Donegal Group Inc 10-Q for FY2024 Q3

Donegal Group Inc (DGICA)

10-Q 2024-11-06 For: 2024-09-30

Added on April 12, 2026

About this 10-Q

Donegal Group Inc filed this 10-Q on November 6, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).

Headline figures

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

Revenue: $251.74M; up 7.6% from $233.93M a year earlier
Net income: $16.75M; compared with a net loss of $805.3K 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	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults upon Senior Securities	35
Item 4.	Mine Safety Disclosure	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
Signatures		37

	September 30, 2024			December 31, 2023
	(Unaudited)
Assets
Investments
Fixed maturities
Held to maturity, at amortized cost (net of allowance for expected credit losses of $1,483,475 and $1,325,847)	$	694,662,557		$	679,497,038
Available for sale, at fair value		622,840,325			589,348,243
Equity securities, at fair value		35,957,068			25,902,956
Short-term investments, at cost, which approximates fair value		15,804,785			32,305,408
Total investments		1,369,264,735			1,327,053,645
Cash		28,650,774			23,792,273
Accrued investment income		10,810,293			9,945,714
Premiums receivable		194,253,985			179,591,821
Reinsurance receivable (net of allowance for expected credit losses of $942,804 and $1,394,074)		434,077,660			441,431,334
Deferred policy acquisition costs		78,484,456			75,043,404
Deferred tax asset, net		16,287,979			19,532,525
Prepaid reinsurance premiums		185,363,903			168,724,465
Property and equipment, net		2,517,163			2,633,405
Accounts receivable - securities		—			1,501,079
Federal income taxes recoverable		2,375,684			8,102,321
Due from affiliate		17,399,612			1,907,527
Goodwill		5,625,354			5,625,354
Other intangible assets		958,010			958,010
Other		56,421			451,011
Total assets	$	2,346,126,029		$	2,266,293,888
Liabilities and Stockholders’ Equity
Liabilities
Losses and loss expenses	$	1,134,852,442		$	1,126,156,838
Unearned premiums		646,870,410			599,411,468
Accrued expenses		2,987,398			3,946,974
Reinsurance balances payable		3,389,828			8,758,976
Borrowings under lines of credit		35,000,000			35,000,000
Cash dividends declared to stockholders		—			5,569,992
Other		9,655,905			7,704,286
Total liabilities		1,832,755,983			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 31,154,488 and 30,764,555 shares and outstanding 28,151,900 and 27,761,967 shares		311,545			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		342,186,402			335,694,478
Accumulated other comprehensive loss		(20,951,289	)		(32,881,822	)
Retained earnings		232,993,253			217,794,917
Treasury stock, at cost		(41,226,357	)		(41,226,357	)
Total stockholders’ equity		513,370,046			479,745,354
Total liabilities and stockholders’ equity	$	2,346,126,029		$	2,266,293,888

	Three Months Ended September 30,
	2024		2023
Revenues:
Net premiums earned	$	237,957,051	$	224,392,849
Investment income, net of investment expenses		10,826,991		10,536,488
Net investment gains (losses) (includes ($69,478) and ($237,611) accumulated other comprehensive income reclassifications)		1,875,466		(1,242,521	)
Lease income		77,335		85,663
Installment payment fees		1,000,702		155,771
Total revenues		251,737,545		233,928,250
Expenses:
Net losses and loss expenses		146,425,777		156,683,024
Amortization of deferred policy acquisition costs		40,200,000		39,332,000
Other underwriting expenses		41,827,018		37,155,385
Policyholder dividends		1,006,645		1,399,310
Interest		367,583		156,318
Other expenses, net		1,499,217		207,127
Total expenses		231,326,240		234,933,164
Income (loss) before income tax expense (benefit)		20,411,305		(1,004,914	)
Income tax expense (benefit) (includes $14,590 and $49,898 income tax benefit from reclassification items)		3,659,775		(199,613	)
Net income (loss)	$	16,751,530	$	(805,301	)
Net income (loss) per share:
Class A common stock - basic and diluted	$	0.51	$	(0.02	)
Class B common stock - basic and diluted	$	0.46	$	(0.02	)

	Nine Months Ended September 30,
	2024		2023
Revenues:
Net premiums earned	$	700,016,877	$	655,886,046
Investment income, net of investment expenses		32,867,817		30,143,025
Net investment gains (includes ($65,121) and ($2,289,648) accumulated other comprehensive income reclassifications)		4,725,513		930,302
Lease income		236,662		261,718
Installment payment fees		1,804,091		648,849
Total revenues		739,650,960		687,869,940
Expenses:
Net losses and loss expenses		462,682,511		446,023,609
Amortization of deferred policy acquisition costs		120,458,000		115,065,000
Other underwriting expenses		117,604,295		113,715,159
Policyholder dividends		3,247,853		4,088,288
Interest		676,766		463,911
Other expenses, net		2,309,392		968,976
Total expenses		706,978,817		680,324,943
Income before income tax expense		32,672,143		7,544,997
Income tax expense (includes $13,675 and $480,826 income tax benefit from reclassification items)		5,812,285		1,149,279
Net income	$	26,859,858	$	6,395,718
Net income per share:
Class A common stock - basic	$	0.82	$	0.20
Class A common stock - diluted	$	0.81	$	0.20
Class B common stock - basic and diluted	$	0.74	$	0.17

	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
Issuance of common stock (stock compensation plans)		33,899		—		339		—		370,784		—			—			—			371,123
Share-based compensation		257,919		—		2,579		—		3,939,010		—			—			—			3,941,589
Net income		—		—		—		—		—		—			16,751,530			—			16,751,530
Cash dividends declared		—		—		—		—		—		—			(5,678,338	)		—			(5,678,338	)
Grant of stock options		—		—		—		—		103,658		—			(103,658	)		—			—
Other comprehensive income		—		—		—		—		—		13,908,275			—			—			13,908,275
Balance, September 30, 2024		31,154,488		5,649,240	$	311,545	$	56,492	$	342,186,402	$	(20,951,289	)	$	232,993,253		$	(41,226,357	)	$	513,370,046

	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	$	88,941	$	53	$	88,994	$	109	$	6,554	$	82,549
Obligations of states and political subdivisions		374,231		267		374,498		1,487		41,220		334,765
Corporate securities		219,807		1,156		220,963		1,477		9,254		213,186
Mortgage-backed securities		11,684		7		11,691		69		214		11,546
Totals	$	694,663	$	1,483	$	696,146	$	3,142	$	57,242	$	642,046

	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	$	87,106	$	458	$	2,895	$	84,669
Obligations of states and political subdivisions		41,761		12		3,231		38,542
Corporate securities		214,243		586		8,420		206,409
Mortgage-backed securities		305,157		1,590		13,527		293,220
Totals	$	648,267	$	2,646	$	28,073	$	622,840

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	23,951	$	12,006	$	—	$	35,957

	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	$	2,498	$	2	$	119,191	$	9,447
Obligations of states and political subdivisions		2,854		40		308,534		44,411
Corporate securities		8,796		202		331,624		17,472
Mortgage-backed securities		5,970		17		164,487		13,724
Totals	$	20,118	$	261	$	923,836	$	85,054

FHLB of Pittsburgh stock purchased and owned	$	1,605,000
Collateral pledged, at par (carrying value $43,441,287)		45,732,251
Borrowing capacity currently available		6,086,525

	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	$	84,669	$	—	$	84,669	$	—
Obligations of states and political subdivisions		38,542		—		38,542		—
Corporate securities		206,409		—		206,409		—
Mortgage-backed securities		293,220		—		293,220		—
Equity securities		35,957		33,952		2,005		—
Total investments in the fair value hierarchy	$	658,797	$	33,952	$	624,845	$	—

	At and For the Three Months Ended September 30, 2024				At and For the Three Months Ended September 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	$	690,580	$	1,354	$	685,402	$	1,324
Current period change for expected credit losses				129				35
Balance at end of period	$	694,663	$	1,483	$	683,912	$	1,359

	Nine Months Ended September 30,
	2024			2023
Cash Flows from Operating Activities:
Net income	$	26,859,858		$	6,395,718
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash items		2,877,843			3,215,399
Net investment gains		(4,725,513	)		(930,302	)
Changes in assets and liabilities:
Losses and loss expenses		8,695,604			(7,691,440	)
Unearned premiums		47,458,942			39,672,853
Premiums receivable		(14,662,164	)		(14,787,307	)
Deferred acquisition costs		(3,441,052	)		(4,750,766	)
Deferred income taxes		73,149			600,019
Reinsurance receivable		7,353,674			17,501,773
Prepaid reinsurance premiums		(16,639,438	)		(12,555,645	)
Accrued investment income		(864,579	)		(1,615,715	)
Due from affiliate		(15,492,085	)		(3,983,806	)
Reinsurance balances payable		(5,369,148	)		3,958,666
Current income taxes		5,726,637			536,759
Accrued expenses		(959,576	)		(119,166	)
Other, net		2,346,248			580,936
Net adjustments		12,378,542			19,632,258
Net cash provided by operating activities		39,238,400			26,027,976
Cash Flows from Investing Activities:
Purchases of fixed maturities, held to maturity		(38,788,763	)		(25,226,609	)
Purchases of fixed maturities, available for sale		(103,059,218	)		(131,155,483	)
Purchases of equity securities, available for sale		(6,680,114	)		(5,128,994	)
Maturity of fixed maturities:
Held to maturity		23,520,685			29,144,970
Available for sale		80,297,679			41,318,216
Sales of fixed maturities:
Available for sale		3,943,799			28,154,556
Sales of equity securities, available for sale		1,574,265			8,080,764
Net purchases of property and equipment		—			(44,701	)
Net sales of short-term investments		16,500,623			36,950,560
Net cash used in investing activities		(22,691,044	)		(17,906,721	)
Cash Flows from Financing Activities:
Cash dividends paid		(16,927,483	)		(16,339,529	)
Issuance of common stock		5,238,628			6,813,772
Net cash used in financing activities		(11,688,855	)		(9,525,757	)

	Amortized Cost		Estimated Fair Value
	(in thousands)
Held to maturity
Due in one year or less	$	23,102	$	22,943
Due after one year through five years		122,463		118,938
Due after five years through ten years		248,220		235,092
Due after ten years		290,670		253,527
Mortgage-backed securities		11,691		11,546
Total held to maturity	$	696,146	$	642,046

Available for sale
Due in one year or less	$	39,282	$	39,006
Due after one year through five years		169,241		163,622
Due after five years through ten years		110,351		105,091
Due after ten years		24,236		21,901
Mortgage-backed securities		305,157		293,220
Total available for sale	$	648,267	$	622,840

	Nine Months Ended September 30,
	2024			2023
	(in thousands)
Revenues:
Premiums earned:
Commercial lines	$	402,982		$	399,427
Personal lines		297,035			256,459
GAAP premiums earned		700,017			655,886
Net investment income		32,868			30,143
Investment gains		4,726			930
Other		2,040			911
Total revenues	$	739,651		$	687,870
Income before income tax expense:
Underwriting loss:
Commercial lines	$	(2,255	)	$	(4,024	)
Personal lines		(7,827	)		(24,950	)
SAP underwriting loss		(10,082	)		(28,974	)
GAAP adjustments		6,106			5,968
GAAP underwriting loss		(3,976	)		(23,006	)
Net investment income		32,868			30,143
Investment gains		4,726			930
Other		(946	)		(522	)
Income before income tax expense	$	32,672		$	7,545

	At and For the Nine Months Ended September 30, 2024				At and For the Nine Months Ended September 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				157				91
Balance at end of period	$	694,663	$	1,483	$	683,912	$	1,359

	At and For the Three Months Ended September 30, 2024				At and For the Three Months Ended September 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	$	440,858	$	932	$	460,681	$	1,567
Current period change for expected credit losses				11				38
Balance at end of period	$	434,078	$	943	$	437,889	$	1,605

Percentage Change in Loss and Loss Expense Reserves Net of Reinsurance	Adjusted Loss and Loss Expense Reserves Net of Reinsurance at September 30, 2024		Percentage Change in Stockholders’ Equity at September 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)%	$	635,348		10.9%	$	620,229		11.3%
(7.5)		652,996		8.1		637,457		8.5
(5.0)		670,645		5.4		654,686		5.7
(2.5)		688,293		2.7		671,914		2.8
Base		705,942		—		689,143		—
2.5		723,591		(2.7)		706,372		(2.8)
5.0		741,239		(5.4)		723,600		(5.7)
7.5		758,888		(8.1)		740,829		(8.5)
10.0		776,536		(10.9)		758,057		(11.3)

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, 2024	Class A – 19,024 Class B – None	Class A – $14.97 Class B – None	Class A – 19,024 Class B – None	(1)

Month #2 August 1-31, 2024	Class A – 146,605 Class B – None	Class A – $14.63 Class B – None	Class A – 146,605 Class B – None	(1)

Month #3 September 1-30, 2024	Class A – 91,215 Class B – None	Class A – $15.23 Class B – None	Class A – 91,215 Class B – None	(1)

Total	Class A – 256,844 Class B – None	Class A – $14.87 Class B – None	Class A – 256,844 Class B – None

Exhibit No.	Description	Reference


Other Exhibits

10.1	Donegal Group Inc. 2024 Agency Stock Purchase Plan.	(a)

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.

November 6, 2024	By:	/s/ Kevin G. Burke
		Kevin G. Burke, President and Chief Executive Officer

November 6, 2024	By:	/s/ Jeffrey D. Miller
		Jeffrey D. Miller, Executive Vice President
		and Chief Financial Officer

Date:	November 6, 2024	/s/ Kevin G. Burke
		Kevin G. Burke, President and Chief Executive Officer

Date: November 6, 2024	/s/ Kevin G. Burke
	Kevin G. Burke, President and Chief Executive Officer