Financial Data and Key Metrics Changes - Net income for Q3 2019 was $5.2 million or $0.18 per diluted Class A share, compared to $1.2 million or $0.04 per Class A share in Q3 2018 [39] - Overall net premiums written decreased by 0.4% to $183.9 million, while net premiums earned grew by 1.2% to $189.8 million for Q3 2019 [20] - The combined ratio for Q3 2019 was 100.6%, an improvement from 105.2% in the prior year quarter [36] Business Line Data and Key Metrics Changes - Commercial lines net premiums written increased by 13.2%, representing approximately 51% of total writings for the quarter, up from 45% in the prior year [20][21] - Personal lines net written premiums declined by 11.6% to approximately $89.4 million, with about 4% of that decline due to exiting unprofitable markets in 7 states [15][23] - The commercial lines segment generated a solid underwriting profit with a combined ratio of 97.9% for Q3 2019, significantly improved from 104.5% in the prior year [11] Market Data and Key Metrics Changes - Commercial renewal pricing increases averaged 1.8% for the quarter, with an 8.4% average rate increase in commercial auto, offset by a 5.1% average decrease in Workers' compensation rates [22] - Weather-related losses for Q3 2019 were $13.9 million, significantly lower than $21.2 million in Q3 2018 [24] Company Strategy and Development Direction - The company aims to develop a solid foundation for consistent underwriting profitability and book value growth over time, focusing on profitable growth in specific geographical markets [6][8] - A high-priority project is underway to design and implement new personal auto and homeowners products utilizing enhanced data analytics and modern technology tools, expected to launch in early 2021 [18] Management's Comments on Operating Environment and Future Outlook - Management expressed satisfaction with the incremental progress in Q3 results and emphasized the importance of executing key strategies to enhance operational efficiency and financial performance [40] - The company remains cautious about the impact of social inflation on claims and is taking conservative actions regarding reserves [44] Other Important Information - The expense ratio for Q3 2019 was 30.5%, up from 29.6% in Q3 2018, attributed to higher underwriting-based incentive costs [36] - Net investment income increased by 11.6% to $7.4 million, primarily due to an increase in average invested assets [37] Q&A Session Summary Question: How much did reserve releases contribute to this quarter's results versus last year's? - Reserve development contributed an 8-point reduction in the loss ratio for Q3 2019, compared to 9.8% in Q3 2018 [42] Question: Are you seeing any pressure from social inflation in auto casualty or commercial property? - Management noted elevation in average paid claims on both personal and commercial auto sides, reflecting actions taken in previous years [43][44] Question: Any unusual items driving the underwriting loss in homeowners? - Unusual claims not related to weather or fires, such as liability claims and water damage, contributed to the underwriting loss [45] Question: Update on Mountain States and plans for pooling arrangement? - Mountain States is making solid progress, but the company will not include it in the pooling arrangement for now, planning to revisit in 6 to 12 months [46] Question: Can you break out reserve development by line? - Favorable development of about $2.3 million in Workers' comp, with unfavorable development in CMP and commercial auto [49] Question: Are rate increases exceeding the loss trend in commercial auto? - Rate increases are significant, but ultimate losses are projected at levels reflecting high large loss activity [51] Question: How have retention rates been affected by rate increases? - Commercial lines retention is steady around 84%, while personal lines retention has dropped to about 79% due to exiting unprofitable states [57]

PART I FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company presents its unaudited consolidated financial statements for the three and six months ended June 30, 2019 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $1.90 billion, driven by investments, with stockholders' equity increasing to $437.9 million Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 (Unaudited) | December 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$1,901,282** | **$1,832,078** | | Total Investments | $1,075,428 | $1,030,798 | | Cash | $35,946 | $52,594 | | **Total Liabilities** | **$1,463,429** | **$1,433,208** | | Unpaid losses and loss expenses | $845,282 | $814,665 | | Unearned premiums | $535,999 | $506,529 | | **Total Stockholders' Equity** | **$437,854** | **$398,870** | [Consolidated Statements of Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)) The company achieved a significant turnaround to a net income of $27.8 million for the six-month period Three Months Ended June 30 (in thousands, except per share data) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Total Revenues | $198,789 | $195,790 | | Total Expenses | $193,251 | $197,123 | | Income (Loss) Before Tax | $5,538 | $(1,333) | | **Net Income (Loss)** | **$4,788** | **$(790)** | | Diluted EPS (Class A) | $0.17 | $(0.03) | Six Months Ended June 30 (in thousands, except per share data) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Total Revenues | $413,503 | $385,118 | | Total Expenses | $381,120 | $414,987 | | Income (Loss) Before Tax | $32,383 | $(29,868) | | **Net Income (Loss)** | **$27,812** | **$(18,968)** | | Diluted EPS (Class A) | $0.99 | $(0.68) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations was $21.2 million for the first half of 2019, with an overall decrease in cash of $16.6 million Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $21,191 | $36,132 | | Net Cash from Investing Activities | $(6,615) | $(15,152) | | Net Cash from Financing Activities | $(31,225) | $(5,161) | | **Net (Decrease) Increase in Cash** | **$(16,649)** | **$15,819** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key disclosures include the $12.7 million gain from the DFSC sale and favorable loss reserve development - On March 8, 2019, the company sold its 48.2% stake in Donegal Financial Services Corporation (DFSC), resulting in a **pre-tax gain of $12.7 million** in the first quarter of 2019[40](index=40&type=chunk)[42](index=42&type=chunk) - The company's insurance subsidiaries and Donegal Mutual implemented a combined third-party reinsurance program effective January 1, 2019, with key retentions of **$1.0 million for property** and **$2.0 million for casualty losses**[55](index=55&type=chunk) - For the first six months of 2019, the company recognized a **$6.9 million decrease (favorable development)** in its liability for losses and loss expenses from prior years, a sharp contrast to the **$26.2 million increase (adverse development)** in H1 2018[91](index=91&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the improved financial results to a lower loss ratio and the gain from the DFSC sale [Critical Accounting Policies and Estimates](index=24&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The liability for unpaid losses and loss expenses is identified as the most significant accounting estimate - The liability for unpaid losses and loss expenses is the company's most critical accounting estimate, where a **1% change** in these net reserves would affect pre-tax operating results by approximately **$4.9 million**[107](index=107&type=chunk)[111](index=111&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Net income reached $27.8 million in H1 2019, with the combined ratio improving significantly to 100.7% GAAP Combined Ratios | Period | 2019 | 2018 | Change (bps) | | :--- | :--- | :--- | :--- | | **Three Months Ended June 30** | **102.0%** | **105.6%** | **-360** | | Loss ratio | 69.7% | 73.1% | -340 | | Expense ratio | 31.3% | 31.8% | -50 | | **Six Months Ended June 30** | **100.7%** | **112.4%** | **-1170** | | Loss ratio | 67.6% | 79.6% | -1200 | | Expense ratio | 32.0% | 32.1% | -10 | - For the first half of 2019, net premiums written increased **1.7% to $397.7 million**, driven by a **13.1% increase in commercial lines** offset by a **9.3% decrease in personal lines**[139](index=139&type=chunk)[141](index=141&type=chunk) - Net income for H1 2019 was **$27.8 million**, or $0.99 per Class A share, a significant improvement from a net loss of **$19.0 million**, or ($0.68) per Class A share, in H1 2018, positively impacted by a **$12.7 million gain** on the sale of DFSC[143](index=143&type=chunk)[149](index=149&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity through operating cash flows and access to a $30.0 million credit facility - Operating activities provided net cash flow of **$21.2 million** in the first six months of 2019, and the company has access to an undrawn **$30.0 million line of credit**[152](index=152&type=chunk)[153](index=153&type=chunk) - The board declared quarterly cash dividends of **14.5 cents per Class A share** and **12.75 cents per Class B share**, with **$30.9 million** available for further distribution from insurance subsidiaries in 2019 without prior regulatory approval[159](index=159&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its market risk exposure from year-end 2018 - There have been **no material changes** to the company's quantitative or qualitative market risk exposure between December 31, 2018, and June 30, 2019[168](index=168&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2019 - Management, including the CEO and CFO, concluded that as of June 30, 2019, the company's disclosure controls and procedures were **effective**[169](index=169&type=chunk) - **No changes** in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[170](index=170&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings during the period - None[174](index=174&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the 2018 Annual Report on Form 10-K are reported - There have been **no material changes** in risk factors from those disclosed in the 2018 Annual Report on Form 10-K[175](index=175&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities or related use of proceeds - None[176](index=176&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including required certifications

Donegal Group, Inc. (NASDAQ:DGICA) Q2 2019 Earnings Conference Call July 30, 2019 11:00 AM ET Company Participants Jeff Miller - Chief Financial Officer Kevin Burke - President and Chief Executive Officer Conference Call Participants Christopher Campbell - KBW Bob Farnam - Boenning and Scattergood Operator Good morning. My name is Cheryl and I will be your conference operator today. At this time, I would like to welcome everyone to the Donegal Group Inc. Q2 2019 Earnings Conference Call. [Operator Instructi ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |-----------------------------------------------------------------------------------------------------------------------------------|------------------------ ...

PART I [Business](index=4&type=section&id=Item%201.%20Business) Donegal Group Inc. is a property and casualty insurance holding company operating in 22 states, controlled by Donegal Mutual, focusing on underwriting profitability and organic growth through independent agents - Donegal Group Inc. is an insurance holding company whose subsidiaries offer personal and commercial lines of property and casualty insurance across **22 states**[14](index=14&type=chunk) - Donegal Mutual Insurance Company is the controlling entity, holding approximately **43% of Class A common stock** and **84% of Class B common stock**, which translates to about **72% of the combined voting power**[15](index=15&type=chunk) - A significant operational aspect is the pooling agreement between DGI's subsidiary, Atlantic States, and Donegal Mutual. Atlantic States has an **80% participation** in the pooled premiums, losses, and expenses, which aims to create stable and uniform underwriting results[24](index=24&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) Net Premiums Written by Line of Insurance (2016-2018) | Line of Insurance | 2018 Amount ($ thousands) | 2018 % | 2017 Amount ($ thousands) | 2017 % | 2016 Amount ($ thousands) | 2016 % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Personal Lines** | | | | | | | | Automobile | $249,275 | 33.5% | $255,297 | 35.0% | $229,789 | 33.7% | | Homeowners | $123,782 | 16.6% | $125,054 | 17.2% | $122,811 | 18.0% | | Other | $21,064 | 2.9% | $19,672 | 2.7% | $19,057 | 2.8% | | **Total Personal Lines** | **$394,121** | **53.0%** | **$400,023** | **54.9%** | **$371,657** | **54.5%** | | **Commercial Lines** | | | | | | | | Automobile | $108,123 | 14.5% | $99,333 | 13.6% | $87,849 | 12.9% | | Commercial Multi-Peril | $117,509 | 15.8% | $110,313 | 15.1% | $104,728 | 15.4% | | Workers' Compensation | $109,022 | 14.7% | $109,884 | 15.1% | $108,349 | 15.9% | | Other | $15,241 | 2.0% | $9,586 | 1.3% | $9,451 | 1.3% | | **Total Commercial Lines** | **$349,895** | **47.0%** | **$329,116** | **45.1%** | **$310,377** | **45.5%** | | **Total Business** | **$744,016** | **100.0%** | **$729,139** | **100.0%** | **$682,034** | **100.0%** | Direct Premiums Written by State (2018) | State | Percentage of Direct Premiums | | :--- | :--- | | Pennsylvania | 34.3% | | Michigan | 15.4% | | Maryland | 8.7% | | Virginia | 8.0% | | Georgia | 7.9% | | Delaware | 5.7% | | Wisconsin | 3.8% | | Ohio | 3.1% | | Iowa | 2.6% | | Nebraska | 2.3% | | Tennessee | 2.3% | | South Dakota | 1.2% | | Other | 4.7% | | **Total** | **100.0%** | - The company sold its **48.2%** stake in Donegal Financial Services Corporation (DFSC) to Northwest Bancshares, Inc. on March 8, 2019. DGI received a dividend of approximately **$14.1 million** and consideration valued at about **$41.4 million** from the sale[21](index=21&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) The company faces industry-specific risks like rising costs and litigation, company-specific risks including control by Donegal Mutual and geographic concentration, and stock-related risks - **Industry Risks:** The company is exposed to trends of increased litigation, rising jury awards, escalating medical costs, and higher loss frequency and severity, which may lead to the deterioration of loss reserves[127](index=127&type=chunk)[128](index=128&type=chunk) - **Control Risk:** Donegal Mutual's majority voting control (approx. **72%**) presents potential conflicts of interest between its policyholders and DGI's stockholders. This control allows Donegal Mutual to elect the entire board and determine the outcome of all corporate matters[146](index=146&type=chunk)[147](index=147&type=chunk)[149](index=149&type=chunk) - **Geographic Concentration Risk:** A substantial portion of business is concentrated in Pennsylvania (**34.3%**), Michigan (**15.4%**), Maryland (**8.7%**), Virginia (**8.0%**), and Georgia (**7.9%**). A single catastrophic event in these states could materially affect results[157](index=157&type=chunk)[158](index=158&type=chunk)[74](index=74&type=chunk) - **Distribution Risk:** The company markets its products exclusively through a network of approximately **2,400 independent insurance agencies**, making it dependent on their performance and adherence to underwriting guidelines[160](index=160&type=chunk) - **Stock Risk:** The Class A and Class B common stocks have limited liquidity and low trading volume. Anti-takeover provisions and Donegal Mutual's control make an acquisition unlikely, which may negatively affect the stock price by removing any potential "takeover" premium[193](index=193&type=chunk)[194](index=194&type=chunk) [Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved written comments from the Securities and Exchange Commission staff regarding its Exchange Act filings - There are no unresolved written comments from the SEC staff regarding the company's filings[197](index=197&type=chunk) [Properties](index=36&type=section&id=Item%202.%20Properties) The company shares its administrative headquarters with Donegal Mutual in Marietta, Pennsylvania, and its subsidiaries own additional facilities in other states - The main administrative headquarters are shared with and owned by Donegal Mutual in Marietta, PA. Other properties are owned by subsidiaries Southern (Glen Allen, VA), Le Mars (Le Mars, IA), and Sheboygan (Sheboygan Falls, WI)[198](index=198&type=chunk) [Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) The company's insurance subsidiaries are involved in routine litigation that is not expected to materially affect its financial condition or results of operations - The company is party to routine litigation arising from its insurance business, which is not expected to have a material adverse effect on its financial condition[199](index=199&type=chunk) [Executive Officers of the Registrant](index=37&type=section&id=Executive%20Officers%20of%20the%20Registrant) This section lists the executive officers of Donegal Group Inc. and Donegal Mutual as of December 31, 2018, including their age, position, and tenure Executive Officers as of December 31, 2018 | Name | Age | Position | | :--- | :--- | :--- | | Kevin G. Burke | 53 | President and Chief Executive Officer | | Cyril J. Greenya | 74 | Senior Vice President and Chief Underwriting Officer | | Richard G. Kelley | 64 | Senior Vice President and Head of Field Operations | | Jeffrey D. Miller | 54 | Executive Vice President and Chief Financial Officer | | Sanjay Pandey | 52 | Senior Vice President and Chief Information Officer | | Robert G. Shenk | 65 | Senior Vice President, Claims (retiring March 2019) | | Daniel J. Wagner | 58 | Senior Vice President and Treasurer | PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details the trading of the company's Class A and Class B common stock on NASDAQ, stockholder information, dividends, and a five-year stock performance comparison Dividends Declared Per Share | Stock Class | 2018 | 2017 | | :--- | :--- | :--- | | Class A | $0.57 | $0.56 | | Class B | $0.50 | $0.49 | - As of March 1, 2019, there were approximately **1,843 holders** of record for Class A common stock and **274 for Class B common stock**[204](index=204&type=chunk) - The stock performance graph for the five years ending December 31, 2018, shows that both Class A and Class B stocks underperformed the Russell 2000 Index and the peer group index[206](index=206&type=chunk)[207](index=207&type=chunk) [Selected Financial Data](index=40&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of key income statement and balance sheet data for the company from 2014 through 2018 Five-Year Selected Financial Data (in thousands, except per share data) | Metric | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Income Statement Data** | | | | | | | Premiums earned | $741,291 | $702,515 | $656,205 | $605,641 | $556,498 | | Total revenues | $771,828 | $739,027 | $688,423 | $636,387 | $586,548 | | Net (loss) income | $(32,760) | $7,116 | $30,801 | $20,990 | $14,539 | | Diluted (loss) earnings per share—Class A | $(1.18) | $0.26 | $1.16 | $0.77 | $0.55 | | Cash dividends per share—Class A | $0.57 | $0.56 | $0.55 | $0.54 | $0.53 | | **Balance Sheet Data** | | | | | | | Total investments | $1,030,799 | $1,005,870 | $945,520 | $900,822 | $832,941 | | Total assets | $1,832,078 | $1,737,920 | $1,623,131 | $1,537,834 | $1,458,655 | | Stockholders' equity | $398,870 | $448,696 | $438,615 | $408,389 | $416,135 | | Book value per share | $14.05 | $15.95 | $16.21 | $15.66 | $15.40 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the 2018 net loss primarily due to higher weather-related losses and significant unfavorable prior-year loss reserve development, alongside premium growth and liquidity - The company reported a net loss of **$32.8 million** in 2018, compared to net income of **$7.1 million** in 2017. The loss was primarily driven by underwriting losses resulting from weather events and significant strengthening of loss reserves[239](index=239&type=chunk)[262](index=262&type=chunk) - The company recognized a **$35.6 million** increase in its liability for losses and loss expenses from prior years in 2018, a sharp increase from **$6.6 million** in 2017. This was mainly due to higher-than-expected severity in commercial multi-peril, personal auto, and commercial auto lines[225](index=225&type=chunk)[256](index=256&type=chunk) Key Performance Indicators (2016-2018) | Metric | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net Premiums Written | $744.0M | $729.1M | $682.0M | | Net Premiums Earned | $741.3M | $702.5M | $656.2M | | Loss Ratio | 77.8% | 69.4% | 64.5% | | Expense Ratio | 31.6% | 32.9% | 33.0% | | Combined Ratio | 110.1% | 103.0% | 98.1% | | Net (Loss) Income | $(32.8M) | $7.1M | $30.8M | - Net premiums written increased by **2.0%** in 2018, driven by a **6.3% growth** in commercial lines, while personal lines decreased by **1.5%** due to pricing actions and underwriting measures to slow new policy growth[252](index=252&type=chunk) - The company's liquidity is supported by net cash from operations (**$63.8 million** in 2018), a marketable investment portfolio, a **$30.0 million** revolving line of credit with M&T Bank, and **$35.0 million** in outstanding advances from the FHLB of Pittsburgh[279](index=279&type=chunk)[280](index=280&type=chunk)[281](index=281&type=chunk) - A significant subsequent event was the sale of DFSC on March 8, 2019, which resulted in proceeds of approximately **$55.5 million** to DGI (a **$14.1 million** dividend and **$41.4 million** in consideration). A gain from this sale will be recorded in Q1 2019[213](index=213&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate, equity price, and credit risks, which are managed through portfolio structuring, diversification, and quality investments - The company's main market risks are interest rate risk, equity price risk, and credit risk[298](index=298&type=chunk) - Interest rate risk is managed by structuring the fixed-maturity portfolio with a "laddering" approach to ensure evenly distributed cash flows and maturities. The company generally holds these investments to maturity rather than hedging[299](index=299&type=chunk) - Credit risk is managed through investment in a diversified portfolio of high-quality securities, regular portfolio reviews, and limits on investment in any single security[303](index=303&type=chunk) [Financial Statements and Supplementary Data](index=57&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for 2018, including balance sheets, income statements, cash flows, and detailed notes Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Total Investments | $1,030,799 | $1,005,870 | | Total Assets | $1,832,078 | $1,737,920 | | Losses and loss expenses | $814,665 | $676,672 | | Total Liabilities | $1,433,208 | $1,289,224 | | Total Stockholders' Equity | $398,870 | $448,696 | Consolidated Statement of (Loss) Income Highlights (in thousands) | Account | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net premiums earned | $741,291 | $702,515 | $656,205 | | Total revenues | $771,828 | $739,027 | $688,423 | | Net losses and loss expenses | $576,458 | $487,268 | $423,316 | | Net (loss) income | $(32,760) | $7,116 | $30,801 | - The Notes to Financial Statements provide critical details, including the **80% participation** of the Atlantic States subsidiary in the reinsurance pool with Donegal Mutual (Note 3), a detailed breakdown of the investment portfolio (Note 4), and a reconciliation of the liability for losses, which shows a **$35.6 million** adverse development from prior years in 2018 (Note 8)[372](index=372&type=chunk)[380](index=380&type=chunk)[408](index=408&type=chunk) - Note 22 (Subsequent Event) confirms the sale of Donegal Financial Services Corporation (DFSC) on March 8, 2019, from which DGI received a **$14.1 million** dividend and **$41.4 million** in consideration. A gain will be recognized in Q1 2019[483](index=483&type=chunk) [Controls and Procedures](index=100&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2018, with an unqualified auditor opinion - Management concluded that disclosure controls and procedures were effective as of December 31, 2018[493](index=493&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2018, based on the COSO framework[494](index=494&type=chunk) - The independent auditor, KPMG LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[495](index=495&type=chunk) PART III [Directors, Executive Compensation, and Corporate Governance](index=102&type=section&id=Item%2010-14) This section incorporates by reference information from the company's 2019 proxy statement regarding directors, executive compensation, and corporate governance - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement for its annual meeting of stockholders to be held on April 18, 2019[507](index=507&type=chunk)[509](index=509&type=chunk)[510](index=510&type=chunk)[511](index=511&type=chunk)[512](index=512&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=103&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with or incorporated by reference into the Form 10-K report - This section lists all financial statements, schedules, and exhibits included in or incorporated by reference into the Form 10-K[515](index=515&type=chunk) - Key exhibits filed with this report include consents of the independent registered public accounting firm, CEO/CFO certifications (Rule 13a-14(a) and Section 1350), and XBRL data files[517](index=517&type=chunk)