Donegal Group, Inc.

Good morning, and thank you for joining us today. This morning, Donegal Group issued its fourth quarter and full year 2022 earnings release outlining its results. The release and the 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 Jeff Miller, Chief Underwriting Officer Jeff Hay, Senior Vice President Field Operations Dan Delamater, and Chief Investment Officer Tony Viazzi. Please be aware that statements made during this call that are not historical facts are forward-looking statements and necessarily involve risks and uncertainties that could cause actual results to vary materially. These factors can be found in Donegal Group's filings with the Security 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. Kevin.

Thank you, Karen, and welcome everyone. From a growth and profitability perspective, our performance in the fourth quarter of 2022 largely reflected the continuation of the trends we experienced throughout the year. Anyone following the insurance industry knows how impactful the current inflationary environment has been for insurance carriers. The historically unprecedented spike in loss costs has caused particularly harsh impacts to carriers with substantial volumes of personalized business, where the process of obtaining regulatory approvals extends the timeline for implementing rate actions that are necessary to respond to rapid increases in loss costs and general profit improvement. While our 2022 financial results did not meet our long-term profitability target, I am proud of the diligent efforts of the entire Donegal team as we continued to navigate through the inflationary challenges and took aggressive actions to position our company for future growth and success. We made significant progress on a number of strategic initiatives during the year, and I will provide a summary overview of our accomplishments during the year in the call today. I will then hand the call over to Jeff Miller for a review of our financial details, who will then be followed by Jeff Hay for a deeper dive into our commercial and personal line segment performance. You will also hear from Dan Delamater, the head of our field operations for the Donegal Insurance Group, who will provide you his perspective on our sales and marketing efforts and opportunities as we move into 2023. Tony Viazzi will end our prepared remarks with an investment update before we respond to questions we received in advance of this call. We had several strategic areas of focus for 2022, and I am pleased with the progress we made in each. First, we maintained growth momentum within our commercial market segment. We made substantial progress in rebalancing our commercial risk portfolio through the successful execution of state-specific strategies that Jeff Hay will cover in more detail later in the call. While the level of commercial new business writings fell short of our business plan, that shortfall was more than offset by excellent premium retention that was supported by solid renewal premium increases we achieved throughout the year. I have been providing regular quarterly updates on our multi-year systems modernization project. Following the successful launch of new personalized products in three states in the fourth quarter of 2021, we continued our new product rollout in six additional states throughout 2022. While we are awaiting final regulatory approval to introduce new products in Michigan, which will be the 10th and final state to complete this initiative, we are pleased that the new product launch and rollout has been successful to date. and our agents have responded favorably to what was essentially a re-entry into the personal lines market. We are actively monitoring the pricing of our new products and the underlying risk characteristics of the policies we are writing, as well as carefully managing our growth in the current environment. The Systems Modernization Project Team has been working for over the past two years on the next software release, which is on track for deployment at the end of March. This release will include a new, sophisticated business owner's product, along with modernized commercial auto and umbrella products that incorporate advanced predictive models for refined risk-based pricing and underwriting. The release will also enable enhanced straight-through processing capabilities that we expect will allow us to attract a higher volume of small commercial accounts. We will be focusing our efforts on the small commercial market as our primary source of profitable commercial lines growth over the next few years. In terms of timing, we plan to introduce the new systems and products in three states in the second quarter of 2023, followed by the remaining 22 states in the third quarter. We are currently offering Commercial Alliance products in 24 states and will add the state of Arizona to our service area as part of this rollout. We added experienced leadership talent to augment our team during the past several years and we are making great strides towards moving the organization forward at a rapid pace. In addition to forward progress in data analytics, business intelligence, and underwriting portfolio management, We are focusing on operational excellence, process improvement, and data-driven decision-making. We have enhanced our analysis of loss trends and rate indications, as well as our regional business planning and performance monitoring processes that include detailed state strategy reviews and monthly monitoring. We remain committed to our strategic plan that we believe will help us achieve sustained excellent financial performance. We have more work to do, but I look forward to reporting to you the favorable impact of these efforts in future periods. At this point, I'll turn a call over to Jeff Miller for a review of our financial results.

Thank you, Kevin. For the fourth quarter of 2022, net premiums earned grew by 6.5% to $213 million. We achieved net premium written growth of 10.2%, which was mostly related to higher new business writings and personal lines, strong retention results, and premium rate increases that averaged 8.9% for all lines excluding workers' compensation. Our underwriting results were impacted by elevated weather-related losses and ongoing inflationary pressures on loss costs for property and automobile physical damage coverages. The overall combined ratio for the fourth quarter of 2022 was 102.8% compared to 101.6% for the prior year quarter. The deterioration of the combined ratio was primarily driven by an increase in the expense ratio, which we primarily attribute to higher technology costs related to our ongoing systems modernization initiatives. The fourth quarter loss ratios were comparable for 2022 and 2021, as higher weather-related losses in the fourth quarter of 2022 were largely offset by a higher benefit of net favorable development of reserves for losses incurred in prior accident years compared to the prior year quarter. Weather-related losses totaled $16.5 million, or 7.7 percentage points on the loss ratio for the fourth quarter of 2022. We incurred $5 million in losses from winter storm Elliott in late December with our reinsurance agreement with Donegal Mutual limiting the net impact to that amount. The total quarterly weather claim impact was higher than our previous five-year average of 4.4 percentage points for the fourth quarter. We experienced favorable net development of reserves for losses incurred in prior accident years of $14.2 million, or a 6.7 point reduction in the loss ratio for the fourth quarter of 2022 compared to 5.3 million, or a 2.7 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 2019, 2020, and 2021 in personal automobile, commercial automobile, and homeowners lines of business, where actual loss emergence during 2022 was lower than our actuarial estimates at the end of 2021. Large fire losses contributed 6.2 percentage points to our fourth quarter of 2022 loss ratio, slightly higher than the 5.5 percentage point impact to the loss ratio of the prior year quarter, with an increase in commercial fire severity due in part to higher costs of repairing damaged properties. Our core loss ratio, which excludes the impact of weather, large fires, and prior period reserve development, was relatively in line with the prior year quarter with both periods reflecting an elevated impact of inflation. The underwriting loss we experienced for the fourth quarter of 2022 was more than offset by $9.4 million of investment income and $626,000 of net investment gains, contributing to after-tax net income of $3.5 million. Turning briefly to results for the full year of 2022, we achieved a 6% increase in net premiums earned, and net premium written growth of 4.9%, which was mostly related to higher new business writings and personal lines, strong retention results, and premium rate increases, averaging 7.2% for all lines excluding workers' compensation. Our full year underwriting results also reflected the ongoing inflationary pressures on loss costs I mentioned earlier. The overall combined ratio was 103.3% for the full year of 2022, compared to 101% for 2021. The increase in the combined ratio was primarily driven by a higher loss ratio. Weather-related losses contributed 7.7 percentage points to our 2022 loss ratio, which was just slightly higher than our 7.2 percentage point five-year average weather impact, but was nearly two percentage points higher than the 2021 weather loss impact. Net favorable development of reserves for losses incurred in prior accident years reduced the loss ratio by 5.4 percentage points for 2022 compared to a 4 percentage point reduction for 2021. The expense ratio of 34.1% for the full year 2022 increased compared to 33.3% for 2021, primarily related to the impact of higher technology systems related costs. Investment income of $34 million for 2022 was more than offset by the underwriting loss and net investment losses of $10.2 million, resulting in a $2 million after-tax net loss for 2022 compared to $25.3 million of net income for 2021. With that, I will turn the call over to Jeff Hay to provide more details about our Commercial and Personal Lines segment results.