Donegal Group, Inc. (NASDAQ:DGICA) Q4 2023 Earnings Conference Call February 22, 2024 8:30 AM ET Company Participants Karin Daly - IR, The Equity Group Kevin Burke - Chairman, President & CEO Jeffrey Miller - EVP & CEO, Donegal Mutual and the Company Jeffery Hay - SVP & Chief Underwriting Officer, Donegal Mutual and SVP of the Company Anthony Viozzi - SVP & Chief Investment Officer, Donegal Mutual and the Company Daniel DeLamater - COO & EVP Conference Call Participants Karin Daly Yes, good morning and than ...

EXHIBIT 99.1 Donegal Group Inc. Announces Fourth Quarter and Full Year 2023 Results MARIETTA, Pa., Feb. 22, 2024 (GLOBE NEWSWIRE) -- Donegal Group Inc. (NASDAQ:DGICA) and (NASDAQ:DGICB) today reported its financial results for the fourth quarter and full year ended December 31, 2023. Significant items for fourth quarter of 2023 (all comparisons to fourth quarter of 2022): Significant items for full year of 2023 (all comparisons to full year of 2022): Financial Summary | | | Three Months Ended December | | | ...

MARIETTA, Pa., Feb. 01, 2024 (GLOBE NEWSWIRE) -- Donegal Group Inc. (NASDAQ:DGICA) and (NASDAQ:DGICB) announced today that it plans to release its results for fourth quarter and full-year ended December 31, 2023 on Thursday, February 22, 2024, before the opening of regular trading on the NASDAQ Stock Market. The Company will provide a supplemental investor presentation in the Investors section of its website at investors.donegalgroup.com, concurrently with its earnings press release. At approximately 8:30 a ...

MARIETTA, Pa., Feb. 01, 2024 (GLOBE NEWSWIRE) -- Donegal Group Inc. (NASDAQ:DGICA) and (NASDAQ:DGICB) announced today that it plans to release its results for fourth quarter and full-year ended December 31, 2023 on Thursday, February 22, 2024, before the opening of regular trading on the NASDAQ Stock Market. The Company will provide a supplemental investor presentation in the Investors section of its website at investors.donegalgroup.com, concurrently with its earnings press release. At approximately 8:30 a ...

(Exact name of registrant as specified in its charter) Delaware 23-2424711 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1195 River Road, P.O. Box 302, Marietta, PA 17547 (Address of principal executive offices) (Zip code) UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number 0-15341 Donegal Group Inc. (Exact name of registrant as specified in its charter) Delaware 23-2424711 (State or other jurisdiction ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number 0-15341 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Donegal Group Inc. (DGI) is a property and casualty insurance holding company operating in 24 states, with segments in commercial, personal, and investments [Introduction and Corporate Structure](index=4&type=section&id=Introduction%20and%20Corporate%20Structure) DGI is an insurance holding company operating in 24 states, controlled by Donegal Mutual, with business segmented into investment, commercial, and personal lines - Donegal Group Inc. (DGI) is an insurance holding company operating in 24 states, segmented into **investment, commercial, and personal lines**[17](index=17&type=chunk)[19](index=19&type=chunk) - Donegal Mutual Insurance Company controls DGI, holding approximately **71%** of the combined voting power[18](index=18&type=chunk) - A pooling agreement allocates **80%** of pooled business to DGI's subsidiary, Atlantic States, sharing underwriting results proportionally[27](index=27&type=chunk)[31](index=31&type=chunk) [Relationship with Donegal Mutual](index=7&type=section&id=Relationship%20with%20Donegal%20Mutual) Donegal Mutual provides essential services to DGI, including management and IT, with allocated expenses totaling **$199.2 million** in 2022 - Donegal Mutual provides facilities, management, and IT services to DGI's subsidiaries, with allocated expenses totaling **$199.2 million** in 2022, up from **$186.6 million** in 2021 and **$153.9 million** in 2020[35](index=35&type=chunk) - All **876** employees serving DGI's insurance subsidiaries are employed by Donegal Mutual[36](index=36&type=chunk) - A coordinating committee reviews and approves intercompany agreements to ensure fairness to both DGI stockholders and Donegal Mutual policyholders[41](index=41&type=chunk)[42](index=42&type=chunk) [Business Strategy](index=9&type=section&id=Business%20Strategy) The company's strategy focuses on disciplined underwriting, technology modernization, profitable growth through agencies, and selective acquisitions - Primary strategies include sustained financial performance, modernizing operations, profitable growth, superior agent/policyholder experience, and P&C company acquisitions[47](index=47&type=chunk)[50](index=50&type=chunk) Combined Ratio Comparison (2018-2022) | | 2022 | 2021 | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Our GAAP combined ratio** | 103.3% | 101.0% | 96.0% | 99.5% | 110.1% | | **Industry SAP combined ratio (1)** | 104.0% | 99.6% | 98.4% | 98.9% | 99.2% | - A multi-year systems modernization project is underway, with new systems for workers' compensation and personal lines launched, and commercial lines scheduled for H1 2023[58](index=58&type=chunk) - The company has acquired **seven** smaller P&C insurers since 1998, a strategy currently de-emphasized but expected to continue[71](index=71&type=chunk)[72](index=72&type=chunk)[76](index=76&type=chunk) [Products and Underwriting](index=14&type=section&id=Products%20and%20Underwriting) The company's insurance operations are segmented into commercial and personal lines, with a strategic shift towards commercial for better long-term growth - The company is strategically shifting its business mix to favor commercial lines for better long-term profitable growth opportunities[82](index=82&type=chunk) Net Premiums Written by Line of Insurance (in thousands) | Line of Business | 2022 Amount | 2022 % | 2021 Amount | 2021 % | 2020 Amount | 2020 % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total commercial lines** | $519,797 | 61.6% | $501,785 | 62.4% | $425,986 | 57.4% | | Commercial automobile | $167,774 | 19.9% | $161,947 | 20.1% | $135,294 | 18.2% | | Workers' compensation | $111,892 | 13.3% | $113,256 | 14.1% | $109,960 | 14.8% | | Commercial multi-peril | $200,045 | 23.7% | $188,242 | 23.4% | $147,993 | 19.9% | | **Total personal lines** | $323,733 | 38.4% | $302,482 | 37.6% | $316,154 | 42.6% | | Personal automobile | $181,129 | 21.5% | $170,578 | 21.2% | $184,602 | 24.9% | | Homeowners | $120,087 | 14.2% | $109,974 | 13.7% | $111,886 | 15.1% | | **Total business** | **$843,530** | **100.0%** | **$804,267** | **100.0%** | **$742,140** | **100.0%** | [Distribution](index=16&type=section&id=Distribution) The company distributes products through **2,300** independent agencies across 24 states, with **Pennsylvania** as the largest market - Products are distributed through approximately **2,300** independent insurance agencies in **24** states[88](index=88&type=chunk) Direct Premiums Written by State (2022) | State | Percentage of Direct Premiums | | :--- | :--- | | Pennsylvania | 35.1 % | | Michigan | 15.8 % | | Maryland | 8.6 % | | Delaware | 6.4 % | | Virginia | 5.9 % | | Georgia | 4.6 % | | Other | 23.6 % | | **Total** | **100.0 %** | [Liabilities for Losses and Loss Expenses](index=19&type=section&id=Liabilities%20for%20Losses%20and%20Loss%20Expenses) The company's loss reserves are subject to uncertainty, with **$44.8 million** favorable development in 2022, and a **1%** change impacting pre-tax results by **$6.7 million** - The company recognized favorable prior-year loss reserve development of **$44.8 million** in 2022, **$31.2 million** in 2021, and **$12.9 million** in 2020[103](index=103&type=chunk) - The **$44.8 million** favorable development in 2022 represented **7.2%** of prior year-end net reserves, primarily from lower loss emergence in personal and commercial auto lines[103](index=103&type=chunk) - A **1%** change in net loss and loss expense reserves would affect pre-tax results by approximately **$6.7 million**[102](index=102&type=chunk) Reconciliation of GAAP Net Liability for Unpaid Losses and Loss Expenses (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net liability at beginning of year | $626,359 | $557,189 | $506,906 | | Total incurred losses | $564,079 | $520,710 | $459,764 | | Total paid losses | $520,576 | $451,540 | $409,481 | | **Net liability at end of year** | **$669,862** | **$626,359** | **$557,189** | [Investments](index=23&type=section&id=Investments) The company's investment strategy focuses on after-tax income and risk limitation, with **$1.3 billion** in total investments, primarily investment-grade fixed maturities - As of December 31, 2022, **100%** of all debt securities held had an investment-grade rating[118](index=118&type=chunk) Investment Portfolio Composition at Dec 31, 2022 (Carrying Value) | Investment Type | Amount (in thousands) | Percent of Total | | :--- | :--- | :--- | | Total fixed maturities | $1,212,231 | 92.9% | | Equity securities | $35,105 | 2.7% | | Short-term investments | $57,321 | 4.4% | | **Total investments** | **$1,304,657** | **100.0%** | Investment Results | (dollars in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Average Invested assets | $1,290,752 | $1,249,024 | $1,165,878 | | Net Investment income | $34,016 | $31,126 | $29,504 | | Average yield | 2.6% | 2.5% | 2.5% | [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including unpredictable catastrophe losses, pricing and reserving challenges, intense competition, and regulatory changes - Industry-wide risks include increasing loss severity from litigation and inflation, unpredictable catastrophe losses, and difficulties in setting adequate premium rates and reserves[145](index=145&type=chunk)[146](index=146&type=chunk)[150](index=150&type=chunk) - Company-specific risks include potential conflicts of interest from Donegal Mutual's control, geographic concentration, dependence on independent agents, and reliance on IT systems[168](index=168&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk)[183](index=183&type=chunk) - Stockholder risks include low trading volume causing price volatility and Donegal Mutual's majority control making a third-party takeover unlikely[200](index=200&type=chunk)[202](index=202&type=chunk) - The company faces reinsurance credit risk, with **$148.3 million** in receivables from third-party reinsurers, including **$60.7 million** from MCCA[194](index=194&type=chunk)[195](index=195&type=chunk) [Unresolved Staff Comments](index=45&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved written comments from the Securities and Exchange Commission staff - There are no unresolved written comments from the SEC staff[205](index=205&type=chunk) [Properties](index=45&type=section&id=Item%202.%20Properties) The company shares a **270,000** sq ft headquarters with Donegal Mutual in Marietta, PA, and owns a **10,000** sq ft facility in Glen Allen, VA - The company shares a **270,000** sq ft headquarters in Marietta, PA, owned by its parent, Donegal Mutual[206](index=206&type=chunk) [Legal Proceedings](index=45&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine litigation not expected to have a material adverse effect on its financial condition or operations - The company is party to routine litigation from its insurance business, not expected to have a material adverse effect[207](index=207&type=chunk) Part II [Market for Common Equity, Stockholder Matters, and Issuer Purchases](index=46&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details the company's Class A and B common stock trading on NASDAQ, including dividends, share purchases, and stock performance Dividends Declared Per Share | Stock Class | 2022 | 2021 | | :--- | :--- | :--- | | Class A Common Stock | $0.66 | $0.64 | | Class B Common Stock | $0.59 | $0.57 | - During Q4 2022, Donegal Mutual purchased **259,508** Class A common shares at an average price of **$15.13** per share[213](index=213&type=chunk) - Over five years ending December 31, 2022, a **$100** investment in Class A stock grew to **$101.23**, and Class B to **$130.35**, compared to **$122.41** for Russell 2000 and **$135.46** for the peer group[215](index=215&type=chunk)[216](index=216&type=chunk) [Management's Discussion and Analysis (MD&A)](index=48&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The MD&A provides an overview of the company's financial performance, condition, critical accounting policies, and analysis of operational results and liquidity [Results of Operations](index=57&type=section&id=Results%20of%20Operations) The company reported a net loss of **$2.0 million** in 2022, driven by a higher combined ratio of **103.3%** due to increased claim severity and weather-related losses Key Financial Results (2020-2022) | (in millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net Premiums Written | $843.5 | $804.3 | $742.1 | | Net Premiums Earned | $822.5 | $776.0 | $742.0 | | Net Investment Income | $34.0 | $31.1 | $29.5 | | Combined Ratio | 103.3% | 101.0% | 96.0% | | Net (Loss) Income | $(2.0) | $25.3 | $52.8 | - The 2022 loss ratio increased to **68.6%** from **67.1%** in 2021, driven by higher claim severity and increased weather-related losses of **$63.5 million** (7.7 points) from **$45.3 million** (5.8 points) in 2021[259](index=259&type=chunk) - Favorable loss reserve development from prior accident years was **$44.8 million** in 2022, compared to **$31.2 million** in 2021[259](index=259&type=chunk) - The expense ratio increased slightly to **34.1%** in 2022 from **33.3%** in 2021, mainly due to higher technology-related expenses[260](index=260&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=63&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$67.1 million** net cash from operations in 2022, a **$1.3 billion** liquid investment portfolio, and **$46.4 million** dividend capacity - Net cash provided by operating activities was **$67.1 million** in 2022, down from **$76.7 million** in 2021 and **$101.1 million** in 2020[282](index=282&type=chunk) - The maximum ordinary dividends payable to the parent company in 2023 without regulatory approval is approximately **$46.4 million**[285](index=285&type=chunk) - At year-end 2022, the company had a **$35.0 million** FHLB advance and access to an undrawn **$20.0 million** line of credit[283](index=283&type=chunk)[419](index=419&type=chunk)[420](index=420&type=chunk) - Book value per share decreased to **$14.79** at December 31, 2022, from **$16.95** due to **$45.4 million** in after-tax unrealized losses on fixed-maturity investments[266](index=266&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate, equity price, and credit risk, managed through portfolio diversification and high-quality investments - The company's main market risk exposures are **interest rate risk, equity price risk, and credit risk**[295](index=295&type=chunk) - Interest rate risk is managed by holding fixed-maturity investments to maturity and maintaining a laddered portfolio structure[296](index=296&type=chunk) - Credit risk is managed by investing in a diversified portfolio of high-quality securities and limiting single issuer exposure[299](index=299&type=chunk) [Financial Statements and Supplementary Data](index=67&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes, with an unqualified audit opinion [Consolidated Financial Statements](index=68&type=section&id=Consolidated%20Financial%20Statements) This section presents core audited financial statements, showing **$2.24 billion** total assets, **$483.6 million** equity, and a **$2.0 million** net loss in 2022 Consolidated Balance Sheet Highlights (in millions) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Investments | $1,304.7 | $1,276.8 | | Total Assets | $2,243.3 | $2,255.2 | | Losses and loss expenses | $1,121.0 | $1,077.6 | | Total Liabilities | $1,759.8 | $1,724.1 | | Total Stockholders' Equity | $483.6 | $531.0 | Consolidated Statement of (Loss) Income Highlights (in millions) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net premiums earned | $822.5 | $776.0 | $742.0 | | Total revenues | $848.2 | $816.5 | $777.8 | | Net losses and loss expenses | $564.1 | $520.7 | $459.8 | | Total expenses | $851.9 | $786.1 | $714.5 | | **Net (loss) income** | **$(2.0)** | **$25.3** | **$52.8** | [Note 3 - Transactions with Affiliates](index=78&type=section&id=Note%203%20-%20Transactions%20with%20Affiliates) This note details significant reinsurance and expense-sharing agreements with Donegal Mutual, including the **80%** pooling agreement and **$199.2 million** in allocated expenses in 2022 Net Effect of Affiliated Reinsurance Transactions (in millions) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **On Premiums Earned** | $232.1 | $212.6 | $192.9 | | **On Losses and Loss Expenses** | $177.8 | $131.4 | $87.4 | - Allocated expenses from Donegal Mutual for services totaled **$199.2 million** in 2022, **$186.6 million** in 2021, and **$153.9 million** in 2020[361](index=361&type=chunk) [Note 8 - Liability for Losses and Loss Expenses](index=88&type=section&id=Note%208%20-%20Liability%20for%20Losses%20and%20Loss%20Expenses) This note analyzes the **$1.121 billion** gross liability for losses and loss expenses, with **$44.8 million** favorable prior-year development in 2022 Activity in Liability for Losses and Loss Expenses (in millions) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net Balance at January 1 | $626.4 | $557.2 | $506.9 | | Incurred related to current year | $608.9 | $551.9 | $472.7 | | Incurred related to prior years | $(44.8) | $(31.2) | $(12.9) | | Total Paid | $(520.6) | $(451.5) | $(409.5) | | **Net Balance at December 31** | **$669.9** | **$626.4** | **$557.2** | - The **$44.8 million** favorable development in 2022 represented **7.2%** of December 31, 2021 net carried reserves, primarily from lower loss emergence in personal and commercial auto lines[389](index=389&type=chunk) [Note 14 - Statutory Information and Dividend Restrictions](index=104&type=section&id=Note%2014%20-%20Statutory%20Information%20and%20Dividend%20Restrictions) This note presents statutory financial data for insurance subsidiaries, detailing capital and surplus, and **$46.4 million** in ordinary dividend capacity for 2023 Statutory Capital and Surplus of Insurance Subsidiaries (in millions) | Subsidiary | 2022 | 2021 | | :--- | :--- | :--- | | Atlantic States | $263.6 | $278.9 | | Southern | $64.5 | $64.2 | | Peninsula | $52.2 | $47.9 | | MICO | $75.4 | $75.2 | - The total ordinary dividends available for payment to the parent company in 2023 without prior regulatory approval is approximately **$46.4 million**[456](index=456&type=chunk) [Controls and Procedures](index=112&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with an unqualified audit opinion - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2022[489](index=489&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on the COSO framework, and audited by KPMG LLP[490](index=490&type=chunk)[491](index=491&type=chunk) - Changes to internal controls over financial reporting resulted from implementing a new system for expense allocation and reinsurance premiums[492](index=492&type=chunk) Part III [Directors, Executive Compensation, Security Ownership, and Related Party Transactions](index=114&type=section&id=Items%2010-14) Information for Items 10-14, including directors, executive compensation, and security ownership, is incorporated by reference from the definitive proxy statement - Information for Items 10-14, covering directors, executive compensation, security ownership, related party transactions, and accounting fees, is incorporated by reference from the definitive proxy statement[503](index=503&type=chunk)[505](index=505&type=chunk)[506](index=506&type=chunk)[507](index=507&type=chunk)[508](index=508&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=115&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including consolidated financials, audit reports, and key corporate documents - This section contains the list of all financial statements, schedules, and exhibits filed with the 10-K[510](index=510&type=chunk) - Key exhibits include the Certificate of Incorporation, By-laws, equity plans, the Proportional Reinsurance Agreement with Donegal Mutual, and CEO/CFO certifications[511](index=511&type=chunk)[512](index=512&type=chunk)

Financial Data and Key Metrics Changes - For the fourth quarter of 2022, net premiums earned grew by 6.5% to $213 million, with net premium written growth of 10.2% primarily due to higher new business writings in personal lines and strong retention results [88] - The overall combined ratio for the full year of 2022 was 103.3%, compared to 101% for 2021, driven by a higher loss ratio [10][26] - The expense ratio for the full year 2022 increased to 34.1% from 33.3% in 2021, attributed to higher technology costs related to ongoing systems modernization initiatives [91] Business Line Data and Key Metrics Changes - Premium retention remained strong in the fourth quarter, holding in the mid-90 percentage range across most lines of business, with a quarterly average rate increase of 9.4% [12] - The commercial auto core loss ratio improved over 10 percentage points from the prior-year quarter due to profit improvement actions [14] - The personal auto core loss ratio was elevated due to higher loss severity related to inflationary impacts and modestly higher claim frequency [15] Market Data and Key Metrics Changes - Weather-related losses totaled $16.5 million, contributing 7.7 percentage points to the loss ratio for the fourth quarter of 2022, higher than the previous five-year average of 4.4 percentage points [8] - Large fire losses contributed 6.2 percentage points to the fourth quarter loss ratio, slightly higher than the prior-year quarter [9] - The homeowners line experienced a spike in the loss ratio due to weather-related losses, comprising 24 percentage points of the homeowners loss ratio in Q4 2022, compared to 17.7 percentage points in the prior-year quarter [47] Company Strategy and Development Direction - The company is focused on a multi-year systems modernization project, with plans to introduce new systems and products in multiple states throughout 2023 [5][6] - The strategic plan aims to achieve sustained excellent financial performance, with ongoing efforts to improve underwriting results and operational efficiency [25][92] - The company is targeting the small commercial market as a primary source of profitable growth over the next few years [104] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the significant impact of inflation on loss costs and emphasized the need for rate increases to achieve rate adequacy [16][22] - The company is confident that improvements in operations will lead to better service for agents and policyholders, contributing to sustainable profitability [71] - Management expressed optimism about the execution of strategic initiatives and their potential to improve future results [92] Other Important Information - The company experienced favorable net development of reserves for losses incurred in prior accident years, reducing the loss ratio by 5.4 percentage points for 2022 [91] - Total invested assets rose by $27.8 million, or 2%, from December 31, 2021, with net investment income increasing to $9.4 million, up 14.5% compared to the fourth quarter of 2021 [52] - The company made a conscious decision to decrease equity exposure by nearly half in 2022, shifting to a heavier weighting of value style stocks [53] Q&A Session Summary Question: Did Donegal Mutual and the Donegal Group subsidiaries make any notable changes to their reinsurance program for 2023? - The aggregate retention for any event impacting multiple subsidiaries was increased from $5 million for 2022 to $6 million for 2023, limiting the incremental increase in losses retained for catastrophe events [78][79] Question: Are you seeing any material changes in medical inflation impacting your book? - Medical inflation is impacting bodily injury liability claims under personal and commercial auto coverages, with current increases in the 7-8% range [64][74] Question: Can you provide a breakdown of the reserve development by line of business? - For the full year, there was $44.8 million of favorable reserve development, mainly comprised of $18.4 million in commercial auto and $10.8 million in personal auto [68] Question: What is Donegal's approach to capital management heading into 2023? - The company continues to utilize cash dividends as the primary means of returning capital to shareholders, focusing on growing book value through favorable operating returns [69]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number 0-15341 Donegal Group Inc. (Exact name of registrant as specified in its charter) Delaware 23-2424711 (State or other jurisdic ...