Donegal Group, Inc. · NASDAQ:DGICA
Donegal — Investor Presentation (September 2013)
33 slides from Donegal's investor presentation, Sep 20, 2013
Slide 1: Pursuing Effective Business Strategy in Regional Insurance Markets
Exhibit 99.1 PursuingPresentation Investor Effective Business September Strategy 2013in Regional Insurance Markets
Slide 2: Forward-Looking Statements
Forward-Looking The of adequacy Company’s Company developments, the or Reconciliations 2 1995) to periodic Company announce and of operates, insurance reports the involve bases changes publicly of loss Statements non-GAAP interest itall and afiles subsidiaries, number in statements the loss regulato
Slide 3: Regional Insurance Holding Company Overview
Insurance Structure Public Class Regional 22 Distribution $496 Completed Rated Debt-to-capital * 3 Mid-Atlantic, million A Acompany dividend shares (Excellent) Includes property provides Holding ten force inhave M&A of 2012 traded Midwestern, yield Donegal approximately of and stability Company by 1
Slide 4: Objective: Outperform Industry in Service, Profitability and Growth
Objective: Service, 50% GAAP 130% Change DGI 30% 2003 Donegal 4 Avg: CAGR: 40% 25% 2004 125% Combined in Profitability Group 97% 30% 20% Net Book Outperform 2005 120% 10% 7%Written Index 20% 15% SNL Value 2006 Index Ratio Index 115% 10% Small and Avg: 2007 Premiums Industry CAGR: CAGR: Book 110% 0%
Slide 5: 1H 2013: Driven by Measurable Progress
1H 2013: 8.2% Driven 99.3% Measurable Year-to-date Book Interest Additional * 5 increase value statutory by rate Reconciliations Strong strong details per progress driven weather inshare combined net Growth commercial are mark-to-market written from losses at available $14.84 and and rate ratio and
Slide 6: Drive Growth By Implementing Plan
Achieve Drive Focus revenues onBook margin Value with enhancements opportunistic Growth ByandImplementing transactions investmentand Plan contributions organic growth
Slide 7: Public Holding Structure
Structure Public 53%(1) (Union Donegal POOLING 48% 100% 80% Sheboygan Michigan Le The Atlantic Southern Peninsula = (1) Mutual 7 Thrift P&C Mars Because Peninsula 100% Reinsurance Stockholders Insurance Community holds 52% Holding States Insurance Mutual Financial Group Insurance Mutual Provides Ins
Slide 8: Acquisitions Have Made Meaningful Contribution to Long-term Growth
Acquisitions Michigan Net (dollars 10% 2003 $496 $454 $392 $363 $365 $314 $307 $302 $283 $207 January December Acquired 8 Written CAGR 2004 in 2004 Le Sheboygan Michigan Sheboygan millions) 2008 2010 2005 Premiums (6.5% Mars Have 2006 and Made organic) Implemented Falls Peninsula 2007 Peninsula Mean
Slide 9: Experienced Team Drives M&A Acquisition Strategy
10 M&Apersonal/commercial Experienced Acquisition Serving Favorable Similar Premium 9 attractive transactions volume regulatory, Strategy criteria: consolidation up geography to Drives legislative since $100team 1988 Geographic million business and judicial mix Expansion environments
Slide 10: Example: Affiliation with SMIC
Example: Affiliation $16.8 100% SMIC Donegal Expanded Serves 10 million quota cedes asMutual model Southern market with share underwriting in Donegal 2012 for surplus includes presence reinsurance Mutual mutual-to-mutual direct note Mutual business results in Insurance written investment Georgia wit
Slide 11: Example: Michigan Attractive Potential
Example: Attractive Potential Track Provided Capable Quality Diversified (Dollars 2010 Direct 2013 2012 2011 External Ceded Retained Included Statutory * 11 ** (under record written toagency management in Premiums quota Projectedin by for Donegal entry combined Michigan franchise millions) mix DGI M
Slide 12: Business Mix and Net Written Premiums
Business Net Ongoing Rate Minimal Workers’ Multi Commercial Personal Other Homeowners 12 Written increases Peril Commercial Personal Auto lines exposure emphasis Mix Comp 13% Premiums Auto lines 20% Offers = 39% in 3% 13% 58% 3-10% = renewal 10% growth 2% on 42% Broad-based of new byNWP range of Lin
Slide 13: Ongoing Organic Growth Objectives
Organic Growth Ongoing Achieve Leverage Continuing Emphasize Appoint Strengthen 13 commercial top objectives: “regional” relationships expanded focus threeCentered on ranking advantages commercial lines commercial with on focused within Relationships agencies and lines appointed lines agencies maint
Slide 14: Best-In-Class Technology for Agent Support
Best-In-Class Personal Commercial Donegal 14 offers Lines Lines Technology state-of-the-art web-based and underwriting Agent quotingSupport and system underwriting with automated capabilities rating and underwriting
Slide 15: Drive Growth By Implementing Plan
Achieve Drive Focus revenues onBook margin Value with enhancements opportunistic Growth ByandImplementing transactions investmentand Plan contributions organic growth
Slide 16: Remain Focused on Underwriting Profitability
Remain Personal Commercial 90% 2005 Donegal 16 80% 2006 Focused Insurance Lines 70% 2007 Lines Loss 60% 2008 onLoss Group Underwriting Ratio 50% 2009 Ratio 40% (SNL 2010 30% P&C 2011 to20% Best Group) 2012 10% Leverage SNL 0% P&C Rate Industry Increases(Aggregate)
Slide 17: Sustain Underwriting Discipline
Sustain Manage Purchase Link Focus Leverage Emphasize 17 employee onpricing exposure reinsurance Underwriting rate centralized IT-based adequacy compensation discipline to programs catastrophe/unusual oversight coverage Profitability and andpricing directly conservative such of in excess regional so
Slide 18: Commercial Lines Growth Emphasis
Emphasize Introduce Growth Expand Add Appropriately In-Force 90,000 2008 100.0% 18 related 2009 80,000 appetite focus 95.0% Policy core 2010 Growth classes on use 70,000 Donegal 90.0% Count within 2011 accounts reinsurance in 2012 More 85.0% 60,000 Retention classes products with Profitable 80.0% 50
Slide 19: Personal Lines Margin Improvement
Acquired Focus Rate New Seek Balance In-Force 500,000 100.0% 2008 19 increases and geographic 2009 on95.0% portfolio 450,000 Policy renewal Margin the companies 2010 preferred in 90.0% Count 2011 spread 400,000 virtually Improvement (auto/home) inspection weighted 2012 85.0% Retention and of350,000
Slide 20: Sophisticated Pricing Tools
Employschedule Predictive Sophisticated Territorial Exploring External Formal Currently 20 Sophisticated information evaluating tools segmentation modeling predictive that of regular allow tools usage-based sources Pricing and modeling enhance consideration rate analysis allow and adequacy insurance
Slide 21: Maintain Conservative Reserves
Maintain Reserves Midpoint Conservative Emphasis Established Reserve Low Development $250,936 $243,015 $217,897 $180,262 $161,306 $2,684 2008 Values 21 $228,720 2009 shown $9,823 Range at Reserve of on 2010 $251 Reserves actuarial faster reinsurance (Favorable) are ($2,885) High at2011 million 12/31
Slide 22: Drive Operational Efficiency
Drive2000 Direct $1,000 (Dollars 1999 Current Premiums Claims Mutual Statutory 22 Increased Premiums $900 system structure infrastructure inexpense per 2001 thousands) $800 employee allows Efficiency 2002 provides per ratio $700Employee can more 2003 of $600 rising 29.3% support opportunities with 2
Slide 23: Maintain Conservative Investment Portfolio
Maintain $769 Equity Short-Term Treasury Agency Corporate Mortgage-Backed Taxable Tax-Exempt * 23 92% Million 1% Effective Tax Emphasis 86% 98% Liquidity7% Munis Excluding 2% Conservative 10% Securities equivalent AA-rated A-rated of Municipals inor portfolio2% duration managed on or Invested qualit
Slide 24: Donegal Financial Services Corporation and Union Community Bank
Donegal DFSC Serves Expanded Added Enhanced Increased DGI 52% Union 24 owns owned Community owns scale Lancaster Financial potential value to approximately by 100% to 13banking Donegal branches ofCounty Services historic of Bank forUnion bottom-line operation Mutual is (location via 48% bank financi
Slide 25: Union Community Bank Financially Strong and Profitable
Union First $514.9 $3.8 Excellent Tier Risk-based 25 1million half capital Community million 2013 capital capital intoresults: in net average risk-weighted ratios assets to income Bank risk-weighted atat total isJune June Financially assets assets 30, 30,2013: 2013 assets 15.40% 22.89% Strong 25.01%
Slide 26: Drive Growth By Implementing Plan
Achieve Drive revenues Book Value with opportunistic Growth By Implementing transactions and Planorganic growth Focus on margin enhancements and investment contributions
Slide 27: Strong Book Value Growth and Rated A (Excellent)
Strong Book $20.00 7% 2003 Rated A.M. Debt-to-capital Premium-to-surplus Dividend New 27 CAGR authorization 2004 Best Value ACapital $15.00 (Excellent) yield 2005 Plus $10.00 +of2006 Solid Cumulative 3.7% approximately for by of2007 $5.00 repurchase Plan approximately for Class 2008 to $- Dividends
Slide 28: Regional Insurance Holding Company Long-Term Strategy
Structure Regional Insurance Objective Drive 10% Focus 28 CAGR revenues on property margin Provides holding to in outperform net with enhancements company casualty written Stability opportunistic industry premiums insurance to with Pursue and mutual intransactions service, investment since company S
Slide 29: Supplemental Information
Supplemental Information => DONEGAL. GROUP INC.
Slide 30: History of Acquisition Transactions
History Mutual Year Company Primary Geographic Transaction Net Acquisition Avg. * 30 ** Premiums Acquired Growth Combined SinceMichigan of Product Michigan’s Type Le Contributing Focus Price Type Mars Rate** Acquired 2004 Mutual Ratio** Line Demutualization $4 acquisitionMidwest Peninsula 2004 direc
Slide 31: Net Premiums Written by Line of Business
Netmillions) (in Personal Homeowners Automobile Workers’ Commercial Other Total 31 Premiums personal commercial net 4.3lines: 1.6premiums compensation 3.415.7 0.3$50.2 lines: multi-peril Q2 4.0 1.8 29.1 lines Written 13 4.2 1.7 15.5 lines $48.6 21.9 Q1 written 83.6 4.2 2.0 12.0 by 57.0 13 22.3 19.7
Slide 32: Supplemental Combined Ratio Analyses
(percents) Stat Personal Commercial Total Loss Expense Dividend Combined GAAP Fire Development 32 Combined losses ratio lines Combined Supplemental ratio lines ratio (non-weather) (weather-related) Q2 Ratio ratio 100.6 greater lines (savings) 13 32.3 100.2 0.3 Ratios: 103.1 Analyses 98.0 Q1101.4 Rat
Slide 33: For Further Information
Pursuing For Senior Further Vice Effective Information: President Business andJeffrey Chief Strategy Financial D. Miller in Regional Officer Insurance Phone: (717) Markets 426-1931 E-mail: investors@donegalgroup.com Website: investors.donegalgroup.com
Donegal Group — Investor Presentation (September 2013) on 6ix