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 March 31, 2000
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: 8,647,474 shares of Common
Stock, $1.00 par value, outstanding on April 30, 2000.
<PAGE>
Part I. Financial Information
Item 1. Financial Statements.
Donegal Group Inc. And Subsidiaries
Consolidated Balance Sheet
<TABLE>
<CAPTION>
Assets March 31, 2000 December 31, 1999
-------------- -----------------
Investments (Unaudited)
<S> <C> <C>
Fixed maturities
Held to maturity, at amortized cost $135,978,678 $136,173,547
Available for sale, at fair value 99,862,214 100,043,548
Equity securities, available for sale at fair value 14,708,561 9,229,498
Short-term investments, at cost, which
approximates fair value 9,485,402 15,995,257
------------ ------------
Total Investments 260,034,855 261,441,850
Cash 4,608,750 3,922,403
Accrued investment income 3,582,698 3,474,430
Premiums receivable 19,066,644 18,218,525
Reinsurance receivable 54,240,774 53,070,283
Deferred policy acquisition costs 11,092,479 11,203,302
Federal income tax receivable -- 698,969
Deferred federal income taxes 9,142,948 9,121,232
Prepaid reinsurance premiums 32,790,457 32,154,837
Property and equipment, net 5,412,428 5,516,688
Due from affiliate -- 262,954
Other 720,309 647,184
------------ ------------
Total Assets $400,692,342 $399,732,657
============ ============
Liabilities and Stockholders' Equity
Liabilities
Losses and loss expenses $151,895,128 $149,979,141
Unearned premiums 97,946,739 97,657,020
Accrued expenses 4,841,908 5,888,392
Drafts payable 141,194 597,775
Reinsurance balances payable 1,332,699 1,216,034
Federal income taxes payable 330,060 --
Cash dividend declared to stockholders -- 760,673
Line of credit 37,000,000 37,000,000
Accounts payable - securities 500,000 2,500,000
Due to affiliate - other 186,878 --
Other 1,130,250 719,010
------------ ------------
Total Liabilities 295,304,856 296,318,045
------------ ------------
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
8,740,846 and 8,574,210 shares and outstanding 8,618,558
and 8,451,922 shares 8,740,846 8,574,210
Additional paid-in capital 44,400,543 43,536,748
Accumulated other comprehensive loss (2,373,611) (2,073,989)
Retained earnings 55,511,464 54,269,399
Treasury stock (891,756) (891,756)
------------ ------------
Total Stockholders' Equity 105,387,486 103,414,612
------------ ------------
Total Liabilities and Stockholders' Equity $400,692,342 $399,732,657
============ ============
</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 March 31, 2000 and 1999
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Premiums earned $53,293,648 $51,836,183
Premiums ceded 17,708,555 15,742,212
---------- -----------
Net premiums earned 35,585,093 36,093,971
Investment income, net of investment expenses 3,877,369 3,369,261
Realized loss (281,910) (16,930)
Lease income 206,772 197,137
Service charge income 358,210 466,551
----------- -----------
Total Revenues 39,745,534 40,109,990
---------- -----------
Expenses:
Losses and loss expenses 37,927,326 36,601,455
Reinsurance recoveries 12,389,334 12,149,804
----------- -----------
Net losses and loss expenses 25,537,992 24,451,651
Amortization of deferred policy acquisition costs 6,071,000 6,031,000
Other underwriting expenses 5,020,612 5,757,757
Policy dividends 352,962 331,376
Interest 823,210 430,944
Other expenses 273,887 382,387
----------- -----------
Total Expenses 38,079,663 37,385,115
----------- -----------
Income before income taxes 1,665.871 2,724,875
Income taxes 415,637 573,508
----------- -----------
Net income $ 1,250,234 $ 2,151,367
=========== ===========
Earnings per common share
Basic $.15 $.26
==== ====
Diluted $.15 $.26
==== ====
</TABLE>
Statement of Comprehensive Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
----------- -----------
<S> <C> <C>
Net Income $1,250,234 $ 2,151,367
----------- -----------
Other comprehensive loss, net of tax
Unrealized gains (losses) on securities:
Unrealized holding loss arising
during the period (485,683) (790,465)
Less: Reclassification adjustment for
Reclassification adjustment,
net of income tax 186,061 11,174
----------- -----------
Other comprehensive loss (299,622) (779,291)
----------- -----------
Comprehensive income $ 950,612 $ 1,372,076
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
DONEGAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Common Stock
------------------------- Accumulated Total
Additional Other Com- Stock-
Paid-In prehensive Retained Treasury holders'
Shares Amount Capital Loss Earnings Stock Equity
--------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1999 8,574,210 $ 8,574,210 $ 43,536,748 $ (2,073,989) $ 54,269,399 $ (891,756) $103,414,612
Issuance of
Common Stock 166,636 166,636 863,795 1,030,431
Net Income 1,250,234 1,250,234
Cash Dividend (8,169) (8,169)
Other Comprehensive
Loss (299,622) (299,622)
--------- ------------ ------------ ------------ ------------ ------------ ------------
Balance,
March 31, 2000 8,740,846 $ 8,740,846 $ 44,400,543 $ (2,373,611) $ 55,511,464 $ (891,756) $105,387,486
========= ============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
DONEGAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the three months ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,250,234 $ 2,151,367
------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 226,718 211,460
Realized investment loss 281,910 16,930
Changes in assets and liabilities:
Losses and loss expenses 1,915,987 1,565,233
Unearned premiums 289,719 (53,849)
Premiums receivable (848,119) (540,608)
Deferred policy acquisition costs 110,823 193,691
Deferred federal income taxes 77,349 (45,404)
Reinsurance receivable (1,170,491) (2,669,163)
Prepaid reinsurance premiums (635,620) (793,765)
Accrued investment income (108,268) 105,870
Due from affiliate 449,832 2,026,523
Reinsurance balances payable 116,665 (525,139)
Federal income taxes receivable 1,029,029 551,664
Other, net (1,173,255) 14,835
------------ ------------
Net adjustments 562,279 58,278
------------ ------------
Net cash provided by operating activities 1,812,513 2,209,645
------------ ------------
Cash flows from investing activities:
Purchase of fixed maturities
Held to maturity (3,249,537) (2,774,667)
Available for sale (6,733,072) (4,180,764)
Purchase of equity securities, available for sale (6,554,263) (5,223,848)
Maturity of fixed maturities
Held to maturity 4,589,737 10,926,853
Available for sale 3,500,000 1,500,000
Sale of equity securities, available for sale 638,629 565,850
Purchase of property and equipment (89,104) (440,317)
Net sales of short-term investments 6,509,855 14,972,212
------------ ------------
Net cash provided by (used in) investing activities (1,387,755) 15,345,319
------------
Cash flows from financing activities:
Cash dividends paid (768,842) (708,513)
Issuance of common stock 1,030,431 587,939
Line of credit, net -- (22,500,000)
------------ ------------
Net cash provided by (used in)
financing activities 261,589 (22,620,574)
------------ ------------
Net increase (decrease) in cash 686,347 (5,065,610)
Cash at beginning of period 3,922,403 8,227,042
------------ ------------
Cash at end of period 4,608,750 $ 3,161,432
============ ============
Cash paid during period - Interest $ 620,391 $ 417,304
Net cash received during period - Income taxes $ 689,544 $ --
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
DONEGAL GROUP INC. AND SUBSIDIARIES
(Unaudited)
Summary Notes to Consolidated Financial Statements
1 - Organization
Donegal Group Inc. (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 the Mid-Atlantic and Southern states through its
wholly-owned stock insurance companies, Atlantic States Insurance Company
("Atlantic States"), Southern Heritage Insurance Company ("Southern Heritage"),
Southern Insurance Company of Virginia ("Southern"), Delaware Atlantic Insurance
Company ("Delaware") and Pioneer Insurance Company ("Pioneer") ( collectively
"Insurance Subsidiaries"). The Company has three operating segments: the
investment function, the personal lines of insurance and the commercial lines of
insurance. Products offered in the personal lines of insurance consist primarily
of homeowners and private passenger automobile policies. Products offered in the
commercial lines of insurance consist primarily of commercial automobile,
commercial multiple peril and workers' compensation policies. The Insurance
Subsidiaries are subject to regulation by Insurance Departments in those states
in which they operate and undergo periodic examinations by those departments.
The Insurance Subsidiaries are also subject to competition from other insurance
companies in their operating areas. Atlantic States participates in an
inter-company pooling arrangement with the Mutual Company and assumes 65% of the
pooled business. Effective July 1, 2000 the pooling arrangement will be amended
changing Atlantic States' portion of the pooled business to 70%. Southern cedes
50% of its business to the Mutual Company.
At March 31, 2000, the Mutual Company held 62% of the outstanding common
stock of the Company. The Company and Donegal Mutual have been granted approval
from the Federal Office of Thrift Supervision to form a savings bank. The bank
will be 40% owned by the Company and 60% by Donegal Mutual and will require that
the Company contribute approximately $2.8 million in start up capital. It is
currently anticipated that the thrift will be formed in the second quarter and
open for business in the third quarter of this year.
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, are
necessary to a fair presentation of the financial position, results of
operations and cash flow for the interim period included herein. The results of
operations for the three months ended March 31, 2000, are not necessarily
indicative of results of operations to be expected for the twelve months ended
December 31, 2000.
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, 1999.
-5-
<PAGE>
3 - Earnings Per Share
The computation of basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
Weighted
Average Earnings
Net Shares Per
Income Outstanding Share
---------- ----------- --------
<S> <C> <C> <C>
Three Months Ended March 31:
2000
Basic $1,250,234 8,572,383 $ .15
Effect of stock options -- -- --
---------- --------- -----
Diluted $1,250,234 8,572,383 $ .15
---------- --------- -----
1999
Basic $2,151,367 8,237,582 $ .26
Effect of stock options -- -- --
---------- --------- -----
Diluted $2,151,367 8,237,582 $ .26
---------- --------- -----
</TABLE>
-6-
<PAGE>
4 - Segment Information
The Company evaluates the performance of the personal lines and commercial
lines based upon underwriting results as determined under statutory accounting
practices (SAP) which is used by management to measure performance for the total
business of the Company.
Financial data by segment is as follows:
Three Months Ended March 31
2000 1999
-------- --------
($ in thousands)
-----------------------
Revenues:
Premiums earned:
Commercial lines $ 12,399 $ 11,385
Personal lines 23,186 24,709
-------- --------
Total net premiums earned 35,585 36,094
-------- --------
Net investment income 3,877 3,369
Realized investment
losses (282) (17)
Other 566 664
-------- --------
Total revenues $ 39,746 $ 40,110
======== ========
Income before income taxes:
Underwriting income (loss)
Commercial lines $ (895) $ (621)
Personal lines (470) 622
-------- --------
SAP underwriting gain
(loss) (1,365) 1
-------- --------
GAAP adjustments (32) (479)
-------- --------
GAAP underwriting
loss (1,397) (478)
Net investment income 3,877 3,369
Realized investment losses (282) (17)
Other (532) (149)
-------- --------
Income before income taxes $ 1,666 $ 2,725
======== ========
-7-
<PAGE>
5 - Restructuring Charge
On September 29, 1999, the Company announced a plan to consolidate certain
subsidiary support functions into its Marietta, Pennsylvania office. As a result
of this consolidation, the Company recorded a restructuring charge in 1999 of
$2,044,000 for employee termination benefits, occupancy charges, lease
cancellation costs, and asset impairments. The charge was included in other
underwriting expenses. The consolidation has been completed.
Employee termination benefits include severance payments, which were paid
either in a lump sum or over a defined period, and related benefits for
approximately 60 employees. Of the terminated employees, approximately 50% were
from subsidiary support functions and approximately 50% were from the Marietta,
Pennsylvania office. By December 31, 1999, all of the terminated employees had
left the employment of the Company.
Included in occupancy charges are future lease obligations, less
anticipated sublease benefits, for leased space which is no longer being used by
the Delaware and Southern Heritage subsidiary support functions.
Also included in the restructuring charges were contract cancellation costs
that represented the estimated cost to buy out of the remaining term on printer,
copier, and computer processing contracts that provided no future benefits to
the Company as a result of the restructuring. By December 31, 1999 all such
assets had been taken out of service.
Asset impairments, which were a direct result of the consolidation of
subsidiary functions, amounted to $407,000. They consisted of capitalized
programming and data center costs, voice systems, and leasehold and office
improvements. These assets were written-down to zero in 1999. By December 31,
1999 all such assets were taken out of service.
Activity in the restructuring accrual is as follows:
<TABLE>
<CAPTION>
Employee
Termination Contract
Benefits Occupancy Cancellations Totals
----------- --------- ------------- --------
<S> <C> <C> <C> <C>
BALANCE AT 12/31/99 $ 368,000 $ 441,000 $ 73,000 $ 882,000
CASH PAYMENTS (165,000) (47,000) (73,000) (285,000)
--------- --------- -------- ---------
BALANCE AT 3/31/00 $ 203,000 $ 394,000 $ -- $ 597,000
========= ========= ======== =========
</TABLE>
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations - Three Months Ended March 31, 2000
to Three Months Ended March 31, 1999
Revenues for the three months ended March 31, 2000 were $39,745,534 a
decrease of $364,456 or 0.9%, over the same period of 1999. A decrease in net
premiums earned of $508,878 or 1.4%, represented most of this change. Premiums
earned of Southern Heritage decreased $2.4 million as part of the reunderwriting
of its book of business. This decrease was mostly offset by an increase of 6.5%
in the earned premiums of the Company's other subsidiaries. Net premiums written
by the insurance subsidiaries, excluding Southern Heritage, increased 9.1% in
the first quarter of 2000 compared to the first quarter of 1999. Investment
income for the first three months of 2000 increased $508,108 or 15.1%. An
increase in the annualized average return on investments from 5.5% in the first
three month of 1999 to 5.6% in the first three months of 2000 and an increase in
average invested assets from $246.9 million in the first three months of 1999 to
$265.0 million in the first three months of 2000, accounted for this change.
Realized investment losses were $281,910 in the first three months of 2000
compared to $16,930 for the same period of 1999. The realized losses in 2000
included $285,228 in losses which resulted from declines in the market value of
two securities that were determined to be other than temporary. The realized
losses in 1999 resulted from the normal turnover of the Company's portfolio.
The GAAP combined ratio of insurance operations in the first three months
of 2000 was 103.9% compared to 101.3% for the same period in 1999. 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's loss ratio in the first three months of 2000 was 71.8%
compared to 67.7% in the first three months of 1999. The loss ratio increase
resulted primarily from deterioration in results from the private passenger
automobile and workers compensation lines of business. The increase in the loss
ratio was partially offset by an improvement in the expense ratio for the first
three months of 2000 to 31.2% compared to 32.7% for the first three months of
1999. The improvement in the expense ratio resulted primarily from the Company's
previously announced restructuring plan that was implemented at the end of the
third quarter in 1999. The dividend ratio remained virtually unchanged at 1.0%
for the first three months of 2000 compared to 0.9% for the same period of 1999.
Federal income taxes for the three months ended March 31, 2000 represented
25.0% of the income before income taxes compared to 21.0% for the same period of
1999. These rates vary from the expected rate of 34% primarily due to the effect
of tax exempt investment income.
-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. The Company
will be required to contribute $2.8 million in capital as part of the formation
of a thrift for which it and Donegal Mutual have been granted approval from the
Federal Office of Thrift Supervision. The capital contribution will take place
in the second quarter of this year.
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 March 31, 2000, pursuant to a credit agreement dated December 29,
1995, with Fleet National Bank of Connecticut, (the " Bank") the Company had
unsecured borrowings of $37.0 million. Per the terms of the credit agreement,
the Company may borrow up to $40 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 March 31, 2000, the interest rates on the outstanding
balances were 9.0% on an outstanding prime rate balance of $22.0 million and
8.1% on an outstanding euro dollar rate balance of $15.0 million. 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 July 27,
commencing July 27, 2001, the credit line will be reduced by $8 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, Southern
Heritage 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, Southern Heritage and Delaware are subject to Risk Based
Capital (RBC) requirements effective for 1994. At December 31, 1999, each of the
five Companies' capital was substantially above the RBC requirements. At
December 31, 1999, amounts available for distribution as dividends to Donegal
Group without prior approval of the insurance regulatory authorities are
$6,851,802 from Atlantic States, $184,285 from Southern, $567,793 from Pioneer,
$956,381 from Delaware and $1,650,842 from Southern Heritage.
-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.
Year 2000 Issues
The Company has not encountered difficulties to date with respect to the
Year 2000 millennium change, either internally or with third parties. The
Company will continue to monitor exposure to any Year 2000 related problems.
The Company has risk that claims related to Year 2000 issues will be made
under insurance policies that it underwrites. The Company has concluded that its
policies do not generally provide coverage for losses relating to year 2000
issues and has issued endorsements further clarifying this exclusion. However,
due in part to the potential for judicial decisions which expand policies to
cover risks that were not contemplated by the policy, which in turn may produce
unanticipated claims, and because there is no prior history of such claims at
this point in time, the amount of any potential Year 2000 coverage liabilities
is not determinable. However, the Company has not had any claims reported to
date.
-11-
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
Quantitative and Qualitative Disclosure About Market Risk
The Company's market risk generally represents the risk of gain or loss
that may result from the potential change in the fair value of the Company's
investment portfolio as a result of fluctuations in prices and interest rates
and, to a lesser extent, its debt obligations. The Company attempts to manage
its interest rate risk by maintaining an appropriate relationship between the
average duration of the investment portfolio and the approximate duration of its
liabilities, i.e., policy claims and debt obligations.
The Company has maintained approximately the same duration of its
investment portfolio to its liabilities from December 31, 1999 to March 31,
2000. In addition, the Company has maintained approximately the investment mix
during this period.
There has been no material changes to the Company's quantitative or
qualitative market risk exposure.
Item 4. Submission of Matters to a Vote of Security Holders.
Annual Stockholders meeting held April 20, 2000.
Directors elected at meeting:
C. Edwin Ireland
Votes for 8,192,977
Votes withheld 41,142
Donald H. Nikolaus
Votes for 8,192,977
Votes withheld 41,142
Directors Continuing:
Robert S. Bolinger
Thomas J. Finley, Jr.
Patricia A. Gilmartin
Philip H. Glatfelter
R. Richard Sherbahn
Approved KPMG LLP as Auditors for 2000:
Votes for 8,188,883
Votes against 37,152
Abstained 8,084
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) EX -27 Financial Data Schedule
(b) Reports on 8-K:
No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 2000.
-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.
May 15, 2000 By:____________________________________
Donald H. Nikolaus, President
and Chief Executive Officer
May 15, 2000 By: __________________________________________
Ralph G. Spontak, Senior Vice President,
Chief Financial Officer and Secretary
-13-
<TABLE> <S> <C>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<DEBT-HELD-FOR-SALE> 99,862,214
<DEBT-CARRYING-VALUE> 135,978,678
<DEBT-MARKET-VALUE> 133,699,339
<EQUITIES> 14,708,561
<MORTGAGE> 0
<REAL-ESTATE> 2,440,110
<TOTAL-INVEST> 260,034,855
<CASH> 4,608,750
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 11,092,479
<TOTAL-ASSETS> 400,692,342
<POLICY-LOSSES> 151,895,128
<UNEARNED-PREMIUMS> 97,946,739
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 37,000,000
0
0
<COMMON> 8,740,846
<OTHER-SE> 96,646,640
<TOTAL-LIABILITY-AND-EQUITY> 400,692,342
35,585,093
<INVESTMENT-INCOME> 3,877,369
<INVESTMENT-GAINS> (281,910)
<OTHER-INCOME> 564,982
<BENEFITS> 25,537,992
<UNDERWRITING-AMORTIZATION> 6,071,000
<UNDERWRITING-OTHER> 5,020,612
<INCOME-PRETAX> 1,665,871
<INCOME-TAX> 415,637
<INCOME-CONTINUING> 1,250,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,250,234
<EPS-BASIC> .15
<EPS-DILUTED> .15
<RESERVE-OPEN> 97,494
<PROVISION-CURRENT> 28,803
<PROVISION-PRIOR> (3,265)
<PAYMENTS-CURRENT> 13,723
<PAYMENTS-PRIOR> 10,688
<RESERVE-CLOSE> 98,621
<CUMULATIVE-DEFICIENCY> (3,265)
</TABLE>
