MARIETTA, Pa., July 21 /PRNewswire-FirstCall/ -- Donegal Group Inc. (NASDAQ:DGICANASDAQ:DGICB) today reported that its net income for the second quarter ended June 30, 2006 increased 14.8% to $10,220,583, or $.40 per share on a diluted basis, compared to $8,903,275, or $.36 per share on a diluted basis, for the second quarter of 2005. Net income for the second quarter of 2006 represented record earnings for any quarterly period in the Company's history.
The Company's second quarter net income reflected a continuation of excellent underwriting results in all lines of business. These results were achieved in spite of an increase in weather-related claims of approximately $1.0 million in the second quarter of 2006 compared to the second quarter of 2005, primarily related to the impact of several significant weather events in the Midwest and Mid-Atlantic regions. Revenues for the second quarter of 2006 were $81,860,487, an increase of 3.0% over the year-earlier period, with net premiums earned of $75,061,105, a 2.2% increase over the second quarter of 2005.
The Company's combined ratio reached a record quarterly low of 88.0% for the second quarter of 2006, comparing favorably to the 89.6% reported for the second quarter of 2005. The Company's loss ratio for the second quarter of 2006 was 54.3%, relatively unchanged from the record low loss ratio of 54.2% posted for the second quarter of 2005. The Company's expense ratio decreased to 33.5% for the second quarter of 2006, compared to 35.0% for the second quarter of 2005, reflecting savings from expense controls initiated in 2005 and a decrease in estimated guaranty fund assessments.
Net investment income increased to $5,054,284 for the second quarter of 2006, an increase of 16.0% over the $4,356,628 reported for the second quarter of 2005. Continuing improvements in the short-term interest rate environment contributed to an increase in the Company's average pre-tax investment yield to 3.6% in the second quarter of 2006, compared to 3.4% in the second quarter of 2005. The Company's shift in asset mix to tax-exempt municipal bonds in 2005 allowed the Company to lower its effective tax rate in the second quarter of 2006 to 29.3%, compared to 29.9% in the second quarter of 2005, notwithstanding an increase in income before income tax expense in the second quarter of 2006.
Net income for the six months ended June 30, 2006 was $19,350,770, or $.76 per share on a diluted basis, an increase of 11.7% over the $17,320,363, or $.71 per share on a diluted basis, reported for the six months ended June 30, 2005.
The Company's combined ratio for the first six months of 2006 was 89.2%, compared to the combined ratio of 90.1% for the comparable period in 2005. The Company's loss ratio was 56.2% for the first six months of 2006, virtually unchanged from the 56.0% reported for the first six months of 2005.
"We are pleased to report a record level of earnings in the second quarter, and attribute our favorable results in the first six months of 2006 to our ongoing focus on underwriting discipline in increasingly challenging market conditions. We remain committed to the pursuit of profitable premium growth, whether organic or through various acquisition methods available to us," stated Donald H. Nikolaus, President and Chief Executive Officer of Donegal Group Inc.
The operating results for the second quarter of 2006 contributed to an increase in the Company's book value to $11.85 per common share at June 30, 2006, representing an increase of 9.9% over the Company's book value of $10.78 per common share at June 30, 2005.
The Company's board of directors yesterday approved a quarterly cash dividend payable August 15, 2006 of $.0825 per share of Class A common stock and $.07 per share of Class B common stock to stockholders of record as of the close of business on August 1, 2006.
All 2005 share and per share information has been restated to reflect the effect of a 4-for-3 stock split effected in the form of a 33-1/3% stock dividend on April 26, 2006.
The Company will hold a conference call and webcast on Friday, July 21, 2006, beginning at 11:00 A.M. Eastern Time. You may participate in the conference call by calling 1-800-510-0178 (Passcode 21473844) or listen via Internet by accessing the "Earnings Release Webcast" link in the Investor Relations area of the Company's web site at http://www.donegalgroup.com/. An instant replay of the conference call will be available until July 28, 2006 by calling 1-888-286-8010 (Passcode 84963058).
Donegal Group Inc. is an insurance holding company whose insurance subsidiaries offer personal and commercial property and casualty lines of insurance in five Mid-Atlantic states (Delaware, Maryland, New Hampshire, New York and Pennsylvania), eight Southeastern states (Alabama, Georgia, Louisiana, North Carolina, South Carolina, Tennessee, Virginia and West Virginia) and five Midwestern states (Iowa, Nebraska, Ohio, Oklahoma and South Dakota).
All statements contained in this press release that are not historic facts are based on current expectations. Such statements are forward-looking in nature (as defined in the Private Securities Litigation Reform Act of 1995) and necessarily involve risks and uncertainties. Actual results could vary materially. The factors that could cause actual results to vary materially include, but are not limited to, the ability of the Company to maintain profitable operations, the adequacy of the Company's reserves for losses and loss adjustment expenses, business and economic conditions in the areas in which the Company operates, severe weather events, competition from various insurance and non-insurance businesses, terrorism, the availability and cost of reinsurance, legal and judicial developments, changes in regulatory requirements and other risks that are described from time to time in the Company's filings with the Securities and Exchange Commission. The Company disclaims any obligation to update such statements or to announce publicly the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
Donegal Group Inc. Financial Highlights Three Months Ended June 30
2006 2005* Net premiums earned $75,061,105 $73,438,090
Investment income, net of investment
expenses 5,054,284 4,356,628
Net realized investment gains 407,248 420,061
Total revenues 81,860,487 79,492,080 Net income $10,220,583 $8,903,275 Net income per common share:
Basic $0.41 $0.37
Diluted $0.40 $0.36
Six Months Ended June 30
2006 2005* Net premiums earned $149,574,954 $145,200,613
Investment income, net of investment
expenses 10,038,812 8,764,096
Net realized investment gains 882,047 1,110,352
Total revenues 163,143,382 157,571,138 Net income $19,350,770 $17,320,363 Net income per common share:
Basic $0.78 $0.72
Diluted $0.76 $0.71 * Per share information restated for 4-for-3 stock split Donegal Group Inc. Consolidated Statements of Income
(unaudited; in thousands, except share data) Quarter Ended June 30
2006 2005* Net premiums earned $75,061 $73,438
Investment income, net of investment
expenses 5,054 4,357
Net realized investment gains 407 420
Lease income 242 236
Installment payment fees 1,096 1,041
Total revenues 81,860 79,492 Net losses and loss expenses 40,784 39,808
Amortization of deferred policy
acquisition costs 11,982 11,736
Other underwriting expenses 13,115 13,991
Other expenses 671 460
Policyholder dividends 150 256
Interest 692 543
Total expenses 67,394 66,794 Income before income tax expense 14,466 12,698
Income tax expense 4,245 3,795 Net income $10,221 $8,903 Net income per common share:
Basic $0.41 $0.37
Diluted $0.40 $0.36 Supplementary Financial Analysts' Data Weighted average number of shares
outstanding:
Basic 24,902,458 23,966,427
Diluted 25,550,751 24,715,696 Net written premiums $80,091 $80,309 Book value per common share at end of
period $11.85 $10.78 * Share and per share information restated for 4-for-3 stock split Donegal Group Inc. Consolidated Statements of Income
(unaudited; in thousands, except share data) Six Months Ended June 30
2006 2005* Net premiums earned $149,575 $145,201
Investment income, net of investment
expenses 10,039 8,764
Net realized investment gains 882 1,110
Lease income 484 465
Installment payment fees 2,163 2,031
Total revenues 163,143 157,571 Net losses and loss expenses 84,072 81,346
Amortization of deferred policy
acquisition costs 23,868 23,222
Other underwriting expenses 25,017 25,645
Other expenses 1,064 890
Policyholder dividends 522 608
Interest 1,336 1,041
Total expenses 135,879 132,752 Income before income tax expense 27,264 24,819
Income tax expense 7,913 7,499 Net income $19,351 $17,320 Net income per common share:
Basic $0.78 $0.72
Diluted $0.76 $0.71 Supplementary Financial Analysts' Data Weighted average number of shares
outstanding:
Basic 24,772,961 23,947,927
Diluted 25,443,092 24,673,537 Net written premiums $156,269 $154,807 Book value per common share at end of
period $11.85 $10.78 * Share and per share information restated for 4-for-3 stock split Donegal Group Inc. Consolidated Balance Sheets
(unaudited; in thousands) June 30, December 31,
2006 2005* ASSETS:
Investments:
Fixed maturities:
Held to maturity, at
amortized cost $177,171 $180,182
Available for sale, at fair
value 300,273 295,097
Equity securities, at fair value 41,356 33,371
Investments in affiliates 7,998 8,442
Short-term investments, at cost,
which approximates fair value 34,456 30,654
Total investments 561,254 547,746
Cash 3,152 3,811
Premiums receivable 49,337 47,124
Reinsurance receivable 104,269 94,137
Accrued investment income 5,353 5,521
Deferred policy acquisition costs 24,378 23,477
Prepaid reinsurance premiums 43,798 40,063
Property and equipment, net 5,184 5,234
Deferred tax asset, net 13,435 11,533
Due from affiliate 1,834 -
Other assets 6,692 2,776
Total assets $818,686 $781,422 Donegal Group Inc. Consolidated Balance Sheets (continued)
(unaudited; in thousands) June 30, December 31,
2006 2005* LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss expenses $272,823 $265,730
Unearned premiums 197,089 186,660
Accrued expenses 10,268 12,706
Subordinated debentures 30,929 30,929
Due to affiliate - 728
Other liabilities 10,209 6,773
Total liabilities 521,318 503,526
Stockholders' equity:
Preferred stock - -
Class A common stock 197 192
Class B common stock 56 56
Additional paid-in capital 147,868 141,933
Accumulated other comprehensive
income (loss) (1,254) 2,532
Retained earnings 151,393 134,075
Treasury stock, at cost (892) (892)
Total stockholders' equity 297,368 277,896
Total liabilities and
stockholders' equity $818,686 $781,422 * Capital accounts restated for 4-for-3 stock split
DATASOURCE: Donegal Group Inc.
CONTACT: Jeffrey D. Miller, Senior Vice President & Chief Financial Officer, Donegal Group, +1-717-426-1931 or Fax +1-717-426-7009 Web site: http://www.donegalgroup.com/
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