-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ULHCSDEFdv1/JKmg+eGBsyVVM48/cHJ+l3GE+aQz9Q+eQABQknTYGftW5JC86u2a UxUiVjA/ysApAn+ugmDaGg== 0000950115-96-001125.txt : 19960816 0000950115-96-001125.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950115-96-001125 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DONEGAL GROUP INC CENTRAL INDEX KEY: 0000800457 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 232424711 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15341 FILM NUMBER: 96612230 BUSINESS ADDRESS: STREET 1: 1195 RIVER RD PO BOX 302 CITY: MARIETTA STATE: PA ZIP: 17547-0302 BUSINESS PHONE: 7174261931 MAIL ADDRESS: STREET 1: 1195 RIVER ROAD STREET 2: BOX 302 CITY: MARIETTA STATE: PA ZIP: 17547 10-Q 1 QUARTERLY REPORT 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, 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 _x_ . 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: 4,446,021 shares of Common Stock, $1.00 par value, outstanding on July 31, 1996. Part I. Financial Information Item 1. Financial Statements. Donegal Group Inc. And Subsidiaries Consolidated Balance Sheet
Assets June 30, 1996 December 31, 1995 ------------- ----------------- Investments (Unaudited) Fixed maturities Held to maturity, at amortized cost $ 102,401,484 $ 91,979,122 Available for sale, at market value 48,839,998 51,646,730 Equity securities, available for sale at market 4,078,796 3,263,878 Short-term investments, at cost, which approximate market 15,742,640 14,498,579 ------------- ------------- Total Investments 171,062,918 161,388,309 Cash 1,969,081 1,747,572 Accrued investment income 2,520,451 2,414,095 Premiums receivable 11,874,327 11,790,396 Reinsurance receivable 36,105,470 27,693,106 Federal income tax receivable 888,146 551,990 Deferred policy acquisition costs 7,540,063 6,902,218 Deferred federal income taxes 3,903,154 3,411,544 Prepaid reinsurance premiums 13,304,314 13,055,893 Property and equipment, net 2,245,322 2,282,570 Accounts receivable - securities -- 2,702,895 Due from affiliate 802,871 546,746 Other 1,543,627 1,217,032 ------------- ------------- Total Assets $ 253,759,744 $ 235,704,366 ============= ============= Liabilities and Stockholders' Equity Liabilities Losses and loss expenses $ 108,069,056 $ 97,733,851 Unearned premiums 58,311,607 54,377,239 Accrued expenses 1,589,015 2,373,142 Reinsurance balances payable 646,912 634,731 Cash dividend declared to stockholders -- 427,694 Line of credit 5,000,000 5,000,000 Accounts payable - securities 2,598,040 2,491,148 Other 345,050 181,426 Due to affiliate - Delaware American acquisition -- 202,243 ------------- ------------- Total Liabilities 176,559,680 163,421,474 ------------- ------------- 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 4,504,992 and 4,326,362 shares and outstanding 4,439,944 and 4,261,314 shares 4,504,992 4,326,362 Additional paid-in capital 36,926,492 35,017,965 Net unrealized gain (losses) on investments (11,668) 819,213 Retained earnings 36,600,028 32,939,132 Treasury stock (819,780) (819,780) ------------- ------------- Total Stockholders' Equity 77,200,064 72,282,892 ------------- ------------- Total Liabilities and Stockholders' Equity $ 253,759,744 $ 235,704,366 ============= =============
See accompanying notes to consolidated financial statements. -1- Donegal Group Inc. and Subsidiaries Consolidated Statement of Income (Unaudited) For the three months ended June 30, 1996 and 1995 Three Months Ended June 30, 1996 1995 ---- ---- Revenues: Premiums earned $ 32,711,343 $ 28,338,971 Premiums ceded (7,876,302) (6,985,323) ------------ ------------ Net premiums earned 24,835,041 21,353,648 Investment income, net of investment expenses 2,359,486 2,258,910 Realized gain 32,674 190,024 Lease income 134,360 122,553 Service charge income 496,425 387,267 ------------ ------------ Total Revenues 27,857,986 24,312,402 ------------ ------------ Expenses: Losses and loss expenses 21,059,043 18,355,892 Reinsurance recoveries (4,911,289) (4,140,699) ------------ ------------ Net losses and loss expenses 16,147,754 14,215,193 Amortization of deferred policy acquisition costs 4,186,000 3,383,783 Other underwriting expenses 3,384,681 2,869,045 Policy dividends 354,085 324,625 Interest expense 102,676 -- Other expenses 411,456 324,855 ------------ ------------ Total Expenses 24,586,652 21,117,501 ------------ ------------ Income before income taxes 3,271,334 3,194,901 Income taxes 550,905 694,201 ------------ ------------ Net income $ 2,720,429 $ 2,500,700 ============ ============ Earnings per common share $.62 $.59 ==== ==== See accompanying notes to consolidated financial statements. -2- Donegal Group Inc. and Subsidiaries Consolidated Statement of Income (Unaudited) For the six months ended June 30, 1996 and 1995 Six Months Ended June 30, 1996 1995 ---- ---- Revenues: Premiums earned $ 65,355,147 $ 55,506,503 Premiums ceded (15,824,797) (13,819,707) ------------ ------------ Net premiums earned 49,530,350 41,686,796 Investment income, net of investment expenses 4,951,220 4,472,447 Realized gain 294,748 213,984 Lease income 266,357 241,274 Service charge income 714,093 706,167 ------------ ------------ Total Revenues 55,756,768 47,320,668 ------------ ------------ Expenses: Losses and loss expenses 43,858,274 34,295,043 Reinsurance recoveries (9,917,283) (7,624,435) ------------ ------------ Net losses and loss expenses 33,940,991 26,670,608 Amortization of deferred policy acquisition costs 8,298,000 6,598,000 Other underwriting expenses 6,810,972 6,329,292 Policy dividends 699,320 633,816 Interest expense 208,681 -- Other expenses 799,035 628,390 ------------ ------------ Total Expenses 50,756,999 40,860,106 ------------ ------------ Income before income taxes 4,999,769 6,460,562 Income taxes 868,408 1,529,737 ------------ ------------ Net income $ 4,131,361 $ 4,930,825 ============ ============ Earnings per common share $.94 $1.17 === ==== See accompanying notes to consolidated financial statements. -3- DONEGAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) FOR THE SIX MONTHS ENDED JUNE 30, 1996
Common Stock ------------ Net Unreal- Total Additional ized Gains Stock- Paid-In (Losses) on Retained Treasury holders' Shares Amount Capital Investments Earnings Stock Equity ------ ------ ------- ----------- -------- ----- ------ Balance, 4,326,362 $4,326,362 $35,017,965 $ 819,213 $32,939,132 $(819,780) $72,282,892 January 1, 1996 4,131,361 4,131,361 Net Income Unrealized loss on investments (830,881) (830,881) Issuance of Common Stock 178,630 178,630 1,908,527 2,087,157 Cash Dividend (470,465) (470,465) --------- ---------- ----------- ---------- ----------- --------- ----------- Balance, June 30, 1996 4,504,992 $4,504,992 $36,926,492 $ (11,668) $36,600,028 $(819,780) $77,200,064 ========= ========== =========== ========== =========== ========= ===========
See accompanying notes to financial statements. -4- DONEGAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) For the six months ended June 30, 1996 and 1995
Six months ended June 30, 1996 1995 ---- ---- Cash Flows from Operating Activities: Net income $ 4,131,361 $ 4,930,825 ------------ ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 195,821 145,587 Realized investment gain (loss) (294,748) (213,984) Changes in Assets and Liabilities: Losses and loss expenses 10,335,205 5,935,149 Unearned premiums 3,934,368 4,706,688 Premiums receivable (83,931) (2,094,415) Deferred acquisition costs (637,845) (709,291) Deferred income taxes (63,579) (288,173) Reinsurance receivable (8,412,364) (2,549,049) Prepaid reinsurance premiums (248,421) (1,446,645) Accrued investment income (106,356) (199,488) Due from affiliate (256,125) (672,315) Accounts payable reinsurance 12,181 306,454 Current income taxes payable (336,156) (156,353) Other, net (952,594) 84,282 ------------ ----------- Net adjustments 3,085,456 2,848,447 ------------ ----------- Net cash provided by operating activities 7,216,817 7,779,272 ------------ ----------- Cash flows from investing activities: Purchase of fixed maturities Held to maturity (15,488,778) 13,804,502) Available for sale (8,183,634) (8,949,847) Purchase of equity securities, available for sale (8,515,859) (3,998,350) Maturity of fixed maturities Held to maturity 4,956,550 2,266,416 Available for sale 9,019,295 937,470 Sale of fixed maturities - available for sale 3,603,517 2,621,843 Sale of equity securities - available for sale 8,016,369 3,840,740 Acquisition of Delaware American (202,243) 219,187 Purchase of property and equipment (145,462) (179,554) Net sales of short-term investments (1,244,061) 8,658,790 ------------ ----------- Net cash used in investing activities (8,184,306) (8,387,807) ------------ ----------- Cash flows from financing activities: Cash dividends paid (898,159) (780,858) Issuance of common stock 2,087,157 844,998 ------------ ----------- Net cash provided by (used in) financing activities 1,188,998 64,140 ------------ ----------- Net decrease in cash 221,509 (544,395) Cash at beginning of year 1,747,572 1,263,764 ------------ ----------- Cash at end of quarter $ 1,969,081 $ 719,369 ============ =========== Cash paid during period - Interest $ 169,806 0 - Income Taxes $ 1,268,143 $ 1,973,000
See accompanying notes to consolidated financial statements. -5- 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 American 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 June 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 American 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 American 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 American. On December 29, 1995, the Company acquired all of the outstanding stock of Delaware American 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- 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 American 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 American 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 June 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 six months ended June 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- Results of Operations - Three Months Ended June 30, 1996 to Three Months Ended June 30, 1995 Revenues for the three months ended June 30, 1996 were $27,857,986, an increase of $3,545,584, or 14.6%, over the same period of 1995. An increase in net premiums earned of $3,481,393, or 16.3% 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 $1,665,568, or 7.8% of this increase. The Company's share of direct premiums written increased 6.8% over the direct premiums written in 1995. The change in Atlantic States' pool participation accounted for all of the increase in the second quarter. Investment income for the second quarter was $2,359,486 an increase of $100,576, or 4.4%, over the second three months of 1995. An increase in the average invested assets of $16,096,840, or 10.7%, to $166,297,674 offset by a decrease in the average return on investments to an annualized rate of 5.7% for the second quarter of 1996 compared to 6.0% for the second quarter of 1995, accounted for the change. Realized investment gains, which resulted from the normal turnover of the Company's investment portfolio, decreased $157,350 for the second quarter of this year to $32,674. The GAAP combined ratio of insurance operations in the second quarter of 1996 was 96.9% compared to 97.4% 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). A decrease in the loss ratio from 66.6% in the second quarter of 1995 to 65.0% in the second quarter of 1996, offset by an increase in the expense ratio of 1.2%, accounted for most of the change. The dividend ratio decreased slightly from 1.5% for the second quarter of 1995 to 1.4% for the second 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 second quarter of 1996 represented 16.8% of income before income taxes, compared to 21.7% for the same period of 1995. This was due primarily to tax deductions related to the exercise of options during the second quarter of 1996. -8- Results of Operations - Six Months Ended June 30, 1996 to Six Months Ended June 30, 1995 Revenues for the six months ended June 30, 1996 were $55,756,768 an increase of $8,436,100, or 17.8%, over the same period of 1995. An increase in net premiums earned of $7,843,554 or 18.8%, 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 $3,322,939, or 7.9% of this increase. The Company's share of direct premiums written increased 6.0% over 1995 before giving effect to the change in the pooling agreement. The pooling change added another 7.0% for a total increase in direct written premiums of 13.0%. Investment income for the first six months of 1996 was $4,951,220, an increase of $478,773, or 10.7% over the first six months of 1995. An increase in the average invested assets of $16,533,770 or 11.0%, to $166,225,613 accounted for the entire change. Realized investment gains, which resulted from the normal turnover of the Company's investment portfolio, increased $80,764 for the first six months of this year to $294,748. The GAAP combined ratio of insurance operations in the first two quarters of 1996 was 100.4% compared to 96.5% 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 64.0% in the first six months of 1995 to 68.5% in the first six 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 effected both the personal lines and commercial property business. The expense ratio decreased from 31.0% to 30.5% for the six months ended June 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 1.5% for the first six months of 1995 to 1.4% for the first six moths 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 six months of 1996 represented 17.4% 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- 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, 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 June 30, 1996, pursuant to a credit agreement dated December 29, 1995 with Fleet National Bank of Connecticut, the Company had unsecured borrowings of $5 million. Such borrowings were made in connection with the acquisition of Delaware American 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 June 30, 1996, the interest rate on the outstanding balance was 7.2%. 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- 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- 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, 1996, Registrant filed one Form 8-K on June 24, 1996. -12- 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 14, 1996 By: ----------------------------- Donald H. Nikolaus, President and Chief Executive Officer Date: August 14, 1996 By: ----------------------------- Ralph G. Spontak, Corporate Secretary, Senior Vice President and Chief Financial Officer -13- EX-27 2 ARTICLE 7 FDS FOR 10-Q
7 6-MOS DEC-31-1996 JUN-30-1996 48,839,998 102,401,484 102,615,738 4,078,796 0 610,000 171,062,918 1,969,081 0 7,540,063 253,759,744 108,069,056 58,311,607 0 0 5,000,000 0 0 4,504,992 72,695,072 253,759,744 24,835,041 2,359,486 32,674 630,785 16,147,754 4,186,000 3,384,681 3,271,334 550,905 2,720,429 0 0 0 2,720,429 .62 .62 71,483 17,038 (890) 10,982 4,685 71,964 0
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