Good morning. My name is Crystal, and I will be your conference operator today. At this time, I would like to welcome everyone to Donegal Group Second Quarter 2013 Conference Call. [Operator Instructions] Thank you. Mr. Jeff Miller, you may begin your conference.

Thank you. Good morning, and welcome to the Donegal Group Conference Call for the Second Quarter Ended June 30, 2013. I'm Jeff Miller, Chief Financial Officer, and I will begin today's call with commentary on the quarterly financial results. Don Nikolaus, President and Chief Executive Officer, will then provide additional comments on the quarter and our current business trends and developments. You should be aware that certain statements made in our news release and in this conference call are forward-looking in nature and involve a number of risks and uncertainties. Please refer to our news release for more information about forward-looking statements. Further information on risk factors that could cause actual results to differ materially from those projected in the forward-looking statements is available in the report on Form 10-K that we submitted to the SEC. You can find a copy of our Form 10-K in the Investors section of our website under the SEC Filings link. Further reconciliation of non-GAAP information, as required by SEC Regulation G, was provided in our news release, which is also available in the Investors section of our website. We might also mention that we recently expanded the Investors section of our website, and we encourage you to take advantage of that resource at investors.donegalgroup.com. Turning to the quarterly results, our operating and net income for the second quarter of 2013 showed significant increases over the prior year quarter as we've made progress on several key objectives and benefited from a continuation of our recent premium growth trends. However, our net income fell short of our expectations due to a number of factors that I will cover during my remarks this morning. Our net premiums written grew by 7.2% for the quarter. Similar to prior periods, the growth was due to premium rate increases…

Thank you, Jeff. Good morning, everyone. Welcome to our call. Jeff has done a very nice job of overviewing the quarter and the 6 months to date. And certainly there's more detail that is outlined in the earnings release that would have been released earlier this morning. A few of the highlights that I would want to cover and also some detail is that, certainly, the continuation of increase in revenues, and particularly increase in net premiums written at 7.2% increase, we think is continuing to be indicative of the business strategy and the constructive environment that currently the property, casualty insurance industry has been experiencing. And I will give more detail about rates and so forth in a little bit of time. Some of the very positives that we find in our quarter, which we would want to point out -- although certainly, our earnings are not where we would want them to be and our combined ratio on both the GAAP and the stat basis are not consistent with our plan. But there is a statistic that we think is very meaningful and very positive, and that's our personal lines combined ratio of 100.2% versus in the prior year of 108.4%. And if you go back to 2011, it was a similar 107%, 108%. There has been a lot of work and effort over the last 2-plus years in both obtaining rate increases, re-underwriting, reinspections, all of the typical underwriting approaches that we believe had played a meaningful role in significantly improving the personal lines combined ratio. And we would expect that there would be some ongoing opportunities there to continue to work and improve on that combined ratio. In the personal lines area, from a growth standpoint, our growth was up 2.7%, which is not significant but…

Okay. Thank you, Don. Crystal, if you could open the lines for questions, please?

[Operator Instructions] And your first question comes from the line of Brett Shirreffs.

I just want to start off with some of the pricing commentary you touched on. Just curious how those rate increases compare to some of the recent previous quarters and different lines of business?

I would say, Brett, that they are -- let's say commercial first, that they are very similar. Matter of fact, in some of the, what I would call, regions in which we do business, that some of our pricing increases are slightly more aggressive since the beginning of the year. But I would say, overall, they are very comparable to the percentages that we would have been obtaining in the first quarter and the third and fourth quarter of 2012. In personal lines, the filings are very similar in percentages that we would have filed in the first quarter and the second quarter and third quarter and fourth quarter of 2012.

Okay, great. And then also along those lines, do you have a sense of how your competitive positioning within those products has tracked over those periods as well? Is it pretty much similar as well?

Well, let's take commercial. I believe that given the 14.5% increase in commercial writing would be reflective of the fact that our premium increases have been accepted by the marketplace and that we are where we think we need to be. In personal lines, as we all know, when you raise rates, you don't necessarily grow at the same level as if you had left rates flat or you had cut rates. But given what we're seeing throughout the industry as a whole, we're not displeased with our 2.7% increase. And we see, as an example, in a number of states that competitive companies continued to make rate filings or increases in both homeowners and automobile. So we think that nothing significant has changed in the constructive and pricing environment that we have been experiencing.

Okay, great. And touching on the reserve development piece, I was wondering if you could provide a little bit more color there, because it seems like most inflation statistics have been pretty low but these -- there seems to be a recurrence of a few additions to all the accident years. I was wondering if you could just provide a little bit more color there.

Sure, Brett, I'll be glad to do that. The majority of the development as we saw in the second quarter was in the 2012 year -- some in the 2011 year. The difference year-over-year, as I said in our -- in my prepared remarks, was related to the CMP line, commercial multi-peril, which is not a line that we've historically seen significant development. As I dug into the details there, I found that there were a handful of liability claims that we had received new information in the second quarter that resulted in some reserve increases. That's a line that we usually think of as a property line, not a lot of liability claims are presented in that line. So that's a bit unusual. In the other lines, workers' comp is fairly comparable to what we would have seen over the past several quarters with some modest development, which is primarily related to some severity. But as you mentioned, we're not seeing any significant trends that would suggest medical inflation or other types of macro trends that are impacting the development. But we would consider most of this development that we've had normal with the exception of the commercial multi-peril losses, which is something we have not typically seen and don't expect to see on a recurring basis.

Okay, great. Thanks for the color. And also just quickly, I noticed duration went up quite a bit in the investment portfolio. Anything happening there?

Not anything that we have done intentionally to expand. That's generally because of the increase in the interest rates and the fact that the callable bonds now have different duration characteristics as a result of the increase in market rates. Because -- and then in your mortgage-backed securities, those payments tend to extend as well when you see an increase in interest rates. So it's all related to the market and what we saw there at the end of June, which of course we think was somewhat overdone, quite a large selloff in bonds that related -- or that resulted from some of the comments from the Fed. A lot of that has moderated since June 30. So we see that as kind of an overreaction by the market and don't see that as an indication of an increase in rates due to any significant extent in the near-term.

[Operator Instructions] And you do have a follow-up question from the line of Brett Shirreffs.

Sorry, just one more quick question. The buyback program that was announced, is there anything to read in there on the timing or the upsize in size? It doesn't look like you've repurchased any shares in recent quarters, but -- so that's just a standard renewal?

It is, just we had utilized the previous authorization and wanted to have flexibility for the future as such opportunities might arise. No plans immediately to embark on some large scale purchases of our stock. It's there for the long-term as we might see opportunities. Seeing no further questions in the queue. I believe we're ready to conclude the call. We thank everyone for their participation this morning and wish you a good day.

Thank you, everyone.

Thank you. This concludes today's conference call. You may now disconnect.