Donegal Group Inc. Q3 FY2024 earnings call

• Completed strategic non-renewals of all commercial policies in Georgia and Alabama in July, with commercial lines growth reflecting higher new business in targeted states and classes, and solid renewal premium increases. - Making progress on systems modernization project, with first phase of software release deployed over the weekend to automate conversion of legacy policies. - Expense ratio for Q3 2024 was 34.5% compared to 34.1% in Q3 2023, with ongoing expense reduction initiatives including agency incentive program revisions, commission schedule adjustments, etc. - Completed fourth annual state strategy sessions in August, refining strategies and action plans for 2025 business plan. - Actively diversifying the geographic footprint of personal lines property book to optimize diversification and mitigate weather-related loss impact.

For the third quarter of 2024, net premiums earned increased 6% to $238 million. In commercial lines, net premiums written increased 6.4% during the quarter, primarily driven by new business in targeted geographies and classes of business, coupled with strong rate and retention achievement. The commercial lines statutory combined ratio for the third quarter was 89.8%, a 7.7-point improvement from 97.5% in the prior-year quarter. In personal lines, net premiums written increased 5.4% for the third quarter, driven by aggressive premium rate increases and strong policy retention, though policies-in-force declined 7.3% compared to the prior-year period. The personal lines statutory combined ratio was 104.7% compared to 119.4% in the prior year period.

• Expect to continue solid execution with strategies and actions generating favorable results through Q4 and into 2025 and beyond. - Ramping up small business commercial underwriting strategy for all four operating regions. - Aim to reduce expense ratio by 1 full point in 2024 and two points by end of 2025. - Continue to obtain appropriate rate increases to offset economic inflation, large loss activity, etc.

• Weather-related losses, such as the $6 million pre-tax catastrophe losses related to Hurricane Helene, which impacted results. - Competitive pressure in workers’ compensation line with continued rate decreases filed by bureaus. - Social inflation impacts on liability severity trends in commercial multi-peril line.