Donegal Group, Inc.

Good morning and thank you for joining us today. This morning, Donegal Group issued its first quarter 2023 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. Speaking today will be President and Chief Executive Officer Kevin Burke, Chief Financial Officer Jeff Miller, Chief Underwriting Officer Jeff Hay, 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 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. Kevin?

Thank you, Karen, and welcome, everyone. I will begin the call with an update on several strategic initiatives before turning it over to Jeff Miller for a review of our quarterly financial results. Jeff Hay will then provide details about the segment performance and action plans for the remainder of 2023, followed by Tony Viasi, who will provide an investment update. I reported in our year-end earnings call just a couple months ago that we successfully launched new personalized products in nine of the 10 states where we offered personalized during 2022. And we were awaiting approvals of our product filings from regulatory authorities in Michigan. I am pleased to report that we have now received those approvals and are preparing to implement new products in Michigan, thus completing the 10 state rollout. We are actively monitoring our personalized new business growth, which has exceeded our expectations. Jeff Hay will provide more commentary about the actions we are taking to control the pace of our growth and ensure rate adequacy in light of ongoing inflationary pressures on lost costs. We successfully deployed our third major software release as planned at the end of March. This release includes new business owner product and modernized commercial auto and umbrella products with new advanced pricing models and enhanced straight through processing capabilities. These products and systems will allow us to focus on the small commercial market as our primary source of profitable growth over the next few years. The products are currently available for new business in three states for policies effective beginning in June, and we are on track to implement them in our 19 remaining states in the third quarter. We also plan to begin converting our legacy policies on the new platform in the fourth quarter of 2023. The renewal conversion process will continue throughout 2024. Our commercial lines footprint will include 22 states after the completion of strategic actions that Jeff Hay will discuss further in a few moments. Looking ahead to releases remaining in our systems modernization project, the next major commercial lines release will include the development of a new commercial lines package policy and migration of our remaining commercial lines products to the new platform. Considering the significant business resources dedicated to the ongoing rollout and monitoring of the recent Commercial Lines release and the renewal conversion activities during the remainder of 2023, we expect to begin working on the next Commercial Lines release in early 2024. In the meantime, the project team is now focused on migrating our dwelling fire product and beginning the process of preparing to migrate our remaining legacy Personal Lines products to the new platform as they renew. Due to the relatively short timeframe before kicking off the next major Commercial Lines release, we have limited the scope of this interim release to development of a dwelling fire product in a base state and converting legacy homeowners policies in Virginia, where required regulatory changes led us to prioritize that migration. We are currently planning to continue Personal Lines legacy conversion activities on a parallel track with the Commercial Lines release in 2024, as project resources allow. I'm very proud of the Donegal team that has shown remarkable resilience and perseverance over the past five years. They have been working to develop and implement new systems, products, reporting systems, and advancements in data analytics. These initiatives have transformed our business processes and refined our underwriting and pricing sophistication and capabilities. While there is more to accomplish over the next few years, I'm looking forward to seeing favorable results from all of the team's efforts. We expect to begin to realize the return of our significant investment in town and technology through improved operating results over time. At this point, I'll turn a call over to Jeff Miller for a review of our quarterly financial results.

Thank you, Kevin. Net premiums earned increased 8% to $215.2 million for the first quarter of 2023. Net premiums written grew by 8.6%. with premium rate increases and continuing strong retention contributing to growth across our lines of business despite planned attrition in several regions where we are working to improve profitability. The combined ratio of 101.2% for the first quarter of 2023 was higher than we targeted, due primarily to a 5 percentage point increase in the loss ratio compared to the first quarter of 2022. The core loss ratio decreased by over two percentage points from the prior year quarter, but that improvement was more than offset by the impact of higher weather-related and large fire losses, as well as lower net favorable reserve development from prior year losses. Weather-related losses were $14.1 million, or 6.5 percentage points of the loss ratio for the first quarter of 2023, compared to 8 million, or 4 percentage points, for the first quarter of 2022. Homeowners' impact was 7.3 million, and commercial property impact was 5.3 million, with the remainder in the auto lines. We incurred close to $4 million in losses from severe wind and hailstorm activity on March 31st. As a result, the first quarter weather claim impact was higher than the previous five-year average for the first quarter of 4.8 percentage points. Large fire losses, which we define as over $50,000 in damages, contributed 5.1 percentage points to our first quarter of 2023 loss ratio, slightly higher than 4.8 percentage points for the prior year quarter. with an increase in commercial fire severity due in part to our higher per-risk reinsurance retention for 2023, as well as inflationary repair cost increases. Our insurance subsidiaries experienced net favorable development of reserves for losses incurred in prior accident years of $8.3 million, or a 3.9 percentage point reduction in the loss ratio for the first quarter of 2023, compared to $16.5 million, or an 8.3 percentage point reduction in the loss ratio for the prior year quarter. Favorable development was primarily related to lower-than-expected claim emergence for accident years 2020 and 2021, with approximately $3.8 million in commercial auto, $3.6 million in workers' compensation, and $800,000 in commercial multi-peril. The expense ratio was 36.4% for the first quarter of 2023, with an increase in technology systems-related expenses primarily driving the increase over the prior year quarter. The quarterly expense ratio was slightly above our expected run rate for the full year. Premium writings are seasonably higher in the first quarter of the year when many of our commercial policies renew. As a result, certain non-deferrable variable costs are incurred in the first quarter while the premium writings will be earned throughout the remainder of the year. In summary, the underwriting loss we incurred for the first quarter of 2023 was more than offset by $9.4 million of investment income, resulting in after-tax net income of $5.2 million, which declined from $13.1 million for the first quarter of 2022 when our results benefited from milder weather conditions and unusually favorable loss reserve development. With that, I will turn the call over to Jeff Hay to provide more details about our commercial and personal lines segment results.