Slide 1: There When it Matters Most
1 There When it Matters Most. NASDAQ: DGICA/DGICB www.DonegalGroup.com www.donegalgroup.com
Slide 2: Safe Harbor
SAFE HARBOR 2 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 uncertainties. Actua
Slide 3: What Is Donegal Group?
WHAT IS DONEGAL GROUP? 3 Donegal Group Inc. is an insurance holding NASDAQ: DGICA/DGICB company offering property and casualty Corporate Headquarters Marietta, Pennsylvania insurance in 20 states. 23.0 million shares outstanding DGICA Share Description (Voting rights 0.1:1) The Company offers full l
Slide 4: Balanced Mix of Commercial and Personal Lines
BALANCED MIX OF COMMERICAL AND PERSONAL LINES 4 Net Written Premiums for First Half 2019 by Line of Business Personal Auto Homeowners Personal lines = 45.0% of NWP Homeowners Other Personal 14.5% 2.7% Other Personal Renewal Premium Workers' Comp Increases Averaged 6% 15.7% Personal Auto 28.2% Multi
Slide 5: Solid First Half of 2019 Financial Results
SOLID FIRST HALF OF 2019 FINANCIAL RESULTS 5 Solid Organic Growth in Sale of Banking Operations Commercial Lines Improving Combined Ratio Net Income Growth Due to Rate and Improvement in Book Value Market Share Gains Net income of $27.8 million, or 99 Combined ratio of 100.7% for the first cents per
Slide 6: Growth in Commercial Lines
GROWTH IN COMMERCIAL LINES 6 94.6% Commercial Lines Statutory Combined Ratio 100,000 100.0% for the First Half of 2019 90,000 95.0% Expand core Donegal products in newer regions 80,000 90.0% Growth focus on accounts with premiums in $10,000 70,000 85.0% to $150,000 range 60,000 80.0% Expand ap
Slide 7: Strong Capital + Solid Plan to Drive Results
STRONG CAPITAL + SOLID PLAN TO DRIVE RESULTS 7 Book Value Plus Cumulative Dividends • Rated A (Excellent) by 20.00 A.M. Best – Debt-to-cash/investments of approximately 4% 15.00 – Premium-to-surplus of approximately 2.0-to-1 10.00 • Dividend yield of 4.0% for Class A shares 5.00 - Book Value Dividen
Slide 8: Donegal: Where We've Been and Where We're Going
8 Donegal: Where We’ve Been and Where We’re Going www.DonegalGroup.com
Slide 9: Organic Growth & Opportunistic Affiliations
ORGANIC GROWTH & OPPORTUNISTIC AFFILIATIONS 9 USD in millions $800 Atlantic States Southern Le Mars Peninsula Sheboygan Michigan $744 $729 $700 $682 $629 $600 $579 $533 $496 $500 $454 $392 $400 $363 $363 $300 $200 $100 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 www.DonegalGroup.com
Slide 10: Maintain Multifaceted Regional Growth Strategy
MAINTAIN MULTIFACETED REGIONAL GROWTH STRATEGY 10 Net premiums written of $744.0 million for the full year 2018, across 20 states in four operating regions – an increase of 2% compared to 2017 M&A transactions 10 since 1988 Acquisition Criteria • Serving attractive geography • Favorable regulatory,
Slide 11: Organic Growth Centered on Relationships with ~2,400 Independent Agencies
ORGANIC GROWTH CENTERED ON RELATIONSHIPS WITH ~2,400 INDEPENDENT AGENCIES 11 Ongoing Objectives Continuing Focus on Commercial Lines Growth • Achieve top-three ranking within appointed • Emphasize expanded commercial lines products agencies in lines of business we write and capabilities in current a
Slide 12: Drive Increased Efficiency with Automation
DRIVE INCREASED EFFICIENCY WITH AUTOMATION 12 Direct Premiums per Employee (USD in 000s) $1,100 • Current infrastructure can support premium growth $1,000 • Premiums per employee rising due to $900 technology systems $800 • Claims system allows more rapid and $700 efficient claims handling $600 • Mu
Slide 13: Enhance Underwriting Profitability to Improve Operating Margins
ENHANCE UNDERWRITING PROFITABILITY TO IMPROVE OPERATING MARGINS 13 • Sustain pricing discipline and conservative underwriting • Manage exposure to catastrophe/unusual weather events • Link employee incentive compensation directly to underwriting performance • Focus on rate adequacy and pricing segme
Slide 14: Donegal Mutual's Acquisition of Mountain States Insurance Group
DONEGAL MUTUAL'S ACQUISITION OF MOUNTAIN STATES INSURANCE GROUP 14 Entering the Southwest – In May 2017, Donegal Mutual completed the merger of Mountain States Mutual Casualty Company with and into Donegal Mutual. Donegal Mutual and its two insurance subsidiaries conduct business as the Mountain Sta
Slide 15: Donegal Completes Sale of Donegal Financial Services Corporation
DONEGAL COMPLETES SALE OF DONEGAL FINANCIAL SERVICES CORPORATION 15 Completed sale to Northwest Bancshares, Inc. in March 2019 DGI received proceeds valued at $55.5 million Realized gain of $12.7 million recorded on sale Utilization of Proceeds – Repaid $25.0 million of line of credit borrowings – C
Slide 16: Maintain Conservative Investment Mix
MAINTAIN CONSERVATIVE INVESTMENT MIX 16 • 93.4% of portfolio invested in $1.1 Billion in Invested Assets (at June 30, 2019) fixed maturities Corporate 27.1% – Effective duration = 4.0 years Mortgage Backed Securities (MBS) 33.4% – Tax equivalent yield = 2.8% • Emphasis on quality – 69% AA-rated or b
Slide 17: Primary Strategies
PRIMARY STRATEGIES 17 • Improve financial performance • Utilize technology to improve operational efficiency • Strategically modernize business to achieve operational excellence • Enhance market position to compete effectively www.DonegalGroup.com
Slide 18: Valuation vs. Peers
VALUATION VS. PEERS (AT 8/19/2019) 18 Price to Tangible Book Value 2.50 2.00 1.50 1.00 0.50 0.00 DGICA UFCS EMCI HALL AFG THG KMPR CINF SIGI www.DonegalGroup.com
Slide 19: Key Takeaways
KEY TAKEAWAYS 19 • Well-established regional insurance carrier with a diverse book of business of both personal and commercial lines • Emphasis on margin improvement • Strength of brand and proven business strategies provide competitive advantages that enables the Company to deliver higher returns o
Slide 20: Donegal Facts and Figures / Contact Info
DONEGAL FACTS AND FIGURES / CONTACT INFO 20 Top 25 Holders ## Holder Name Position 1 Donegal Mutual Insurance Co 9,851,025 Analyst Coverage 2 Dimensional Fund Advisors LP 1,796,601 3 Nikolaus Donald H 1,249,162 KBW 4 BlackRock Inc 885,331 Boenning & Scattergood 5 Kennedy Capital Management Inc 882,1
Slide 21: Supplemental Information
21 SUPPLEMENTAL INFORMATION www.DonegalGroup.com
Slide 22: Structure Provides Flexibility and Capacity
STRUCTURE PROVIDES FLEXIBILITY AND CAPACITY 22 Public 49%(1) 51%(1) Donegal Mutual Stockholders Insurance Company Donegal Group Inc. 20% POOLING 100% AGREEMENT Reinsurance 80% 100% 100% 100% 100% 100% 100% Sheboygan Southern The Atlantic Southern Michigan Le Mars Falls Insurance Peninsula States Mut
Slide 23: History of Contributing Affiliations
HISTORY OF CONTRIBUTING AFFILIATIONS 23 Le Mars Peninsula Sheboygan Southern Mutual Michigan 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 Wisconsin
Slide 24: Net Premiums Written by Line of Business
NET PREMIUMS WRITTEN BY LINE OF BUSINESS (last 3 years by quarter) 24 (USD in millions) Q2 19 Q1 19 Q4 18 Q3 18 Q2 18 Q1 18 Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Q3 16 Q2 16 Q1 16 Personal lines: Automobile $56.2 $56.0 $55.4 $62.5 $66.5 $64.9 $61.4 $66.9 $65.7 $61.3 $55.9 $59.8 $59.0 $55.0 Homeowners 32.7 2
Slide 25: Combined Ratio Analyses
COMBINED RATIO ANALYSES (last 3 years by quarter) 25 (in percentages) Q2 19 Q1 19 Q4 18 Q3 18 Q2 18 Q1 18 Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Q3 16 Q2 16 Q1 16 Statutory combined ratios: Personal lines 108.5 97.8 118.9 111.4 110.3 116.1 109.3 107.5 114.1 104.0 107.5 103.6 100.2 95.6 Commercial lines 92.9