Donegal Group Inc 10-Q for FY2024 Q1

Donegal Group Inc (DGICA)

10-Q 2024-05-03 For: 2024-03-31

Added on April 12, 2026

About this 10-Q

Donegal Group Inc filed this 10-Q on May 3, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).

Headline figures

Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $241.14M; up 7.3% from $224.75M a year earlier
Net income: $5.96M; up 14.5% from net income of $5.2M 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	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults upon Senior Securities	30
Item 4.	Mine Safety Disclosure	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

	March 31, 2024			December 31, 2023
	(Unaudited)
Assets
Investments
Fixed maturities
Held to maturity, at amortized cost (net of allowance for expected credit losses of $1,329,099 and $1,325,847)	$	683,398,852		$	679,497,038
Available for sale, at fair value		600,761,425			589,348,243
Equity securities, at fair value		28,883,318			25,902,956
Short-term investments, at cost, which approximates fair value		18,860,030			32,305,408
Total investments		1,331,903,625			1,327,053,645
Cash		19,805,040			23,792,273
Accrued investment income		10,497,341			9,945,714
Premiums receivable		193,160,160			179,591,821
Reinsurance receivable (net of allowance for expected credit losses of $1,026,016 and $1,394,074)		435,505,126			441,431,334
Deferred policy acquisition costs		78,857,108			75,043,404
Deferred tax asset, net		19,483,755			19,532,525
Prepaid reinsurance premiums		179,757,762			168,724,465
Property and equipment, net		2,594,056			2,633,405
Accounts receivable - securities		32,162			1,501,079
Federal income taxes recoverable		7,271,415			8,102,321
Due from affiliate		8,841,178			1,907,527
Goodwill		5,625,354			5,625,354
Other intangible assets		958,010			958,010
Other		15,961			451,011
Total assets	$	2,294,308,053		$	2,266,293,888
Liabilities and Stockholders’ Equity
Liabilities
Losses and loss expenses	$	1,124,452,191		$	1,126,156,838
Unearned premiums		634,136,621			599,411,468
Accrued expenses		3,685,534			3,946,974
Reinsurance balances payable		4,016,080			8,758,976
Borrowings under lines of credit		35,000,000			35,000,000
Cash dividends declared to stockholders		—			5,569,992
Other		7,931,153			7,704,286
Total liabilities		1,809,221,579			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 30,819,242 and 30,764,555 shares and outstanding 27,816,654 and 27,761,967 shares		308,193			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		336,817,945			335,694,478
Accumulated other comprehensive loss		(34,483,112	)		(32,881,822	)
Retained earnings		223,613,313			217,794,917
Treasury stock, at cost		(41,226,357	)		(41,226,357	)
Total stockholders’ equity		485,086,474			479,745,354
Total liabilities and stockholders’ equity	$	2,294,308,053		$	2,266,293,888

	Three Months Ended March 31,
	2024		2023
Revenues:
Net premiums earned	$	227,748,679	$	215,233,160
Investment income, net of investment expenses		10,972,327		9,449,078
Net investment gains (losses) (includes ($77,051) and ($2,199,673) accumulated other comprehensive income reclassifications)		2,113,378		(331,189	)
Lease income		81,823		89,347
Installment payment fees		224,662		305,375
Total revenues		241,140,869		224,745,771
Expenses:
Net losses and loss expenses		150,896,415		138,105,889
Amortization of deferred policy acquisition costs		39,602,000		37,798,000
Other underwriting expenses		41,739,868		40,611,437
Policyholder dividends		1,054,659		1,343,340
Interest		154,597		152,957
Other expenses, net		444,934		437,715
Total expenses		233,892,473		218,449,338
Income before income tax expense		7,248,396		6,296,433
Income tax expense (includes $16,181 and $461,931 income tax benefit from reclassification items)		1,292,845		1,092,837
Net income	$	5,955,551	$	5,203,596
Net income per share:
Class A common stock - basic and diluted	$	0.18	$	0.16
Class B common stock - basic and diluted	$	0.16	$	0.15

	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

	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		$	91,551		$	55		$	91,606		$	—		$	9,550		$	82,056
Obligations of states and political subdivisions			376,569			266			376,835			1,057			50,664			327,228
Corporate securities			202,093			1,001			203,094			246			15,565			187,775
Mortgage-backed securities			13,186			7			13,193			9			447			12,755
Totals		$	683,399		$	1,329		$	684,728		$	1,312		$	76,226		$	609,814

	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	$	91,561	$	79	$	4,585	$	87,055
Obligations of states and political subdivisions		41,893		10		4,164		37,739
Corporate securities		208,888		74		13,792		195,170
Mortgage-backed securities		300,874		377		20,454		280,797
Totals	$	643,216	$	540	$	42,995	$	600,761

	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		$	91,518		$	54		$	91,572		$	—		$	8,885		$	82,687
Obligations of states and political subdivisions			376,898			266			377,164			1,449			46,845			331,768
Corporate securities			201,847			1,000			202,847			207			14,805			188,249
Mortgage-backed securities			9,234			6			9,240			—			418			8,822
Totals		$	679,497		$	1,326		$	680,823		$	1,656		$	70,953		$	611,526

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	19,631	$	9,315	$	63	$	28,883

	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	$	37,188	$	299	$	125,533	$	13,836
Obligations of states and political subdivisions		29,747		251		304,139		54,577
Corporate securities		18,034		431		343,673		28,926
Mortgage-backed securities		58,891		656		187,697		20,245
Totals	$	143,860	$	1,637	$	961,042	$	117,584

FHLB of Pittsburgh stock purchased and owned	$	1,591,800
Collateral pledged, at par (carrying value $41,087,980)		44,459,589
Borrowing capacity currently available		3,579,560

	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	$	87,055	$	—	$	87,055	$	—
Obligations of states and political subdivisions		37,739		—		37,739		—
Corporate securities		195,170		—		195,170		—
Mortgage-backed securities		280,797		—		280,797		—
Equity securities		28,883		26,891		1,992		—
Total investments in the fair value hierarchy	$	629,644	$	26,891	$	602,753	$	—

	At and For the Three Months Ended March 31, 2024				At and For the Three Months Ended March 31, 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	$	668,439	$	—
Cumulative effect of adoption of updated accounting guidance for credit losses				—				1,268
Current period change for expected credit losses				3				87
Balance at end of period	$	683,399	$	1,329	$	693,779	$	1,355

	Three Months Ended March 31,
	2024			2023
Cash Flows from Operating Activities:
Net income	$	5,955,551		$	5,203,596
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, amortization and other non-cash items		966,911			1,122,609
Net investment (gains) losses		(2,113,378	)		331,189
Changes in assets and liabilities:
Losses and loss expenses		(1,704,647	)		2,488,926
Unearned premiums		34,725,153			32,031,102
Premiums receivable		(13,568,339	)		(15,699,109	)
Deferred acquisition costs		(3,813,704	)		(4,019,366	)
Deferred income taxes		474,439			355,524
Reinsurance receivable		5,926,208			(5,291,035	)
Prepaid reinsurance premiums		(11,033,297	)		(9,960,021	)
Accrued investment income		(551,627	)		(1,322,590	)
Due from affiliate		(6,933,651	)		(7,651,293	)
Reinsurance balances payable		(4,742,896	)		(220,377	)
Current income taxes		830,906			749,813
Accrued expenses		(261,440	)		465,988
Other, net		661,955			734,310
Net adjustments		(1,137,407	)		(5,884,330	)
Net cash provided by (used in) operating activities		4,818,144			(680,734	)
Cash Flows from Investing Activities:
Purchases of fixed maturities, held to maturity		(11,911,672	)		(12,092,863	)
Purchases of fixed maturities, available for sale		(46,490,362	)		(34,354,601	)
Purchases of equity securities, available for sale		(786,680	)		(3,590,015	)
Maturity of fixed maturities:
Held to maturity		8,008,034			6,127,883
Available for sale		30,922,241			12,365,403
Sales of fixed maturities:
Available for sale		2,995,648			748,250
Sales of equity securities, available for sale		—			3,066,129
Net purchases of property and equipment		—			(44,700	)
Net sales of short-term investments		13,445,378			29,183,513
Net cash (used in) provided by investing activities		(3,817,413	)		1,408,999
Cash Flows from Financing Activities:
Cash dividends paid		(5,578,880	)		(5,304,047	)
Issuance of common stock		590,916			2,288,494
Net cash used in financing activities		(4,987,964	)		(3,015,553	)

	Amortized Cost		Estimated Fair Value
	(in thousands)
Held to maturity
Due in one year or less	$	42,228	$	41,549
Due after one year through five years		130,205		121,873
Due after five years through ten years		237,241		216,118
Due after ten years		261,861		217,519
Mortgage-backed securities		13,193		12,755
Total held to maturity	$	684,728	$	609,814

Available for sale
Due in one year or less	$	62,925	$	61,761
Due after one year through five years		170,058		160,071
Due after five years through ten years		86,138		77,937
Due after ten years		23,221		20,195
Mortgage-backed securities		300,874		280,797
Total available for sale	$	643,216	$	600,761

	Three Months Ended March 31,
	2024			2023
	(in thousands)
Revenues:
Premiums earned:
Commercial lines	$	132,092		$	133,187
Personal lines		95,657			82,046
GAAP premiums earned		227,749			215,233
Net investment income		10,972			9,449
Investment gains (losses)		2,113			(331	)
Other		307			395
Total revenues	$	241,141		$	224,746
Income before income tax expense:
Underwriting (loss) gain:
Commercial lines	$	(10,371	)	$	(7,912	)
Personal lines		(532	)		879
SAP underwriting loss		(10,903	)		(7,033	)
GAAP adjustments		5,359			4,407
GAAP underwriting loss		(5,544	)		(2,626	)
Net investment income		10,972			9,449
Investment gains (losses)		2,113			(331	)
Other		(293	)		(196	)
Income before income tax expense	$	7,248		$	6,296

	At and For the Three Months Ended March 31, 2024					At and For the Three Months Ended March 31, 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	$	441,431	$	1,394		$	456,522	$	—
Cumulative effect of adoption of updated accounting guidance for credit losses				—					1,132
Current period change for expected credit losses				(368	)				335
Balance at end of period	$	435,505	$	1,026		$	460,681	$	1,467

Percentage Change in Loss and Loss Expense Reserves Net of Reinsurance		Adjusted Loss and Loss Expense Reserves Net of Reinsurance at March 31, 2024		Percentage Change in Stockholders’ Equity at March 31, 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)%	$	624,560		11.3%	$	620,229		11.3%
	(7.5)		641,909		8.5		637,457		8.5
	(5.0)		659,258		5.7		654,686		5.7
	(2.5)		676,607		2.8		671,914		2.8
Base			693,956		—		689,143		—
	2.5		711,305		(2.8)		706,372		(2.8)
	5.0		728,654		(5.7)		723,600		(5.7)
	7.5		746,003		(8.5)		740,829		(8.5)
	10.0		763,352		(11.3)		758,057		(11.3)

Exhibit No.	Description	Reference

Management Contracts and Compensatory Plans or Arrangements

10.1	Donegal Group Inc. 2024 Equity Incentive Plan for Employees.	(a)

10.2	Donegal Group Inc. 2024 Equity Incentive Plan for Directors.	(a)

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.

May 3, 2024	By:	/s/ Kevin G. Burke
		Kevin G. Burke, President and Chief Executive Officer

May 3, 2024	By:	/s/ Jeffrey D. Miller
		Jeffrey D. Miller, Executive Vice President
		and Chief Financial Officer

Date:	May 3, 2024	/s/ Kevin G. Burke
		Kevin G. Burke, President and Chief Executive Officer

Date: May 3, 2024	/s/ Kevin G. Burke
	Kevin G. Burke, President and Chief Executive Officer