Good morning. My name is Mariama and I will be your conference operator today. At this time, I would like to welcome everyone to the Donegal Group Inc's Q2, 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] Thank you. I would now like to turn the call over to Chief Financial Officer, Jeff Miller. You may begin your conference.

Thank you very much. Good morning and welcome to the Donegal Group conference call for the second quarter and first half ended June, 30, 2016. Our second results were highlighted by continued premium growth and bottom-line improvement. I will be begin today's call with commentary on these quarterly financial results, Kevin Burke, President and Chief Executive Officer, will then discuss our current business developments and growth initiatives, Don Nikolaus, our Chairman, will follow up with his perspective on the quarter and our ongoing business strategy before we open the line for questions. 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 Investor section of our website. Turning to the second results, we were pleased to report a 33% increase in our net income to $8.6 million or $0.32 per diluted Class A share, compared to $6.5 million or $0.24 per diluted Class A share for the second quarter of 2015. Our net premiums written grew 7.7% for the quarter, due primarily to commercial lines new business growth, as well as modest premium rate increases across our lines of business. Kevin will discuss the growth in our regional markets in greater…

Thank you, Jeff. We are very pleased with the continued growth and bottom-line improvements we achieved for the second quarter, as well as for the first six months of 2016. We are driving this profitable growth by staying true to the core fundamental philosophy of Donegal, sound conservative underwriting, proactive claims management, and strengthening our agent relationships within our 21 states. We have seen notable growth in our commercial lines throughout our marketing regions from regions where we are well established to new markets such as Indiana where we have been actively writing for only two years. Let me take a moment to review our commercial and first lines underwriting segments of our business. During the second quarter, we achieved 12.4% growth in our commercial lines with each business line, multi-peril, workers comp and auto reporting strong growth. In addition, we achieved solid underwriting performance in all of these lines that help contribute to an excellent combined ratio. Our workers comp products which we provide predominantly for small to mid-sized businesses performed incredibly well in the second quarter and in the first half of the year. We are seeing a decided trend of lower claims frequency. We feel that our proactive approach to claims management has also had a positive impact. We are continuing to see opportunities to obtain modest renewal premium increase with increased competition for quality accounts, our renewal premium increases during the second quarter generally range from 3% to 5% which is consistent with past - the past several quarters. Our commercial lines retention levels remain strong and we believe we are in an excellent position within the marketplace to continue to profitably grow our commercial lines. Moving to the personal lines segment of our business, we are pleased to report an increase of 4% in net…

Thank you, Kevin. Good morning everybody and welcome to our earnings conference call. We have been pleased with the favorable trends and our financial results over the last number of quarters, which we believe is been driven by a number of the long-term initiatives that we have implemented that Kevin has detailed in his presentation. We operate in an industry where you can achieve growth, if you so desire, but potentially at the expense of profitability and it is to say the needs always to be a balance between growth and profitability. We focus on underwriting profitability, a diverse book of business, strong agency relationships and ensuring that our technology and service to our agents and customers are superior to our competition. Last quarter I made reference to the importance of rate adequacy. This has been at the forefront of our business strategy for many years, are we properly rating the business we write and still achieving consistent growth. It is to say that’s an ongoing analysis and an ongoing challenge. We have a high experience actuarial department that works to ensure each of our lines of business are priced adequately to generate appropriate process levels, but at the same time to maintain retention levels we desire and to allow us to grow. In addition, as Kevin has mentioned, we rely on constant communications with our agency force to have close trends [ph] to the market, because it’s extremely important to understand what’s going on in the marketplace. We try very hard to listen, we respond and I think our agent appreciated and respected. In closing, we are pleased to report a second strong quarter and first half for our stockholders. Net income and book value increased nicely and we are pleased to be able to return capital to stockholders in the form of a consistent quarterly dividend. The first half represented an excellent start of the year and we are clearly optimistic for the remainder of 2016. At this point, I will turn it back to Jeff.

Great. Thank you, Don. And Mariama, we are ready to open the line for questions please.

[Operator Instruction] Your first question comes from the line of Meyer Shields from KBW. Your line is open.

Thanks. Good morning, everyone.

Good morning, Meyer.

I guess in workers compensation the results were fairly stellar. Was there any prior year reserve adjustments in the 827 or is that an accident order number?

There is a modest amount of prior year, favorable prior year developments somewhere around $600,000. So it’s not a significant number, but there was a small amount of favorable development in that number.

Okay. And then turning to the auto side, is there – I am not sure if this the right way to ask this, but is there a target combined ratios because basically from your comments of low single digit increases, it sounds like that might keep pace with loss trend, but necessarily get ahead of it, I'm thinking about that the right way?

For a personnel auto, I think we feel like the rate increases that we are able to get our keeping pace with the loss cost increase, we believe that our target loss ratio, our combined ratio is of course under 100 for personal auto and that we've been seeing some improvements there. Commercial auto side is a little more challenging. That line has a run a temperature in terms of the combined ratio. We've taken the number of actions to address that particular line. We've taken rate increases across all of the states where we do business. Those rate increases range from 2% to 10% with the majority of the states being closer to 2%, but a few of the states where we've seen some outsized loss activity, we have increased as much as 10%. And I think we've talked in the past of the commercial auto improvement program we have in place where we have a multi-functional group of senior management team members that meet monthly to grow over large losses, to look at the various classes of business where we’re seeing losses. So we do have a target to reduce that combine ratio to a profitable level, but that one is work in progress. And certainly as we mentioned in the second quarter, we did see an up-tick in reported losses, in commercial auto, there were some adverse development from prior accident years may have about 700,000 and then there was an additional about a $1 million of reported losses that increased over what we would have seen in the second quarter of 2015. And it’s little difficult to pin point a number that small, as to what the cause may have been. But it was spread across a number of our subsidiaries and we don’t think it’s a trend. We think it was just a timing anomaly in those reported losses. So hopefully that gives you some color, I don’t know if there is any additional detail you'd like us to talk about.

No, that's very helpful. Appreciate that. One last question, if I can. Just in terms of the overall growth in commercial, is that coming more from other regional companies or from some of the national carriers, is there a good way of looking at that?

Yes, it’s actually coming from a cross section of both, I mean, we’ve got one of the things that I had mentioned in my comments was the word stability has been listed a couple of times and mentioned. And so whether it’s a national carrier that is may be making some changes or we’ve seen it also amongst the regional as well with that when there is disruption in the marketplace from a commercial line standpoint, we're in a really great position to take some advantage of that, the agents, US not only is a very good commercial market, but is a stable, stable carrier. And so we're seeing it actually from across the board, there is no one particular size of organization or even geographically we are seeing it from as we mentioned Indiana which we've been writing only for the last two years we've been in there. We are seeing very solid growth in the commercial line side from all their states that we’re operating in. And so we're very pleased with the up-tick in commercial growth. And it’s our expectation that that’s going to continue, we've got some very good momentum build.

Okay, fantastic. Thank you so much.

[Operator Instructions] And your next question comes from the line of Louis Feldman from Wells Capital Management. Your line is open.

Thank you. Good morning, gentlemen.

Good morning, Lou.

Good morning, Lou.

Can you give a little color on your decision to start increasing your equity weighting in the investment portfolio?

Sure. As you’ve fully recognize its very difficult to find yield in the fixed income market and we’ve been increasing the allocation to dividend paying equities, where the dividend yield is comparable or even in some cases higher than what we’re able to get in the types of fixed income securities that we’ve historically invested in. But still a very modest allocation relative to our portfolio as a whole, but it’s – we've been increasing it in recognition of the yield, the attractiveness of the yield in equity.

And I would like to emphasize that yes, we are increasing it, but underscore what Jeff has said, the dollar amount relative fixed income, it is a modest percentage. So we are not making any major shift into equity. We are simply increasing it moderately to reflect that there are some very good higher dividend paying stocks that are quality equities.

And Lou just give you some details there, primarily Blue Chip value stocks and I think we’re currently earning around a 3.15% dividend yield on the portfolio. So it’s definitely an income play.

I guess, being working free value shop I would question some of the valuations at this point in time to be perfectly candid with you, gentlemen.

We guarantee that we will monitor it closely.

Okay.

And then, one of the reasons why the dollar amount is quite modest because we recognize that the markets are certainly under all kinds of pressure, whether it be Brexit [ph] or other things that are going on in society and the economy. So being the conservative company that we are we will be very careful what we are doing.

Okay. Thank you very much, gentlemen.

Thank you,

Thanks, Lou.

There are no further questions at this time. I will turn the call back over to the presenters.

All right. Thank you very much. We appreciate everyone’s participation today and interest in following our conference call and we will talk to you next quarter.

Yes, thank you everyone.

Thank you.

This concludes today’s conference call. You may now disconnect.