DEF 14A 1 brhc10035037_def14a.htm DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

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Filed by a Party other than the Registrant ☐

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☒	Definitive Proxy Statement

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☐	Soliciting Material Pursuant to §240.14a-12

Donegal Group Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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(1)

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NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS

WE WILL HOLD ON APRIL 21, 2022

To the Stockholders of

DONEGAL GROUP INC.:

We encourage you to read the accompanying proxy statement and our 2021 Annual Report to stockholders (our “2021 Annual Report”). The accompanying proxy statement, together with the enclosed form of proxy card, is first being mailed to our stockholders on or about March 18, 2022.

We will hold our 2022 annual meeting of stockholders (our “2022 Annual Meeting”) as a “virtual meeting” on Thursday, April 21, 2022 at 10:00 a.m., Eastern time. Stockholders will not be able to attend the meeting in person. You will be able to attend our 2022 Annual Meeting, vote and submit questions during our 2022 Annual Meeting via live webcast only at www.virtualshareholdermeeting.com/DGICA2022. In order to participate, vote and submit questions in our 2022 Annual Meeting, you will need to have your 16-digit control number that is included on the proxy card we include with this notice of our 2022 Annual Meeting and our proxy statement relating to our 2022 Annual Meeting. Guests may participate in the webcast but will not have the ability to vote or ask questions during our 2022 Annual Meeting.

At our 2022 Annual Meeting, our stockholders will vote on the following items of stockholder business:

•

The election of the three persons our board of directors has nominated to serve as Class C directors, each for a term of three years and until the election of their respective successors and their respective successors take office; and

•

The ratification of the appointment by our audit committee of KPMG LLP to serve as our independent registered public accounting firm for our fiscal year ending December 31, 2022.

Our advance notice by-laws require that our stockholders submit to us, not later than 90 days prior to the first anniversary of the date on which we first mailed our proxy statement to stockholders for our most recent year’s annual meeting of stockholders, the information specified in those by-laws regarding any nomination by a stockholder of a candidate for election as a director or any proposal by a stockholder of any other item of stockholder business a stockholder wishes our stockholders to consider at our next forthcoming annual meeting of stockholders. That date was December 15, 2021 with respect to our 2022 Annual Meeting and is December 18, 2022 with respect to our 2023 annual meeting of stockholders. No stockholder made another nomination or other proposal for consideration by our stockholders at our 2022 Annual Meeting.

Our board of directors has established the close of business on March 1, 2022 as the record date for the determination of the holders of our Class A common stock and for the determination of the holders of our Class B common stock entitled to notice of, and to vote at, our 2022 Annual Meeting.

We include our 2021 Annual Report with this notice of our 2022 Annual Meeting and our proxy statement relating to our 2022 Annual Meeting. You may vote at our 2022 Annual Meeting by mail, by telephone or via the Internet as we describe on the enclosed proxy card that you may use to vote by proxy at our 2022 Annual Meeting.

	By order of our board of directors,



	Kevin G. Burke,
	President and Chief Executive Officer

March 18, 2022
Marietta, Pennsylvania

Important Notice Regarding the Availability of Our Proxy Materials for

Our April 21, 2022 Annual Meeting

This mailing includes our notice of our 2022 Annual Meeting, our proxy statement with respect to our 2022 Annual Meeting and our 2021 Annual Report. You may also view each of these documents on the Internet at www.proxyvote.com. No information on our website other than our notice of our 2022 Annual Meeting, this proxy statement with respect to our 2022 Annual Meeting and our 2021 Annual Report constitutes a part of our proxy solicitation materials for our 2022 Annual Meeting or part of our 2021 Annual Report.

DONEGAL GROUP INC.

PROXY STATEMENT

Introduction

This proxy statement contains information relating to our 2022 Annual Meeting. Due to the ongoing health risks associated with large public gatherings, we will hold our 2022 Annual Meeting as a “virtual meeting” on Thursday, April 21, 2022 at 10:00 a.m., Eastern time. You will be able to attend our 2022 Annual Meeting, vote and submit questions during our 2022 Annual Meeting via live webcast only at www.virtualshareholdermeeting.com/DGICA2022. In order to participate, vote and submit questions in our 2022 Annual Meeting, you will need to have your 16-digit control number that is included on the proxy card we include with this notice of our 2022 Annual Meeting and our proxy statement relating to our 2022 Annual Meeting. Guests may participate in the webcast but will not have the ability to vote or ask questions during our 2022 Annual Meeting.

On March 18, 2022, we commenced the mailing to our stockholders of record at the close of business on March 1, 2022 of:

•

this proxy statement;

•

a form of proxy card;

•

a postage-paid return envelope for the convenience of our stockholders in returning their completed and signed proxy card to the firm that tabulates the results of the proxy votes of our stockholders; and

•

our 2021 Annual Report.

We ask our stockholders to return their completed proxy cards promptly unless a stockholder prefers to vote by telephone or via the Internet at www.proxyvote.com.

We will pay the costs of preparing and mailing our proxy materials for our 2022 Annual Meeting to our stockholders and making those materials available for our stockholders to view on the Internet. We will, upon request, reimburse brokers, nominees, fiduciaries, custodians and other record holders for their reasonable expenses in forwarding our proxy solicitation materials for our 2022 Annual Meeting to the beneficial owners of our Class A common stock and to the beneficial owners of our Class B common stock for whom such persons serve as record holders. We may also solicit proxies from some stockholders in person, by mail, by e-mail or by telephone through our directors, officers and regular employees whom we do not employ specifically for proxy solicitation purposes and none of whom will receive any additional compensation for performing such services.

(i)

Summary of Our 2021 Performance

For 2021, our total revenues increased 5.0% compared to 2020, with the increase largely related to a 4.6% increase in net premiums earned for 2021 compared to 2020. We had net income of $25.3 million and net income per diluted Class A share of 83 cents for 2021, compared to $52.8 million and net income per diluted Class A share of $1.83 for 2020. The following table depicts our total revenues, net income, net income per diluted Class A share and net income per Class B share for the three years ended December 31, 2021, 2020 and 2019. For further information, we refer you to the financial statements we include in our 2021 Annual Report.

	Year Ended December 31
	2021		2020		2019

Total revenues	$816.5 million		$777.8 million		$812.5 million
Net income	25.3 million		52.8 million		47.2 million
Net income per diluted Class A share		0.83		1.83		1.67
Net income per Class B share		0.74		1.65		1.51

We use the following defined terms in this proxy statement:

•

“Annual Meeting” or “2022 Annual Meeting” means our annual meeting of stockholders that we will hold virtually on April 21, 2022;

•

“Annual Report” or “2021 Annual Report” means our Annual Report to our stockholders for 2021;

•

“Atlantic States” means Atlantic States Insurance Company;

•

“Code” means the Internal Revenue Code of 1986, as amended;

•

“Computershare” means Computershare Trust Company, N.A., the transfer agent for our Class A common stock and our Class B common stock;

•

“DGCL” means the Delaware General Corporation Law, as amended;

•

“DGI,” “we,” “us” or “our” means Donegal Group Inc.;

•

“Donegal Mutual” means Donegal Mutual Insurance Company;

•

“Exchange Act” means the Securities Exchange Act of 1934, as amended;

•

“Form 10-K Report” means the annual report on Form 10-K that we file annually with the SEC;

•

“MICO” means Michigan Insurance Company;

•

“PCAOB” means the Public Company Accounting Oversight Board (United States);

•

“Peninsula” means the Peninsula Insurance Group;

•

“PHCA” means the Pennsylvania Insurance Holding Companies Act, as amended;

•

“SEC” means the Securities and Exchange Commission; and

•

“Southern” means Southern Insurance Company of Virginia.

(ii)

CONTENTS

	Page
PROXY STATEMENT	i
Introduction	i
Summary of Our 2021 Performance	ii
OUR 2022 ANNUAL MEETING	1
OUR BUSINESS STRATEGIES	13
CERTAIN BENEFICIAL OWNERS OF OUR CLASS A COMMON STOCK AND OUR CLASS B COMMON STOCK	14
Beneficial Owners of 5% or More of Our Class A Common Stock or Our Class B Common Stock	14
The Beneficial Ownership of Our Stock by Our Directors and Executive Officers	14
Delinquent Section 16(a) Reports	16
THE RELATIONSHIP OF DONEGAL MUTUAL AND DGI	16
Introduction	16
Donegal Mutual's Controlling Interest in Our Common Stock	16
The Interrelated Operations of Donegal Mutual and Our Insurance Subsidiaries	17
Inter-Company Transactions	18
The Coordinating Committee	20
The Risk Management Committee	23
CORPORATE GOVERNANCE	23
The Composition of Our Board of Directors	24
Board Leadership Structure and the Role of Our Board of Directors in Risk Oversight	25
The Committees of Our Board of Directors	26
Compensation Committee Interlocks and Insider Participation	31
Related Person Transactions	31
Our Code of Business Conduct and Ethics; Our Internal Audit Department; Hedging	32
No Material Proceedings	32
EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS	32
Executive Summary	32
2021 Performance Review	33
Our Compensation Process	33
Summary of the 2021 Compensation of Our Named Executive Officers	34
Director Compensation	38
Our Compensation Philosophy and Risk Management Considerations	43
Employment Agreements; Consulting Agreement with Our Former Chief Executive Officer	44
Potential Payments to Our Named Executive Officers upon Termination or a Change-of -Control	46
Limitations on the Deductibility of Compensation	49
Our Cash Incentive Bonus Plan	50
Our Long-Term Executive Incentive Plan	51
Other Aspects of Our Compensation Philosophy	52

(iii)

Summary Compensation Table	52
Grants of Plan-Based Awards	54
Stock Incentive Plans	54
Outstanding Equity Awards at December 31, 2021	55
Option Exercises and Stock Vested	57
Pension Benefits	57
Non-Qualified Deferred Compensation	57
Limitation of Liability and Indemnification	57
Pay Ratio Disclosure	58
Joint Report of the Compensation Committees of Donegal Mutual and DGI	59
Equity Compensation Plan Information	60
PROPOSAL 1 – ELECTION OF DIRECTORS	61
PROPOSAL 2 – RATIFICATION OF THE APPOINTMENT BY OUR AUDIT COMMITTEE OF KPMG LLP TO SERVE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2022	68
AUDIT AND NON-AUDIT FEES	68
Report of our Audit Committee	69
STOCKHOLDER PROPOSALS FOR OUR 2023 ANNUAL MEETING OF STOCKHOLDERS	71
HOUSEHOLDING	74
DIRECTOR - STOCKHOLDER COMMUNICATIONS	74
OTHER MATTERS	74

Unless we otherwise expressly indicate, all of the financial information we include or incorporate by reference in this proxy statement for our 2022 Annual Meeting

relates to our 2021 fiscal year. Our 2021 fiscal year began

on January 1, 2021 and ended on December 31, 2021.

(iv)

Item of Business	Routine	Non-Routine

Election of Class C directors		X
Ratification of the appointment by our audit committee of KPMG LLP to serve as our independent registered public accounting firm for the year ending December 31, 2022	X

Proposals for Your Vote	Voting Options	Vote Required	Effect of Abstentions	Effect of Broker Non-Votes

Election of three Class C directors	“For” or “Withhold”	Plurality of the votes cast	No effect	No effect

Ratification of appointment of independent public accounting firm	“For,” “Against” or “Abstain”	Majority of votes cast	No effect	Brokers have discretion to vote

	Class A Common Stock					Class B Common Stock
Name and Address of Beneficial Owner	Shares Beneficially Owned		Percent Owned			Shares Beneficially Owned		Percent Owned

Donegal Mutual Insurance Company 1195 River Road Marietta, PA 17547		10,542,692		40.9	%		4,654,339		83.5	%
Dimensional Fund Advisors LP(1) 6300 Bee Cave Road Austin, TX 78746		1,667,619		6.5			—		—
BlackRock, Inc.(2) 55 East 52nd Street New York, NY 10055		1,377,134		5.3			—		—

	Class A Common Stock					Class B Common Stock
Name of Individual or Identity of Group(1)	Shares Beneficially Owned		Percent Owned			Shares Beneficially Owned		Percent Owned

Directors:
Scott A. Berlucchi		49,397		—			—		—
Dennis J. Bixenman		48,655		—			—		—
Kevin G. Burke		283,247		1.1	%		—		—
Jack L. Hess		110,855		—			—		—
Barry C. Huber		36,067		—			—		—
David C. King		2,500		—			—		—
Kevin M. Kraft, Sr.		53,936		—			—		—
Jon M. Mahan		49,988		—			—		—
S. Trezevant Moore, Jr.		66,655		—			1,000		—
Annette B. Szady		2,500		—			—		—
Richard D. Wampler, II		51,102		—			—		—

Named Executive Officers:
Jeffrey D. Miller		312,575		1.2			584		—
Jeffery T. Hay		4,197		—			—		—
Richard G. Kelley		231,579		—			—		—
Sanjay Pandey		261,417		1.0			—		—

All directors and executive officers as a group (23 persons)		2,686,652		9.6			1,750		—

Mr. Miller	-	260,667 shares;
Mr. Hay	-	3,333 shares;
Mr. Kelley	-	195,333 shares; and
Mr. Pandey	-	233,333 shares.

	Our Board Committees
	Executive	Audit	Nominating	Compensation
Number of Meetings Held in 2021	12	8	1	5

Number of Meetings Attended in 2021 by Members of the Committees:

Kevin G. Burke	12	—	—	—
Jack L. Hess	12	8	1	5
Barry C. Huber	—	8	—	—
Kevin M. Kraft, Sr.	12	—	1	5
Jon M. Mahan	—	7	1	—
S. Trezevant Moore, Jr.	—	—	—	5
Richard D. Wampler, II	—	8	1	5

	At or For the Year Ended December 31,
	2021		2020		Increase/ Decrease

Total revenues	$816.5 million		$777.8 million			5.0	%
Net income	25.3 million		52.8 million			-52.2
Class A common stock price		14.29		14.07		1.6
Class B common stock price		13.47		11.81		14.1

Name of Named Executive Officer		Number of Shares Purchasable

Kevin G. Burke		24,000
Jeffrey D. Miller		21,000
Jeffery T. Hay		18,000
Sanjay Pandey		18,000

Annual Compensation	Key Factors	Purpose	2021 Actions

Base Salary	Compensation committee reviews and recommends adjustments to base salary annually based on performance and prevailing salaries within our peer group	Provides fixed amount of cash on which named executive officers may rely	Cash increase for 2021 of an average of 4.9% to reflect salary increases within our peer group

Annual Incentive Plan (Cash Incentive Award)	Compensation committee determines funding level on a formula basis tied to our underwriting results for the year Compensation committee reviews and recommends the allocation of the bonus pool among our named executive officers based on performance against key business priorities and performance of their respective business units	Motivates named executive officers to achieve individual performance goals Reinforces pay for performance Focuses entire organization on achieving key business objectives	We determined cash bonuses for 2021 under a formula based on our commercial lines growth, personal lines growth, underwriting results and operating return on equity for 2021 Cash bonuses earned for 2021 related to meeting commercial lines growth performance objective only

Type of Compensation		Amount	Form of Payment

Annual Retainer	Base Retainer	$92,145	$85,000 in cash and an annual restricted stock award of 500 shares of Class A common stock in 2022 with an estimated value of $7,145 based on the closing price of our Class A common stock on December 31, 2021

	Additional retainer amount for each board meeting attended in excess of five meetings per year	$500	Cash

	Additional retainer amount for each compensation committee meeting and each executive committee meeting attended	$300	Cash

	Additional retainer amount for each coordinating committee meeting, each nominating committee meeting and each special committee meeting attended	$500	Cash

	Additional retainer amount for each audit committee meeting attended	$750	Cash

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	Total ($)

Scott A. Berlucchi	93,100	7,035	5,445	105,580
Dennis J. Bixenman	96,150	7,035	5,445	108,630
Jack L. Hess	103,750	7,035	5,445	116,230
Barry C. Huber	93,500	7,035	5,445	105,980
David C. King	86,500	7,035	5,445	98,980
Kevin M. Kraft, Sr.	97,500	7,035	5,445	109,980
Jon M. Mahan	91,750	7,035	5,445	104,230
S. Trezevant Moore, Jr.	87,700	7,035	5,445	100,180
Annette B. Szady	90,250	7,035	5,445	102,730
Richard D. Wampler, II	95,900	7,035	5,445	108,380


Scott A. Berlucchi	8,500	—	14.50	12/20/2022	500	7,145
	12,000	—	15.90	12/19/2023
	8,000	—	15.80	12/18/2024
	4,500	—	17.60	12/21/2022
	4,500	—	13.69	12/20/2023
	3,000	1,500	14.98	12/19/2024
	1,500	3,000	14.43	12/17/2025
	—	4,500	14.39	12/16/2026

Dennis J. Bixenman	8,500	—	14.50	12/20/2022	500	7,145
	12,000	—	15.90	12/19/2023
	8,000	—	15.80	12/18/2024
	4,500	—	17.60	12/21/2022
	4,500	—	13.69	12/20/2023
	3,000	1,500	14.98	12/19/2024
	1,500	3,000	14.43	12/17/2025
	—	4,500	14.39	12/16/2026

Jack L. Hess	8,500	—	14.50	12/20/2022	500	7,145
	12,000	—	15.90	12/19/2023
	8,000	—	15.80	12/18/2024
	4,500	—	17.60	12/21/2022
	4,500	—	13.69	12/20/2023
	3,000	1,500	14.98	12/19/2024
	1,500	3,000	14.43	12/17/2025
	—	4,500	14.39	12/16/2026

Barry C. Huber	2,200	—	14.50	12/20/2022	500	7,145
	4,000	—	15.90	12/19/2023
	2,500	—	15.80	12/18/2024
	4,500	—	17.60	12/21/2022
	4,500	—	13.69	12/20/2023
	3,000	1,500	14.98	12/19/2024
	1,500	3,000	14.43	12/17/2025
	—	4,500	14.39	12/16/2026

Name	Event	Severance Benefits ($)	Stock Options ($)	Other Benefits ($)	Total ($)

Kevin G. Burke	Voluntary Termination	—	27,000	—	27,000
	Involuntary-for-Cause Termination	—	27,000	—	27,000
	Involuntary Termination	2,432,500	27,000	53,061	2,512,561
	Change-in-Control	2,432,500	27,000	53,061	2,512,561

Jeffrey D. Miller	Voluntary Termination	—	24,000	—	24,000
	Involuntary-for-Cause Termination	—	24,000	—	24,000
	Involuntary Termination	2,058,000	24,000	44,049	2,126,049
	Change-in-Control	2,058,000	24,000	44,049	2,126,049

Jeffery T. Hay	Voluntary Termination	—	733	—	733
	Involuntary-for-Cause Termination	—	733	—	733
	Involuntary Termination	—	733	—	733
	Change-in-Control	—	733	—	733

Richard G. Kelley	Voluntary Termination	—	21,000	—	21,000
	Involuntary-for-Cause Termination	—	21,000	—	21,000
	Involuntary Termination	1,329,000	21,000	41,169	1,391,169
	Change-in-Control	1,329,000	21,000	41,169	1,391,169

Sanjay Pandey	Voluntary Termination	—	21,000	—	21,000
	Involuntary-for-Cause Termination	—	21,000	—	21,000
	Involuntary Termination	1,350,000	21,000	53,061	1,424,061
	Change-in-Control	1,350,000	21,000	53,061	1,424,061

SEC Form DEF 14A filed by Donegal Group Inc.