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 June 30, 1997
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: 6,021,835 shares of Common
Stock, $1.00 par value, outstanding on July 31, 1997.
<PAGE>
Part I. Financial Information
Item 1. Financial Statements.
Donegal Group Inc. And Subsidiaries
Consolidated Balance Sheet
<TABLE>
<CAPTION>
Assets June 30, 1997 December 31, 1996*
------------- -----------------
Investments (Unaudited)
<S> <C> <C>
Fixed maturities
Held to maturity, at amortized cost $ 120,401,349 $ 114,339,006
Available for sale, at market value 55,909,200 53,536,543
Equity securities, available for sale
at market 4,812,501 3,142,944
Short-term investments, at cost, which
approximate market 14,963,275 21,470,757
------------- -------------
Total Investments 196,086,325 192,489,250
Cash 1,835,392 3,700,163
Accrued investment income 2,779,641 2,628,563
Premiums receivable 11,091,026 11,075,415
Reinsurance receivable 38,426,808 40,894,788
Deferred policy acquisition costs 7,910,695 7,837,899
Federal income tax recoverable 150,889 --
Deferred federal income taxes 3,723,498 3,613,307
Prepaid reinsurance premiums 22,888,431 22,373,319
Property and equipment, net 3,410,621 2,622,399
Accounts receivable - securities -- 98,622
Other 2,146,193 677,048
------------- -------------
Total Assets $ 290,449,519 $ 288,010,773
============= =============
Liabilities and Stockholders' Equity
Liabilities
Losses and loss expenses $ 114,908,968 $ 114,641,740
Unearned premiums 71,119,082 70,555,906
Accrued expenses 2,070,340 2,387,040
Reinsurance balances payable 696,313 746,935
Federal income tax payable -- 644,529
Cash dividend declared to stockholders -- 492,619
Line of credit 8,500,000 8,500,000
Accounts payable - securities -- 2,748,838
Other 293,248 204,989
Due to affiliate - Pioneer acquisition 5,191,774 5,191,774
- Other 1,264,462 297,129
------------- -------------
Total Liabilities 204,044,187 206,411,499
------------- -------------
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 4,561,578 and
4,540,569 shares and outstanding 4,492,791
and 4,471,782 shares 4,561,578 4,540,569
Additional paid-in capital 38,239,783 37,862,715
Net unrealized gains on investments 422,327 422,916
Retained earnings 44,073,400 39,664,830
Treasury stock (891,756) (891,756)
------------- -------------
Total Stockholders' Equity 86,405,332 81,599,274
------------- -------------
Total Liabilities and
Stockholders' Equity $ 290,449,519 $ 288,010,773
============= =============
</TABLE>
* Restated
See accompanying notes to consolidated financial statements.
-1-
<PAGE>
Donegal Group Inc. and Subsidiaries
Consolidated Statement of Income
(Unaudited)
For the three months ended June 30, 1997 and 1996
Three Months Ended June 30,
1997 1996*
----------- -----------
Revenues:
Premiums earned $39,721,921 $34,005,961
Premiums ceded 12,898,416 8,026,590
----------- -----------
Net premiums earned 26,823,505 25,979,371
Investment income, net of investment
expenses 2,881,771 2,468,432
Realized gain 35,527 32,674
Lease income 154,396 134,360
Service charge income 358,661 504,549
----------- -----------
Total Revenues 30,253,860 29,119,386
----------- -----------
Expenses:
Losses and loss expenses 25,799,082 22,207,837
Reinsurance recoveries 8,469,679 4,925,416
----------- -----------
Net losses and loss expenses 17,329,403 17,282,421
Amortization of deferred policy
acquisition costs 4,251,000 4,186,000
Other underwriting expenses 4,605,054 3,825,503
Policy dividends 308,070 354,085
Interest 277,938 102,676
Other expenses 376,348 411,456
----------- -----------
Total Expenses 27,147,813 26,162,141
----------- -----------
Income before income taxes 3,106,047 2,957,245
Income taxes 705,450 449,209
----------- -----------
Net income $ 2,400,597 $ 2,508,036
=========== ===========
Earnings per common share $.54 $.57
==== ====
*Restated
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
Donegal Group Inc. and Subsidiaries
Consolidated Statement of Income
(Unaudited)
For the six months ended June 30, 1997 and 1996
Six Months Ended June 30,
1997 1996
----------- -----------
Revenues:
Premiums earned $78,763,105 $67,939,361
Premiums ceded 25,535,267 16,124,495
----------- -----------
Net premiums earned 53,227,838 51,814,866
Investment income, net of investment
expenses 5,726,754 5,188,639
Realized gain 73,354 294,748
Lease income 296,848 266,357
Service charge income 752,437 732,717
----------- -----------
Total Revenues 60,077,231 58,297,327
----------- -----------
Expenses:
Losses and loss expenses 49,706,729 45,955,736
Reinsurance recoveries 15,464,783 9,962,108
----------- -----------
Net losses and loss expenses 34,241,946 35,993,628
Amortization of deferred policy
acquisition costs 8,730,000 8,298,000
Other underwriting expenses 8,717,870 7,738,718
Policy dividends 741,769 699,320
Interest 442,925 208,681
Other expenses 773,813 799,035
----------- -----------
Total Expenses 53,648,323 53,737,382
----------- -----------
Income before income taxes 6,428,908 4,559,945
Income taxes 1,465,878 715,515
----------- -----------
Net income $ 4,963,030 $ 3,844,430
=========== ===========
Earnings per common share $1.11 $.87
===== ====
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
DONEGAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Net Unrealized
Additional Gains (Losses) Total
Common Stock Common Stock Paid-In on Investments Retained Treasury Stockholders'
Shares Amount Capital Available for Sale Earnings Stock Equity
----------- ----------- ----------- ------------------ ----------- ----------- -----------
Balance,
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996* 4,540,569 $ 4,540,569 $37,862,715 $ 422,916 $39,664,830 $ (891,756) $81,599,274
Issuance of Common
Stock 21,009 21,009 377,068 398,077
Net Income 4,963,030 4,963,030
Change in unrealized
gains (losses) on
investments (Net of
applicable federal
income taxes) (589) (589)
Dividends (554,460) (554,460)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
June 30, 1997 4,561,578 $ 4,561,578 $38,239,783 $ 422,327 $44,073,400 $ (891,756) $86,405,332
=========== =========== =========== =========== =========== =========== ===========
*Restated
See accompanying notes to financial statements.
</TABLE>
-4-
<PAGE>
DONEGAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the six months ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
Six months ended June 30,
1997 1996*
------------ ------------
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 4,963,030 $ 3,844,430
------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 178,538 206,574
Realized investment gain (loss) (73,354) (294,748)
Changes in Assets and Liabilities:
Losses and loss expenses 267,228 10,590,575
Unearned premiums 563,176 3,893,517
Premiums receivable (15,611) (313,537)
Deferred acquisition costs (72,796) (637,845)
Deferred income taxes (110,876) (63,579)
Reinsurance receivable 2,467,980 (8,425,120)
Prepaid reinsurance premiums (515,112) (248,421)
Accrued investment income (151,078) (107,780)
Due from affiliate 967,333 (285,991)
Accounts payable reinsurance (50,622) 30,838
Current income taxes payable (795,418) (489,049)
Other, net (1,697,586) (1,013,792)
------------ ------------
Net adjustments 961,802 2,841,642
------------ ------------
Net cash provided by operating activities 5,924,832 6,686,072
------------ ------------
Cash flows from investing activities:
Purchase of fixed maturities
Held to maturity (13,087,963) (15,788,466)
Available for sale (10,183,672) (8,581,524)
Purchase of equity securities, available for sale (3,015,732) (8,515,859)
Maturity of fixed maturities
Held to maturity 4,484,420 5,256,550
Available for sale 3,594,999 9,019,295
Sale of fixed maturities - available for sale 4,010,313 3,603,517
Sale of equity securities - available for sale 1,538,232 8,016,369
Acquisition of Delaware American -- (202,243)
Purchase of property and equipment (988,680) (146,570)
Net sales of short-term investments 6,507,482 1,059,314
------------ ------------
Net cash used in investing activities (7,140,601) (8,398,245)
------------ ------------
Cash flows from financing activities:
Cash dividends paid (1,047,079) (898,159)
Issuance of common stock 398,077 2,287,157
------------ ------------
Net cash provided by (used in)
financing activities (649,002) 1,388,998
------------ ------------
Net decrease in cash (1,864,771) (323,175)
Cash at beginning of year 3,700,163 2,397,386
------------ ------------
Cash at end of quarter $ 1,835,392 $ 2,074,211
============ ============
Cash paid during period - Interest $ 334,014 $ 169,806
- Income taxes $ 559,584 $ 1,268,143
</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 four wholly owned property-casualty insurance subsidiaries, Atlantic
States Insurance Company ("Atlantic"), Southern Insurance Company of Virginia
("Southern"), Pioneer Insurance Company ("Pioneer") and Delaware Atlantic
Insurance Company ("Delaware"). The Company's major lines of business in 1996
and their percentage of total net earned premiums were Automobile Liability
(27.7%), Workers' Compensation (18.0%), Automobile Physical Damage (16.0%),
Homeowners (16.6%), and Commercial Multiple Peril (16.0%). 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 June 30, 1997.
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
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 into the pool, from which the Company has a 60%
allocation, the Company's results of operations include approximately 80% of the
business written by Southern and approximately 70% of the Workers' Compensation
business written by Delaware.
On March 31, 1997, the Company acquired all of the outstanding stock of
Pioneer 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 Pioneer 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"), Pioneer Insurance Company
("Pioneer") 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. 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. On March 31, 1997, the Company acquired all
of the outstanding stock of Pioneer. 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 Pioneer as a consolidated subsidiary from January
1, 1994 to the present. At June 30, 1997 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 three months
ended March 31, 1997, 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, 1996.
-7-
<PAGE>
Results of Operations - Three Months Ended June 30, 1997
to Three Months Ended June 30, 1996
- -----------------------------------
Revenues for the three months ended June 30,1997 were $30,253,860 an
increase of $1,134,474, or 3.9%, over the same period of 1996. An increase in
net premiums earned of $844,134 or 3.2%, represented most of this change.
Investment income for the second quarter of 1997 was $2,881,771 an increase of
$413,339, or 16.7%, over the second quarter of 1996. An increase in the average
invested assets of $21,555,080 or 12.3%, to $197,161,046 and an increase in the
average return on investments to an annualized rate of 5.8% for the second
quarter of 1997 compared to 5.6% for the second quarter of 1996, accounted for
the change. Realized investment gains, which resulted from the normal turnover
of the Company's investment portfolio, increased $2,853 for the three months
ended June 30, 1997 compared to the same period in 1996, to $35,527.
The GAAP combined ratio of insurance operations in the second quarter of
1997 was 98.8% compared to 98.7% for the same period in 1996. 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 64.6% for the second quarter 1997 compared to
the 66.5% loss ratio it posted for the second quarter 1996. The expense ratio
increased from 30.8% to 33.0% for the three months ended June 30, 1997 due to
higher inspection costs related to a reunderwriting program for existing
Homeowners business and increases in incentive expenses for employees and agents
related to the lower claims activity for the first six months of the year. The
dividend ratio decreased slightly from 1.4% for the second quarter of 1996 to
1.1% for the second quarter of 1997, due primarily to a 25% mandatory rate
rollback in Pennsylvania Workers' Compensation rates.
Federal income taxes for the second quarter of 1997 represented 22.7% of
income before income taxes, compared to 15.2% for the same period of 1996. A tax
benefit from the exercise of options in 1996 which reduced that year's tax
expense accounted for the difference.
-8-
<PAGE>
Results of Operations - Six Months Ended June 30, 1997
to Six Months Ended June 30, 1996
- ---------------------------------
Revenues for the six months ended June 30,1997 were $53,227,838 an increase
of $1,779,904, or 3.1%, over the same period of 1996. An increase in net
premiums earned of $1,412,972, or 2.7%, represented most of this change.
Investment income for the first six months of 1997 was $5,726,754 an increase of
$538,115, or 10.4%, over the first six months of 1996. An increase in the
average invested assets of $20,971,625, or 11.9%, to $197,055,565 and a decrease
in the average return on investments to an annualized rate of 5.8% for the first
six months of 1997 compared to 5.9% for the first six months of 1996, accounted
for the change. Realized investment gains, which resulted from the normal
turnover of the Company's investment portfolio, decreased $221,394 for the six
months ended June 30, 1997 compared to the same period in 1996, to $73,354.
The GAAP combined ratio of insurance operations in the first six months of
1997 was 98.5% compared to 103.6% for the same period in 1996. 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 64.3% for the first six months of 1997
compared to the 69.5% loss ratio it posted for the first six months of 1996.
Dramatically improved weather conditions in 1997 compared to the severe and
unusual weather that was experienced in early 1996 accounted for the
improvement. The expense ratio increased from 30.9% to 32.8% for the six months
ended June 30, 1997 due to higher inspection costs related to a reunderwriting
process in the Homeowners line and increases in incentive expenses for employees
and agents related to the lower claims activity for the first quarter. The
dividend ratio remained the same at 1.3%.
Federal income taxes for the first six months of 1997 represented 22.8% of
income before income taxes, compared to 15.7% for the same period of 1996.
Larger underwriting profits in 1997 representing a larger portion of overall
income than in 1996 and tax deductions from the exercise of options in 1996
reducing that year's tax liability accounted for the increase.
-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 June
30, 1997, 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 June 30, 1997, pursuant to a credit agreement dated December 29,
1995, with Fleet National Bank of Connecticut, the Company had unsecured
borrowings of $8.5 million. 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 June 30, 1997, the interest rate on the outstanding balance was 7.57891%. 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, Pioneer 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, Pioneer
and Delaware are subject to Risk Based Capital (RBC) requirements effective for
1994. At December 31, 1996, all four Companies' capital was substantially above
the RBC requirements. At December 31, 1996, amounts available for distribution
as dividends to Donegal Group without prior approval of the insurance regulatory
authorities are $5,410,536 from Atlantic States, $255,480 from Southern, $48,582
from Pioneer and $1,120,952 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
Stock-based compensation plans are accounted for under the provisions of
Accounting Principles Board (APB) Opinion No. 25. "Accounting for Stock Issued
to Employees," and related interpretations. As such, compensation expense would
be recorded on the date of a stock option grant only if the current market price
of the underlying stock exceeded the exercise price. Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-based Compensation"
was effective for 1996 and permits entities to recognize as expense, over the
vesting period, the fair value of all stock-based awards on the date of the
grant. Alternatively, SFAS No. 123 allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and earnings
per share disclosures for employee stock option grants made in 1995 and 1997 as
if the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No.
25 and provide the pro forma disclosures under SFAS No. 123.
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 June 30, 1997,
the Registrant filed one report on Form 8-K on April 21, 1997.
-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: August 15, 1997 By:_______________________
Donald H. Nikolaus,
President and
Chief Executive Officer
Date: August 15, 1997 By:_______________________
Ralph G. Spontak,
Corporate Secretary,
Senior Vice President and
Chief Financial Officer
-13-
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<DEBT-HELD-FOR-SALE> 55,909,200
<DEBT-CARRYING-VALUE> 120,401,349
<DEBT-MARKET-VALUE> 122,103,147
<EQUITIES> 4,812,501
<MORTGAGE> 0
<REAL-ESTATE> 1,393,451
<TOTAL-INVEST> 196,086,325
<CASH> 1,835,392
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 7,910,695
<TOTAL-ASSETS> 290,449,519
<POLICY-LOSSES> 114,908,968
<UNEARNED-PREMIUMS> 71,119,082
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 8,500,000
0
0
<COMMON> 4,561,578
<OTHER-SE> 86,405,332
<TOTAL-LIABILITY-AND-EQUITY> 204,044,187
53,227,838
<INVESTMENT-INCOME> 5,726,754
<INVESTMENT-GAINS> 73,354
<OTHER-INCOME> 1,049,285
<BENEFITS> 34,241,946
<UNDERWRITING-AMORTIZATION> 8,730,000
<UNDERWRITING-OTHER> 8,717,870
<INCOME-PRETAX> 6,428,908
<INCOME-TAX> 1,465,878
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</TABLE>
