QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company |
Emerging growth company
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Title of Each Class
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Trading Symbols
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Name of Each Exchange on Which Registered
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Page
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PART I
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FINANCIAL INFORMATION
|
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Item 1.
|
1
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Item 2.
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21
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Item 3.
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31
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Item 4.
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31
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PART II
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OTHER INFORMATION
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Item 1.
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32
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Item 1A.
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32
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Item 2.
|
33
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Item 3.
|
33
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Item 4.
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33
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Item 5.
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33
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Item 6.
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34
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35 |
Item 1. |
Financial Statements
|
September 30,
2022
|
December 31,
2021
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Investments
|
||||||||
Fixed maturities
|
||||||||
Held to maturity, at amortized cost
|
$
|
|
$
|
|
||||
Available for sale, at fair value
|
|
|
||||||
Equity securities, at fair value
|
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|
||||||
Short-term investments, at cost, which approximates fair value
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|
||||||
Total investments
|
|
|
||||||
Cash
|
|
|
||||||
Accrued investment income
|
|
|
||||||
Premiums receivable
|
|
|
||||||
Reinsurance receivable
|
|
|
||||||
Deferred policy acquisition costs
|
|
|
||||||
Deferred tax asset, net
|
|
|
||||||
Prepaid reinsurance premiums
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|
||||||
Property and equipment, net
|
|
|
||||||
Accounts receivable - securities
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|
||||||
Federal income taxes recoverable
|
|
|
||||||
Receivable from Michigan Catastrophic Claims Association
|
||||||||
Due from affiliate
|
||||||||
Goodwill
|
|
|
||||||
Other intangible assets
|
|
|
||||||
Other
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
Liabilities and Stockholders’ Equity
|
||||||||
Liabilities
|
||||||||
Losses and loss expenses
|
$
|
|
$
|
|
||||
Unearned premiums
|
|
|
||||||
Accrued expenses
|
|
|
||||||
Reinsurance balances payable
|
|
|
||||||
Borrowings under lines of credit
|
|
|
||||||
Cash dividends declared to stockholders
|
|
|
||||||
Cash refunds due to Michigan policyholders
|
||||||||
Other
|
|
|
||||||
Total liabilities
|
|
|
||||||
Stockholders’ Equity
|
||||||||
Preferred stock, $
|
|
|
||||||
Class A common stock, $
and
|
|
|
||||||
Class B common stock, $
shares and outstanding
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated other comprehensive (loss) income
|
(
|
)
|
|
|||||
Retained earnings
|
|
|
||||||
Treasury stock, at cost
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
Three Months Ended September 30,
|
||||||||
2022
|
2021
|
|||||||
Revenues:
|
||||||||
Net premiums earned
|
$
|
|
$
|
|
||||
Investment income, net of investment expenses
|
|
|
||||||
Net investment losses (includes $
|
(
|
)
|
(
|
)
|
||||
Lease income
|
|
|
||||||
Installment payment fees
|
|
|
||||||
Total revenues
|
|
|
||||||
Expenses:
|
||||||||
Net losses and loss expenses
|
|
|
||||||
Amortization of deferred policy acquisition costs
|
|
|
||||||
Other underwriting expenses
|
|
|
||||||
Policyholder dividends
|
|
|
||||||
Interest
|
|
|
||||||
Other expenses, net
|
|
|
||||||
Total expenses
|
|
|
||||||
Loss before income tax benefit
|
(
|
)
|
(
|
)
|
||||
Income tax benefit (includes $
|
(
|
)
|
(
|
)
|
||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Loss per common share:
|
||||||||
Class A common stock - basic and diluted
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Class B common stock - basic and diluted
|
$
|
(
|
)
|
$
|
(
|
)
|
Three Months Ended September 30,
|
||||||||
2022
|
2021
|
|||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Other comprehensive loss, net of tax
|
||||||||
Unrealized loss on securities:
|
||||||||
Unrealized holding loss during the period, net of income tax benefit of $
|
(
|
)
|
(
|
)
|
||||
Reclassification adjustment for gains included in net loss, net of income tax expense of $
|
(
|
)
|
(
|
)
|
||||
Other comprehensive loss
|
(
|
)
|
(
|
)
|
||||
Comprehensive loss
|
$
|
(
|
)
|
$
|
(
|
)
|
Nine Months Ended September 30,
|
||||||||
2022 |
2021
|
|||||||
Revenues:
|
||||||||
Net premiums earned
|
$
|
|
$
|
|
||||
Investment income, net of investment expenses
|
|
|
||||||
Net investment (losses) gains (includes $
|
(
|
)
|
|
|||||
Lease income
|
|
|
||||||
Installment payment fees
|
|
|
||||||
Total revenues
|
|
|
||||||
Expenses:
|
||||||||
Net losses and loss expenses
|
|
|
||||||
Amortization of deferred policy acquisition costs
|
|
|
||||||
Other underwriting expenses
|
|
|
||||||
Policyholder dividends
|
|
|
||||||
Interest
|
|
|
||||||
Other expenses, net
|
|
|
||||||
Total expenses
|
|
|
||||||
(Loss) income before income tax (benefit) expense
|
(
|
)
|
|
|||||
Income tax (benefit) expense (includes $
|
(
|
)
|
|
|||||
Net (loss) income
|
$
|
(
|
)
|
$
|
|
|||
(Loss) earnings per common share:
|
||||||||
Class A common stock - basic and diluted | $ | ( |
) | $ | ||||
Class B common stock - basic and diluted
|
$
|
(
|
)
|
$
|
|
Nine Months Ended September 30,
|
||||||||
2022
|
2021
|
|||||||
Net (loss) income
|
$
|
(
|
)
|
$
|
|
|||
Other comprehensive loss, net of tax
|
||||||||
Unrealized loss on securities:
|
||||||||
Unrealized holding loss during the period, net of income tax benefit of $
|
(
|
)
|
(
|
)
|
||||
Reclassification adjustment for gains included in net income, net of income tax expense of $
|
(
|
)
|
(
|
)
|
||||
Other comprehensive loss
|
(
|
)
|
(
|
)
|
||||
Comprehensive (loss) income
|
$
|
(
|
)
|
$
|
|
Class A
Shares
|
Class B
Shares
|
Class A
Amount
|
Class B
Amount
|
Additional
Paid-In Capital
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Retained
Earnings
|
Treasury Stock
|
Total
Stockholders’
Equity
|
||||||||||||||||||||||||||||
Balance, December 31, 2021
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||||
Issuance of common stock
(stock compensation plans)
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Net income
|
—
|
—
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Cash dividends declared
|
—
|
—
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||
Grant of stock options
|
—
|
—
|
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||||||||
Other comprehensive loss
|
—
|
—
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|||||||||||||||||||||||||
Balance, March 31, 2022
|
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||||||||
Issuance of common stock
(stock compensation plans)
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Net loss
|
—
|
—
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||
Cash dividends declared
|
—
|
—
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||
Grant of stock options
|
—
|
—
|
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||||||||
Other comprehensive loss
|
—
|
—
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|||||||||||||||||||||||||
Balance, June 30, 2022
|
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||||||||
Issuance of common stock
(stock compensation plans)
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Net loss
|
—
|
—
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||
Cash dividends declared
|
—
|
—
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||
Grant of stock options
|
—
|
—
|
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||||||||
Other comprehensive loss
|
—
|
—
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|||||||||||||||||||||||||
Balance, September 30, 2022
|
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
Class A
Shares
|
Class B
Shares
|
Class A
Amount
|
Class B
Amount
|
Additional
Paid-In Capital
|
Accumulated
Other
Comprehensive
Income
|
Retained
Earnings
|
Treasury Stock
|
Total
Stockholders’
Equity
|
||||||||||||||||||||||||||||
Balance, December 31, 2020
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||||
Issuance of common stock
(stock compensation plans)
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Net income
|
—
|
—
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Cash dividends declared
|
—
|
—
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||
Grant of stock options
|
—
|
—
|
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||||||||
Other comprehensive loss
|
—
|
—
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|||||||||||||||||||||||||
Balance, March 31, 2021
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||||
Issuance of common stock
(stock compensation plans)
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Net income
|
—
|
—
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Cash dividends declared
|
—
|
—
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||
Grant of stock options
|
—
|
—
|
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||||||||
Other comprehensive income
|
—
|
—
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Balance, June 30, 2021
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||||
Issuance of common stock
(stock compensation plans)
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Net loss
|
—
|
—
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||
Cash dividends declared
|
—
|
—
|
|
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||
Grant of stock options
|
—
|
—
|
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||||||||
Other comprehensive loss
|
—
|
—
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|||||||||||||||||||||||||
Balance, September 30, 2021
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
Nine Months Ended September 30,
|
||||||||
2022
|
2021
|
|||||||
Cash Flows from Operating Activities:
|
||||||||
Net (loss) income
|
$
|
(
|
)
|
$
|
|
|||
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
||||||||
Depreciation, amortization and other non-cash items
|
|
|
||||||
Net investment losses (gains)
|
|
(
|
)
|
|||||
Changes in assets and liabilities:
|
||||||||
Losses and loss expenses
|
|
|
||||||
Unearned premiums
|
|
|
||||||
Premiums receivable
|
(
|
)
|
(
|
)
|
||||
Deferred acquisition costs
|
(
|
)
|
(
|
)
|
||||
Deferred income taxes
|
(
|
)
|
|
|||||
Reinsurance receivable
|
|
(
|
)
|
|||||
Prepaid reinsurance premiums
|
|
(
|
)
|
|||||
Accrued investment income
|
(
|
)
|
(
|
)
|
||||
Due from affiliate
|
(
|
)
|
(
|
)
|
||||
Reinsurance balances payable
|
(
|
)
|
|
|||||
Current income taxes
|
(
|
)
|
(
|
)
|
||||
Accrued expenses
|
|
(
|
)
|
|||||
Other, net
|
|
|
||||||
Net adjustments
|
|
|
||||||
Net cash provided by operating activities
|
|
|
||||||
Cash Flows from Investing Activities:
|
||||||||
Purchases of fixed maturities, held to maturity
|
(
|
)
|
(
|
)
|
||||
Purchases of fixed maturities, available for sale
|
(
|
)
|
(
|
)
|
||||
Purchases of equity securities, available for sale
|
(
|
)
|
(
|
)
|
||||
Maturity of fixed maturities:
|
||||||||
Held to maturity
|
|
|
||||||
Available for sale
|
|
|
||||||
Sales of fixed maturities securities, available for sale
|
||||||||
Sales of equity securities, available for sale
|
|
|
||||||
Net sales of property and equipment
|
|
|
||||||
Net (purchases) sales of short-term investments
|
(
|
)
|
|
|||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
Cash Flows from Financing Activities:
|
||||||||
Cash dividends paid
|
(
|
)
|
(
|
)
|
||||
Issuance of common stock
|
|
|
||||||
Payment on subordinated debentures
|
( |
) | ||||||
Payments on lines of credit
|
|
(
|
)
|
|||||
Net cash provided by (used in) financing activities
|
|
(
|
)
|
|||||
Net decrease in cash
|
(
|
)
|
(
|
)
|
||||
Cash at beginning of period
|
|
|
||||||
Cash at end of period
|
$
|
|
$
|
|
||||
Cash paid during period - Interest
|
$
|
|
$
|
|
||||
Net cash paid during period - Taxes
|
$
|
|
$
|
|
1 - |
Organization
|
2 - |
Basis of Presentation
|
3 - |
(Loss) Earnings Per Share
|
Three Months Ended September 30,
|
||||||||||||||||
2022
|
2021
|
|||||||||||||||
Class A
|
Class B
|
Class A
|
Class B
|
|||||||||||||
(in thousands, except per share data)
|
||||||||||||||||
Basic loss per share:
|
||||||||||||||||
Numerator:
|
||||||||||||||||
Allocation of net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Denominator:
|
||||||||||||||||
Weighted-average shares outstanding
|
|
|
|
|
||||||||||||
Basic loss per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Diluted loss per share:
|
||||||||||||||||
Numerator:
|
||||||||||||||||
Allocation of net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Denominator:
|
||||||||||||||||
Number of shares used in basic computation
|
|
|
|
|
||||||||||||
Weighted-average shares effect of dilutive securities:
|
||||||||||||||||
Director and employee stock options
|
|
|
|
|
||||||||||||
Number of shares used in diluted computation
|
|
|
|
|
||||||||||||
Diluted loss per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
Nine Months Ended September 30,
|
||||||||||||||||
2022
|
2021
|
|||||||||||||||
Class A
|
Class B
|
Class A
|
Class B
|
|||||||||||||
(in thousands, except per share data)
|
||||||||||||||||
Basic (loss) earnings per share:
|
||||||||||||||||
Numerator:
|
||||||||||||||||
Allocation of net (loss) income
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||
Denominator:
|
||||||||||||||||
Weighted-average shares outstanding
|
|
|
|
|
||||||||||||
Basic (loss) earnings per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||
Diluted (loss) earnings per share:
|
||||||||||||||||
Numerator:
|
||||||||||||||||
Allocation of net (loss) income
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||
Denominator:
|
||||||||||||||||
Number of shares used in basic computation
|
|
|
|
|
||||||||||||
Weighted-average shares effect of dilutive securities:
|
||||||||||||||||
Director and employee stock options
|
|
|
|
|
||||||||||||
Number of shares used in diluted computation
|
|
|
|
|
||||||||||||
Diluted (loss) earnings per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Number of options to purchase Class A shares excluded
|
|
|
|
|
4 - |
Reinsurance
|
• |
excess of loss reinsurance, under which Donegal Mutual and our insurance subsidiaries recover losses over a set retention of $
|
•
|
catastrophe reinsurance, under which Donegal Mutual and our insurance subsidiaries recover
|
5 - |
Investments
|
Amortized Cost
|
Gross Unrealized
Gains
|
Gross Unrealized
Losses
|
Estimated Fair
Value
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Held to Maturity
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Obligations of states and political subdivisions
|
|
|
|
|
||||||||||||
Corporate securities
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
|
|
|
||||||||||||
Totals
|
$
|
|
$
|
|
$
|
|
$
|
|
Amortized Cost
|
Gross Unrealized
Gains
|
Gross Unrealized
Losses
|
Estimated Fair
Value
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Available for Sale
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Obligations of states and political subdivisions
|
|
|
|
|
||||||||||||
Corporate securities
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
|
|
|
||||||||||||
Totals
|
$
|
|
$
|
|
$
|
|
$
|
|
Amortized Cost
|
Gross Unrealized
Gains
|
Gross Unrealized
Losses
|
Estimated Fair
Value
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Held to Maturity
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Obligations of states and political subdivisions
|
|
|
|
|
||||||||||||
Corporate securities
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
|
|
|
||||||||||||
Totals
|
$
|
|
$
|
|
$
|
|
$
|
|
Amortized Cost
|
Gross Unrealized
Gains
|
Gross Unrealized
Losses
|
Estimated Fair
Value
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Available for Sale
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Obligations of states and political subdivisions
|
|
|
|
|
||||||||||||
Corporate securities
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
|
|
|
||||||||||||
Totals
|
$
|
|
$
|
|
$
|
|
$
|
|
Amortized Cost
|
Estimated Fair
Value
|
|||||||
(in thousands)
|
||||||||
Held to maturity
|
||||||||
Due in one year or less
|
$
|
|
$
|
|
||||
Due after one year through five years
|
|
|
||||||
Due after five years through ten years
|
|
|
||||||
Due after ten years
|
|
|
||||||
Mortgage-backed securities
|
|
|
||||||
Total held to maturity
|
$
|
|
$
|
|
||||
Available for sale
|
||||||||
Due in one year or less
|
$
|
|
$
|
|
||||
Due after one year through five years
|
|
|
||||||
Due after five years through ten years
|
|
|
||||||
Due after ten years
|
|
|
||||||
Mortgage-backed securities
|
|
|
||||||
Total available for sale
|
$
|
|
$
|
|
Cost
|
Gross Gains
|
Gross Losses
|
Estimated Fair
Value
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Equity securities
|
$
|
|
$
|
|
$
|
|
$
|
|
Cost
|
Gross Gains
|
Gross Losses
|
Estimated Fair
Value
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Equity securities
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Gross realized gains:
|
||||||||||||||||
Fixed maturities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Equity securities
|
|
|
|
|
||||||||||||
Real estate |
||||||||||||||||
|
|
|
|
|
||||||||||||
Gross realized losses:
|
||||||||||||||||
Fixed maturities
|
|
|
|
|
||||||||||||
Equity securities
|
|
|
|
|
||||||||||||
|
|
|
|
|||||||||||||
Net realized gains
|
|
|
|
|
||||||||||||
Gross unrealized gains on equity securities |
||||||||||||||||
Gross unrealized losses on equity securities |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net investment (losses) gains |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ |
Less Than 12 Months
|
More Than 12 Months
|
|||||||||||||||
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
|||||||||||||
(in thousands)
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Obligations of states and political subdivisions
|
|
|
|
|
||||||||||||
Corporate securities
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
|
|
|
||||||||||||
Totals
|
$
|
|
$
|
|
$
|
|
$
|
|
Less Than 12 Months
|
More Than 12 Months
|
|||||||||||||||
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
|||||||||||||
(in thousands)
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Obligations of states and political subdivisions
|
|
|
|
|
||||||||||||
Corporate securities
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
|
|
|
||||||||||||
Totals
|
$
|
|
$
|
|
$
|
|
$
|
|
6 -
|
Segment Information
|
Three Months Ended September 30,
|
||||||||
2022
|
2021
|
|||||||
(in thousands)
|
||||||||
Revenues:
|
||||||||
Premiums earned:
|
||||||||
Commercial lines
|
$
|
|
$
|
|
||||
Personal lines
|
|
|
||||||
GAAP premiums earned
|
|
|
||||||
Net investment income
|
|
|
||||||
Investment losses
|
(
|
)
|
(
|
)
|
||||
Other
|
|
|
||||||
Total revenues
|
$
|
|
$
|
|
||||
Loss before income tax benefit:
|
||||||||
Underwriting loss:
|
||||||||
Commercial lines
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Personal lines
|
(
|
)
|
(
|
)
|
||||
SAP underwriting loss
|
(
|
)
|
(
|
)
|
||||
GAAP adjustments
|
|
|
||||||
GAAP underwriting loss
|
(
|
)
|
(
|
)
|
||||
Net investment income
|
|
|
||||||
Investment losses
|
(
|
)
|
(
|
)
|
||||
Other
|
|
|
||||||
Loss before income tax benefit
|
$
|
(
|
)
|
$
|
(
|
)
|
Nine Months Ended September 30,
|
||||||||
2022
|
2021
|
|||||||
(in thousands)
|
||||||||
Revenues:
|
||||||||
Premiums earned:
|
||||||||
Commercial lines
|
$
|
|
$
|
|
||||
Personal lines
|
|
|
||||||
GAAP premiums earned
|
|
|
||||||
Net investment income
|
|
|
||||||
Investment (losses) gains
|
(
|
)
|
|
|||||
Other
|
|
|
||||||
Total revenues
|
$
|
|
$
|
|
||||
(Loss) income before income tax (benefit) expense:
|
||||||||
Underwriting (loss) income:
|
||||||||
Commercial lines
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Personal lines
|
(
|
)
|
|
|||||
SAP underwriting loss
|
(
|
)
|
(
|
)
|
||||
GAAP adjustments
|
|
|
||||||
GAAP underwriting loss
|
(
|
)
|
(
|
)
|
||||
Net investment income
|
|
|
||||||
Investment (losses) gains
|
(
|
)
|
|
|||||
Other
|
|
|
||||||
(Loss) income before income tax (benefit) expense
|
$
|
(
|
)
|
$
|
|
7 -
|
Borrowings
|
FHLB of Pittsburgh stock purchased and owned
|
$
|
|
||
Collateral pledged, at par (carrying value $
|
|
|||
Borrowing capacity currently available
|
|
8 -
|
Share–Based Compensation
|
9 - |
Fair Value Measurements
|
Fair Value Measurements Using
|
||||||||||||||||
Fair Value
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
Significant Other
Observable
Inputs (Level 2)
|
Significant
Unobservable
Inputs (Level 3)
|
|||||||||||||
(in thousands)
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Obligations of states and political subdivisions
|
|
|
|
|
||||||||||||
Corporate securities
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
|
|
|
||||||||||||
Equity securities
|
|
|
|
|
||||||||||||
Total investments in the fair value hierarchy
|
$
|
|
$
|
|
$
|
|
$
|
|
Fair Value Measurements Using
|
||||||||||||||||
Fair Value
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
Significant Other
Observable
Inputs (Level 2)
|
Significant
Unobservable
Inputs (Level 3)
|
|||||||||||||
(in thousands)
|
||||||||||||||||
U.S. Treasury securities and obligations of U.S. government corporations and agencies
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Obligations of states and political subdivisions
|
|
|
|
|
||||||||||||
Corporate securities
|
|
|
|
|
||||||||||||
Mortgage-backed securities
|
|
|
|
|
||||||||||||
Equity securities
|
|
|
|
|
||||||||||||
Totals
|
$
|
|
$
|
|
$
|
|
$
|
|
10 - |
Income Taxes
|
11 -
|
Liabilities for Losses and Loss Expenses
|
Nine Months Ended September 30,
|
||||||||
2022
|
2021
|
|||||||
(in thousands)
|
||||||||
Balance at January 1
|
$
|
|
$
|
|
||||
Less reinsurance recoverable
|
(
|
)
|
(
|
)
|
||||
Net balance at January 1
|
|
|
||||||
Incurred related to:
|
||||||||
Current year
|
|
|
||||||
Prior years
|
(
|
)
|
(
|
)
|
||||
Total incurred
|
|
|
||||||
Paid related to:
|
||||||||
Current year
|
|
|
||||||
Prior years
|
|
|
||||||
Total paid
|
|
|
||||||
Net balance at end of period
|
|
|
||||||
Plus reinsurance recoverable
|
|
|
||||||
Balance at end of period
|
$
|
|
$
|
|
12 - |
Impact of New Accounting Standards
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
September 30,
2022
|
December 31,
2021
|
|||||||
(in thousands)
|
||||||||
Commercial lines:
|
||||||||
Automobile
|
$
|
177,188
|
$
|
172,302
|
||||
Workers’ compensation
|
123,784
|
122,398
|
||||||
Commercial multi-peril
|
189,906
|
168,445
|
||||||
Other
|
25,220
|
18,530
|
||||||
Total commercial lines
|
516,098
|
481,675
|
||||||
Personal lines:
|
||||||||
Automobile
|
109,444
|
109,915
|
||||||
Homeowners
|
28,743
|
26,169
|
||||||
Other
|
8,140
|
8,600
|
||||||
Total personal lines
|
146,327
|
144,684
|
||||||
Total commercial and personal lines
|
662,425
|
626,359
|
||||||
Plus reinsurance recoverable
|
445,701
|
451,261
|
||||||
Total liabilities for losses and loss expenses
|
$
|
1,108,126
|
$
|
1,077,620
|
Percentage Change in Loss
and Loss Expense Reserves
Net of Reinsurance |
Adjusted Loss and Loss
Expense Reserves Net of
Reinsurance at
September 30, 2022
|
Percentage Change
in Stockholders’ Equity at
September 30, 2022(1)
|
Adjusted Loss and Loss
Expense Reserves Net of
Reinsurance at
December 31, 2021
|
Percentage Change
in Stockholders’ Equity at
December 31, 2021(1)
|
||||||||||||||
(dollars in thousands)
|
||||||||||||||||||
(10.0)%
|
|
$
|
596,183
|
10.9%
|
|
$
|
563,723
|
9.3%
|
|
|||||||||
(7.5)
|
|
612,743
|
8.2
|
579,382
|
7.0
|
|||||||||||||
(5.0)
|
|
629,304
|
5.4
|
595,041
|
4.7
|
|||||||||||||
(2.5)
|
|
645,864
|
2.7
|
610,700
|
2.3
|
|||||||||||||
|
Base
|
662,425
|
—
|
626,359
|
—
|
|||||||||||||
2.5
|
678,986
|
(2.7)
|
|
642,018
|
(2.3)
|
|
||||||||||||
5.0
|
695,546
|
(5.4)
|
|
657,677
|
(4.7)
|
|
||||||||||||
7.5
|
712,107
|
(8.2)
|
|
673,336
|
(7.0)
|
|
||||||||||||
10.0
|
728,668
|
(10.9)
|
|
688,995
|
(9.3)
|
|
(1) |
Net of income tax effect.
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
(in thousands)
|
(in thousands)
|
|||||||||||||||
Net premiums earned
|
$
|
206,122
|
$
|
196,235
|
$
|
609,499
|
$
|
575,975
|
||||||||
Change in net unearned premiums
|
107
|
780
|
33,618
|
46,507
|
||||||||||||
Net premiums written
|
$
|
206,229
|
$
|
197,015
|
$
|
643,117
|
$
|
622,482
|
• |
the statutory loss ratio, which is the ratio of calendar-year net incurred losses and loss expenses, excluding anticipated salvage and subrogation recoveries, to net premiums earned;
|
• |
the statutory expense ratio, which is the ratio of expenses incurred for net commissions, premium taxes and underwriting expenses to net premiums written; and
|
• |
the statutory dividend ratio, which is the ratio of dividends to holders of workers’ compensation policies to net premiums earned.
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
GAAP Combined Ratios (Total Lines)
|
||||||||||||||||
Loss ratio (non-weather)
|
66.2
|
%
|
66.3
|
%
|
60.4
|
%
|
59.8
|
%
|
||||||||
Loss ratio (weather-related)
|
9.4
|
9.2
|
7.7
|
6.4
|
||||||||||||
Expense ratio
|
33.4
|
31.5
|
34.7
|
33.9
|
||||||||||||
Dividend ratio
|
0.6
|
0.7
|
0.7
|
0.7
|
||||||||||||
Combined ratio
|
109.6
|
%
|
107.7
|
%
|
103.5
|
%
|
100.8
|
%
|
||||||||
Statutory Combined Ratios
|
||||||||||||||||
Commercial lines:
|
||||||||||||||||
Automobile
|
107.0
|
%
|
111.9
|
%
|
98.7
|
%
|
106.7
|
%
|
||||||||
Workers’ compensation
|
105.9
|
109.0
|
93.9
|
96.0
|
||||||||||||
Commercial multi-peril
|
125.0
|
116.9
|
114.9
|
106.5
|
||||||||||||
Other
|
85.9
|
64.0
|
81.9
|
67.2
|
||||||||||||
Total commercial lines
|
112.1
|
109.4
|
102.4
|
101.1
|
||||||||||||
Personal lines:
|
||||||||||||||||
Automobile
|
103.1
|
102.0
|
100.2
|
95.4
|
||||||||||||
Homeowners
|
125.0
|
117.5
|
118.8
|
107.4
|
||||||||||||
Other
|
54.6
|
65.4
|
49.9
|
72.2
|
||||||||||||
Total personal lines
|
107.8
|
105.2
|
103.4
|
98.2
|
||||||||||||
Total commercial and personal lines
|
110.1
|
107.7
|
102.8
|
100.0
|
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 4. |
Controls and Procedures.
|
Item 1. |
Legal Proceedings.
|
Item 1A. |
Risk Factors.
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Period
|
(a) Total Number
of Shares (or Units)
Purchased
|
(b) Average Price Paid per
Share (or Unit)
|
(c) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced Plans
or Programs
|
(d) Maximum Number (or
Approximate Dollar
Value) of Shares (or Units)
that May Yet Be
Purchased Under the
Plans or Programs
|
||||
Month #1 July 1-31, 2022
|
Class A – None
Class B – None
|
Class A – None
Class B – None
|
Class A – None
Class B – None
|
|||||
Month #2 August 1-31, 2022
|
Class A – 310,408
Class B – None
|
Class A – $14.99
Class B – None
|
Class A – 310,408
Class B – None
|
(1)
|
||||
Month #3
September 1-30, 2022
|
Class A – 98,785
Class B – None
|
Class A – $14.49
Class B – None
|
Class A – 98,785
Class B – None
|
(1)
|
||||
Total
|
Class A – 409,193
Class B – None
|
Class A – $14.87
Class B –None
|
Class A – 409,193
Class B – None
|
(1) |
Donegal Mutual purchased these shares pursuant to its disclosure on April 29, 2022 that it will, at its discretion, purchase shares of our Class A common stock and Class B common stock at market prices prevailing from time to time in
the open market subject to the provisions of SEC Rule 10b-18 and in privately negotiated transactions. Such disclosure did not stipulate a maximum number of shares that may be purchased under this program.
|
Item 3. |
Defaults upon Senior Securities.
|
Item 4. |
Mine Safety Disclosure.
|
Item 5. |
Other Information.
|
Item 6. |
Exhibits.
|
Exhibit No.
|
Description
|
||
Employment Agreement dated as of October 1, 2020 among Donegal Mutual Insurance Company and David W. Sponic.
|
Filed herewith
|
||
Certification of Chief Executive Officer
|
Filed herewith
|
||
Certification of Chief Financial Officer
|
Filed herewith
|
||
Statement of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Title 18 of the United States Code
|
Filed herewith
|
||
Statement of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Title 18 of the United States Code
|
Filed herewith
|
||
Exhibit 101.INS
|
XBRL Instance Document
|
Filed herewith
|
|
Exhibit 101.SCH
|
XBRL Taxonomy Extension Schema Document
|
Filed herewith
|
|
Exhibit 101.PRE
|
XBRL Taxonomy Presentation Linkbase Document
|
Filed herewith
|
|
Exhibit 101.CAL
|
XBRL Taxonomy Calculation Linkbase Document
|
Filed herewith
|
|
Exhibit 101.LAB
|
XBRL Taxonomy Label Linkbase Document
|
Filed herewith
|
|
Exhibit 101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
Filed herewith
|
|
Exhibit 104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
|
Filed herewith
|
DONEGAL GROUP INC.
|
||
November 4, 2022
|
By:
|
/s/ Kevin G. Burke
|
Kevin G. Burke, President and Chief Executive Officer
|
November 4, 2022
|
By:
|
/s/ Jeffrey D. Miller
|
Jeffrey D. Miller, Executive Vice President
|
||
and Chief Financial Officer
|