DONEGAL MUTUAL INSURANCE COMPANY
DONEGAL GROUP INC.
2020 ANNUAL EXECUTIVE INCENTIVE PLAN
The 2020 Annual Executive Incentive Plan (this Plan) provides for the payment of performance-based bonuses to Plan participants based upon the Donegal Insurance Groups achievement of performance objectives for individual performance measures according to the weighting assigned to each performance measure.
The performance objectives correlate to incentive levels that represent percentages of a participants 2020 base salary (as defined in this Plan). The potential bonuses available for Plan participants with respect to the performance measures will be based on the incentive levels, performance objectives and weighting percentages as outlined in Appendix 1. The Compensation Committee of the Boards of Directors of Donegal Mutual Insurance Company and Donegal Group Inc. (the Committee) shall have the sole and absolute discretion to interpret and apply the terms of this Plan, including, but not limited to, the determination of the achievement of the performance objectives of Appendix 1.
The performance measures and objectives, unless otherwise specified, relate to the statutory financial results of the Donegal Insurance Group, which includes the following legal entities for the purposes of this Plan:
Donegal Mutual Insurance Company
Atlantic States Insurance Company
Michigan Insurance Company
Mountain States Commercial Insurance Company
Mountain States Indemnity Company
Peninsula Indemnity Company
Peninsula Insurance Company
Southern Insurance Company of Virginia
Southern Mutual Insurance Company
Commercial Lines Premium Growthannual growth in commercial lines direct premiums written compared to the previous calendar year total.
Personal Lines Premium Growthannual growth in personal lines direct premiums written compared to the previous calendar year total.
Adjusted Statutory Combined Ratioreported statutory combined ratio excluding any catastrophe adjustment, all executive incentive plan bonus accruals and a stock option expense adjustment (see definitions below).
Operating Return on EquityDonegal Group Inc.s consolidated GAAP net income divided by average GAAP stockholders equity excluding accumulated other comprehensive income or loss (average of current year-end and prior year-end values).
Each participant in this Plan shall be eligible to receive a bonus that represents the sum of the performance bonuses such participant earns for each respective performance measure. Each performance bonus shall be calculated by multiplying the participants 2020 base salary, as defined in this Plan, by the bonus percentage that correlates to the incentive level achieved and multiplying that result by the weighting percentage assigned to the respective performance measure. The calculation methodology is illustrated below:
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Base Salary x Incentive Level Bonus % x Weighting % = Performance Bonus
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Sum of Performance Bonuses = Total Bonus Earned