Donegal Group CEO: Acquisition opportunities exist
Donegal Group Inc. (Nasdaq: DGICA) CEO Donald Nikolaus said the company does not have any acquisitions to announce, but the insurance holding company has opportunities for “increased discussions” about affiliation and acquisition. Nikolaus made the comments during a midday conference call.
“We talk to people all the time and we hope at some point a discussion materializes into something more,” Nikolaus said. “We have more than adequate capital to grow either organically or by acquisition.”
The firm’s low level of share repurchases during the third quarter has “absolutely zero connection” with any potential acquisitions, Nikolaus said. He also said a $100 million acquisition is “unrealistic” at this time. In terms of premium, a $50 million or $75 million acquisition would be ideal, he said.
“That’s not necessarily the size of entity that might be available,” he said. “The opportunities are many times between $10 million and $30 million and we’re not going to pass those up. We’re not going to say we’re only going to play in the larger type of opportunities.”
The Marietta, Penn.-based company announced before the opening that its third-quarter net income totaled $11.2 million, or $0.45 per share, above Wall Street estimates of $0.38 per share and compared with $9.8 million, or $0.36 per share, a year earlier.
For the three months ended Sept. 30, Donegal Group’s revenue was $85.4 million, inline with analyst views of $85.39 million and above $82.6 million during the same period of 2006.
The firm’s combined ratio—a gauge of the amount spent for claims and expenses and for premium dollars taken in—was 88.3%, below 89.5% during the third quarter of 2006.
“The combined ratio, we believe, is reflective of the commitment to underwriting discipline and adequacy in pricing and a continuation of the implementation of our overall strategy,” Nikolaus said.
The company appointed 40 new insurance agents, which Nikolaus said beat expectations. Donegal Group has 157 total agents, he said.
“We continue to work aggressively to appoint new agents and will do that in the balance of the year and certainly going into the year 2008,” the chief executive said.
Nikolaus also said the company increased some automobile and homeowner insurance rates during the quarter.
In midday trading, DGICA shares are up 4.14%, or $0.67, at $16.87. Over the last 52 weeks, shares have ranged from $14.19 to $20.48.
