☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2021
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 23-2424711 | |||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Securities registered pursuant to Section 12(b) of the Act:
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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 |
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PART I | ||||||
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Item 1. | 1 | |||||
Item 2. | ||||||
Item 3. | ||||||
Item 4. | ||||||
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PART II | ||||||
| OTHER INFORMATION | |||||
Item | ||||||
Item | 25 | |||||
Item 2. | ||||||
Item 3. | ||||||
Item 4. | ||||||
Item 5. | ||||||
Item 6. | ||||||
Item 1. | Financial |
March 31, 2020 | December 31, 2019 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Investments | ||||||||
Fixed maturities | ||||||||
Held to maturity, at amortized cost | $ | 487,156,618 | $ | 476,093,782 | ||||
Available for sale, at fair value | 554,463,492 | 564,951,803 | ||||||
Equity securities, at fair value | 46,179,107 | 55,477,556 | ||||||
Short-term investments, at cost, which approximates fair value | 72,719,077 | 14,030,222 | ||||||
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Total investments | 1,160,518,294 | 1,110,553,363 | ||||||
Cash | 52,281,735 | 49,318,930 | ||||||
Accrued investment income | 7,800,132 | 7,066,029 | ||||||
Premiums receivable | 182,064,297 | 165,732,949 | ||||||
Reinsurance receivable | 374,758,028 | 367,021,468 | ||||||
Deferred policy acquisition costs | 60,314,704 | 59,284,859 | ||||||
Deferred tax asset, net | 9,665,172 | 8,514,311 | ||||||
Prepaid reinsurance premiums | 163,622,680 | 142,475,767 | ||||||
Property and equipment, net | 4,497,502 | 4,558,072 | ||||||
Accounts receivable - securities | 23,211 | 4,961 | ||||||
Goodwill | 5,625,354 | 5,625,354 | ||||||
Other intangible assets | 958,010 | 958,010 | ||||||
Other | 1,242,243 | 2,047,058 | ||||||
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Total assets | $ | 2,023,371,362 | $ | 1,923,161,131 | ||||
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Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Unpaid losses and loss expenses | $ | 888,212,299 | $ | 869,673,849 | ||||
Unearned premiums | 542,278,223 | 510,147,485 | ||||||
Accrued expenses | 22,025,916 | 28,453,744 | ||||||
Reinsurance balances payable | 2,594,034 | 2,116,084 | ||||||
Borrowings under lines of credit | 85,000,000 | 35,000,000 | ||||||
Cash dividends declared to stockholders | — | 4,075,234 | ||||||
Subordinated debentures | 5,000,000 | 5,000,000 | ||||||
Accounts payable - securities | 2,920,388 | 1,119 | ||||||
Income taxes payable | 870,829 | 84,831 | ||||||
Due to affiliate | 7,189,211 | 10,069,171 | ||||||
Other | 7,719,531 | 7,524,095 | ||||||
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Total liabilities | 1,563,810,431 | 1,472,145,612 | ||||||
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Stockholders’ Equity | ||||||||
Preferred stock, $.01 par value, authorized 2,000,000 shares; none issued | — | — | ||||||
Class A common stock, $.01 par value, authorized 50,000,000 shares, issued 26,299,946 and 26,203,935 shares and outstanding 23,297,358 and 23,201,347 shares | 263,000 | 262,040 | ||||||
Class B common stock, $.01 par value, authorized 10,000,000 shares, issued 5,649,240 shares and outstanding 5,576,775 shares | 56,492 | 56,492 | ||||||
Additionalpaid-in capital | 269,888,980 | 268,151,601 | ||||||
Accumulated other comprehensive income | 3,704,010 | 504,170 | ||||||
Retained earnings | 226,874,806 | 223,267,573 | ||||||
Treasury stock, at cost | (41,226,357 | ) | (41,226,357 | ) | ||||
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Total stockholders’ equity | 459,560,931 | 451,015,519 | ||||||
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Total liabilities and stockholders’ equity | $ | 2,023,371,362 | $ | 1,923,161,131 | ||||
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March 31, 2021 | December 31, 2020 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Investments | ||||||||
Fixed maturities | ||||||||
Held to maturity, at amortized cost | $ | 613,485,144 | $ | 586,609,439 | ||||
Available for sale, at fair value | 497,654,660 | 555,136,017 | ||||||
Equity securities, at fair value | 68,639,946 | 58,556,173 | ||||||
Short-term investments, at cost, which approximates fair value | 21,098,394 | 20,900,155 | ||||||
Total investments | 1,200,878,144 | 1,221,201,784 | ||||||
Cash | 102,391,547 | 103,094,236 | ||||||
Accrued investment income | 8,946,304 | 7,936,879 | ||||||
Premiums receivable | 181,608,350 | 169,596,332 | ||||||
Reinsurance receivable | 426,339,825 | 408,908,850 | ||||||
Deferred policy acquisition costs | 64,530,713 | 59,156,958 | ||||||
Deferred tax asset, net | 6,718,013 | 5,683,113 | ||||||
Prepaid reinsurance premiums | 181,099,859 | 169,418,333 | ||||||
Property and equipment, net | 3,650,378 | 4,390,377 | ||||||
Accounts receivable - securities | 72,387 | 67,676 | ||||||
Federal income taxes recoverable | 940,613 | 3,089,369 | ||||||
Goodwill | 5,625,354 | 5,625,354 | ||||||
Other intangible assets | 958,010 | 958,010 | ||||||
Other | 1,461,163 | 1,393,053 | ||||||
Total assets | $ | 2,185,220,660 | $ | 2,160,520,324 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Losses and loss expenses | $ | 996,978,876 | $ | 962,007,437 | ||||
Unearned premiums | 577,481,172 | 537,189,598 | ||||||
Accrued expenses | 23,562,671 | 29,115,198 | ||||||
Reinsurance balances payable | 3,814,566 | 3,233,523 | ||||||
Borrowings under lines of credit | 35,000,000 | 85,000,000 | ||||||
Cash dividends declared to stockholders | 0 | 4,436,301 | ||||||
Subordinated debentures | 5,000,000 | 5,000,000 | ||||||
Accounts payable - securities | 2,177,340 | 0 | ||||||
Due to affiliate | 3,921,089 | 10,293,495 | ||||||
Other | 8,050,456 | 6,470,652 | ||||||
Total liabilities | 1,655,986,170 | 1,642,746,204 | ||||||
Stockholders’ Equity | ||||||||
Preferred stock, $.01 par value, authorized 2,000,000 shares; 0ne issued | 0— | 0— | ||||||
Class A common stock, $.01 par value, authorized 50,000,000 shares, issued 28,031,234 and 27,651,774 shares and outstanding 25,028,646 and 24,649,186 shares | 280,313 | 276,518 | ||||||
Class B common stock, $.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 | 294,397,593 | 289,149,567 | ||||||
Accumulated other comprehensive income | 6,923,497 | 11,130,612 | ||||||
Retained earnings | 268,802,952 | 258,387,288 | ||||||
Treasury stock, at cost | (41,226,357 | ) | (41,226,357 | ) | ||||
Total stockholders’ equity | 529,234,490 | 517,774,120 | ||||||
Total liabilities and stockholders’ equity | $ | 2,185,220,660 | $ | 2,160,520,324 | ||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Revenues: | ||||||||
Net premiums earned | $ | 187,252,778 | $ | 188,073,242 | ||||
Investment income, net of investment expenses | 7,376,284 | 7,048,503 | ||||||
Net investment (losses) gains (includes $421,835 and ($39,264) accumulated other comprehensive income reclassifications) | (10,694,843 | ) | 18,097,113 | |||||
Lease income | 109,267 | 111,099 | ||||||
Installment payment fees | 867,720 | 1,088,917 | ||||||
Equity in earnings of Donegal Financial Services Corporation | — | 295,000 | ||||||
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Total revenues | 184,911,206 | 214,713,874 | ||||||
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Expenses: | ||||||||
Net losses and loss expenses | 117,246,526 | 123,110,656 | ||||||
Amortization of deferred policy acquisition costs | 29,937,000 | 30,592,000 | ||||||
Other underwriting expenses | 32,597,629 | 30,684,883 | ||||||
Policyholder dividends | 1,842,000 | 2,349,648 | ||||||
Interest | 224,330 | 565,292 | ||||||
Other expenses, net | 560,550 | 566,371 | ||||||
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Total expenses | 182,408,035 | 187,868,850 | ||||||
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Income before income tax (benefit) expense | 2,503,171 | 26,845,024 | ||||||
Income tax (benefit) expense (includes $88,585 and ($8,245) income tax expense (benefit) from reclassification items) | (1,227,950 | ) | 3,821,860 | |||||
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Net income | $ | 3,731,121 | $ | 23,023,164 | ||||
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Earnings per common share: | ||||||||
Class A common stock - basic and diluted | $ | 0.13 | $ | 0.82 | ||||
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Class B common stock - basic and diluted | $ | 0.12 | $ | 0.75 | ||||
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Donegal Group Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Net income | $ | 3,731,121 | $ | 23,023,164 | ||||
Other comprehensive income, net of tax | ||||||||
Unrealized gain on securities: | ||||||||
Unrealized holding gain during the period, net of income tax expense of $939,175 and $1,711,222 | 3,533,090 | 6,437,454 | ||||||
Reclassification adjustment for (gains) losses included in net income, net of income tax expense (benefit) of $88,585 and ($8,245) | (333,250 | ) | 31,019 | |||||
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Other comprehensive income | 3,199,840 | 6,468,473 | ||||||
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Comprehensive income | $ | 6,930,961 | $ | 29,491,637 | ||||
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Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Revenues: | ||||||||
Net premiums earned | $ | 187,251,600 | $ | 187,252,778 | ||||
Investment income, net of investment expenses | 7,510,578 | 7,376,284 | ||||||
Net investment gains (losses) (includes ($ 29,186) and $421,835 accumulated other comprehensive income reclassifications) | 2,469,054 | (10,694,843 | ) | |||||
Lease income | 107,767 | 109,267 | ||||||
Installment payment fees | 630,899 | 867,720 | ||||||
Total revenues | 197,969,898 | 184,911,206 | ||||||
Expenses: | ||||||||
Net losses and loss expenses | 119,219,747 | 117,246,526 | ||||||
Amortization of deferred policy acquisition costs | 30,179,000 | 29,937,000 | ||||||
Other underwriting expenses | 33,782,050 | 32,597,629 | ||||||
Policyholder dividends | 1,294,021 | 1,842,000 | ||||||
Interest | 312,326 | 224,330 | ||||||
Other expenses, net | 432,069 | 560,550 | ||||||
Total expenses | 185,219,213 | 182,408,035 | ||||||
Income before income tax expense (benefit) | 12,750,685 | 2,503,171 | ||||||
Income tax expense (benefit) (includes ($ 6,129) and $88,585income tax (benefit) expense from reclassification items) | 2,220,837 | (1,227,950 | ) | |||||
Net income | $ | 10,529,848 | $ | 3,731,121 | ||||
Earnings per common share: | ||||||||
Class A common stock - basic and diluted | $ | 0.35 | �� | $ | 0.13 | |||
Class B common stock - basic and diluted | $ | 0.32 | $ | 0.12 | ||||
Donegal Group Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Unaudited) | ||||||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Net income | $ | 10,529,848 | $ | 3,731,121 | ||||
Other comprehensive (loss) income, net of tax | ||||||||
Unrealized (loss) gain on securities: | ||||||||
Unrealized holding (loss) gain during the period, net of income tax (benefit) expense of ($ 1,125,625) and $939,175 | (4,230,172 | ) | 3,533,090 | |||||
Reclassification adjustment for losses (gains) included in net income, net of income tax (benefit) expense of ( $6,129) and 88,585$ | 23,057 | (333,250 | ) | |||||
Other comprehensive (loss) income | (4,207,115 | ) | 3,199,840 | |||||
Comprehensive income | $ | 6,322,733 | $ | 6,930,961 | ||||
Class A Shares | Class B Shares | Class A Amount | Class B Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Retained Earnings | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
Balance, December 31, 2020 | 27,651,774 | 5,649,240 | $ | 276,518 | $ | 56,492 | $ | 289,149,567 | $ | 11,130,612 | $ | 258,387,288 | $ | (41,226,357 | ) | $ | 517,774,120 | |||||||||||||||||||
Issuance of common stock (stock compensation plans) | 33,336 | — | 334 | — | 419,454 | — | — | — | 419,788 | |||||||||||||||||||||||||||
Share-based compensation | 346,124 | — | 3,461 | — | 4,719,388 | — | — | — | 4,722,849 | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 10,529,848 | — | 10,529,848 | |||||||||||||||||||||||||||
Cash dividends declared | — | — | — | — | — | — | (5,000 | ) | — | (5,000 | ) | |||||||||||||||||||||||||
Grant of stock options | — | — | — | — | 109,184 | — | (109,184 | ) | — | — | ||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (4,207,115 | ) | — | — | (4,207,115 | ) | |||||||||||||||||||||||||
Balance, March 31, 2021 | 28,031,234 | 5,649,240 | $ | 280,313 | $ | 56,492 | $ | 294,397,593 | $ | 6,923,497 | $ | 268,802,952 | $ | (41,226,357 | ) | $ | 529,234,490 | |||||||||||||||||||
Class A Shares | Class B Shares | Class A Amount | Class B Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Retained Earnings | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
Balance, December 31, 2019 | 26,203,935 | 5,649,240 | $ | 262,040 | $ | 56,492 | $ | 268,151,601 | $ | 504,170 | $ | 223,267,573 | $ | (41,226,357 | ) | $ | 451,015,519 | |||||||||||||||||||
Issuance of common stock (stock compensation plans) | 28,924 | — | 289 | — | 376,539 | — | — | — | 376,828 | |||||||||||||||||||||||||||
Share-based compensation | 67,087 | — | 671 | — | 1,242,315 | — | — | — | 1,242,986 | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 3,731,121 | — | 3,731,121 | |||||||||||||||||||||||||||
Cash dividends declared | — | — | — | — | — | — | (5,363 | ) | — | (5,363 | ) | |||||||||||||||||||||||||
Grant of stock options | — | — | — | — | 118,525 | — | (118,525 | ) | — | — | ||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 3,199,840 | — | — | 3,199,840 | |||||||||||||||||||||||||||
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Balance, March 31, 2020 | 26,299,946 | 5,649,240 | $ | 263,000 | $ | 56,492 | $ | 269,888,980 | $ | 3,704,010 | $ | 226,874,806 | $ | (41,226,357 | ) | $ | 459,560,931 | |||||||||||||||||||
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Three Months Ended March 31, 2019
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, 2018 | 25,819,341 | 5,649,240 | $ | 258,194 | $ | 56,492 | $ | 261,258,423 | $ | (14,228,059 | ) | $ | 192,751,208 | $ | (41,226,357 | ) | $ | 398,869,901 | ||||||||||||||||||
Issuance of common stock (stock compensation plans) | 33,334 | — | 333 | — | 403,722 | — | — | — | 404,055 | |||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | 442,920 | — | — | — | 442,920 | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 23,023,164 | — | 23,023,164 | |||||||||||||||||||||||||||
Cash dividends declared | — | — | — | — | — | — | (4,752 | ) | — | (4,752 | ) | |||||||||||||||||||||||||
Grant of stock options | — | — | — | — | 144,226 | — | (144,226 | ) | — | — | ||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 6,468,473 | — | — | 6,468,473 | |||||||||||||||||||||||||||
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Balance, March 31, 2019 | 25,852,675 | 5,649,240 | $ | 258,527 | $ | 56,492 | $ | 262,249,291 | $ | (7,759,586 | ) | $ | 215,625,394 | $ | (41,226,357 | ) | $ | 429,203,761 | ||||||||||||||||||
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Class A Shares | Class B Shares | Class A Amount | Class B Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Retained Earnings | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||||||||||||||
Balance, December 31, 2019 | 26,203,935 | 5,649,240 | $ | 262,040 | $ | 56,492 | $ | 268,151,601 | $ | 504,170 | $ | 223,267,573 | $ | (41,226,357 | ) | $ | 451,015,519 | |||||||||||||||||||
Issuance of common stock (stock compensation plans) | 28,924 | — | 289 | — | 376,539 | — | — | — | 376,828 | |||||||||||||||||||||||||||
Share-based compensation | 67,087 | — | 671 | — | 1,242,315 | — | — | — | 1,242,986 | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 3,731,121 | — | 3,731,121 | |||||||||||||||||||||||||||
Cash dividends declared | — | — | — | — | — | — | (5,363 | ) | — | (5,363 | ) | |||||||||||||||||||||||||
Grant of stock options | — | — | — | — | 118,525 | — | (118,525 | ) | — | — | ||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 3,199,840 | — | — | 3,199,840 | |||||||||||||||||||||||||||
Balance, March 31, 2020 | 26,299,946 | 5,649,240 | $ | 263,000 | $ | 56,492 | $ | 269,888,980 | $ | 3,704,010 | $ | 226,874,806 | $ | (41,226,357 | ) | $ | 459,560,931 | |||||||||||||||||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 3,731,121 | $ | 23,023,164 | ||||
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Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation, amortization and othernon-cash items | 1,737,307 | 1,460,943 | ||||||
Net investment losses (gains) | 10,694,843 | (18,097,113 | ) | |||||
Equity in earnings of Donegal Financial Services Corporation | — | (295,000 | ) | |||||
Changes in assets and liabilities: | ||||||||
Losses and loss expenses | 18,538,450 | 21,854,552 | ||||||
Unearned premiums | 32,130,738 | 17,174,323 | ||||||
Premiums receivable | (16,331,348 | ) | (14,813,728 | ) | ||||
Deferred acquisition costs | (1,029,845 | ) | (1,731,579 | ) | ||||
Deferred income taxes | (2,001,451 | ) | 962,330 | |||||
Reinsurance receivable | (7,736,560 | ) | (7,335,564 | ) | ||||
Prepaid reinsurance premiums | (21,146,913 | ) | (5,332,159 | ) | ||||
Accrued investment income | (734,103 | ) | (532,403 | ) | ||||
Due to affiliate | (2,879,960 | ) | (2,908,940 | ) | ||||
Reinsurance balances payable | 477,950 | (1,136,290 | ) | |||||
Current income taxes | 785,998 | 2,872,028 | ||||||
Accrued expenses | (6,427,828 | ) | (3,943,576 | ) | ||||
Other, net | 1,000,247 | 233,485 | ||||||
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Net adjustments | 7,077,525 | (11,568,691 | ) | |||||
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Net cash provided by operating activities | 10,808,646 | 11,454,473 | ||||||
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Cash Flows from Investing Activities: | ||||||||
Purchases of fixed maturities, held to maturity | (19,222,869 | ) | (8,396,937 | ) | ||||
Purchases of fixed maturities, available for sale | (13,558,579 | ) | (53,176,164 | ) | ||||
Purchases of equity securities, available for sale | (5,020,901 | ) | (30,672 | ) | ||||
Maturity of fixed maturities: | ||||||||
Held to maturity | 9,287,575 | 3,852,973 | ||||||
Available for sale | 29,078,287 | 15,904,570 | ||||||
Sales of fixed maturities, available for sale | — | 19,527,660 | ||||||
Sales of equity securities, available for sale | 3,202,672 | 20,537,415 | ||||||
Net (purchases) sales of property and equipment | (5,905 | ) | 1,171,305 | |||||
Sale of investment in Donegal Financial Services Corporation | — | 33,922,773 | ||||||
Net purchases of short-term investments | (58,688,855 | ) | (24,088,831 | ) | ||||
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Net cash (used in) provided by investing activities | (54,928,575 | ) | 9,224,092 | |||||
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Cash Flows from Financing Activities: | ||||||||
Cash dividends paid | (4,080,597 | ) | (3,953,236 | ) | ||||
Issuance of common stock | 1,163,331 | 288,115 | ||||||
Borrowing under lines of credit | 50,000,000 | — | ||||||
Payments on lines of credit | — | (25,000,000 | ) | |||||
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Net cash provided by (used in) financing activities | 47,082,734 | (28,665,121 | ) | |||||
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Net increase (decrease) in cash | 2,962,805 | (7,986,556 | ) | |||||
Cash at beginning of period | 49,318,930 | 52,594,461 | ||||||
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Cash at end of period | $ | 52,281,735 | $ | 44,607,905 | ||||
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Cash paid during period - Interest | $ | 161,830 | $ | 325,325 | ||||
Net cash paid during period - Taxes | $ | — | $ | — |
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 10,529,848 | $ | 3,731,121 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation, amortization and other non-cash items | 1,654,449 | 1,737,307 | ||||||
Net investment (gains) losses | (2,469,054 | ) | 10,694,843 | |||||
Changes in assets and liabilities: | ||||||||
Losses and loss expenses | 34,971,439 | 18,538,450 | ||||||
Unearned premiums | 40,291,574 | 32,130,738 | ||||||
Premiums receivable | (12,012,018 | ) | (16,331,348 | ) | ||||
Deferred acquisition costs | (5,373,755 | ) | (1,029,845 | ) | ||||
Deferred income taxes | 84,596 | (2,001,451 | ) | |||||
Reinsurance receivable | (17,430,975 | ) | (7,736,560 | ) | ||||
Prepaid reinsurance premiums | (11,681,526 | ) | (21,146,913 | ) | ||||
Accrued investment income | (1,009,425 | ) | (734,103 | ) | ||||
Due to affiliate | (6,372,406 | ) | (2,879,960 | ) | ||||
Reinsurance balances payable | 581,043 | 477,950 | ||||||
Current income taxes | 2,148,756 | 785,998 | ||||||
Accrued expenses | (5,552,527 | ) | (6,427,828 | ) | ||||
Other, net | 1,516,906 | 1,000,247 | ||||||
Net adjustments | 19,347,077 | 7,077,525 | ||||||
Net cash provided by operating activities | 29,876,925 | 10,808,646 | ||||||
Cash Flows from Investing Activities: | ||||||||
Purchases of fixed maturities, held to maturity | (33,904,795 | ) | (19,222,869 | ) | ||||
Purchases of fixed maturities, available for sale | (16,747,351 | ) | (13,558,579 | ) | ||||
Purchases of equity securities, available for sale | (13,885,992 | ) | (5,020,901 | ) | ||||
Maturity of fixed maturities: | ||||||||
Held to maturity | 7,317,449 | 9,287,575 | ||||||
Available for sale | 69,586,285 | 29,078,287 | ||||||
Sales of equity securities, available for sale | 6,300,459 | 3,202,672 | ||||||
Net sales (purchases) of property and equipment | 684,629 | (5,905 | ) | |||||
Net purchases of short-term investments | (198,239 | ) | (58,688,855 | ) | ||||
Net cash provided by (used in) investing activities | 19,152,445 | (54,928,575 | ) | |||||
Cash Flows from Financing Activities: | ||||||||
Cash dividends paid | (4,441,301 | ) | (4,080,597 | ) | ||||
Issuance of common stock | 4,709,242 | 1,163,331 | ||||||
Borrowing under lines of credit | — | 50,000,000 | ||||||
Payments on lines of credit | ) | — | ||||||
Net cash (used in) provided by financing activities | (49,732,059 | ) | 47,082,734 | |||||
Net (decrease) increase in cash | (702,689 | ) | 2,962,805 | |||||
Cash at beginning of period | 103,094,236 | 49,318,930 | ||||||
Cash at end of period | $ | 102,391,547 | $ | 52,281,735 | ||||
Cash paid during period - Interest | $ | 257,821 | $ | 161,830 | ||||
Net cash paid during period - Taxes | $ | 0— | $ | — |
At March 31, 2020, we had three
The personal lines products of our insurance subsidiaries consist primarily of homeowners and private passenger automobile policies.
underwriting pool.
We and Donegal Mutual sold Donegal Financial Services Corporation (“DFSC”) to Northwest Bancshares, Inc. (“Northwest”) on March 8, 2019, resulting in proceeds valued at approximately $85.8 million in As a combination of cash and Northwest common stock. Immediately prior toresult, our consolidated financial results through December 31, 2020 excluded the closingresults of the merger, DFSC paid a dividendMountain States Insurance Group operations in those Southwestern states.
2021.
2020.
Three Months Ended March 31, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Basic earnings per share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income | $ | 3,064 | $ | 667 | $ | 18,843 | $ | 4,180 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Denominator: | ||||||||||||||||
Weighted-average shares outstanding | 23,260 | 5,577 | 22,850 | 5,577 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Basic earnings per share | $ | 0.13 | $ | 0.12 | $ | 0.82 | $ | 0.75 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted earnings per share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income | $ | 3,064 | $ | 667 | $ | 18,843 | $ | 4,180 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Denominator: | ||||||||||||||||
Number of shares used in basic computation | 23,260 | 5,577 | 22,850 | 5,577 | ||||||||||||
Weighted-average shares effect of dilutive securities: | ||||||||||||||||
Director and employee stock options | 188 | — | 71 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Number of shares used in diluted computation | 23,448 | 5,577 | 22,921 | 5,577 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted earnings per share | $ | 0.13 | $ | 0.12 | $ | 0.82 | $ | 0.75 | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended March 31, | ||||||||||||||||
2021 | 2020 | |||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Basic earnings per share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income | $ | 8,742 | $ | 1,788 | $ | 3,064 | $ | 667 | ||||||||
Denominator: | ||||||||||||||||
Weighted-average shares outstanding | 24,768 | 5,577 | 23,260 | 5,577 | ||||||||||||
Basic earnings per share | $ | 0.35 | $ | 0.32 | $ | 0.13 | $ | 0.12 | ||||||||
Diluted earnings per share: | ||||||||||||||||
Numerator: | ||||||||||||||||
Allocation of net income | $ | 8,742 | $ | 1,788 | $ | 3,064 | $ | 667 | ||||||||
Denominator: | ||||||||||||||||
Number of shares used in basic computation | 24,768 | 5,577 | 23,260 | 5,577 | ||||||||||||
Weighted-average shares effect of dilutive securities: | ||||||||||||||||
Director and employee stock options | 128 | — | 188 | — | ||||||||||||
Number of shares used in diluted computation | 24,896 | 5,577 | 23,448 | 5,577 | ||||||||||||
Diluted earnings per share | $ | 0.35 | $ | 0.32 | $ | 0.13 | $ | 0.12 | ||||||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Number of options to purchase Class A shares excluded | 6,196,526 | 8,967,857 |
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Number of options to purchase Class A shares excluded | 6,051,359 | 6,196,526 |
5 - Investments
5 - Investments |
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 | $ | 81,198 | $ | 4,589 | $ | — | $ | 85,787 | ||||||||
Obligations of states and political subdivisions | 214,108 | 15,793 | 89 | 229,812 | ||||||||||||
Corporate securities | 161,681 | 5,041 | 4,199 | 162,523 | ||||||||||||
Mortgage-backed securities | 30,170 | 1,424 | — | 31,594 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totals | $ | 487,157 | $ | 26,847 | $ | 4,288 | $ | 509,716 | ||||||||
|
|
|
|
|
|
|
|
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 | $ | 15,850 | $ | 571 | $ | — | $ | 16,421 | ||||||||
Obligations of states and political subdivisions | 61,607 | 1,868 | 135 | 63,340 | ||||||||||||
Corporate securities | 152,968 | 2,622 | 2,045 | 153,545 | ||||||||||||
Mortgage-backed securities | 312,136 | 9,141 | 120 | 321,157 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totals | $ | 542,561 | $ | 14,202 | $ | 2,300 | $ | 554,463 | ||||||||
|
|
|
|
|
|
|
|
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 | $ | 79,016 | $ | 2,720 | $ | 1,329 | $ | 80,407 | ||||||||
Obligations of states and political subdivisions | 332,642 | 16,797 | 3,200 | 346,239 | ||||||||||||
Corporate securities | 180,425 | 11,307 | 921 | 190,811 | ||||||||||||
Mortgage-backed securities | 21,402 | 1,037 | — | 22,439 | ||||||||||||
Totals | $ | 613,485 | $ | 31,861 | $ | 5,450 | $ | 639,896 | ||||||||
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 | $ | 19,512 | $ | 251 | $ | 610 | $ | 19,153 | ||||||||
Obligations of states and political subdivisions | 67,283 | 1,829 | 260 | 68,852 | ||||||||||||
Corporate securities | 194,779 | 8,674 | 678 | 202,775 | ||||||||||||
Mortgage-backed securities | 201,606 | 5,900 | 631 | 206,875 | ||||||||||||
Totals | $ | 483,180 | $ | 16,654 | $ | 2,179 | $ | 497,655 | ||||||||
The
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 | $ | 82,916 | $ | 1,803 | $ | 69 | $ | 84,650 | ||||||||
Obligations of states and political subdivisions | 204,634 | 14,237 | 288 | 218,583 | ||||||||||||
Corporate securities | 156,398 | 8,275 | 333 | 164,340 | ||||||||||||
Mortgage-backed securities | 32,146 | 611 | 16 | 32,741 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totals | $ | 476,094 | $ | 24,926 | $ | 706 | $ | 500,314 | ||||||||
|
|
|
|
|
|
|
|
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 | $ | 19,302 | $ | 82 | $ | 19 | $ | 19,365 | ||||||||
Obligations of states and political subdivisions | 55,162 | 1,641 | 7 | 56,796 | ||||||||||||
Corporate securities | 154,946 | 4,477 | 180 | 159,243 | ||||||||||||
Mortgage-backed securities | 327,429 | 2,857 | 738 | 329,548 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totals | $ | 556,839 | $ | 9,057 | $ | 944 | $ | 564,952 | ||||||||
|
|
|
|
|
|
|
|
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 | $ | 77,435 | $ | 3,984 | $ | 223 | $ | 81,196 | ||||||||
Obligations of states and political subdivisions | 312,319 | 23,212 | 143 | 335,388 | ||||||||||||
Corporate securities | 173,270 | 18,172 | 206 | 191,236 | ||||||||||||
Mortgage-backed securities | 23,585 | 1,236 | 0 | 24,821 | ||||||||||||
Totals | $ | 586,609 | $ | 46,604 | $ | 572 | $ | 632,641 | ||||||||
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 | $ | 47,512 | $ | 424 | $ | 121 | $ | 47,815 | ||||||||
Obligations of states and political subdivisions | 66,287 | 2,690 | 12 | 68,965 | ||||||||||||
Corporate securities | 202,396 | 10,496 | 184 | 212,708 | ||||||||||||
Mortgage-backed securities | 218,763 | 6,902 | 17 | 225,648 | ||||||||||||
Totals | $ | 534,958 | $ | 20,512 | $ | 334 | $ | 555,136 | ||||||||
Amortized Cost | Estimated Fair Value | |||||||
(in thousands) | ||||||||
Held to maturity | ||||||||
Due in one year or less | $ | 32,274 | $ | 32,482 | ||||
Due after one year through five years | 84,232 | 88,324 | ||||||
Due after five years through ten years | 184,263 | 191,792 | ||||||
Due after ten years | 156,218 | 165,524 | ||||||
Mortgage-backed securities | 30,170 | 31,594 | ||||||
|
|
|
| |||||
Total held to maturity | $ | 487,157 | $ | 509,716 | ||||
|
|
|
| |||||
Available for sale | ||||||||
Due in one year or less | $ | 33,593 | $ | 33,619 | ||||
Due after one year through five years | 95,836 | 97,160 | ||||||
Due after five years through ten years | 89,588 | 90,691 | ||||||
Due after ten years | 11,408 | 11,836 | ||||||
Mortgage-backed securities | 312,136 | 321,157 | ||||||
|
|
|
| |||||
Total available for sale | $ | 542,561 | $ | 554,463 | ||||
|
|
|
|
Amortized Cost | Estimated Fair Value | |||||||
(in thousands) | ||||||||
Held to maturity | ||||||||
Due in one year or less | $ | 50,512 | $ | 52,261 | ||||
Due after one year through five years | 84,179 | 89,856 | ||||||
Due after five years through ten years | 205,132 | 214,111 | ||||||
Due after ten years | 252,260 | 261,229 | ||||||
Mortgage-backed securities | 21,402 | 22,439 | ||||||
Total held to maturity | $ | 613,485 | $ | 639,896 | ||||
Available for sale | ||||||||
Due in one year or less | $ | 34,002 | $ | 34,683 | ||||
Due after one year through five years | 122,623 | 128,868 | ||||||
Due after five years through ten years | 97,120 | 99,047 | ||||||
Due after ten years | 27,829 | 28,182 | ||||||
Mortgage-backed securities | 201,606 | 206,875 | ||||||
Total available for sale | $ | 483,180 | $ | 497,655 | ||||
Cost | Gross Gains | Gross Losses | Estimated Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Equity securities | $ | 42,523 | $ | 6,815 | $ | 3,159 | $ | 46,179 |
Cost | Gross Gains | Gross Losses | Estimated Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Equity securities | $ | 50,216 | $ | 18,959 | $ | 535 | $ | 68,640 |
Cost | Gross Gains | Gross Losses | Estimated Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Equity securities | $ | 43,419 | $ | 12,180 | $ | 121 | $ | 55,478 |
Cost | Gross Gains | Gross Losses | Estimated Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Equity securities | $ | 42,410 | $ | 17,103 | $ | 957 | $ | 58,556 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Gross investment gains: | ||||||||
Fixed maturities | $ | 423 | $ | 358 | ||||
Equity securities | 431 | 5,986 | ||||||
Investment in affiliate | — | 12,662 | ||||||
|
|
|
| |||||
854 | 19,006 | |||||||
|
|
|
| |||||
Gross investment losses: | ||||||||
Fixed maturities | 1 | 318 | ||||||
Equity securities | 11,548 | 591 | ||||||
|
|
|
| |||||
11,549 | 909 | |||||||
|
|
|
| |||||
Net investment (losses) gains | $ | (10,695 | ) | $ | 18,097 | |||
|
|
|
|
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Gross investment gains: | ||||||||
Fixed maturities | $ | 193 | $ | 423 | ||||
Equity securities | 3,277 | 431 | ||||||
3,470 | 854 | |||||||
Gross investment losses: | ||||||||
Fixed maturities | 222 | 1 | ||||||
Equity securities | 779 | 11,548 | ||||||
1,001 | 11,549 | |||||||
Net investment gains (losses) | $ | 2,469 | $ | (10,695 | ) | |||
Less Than 12 Months | More Than 12 Months | |||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||
(in thousands) | ||||||||||||||||
Obligations of states and political subdivisions | $ | 11,918 | $ | 224 | $ | — | $ | — | ||||||||
Corporate securities | 111,062 | 4,957 | 11,196 | 1,287 | ||||||||||||
Mortgage-backed securities | 5,681 | 59 | 4,287 | 61 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totals | $ | 128,661 | $ | 5,240 | $ | 15,483 | $ | 1,348 | ||||||||
|
|
|
|
|
|
|
|
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 | $ | 33,349 | $ | 1,939 | $ | — | $ | — | ||||||||
Obligations of states and political subdivisions | 88,703 | 3,255 | 2,094 | 205 | ||||||||||||
Corporate securities | 46,939 | 1,403 | 8,289 | 196 | ||||||||||||
Mortgage-backed securities | 21,509 | 626 | 520 | 5 | ||||||||||||
Totals | $ | 190,500 | $ | 7,223 | $ | 10,903 | $ | 406 | ||||||||
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 | $ | 7,461 | $ | 46 | $ | 5,395 | $ | 42 | ||||||||
Obligations of states and political subdivisions | 23,339 | 293 | 2,327 | 2 | ||||||||||||
Corporate securities | 19,363 | 263 | 18,803 | 250 | ||||||||||||
Mortgage-backed securities | 28,507 | 56 | 74,089 | 698 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totals | $ | 78,670 | $ | 658 | $ | 100,614 | $ | 992 | ||||||||
|
|
|
|
|
|
|
|
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 | $ | 29,144 | $ | 345 | $ | — | $ | — | ||||||||
Obligations of states and political subdivisions | 9,362 | 154 | — | — | ||||||||||||
Corporate securities | 26,143 | 115 | 8,230 | 276 | ||||||||||||
Mortgage-backed securities | 3,091 | 15 | 236 | 1 | ||||||||||||
Totals | $ | 67,740 | $ | 629 | $ | 8,466 | $ | 277 | ||||||||
6 - Segment Information
6 - | Segment Information |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Revenues: | ||||||||
Premiums earned: | ||||||||
Commercial lines | $ | 101,775 | $ | 91,481 | ||||
Personal lines | 85,478 | 96,592 | ||||||
|
|
|
| |||||
Premiums earned | 187,253 | 188,073 | ||||||
Net investment income | 7,376 | 7,049 | ||||||
Investment (losses) gains | (10,695 | ) | 18,097 | |||||
Equity in earnings of DFSC | — | 295 | ||||||
Other | 977 | 1,200 | ||||||
|
|
|
| |||||
Total revenues | $ | 184,911 | $ | 214,714 | ||||
|
|
|
| |||||
Income before income tax expense: | ||||||||
Underwriting income (loss): | ||||||||
Commercial lines | $ | (566 | ) | $ | (1,688 | ) | ||
Personal lines | 4,811 | 2,473 | ||||||
|
|
|
| |||||
SAP underwriting income | 4,245 | 785 | ||||||
GAAP adjustments | 1,385 | 551 | ||||||
|
|
|
| |||||
GAAP underwriting income | 5,630 | 1,336 | ||||||
Net investment income | 7,376 | 7,049 | ||||||
Investment (losses) gains | (10,695 | ) | 18,097 | |||||
Equity in earnings of DFSC | — | 295 | ||||||
Other | 192 | 68 | ||||||
|
|
|
| |||||
Income before income tax (benefit) expense | $ | 2,503 | $ | 26,845 | ||||
|
|
|
|
7 - Borrowings
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Revenues: | ||||||||
Premiums earned: | ||||||||
Commercial lines | $ | 109,226 | $ | 101,775 | ||||
Personal lines | 78,026 | 85,478 | ||||||
GAAP premiums earned | 187,252 | 187,253 | ||||||
Net investment income | 7,511 | 7,376 | ||||||
Investment gains (losses) | 2,469 | (10,695 | ) | |||||
Other | 738 | 977 | ||||||
Total revenues | $ | 197,970 | $ | 184,911 | ||||
Income before income tax expense (benefit): | ||||||||
Underwriting (loss) income: | ||||||||
Commercial lines | $ | (8,242 | ) | $ | (566 | ) | ||
Personal lines | 5,037 | 4,811 | ||||||
SAP underwriting (loss) income | (3,205 | ) | 4,245 | |||||
GAAP adjustments | 5,982 | 1,385 | ||||||
GAAP underwriting income | 2,777 | 5,630 | ||||||
Net investment income | 7,511 | 7,376 | ||||||
Investment gains (losses) | 2,469 | (10,695 | ) | |||||
Other | (6 | ) | 192 | |||||
Income before income tax expense (benefit) | $ | 12,751 | $ | 2,503 | ||||
7 - | Borrowings |
that was outstanding at March 31, 2020. The debt carries carried
FHLB of Pittsburgh stock purchased and owned | $ | 3,639,200 | ||
Collateral pledged, at par (carrying value $107,645,543) | 106,140,378 | |||
Borrowing capacity currently available | 21,278,660 |
2021.
FHLB of Pittsburgh stock purchased and owned | $ | 1,690,100 | ||||
Collateral pledged, at par (carrying value $49,326,964) | 48,385,986 | |||||
Borrowing capacity currently available | 12,714,454 |
8 - Share–Based Compensation
8 - | Share–Based Compensation |
9 - Fair Value Measurements
9 - | Fair Value Measurements |
that the estimated fair value does not reflect the price at which an actual transaction would occur. We utilize nationally recognized independent pricing services to estimate fair values or obtain market quotations for substantially all of our fixed maturity and equity investments. These pricing services utilize market quotations for fixed maturity and equity securities that have quoted prices in active markets. For fixed maturity securities that generally do not trade on a daily basis, the pricing services prepare estimates of fair value measurements based predominantly on observable market inputs. The pricing services do not use broker quotes in determining the fair values of our investments. Our investment personnel review the estimates of fair value the pricing services provide to verify that the estimates we obtain from the pricing services are representative of fair values based upon our investment personnel’s general knowledge of the market, their research findings related to unusual fluctuations in value and their comparison of such values to execution prices for similar securities. Our investment personnel regularly monitor the market, current trading ranges for similar securities and the pricing of specific investments. Our investment personnel review all pricing estimates that we receive from the pricing services against their expectations with respect to pricing based on fair market curves, security ratings, interest rates, security types and recent trading activity. Our investment personnel periodically review documentation with respect to the pricing services’ pricing methodology that they obtain to determine if the primary pricing sources, market inputs and pricing frequency for various security types are reasonable. At March 31, 2020,2021, we received two estimates per security from the pricing services, and we priced substantially all of our Level 1 and Level 2 investments using those prices. In our review of the estimates the pricing services provided at March 31, 2020,2021, we did not identify any material discrepancies, and we did not make any adjustments to the estimates the pricing services provided.
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 | $ | 16,421 | $ | — | $ | 16,421 | $ | — | ||||||||
Obligations of states and political subdivisions | 63,340 | — | 63,340 | — | ||||||||||||
Corporate securities | 153,545 | — | 153,545 | — | ||||||||||||
Mortgage-backed securities | 321,157 | — | 321,157 | — | ||||||||||||
Equity securities | 46,179 | 41,826 | 4,353 | — | ||||||||||||
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Total investments in the fair value hierarchy | $ | 600,642 | $ | 41,826 | $ | 558,816 | $ | — | ||||||||
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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 | $ | 19,153 | $ | — | $ | 19,153 | $ | — | ||||||||
Obligations of states and political subdivisions | 68,852 | — | 68,852 | — | ||||||||||||
Corporate securities | 202,775 | — | 202,775 | — | ||||||||||||
Mortgage-backed securities | 206,875 | — | 206,875 | — | ||||||||||||
Equity securities | 68,640 | 66,236 | 2,404 | — | ||||||||||||
Total investments in the fair value hierarchy | $ | 566,295 | $ | 66,236 | $ | 500,059 | $ | — | ||||||||
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 | $ | 19,364 | $ | — | $ | 19,364 | $ | — | ||||||||
Obligations of states and political subdivisions | 56,796 | — | 56,796 | — | ||||||||||||
Corporate securities | 159,243 | — | 159,243 | — | ||||||||||||
Mortgage-backed securities | 329,548 | — | 329,548 | — | ||||||||||||
Equity securities | 55,478 | 53,124 | 2,354 | — | ||||||||||||
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Totals | $ | 620,429 | $ | 53,124 | $ | 567,305 | $ | — | ||||||||
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2020:
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 | $ | 47,815 | $ | — | $ | 47,815 | $ | — | ||||||||
Obligations of states and political subdivisions | 68,965 | — | 68,965 | — | ||||||||||||
Corporate securities | 212,708 | — | 212,708 | — | ||||||||||||
Mortgage-backed securities | 225,648 | — | 225,648 | — | ||||||||||||
Equity securities | 58,556 | 54,152 | 4,404 | — | ||||||||||||
Totals | $ | 613,692 | $ | 54,152 | $ | 559,540 | $ | — | ||||||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Balance at January 1 | $ | 869,674 | $ | 814,665 | ||||
Less reinsurance recoverable | (362,768 | ) | (339,267 | ) | ||||
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Net balance at January 1 | 506,906 | 475,398 | ||||||
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Incurred related to: | ||||||||
Current year | 121,551 | 127,117 | ||||||
Prior years | (4,304 | ) | (4,006 | ) | ||||
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Total incurred | 117,247 | 123,111 | ||||||
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Paid related to: | ||||||||
Current year | 39,689 | 43,232 | ||||||
Prior years | 68,050 | 66,305 | ||||||
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Total paid | 107,739 | 109,537 | ||||||
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Net balance at end of period | 516,414 | 488,972 | ||||||
Plus reinsurance recoverable | 371,798 | 347,548 | ||||||
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Balance at end of period | $ | 888,212 | $ | 836,520 | ||||
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Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Balance at January 1 | $ | 962,007 | $ | 869,674 | ||||
Less reinsurance recoverable | (404,818 | ) | (362,768 | ) | ||||
Net balance at January 1 | 557,189 | 506,906 | ||||||
Incurred related to: | ||||||||
Current year | 127,433 | 121,551 | ||||||
Prior years | (8,213 | ) | (4,304 | ) | ||||
Total incurred | 119,220 | 117,247 | ||||||
Paid related to: | ||||||||
Current year | 35,584 | 39,689 | ||||||
Prior years | 65,192 | 68,050 | ||||||
Total paid | 100,776 | 107,739 | ||||||
Net balance at end of period | 575,633 | 516,414 | ||||||
Plus reinsurance recoverable | 421,346 | 371,798 | ||||||
Balance at end of period | $ | 996,979 | $ | 888,212 | ||||
2021.
In January 2017, the FASB issued guidance that simplifies the measurement of goodwill by modifying the goodwill impairment test previous guidance required. The guidance requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize impairment for the amount by which the reporting unit’s carrying amount exceeds its fair value. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019 and permits early adoption. We early adopted this guidance in 2019. The adoption of this guidance did not have a significant impact on our financial position, results of operations or cash flows.
In August 2018, the FASB issued guidance that modifies disclosure requirements related to fair value measurements. The guidance removes the requirements to disclose the amounts of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019 and permits early adoption. We early adopted this guidance in 2019. The adoption of this guidance on January 1, 2019 did not have a significant impact on our financial position, results of operations or cash flows.
In JuneSeptember 2016, the FASB issued guidance that amends previous guidance on the impairment of financial instruments by adding an impairment model that requires an entity to recognize expected credit losses as an allowance rather than impairments as credit losses are incurred. The intent of this guidance is to reduce complexity and result in a more timely recognition of expected credit losses. In November 2019, the FASB issued guidance that delays the effective date for “smaller reporting companies,” as defined in Item 10(f)(1) of
13 - Risks and Uncertainties
Beginning in March 2020, theCOVID-19 pandemic resulted in significant disruptions in economic activity throughout our operating regions.COVID-19 concerns contributed to substantial declines in equity markets and a sharp decrease in market interest rates. We cannot predict at this time the ultimate impact that the economic and financial disruption related to the ongoingCOVID-19 pandemic or any other future pandemic will have on our financial position, results of operations and cash flows. The impact of the following risks and uncertainties could be material:
the revenues of our insurance subsidiaries may decrease as a result of reduced demand for their insurance products as the ongoing economic disruption adversely impacts current and potential insurance customers;
our insurance subsidiaries may incur an increase in their losses and loss expenses in certain lines of business as a result ofCOVID-19 and related economic disruption, and such losses and loss expenses may exceed the reserves our insurance subsidiaries have established or may establish in the future;
our insurance subsidiaries may incur increased costs related to legal disputes over policy coverages or exclusions and their defense against litigation related toCOVID-19;
legislative, judicial and regulatory actions may expand coverage definitions, retroactively mandate coverage or otherwise require our insurance subsidiaries to pay losses for damages that their policies explicitly excluded or did not intend to cover;
legislative, judicial and regulatory actions may require our insurance subsidiaries to reduce or refund premiums, suspend cancellation of policies fornon-payment of premiums or otherwise grant extended grace periods and time allowances for the payment of premium balances due to them;
our insurance subsidiaries may not be able to collect premium balances due to them, resulting in reduced operating cash flows and an increase in premium write-offs that would increase their operating expenses;
our insurance subsidiaries may suffer declines in the market values of their investments as a result of financial market volatility related toCOVID-19 concerns and related economic disruption; and
our insurance subsidiaries may experience declines in investment income as a result of lower interest rates that may be available upon reinvestment of the proceeds of maturing investments.
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2020.
Liability
expenses.
Atlantic States’ participation in the pool with Donegal Mutual exposes Atlantic States to adverse loss development on the business of Donegal Mutual that the pool includes. However, pooled business represents the predominant percentage of the net underwriting activity of both companies, and Donegal Mutual and Atlantic States share proportionately any adverse risk development relating to the pooled business. The business in the pool is homogeneous and each company has a
March 31, 2020 | December 31, 2019 | |||||||
(in thousands) | ||||||||
Commercial lines: | ||||||||
Automobile | $ | 134,407 | $ | 126,224 | ||||
Workers’ compensation | 111,853 | 109,060 | ||||||
Commercial multi-peril | 104,063 | 102,424 | ||||||
Other | 10,195 | 9,115 | ||||||
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Total commercial lines | 360,518 | 346,823 | ||||||
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Personal lines: | ||||||||
Automobile | 129,689 | 132,191 | ||||||
Homeowners | 20,999 | 23,494 | ||||||
Other | 5,208 | 4,398 | ||||||
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Total personal lines | 155,896 | 160,083 | ||||||
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Total commercial and personal lines | 516,414 | 506,906 | ||||||
Plus reinsurance recoverable | 371,798 | 362,768 | ||||||
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Total liability for unpaid losses and loss expenses | $ | 888,212 | $ | 869,674 | ||||
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March 31, 2021 | December 31, 2020 | |||||||
(in thousands) | ||||||||
Commercial lines: | ||||||||
Automobile | $ | 153,747 | $ | 151,813 | ||||
Workers’ compensation | 120,963 | 118,037 | ||||||
Commercial multi-peril | 137,868 | 126,299 | ||||||
Other | 13,850 | 13,212 | ||||||
Total commercial lines | 426,428 | 409,361 | ||||||
Personal lines: | ||||||||
Automobile | 120,386 | 120,861 | ||||||
Homeowners | 22,399 | 20,976 | ||||||
Other | 6,420 | 5,991 | ||||||
Total personal lines | 149,205 | 147,828 | ||||||
Total commercial and personal lines | 575,633 | 557,189 | ||||||
Plus reinsurance recoverable | 421,346 | 404,818 | ||||||
Total liabilities for losses and loss expenses | $ | 996,979 | $ | 962,007 | ||||
The following table sets forth the estimated effect on our insurance subsidiaries’ unpaid loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we considered in establishing the loss and loss expense reserves of our insurance subsidiaries:
Percentage Change in Loss and Loss Expense Reserves Net of Reinsurance | Adjusted Loss and Loss Expense Reserves Net of Reinsurance at March 31, 2020 | Percentage Change in Stockholders’ Equity at March 31, 2020(1) | Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2019 | Percentage Change in Stockholders’ Equity at December 31, 2019(1) | ||||||||||||
(dollars in thousands) | ||||||||||||||||
(10.0)% | $ | 464,773 | 8.9 | % | $ | 456,215 | 8.9 | % | ||||||||
(7.5) | 477,683 | 6.7 | 468,888 | 6.7 | ||||||||||||
(5.0) | 490,593 | 4.4 | 481,561 | 4.4 | ||||||||||||
(2.5) | 503,504 | 2.2 | 494,233 | 2.2 | ||||||||||||
Base | 516,414 | — | 506,906 | — | ||||||||||||
2.5 | 529,324 | (2.2 | ) | 519,579 | (2.2 | ) | ||||||||||
5.0 | 542,235 | (4.4 | ) | 532,251 | (4.4 | ) | ||||||||||
7.5 | 555,145 | (6.7 | ) | 544,924 | (6.7 | ) | ||||||||||
10.0 | 568,055 | (8.9 | ) | 557,597 | (8.9 | ) |
Percentage Change in Loss and Loss Expense Reserves Net of Reinsurance | Adjusted Loss and Loss Expense Reserves Net of Reinsurance at March 31, 2021 | Percentage Change in Stockholders’ Equity at March 31, 2021(1) | Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2020 | Percentage Change in Stockholders’ Equity at December 31, 2020(1) | ||||
(dollars in thousands) | ||||||||
(10.0)% | $518,070 | 8.6% | $501,470 | 8.5% | ||||
(7.5) | 532,461 | 6.4 | 515,400 | 6.4 | ||||
(5.0) | 546,851 | 4.3 | 529,330 | 4.3 | ||||
(2.5) | 561,242 | 2.1 | 543,259 | 2.1 | ||||
Base | 575,633 | — | 557,189 | — | ||||
2.5 | 590,024 | (2.1) | 571,119 | (2.1) | ||||
5.0 | 604,415 | (4.3) | 585,048 | (4.3) | ||||
7.5 | 618,805 | (6.4) | 598,978 | (6.4) | ||||
10.0 | 633,196 | (8.6) | 612,908 | (8.5) |
(1) | Net of income tax effect. |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Net premiums earned | $ | 187,253 | $ | 188,073 | ||||
Change in net unearned premiums | 10,984 | 11,842 | ||||||
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Net premiums written | $ | 198,237 | $ | 199,915 | ||||
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Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Net premiums earned | $ | 187,252 | $ | 187,253 | ||||
Change in net unearned premiums | 28,610 | 10,984 | ||||||
Net premiums written | $ | 215,862 | $ | 198,237 | ||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
GAAP Combined Ratios (Total Lines) | ||||||||
Loss ratio(non-weather) | 58.9 | % | 60.4 | % | ||||
Loss ratio (weather-related) | 3.7 | 5.1 | ||||||
Expense ratio | 33.4 | 32.6 | ||||||
Dividend ratio | 1.0 | 1.2 | ||||||
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Combined ratio | 97.0 | % | 99.3 | % | ||||
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Statutory Combined Ratios | ||||||||
Commercial lines: | ||||||||
Automobile | 117.4 | % | 116.5 | % | ||||
Workers’ compensation | 90.1 | 88.8 | ||||||
Commercial multi-peril | 89.1 | 90.9 | ||||||
Other | 64.2 | 65.2 | ||||||
Total commercial lines | 96.0 | 96.4 | ||||||
Personal lines: | ||||||||
Automobile | 100.0 | 101.3 | ||||||
Homeowners | 90.7 | 95.4 | ||||||
Other | 66.5 | 70.3 | ||||||
Total personal lines | 94.7 | 97.8 | ||||||
Total commercial and personal lines | 95.4 | 97.1 |
2020:
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
GAAP Combined Ratios (Total Lines) | ||||||||
Loss ratio (non-weather) | 60.0% | 58.9% | ||||||
Loss ratio (weather-related) | 3.7 | 3.7 | ||||||
Expense ratio | 34.1 | 33.4 | ||||||
Dividend ratio | 0.7 | 1.0 | ||||||
Combined ratio | 98.5% | 97.0% | ||||||
Statutory Combined Ratios | ||||||||
Commercial lines: | ||||||||
Automobile | 102.3% | 117.4% | ||||||
Workers’ compensation | 95.4 | 90.1 | ||||||
Commercial multi-peril | 107.7 | 89.1 | ||||||
Other | 60.1 | 64.2 | ||||||
Total commercial lines | 99.3 | 96.0 | ||||||
Personal lines: | ||||||||
Automobile | 93.4 | 100.0 | ||||||
Homeowners | 94.7 | 90.7 | ||||||
Other | 76.9 | 66.5 | ||||||
Total personal lines | 92.6 | 94.7 | ||||||
Total commercial and personal lines | 96.5 | 95.4 |
2020
20202021 were $198.2$215.9 million, a decreasean increase of $1.7$17.6 million, or 0.8%8.9%, from the $199.9$198.2 million of net premiums written for the first three months of 2019.2020. Commercial lines net premiums written increased $8.0$22.7 million, or 7.1%18.7%, for the first three months of 20202021 compared to the first three months of 2019.2020. We attribute the increase in commercial lines net premiums written primarily to increased writingsthe inclusion of new commercial accounts and premium rate increases throughout 2019 and 2020.the business of the Mountain States Insurance Group in the pool beginning with policies effective in 2021.. Personal lines net premiums written decreased $9.7$5.1 million, or 11.2%6.7%, for the first three months of 20202021 compared to the first three months of 2019.2020. We attribute the decrease in personal lines net premiums written primarily to net attrition as a result of underwriting measures our insurance subsidiaries have implemented to slow new policy growth and to increase pricing on renewal policies,improve underwriting profitability, partially offset by the impact of premium rate increases our insurance subsidiaries have implemented.
2020.
2020.
2020.
2020.
The following table shows our expected payments for significant contractual obligations at March 31, 2020:
Total | Less than 1 year | 1-3 years | 4-5 years | After 5 years | ||||||||||||||||
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Net liability for unpaid losses and loss expenses of our insurance subsidiaries | $ | 516,414 | $ | 230,595 | $ | 247,762 | $ | 18,623 | $ | 19,434 | ||||||||||
Subordinated debentures | 5,000 | — | — | — | 5,000 | |||||||||||||||
Borrowings under lines of credit | 85,000 | 50,000 | — | 35,000 | — | |||||||||||||||
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Total contractual obligations | $ | 606,414 | $ | 280,595 | $ | 247,762 | $ | 53,623 | $ | 24,434 | ||||||||||
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2021.
Impact of Inflation
We establish property and casualty insurance premium rates before we know the amount of unpaid losses and loss expenses or the extent to which inflation may impact such losses and expenses. Consequently, our insurance subsidiaries attempt, in establishing rates, to anticipate the potential impact of inflation.
Other than interest rate and pricing fluctuations related theCOVID-19 pandemic, there
The emergence2021.
The business operations of our insurance subsidiaries could be disrupted by the illness of significant numbers of their employees and remedial efforts that would be required upon discovery of exposure toCOVID-19 within their facilities.
The business operations of our insurance subsidiaries are dependent upon technology systems for which regular physical access is required to maintain critical operational capabilities. The business operations of our insurance subsidiaries would be adversely impacted by government mandates requiring closure of facilities where those technology systems are located or restricting physical access to such facilities.
The revenues of our insurance subsidiaries may decrease as a result of reduced demand for their insurance products as the ongoing economic disruption adversely impacts current and potential insurance customers.
Our insurance subsidiaries may incur an increase in their losses and loss expenses in certain lines of business as a result ofCOVID-19 and related economic disruption, and such losses and loss expenses may exceed the reserves our insurance subsidiaries have established or may establish in the future.
Our insurance subsidiaries may incur increased costs related to legal disputes over policy coverages or exclusions and their defense against litigation related toCOVID-19.
Legislative, judicial and regulatory actions may expand coverage definitions, retroactively mandate coverage or otherwise require our insurance subsidiaries to pay losses for damages that their policies explicitly excluded or did not intend to cover.
Legislative, judicial and regulatory actions may require our insurance subsidiaries to reduce or refund premiums, suspend cancellation of policies fornon-payment of premiums or otherwise grant extended grace periods and time allowances for the payment of premium balances due to them.
Our insurance subsidiaries may not be able to collect premium balances due to them, resulting in reduced operating cash flows and an increase in premium write-offs that would increase their operating expenses.
Our insurance subsidiaries may suffer declines in the market values of their investments as a result of financial market volatility related toCOVID-19 concerns and related economic disruption.
Our insurance subsidiaries may experience declines in investment income as a result of lower interest rates that may be available upon reinvestment of the proceeds of maturing investments.
Economic disruption related toCOVID-19 could result in significant declines in the credit quality of issuers, ratings downgrades or changes in financial market conditions and regulatory changes that might adversely impact the value of the fixed-maturity investments of our insurance subsidiaries own.
None.
(1) | Donegal Mutual purchased these shares pursuant to its announcement on August 17, 2004 that it will, at its discretion, purchase shares of our Class A common stock and Class B common stock at market prices prevailing from time to time in the open market subject to the provisions of SEC Rule 10b-18 and in privately negotiated transactions. Such announcement did not stipulate a maximum number of shares that may be purchased under this program. |
Exhibit No. | Description | |
Exhibit 31.1 | ||
Exhibit 31.2 | ||
Exhibit 32.1 | ||
Exhibit 32.2 | ||
Exhibit 101.INS | XBRL Instance Document | |
Exhibit 101.SCH | XBRL Taxonomy Extension Schema Document | |
Exhibit 101.PRE | XBRL Taxonomy Presentation Linkbase Document | |
Exhibit 101.CAL | XBRL Taxonomy Calculation Linkbase Document | |
Exhibit 101.LAB | XBRL Taxonomy Label Linkbase Document | |
Exhibit 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
DONEGAL GROUP INC. | ||||||
May | By: | /s/ Kevin G. Burke | ||||
Kevin G. Burke, President and Chief Executive Officer |
May | By: | /s/ Jeffrey D. Miller | ||||
Jeffrey D. Miller, Executive Vice President and Chief Financial Officer |
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