Donegal Group Inc 10-Q for FY2024 Q2

Donegal Group Inc (DGICA)

10-Q 2024-08-07 For: 2024-06-30

Added on April 12, 2026

About this 10-Q

Donegal Group Inc filed this 10-Q on August 7, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).

Headline figures

Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $246.77M; up 7.7% from $229.2M a year earlier
Net income: $4.15M; up 107.9% from net income of $2M a year earlier

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Delaware	23-2424711
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Large accelerated filer ☐	Accelerated filer ☑	Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

Title of Each Class	Trading Symbols	Name of Each Exchange on Which Registered

Class A Common Stock, $.01 par value	DGICA	The NASDAQ Global Select Market

Class B Common Stock, $.01 par value	DGICB	The NASDAQ Global Select Market

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults upon Senior Securities	37
Item 4.	Mine Safety Disclosure	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
Signatures		39

	June 30, 2024			December 31, 2023
	(Unaudited)
Assets
Investments
Fixed maturities
Held to maturity, at amortized cost (net of allowance for expected credit losses of $1,353,571 and $1,325,847)	$	690,580,051		$	679,497,038
Available for sale, at fair value		604,168,056			589,348,243
Equity securities, at fair value		32,455,954			25,902,956
Short-term investments, at cost, which approximates fair value		16,570,667			32,305,408
Total investments		1,343,774,728			1,327,053,645
Cash		24,225,596			23,792,273
Accrued investment income		10,323,445			9,945,714
Premiums receivable		203,813,652			179,591,821
Reinsurance receivable (net of allowance for expected credit losses of $932,350 and $1,394,074)		440,857,671			441,431,334
Deferred policy acquisition costs		80,926,482			75,043,404
Deferred tax asset, net		19,710,757			19,532,525
Prepaid reinsurance premiums		186,323,040			168,724,465
Property and equipment, net		2,555,448			2,633,405
Accounts receivable - securities		1,052			1,501,079
Federal income taxes recoverable		6,322,318			8,102,321
Due from affiliate		9,819,685			1,907,527
Goodwill		5,625,354			5,625,354
Other intangible assets		958,010			958,010
Other		15,961			451,011
Total assets	$	2,335,253,199		$	2,266,293,888
Liabilities and Stockholders’ Equity
Liabilities
Losses and loss expenses	$	1,147,418,755		$	1,126,156,838
Unearned premiums		653,579,467			599,411,468
Accrued expenses		3,511,439			3,946,974
Reinsurance balances payable		3,935,320			8,758,976
Borrowings under lines of credit		35,000,000			35,000,000
Cash dividends declared to stockholders		—			5,569,992
Other		7,732,351			7,704,286
Total liabilities		1,851,177,332			1,786,548,534
Stockholders’ Equity
Preferred stock, $0.01 par value, authorized 2,000,000 shares; none issued		—			—
Class A common stock, $0.01 par value, authorized 50,000,000 shares, issued 30,862,670 and 30,764,555 shares and outstanding 27,860,082 and 27,761,967 shares		308,627			307,646
Class B common stock, $0.01 par value, authorized 10,000,000 shares, issued 5,649,240 shares and outstanding 5,576,775 shares		56,492			56,492
Additional paid-in capital		337,772,950			335,694,478
Accumulated other comprehensive loss		(34,859,564	)		(32,881,822	)
Retained earnings		222,023,719			217,794,917
Treasury stock, at cost		(41,226,357	)		(41,226,357	)
Total stockholders’ equity		484,075,867			479,745,354
Total liabilities and stockholders’ equity	$	2,335,253,199		$	2,266,293,888

	Three Months Ended June 30,
	2024		2023
Revenues:
Net premiums earned	$	234,311,147	$	216,260,037
Investment income, net of investment expenses		11,068,499		10,157,459
Net investment gains (includes $81,410 and $147,636 accumulated other comprehensive income reclassifications)		736,669		2,504,012
Lease income		77,504		86,708
Installment payment fees		578,727		187,703
Total revenues		246,772,546		229,195,919
Expenses:
Net losses and loss expenses		165,360,319		151,234,696
Amortization of deferred policy acquisition costs		40,656,000		37,935,000
Other underwriting expenses		34,037,409		35,948,337
Policyholder dividends		1,186,549		1,345,638
Interest		154,586		154,636
Other expenses, net		365,241		324,134
Total expenses		241,760,104		226,942,441
Income before income tax expense		5,012,442		2,253,478
Income tax expense (includes $17,096 and $31,003 income tax expense from reclassification items)		859,665		256,055
Net income	$	4,152,777	$	1,997,423
Net income per share:
Class A common stock - basic and diluted	$	0.13	$	0.06
Class B common stock - basic and diluted	$	0.11	$	0.05

	Six Months Ended June 30,
	2024		2023
Revenues:
Net premiums earned	$	462,059,826	$	431,493,197
Investment income, net of investment expenses		22,040,826		19,606,537
Net investment gains (includes $4,359 and ($2,052,037) accumulated other comprehensive income reclassifications)		2,850,047		2,172,823
Lease income		159,327		176,055
Installment payment fees		803,389		493,078
Total revenues		487,913,415		453,941,690
Expenses:
Net losses and loss expenses		316,256,734		289,340,585
Amortization of deferred policy acquisition costs		80,258,000		75,733,000
Other underwriting expenses		75,777,277		76,559,774
Policyholder dividends		2,241,208		2,688,978
Interest		309,183		307,593
Other expenses, net		810,175		761,849
Total expenses		475,652,577		445,391,779
Income before income tax expense		12,260,838		8,549,911
Income tax expense (includes $915 and ($430,928) income tax expense (benefit) from reclassification items)		2,152,510		1,348,892
Net income	$	10,108,328	$	7,201,019
Net income per share:
Class A common stock - basic and diluted	$	0.31	$	0.22
Class B common stock - basic and diluted	$	0.28	$	0.20

	Class A Shares		Class B Shares		Class A Amount		Class B Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss			Retained Earnings			Treasury Stock			Total Stockholders’ Equity
Balance, December 31, 2023		30,764,555		5,649,240	$	307,646	$	56,492	$	335,694,478	$	(32,881,822	)	$	217,794,917		$	(41,226,357	)	$	479,745,354
Issuance of common stock (stock compensation plans)		38,287		—		383		—		472,740		—			—			—			473,123
Share-based compensation		16,400		—		164		—		522,460		—			—			—			522,624
Net income		—		—		—		—		—		—			5,955,551			—			5,955,551
Cash dividends declared		—		—		—		—		—		—			(8,888	)		—			(8,888	)
Grant of stock options		—		—		—		—		128,267		—			(128,267	)		—			—
Other comprehensive loss		—		—		—		—		—		(1,601,290	)		—			—			(1,601,290	)
Balance, March 31, 2024		30,819,242		5,649,240	$	308,193	$	56,492	$	336,817,945	$	(34,483,112	)	$	223,613,313		$	(41,226,357	)	$	485,086,474
Issuance of common stock (stock compensation plans)		43,428		—		434		—		604,562		—			—			—			604,996
Share-based compensation		—		—		—		—		278,337		—			—			—			278,337
Net income		—		—		—		—		—		—			4,152,777			—			4,152,777
Cash dividends declared		—		—		—		—		—		—			(5,670,265	)		—			(5,670,265	)
Grant of stock options		—		—		—		—		72,106		—			(72,106	)		—			—
Other comprehensive loss		—		—		—		—		—		(376,452	)		—			—			(376,452	)
Balance, June 30, 2024		30,862,670		5,649,240	$	308,627	$	56,492	$	337,772,950	$	(34,859,564	)	$	222,023,719		$	(41,226,357	)	$	484,075,867

	Carrying Value		Allowance for Credit Losses		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	$	93,404	$	56		$	93,460		$	9		$	9,476		$	83,993
Obligations of states and political subdivisions		376,833		269			377,102			625			53,705			324,022
Corporate securities		207,881		1,021			208,902			164			15,883			193,183
Mortgage-backed securities		12,462		8			12,470			—			422			12,048
Totals	$	690,580	$	1,354		$	691,934		$	798		$	79,486		$	613,246

	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	$	94,952	$	42	$	4,476	$	90,518
Obligations of states and political subdivisions		41,827		9		4,503		37,333
Corporate securities		207,842		54		13,258		194,638
Mortgage-backed securities		302,528		106		20,955		281,679
Totals	$	647,149	$	211	$	43,192	$	604,168

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	22,524	$	10,042	$	110	$	32,456

	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	$	40,893	$	316	$	127,737	$	13,636
Obligations of states and political subdivisions		48,038		1,069		286,569		57,139
Corporate securities		43,123		1,031		327,109		28,110
Mortgage-backed securities		64,748		407		207,386		20,970
Totals	$	196,802	$	2,823	$	948,801	$	119,855

FHLB of Pittsburgh stock purchased and owned	$	1,605,000
Collateral pledged, at par (carrying value $39,592,120)		43,096,513
Borrowing capacity currently available		2,220,037

	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	$	90,518	$	—	$	90,518	$	—
Obligations of states and political subdivisions		37,333		—		37,333		—
Corporate securities		194,638		—		194,638		—
Mortgage-backed securities		281,679		—		281,679		—
Equity securities		32,456		30,451		2,005		—
Total investments in the fair value hierarchy	$	636,624	$	30,451	$	606,173	$	—

	At and For the Three Months Ended June 30, 2024				At and For the Three Months Ended June 30, 2023
	Held-to- Maturity, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses		Held-to- Maturity, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses
	(in thousands)
Balance at beginning of period	$	683,399	$	1,329	$	693,779	$	1,355
Current period change for expected credit losses				25				(31	)
Balance at end of period	$	690,580	$	1,354	$	685,402	$	1,324

	Six Months Ended June 30,
	2024			2023
Cash Flows from Operating Activities:
Net income	$	10,108,328		$	7,201,019
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash items		1,897,738			2,191,794
Net investment gains		(2,850,047	)		(2,172,823	)
Changes in assets and liabilities:
Losses and loss expenses		21,261,917			1,637,440
Unearned premiums		54,167,999			46,810,143
Premiums receivable		(24,221,831	)		(21,405,669	)
Deferred acquisition costs		(5,883,078	)		(5,732,813	)
Deferred income taxes		347,507			714,695
Reinsurance receivable		573,663			4,710,479
Prepaid reinsurance premiums		(17,598,575	)		(14,487,216	)
Accrued investment income		(377,731	)		(591,925	)
Due from affiliate		(7,912,158	)		(11,394,864	)
Reinsurance balances payable		(4,823,656	)		3,361,990
Current income taxes		1,780,003			609,196
Accrued expenses		(435,535	)		301,761
Other, net		463,153			1,301,884
Net adjustments		16,389,369			5,854,072
Net cash provided by operating activities		26,497,697			13,055,091
Cash Flows from Investing Activities:
Purchases of fixed maturities, held to maturity		(23,566,350	)		(23,242,218	)
Purchases of fixed maturities, available for sale		(72,190,538	)		(99,497,145	)
Purchases of equity securities, available for sale		(3,679,586	)		(3,608,514	)
Maturity of fixed maturities:
Held to maturity		12,484,869			25,869,261
Available for sale		52,270,575			25,585,850
Sales of fixed maturities:
Available for sale		2,995,648			28,154,556
Sales of equity securities, available for sale		—			4,375,411
Net purchases of property and equipment		—			(44,703	)
Net sales of short-term investments		15,734,741			34,169,777
Net cash used in investing activities		(15,950,641	)		(8,237,725	)
Cash Flows from Financing Activities:
Cash dividends paid		(11,249,145	)		(10,802,920	)
Issuance of common stock		1,135,412			5,610,255
Net cash used in financing activities		(10,113,733	)		(5,192,665	)

	Amortized Cost		Estimated Fair Value
	(in thousands)
Held to maturity
Due in one year or less	$	38,451	$	37,894
Due after one year through five years		130,089		121,597
Due after five years through ten years		242,095		219,387
Due after ten years		268,829		222,320
Mortgage-backed securities		12,470		12,048
Total held to maturity	$	691,934	$	613,246

Available for sale
Due in one year or less	$	57,703	$	56,838
Due after one year through five years		171,272		161,287
Due after five years through ten years		92,540		84,403
Due after ten years		23,106		19,961
Mortgage-backed securities		302,528		281,679
Total available for sale	$	647,149	$	604,168

	Three Months Ended June 30,
	2024			2023
	(in thousands)
Revenues:
Premiums earned:
Commercial lines	$	134,489		$	130,808
Personal lines		99,822			85,452
GAAP premiums earned		234,311			216,260
Net investment income		11,068			10,157
Investment gains		737			2,504
Other		657			275
Total revenues	$	246,773		$	229,196
Income before income tax expense:
Underwriting loss:
Commercial lines	$	(9,319	)	$	(5,429	)
Personal lines		(405	)		(6,424	)
SAP underwriting loss		(9,724	)		(11,853	)
GAAP adjustments		2,795			1,649
GAAP underwriting loss		(6,929	)		(10,204	)
Net investment income		11,068			10,157
Investment gains		737			2,504
Other		136			(204	)
Income before income tax expense	$	5,012		$	2,253

	Six Months Ended June 30,
	2024			2023
	(in thousands)
Revenues:
Premiums earned:
Commercial lines	$	266,581		$	263,995
Personal lines		195,479			167,498
GAAP premiums earned		462,060			431,493
Net investment income		22,041			19,607
Investment gains		2,850			2,173
Other		962			669
Total revenues	$	487,913		$	453,942
Income before income tax expense:
Underwriting loss:
Commercial lines	$	(19,690	)	$	(13,353	)
Personal lines		(937	)		(5,562	)
SAP underwriting loss		(20,627	)		(18,915	)
GAAP adjustments		8,154			6,086
GAAP underwriting loss		(12,473	)		(12,829	)
Net investment income		22,041			19,607
Investment gains		2,850			2,173
Other		(157	)		(401	)
Income before income tax expense	$	12,261		$	8,550

	At and For the Six Months Ended June 30, 2024				At and For the Six Months Ended June 30, 2023
	Held-to- Maturity, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses		Held-to- Maturity, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses
	(in thousands)
Balance at beginning of period	$	679,497	$	1,326	$	688,439	$	—
Cumulative effect of adoption of updated accounting guidance for credit losses				—				1,268
Current period change for expected credit losses				28				56
Balance at end of period	$	690,580	$	1,354	$	685,402	$	1,324

	At and For the Three Months Ended June 30, 2024					At and For the Three Months Ended June 30, 2023
	Reinsurance Receivable, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses			Reinsurance Receivable, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses
	(in thousands)
Balance at beginning of period	$	435,505	$	1,026		$	460,681	$	1,467
Current period change for expected credit losses				(94	)				100
Balance at end of period	$	440,858	$	932		$	450,680	$	1,567

Percentage Change in Loss and Loss Expense Reserves Net of Reinsurance	Adjusted Loss and Loss Expense Reserves Net of Reinsurance at June 30, 2024		Percentage Change in Stockholders’ Equity at June 30, 2024(1)		Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2023		Percentage Change in Stockholders’ Equity at December 31, 2023(1)
(dollars in thousands)
(10.0)%	$	639,016		11.6%	$	620,229		11.3%
(7.5)		656,767		8.7		637,457		8.5
(5.0)		674,517		5.8		654,686		5.7
(2.5)		692,268		2.9		671,914		2.8
Base		710,018		—		689,143		—
2.5		727,768		(2.9)		706,372		(2.8)
5.0		745,519		(5.8)		723,600		(5.7)
7.5		763,269		(8.7)		740,829		(8.5)
10.0		781,020		(11.6)		758,057		(11.3)

Exhibit No.	Description	Reference

Other Exhibits

31.1	Certification of Chief Executive Officer.	Filed herewith

31.2	Certification of Chief Financial Officer.	Filed herewith

32.1	Statement of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Title 18 of the United States Code.	Filed herewith

32.2	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.

August 7, 2024	By:	/s/ Kevin G. Burke
		Kevin G. Burke, President and Chief Executive Officer

August 7, 2024	By:	/s/ Jeffrey D. Miller
		Jeffrey D. Miller, Executive Vice President
		and Chief Financial Officer

Date:	August 7, 2024	/s/ Kevin G. Burke
		Kevin G. Burke,
		President and Chief Executive Officer

Date: August 7, 2024	/s/ Kevin G. Burke
	Kevin G. Burke, President and Chief Executive Officer