Donegal Groups 2002 4thQ Results Improve From Year Ago

Pennsylvania-based Donegal Group Inc. reported its results of operations for the quarter and year ended Dec. 31, 2002.

The company continued its trend of strong underwriting quarters during the fourth quarter of 2002 with the Company posting net income of $3,627,496, or $.39 per share on a diluted basis, compared to a net loss of $857,155, or $.10 per share on a diluted basis, in the fourth quarter of 2001.

For the year ended Dec. 31, 2002 the Company posted historic high net income of $12,002,722, or $1.31 per share on a diluted basis and a return on average equity of 9.4 percent, compared to net income of $5,818,131, or $.64 per share on a diluted basis, in 2001.

“The fourth quarter and year 2002 results reflect the effects of significant rate and premium increases put into place over the last eighteen months,” Donald Nikolaus, president and CEO of Donegal Group Inc., said, “along with the reemphasis of underwriting disciplines and the implementation of extensive cost control efforts.”

The company’s 2002 fourth quarter results improved significantly over the fourth quarter results of 2001 which were impacted by reserve strengthening of $4.2 million. The company’s operating income for the fourth quarter was $3,523,729, or $.38 per share on a diluted basis, compared to an operating loss of $572,172, or $.09 per share on a diluted basis, for the fourth quarter of 2001.

Revenues for the fourth quarter of 2002 were $51,947,295, an increase of 9.3 percent over a year earlier, with premiums earned for the fourth quarter of $47,485,673, a 9.2 percent increase over the fourth quarter of 2001. Service fees for the fourth quarter were $586,060, an increase of 61.2 percent over a year earlier of $363,459, reflecting increases in premium installment plan service fees.

Revenues for the year 2002 were $203,803,561, an increase of 10.1 percent over a year earlier, with premiums earned for the year of $185,841,193, a 10.8 percent increase over 2001. Service fees for the year were $2,447,229, an increase of 54.2 percent over a year earlier of $1,587,396.

The company’s combined ratio for the fourth quarter of 2002 was an excellent 97.9 percent, compared to 111.4 percent for the fourth quarter of 2001. The company’s loss ratio for the fourth quarter was 70.4 percent compared to 78.3 percent for the fourth quarter of 2001. The company’s expense ratio improved to 27.2 percent for the fourth quarter of 2002 compared to 31.9 percent in the fourth quarter of 2001. The company’s dividend ratio decreased from 1.2 percent in the fourth quarter of 2001 to 0.4 percent in the fourth quarter of 2002 due to the implementation of more stringent requirements to qualify for workers’ compensation policy dividends.

The company’s combined ratio for the year 2002 was a strong 99.6 percent, compared to 103.7 percent for 2001. The company’s loss ratio for 2002 was 69.6 percent compared to 70.4 percent for 2001. The company’s expense ratio improved to 29.5 percent for 2002 compared to 32.3 percent in 2001. The company’s dividend ratio decreased from 1.0 percent in 2001 to 0.6 percent in 2002.