Slide 1: Pursuing Effective Business Strategy in Regional Insurance Markets
Exhibit 99.1 Pursuing Effective Business Strategy in Regional Insurance Markets Investor Meetings March 2014
Slide 2: Forward-Looking Statements
Forward-Looking Statements The Company bases all statements made in this presentation that are not historic facts on its current expectations. These statements are forward-looking in nature (as defined in the Private Securities Litigation Reform Act of 1995) and involve a number of risks and uncerta
Slide 3: Insurance Holding Company with Mutual Affiliate
Insurance Holding Company with Mutual Affiliate • Structure provides stability for successful long-term business strategy • Public company traded on NASDAQ (DGICA/DGICB) – Class A dividend yield of 3.6% – Class A shares have 1/10 vote; Class B shares have one vote • Regional property and casualty in
Slide 4: Objective: Outperform Industry Service, Profitability and Book Value Growth
Objective: Outperform Industry Service, Profitability and Book Value Growth Change in Net Written Premiums GAAP Combined Ratio Change in Book Value DGI CAGR: 10% Index CAGR: 2% DGI Avg: 98% Index Avg: 104% DGI CAGR: 7% Index CAGR: N/A 50% 130% 30% 40% 125% 25% 120% 30% 20% 115% 20% 110% 15% 10% 105%
Slide 5: 2013: Strong Growth and Profitability
2013: Strong Growth and Profitability Operating EPS* of 96¢ vs. 73¢ in 2012 • 7.4% increase in net written premiums – Driven by strong commercial lines growth • 97.4% statutory combined ratio – Q3 and Q4 combined ratios of 96.0% and 95.4% were lowest for any period in past five years – Measurable pr
Slide 6: Achieve Book Value Growth By Implementing Plan
Achieve Book Value Growth By Implementing Plan Drive revenues with opportunistic transactions and organic growth Focus on margin enhancements and investment contributions
Slide 7: Structure Provides Flexibility and Capacity
Structure Provides Flexibility and Capacity Opportunistic Ownership Structure Provides Flexibility and Capacity Public 45% (1) Donegal Mutual Stockholders Insurance Company 52% 20% 55% (1) Donegal Financial Services Corporation (Union Community Bank) POOLING 100% 48% Donegal Group Inc. AGREEMENT Rei
Slide 8: Acquisitions Have Made Meaningful Contribution to Long-term Growth
Acquisitions Have Made Meaningful Contribution to Long-term Growth Michigan Net Written Premiums $533 Sheboygan (dollars in millions) $496 Peninsula Le Mars $454 Southern $392 Atlantic States $365 $363 $302 $307 $314 $283 $207 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 January 2004 Decem
Slide 9: Acquisition Strategy Drives Geographic Expansion
Acquisition Strategy Drives Geographic Expansion • 10 M&A transactions since 1988 – Experienced consolidation team • Acquisition criteria: – Serving attractive geography – Favorable regulatory, legislative and judicial environments – Similar personal/commercial business mix – Premium volume up to $1
Slide 10: Example: Southern Mutual Insurance Co.
Example: Southern Mutual Insurance Co. • Affiliation with Donegal Mutual in 2009 • Donegal Mutual surplus note investment of $2.5 million • $16.8 million in 2012 direct written premiums • 100% quota share reinsurance with Donegal Mutual – SMIC cedes underwriting results to Donegal Mutual – Donegal M
Slide 11: Example: Michigan Insurance Company
Example: Michigan Insurance Company • Attractive franchise (Dollars in millions) 2014 2013 2012 2011 2010 acquired in 2010 (under prior owner) • Potential for increased Direct written premiums $116** $112 $111 $108 $105 premium contribution External quota 20% 30% 40% 50% 75% share • Track record of
Slide 12: Business Mix Offers Broad-based Opportunities
Business Mix Offers Broad-based Opportunities • Commercial lines = 40% of Net Written Premiums by Line of Business (December 31, 2013) NWP in 2013 – Commercial lines renewal Workers' premiums increases in 5-7% Homeowners Comp 20% range 14% Other Personal – Ongoing emphasis on new 3% business growth
Slide 13: Organic Growth Centered on Relationships with ~2,600 Independent Agencies
Organic Growth Centered on Relationships with ~2,600 Independent Agencies • Ongoing objectives: – Achieve top three ranking within appointed agencies in lines of businesswe write – Leverage “regional”advantages and maintain personal relationships as agencies grow and consolidate • Continuing focus o
Slide 14: Best-In-Class Technology and Agent Support
Best-In-Class Technology and Agent Support Personal Lines Commercial Lines • Donegal offers state-of-the-art • Donegal offers web-based quoting and underwriting underwriting system with capabilities automated rating and underwriting Mobile App ImageRight Service Call Center ClaimCenter Center 14
Slide 15: Achieve Book Value Growth By Implementing Plan
Achieve Book Value Growth By Implementing Plan Drive revenues with opportunistic transactions and organic growth Focus on margin enhancements and investment contributions
Slide 16: Remain Focused on Underwriting to Best Leverage Rate Increases
Remain Focused on Underwriting to Best Leverage Rate Increases Personal Lines Loss Ratio Commercial Lines Loss Ratio 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 2013 Donegal Insurance Group (
Slide 17: Focus on Underwriting Profitability
Focus on Underwriting Profitability • Sustain pricing discipline and conservative underwriting • Manage exposure to catastrophe/unusual weather events – Purchase reinsurance coverage in excess of a one-in-200 year event • Link employee incentive compensation directly to underwriting performance • Fo
Slide 18: Emphasize Growth in More Profitable Commercial Lines
Emphasize Growth in More Profitable Commercial Lines In-Force Policy Count Retention Levels • 95.7% statutory combined 90,000 100.0% ratio for 2013 80,000 95.0% • Introduce core Donegal 70,000 90.0% products in new regions 85.0% 60,000 • Growth focus on accounts 80.0% with premiums in $10,000 to50,0
Slide 19: Focus on Margin Improvement in Personal Lines
Focus on Margin Improvement in Personal Lines In-Force Policy Count Retention Levels 500,000 100.0% • 98.8% statutory combined 450,000 95.0% ratio for 2013 400,000 90.0% • Acquired companies weighted to personal lines 350,000 85.0% • Focus on the preferred and 300,000 80.0% superior risk markets 250
Slide 20: Employ Sophisticated Pricing and Actuarial Tools
Employ Sophisticated Pricing and Actuarial Tools • Predictive modeling tools • External information enhance our ability to sources allow us to appropriately price our develop price optimization products strategies – Sophisticated predictive • Formal schedule of regular modeling algorithms for pricin
Slide 21: Maintain Reserve Adequacy to Support Margin Expansion
Maintain Reserve Adequacy to Support Margin Expansion Established Reserves at Year-end • Reserves at $266 million (dollars in thousands, net of reinsurance) Reserve Range at 12/31/2013 at year-end 2013 Low $238,800 $265,605 High $295,500 – Midpoint of actuarial range Selected at midpoint $250,936 –
Slide 22: Drive Increased Efficiency with Automation
Drive Increased Efficiency with Automation Direct Premiums per Employee • Current infrastructure can $1,000 support premium growth (Dollars in thousands) $900 • Premiums per employee rising due to underwriting systems $800 • Claims system allows more $700 rapid and efficient claims $600 handling $50
Slide 23: Maintain Conservative Investment Mix to Minimize Risk
Maintain Conservative Investment Mix to Minimize Risk $756 Million in Invested Assets* • 81% of portfolio invested (as of December 31, 2013) in fixed maturities at Short-Term Treasury year-end 2013 Securities 13% 3% Agency – Effective duration = Equity 2% 5% 4.5years Corporate – Tax equivalent yield
Slide 24: Donegal Financial Services Corporation Bank Investment = 5% of Invested Assets
Donegal Financial Services Corporation Bank Investment = 5% of Invested Assets • DFSC owns 100% of Union Community Bank – Serves Lancaster County (location of Donegal headquarters) • Expanded to 13 branches via acquisition in May 2011 – Added scale to banking operation – Enhanced value of historic b
Slide 25: Union Community Bank is Financially Strong and Profitable
Union Community Bank is Financially Strong and Profitable • 2013 results: – $513million in assets at year-end 2013 – $6.3 million in net income • Excellent capital ratios at December 31, 2013: Tier 1 capital to average total assets 15.67% Tier 1 capital to risk-weighted assets 23.64% Risk-based capi
Slide 26: Achieve Book Value Growth By Implementing Plan
Achieve Book Value Growth By Implementing Plan Drive revenues with opportunistic transactions and organic growth Focus on margin enhancements and investment contributions
Slide 27: Strong Capital + Solid Plan to Drive Results
Strong Capital + Solid Plan to Drive Results Book Value Plus Cumulative Dividends• Rated A (Excellent) by A.M. Best $20.00 – Debt-to-capital of approximately 16% $15.00 – Premium-to-surplus of approximately 1.4-to-1 $10.00 • Dividend yield of 3.6% for Class A shares $5.00 • New authorization for rep
Slide 28: Structure Provides Stability to Pursue Successful Long-Term Business Strategy
Structure Provides Stability to Pursue Successful Long-Term Business Strategy • Regional property casualty insurance company – Insurance holding company with mutual affiliate • Objective to outperform industry in service, profitability and book value growth • Drive revenues with opportunistic transa
Slide 29: Supplemental Information
Supplemental Information > DONEGAL. GROUP INC.
Slide 30: History of Contributing Transactions
History of Contributing Transactions Southern Company Le Mars Peninsula Sheboygan Michigan Mutual Year Acquired 2004 2004 2008 2009 2010 Company Type Mutual Stock Mutual Mutual Stock Primary Product Line Personal Niche Personal Personal Pers./Comm. Georgia/ Geographic Focus Midwest Mid-Atlantic Wisc
Slide 31: Net Premiums Written by Line of Business
Net Premiums Written by Line of Business (in millions) Q4 13 Q3 13 Q2 13 Q1 13 Q4 12 Q3 12 Q2 12 Q1 12 Personal lines: Automobile $46.7 $50.9 $50.2 $48.6 $45.6 $51.4 $50.2 $48.0 Homeowners 25.7 29.8 29.1 21.9 22.3 27.6 27.0 20.2 Other 4.0 4.2 4.3 3.4 4.0 4.2 4.2 3.7 Total personal lines 76.4 84.8 83
Slide 32: Combined Ratio Analyses
Combined Ratio Analyses (percent) Q413 Q3 13 Q2 13 Q1 13 Q4 12 Q3 12 Q2 12 Q1 12 Stat Combined Ratios: Personal lines 99.3 97.9 100.2 98.1 108.9 101.3 108.4 101.6 Commercial lines 89.4 93.0 101.4 98.4 88.5 91.4 95.1 88.8 Total lines 95.4 96.0 100.6 98.0 101.2 97.6 103.5 96.9 GAAP Combined Ratios (to
Slide 33: Pursuing Effective Business Strategy in Regional Insurance Markets
Pursuing Effective Business Strategy in Regional Insurance Markets For Further Information: Jeffrey D. Miller Senior Vice President and Chief Financial Officer Phone: (717) 426-1931 E-mail:investors@donegalgroup.com Website:investors.donegalgroup.com