Slide 1: First Quarter 2021 Investor Presentation
NASDAQ: DGICA/DGICB First Quarter 2021 Investor Presentation April 26, 2021
Slide 2: Safe Harbor
Safe Harbor 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. Actual
Slide 3: Investment Thesis
Investment Thesis • Well-established regional insurance group with a diverse book of business including both commercial and personal lines • Shift in focus to commercial lines growth and actions to improve personal lines results contributed to recent margin improvement (96.0% combined ratio and 9% b
Slide 4: Company Overview
Company Overview Donegal Group Inc. is an insurance holding NASDAQ: DGICA/DGICB company whose subsidiaries and affiliates Corporate Headquarters Marietta, Pennsylvania offer property and casualty insurance in 24 DGICA Share Description 25.0 million shares outstanding at 3/31/2021 (Voting rights 0.1:
Slide 5: First Quarter 2021 – Operating Results
First Quarter 2021 – Operating Results Solid Organic/Acquisition Growth Continuation of Improved Results and Profitability in Commercial in Personal Lines Lines Non-GAAP Net Income Combined Ratio Book Value Operating Income* Book value per share Net income of $10.5 million, or 35 Non-GAAP operating
Slide 6: Accomplishments in the Last Two Years
Accomplishments in the Last Two Years • Substantial improvement in financial results in 2019 and 2020 • Continuing growth in our commercial lines segment • Development of new personal lines products on track for deployment beginning in Q3 2021 • Favorable net development of reserves following streng
Slide 7: Mix of Commercial and Personal Lines
Mix of Commercial and Personal Lines Net Premiums Written for Q1 2021 by Line of Business Personal Auto Homeowners, Other Personal, Homeowners Personal lines = 33.1% of NPW 10.5% 2.7% Personal Auto, Other Personal 19.9% Renewal Premium Workers' Comp, Increases Averaged ~2% 16.2% Commercial Auto Comm
Slide 8: Growth and Profitability in Commercial Lines
Growth and Profitability in Commercial Lines 99.3% Commercial Lines Statutory Combined Ratio for Q1 2021 100.0% 100,000 ✓ Expand core Donegal products across regions 95.0% 90,000 ✓ Growth focus on accounts with premiums in $10,000 to 90.0% 80,000 $150,000 range 85.0% 70,000 ✓ Expand appetite within
Slide 9: Strong Capital Position and Shareholder Returns
Strong Capital Position ~ Shareholder Returns Book Value Plus Cumulative Dividends Strong Operating Results Since Donegal Began Implementing Corporate Initiatives in 2018 • Rated A (Excellent) by $20.00 A.M. Best $1.72 $1.87 – Debt-to-cash/investments of $1.13 approximately 3.1% $15.00 $0.56 – Premi
Slide 10: Donegal: Where We've Been and Where We're Going
Donegal: Where We’ve Been and Where We’re Going www.DonegalGroup.com 10
Slide 11: Organic Growth Centered on Relationships with ~2,300 Independent Agencies
Organic Growth Centered on Relationships with ~2,300 Independent Agencies 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 agen
Slide 12: Donegal Mutual Acquisition of Mountain States Insurance Group
Donegal Mutual Acquisition of Mountain States Insurance Group 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 States I
Slide 13: Maintain Multi-Faceted Regional Growth Strategy
Maintain Multi-Faceted Regional Growth Strategy Now operating across 24 states in five operating regions M&A transactions 10 since 1988 Acquisition Criteria • Serving attractive geography • Favorable regulatory, legislative and judicial environments • Similar personal/commercial business mix • Premi
Slide 14: Significant Benefits to Shareholders from Mutual Relationship
Significant Benefits to Shareholders from Mutual Relationship • Interrelated operations and pooling agreement with Donegal Mutual since inception in 1986 • At March 31, 2021, Donegal Mutual held approximately 41.3% of our outstanding Class A common stock and approximately 83.5% of our outstanding Cl
Slide 15: Conservative Investment Strategy
Conservative Investment Strategy $1.2 Billion in Invested Assets • 92.5% of portfolio invested in fixed (at March 31, 2021) maturities Corporate Mortgage Backed Securities (MBS) – Effective duration = 4.8 years 19.0% 31.9% – Tax-equivalent yield = 2.6% • Emphasis on quality Treasury and • Liquidity
Slide 16: Valuation vs. Multi-Line Insurers
Valuation vs. Multi-Line Insurers (Stock Price as of April 23, 2021) 2.50 Price to Book Multiple 2.29 2.00 1.82 1.79 1.63 1.53 1.57 1.50 Peer Average 1.4X 1.40 1.40 1.35 1.35 1.28 1.19 0.94 0.98 0.99 1.00 0.83 0.50 0.00 www.DonegalGroup.com 16
Slide 17: Investment Conclusions
Investment Conclusions • Diverse book of business of both commercial and personal lines • Opportunities for growth in multiple lines of business and several regional markets • Emphasis on solid underwriting returns driving margin improvement • Strength of brand and solid agency relationships provide
Slide 18: Contact Information
Contact Information Contact Information Donegal Group Inc. 1195 River Road P.O. Box 302 Marietta, PA 17547 Phone: (800) 877-0600 Corporate Website: donegalgroup.com Investor Relations Contact Mr. Jeffrey D. Miller Adam Prior Phone: (800) 877-0600 x7357 (212) 836-9606 investors@donegalgroup.com aprio
Slide 19: Financial Supplement
Financial Supplement 2021 First Quarter
Slide 20: Summary of 2021 First Quarter Financial Results
SUMMARY OF 2021 FIRST QUARTER FINANCIAL RESULTS www.DonegalGroup.com 20
Slide 21: Insurance Operations
INSURANCE OPERATIONS www.DonegalGroup.com 21
Slide 22: Underwriting Performance
UNDERWRITING PERFORMANCE www.DonegalGroup.com 22
Slide 23: Investment Operations
INVESTMENT OPERATIONS www.DonegalGroup.com 23
Slide 24: Reconciliation of Net Premiums Earned to Net Premiums Written
RECONCILIATION OF NET PREMIUMS EARNED TO NET PREMIUMS WRITTEN www.DonegalGroup.com 24
Slide 25: Reconciliation of Net Income to Non-GAAP Operating Income
RECONCILIATION OF NET INCOME TO NON-GAAP OPERATING INCOME www.DonegalGroup.com 25