Donegal Group, Inc.

Good morning, and thank you for joining us today. This morning, Donegal Group issued its second quarter 2022 earnings release, outlining its results. The release and a supplemental investor presentation are available in the investor relations section of Donegal's website at www.donegalgroup.com. Please be advised that today's conference was prerecorded and all participants are in listen-only mode. After management remarks, there will be a question and answer session for questions submitted ahead of the call. Speaking today will be President and Chief Executive Officer Kevin Burke, Chief Financial Officer Jeffrey Miller, Chief Underwriting Officer Jeffrey Hay, and Chief Investment Officer Tony Biazzi. Please be aware that statements made during this call that are not historical facts are forward-looking statements and necessarily involve risk and uncertainties that could cause actual results to vary materially. These factors can be found in Donagle Group's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and quarterly reports on Form 10-Q. The company disclaims any obligation to update or publicly announce the results of any revisions that they may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. With that, it's my pleasure to turn it over to Mr. Kevin Burke.

Thank you, Karen, and welcome, everyone. I will start the call with an update on our strategic initiatives and then ask Jeff Miller to provide details on our financial results for the second quarter of 2022. Jeff Hay will then highlight our commercial and personal line segment results, followed by Tony Biazzi with an update on our activities and results within our investment portfolio. I will then provide a few closing remarks before we address the questions that were submitted to us. As we have now passed the midpoint of 2022, I am pleased to report that we continue to make solid progress in our ongoing business transformation. We have now launched our new personal lines products in eight of the 10 states in which we offer personal lines and expect to have the new product suite available in all 10 of those states for policies effective in 2023. While our new business expectations remain modest as we closely monitor the competitiveness and performance of these products relative to our expectations, we are pleased with the initial agency engagement and early results. New business volumes are growing each month, and we are working diligently to encourage our agents to re-engage with us in the quoting of our new products, whether it's through our state-of-the-art online portal or the competitive rating systems. The focus of our new systems development efforts has now shifted to commercial lines as we work towards our 2023 release of our new BOP product, as well as migrating our commercial auto and commercial umbrella business lines to our new operating platform. The new platform will enable enhanced straight-through processing capabilities to streamline our agents' experience and improve the efficiency of our internal operations. This release of our new systems is a heavy lift for us, as we offer Commercial Lines products in 24 states, and we very much appreciate the efforts of our technical and business teams who've been working tirelessly for several years to modernize our systems that will continue to drive business transformation we need to effectively compete for quality insurance accounts in the years ahead. We announced the hiring of a new Senior Vice President of Commercial Lines Underwriting to our team in April. We are also pleased to add a Vice President of Commercial Lines Operations and a Vice President of Personal Lines Product Management and Data during the second quarter. All three of these individuals have extensive industry expertise and experience and have already begun to make meaningful contributions within our underwriting departments. We are positioning our company to successfully execute our strategic plan by making critical investments in infrastructure, personnel, and capabilities as we look forward to return on these investments. As we think about what we can accomplish in the remaining months in 2022, we are already beginning to plan for 2023 as we are emphasizing to the entire Donegal team the importance of remaining focused on our core strategic pillars, achieving sustained excellent financial performance, strategically modernizing operations and processes to transform our business, capitalizing on opportunities to grow profitably, and delivering a superior experience to our agents and policyholders. Like our peers, we face many headwinds in the current challenging economic environment. We are committed to the execution of our business strategy that we believe will yield successful results in the future and ultimately increase shareholder value. At this point, I'll turn a call over to Jeff Miller for a review of our financial results for the second quarter.

Thank you, Kevin. I'll provide a brief overview of the quarterly results and then turn the call over to Jeff Hay for more information specific to our commercial and personal line segments. We were pleased with the continued modest premium growth in the second quarter, which was mostly related to strong retention results and premium rate increases that averaged 8.5% for all lines excluding workers' compensation. While underwriting results were heavily impacted by weather-related and large fire losses in the quarter, They also reflected inflationary pressures on lost costs in certain lines of business. For the second quarter, net premiums earned grew by 6% to $204 million, with 10% growth in commercial lines, which was primarily related to the additional premiums from our Mountain States region that were included in the pooling agreement beginning in 2021. The overall combined ratio was 105% for the second quarter of 2022, compared to 96.1% for the prior year quarter. The deterioration of the combined ratio was primarily driven by higher weather-related losses and a lower level of net favorable development of reserves for losses incurred in prior accident years compared to the prior year quarter. Similar to the broader insurance industry, our results were significantly impacted by numerous severe weather events that occurred in our operating regions during the second quarter, with weather-related losses totaling 19.6 million, or 9.6 percentage points on the loss ratio. While we did not incur significant losses from any single catastrophe event, the accumulation of losses from smaller events led to a weather claim impact that was higher than our previous five-year average for the second quarter. Our non-weather loss ratio increased 6.7 percentage points from the prior year quarter. The differential included three points from lower favorable reserve development, 50 basis points from large fire losses, and a three-point increase in core losses, which was due in large part to the inflationary impact on repair and replacement costs in our property and auto lines of business. While large fire losses had a relatively low impact to the loss ratio for the first quarter of 2022, we experienced an elevated volume of fire losses in the second quarter. totaling 13.4 million or 6.6 points on the loss ratio. That impact was relatively comparable to the 6.1 point impact on the loss ratio for the prior year quarter when we also experienced higher than average fire losses. We continued to experience favorable net development of reserves for losses incurred in prior accident years, albeit at a lower amount than in the first quarter of 2022 and prior year second quarter. Favorable development totaled 7.9 million, or a 3.9 point reduction in our loss ratio for the second quarter of 2022, compared to 13.4 million, or a 6.9 point reduction in the loss ratio for the same period last year. Our insurance subsidiaries experienced favorable development primarily related to reserves for accident years 2021 and 2020. The expense ratio improved to 35% for the second quarter of 2022, compared to 36% for the second quarter of 2021. We primarily attribute the expense ratio decrease to lower underwriting-based incentive costs for our agents and employees for the second quarter of 2022 compared to the prior year quarter. The combination of all of the factors I discussed, along with pre-tax net investment losses of $8.4 million, resulted in a net loss of $8.2 million for the quarter. Excluding the net investment losses, we had an operating loss of $1.6 million for the second quarter. While those results were disappointing, we believe the rate increases we have implemented and will continue to implement, as well as strategic shifts in our geographic business mix that Jeff Hay will discuss in more detail, will lead to improved profitability in future periods. From a capital perspective, on July 21, 2022, We declared regular quarterly cash dividends of $0.165 per share for our Class A common stock and $0.1475 per share for our Class B common stock, which are payable on August 15, 2022, to stockholders of record as of the close of business on August 1, 2022. With that, let me turn it to Jeff Hay to provide more details about our commercial and personal lines results.