Capital (RBC) requirements effective for 1994. At December 31, 1995,
all three Companies' capital was substantially above the RBC requirements. At
December 31, 1995, amounts available for distribution as dividends to Donegal
Group without prior approval of the insurance regulatory authorities are
$5,224,905 from Atlantic States, $638,042 from Southern and $569,563 from
Delaware.
-10-
<PAGE>
Credit Risk
The Company provides property and liability coverages through its
subsidiaries' independent agency systems located throughout its operating area.
The majority of this business is billed directly to the insured although a
portion of Donegal Group's commercial business is billed through its agents who
are extended credit in the normal course of business.
The Company's subsidiaries have reinsurance agreements in place with the
Mutual Company and with a number of other major authorized reinsurers.
Impact of Inflation
Property and casualty insurance premiums are established before the amount
of losses and loss settlement expenses, or the extent to which inflation may
impact such expenses, are known. Consequently, the Company attempts, in
establishing rates, to anticipate the potential impact of inflation.
Impact of New Accounting Standards
Stock-Based Compensation
The Company has adopted Statement of Financial Accounting Standards No. 123
(SFAS No. 123), effective January 1, 1996. Upon adoption of SFAS No. 123, the
Company continues to measure compensation expense for its stock-based employee
compensation plans using the intrinsic value method prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees" and will provide pro forma
disclosures of net income and earnings per share as if the fair value-based
method prescribed by SFAS No. 123 had been applied in measuring compensation
expense.
Impairment of Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of" (SFAS No. 121) effective January 1, 1996, SFAS No. 121
provides guidance for recognition and measurement of impairment long-lived
assets, certain identifiable intangibles and goodwill related both to assets to
be held and used and assets to be disposed of.
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. In performing the review for recoverability, an entity
should estimate the future cash flows expected to result from the use of the
asset and its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, an impairment loss is not recognized. Measurement of an impairment
loss for long-lived assets and identifiable intangibles that an entity expects
to hold and use should be based on the fair value of the asset.
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell.
Management believes the adoption of SFAS No. 121 has no material effect on
its financial condition or results of operation.
-11-
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) EX-27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended September 30, 1996 - None.
-12-
<PAGE>
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, thereunto duly authorized.
Donegal Group Inc.
Date: November 14, 1996 By: /s/ Donald H. Nikolaus
-----------------------
Donald H. Nikolaus,
President and
Chief Executive Officer
Date: November 14, 1996 By: /s/ Ralph G. Spontak
-----------------------
Ralph G. Spontak,
Corporate Secretary,
Senior Vice President and
Chief Financial Officer
-13-
