Filed pursuant to Rules 424(b)(3) and 424(c)
Registration No. 333-63102
DONEGAL GROUP INC.
2001 AGENCY STOCK PURCHASE PLAN
PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED APRIL 12, 2002
On May 14, 2003, Donegal Group Inc. (the "Company") filed with the
Securities and Exchange Commission a Form 10-Q Quarterly Report for the quarter
ended March 31, 2003, a copy of which, without exhibits, is attached to this
Prospectus Supplement.
This Prospectus Supplement should be read in conjunction with the
Company's Prospectus dated April 12, 2002.
The date of this Prospectus Supplement is June 3, 2003.
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________.
Commission file number 0-15341
DONEGAL GROUP INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 23-2424711
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1195 RIVER ROAD, P.O. BOX 302, MARIETTA, PA 17547-0302
------------------------------------------------------
(Address of principal executive offices) (Zip code)
(717) 426-1931
---------------------------------------------------
(Registrant's telephone number, including area code)
N/A
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x . No .
--- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 6,258,185 shares of
Class A Common Stock, $0.01 par value, and 2,988,757 shares of Class B Common
Stock, $0.01 par value, outstanding on April 24, 2003.
Part 1. Financial Information
ITEM 1. FINANCIAL STATEMENTS.
DONEGAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003 DEC. 31, 2002
-------------- -------------
(Unaudited)
ASSETS
Investments
Fixed maturities
Held to maturity, at amortized cost $ 91,674,740 $ 86,701,556
Available for sale, at market value 195,273,919 194,731,660
Equity securities, available for sale, at market value 23,549,976 21,836,460
Short-term investments, at cost, which
approximates market value 32,106,928 29,029,418
------------ ------------
Total investments 342,605,563 332,299,094
Cash 4,923,685 1,124,604
Accrued investment income 3,579,287 3,815,449
Premiums receivable 27,725,714 26,286,482
Reinsurance receivable 77,538,821 83,207,272
Deferred policy acquisition costs 14,735,831 14,567,070
Deferred federal income taxes 7,275,816 6,955,707
Prepaid reinsurance premiums 29,307,185 27,853,996
Property and equipment, net 4,249,969 4,430,394
Accounts receivable - securities - 146,507
Due from affiliate 1,026,731 -
Other 585,754 531,589
------------ ------------
Total assets $513,554,356 $501,218,164
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Losses and loss expenses $210,708,185 $210,691,752
Unearned premiums 124,867,011 121,002,447
Accrued expenses 6,151,680 6,583,825
Reinsurance balances payable 1,288,139 1,100,443
Federal income taxes payable 1,555,504 357,547
Cash dividend declared to stockholders - 887,315
Borrowings under line of credit 19,800,000 19,800,000
Accounts payable - securities 5,636,993 2,121,619
Due to affiliate 4,441,311 4,080,415
Other 1,493,526 1,409,951
------------ ------------
Total liabilities 375,942,349 368,035,314
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value, authorized
2,000,000 shares; none issued
Class A common stock, $.01 par value, authorized 30,000,000 shares,
issued 6,323,139 and 6,269,093 shares and outstanding
6,241,615 and 6,187,569 shares 63,232 62,691
Class B common stock, $.01 par value, authorized
10,000,000 shares, issued 3,029,519 and 3,024,742
shares and outstanding 2,988,757 and 2,983,980 shares 30,295 30,247
Additional paid-in capital 61,253,404 60,651,751
Accumulated other comprehensive income 4,896,072 4,911,953
Retained earnings 72,260,752 68,417,956
Treasury stock (891,748) (891,748)
------------ ------------
Total stockholders' equity 137,612,007 133,182,850
------------ ------------
Total liabilities and stockholders' equity $513,554,356 $501,218,164
============ ============
See accompanying notes to consolidated financial statements.
1
DONEGAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED MARCH 31,
2003 2002
------------ ------------
REVENUES:
Net premiums earned $ 47,928,881 $ 45,452,260
Investment income, net of investment expenses 3,364,518 3,730,304
Realized investment gains (losses) (130,480) 126,778
Lease income 202,617 194,962
Service charge income 614,033 529,742
Other income 205,850 -
------------ ------------
Total revenues 52,185,419 50,034,046
------------ ------------
EXPENSES:
Net losses and loss expenses $ 31,850,515 $ 31,297,569
Amortization of deferred policy acquisition costs 7,442,000 7,385,000
Other underwriting expenses 7,023,217 7,112,250
Policy dividends 241,843 466,179
Interest 214,741 324,824
Other expenses 330,576 502,423
------------ ------------
Total expenses 47,102,892 47,088,245
------------ ------------
Income before income taxes 5,082,527 2,945,801
Income taxes 1,238,095 765,085
------------ ------------
Net income $ 3,844,432 $ 2,180,716
============ ============
Earnings per common share
Basic $ 0.42 $ 0.24
============ ============
Diluted $ 0.41 $ 0.24
============ ============
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
THREE MONTHS ENDED MARCH 31,
2003 2002
------------ ------------
Net income $ 3,844,432 $ 2,180,716
Other comprehensive loss, net of tax
Unrealized losses on securities:
Unrealized holding loss during the period,
net of income tax benefit (100,693) (1,243,416)
Reclassification adjustment, net of income tax 84,812 (83,673)
------------ ------------
Other comprehensive loss (15,881) (1,327,089)
------------ ------------
Comprehensive income $ 3,828,551 $ 853,627
============ ============
See accompanying notes to consolidated financial statements.
2
DONEGAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
THREE MONTHS ENDED MARCH 31, 2003
Class A Shares Class B Shares Class A Amount Class B Amount
--------------- --------------- --------------- --------------
Balance, December 31, 2002 6,269,093 3,024,742 $ 62,691 $ 30,247
Issuance of common stock 54,046 4,777 541 48
Net income
Cash dividends
Exercise of stock options
Other comprehensive loss
-----------------------------------------------------------------------------------------------
Balance, March 31, 2003 6,323,139 3,029,519 $ 63,232 $ 30,295
===============================================================================================
Accumulated
Additional Other
Paid-In Comprehensive Retained Treasury
Capital Income Earnings Stock
------------ ------------- ------------ ----------
Balance, December 31, 2002 $ 60,651,751 $ 4,911,953 $ 68,417,956 $ (891,748)
Issuance of common stock 586,226
Net income 3,844,432
Cash dividends (1,636)
Exercise of stock options 15,427
Other comprehensive loss (15,881)
----------------------------------------------------------------------------------------------
Balance, March 31, 2003 $ 61,253,404 $ 4,896,072 $ 72,260,752 $ (891,748)
==============================================================================================
Total
Stockholders'
Equity
--------------
Balance, December 31, 2002 $ 133,182,850
Issuance of common stock 586,815
Net income 3,844,432
Cash dividends (1,636)
Exercise of stock options 15,427
Other comprehensive loss (15,881)
--------------------
Balance, March 31, 2003 $ 137,612,007
====================
See accompanying notes to consolidated financial statements.
3
DONEGAL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED MARCH 31,
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,844,432 $ 2,180,716
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 386,815 280,731
Realized investment (gains) losses 130,480 (126,778)
Changes in assets and liabilities:
Losses and loss expenses 16,433 6,145,095
Unearned premiums 3,864,564 (3,592,624)
Premiums receivable (1,439,232) (1,579,203)
Deferred policy acquisition costs (168,761) (711,206)
Deferred income taxes (383,527) (114,022)
Reinsurance receivable 5,668,451 (1,345,009)
Prepaid reinsurance premiums (1,453,189) 6,455,283
Accrued investment income 236,162 162,117
Due to affiliate (665,835) (1,328,480)
Reinsurance balances payable 187,696 (168,050)
Current income taxes 1,197,957 1,264,090
Accrued expenses (432,145) (1,225,491)
Other, net (176,440) 163,117
------------ ------------
Net adjustments 6,969,429 4,279,570
------------ ------------
Net cash provided by operating activities 10,813,861 6,460,286
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed maturities
Held to maturity (9,261,443) (7,215,618)
Available for sale (22,199,356) (20,985,876)
Purchase of equity securities, available for sale (2,402,873) (1,312,500)
Maturity of fixed maturities
Held to maturity 6,803,087 8,627,033
Available for sale 22,592,599 12,728,932
Sale of fixed maturities
Held to maturity - 415,000
Available for sale - 461,965
Sale of equity securities, available for sale 594,036 514,021
Net sale (purchase) of property and equipment 223,389 (107,151)
Net sale (purchase) of short-term investments (3,077,510) 55,252
------------ ------------
Net cash used in investing activities (6,728,071) (6,818,942)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (888,951) (871,638)
Issuance of common stock 602,242 471,655
------------ ------------
Net cash used in financing activities (286,709) (399,983)
------------ ------------
Net increase (decrease) in cash 3,799,081 (758,639)
Cash at beginning of period 1,124,604 4,075,288
------------ ------------
Cash at end of period $ 4,923,685 $ 3,316,649
============ ============
Cash paid during period - Interest $ 178,129 $ 92,823
Net cash paid during period - Taxes $ 410,000 $ 380,000
See accompanying notes to consolidated financial statements.
4
DONEGAL GROUP INC. AND SUBSIDIARIES
(Unaudited)
Summary Notes to Consolidated Financial Statements
1. ORGANIZATION
Donegal Group Inc. (the "Company") was organized as a regional insurance
holding company by Donegal Mutual Insurance Company (the "Mutual Company") on
August 26, 1986 and operates in the Mid-Atlantic and Southern states through its
wholly owned insurance subsidiaries, Atlantic States Insurance Company
("Atlantic States") and Southern Insurance Company of Virginia ("Southern")
(collectively, the "Insurance Subsidiaries"). The Company has three operating
segments: the investment function, the personal lines of insurance and the
commercial lines of insurance. Products offered in the personal lines of
insurance consist primarily of homeowners and private passenger automobile
policies. Products offered in the commercial lines of insurance consist
primarily of commercial automobile, commercial multiple peril and workers'
compensation policies. The Insurance Subsidiaries are subject to regulation by
Insurance Departments in those states in which they operate and undergo periodic
examinations by those departments. The Insurance Subsidiaries are also subject
to competition from other insurance companies in their operating areas. Atlantic
States participates in an inter-company pooling arrangement with the Mutual
Company and assumes 70% of the pooled business. At March 31, 2003, the Mutual
Company held approximately 66% of the outstanding Class A and approximately 62%
of the outstanding Class B common stock of the Company.
Prior to 2002, Southern ceded 50% of its business to the Mutual Company.
On January 1, 2002, the Mutual Company and Southern terminated their quota share
agreement, under which Southern ceded 50% of its direct business, less
reinsurance, to the Mutual Company. As a result of this termination, the
Company's prepaid reinsurance premiums decreased $7,310,471, unearned premiums
decreased $5,117,330, and deferred policy acquisition costs increased $714,853.
The Mutual Company transferred $1,478,288 in cash to the Company related to this
termination. The Company did not recognize a gain or loss on this transaction.
During 2000, the Company acquired 45% of the outstanding stock of Donegal
Financial Services Corporation ("DFSC"), a thrift holding company, for
$3,042,000 in cash. The remaining 55% of the outstanding stock of DFSC is owned
by the Mutual Company.
The Company has streamlined its corporate structure by merging a number
of its subsidiaries. Delaware Atlantic Insurance Company ("Delaware"), Pioneer
Insurance Company, New York, ("Pioneer-New York") and Pioneer Insurance Company,
Ohio ("Pioneer-Ohio"), previously wholly owned subsidiaries, were merged into
Atlantic States on August 1, 2001, September 30, 2001 and May 8, 2002,
respectively. Southern Heritage Insurance Company ("Southern Heritage"),
previously a wholly owned subsidiary, was merged into Southern on April 30,
2002. The mergers were accounted for as a reorganization of entities under
common control as they were all within the consolidated group. The mergers had
no financial impact on the consolidated entity.
Southern has (and Delaware, Pioneer-Ohio, Southern Heritage and
Pioneer-New York had prior to their mergers) an agreement with the Mutual
Company under which it cedes, and then reassumes back, 100% of its business net
of reinsurance. The primary purpose of these agreements is to assist Southern
and the former subsidiaries, in maintaining the same A. M. Best rating
(currently "A") as the Mutual Company. These agreements do not transfer
insurance risk. While these subsidiaries ceded and reassumed amounts received
from policyholders of $11,677,018 and $20,541,417 and claims of $ 6,408,617 and
$7,559,925 under these agreements in the three months ended March 31, 2003 and
2002, respectively, the amounts are not reflected in the consolidated financial
statements. The aggregate liabilities ceded and reassumed under these agreements
were $43,661,149 and $43,541,766 at March 31, 2003 and December 31, 2002,
respectively.
2. BASIS OF PRESENTATION
The financial information for the interim periods included herein are
unaudited; however, such information reflects all adjustments, consisting only
of normal recurring adjustments, that, in the opinion of management, are
necessary to a fair presentation of the Company's financial position, results of
operations and cash flows for the interim periods included herein. The Company's
results of operations for the three months ended March 31, 2003 are not
necessarily indicative of its results of operations for the twelve months ending
December 31, 2003.
These financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 2002
3. EARNINGS PER SHARE
The computation of basic and diluted earnings per share is as follows:
WEIGHTED
AVERAGE EARNINGS
NET SHARES PER
INCOME OUTSTANDING SHARE
------------ ----------- --------
THREE MONTHS ENDED MARCH 31:
2003
Basic $3,844,432 9,210,402 $ .42
Effect of stock options --- 120,453 (.01)
----------- --------- -----
Diluted $3,844,432 9,330,855 $ .41
========== ========= -----
2002
Basic $2,180,716 9,030,160 $ .24
Effect of stock options --- 94,365 ---
---------- --------- -----
Diluted $2,180,716 9,124,525 $ .24
========== ========= -----
The following options to purchase shares of common stock were not
included in the computation of diluted earnings per share because the exercise
price of the options was greater than the average market price during the
relevant period:
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------------
2003 2002
------- -------
Number of Options 948,832 942,834
======= =======
4. Segment Information
The Company evaluates the performance of the personal lines and
commercial lines based upon underwriting results as determined under statutory
accounting practices (SAP), which is used by management to measure performance
for the total business of the Company. Financial data by segment is as follows:
THREE MONTHS ENDED MARCH 31,
------------------------------
2003 2002
--------- ----------
($ in thousands)
Revenues:
Premiums earned:
Commercial lines $ 17,305 $ 16,494
Personal lines 30,624 28,958
--------- ----------
Total net premiums earned 47,929 45,452
--------- ----------
Net investment income, net of investment expense 3,365 3,730
Realized investment gain (loss) (131) 127
Other 1,022 725
--------- ----------
Total revenues $ 52,185 $ 50,034
========= ==========
Income before income taxes:
Underwriting income (loss)
Commercial lines $ 2,347 $ 1,130
Personal lines (1,133) (2,517)
--------- ----------
SAP underwriting income (loss) 1,214 (1,387)
GAAP adjustments 157 579
--------- ----------
GAAP underwriting income (loss) 1,371 (808)
Net investment income, net of investment expense 3,365 3,730
Realized investment gain (loss) (131) 127
Other 478 (103)
--------- ----------
Income before income taxes $ 5,083 $ 2,946
========= ==========
5. INVESTMENTS
During the first quarter of 2002, the Company sold Halliburton Company
bonds that had been classified as held to maturity due to significant
deterioration in the issuer's credit worthiness. These bonds had an amortized
cost of $488,901, and the sale resulted in a realized loss of $73,901. There
were no other sales or transfers from the held to maturity portfolio.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS -THREE MONTHS ENDED MARCH 31, 2003 COMPARED
TO THREE MONTHS ENDED MARCH 31, 2002
Total revenues for the three months ended September 30, 2003 were
$52,185,419, which were $2,151,373, or 4.3%, greater than the same period in
2002. Net premiums earned increased to $47,928,881, an increase of $2,476,621,
or 5.4%, over the first quarter of 2002. Direct premiums written of the combined
pool of Atlantic States and the Mutual Company increased $6,983,057, or 12.9%,
in the first quarter of 2003 compared to the first quarter of 2002. A 3.0%
increase in the direct written premiums of Southern accounted for a majority of
the remaining change. The Company reported net realized investment losses of
$130,480 in the first quarter of 2003, compared to net realized investment gains
of $126,778 for the same period of 2002. The realized loss in 2003 included
realized losses of $223,499 that resulted from changes in the market value of
securities that were determined to be other than temporary. The realized gain in
2002 was net of realized losses of $60,078 that resulted from changes in the
market value of securities that were determined to be other than temporary.
Investment income was $3,364,518, a decrease of $365,786, or 9.8%, from the
first quarter of 2002. An increase in average invested assets from $304.0
million in the first quarter of 2002 to $337.5 million in the first quarter of
2003 that was more than offset by a decrease in the annualized average return on
investments from 4.9% in the first quarter of 2002 to 4.0% in the first quarter
of 2003 accounted for the decrease in investment income.
The GAAP combined ratio of insurance operations in the first quarter of
2003 was 97.2% compared to 101.8% for the same period in 2002. The GAAP combined
ratio is the sum of the ratios of incurred losses and loss adjusting expenses to
premiums earned (loss ratio), policyholders' dividends to premiums earned
(dividend ratio) and underwriting expenses to premiums earned (expense ratio).
The Company's loss ratio in the first quarter of 2003 was 66.5% compared to
68.9% in the first quarter of 2002. The commercial loss ratio decreased
significantly to 52.5% in the first quarter of 2003 compared to 57.7% in the
first quarter of 2002 with Workers' Compensation showing the largest improvement
decreasing from 60.7% in the first quarter of 2002 to 50.9% in the first quarter
of 2003. The personal lines loss ratio showed a modest improvement from 74.9% in
the first quarter of 2002 to 74.1% in the first quarter of 2002. The Company's
expense ratio for the first quarter of 2003 was 30.2% compared to 31.9% for the
first quarter of 2002. The dividend ratio decreased to 0.5% for the first
quarter of 2003 compared to 1.0% in the first quarter of 2002 because of more
stringent qualification standards.
Federal income taxes for the first quarter of 2003 represented 24.4% of
income before income taxes compared to 26.0% for the same period of 2002. The
decrease in the effective tax rate was due to an increase in tax-exempt
investment income.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates sufficient funds from its operations and maintains
a high degree of liquidity in its investment portfolio. The primary source of
funds to meet the demands of claim settlements and operating expenses are
premium collections, investment income and maturing investments. The Company had
no significant commitments for capital expenditures as of March 31, 2003.
In investing funds made available from operations, the Company maintains
securities maturities consistent with its projected cash needs for the payment
of claims and expenses. The Company maintains a portion of its investment
portfolio in relatively short-term and highly liquid assets to ensure the
availability of funds.
As of March 31, 2003, under a credit agreement dated December 29, 1995,
and amended as of July 27, 1998, with Fleet National Bank of Connecticut ("the
Bank"), the Company had unsecured borrowings of $19.8 million. Per the terms of
the credit agreement, the Company may borrow up to $24 million at interest rates
equal to the Bank's then current prime rate or the then current London interbank
eurodollar bank rate plus 1.70%. At March 31, 2003, the interest rate on the
outstanding balances was 3.05% on outstanding eurodollar balances of $19.8
million. In addition, the Company pays a non-use fee at a rate of 3/10 of 1% per
annum on the average daily unused portion of the Bank's commitment. Each July
27th the credit line is reduced by $8 million and is currently $24 million. Any
outstanding loan in excess of the remaining credit line, after such reduction,
will then be payable.
The Company's principal source of cash with which to pay stockholder
dividends is dividends from Atlantic States and Southern. Atlantic States and
Southern are required by law to maintain certain minimum surplus on a statutory
basis, and are subject to regulations under which payment of dividends from
statutory surplus is restricted and may require prior approval of their
domiciliary insurance regulatory authorities. Atlantic States and Southern are
subject to Risk-Based Capital (RBC) requirements. At December 31, 2002 each
Atlantic States' and Southern's capital was substantially above the RBC
requirements. In 2003 amounts available for distribution as dividends to the
Company without prior approval of their domiciliary insurance regulatory
authorities were $10,646,804 from Atlantic States and $2,493,398 from Southern.
CREDIT RISK
The Company provides property and liability insurance coverages through
independent insurance agencies located throughout its operating area. The
majority of this business is billed directly to the insured, although a portion
of the Company's commercial business is billed through its agents who are
extended credit in the normal course of business.
The Company's subsidiaries have reinsurance agreements in place with the
Mutual Company and with a number of other major unaffiliated authorized
reinsurers.
IMPACT OF INFLATION
Property and casualty insurance premium rates are established before the
amount of losses and loss settlement expenses, or the extent to which inflation
may impact such expenses, are known. Consequently, the Company attempts, in
establishing rates, to anticipate the potential impact of inflation.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's market risk generally represents the risk of gain or loss
that may result from the potential change in the fair value of the Company's
investment portfolio as a result of fluctuations in prices and interest rates
and, to a lesser extent, its debt obligations. The Company attempts to manage
its interest rate risk by maintaining an appropriate relationship between the
average duration of the investment portfolio and the approximate duration of its
liabilities, i.e., policy claims and debt obligations.
The Company has maintained approximately the same duration of its
investment portfolio to its liabilities from December 31, 2002 to March 31,
2003. In addition, the Company has maintained approximately the same investment
mix during this period.
There have been no material changes to the Company's quantitative or
qualitative market risk exposure from December 31, 2002 through March 31, 2003.
ITEM 4. CONTROL AND PROCEDURES
Within 90 days prior to the date of filing of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including its Chief Executive Officer and its Chief
Financial Officer, of the design and operation of the Company's disclosure
controls and procedures. Based on this evaluation, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective for gathering, analyzing and disclosing
the information the Company is required to disclose in the reports it files
under the Securities Exchange Act of 1934, within the time periods specified in
the SEC's rules and forms. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date of this evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
NONE.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
NONE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Annual Stockholders meeting held April 17, 2003.
Directors elected at meeting:
Donald H. Nikolaus
Votes for 3,238,525
Votes withheld 20,099
ITEM 5. OTHER INFORMATION.
NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit No. Description
----------- -----------
Exhibit 99.1 Statement of Chief Executive Officer
pursuant to 18 U.S.C. Section 1350 of
Title 18 of the United States Code
Exhibit 99.2 Statement of Chief Financial Officer
pursuant to 18 U.S.C. Section 1350 of
Title 18 of the United States Code
(b) Reports on Form 8-K:
On April 16, 2003, the Company filed a report on form
8-K including as an exhibit the Company's first quarter
2003 earnings press release.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DONEGAL GROUP INC.
May , 2003 By:
---------------------------------------
Donald H. Nikolaus, President
and Chief Executive Officer
May , 2003 By:
---------------------------------------
Ralph G. Spontak, Senior Vice President,
Chief Financial Officer and Secretary
CERTIFICATION
I, Donald H. Nikolaus, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Donegal Group,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May , 2003
-------------------------------------
Donald H. Nikolaus
President and Chief Executive Officer
CERTIFICATION
I, Ralph G. Spontak, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Donegal Group,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date; and
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May , 2003
-------------------------------------------------
Ralph G. Spontak
Senior Vice President and Chief Financial Officer