EX-99.1 3 ex-99_1.txt EXHIBIT 99.1 DONEGAL GROUP INC. ANNOUNCES RECORD EARNINGS FOR SECOND QUARTER Ralph G. Spontak Senior Vice President and Chief Financial Officer Phone (717) 426-1931 Fax (717) 426-7009 For Immediate Release MARIETTA, Pennsylvania, July 18, 2003 - Donegal Group Inc. (Nasdaq: DGICA and DGICB) today reported record operating results for the quarter and six months ended June 30, 2003. The Company's excellent underwriting results continued through the second quarter of this year with the Company posting record quarterly net income of $5,268,953, or $.56 per share on a diluted basis, compared to $3,178,834, or $.35 per share on a diluted basis, in the second quarter of 2002. The Company's combined ratio continued to improve from the strong results posted for the first quarter ending up the second quarter at an exceptional 92.3%, compared to 99.3% for the second quarter of 2002. The Company's loss ratio was an outstanding 61.2% for the second quarter 2003 compared to 69.7% for the second quarter of 2002, with both commercial and personal lines showing improvement. The Company's expense ratio increased slightly, due to higher underwriting based incentives, resulting in a ratio of 30.6% for the second quarter of 2003 compared to 29.4% for the second quarter of 2002. The Company's workers' compensation policy dividend ratio increased slightly from 0.2% in the second quarter of 2002 to 0.5% in the second quarter of 2003. The strong operational results helped the Company increase its book value per common share to $15.49 as of June 30, 2003. "We are delighted that our expense control and underwriting efforts have resulted in improvements in the results of both our personal and commercial lines", stated Donald H. Nikolaus, President and Chief Executive Officer of Donegal Group, "and even more pleased those improvements have resulted in our annualized return on equity improving to 13 percent through the first half of this year." Net income of $9,113,385, or $.97 per share on a diluted basis, for the first six month of 2003 represented the highest first half earnings in the Company's history, compared to $5,359,550, or $.59 per share on a diluted basis for the first six months of 2002. The Company's combined ratio for the six months ended June 30, 2003 was 94.7%, compared to 100.5% for the six months ended June 30, 2002, with all major lines of business showing improvement over the prior year. Revenues for the second quarter of 2003 were $52,826,818, an increase of 4.1% over a year earlier, with premiums earned for the second quarter of $48,433,689, a 5.0% increase over the second quarter of 2002. The lower interest rate environment impacted investment income which was down 10.6% to $3,315,710 compared to $3,710,282 for the second quarter of 2002 despite an increase in average invested assets. Yesterday the Company's Board of Directors declared a regular quarterly cash dividend of 11 cents per share of Class A Common Stock and 10 cents per share of Class B Common Stock payable August 15, 2003 to shareholders of record as of the close of business on August 1, 2003. The Company will hold a conference call and webcast on Friday July 18, 2003, beginning at 11:00 A. M. Eastern Time. You may participate in the conference call by calling 1-800-901-5213 (International 617-786-2962) Passcode I. D. 53873373. An instant replay of the conference call will be available for 10 days by calling 1-888-286-8010 (Passcode I. D. 71251761). 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 reserve 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, changes in regulatory requirements, and other risks that may be described from time to time in the reports Donegal is required to file 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)
Second Quarter Ended ------------------------------------------------------------- June 30, June 30, 2003 2002 ----------------------------- ------------------------------- Net premiums earned $48,433,689 $46,110,512 Investment income, net of expenses 3,315,710 3,710,282 Realized investment gains 216,370 60,481 Total revenues 52,826,818 50,736,803 Net income $5,268,953 $3,178,834 Net income per common share Basic $ 0.57 $ 0.35 Diluted $ 0.56 $ 0.35
Six Months Ended ------------------------------------------------------------- June 30, June 30, 2003 2002 ----------------------------- ------------------------------- Net premiums earned $ 96,362,570 $ 91,562,772 Investment income, net of expenses 6,680,228 7,440,586 Realized investment gains 85,890 187,259 Total revenues 105,012,237 100,770,849 Net income $9,113,385 $ 5,359,550 Net income per common share Basic $ 0.99 $ 0.59 Diluted $ 0.97 $ 0.59
Consolidated Statements of Income (unaudited; in thousands, except share data)
Second Quarter Ended ------------------------------------------------------------- June 30, June 30, 2003 2002 ------------------------------ ------------------------------ Net premiums earned $ 48,434 $ 46,111 Investment income, net of investment expenses 3,316 3,710 Realized investment gains 216 61 Lease income 211 194 Service charge income 650 661 ------ ------ Total revenues 52,827 50,737 ------ ------ Losses and loss expenses 29,658 32,136 Amortization of deferred policy acquisition costs 7,545 7,345 Other underwriting expenses 7,269 6,189 Other expenses 345 211 Dividends 228 105 Interest 307 296 ------ ------ Total expenses 45,352 46,282 ------ ------ Income before income taxes 7,475 4,455 Income tax expense 2,206 1,276 ----- ----- Net income $ 5,269 $ 3,179 ========= ======= Net income per common share Basic $ 0.57 $ 0.35 -------- ------- Diluted $ 0. 56 $ 0.35 -------- ------- Supplementary Financial Analysts' Data Weighted average number of shares outstanding Basic 9,269,029 9,059,477 --------- --------- Diluted 9,424,050 9,175,729 --------- --------- Net written premiums $ 53,184 $ 51,652 -------- -------- Book value per common share $ 15.49 $ 13.94 -------- --------
Six Months Ended ------------------------------------------------------------- June 30, June 30, 2003 2002 ----------------------------- ------------------------------- Net premiums earned $ 96,363 $ 91,563 Investment income, net of investment expenses 6,680 7,626 Realized investment gains 86 187 Lease income 413 389 Service charge income 1,264 1,191 Other Income 206 - ------- ------- 105,012 100,956 ------- ------- Total revenues Losses and loss expenses 61,509 63,434 Amortization of deferred policy acquisition costs 14,987 14,730 Other underwriting expenses 14,292 13,515 Other expenses 675 714 Dividends 469 571 Interest 522 621 ------ ------ Total expenses 92,454 93,585 ------ ------ Income before income taxes 12,558 7,371 Income tax expense 3,445 2,024 ------- ------- Net income $ 9,113 $ 5,347 ======= ======= Net income per common share Basic $ 0.99 $ 0.59 ------- ------- Diluted $ 0.97 $ 0.58 ------- -------
Supplementary Financial Analysts' Data Net written premiums $ 103,524 $ 99,967 --------- -------- Weighted average number of shares outstanding Basic 9,239,878 9,044,899 --------- --------- Diluted 9,377,614 9,150,208 --------- --------- Consolidated Balance Sheet (unaudited; in thousands, except share data)
June 30, 2003 December 31, 2002 ------------- ------------------ ASSETS Investments: Fixed Maturities: Held to maturity, at amortized cost $ 106,781 $ 86,702 Available for sale, at fair value 186,685 194,732 Equity securities, at fair value 22,638 21,836 Short-term investments, at cost, which approximates fair value 45,352 29,029 ------ ------ Total investments 361,456 332,299 Cash 2,326 1,125 Premiums in course of collection 29,154 26,287 Reinsurance receivable 78,865 83,207 Accrued investment income 3,598 3,815 Deferred policy acquisition costs 15,521 14,567 Prepaid reinsurance premiums 31,803 27,854 Property and equipment, net 4,264 4,430 Deferred income taxes 6,511 6,956 Other assets 2,935 678 --------- --------- Total assets $ 536,433 $ 501,218 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Unpaid losses and loss settlement expenses $ 209,650 $ 210,692 Unearned premiums 132,113 121,002 Accounts payable and accrued expenses 6,195 6,584 Debt 12,800 19,800 Due to affiliates 4,441 4,080 Other liabilities 12,362 5,877 Subordinate Debt 15,000 0 ------- ------- Total liabilities 392,561 368,035
Shareholders' Equity Preferred stock $1 par value; authorized 2,000,000 shares, none issued Class A common stock, $.01 par Value, Authorized 30,000,000 shares, issued 6,369,829 and 6,269,093 shares and outstanding 6,288,305 and 64 63 6,187,569 shares Class B common stock, $.01 par Value Authorized 10,000,000 shares, issued 3,037,549 and 30 30 3,024,742 shares and outstanding 2,996,787 and 2,983,980 shares Additional paid-in capital 62,748 60,652 Accumulated other comprehensive 6,322 4,912 income Retained earnings 75,600 68,418 Treasury stock, at cost (892) (892) --------- --------- Total stockholders' equity 143,872 133,183 --------- --------- Total liabilities and shareholders' equity $ 536,433 $ 501,218 ========= =========