Slides
Page 1
www.donegalgroup.com Second Quarter 2025 Investor Presentation July 24, 2025 Kevin G. Burke President and Chief Executive Officer Jeffrey D. Miller Executive Vice President and Chief Financial Officer
Page 2
www.donegalgroup.com Safe Harbor We base all statements contained in this release that are not historic facts on our current expectations. Such statements are forward-looking in nature (as defined in the Private Securities Litigation Reform Act of 1995) and necessarily involve risks and uncertainties. Forward-looking statements we make may be identified by our use of words such as “will,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “seek,” “estimate” and similar expressions. Our actual results could vary materially from our forward-looking statements. The factors that could cause our actual results to vary materially from the forward-looking statements we have previously made include, but are not limited to, adverse litigation and other trends that could increase our loss costs (including social inflation, labor shortages and escalating medical, automobile and property repair costs, including due to tariffs), adverse and catastrophic weather events (including from changing climate conditions), our ability to maintain profitable operations (including our ability to underwrite risks effectively and charge adequate premium rates), the adequacy of the loss and loss expense reserves of our insurance subsidiaries, the availability and successful operation of the information technology systems our insurance subsidiaries utilize, the successful development of new information technology systems to allow our insurance subsidiaries to compete effectively, business and economic conditions in the areas in which we and our insurance subsidiaries operate, interest rates, competition from various insurance and other financial businesses, terrorism, the availability and cost of reinsurance, legal and judicial developments, changes in regulatory requirements, our ability to attract and retain independent insurance agents, changes in our A.M. Best rating and the other risks that we describe from time to time in our filings with the Securities and Exchange Commission. We disclaim any obligation to update such statements or to announce publicly the results of any revisions that we may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. Reconciliations of non-GAAP data are included in the financial supplement section of this presentation. 2
Page 3
www.donegalgroup.com Donegal Group Inc. is an insurance holding company whose insurance subsidiaries and affiliates offer commercial and personal lines of property and casualty insurance to businesses and individuals in certain Mid-Atlantic, Midwestern, Southern and Southwestern states through approximately 2,100 independent insurance agencies. The Company offers full lines of commercial products (approx. 58% of 2024 NPW) and personal products (approx. 42% of 2024 NPW), including commercial multi-peril, automobile, homeowners, workers' compensation and other coverages. Company Overview 3
Page 4
www.donegalgroup.com Strategies to Provide Value to Stakeholders Continued emphasis on growing commercial lines while maintaining a profitable book of personal lines Achieving sustained excellent financial performance Maintaining underwriting discipline and premium rate adequacy Utilizing data analytics and predictive modeling tools to inform risk selection and pricing decisions Strategically modernizing our operations and processes to transform our business Implementing new systems to streamline business processes and workflows and enhance data analytics Expanding focus on process excellence to identify opportunities for operational efficiencies Capitalizing on opportunities to grow profitably Continuing expansion within existing markets through independent agents State-specific strategies for growth or reduction of premiums, agency distribution and enhanced profit Providing superior experiences to our agents, policyholders and employees Ensuring “ease of doing business” through automated agency portals and interfaces Responsive claims service, underwriting and customer support 4
Page 5
www.donegalgroup.com Significant Benefits to Shareholders from Mutual Relationship • Pooling agreement fosters an environment of continuity and maintains superior employee relations in which the business can grow. • Shared combined business plan to enhance market penetration and underwriting profitability. • Product offerings are complementary, offering a broad range of products that expands our ability to service accounts. 1Because of the different relative voting power of Class A common stock and Class B common stock, public stockholders hold approximately 30% of the aggregate voting power of the combined classes and Donegal Mutual holds approximately 70% of the aggregate voting power of the combined classes. 5 Rated A (Excellent) by A.M. Best
Page 6
www.donegalgroup.com Mix of Commercial and Personal Lines Commercial Auto 19.6% Workers' Comp 11.0% Comm Multi-Peril 22.7% Other Commercial 4.9% Personal Auto 25.8% Homeowners 14.9% Other Personal 1.1% Net Premiums Written by Line of Business Year Ended December 31, 2024 Personal Lines Personal Automobile Homeowners Other Personal Commercial Lines Commercial Auto Commercial Multi-Peril Workers’ Comp Other Commercial 58% of NPW 42% of NPW 6
Page 7
www.donegalgroup.com Strategic Initiatives to Increase Long-Term Profitability • Strategic non-renewal actions in Georgia and Alabama completed in 2024. • Intentional underwriting actions to non-renew underperforming individual accounts/classes of business. • Conservatively underwriting new business premium. Continued Emphasis on Growth in Commercial Lines 87,051 89,971 91,254 96,316 99,210 97,878 99,325 100,075 106,686 105,549 96,562 92,334 86.4% 85.5% 85.4% 86.6% 86.2% 85.4% 84.4% 86.8% 89.7% 91.0% 87.2% 89.2% 50.0% 55.0% 60.0% 65.0% 70.0% 75.0% 80.0% 85.0% 90.0% 95.0% 100.0% 75,000 85,000 95,000 105,000 115,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 In-Force Policy Count Retention Levels 7
Page 8
www.donegalgroup.com Valuation vs. Multi-Line Insurers Price-to-Book Multiple Peer Average 1.88x 8 DGICA: Price and Book Value as of 6/30/2025. Peer Data Source: FactSet; Price as of 6/30/2025 and Book Value as of latest reported quarter as of 7/16/2025. 0.56 0.89 1.20 1.42 1.70 1.72 1.77 2.01 2.15 2.19 2.40 2.66 3.13
Page 9
www.donegalgroup.com Second Quarter 2025 – Overview Modest Growth Excellent Underwriting Results High-Quality Investment Portfolio Net Premiums Earned $231.8M (1.1)% vs. Q2’24 Loss Ratio 65.1% 5.5 pts vs. Q2’24 Expense Ratio 32.2% (0.3) pts vs. Q2’24 Net Investment Income $12.5M 13.3% vs. Q2’24 Avg. Investment Yield 3.5% 20 bps vs. Q2’24 Lower new business volume and planned attrition offset partially by solid retention and renewal premium increases. Percentage change is reflective of Better/(Worse) 9
Page 10
www.donegalgroup.com Financial Results – Second Quarter 2025 (dollars in thousands, except per share data) Q2’25 Q2’24 Change Net Premiums Written $233,813 $247,189 (5.4)% Net Premiums Earned $231,775 $234,311 (1.1)% Better/(Worse) Loss Ratio 65.1% 70.6% 5.5 pts Core 50.1% 55.0% 4.9 pts Weather 11.1% 10.6% (0.5) pts Large Fire Losses 5.2% 5.3% 0.1 pts Prior Accident Year Development Adverse/(Favorable) (1.3)% (0.3)% 1.0 pts Expense Ratio 32.2% 31.9% (0.3) pts Dividend Ratio 0.4% 0.5% 0.1 pts Combined Ratio 97.7% 103.0% 5.3 pts Net Investment Income $12,540 $11,068 13.3% Net Income $16,866 $4,153 306.1% Per Share – Class A (Diluted) $0.46 $0.13 253.8% Book Value Per Share $16.62 $14.48 14.8% 10
Page 11
www.donegalgroup.com Second Quarter 2025 - Results by Line of Business ($ in millions) Net Premiums Written Statutory Combined Ratio Q2’25 Q2’24 Change Better/(Worse) Q2’25 Q2’24 Change Better/(Worse) Commercial Lines – Total $144.9 $142.2 1.9% 101.0% 104.9% 3.9 pts Automobile $50.6 $47.1 7.4% 97.7% 93.5% (4.2) pts Workers’ Compensation $24.2 $27.6 (12.1)% 104.9% 117.0% 12.1 pts Commercial Multi-peril $56.5 $55.9 1.1% 97.5% 110.6% 13.1 pts Other $13.6 $11.7 16.3% 119.8% 94.3% (25.5) pts Personal Lines - Total $88.9 $104.9 (15.3)% 91.7% 98.6% 6.9 pts Automobile $52.7 $62.4 (15.5)% 79.3% 95.6% 16.3 pts Homeowners $33.6 $39.6 (15.2)% 115.1% 103.1% (12.0) pts Other $2.6 $2.9 (11.6)% 55.2% 104.7% 49.5 pts Total Lines $233.8 $247.2 (5.4)% 97.4% 102.2% 4.8 pts Certain components may not foot due to rounding. • Net premiums written decreased 5.4% (Commercial Lines +1.9%; Personal Lines -15.3%), primarily attributable to solid retention and a continuation of renewal premium increases, offset primarily driven by lower new business writings and planned attrition to preserve the quality of our portfolio. • Commercial lines renewal premium increases averaged 11.1%, excluding workers’ compensation (Commercial Multi-Peril 11.7%; Commercial Auto line 10.9%; Commercial Umbrella 10.1%). • Personal lines renewal premium increases averaged 5.9% (Homeowners 8.1%; Personal Auto 4.5%). 11
Page 12
www.donegalgroup.com Short-Term Securities 1.7% Treasury and Agency 10.2% Corporate 30.9% Mortgage Backed Securities (MBS) 24.7% Taxable and Tax- Exempt Municipals 29.7% Equity 2.9% Conservative Investment Strategy • Quarterly net investment income increased 13.3% to $12.5 million. • Investment portfolio emphasizes on high- quality fixed-income securities. • “Laddering” structure provides additional measure of liquidity. • Q2 2025 reinvestment rate of ~5.67% exceeded rate received on maturing assets by ~233 basis points. $1.4 Billion in Invested Assets As of June 30, 2025 12 May not foot due to rounding.
Page 13
www.donegalgroup.com Investment Thesis • Well-established regional insurance group with a diverse book of business including both commercial and personal lines • Continuing the optimization of our mix of business with emphasis on commercial lines while strategically stabilizing personal lines to maintain a profitable book of business that will increase stockholder value over time • Focusing on achieving sustained excellent financial performance, strategically modernizing our operations and processes to transform our business, capitalizing on opportunities to grow profitably and providing superior experiences to our agents, policyholders and employees • Maintaining our highly responsive service levels as a key underlying force that contributes to solid growth in our commercial lines of business 13
Page 14
www.donegalgroup.com Contact Information Investor Relations Contact Karin Daly Vice President, The Equity Group Phone: (212) 836-9623 kdaly@theequitygroup.com 14 Transfer Agent Computershare Trust Company, N.A. P.O. Box 43006 Providence, RI 02940 Phone: 800-317-4445 www.computershare.com
Page 15
www.donegalgroup.com Definitions of Non-GAAP Financial Measures We prepare our consolidated financial statements on the basis of GAAP. Our insurance subsidiaries also prepare financial statements based on statutory accounting principles state insurance regulators prescribe or permit (“SAP”). In addition to using GAAP-based performance measurements, we also utilize certain non-GAAP financial measures that we believe provide value in managing our business and for comparison to the financial results of our peers. These non-GAAP measures are net premiums written, operating income or loss and statutory combined ratio. Net premiums written and operating income or loss are non-GAAP financial measures investors in insurance companies commonly use. We define net premiums written as the amount of full-term premiums our insurance subsidiaries record for policies effective within a given period less premiums our insurance subsidiaries cede to reinsurers. We define operating income or loss as net income or loss excluding after-tax net investment gains or losses, after-tax restructuring charges and other significant non-recurring items. Because our calculation of operating income or loss may differ from similar measures other companies use, investors should exercise caution when comparing our measure of operating income or loss to the measure of other companies.
Page 16
www.donegalgroup.com Supplemental Information: Reconciliations Reconciliation of net premiums earned to net premiums written: Reconciliation of net income to non-GAAP operating income: 2025 2024 % Change 2025 2024 % Change Reconciliation of Net Premiums E arned to Net Premiums Written Net premiums earned 231,775$ 234,311$ -1.1% 464,476$ 462,060$ 0.5% Change in net unearned premiums 2,038 12,878 -84.2 16,429 36,571 -55.1 Net premiums written 233,813$ 247,189$ -5.4% 480,905$ 498,631$ -3.6% Three Months E nded June 30, Six Months E nded June 30, (dollars in thousands)
Page 17
www.donegalgroup.com Supplemental Information: GAAP Loss Ratio Components Certain components may not foot due to rounding. Workers' Commercial Automobile Compensation Multi-peril Other Total Automobile Homeowners Other Total Second Quarter 2025 Loss ratio - core losses 62.2% 71.3% 38.8% 60.3% 54.5% 53.4% 27.5% 31.1% 43.3% Loss ratio - weather-related losses 1.6% 0.0% 12.0% 4.6% 5.7% 3.4% 46.4% 12.0% 19.3% Loss ratio - large fire losses 0.8% 0.0% 11.0% 4.7% 5.0% 0.0% 15.3% 0.0% 5.6% Loss ratio - net prior-year reserve development -0.3% -3.1% -1.1% 17.6% 0.6% -4.3% -3.2% -10.9% -4.1% Loss ratio 64.3% 68.2% 60.7% 87.2% 65.8% 52.5% 86.0% 32.2% 64.1% Second Quarter 2024 Loss ratio - core losses 64.2% 65.2% 44.9% 37.6% 54.8% 69.3% 29.1% 76.3% 55.3% Loss ratio - weather-related losses 2.3% 0.0% 15.9% 26.5% 9.0% 2.0% 31.7% 6.9% 12.7% Loss ratio - large fire losses 0.6% 0.0% 14.9% 1.2% 6.0% 0.0% 12.4% 0.0% 4.4% Loss ratio - net prior-year reserve development -6.8% 17.4% -0.2% -6.8% 0.6% -2.6% 0.4% -3.9% -1.6% Loss ratio 60.3% 82.6% 75.5% 58.5% 70.4% 68.7% 73.6% 79.3% 70.8% Commercial Lines Personal Lines
Page 18
www.donegalgroup.com Supplemental Information: GAAP Loss Ratio Components Certain components may not foot due to rounding. Workers' Commercial Automobile Compensation Multi-peril Other Total Automobile Homeowners Other Total First Half 2025 Loss ratio - core losses 64.7% 72.7% 43.0% 50.6% 56.4% 56.2% 29.4% 42.0% 46.0% Loss ratio - weather-related losses 0.9% 0.0% 8.7% 3.7% 4.1% 1.9% 29.8% 9.0% 12.3% Loss ratio - large fire losses 1.0% 0.0% 10.2% 2.8% 4.6% 0.0% 10.5% 0.0% 3.8% Loss ratio - net prior-year reserve development -5.2% 2.1% -4.6% 10.2% -2.2% -4.1% -2.3% -19.6% -3.9% Loss ratio 61.4% 74.8% 57.3% 67.3% 62.9% 54.0% 67.4% 31.4% 58.2% First Half 2024 Loss ratio - core losses 66.7% 64.8% 48.2% 37.8% 56.9% 69.1% 32.9% 84.9% 56.6% Loss ratio - weather-related losses 1.5% 0.0% 10.2% 15.3% 5.6% 1.4% 26.6% 5.5% 10.5% Loss ratio - large fire losses 0.3% 0.0% 17.3% 5.4% 7.1% 0.0% 12.1% 0.0% 4.3% Loss ratio - net prior-year reserve development -6.3% 14.3% -5.0% -6.4% -1.7% -1.9% -1.4% -23.5% -2.3% Loss ratio 62.2% 79.1% 70.7% 52.1% 67.9% 68.6% 70.2% 66.9% 69.1% Commercial Lines Personal Lines