MARIETTA, Pa., April 16, 2008 (PRIME NEWSWIRE) -- Donegal Group Inc. (Nasdaq:DGICA) (Nasdaq:DGICB) today reported net income for the first quarter ended March 31, 2008.
Net income for the first quarter of 2008 increased 22.5% to $6,724,983, or $.27 per share of Class A common stock on a diluted basis, over the $5,489,938, or $.22 per share of Class A common stock on a diluted basis, reported for the first quarter of 2007. The Company achieved these results primarily through increased net premiums earned as well as an increase in net realized investment gains, which were partially offset by higher losses and loss expenses from claim activity attributable to active winter weather patterns in the Company's operating areas.
Revenues for the first quarter of 2008 were $89,792,103, an increase of 7.3% over the year earlier period, with net premiums earned of $82,007,766, representing a 6.9% increase over the first quarter of 2007. Net premiums written in the first quarter of 2008 grew by 24.7% to $99,674,856, including 17.1% growth due to a non-recurring $13.6 million transfer of unearned premiums pursuant to the previously announced change in the pooling agreement between Atlantic States Insurance Company and Donegal Mutual Insurance Company effective March 1, 2008. Net premiums written and earned in the 2008 period also reflected the impact of the increased pooling allocation of approximately $2.5 million for the month of March and benefited from the renewal of the Company's 2008 reinsurance program at lower rates compared to 2007. The lower reinsurance rates were largely due to the Company's decision to increase its per loss retention from $400,000 to $600,000 effective January 1, 2008.
Net investment income increased to $5,691,741 for the first quarter of 2008, an increase of 3.4% over the $5,504,059 reported for the first quarter of 2007. Income attributable to an increase in average invested assets during the first quarter of 2008 was offset by the impact of lower short-term interest rates compared to the year earlier period. The Company has continued to increase its investment in tax-exempt municipal bonds during the first quarter of 2008 to obtain more favorable after-tax yields.
The Company's combined ratio was 97.5% for the first quarter of 2008, compared to 98.4% for the first quarter of 2007. The improvement in the combined ratio resulted from slight declines in both the loss and expense ratios, largely due to earned premium increases exceeding the related loss and expense increases for the periods. The Company's loss ratio for the first quarter of 2008 was 65.3%, generally consistent with the loss ratio of 66.0% posted for the first quarter of 2007. However, losses and loss expenses increased for the first quarter of 2008, as the Company experienced significant weather-related claim activity and increased severity in several casualty lines of business compared to the comparable period in 2007. The Company's expense ratio decreased to 31.9% for the first quarter of 2008, compared to 32.1% for the first quarter of 2007, with both periods reflecting reduced levels of underwriting-based incentive costs.
"Our first quarter results were impacted by a very active winter storm season, but we are pleased to report a solid increase in premium writings during the quarter, enhanced by the pooling change and reinsurance cost savings. Considering insurance market conditions and the weather challenges we faced during the quarter, we are pleased to report positive premium growth and underwriting profitability," stated Donald H. Nikolaus, President and Chief Executive Officer of Donegal Group Inc.
The operating results for the first quarter of 2008 contributed to an increase in the Company's book value to $14.02 per common share at March 31, 2008, compared to $13.92 per common share at December 31, 2007.
The Company will hold a conference call and webcast on Wednesday, April 16, 2008, beginning at 11:00 A.M. Eastern Time. You may participate in the conference call by calling 1-800-798-2864 (Passcode 86081361) or listen via Internet by accessing the webcast link in the Investors area of the Company's web site at www.donegalgroup.com. An instant replay of the conference call will be available until April 23, 2008 by calling 1-888-286-8010 (Passcode 62225492).
Donegal Group Inc. is an insurance holding company whose insurance subsidiaries offer personal and commercial property and casualty lines of insurance in five Mid-Atlantic states (Delaware, Maryland, New Hampshire, New York and Pennsylvania), eight Southeastern states (Alabama, Georgia, Louisiana, North Carolina, South Carolina, Tennessee, Virginia and West Virginia) and five Midwestern states (Iowa, Nebraska, Ohio, Oklahoma and South Dakota).
All statements contained in this press release that are not historic facts are based on current expectations. Such statements are forward-looking in nature (as defined in the Private Securities Litigation Reform Act of 1995) and necessarily involve risks and uncertainties. Actual results could vary materially. The factors that could cause actual results to vary materially include, but are not limited to, the ability of the Company to maintain profitable operations, the adequacy of the Company's reserves for losses and loss adjustment expenses, business and economic conditions in the areas in which the Company operates, severe weather events, competition from various insurance and non-insurance businesses, terrorism, the availability and cost of reinsurance, legal and judicial developments, changes in regulatory requirements and other risks that are described from time to time in the Company's filings with the Securities and Exchange Commission. The Company disclaims any obligation to update such statements or to announce publicly the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
Donegal Group Inc.
Financial Highlights
(unaudited)
Quarter Ended March 31
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2008 2007
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Net premiums earned $ 82,007,766 $ 76,697,819
Investment income, net of investment
expenses 5,691,741 5,504,059
Net realized investment gains 695,356 104,785
Total revenues 89,792,103 83,682,016
Net income $ 6,724,983 $ 5,489,938
Net income per common share:
Class A common stock - basic $ 0.27 $ 0.22
Class A common stock - diluted $ 0.27 $ 0.22
Class B common stock - basic and diluted $ 0.25 $ 0.20
Donegal Group Inc.
Consolidated Statements of Income
(unaudited; in thousands, except share data)
Quarter Ended March 31
--------------------------
2008 2007
------------ ------------
Net premiums earned $ 82,008 $ 76,698
Investment income, net of investment
expenses 5,692 5,504
Net realized investment gains 695 105
Lease income 244 261
Installment payment fees 1,153 1,114
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Total revenues 89,792 83,682
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Net losses and loss expenses 53,530 50,595
Amortization of deferred policy
acquisition costs 13,719 12,418
Other underwriting expenses 12,403 12,186
Other expenses 499 492
Policyholder dividends 270 248
Interest 613 709
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Total expenses 81,034 76,648
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Income before income tax expense 8,758 7,034
Income tax expense 2,033 1,545
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Net income $ 6,725 $ 5,489
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Net income per common share:
Class A common stock - basic $ 0.27 $ 0.22
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Class A common stock - diluted $ 0.27 $ 0.22
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Class B common stock - basic and diluted $ 0.25 $ 0.20
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Supplementary Financial Analysts' Data
Weighted-average number of shares
outstanding:
Class A common stock - basic 19,787,849 19,712,200
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Class A common stock - diluted 19,930,680 20,116,225
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Class B common stock - basic and diluted 5,576,775 5,576,775
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Net written premiums $ 99,675 $ 79,919
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Book value per common share at end of
period $ 14.02 $ 12.93
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Donegal Group Inc.
Consolidated Balance Sheets
(in thousands)
March 31, December 31,
2008 2007
------------ ------------
(unaudited)
ASSETS
Investments:
Fixed maturities:
Held to maturity, at amortized cost $ 134,113 $ 154,290
Available for sale, at fair value 403,250 336,318
Equity securities, at fair value 32,268 36,361
Investments in affiliates 8,869 8,649
Short-term investments, at cost, which
approximates fair value 51,994 70,252
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Total investments 630,494 605,870
Cash 3,951 4,289
Premiums receivable 55,933 51,038
Reinsurance receivable 76,871 78,897
Accrued investment income 5,526 5,875
Deferred policy acquisition costs 28,964 26,235
Prepaid reinsurance premiums 49,551 47,286
Property and equipment, net 5,772 5,608
Deferred tax asset, net 9,234 7,026
Due from affiliate 1,007 --
Other assets 1,322 1,972
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Total assets $ 868,625 $ 834,096
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Donegal Group Inc.
Consolidated Balance Sheets (continued)
(in thousands)
March 31, December 31,
2008 2007
------------ ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss expenses $ 228,808 $ 226,432
Unearned premiums 223,362 203,431
Accrued expenses 10,257 12,313
Subordinated debentures 30,929 30,929
Due to affiliate -- 242
Accounts payable - securities 12,728 1,820
Other liabilities 5,845 6,239
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Total liabilities 511,929 481,406
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Stockholders' equity:
Preferred stock -- --
Class A common stock 204 202
Class B common stock 56 56
Additional paid-in capital 159,178 156,851
Accumulated other comprehensive income 3,475 6,974
Retained earnings 200,491 193,807
Treasury stock, at cost (6,708) (5,200)
------------ ------------
Total stockholders' equity 356,696 352,690
------------ ------------
Total liabilities and stockholders'
equity $ 868,625 $ 834,096
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