-----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, FE14UiMgBjwHIhMpGAEAoUKhs7VGc6BtcumY/ovcKj6km98PDaZYYz2YO81EeK6n NqEpss/3JLaR2n1Ww/3RIQ== 0000950123-09-026898.txt : 20090914 0000950123-09-026898.hdr.sgml : 20090914 20090729150005 ACCESSION NUMBER: 0000950123-09-026898 CONFORMED SUBMISSION TYPE: CORRESP PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20090729 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: CORRESP 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 CORRESP 1 filename1.htm corresp
           
 
  Duane Morris     FIRM and AFFILIATE OFFICES
 
          
 
        NEW YORK
 
        LONDON
 
        SINGAPORE
FREDERICK W. DREHER
        LOS ANGELES
DIRECT DIAL: 215.979.1234
        CHICAGO
PERSONAL FAX: 215.979.1213
        HOUSTON
E-MAIL: fwdreher@duanemorris.com
        HANOI
 
        PHILADELPHIA
 
        SAN DIEGO
 
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  July 29, 2009     BOSTON
 
        WASHINGTON, DC
 
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VIA EDGAR AND FEDEX
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attention: Jim B. Rosenberg,
                   Senior Assistant Chief Accountant
      Re: Donegal Group Inc.
Form 10-K for the Fiscal Year Ended December 31, 2008
Filed March 12, 2009
File Number: 000-15341
Dear Mr. Rosenberg:
     The purpose of this letter is to provide a detailed response on behalf of Donegal Group Inc., or the Company, to the comment contained in the Commission’s July 24, 2009 letter to Jeffrey D. Miller, the Senior Vice President and Chief Financial Officer of the Company. For convenience of reference, we have included in italics the Commission’s comment followed by the Company’s response to that comment.
     The Company’s response is as follows:
Definitive Proxy Statement filed March 16, 2009
Executive Compensation
Compensation Discussion and Analysis
Our Compensation Philosophy and Objectives. page 15
1. We have reviewed your response to prior comment 4 regarding how you arrive at the cash available for allocation in your cash incentive compensation program. In the revised disclosure that
     
Duane Morris llp    
 
30 South 17th Street   PHILADELPHIA, PA 19103-4196   PHONE: 215.979.1000    FAX: 215.979.1020

 

 

Securities and Exchange Commission
Page 2
July 29, 2009
you have presented, it appears that you have omitted several steps that you describe in your response to prior comment 4. The steps that you have described in your response are below. Please expand your disclosure to include the bolded bullet points previously omitted from this
disclosure and describe the “certain exclusions” that you refer to in the last bullet point.
  •   The Company first determines the base underwriting income of the Donegal Insurance Group for the year.
 
  •   The Company then adjusts this amount by adding back the amount it has accrued for executive bonuses, a formula-based adjustment for catastrophe losses and a formula-based adjustment for guaranty fund assessments.
 
  •   The Company then adjusts its underwriting income for the year by a variable percentage specified in the incentive plan based on the growth in the Company’s net written premium for the year. This percentage ranges from 2.5% for growth in net written premium that is less than 5.0% to 4.5% for growth in net written premium that is 12.0% or greater.
 
  •   The Company further adjusts its underwriting income for the applicable year by a variable percentage specified in the incentive plan based on the Company’s return on equity for the year. This percentage ranges from 75.0% for a return on equity of less than 7.0% to 150.0% for 0. return on equity in excess of 15.0%.
 
  •   The Company then multiplies the resulting amount by 5.0% and the product of that multiplication is the executive incentive pool for the applicable year.
 
  •   The Company reduces the executive officers incentive pool amount by 50.0% for any year in which the surplus of the Donegal Insurance Group decreases by 5.0% ·or more, subject to certain exclusions.
     The Company proposes to make substantially all of the additional disclosures requested by the staff comments, but believes disclosure of some precise details of the plan would harm the Company’s competitive position. The paragraph as proposed to be revised for inclusion in the Company’s 2010 proxy statement for its annual meeting of stockholders would read in its entirety as follows:
     “For a number of years, we have maintained a formula-based cash incentive compensation plan for our officers, including our named executive officers. The formula is based on the annual underwriting income of the insurance companies that comprise the Donegal Insurance Group, which is our insurance subsidiaries and Donegal Mutual. The formula operates as follows:

 

Securities and Exchange Commission
Page 3
July 29, 2009
  •   We first determine the base underwriting income of the Donegal Insurance Group for the year.
 
  •   We then adjust this amount by adding back our accrual for bonuses to our officers, and make a formula-based adjustment to limit the impact of any catastrophe losses and guaranty fund assessments.
 
  •   We then adjust the amount so determined based on variable percentages specified in the plan of the growth in new written premium of Donegal Insurance Group for the year that ranges from 2.5% to 5.0%.
 
  •   We then further adjust the amount so determined by a variable percentage specified in the plan based on the Company’s return on equity for the year. This percentage ranges from 75% to 150%.
 
  •   We then multiply the amount so determined by 5.0% and the amount resulting constitutes the executive incentive compensation pool for the applicable year.
 
  •   If the Donegal Insurance Group’s surplus for the year is below an amount specified in the plan, the executive incentive compensation pool is then reduced by 50%, exclusive of any decreases in surplus caused by the changes in the price of our stock, statutory reserve changes and statutory accounting changes.”
     We would be happy to discuss the Company’s responses with you in order to address any further questions or concerns. Please call the undersigned at (215) 979-1234 to arrange a discussion.
         
  Sincerely,
 		  
  /s/ Frederick W. Dreher    
  Frederick W. Dreher   
     
 
FWD:am
cc:   Donald H. Nikolaus
Jeffrey D. Miller
Kathleen Johnson

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