Donegal Group, Inc.

Good morning, and thank you for joining us today. This morning, Donegal Group issued its fourth quarter and full year 2024 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 pre-recorded 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, Chief Operating Officer Dan Delamater, and Chief Investment Officer Tony Viasi. 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. We are pleased to provide an update on our quarterly results, important accomplishments in 2024, and areas of focus for 2025. At this time last year, I stated that we believe the action plans and rate increases we implemented during 2023 would lead to incremental improvement in our results for 2024 and beyond. In today's call, we'll outline the details of improvement we achieved. Our fourth quarter 2024 net income of $24 million represents the highest quarterly earnings in our history. While weather-related losses were lower than average during the fourth quarter of 2024, the primary driver of our favorable results was substantial improvement in our core loss ratios in both commercial lines and personal lines. We are now reaping the benefits of all of the underwriting actions, specific state strategies, significant premium rate increases we implemented over the past several years, and leveraging our new technology and product enhancements. We are not finished with all of those actions as we continue to address pockets of underperformance to build on the positive momentum. We made excellent progress during 2024 on the last two major software releases within our systems modernization project. As a reminder, a major commercial systems release scheduled for deployment in the third quarter of 2025 will include new commercial package policy and will modernize our mid-market commercial products from our legacy systems. These products will allow us to continue to compete effectively for profitable commercial accounts. Our last major software release will facilitate the conversion of all remaining legacy personal lines policy renewals to the new operating platform. I want to express my appreciation to the technology business teams that are working diligently to complete the development and testing of both of these releases, which will allow us to decommission all of our legacy systems when the conversion is completed in 2027. As our call progresses, you'll hear from Jeff Hay and Dan Delamater about our areas of focus for 2025. After implementing many changes over the past several years, we are now fine tuning our strategy to respond to external challenges and opportunities. We have developed and implemented sophisticated analytical and reporting tools to give us granular insights into all aspects of our business, with performance monitoring routines in place that allow us to respond quickly to address issues or to meet market changes. We expect further efficiency gains as we take full advantage of recent and ongoing technology investments, including the development of a comprehensive cloud-based data infrastructure that will provide further enhancements in data analysis and reporting capabilities when fully deployed. Our favorable results for the second half of 2024 has generated confidence that our strategies will result in sustained excellent financial performance. keeping profitability is our primary objective we also desire to capitalize on opportunities to grow our premium base our business plan for 2025 includes detailed regional action plans to achieve high single digit percentage growth in commercial lines targeting profitable small and mid-market accounts in specific geographical regions and classes of business. We expect a modest decline in personal lines for 2025. As the year progresses, we expect to stabilize our personal lines premium writings by gradually increasing new business levels while maintaining rate adequacy we worked so hard to achieve over the past several years. Our team is focused on the completion of the major systems transformation project, execution of ongoing profit focus initiatives, and the achievement of measured intentional growth. At this point, I'll turn a call over to Jeff Miller for a review of our financial results.

Thanks, Kevin. I'll start with a summary of our fourth quarter results and then provide some highlights of our full year results. For the fourth quarter of 2024, net premiums earned increased 4.6% to $236.6 million. Net premiums written decreased by 0.6%, with a 5% decrease in personal lines premiums offset partially by 2.8% growth in commercial lines. Rate increases achieved during the fourth quarter were in double-digit percentages for all major lines of business except workers' compensation, averaging 11% in total and 12% when excluding workers' comp. The combined ratio for the fourth quarter of 2024 was an excellent 92.9% compared to 106.8% for the prior year quarter. We attribute the improvement to a 9.5 percentage point decrease in the core loss ratio compared to the prior quarter. The core loss ratio is a measure of our underlying underwriting performance after excluding the impact of weather-related losses, large fire losses, and net development of reserves for losses incurred in prior accident years. Compared to the prior year quarter, we achieved a 4.4 percentage point decrease in the commercial lines core loss ratio and a 16.7 percentage point decrease in the personal lines core loss ratio for the fourth quarter of 2024. The substantial improvement in the personal line's core loss ratio was due largely to the favorable impact of premium rate increases on net premiums earned for that segment. Weather-related losses of 7.7 million, or 3.3 percentage points of the loss ratio for the fourth quarter of 2024, decreased from 13.4 million, or 5.9 percentage points of the loss ratio for the fourth quarter of 2023. We incurred lower commercial property losses with $1.5 million of weather losses contributing 2.8 percentage points to the quarterly commercial multi-parallel loss ratio compared to $3.5 million of weather losses contributing 7 percentage points for the fourth quarter of 2023. The fourth quarter of 2024 weather impact to the homeowners line was $3.7 million or 10.5 percentage points of the homeowner's loss ratio, significantly lower compared to 8.3 million or 24.5 percentage points for the prior year quarter. In total, the quarterly weather claim impact was lower than the previous five-year average for the fourth quarter of 5.2 percentage points. Our insurance subsidiaries did not incur losses from any single event during the fourth quarter of 2024 or 2023 that exceeded their individual $3 million catastrophe reinsurance retention with Donegal Mutual. Large fire losses, which we define as over $5,000 in damages, contributed 4 percentage points to the loss ratio for the fourth quarter of 2024, which was lower than 4.8 percentage points for the prior year quarter. A decline in the severity of homeowner fire losses was the primary driver of the decrease. Our insurance subsidiaries experienced a nominal level of net development of reserves for losses incurred in prior accident years, with minimal impact to the loss ratio for the fourth quarter of 2024-2023. Details by line of business for the fourth quarter of 2024 included net favorable development of $4.8 million for commercial multi-parole, $600,000 for homeowners and $500,000 for workers' comp that was partially offset by unfavorable development of $5.1 million for commercial auto and $1.6 million for personal auto. We attribute the unfavorable development in those two lines to higher than expected severity for previously reported bodily injury losses in accident years 2021 through 2023 in light of continuing social inflation trends. Netting all of the lines together, we had virtually no development in the fourth quarter. The expense ratio of 32.8% for the fourth quarter of 2024 decreased from 34.1% for the prior year quarter. The decrease primarily reflected the benefits of various expense reduction initiatives that we discussed in the past several earnings calls. These benefits were offset partially by an increase in underwriting-based incentive costs for employees and higher technology systems-related expenses related to our ongoing system modernization initiatives. Shifting to the full year of 2024 results, the loss ratio of 64.5% compared favorably to 69.1% for 2023. with a 3.5 percentage point improvement in the 2024 core loss ratio compared to the prior year. That improvement reflected a 2.1 percentage point decrease in the commercial lines core loss ratio and a 5.6 percentage point decrease in the personal lines core loss ratio. Weather-related losses for the full year of 2024 were $67.7 million, or 7.2 percentage points of the loss ratio, comparing favorably to $72.9 million, or 8.3 percentage points of the loss ratio for the full year of 2023, and generally in line with the previous five-year average of 7 percentage points of the loss ratio. Large fire losses contributed 4.9 percentage points to the 2024 loss ratio, a modest decrease from the 5.2 percentage points for 2023. Net favorable development of reserves for losses incurred in prior accident years reduced the 2024 loss ratio by 1.6 percentage points, generally in line with the 1.9 percentage point reduction in the 2023 loss ratio. Details by line of business include favorable development of $13.9 million in commercial multi-parallel, $3.8 million for other commercial, which is primarily commercial umbrella, $1.4 million in personal auto and $1.4 million in homeowners. That favorable development was partially offset by $62 million of unfavorable development in workers' comp and $1 million in commercial auto for total net favorable development of $15 million. In total, we had net favorable development primarily for reserves in accident years 2019 through 2022. with virtually no net development for reserves in accident year 2023. The expense ratio was 33.7% for the full year of 2024 compared to 34.7% for the full year of 2023, again reflecting the benefits of various expense reduction initiatives we implemented during 2024, offset partially by higher underwriting-based incentive costs and increased technology expenses. The decreases in our loss and expense ratios contributed to a combined ratio of 98.6% for 2024, representing a significant improvement from 104.4% for 2023. Before concluding my remarks, I will provide a brief summary of the renewal of our reinsurance program for 2025. As in past years, Donegal Mutual and the insurance subsidiaries of Donegal Group are purchasing reinsurance together to achieve economies of scale. We successfully renewed our program for 2025 with a similar structure, but with several changes in coverage or loss retention. We added $25 million to the top-end limit of our property catastrophe reinsurance coverage, primarily in response to changes within the catastrophe models we utilize to measure our potential exposures to severe weather events. Those changes within the models increased the expected losses at the targeted return period we use when determining the amount of reinsurance to purchase. We made no change to the retention level for that program or the intercompany catastrophe reinsurance agreement with Donegal Mutual. We've renewed the property per risk and workers' compensation excess of loss programs for 2025 with no changes in coverage or retentions from 2024. For our casualty excess of loss reinsurance program, we increased our external retention amount from $3 million to $6 million because we considered the cost to renew coverage at a $3 million retention to be unreasonably high in relation to our historical loss experience. To mitigate the potential impact of the higher retention to the results of several of our insurance subsidiaries, They entered into a new intercompany reinsurance agreement with Donegal Mutual that maintains their individual company retentions at $3 million. When including both external and internal reinsurance, we expect our seeded reinsurance premium costs for 2025 will be virtually unchanged from 2024. I will now turn the call over to our Chief Underwriting Officer, Jeff Haye, to provide more details about our commercial and personal lines segment results and an update on rate activity and other underwriting initiatives.