EX-99.1 3 ex-99.txt DONEGAL GROUP INC. ANNOUNCES FIRST QUARTER RESULTS Ralph G. Spontak Senior Vice President and Chief Financial Officer Phone (717) 426-1931 Fax (717) 426-7009 For Immediate Release MARIETTA, Pennsylvania, April 16, 2003 - Donegal Group Inc. (Nasdaq: DGICA and DGICB ) today reported its operating results for the quarter ended March 31, 2003. The Company continued its strong underwriting results during the first quarter of 2003 with the Company posting net income of $3,844,432, or $.41 per share on a diluted basis, compared to $2,180,716, or $.24 per share on a diluted basis, in the first quarter of 2002. The Company's combined ratio for the first quarter of 2003 was a strong 97.2%, compared to 101.8% for the first quarter of 2002. The Company's loss ratio for the first quarter 2003 improved to 66.5% compared to 68.9% for the first quarter of 2002, despite the impact of a more severe winter in the Northeast during the first quarter of 2003. The Company's expense ratio improved to 30.2% for the first quarter of 2003 compared to 31.9% for the first quarter of 2002. The Company's workers' compensation policy dividend ratio decreased from 1.0% in the first quarter of 2002 to 0.5% in the first quarter of 2003 due to the implementation of more stringent qualification requirements. "Despite the effects of more severe weather in the Northeast this winter, the Company was able to continue its string of very strong underwriting quarters" stated Donald H. Nikolaus, President and Chief Executive Officer of Donegal Group Inc. "The rate increases taken over the past two years, coupled with our rededication to underwriting principles and our ongoing expense control initiative have made it possible to absorb moderate weather-related events while still generating an annualized return on equity of over 11% in the first quarter" stated Nikolaus. Operating income, which excludes after tax realized investment gains (losses) of ($84,812) in 2003 and $83,673 in 2002, for the first quarter of 2003 was $3,929,244, or $.42 per share on a diluted basis, compared to $2,097,043, or $.23 per share on a diluted basis, for the first quarter of 2002. These strong results helped the Company increase its book value per common share to $14.91 as of March 31, 2003. Revenues for the first quarter of 2003 were $52,185,419, an increase of 4.3% over a year earlier, with premiums earned for the first quarter of $47,928,881, a 5.4% increase over the first quarter of 2002. The lower interest rate environment impacted investment income which was down 9.8% to $3,364,518 compared to $3,730,304 for the first quarter of 2002 despite an increase in average invested assets. The annualized average return on investments was 4.0% for the first quarter of 2003 compared to 4.9% for the first quarter of 2002. Service fees for the first quarter were $614,033, an increase of 15.9% over the year earlier total of $529,742, reflecting increases in premium installment plan service fees. The Company will hold a conference call on Wednesday April 16, 2003, beginning at 11:00 A. M. Eastern Time. You may participate in the conference call by calling 1-800-915-4836. An instant replay of the conference call will be available until April 23, 2003, by calling 1-800-428-6051 (Passcode I. D. # 289227). All statements contained in this release that are not historic facts are based on current expectations. Such statements are forward-looking (as defined in the Private Securities Litigation Reform Act of 1995) in nature and involve a number of risks and uncertainties. Actual results may vary materially. The factors that could cause actual results to vary materially include: The ability of the Company to maintain profitable operations, the adequacy of the Company's reserves for losses and loss adjusting expenses, business and economic conditions in the Company's primary operating areas, competition from various insurance and non-insurance businesses, the effects of terrorism, changes in regulatory requirements, and other risks that may be described from time to time in the reports the Company files with the Securities and Exchange Commission. Undue reliance should not be placed on any such forward-looking statements. Donegal Group Inc. is a regional property-casualty insurance holding company doing business in 14 Mid-Atlantic and Southern states through its insurance subsidiaries Atlantic States Insurance Company and Southern Insurance Company of Virginia. (Tables Follow)
Quarter Ended March 31 ------------------------------------------------------------- 2003 2002 ----------------------------- ------------------------------- Net premiums earned $47,928,881 $45,452,260 Investment income, net of investment expenses 3,364,518 3,730,304 Realized investment gains (losses) (130,480) 126,778 Total revenues 52,185,419 50,034,046 Net income $3,844,432 $2,180,716 Net income per common share Basic $ 0.42 $ 0.24 Diluted $ 0.41 $ 0.24 Consolidated Statements of Income (unaudited; in thousands, except per share data) Quarter Ended March 31 ------------------------------------------------------------- 2003 2002 ------------------------------ ------------------------------ Net premiums earned $ 47,929 $ 45,452 Investment income, net of investment expenses 3,364 3,730 Realized investment gains (losses) (131) 127 Lease income 203 195 Service fees 614 530 Other income 206 - -------- -------- - Total revenues $ 52,185 $ 50,034 -------- -------- Losses and loss expenses 31,850 31,298 Amortization of deferred policy acquisition costs 7,442 7,385 Other underwriting expenses 7,023 7,112 Other expenses 331 502 Dividends 242 466 Interest 215 325 -------- -------- Total expenses 47,103 47,088 -------- -------- Income before income taxes 5,082 2 ,946 Income tax expense 1,238 765 -------- -------- Net income $ 3,844 $ 2,181 -------- ------- Net income per common share Basic $ 0.42 $ 0.24 -------- -------- Diluted $ 0.41 $ 0.24 -------- -------- Supplementary Financial Analysts' Data Weighted average number of shares outstanding Basic 9,210,402 9,030,160 --------- --------- Diluted 9,330,855 9,124,525 --------- --------- Net written premiums $ 50,340 $ 48,315 -------- -------- Book value per common share $ 14.91 $ 13.51 -------- --------
Consolidated Balance Sheet (unaudited; in thousands)
March 31, December 31, 2002 2003 ----------------- ---------- ASSETS Investments: Fixed Maturities: Held to maturity, at amortized cost $ 91,675 $ 86,702 Available for sale, at fair value 195,274 194,732 Equity securities, at fair value 23,550 21,836 Short-term investments, at cost, which approximates fair value 32,107 29,029 ------ ------ Total investments 342,606 332,299 Cash 4,924 1,125 Premiums in course of collection 27,725 26,287 Reinsurance receivable 77,539 83,207 Accrued investment income 3,579 3,815 Deferred policy acquisition costs 14,736 14,567 Prepaid reinsurance premiums 29,307 27,854 Property and equipment, net 4,250 4,430 Deferred income taxes 7,276 6,956 Other assets 1,612 678 ----------- --------- Total assets $ 513,554 $ 501,218 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Unpaid losses and loss settlement expenses $ 210,708 $ 210,692 Unearned premiums 124,867 121,002 Accounts payable and accrued 6,152 6,584 expenses Debt 19,800 19,800 Due to affiliates 4,441 4,080 Other liabilities 9,974 ----------- --------- 5,877 Total liabilities 375,942 368,035 Shareholders' equity: Preferred stock Class A common stock 63 63 Class B common stock 30 30 Additional paid-in capital 61,254 60,652 Accumulated other comprehensive 4,896 4,912 Income Retained earnings 72,261 68,418 Treasury stock, at cost (892) (892) Total shareholders' equity 137,612 133,183 ----------- --------- Total liabilities and shareholders' equity $ 513,554 $ 501,218 ========= =========