Donegal Group, Inc.: Donegal Group Inc. Announces Second Quarter and First Half 2025 Results

MARIETTA, Pa., July 24, 2025 (GLOBE NEWSWIRE) -- Donegal Group Inc. (NASDAQ: DGICA) and (NASDAQ: DGICB) today reported its financial results for the second quarter and first half of 2025.

Significant Items for Second Quarter of 2025 (all comparisons to second quarter of 2024):

• Net premiums earned decreased 1.1% to $231.8 million
• Combined ratio of 97.7%, compared to 103.0%
• Net income of $16.9 million, or 46 cents per diluted Class A share, compared to $4.2 million, or 13 cents per diluted Class A share
• Net investment gains (after tax) of $1.2 million, or 3 cents per diluted Class A share, compared to $0.6 million, or 2 cents per diluted Class A share, are included in net income
• Annualized return on average equity of 11.3%, compared to 3.4%
• Book value per share of $16.62 at June 30, 2025, compared to $14.48 at June 30, 2024

Financial Summary

	Three Months Ended June 30,												Six Months Ended June 30,
		2025				2024			% Change					2025				2024			% Change
	(dollars in thousands, except per share amounts)
Income Statement Data
Net premiums earned	$	231,775			$	234,311				-1.1	%		$	464,476			$	462,060				0.5	%
Investment income, net		12,540				11,068				13.3				24,524				22,041				11.3
Net investment gains		1,544				737				109.5				1,073				2,850				-62.4
Total revenues		247,148				246,773				0.2				491,953				487,913				0.8
Net income		16,866				4,153				306.1				42,071				10,108				316.2
Non-GAAP operating income1		15,647				3,571				338.2				41,224				7,857				424.7
Annualized return on average equity		11.3	%			3.4	%		7.9 pts					14.6	%			4.2	%		10.4 pts
Per Share Data
Net income - Class A (diluted)	$	0.46			$	0.13				253.8	%		$	1.17			$	0.31				277.4	%
Net income - Class B		0.43				0.11				290.9				1.08				0.28				285.7
Non-GAAP operating income - Class A (diluted)		0.43				0.11				290.9				1.14				0.24				375.0
Non-GAAP operating income - Class B		0.40				0.10				300.0				1.06				0.22				381.8
Book value		16.62				14.48				14.8				16.62				14.48				14.8

¹The "Definitions of Non-GAAP Financial Measures" section of this release defines and reconciles data that we prepare on an accounting basis other than U.S. generally accepted accounting principles ("GAAP").

Management Commentary

Kevin G. Burke, President and Chief Executive Officer of Donegal Group Inc., stated, "We are pleased with the progress we have made and the results we delivered for both the second quarter and first half of 2025, which we believe reflect the strength of our strategic execution and underwriting discipline. A meaningful improvement in our core loss ratio for both periods underscores our commitment to disciplined risk management and sustainable profitability. As expected, net premiums written¹ declined this quarter, as lower new business writings and planned attrition modestly outpaced ongoing premium rate increases and solid retention levels. As a proactive measure, we intentionally slowed new business writings in our personal lines of business to protect underwriting margins and ensure we remain focused on profitable growth opportunities. We continue to identify and pursue profitable new business opportunities in states and classes that match our objectives.

"We reached a significant milestone in our multi-year systems modernization project with the successful deployment of our final major commercial lines systems release. During the second half of 2025, we will begin to roll out this enhanced platform on a state-by-state basis, enabling us to more effectively target and win key middle market accounts. When the rollout is completed in the first half of 2026, we will be operating on a single modern technology platform for all of our middle market and small business commercial product offerings.

"As we look ahead, we remain focused on disciplined execution, organizational alignment and operational excellence to further strengthen our long-term competitive position and enhance value for our stockholders."

Insurance Operations

Donegal Group is an insurance holding company whose insurance subsidiaries and affiliates offer property and casualty lines of insurance in three Mid-Atlantic states (Delaware, Maryland and Pennsylvania), five Southern states (Georgia, North Carolina, South Carolina, Tennessee and Virginia), eight Midwestern states (Illinois, Indiana, Iowa, Michigan, Nebraska, Ohio, South Dakota and Wisconsin) and five Southwestern states (Arizona, Colorado, New Mexico, Texas and Utah). Donegal Mutual Insurance Company and the insurance subsidiaries of Donegal Group conduct business together as the Donegal Insurance Group.

	Three Months Ended June 30,												Six Months Ended June 30,
		2025				2024			% Change					2025				2024			% Change
	(dollars in thousands)
Net Premiums Earned
Commercial lines	$	138,527			$	134,489				3.0	%		$	274,743			$	266,581				3.1	%
Personal lines		93,248				99,822				-6.6				189,733				195,479				-2.9
Total net premiums earned	$	231,775			$	234,311				-1.1	%		$	464,476			$	462,060				0.5	%
Net Premiums Written
Commercial lines:
Automobile	$	50,584			$	47,089				7.4	%		$	107,109			$	100,603				6.5	%
Workers' compensation		24,243				27,591				-12.1				52,997				58,665				-9.7
Commercial multi-peril		56,478				55,870				1.1				117,268				113,373				3.4
Other		13,609				11,698				16.3				28,158				25,101				12.2
Total commercial lines		144,914				142,248				1.9				305,532				297,742				2.6
Personal lines:
Automobile		52,741				62,427				-15.5				107,933				123,808				-12.8
Homeowners		33,590				39,608				-15.2				62,378				71,367				-12.6
Other		2,568				2,906				-11.6				5,062				5,714				-11.4
Total personal lines		88,899				104,941				-15.3				175,373				200,889				-12.7
Total net premiums written	$	233,813			$	247,189				-5.4	%		$	480,905			$	498,631				-3.6	%

Net Premiums Written

The 5.4% decrease in net premiums written for the second quarter of 2025 compared to the second quarter of 2024, as shown in the table above, represents the net combination of a 1.9% increase in commercial lines net premiums written and a 15.3% decrease in personal lines net premiums written. The $13.3 million decrease in net premiums written for the second quarter of 2025 compared to the second quarter of 2024 included:

• Commercial Lines: $2.7 million increase that we attribute primarily to solid retention and a continuation of renewal premium increases in lines other than workers' compensation, offset partially by lower new business writings.
• Personal Lines: $16.0 million decrease that we attribute primarily to planned attrition due to lower new business writings and non-renewal actions, offset partially by a continuation of renewal premium rate increases and solid retention.

Underwriting Performance

We evaluate the performance of our commercial lines and personal lines segments primarily based upon the underwriting results of our insurance subsidiaries as determined under statutory accounting practices. The following table presents comparative details with respect to the GAAP and statutory combined ratios¹ for the three and six months ended June 30, 2025 and 2024:

	Three Months Ended								Six Months Ended
	June 30								June 30
		2025				2024				2025				2024
GAAP Combined Ratios (Total Lines)
Loss ratio - core losses		50.1	%			55.0	%			52.1	%			56.8	%
Loss ratio - weather-related losses		11.1				10.6				7.4				7.7
Loss ratio - large fire losses		5.2				5.3				4.3				5.9
Loss ratio - net prior-year reserve development		-1.3				-0.3				-2.9				-2.0
Loss ratio		65.1				70.6				60.9				68.4
Expense ratio		32.2				31.9				33.4				33.8
Dividend ratio		0.4				0.5				0.3				0.5
Combined ratio		97.7	%			103.0	%			94.6	%			102.7	%
Statutory Combined Ratios
Commercial lines:
Automobile		97.7	%			93.5	%			94.6	%			96.6	%
Workers' compensation		104.9				117.0				111.3				114.2
Commercial multi-peril		97.5				110.6				93.9				106.7
Other		119.8				94.3				100.6				88.3
Total commercial lines		101.0				104.9				97.8				103.3
Personal lines:
Automobile		79.3				95.6				82.2				97.7
Homeowners		115.1				103.1				99.0				102.7
Other		55.2				104.7				55.9				94.8
Total personal lines		91.7				98.6				87.5				99.4
Total lines		97.4	%			102.2	%			93.9	%			101.7	%

Loss Ratio

For the second quarter of 2025, the loss ratio decreased to 65.1%, compared to 70.6% for the second quarter of 2024. For the commercial lines segment, the core loss ratio, which excludes weather-related losses, large fire losses and net development of reserves for losses incurred in prior accident years, of 54.5% for the second quarter of 2025 decreased modestly from 54.8% for the second quarter of 2024. For the personal lines segment, the core loss ratio of 43.3% for the second quarter of 2025 decreased from 55.3% for the second quarter of 2024, due largely to the favorable impact of premium rate increases on net premiums earned for that segment.

Weather-related losses were $25.8 million, or 11.1 percentage points of the loss ratio, for the second quarter of 2025, compared to $24.7 million, or 10.6 percentage points of the loss ratio, for the second quarter of 2024. Weather-related loss activity for the second quarter of 2025 was higher than our previous five-year average of $18.9 million, or 9.2 percentage points of the loss ratio, for second-quarter weather-related losses. Atlantic States Insurance Company, our largest insurance subsidiary, incurred $3.0 million in net losses from a catastrophic wind and hail loss event in April 2025, with Donegal Mutual assuming losses that subsidiary incurred from the event in excess of its retention under an intercompany catastrophe reinsurance agreement.

Large fire losses, which we define as individual fire losses in excess of $50,000, for the second quarter of 2025 were $12.1 million, or 5.2 percentage points of the loss ratio. That amount was comparable to the large fire losses of $12.5 million, or 5.3 percentage points of the loss ratio, for the second quarter of 2024. We experienced a modest decrease in commercial property fire losses that was partially offset by a modest increase in homeowners fire losses compared to the prior-year quarter.

Net favorable development of reserves for losses incurred in prior accident years reduced the loss ratio by 1.3 percentage points for the second quarter of 2025 and had virtually no impact for the second quarter of 2024. Our insurance subsidiaries experienced favorable development primarily in the personal automobile and homeowners lines of business, partially offset by adverse development in other commercial lines that we primarily attribute to higher-than-anticipated case reserve development.

Expense Ratio

The expense ratio was 32.2% for the second quarter of 2025, compared to 31.9% for the second quarter of 2024. The increase in the expense ratio primarily reflected higher underwriting-based incentive costs for agents and employees, partially offset by the favorable impact of ongoing expense management initiatives. The impact from costs that Donegal Mutual Insurance Company allocated to our insurance subsidiaries related to its ongoing systems modernization project peaked at approximately 1.3 percentage points of the full year 2024 expense ratio, and we expect that impact to subside gradually over the next several years. Allocated costs related to that project represented approximately 1.0 percentage point of the expense ratio for the second quarter of 2025, and we expect the full year 2025 expense ratio impact will also be approximately 1.0 percentage point.

Investment Operations

Donegal Group's investment strategy is to generate an appropriate amount of after-tax income on its invested assets while minimizing credit risk through investment in high-quality securities. As a result, we had invested 95.4% of our consolidated investment portfolio in diversified, highly rated and marketable fixed-maturity securities at June 30, 2025.

	June 30, 2025								December 31, 2024
	Amount				%				Amount				%
	(dollars in thousands)
Fixed maturities, at carrying value:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies	$	145,585				10.2	%		$	170,423				12.3	%
Obligations of states and political subdivisions		424,010				29.7				409,560				29.6
Corporate securities		441,603				30.9				440,552				31.8
Mortgage-backed securities		353,639				24.7				304,459				22.0
Allowance for expected credit losses		(1,374	)			-0.1				(1,388	)			-0.1
Total fixed maturities		1,363,463				95.4				1,323,606				95.6
Equity securities, at fair value		41,007				2.9				36,808				2.6
Short-term investments, at cost		24,764				1.7				24,558				1.8
Total investments	$	1,429,234				100.0	%		$	1,384,972				100.0	%
Average investment yield		3.5	%							3.3	%
Average tax-equivalent investment yield		3.6	%							3.4	%
Average fixed-maturity duration (years)		5.2								5.2

Net investment income of $12.5 million for the second quarter of 2025 increased 13.3% compared to $11.1 million for the second quarter of 2024. The increase in net investment income primarily reflected an increase in average investment yield relative to the prior-year second quarter.

Net investment gains of $1.5 million for the second quarter of 2025 were primarily related to unrealized gains in the fair value of equity securities held at June 30, 2025, offset partially by net realized investment losses on the sale of available-for-sale fixed-maturity securities. Net investment gains of $0.7 million for the second quarter of 2024 were primarily related to unrealized gains in the fair value of equity securities held at June 30, 2024.

Our book value per share was $16.62 at June 30, 2025, compared to $15.36 at December 31, 2024, with the increase related to net income as well as $10.7 million of after-tax unrealized gains within our available-for-sale fixed-maturity portfolio during 2025 that increased our book value by $0.31 per share, offset partially by cash dividends declared.

Definitions of Non-GAAP Financial Measures

We prepare our consolidated financial statements on the basis of GAAP. Our insurance subsidiaries also prepare financial statements based on statutory accounting principles state insurance regulators prescribe or permit ("SAP"). In addition to using GAAP-based performance measurements, we also utilize certain non-GAAP financial measures that we believe provide value in managing our business and for comparison to the financial results of our peers. These non-GAAP measures are net premiums written, operating income or loss and statutory combined ratio.

Net premiums written and operating income or loss are non-GAAP financial measures investors in insurance companies commonly use. We define net premiums written as the amount of full-term premiums our insurance subsidiaries record for policies effective within a given period less premiums our insurance subsidiaries cede to reinsurers. We define operating income or loss as net income or loss excluding after-tax net investment gains or losses, after-tax restructuring charges and other significant non-recurring items. Because our calculation of operating income or loss may differ from similar measures other companies use, investors should exercise caution when comparing our measure of operating income or loss to the measure of other companies.

The following table provides a reconciliation of net premiums earned to net premiums written for the periods indicated:

	Three Months Ended June 30,												Six Months Ended June 30,
		2025				2024			% Change					2025				2024			% Change
	(dollars in thousands)
Reconciliation of Net Premiums
Earned to Net Premiums Written
Net premiums earned	$	231,775			$	234,311				-1.1	%		$	464,476			$	462,060				0.5	%
Change in net unearned premiums		2,038				12,878				-84.2				16,429				36,571				-55.1
Net premiums written	$	233,813			$	247,189				-5.4	%		$	480,905			$	498,631				-3.6	%

The following table provides a reconciliation of net income to operating income for the periods indicated:

	Three Months Ended June 30,												Six Months Ended June 30,
		2025				2024			% Change					2025				2024			% Change
	(dollars in thousands, except per share amounts)
Reconciliation of Net Income
to Non-GAAP Operating Income
Net income	$	16,866			$	4,153				306.1	%		$	42,071			$	10,108				316.2	%
Investment gains (after tax)		(1,219	)			(582	)			109.5				(847	)			(2,251	)			-62.4
Non-GAAP operating income	$	15,647			$	3,571				338.2	%		$	41,224			$	7,857				424.7	%
Per Share Reconciliation of Net Income
to Non-GAAP Operating Income
Net income - Class A (diluted)	$	0.46			$	0.13				253.8	%		$	1.17			$	0.31				277.4	%
Investment gains (after tax)		(0.03	)			(0.02	)			50.0				(0.03	)			(0.07	)			-57.1
Non-GAAP operating income - Class A	$	0.43			$	0.11				290.9	%		$	1.14			$	0.24				375.0	%
Net income - Class B	$	0.43			$	0.11				290.9	%		$	1.08			$	0.28				285.7	%
Investment gains (after tax)		(0.03	)			(0.01	)			200.0				(0.02	)			(0.06	)			-66.7
Non-GAAP operating income - Class B	$	0.40			$	0.10				300.0	%		$	1.06			$	0.22				381.8	%

The statutory combined ratio is a non-GAAP standard measurement of underwriting profitability that is based upon amounts determined under SAP. The statutory combined ratio is the sum of:

• the statutory loss ratio, which is the ratio of calendar-year incurred losses and loss expenses, excluding anticipated salvage and subrogation recoveries, to premiums earned;
• the statutory expense ratio, which is the ratio of expenses incurred for net commissions, premium taxes and underwriting expenses to premiums written; and
  • the statutory dividend ratio, which is the ratio of dividends to holders of workers' compensation policies to premiums earned.
    

The statutory combined ratio does not reflect investment income, federal income taxes or other non-operating income or expense. A statutory combined ratio of less than 100% generally indicates underwriting profitability.

Dividend Information

On July 17, 2025, we declared a regular quarterly cash dividend of $0.1825 per share for our Class A common stock and $0.165 per share for our Class B common stock, which are payable on August 15, 2025 to stockholders of record as of the close of business on August 1, 2025.

Pre-Recorded Webcast

At approximately 8:30 am ET on Thursday, July 24, 2025, we will make available in the Investors section of our website a pre-recorded audio webcast featuring management commentary on our quarterly results and general business updates. You may listen to the pre-recorded webcast by accessing the link on our website at http://investors.donegalgroup.com. A supplemental investor presentation is also available via our website.

About the Company

Donegal Group Inc. is an insurance holding company whose insurance subsidiaries and affiliates offer property and casualty lines of insurance in certain Mid-Atlantic, Midwestern, Southern and Southwestern states. Donegal Mutual Insurance Company and the insurance subsidiaries of Donegal Group Inc. conduct business together as the Donegal Insurance Group. The Donegal Insurance Group has an A.M. Best rating of A (Excellent).

The Class A common stock and Class B common stock of Donegal Group Inc. trade on the NASDAQ Global Select Market under the symbols DGICA and DGICB, respectively. We are focused on several primary strategies, including achieving sustained excellent financial performance, strategically modernizing our operations and processes to transform our business, capitalizing on opportunities to grow profitably and providing superior experiences to our agents, policyholders and employees.

Safe Harbor

We base all statements contained in this release that are not historic facts on our current expectations. Such statements are forward-looking in nature (as defined in the Private Securities Litigation Reform Act of 1995) and necessarily involve risks and uncertainties. Forward-looking statements we make may be identified by our use of words such as "will," "expect," "intend," "plan," "anticipate," "believe," "seek," "estimate" and similar expressions. Our actual results could vary materially from our forward-looking statements. The factors that could cause our actual results to vary materially from the forward-looking statements we have previously made include, but are not limited to, adverse litigation and other trends that could increase our loss costs (including social inflation, labor shortages and escalating medical, automobile and property repair costs, including due to tariffs), adverse and catastrophic weather events (including from changing climate conditions), our ability to maintain profitable operations (including our ability to underwrite risks effectively and charge adequate premium rates), the adequacy of the loss and loss expense reserves of our insurance subsidiaries, the availability and successful operation of the information technology systems our insurance subsidiaries utilize, the successful development of new information technology systems to allow our insurance subsidiaries to compete effectively, business and economic conditions in the areas in which we and our insurance subsidiaries operate, interest rates, competition from various insurance and other financial businesses, terrorism, the availability and cost of reinsurance, legal and judicial developments, changes in regulatory requirements, our ability to attract and retain independent insurance agents, changes in our A.M. Best rating and the other risks that we describe from time to time in our filings with the Securities and Exchange Commission. We disclaim any obligation to update such statements or to announce publicly the results of any revisions that we may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Investor Relations Contacts

Karin Daly, Vice President, The Equity Group Inc.

Phone: [phone]
E-mail: [e-mail]

Jeffrey D. Miller, Executive Vice President & Chief Financial Officer
Phone: [phone]
E-mail: [e-mail]

Financial Supplement

Donegal Group Inc.
Consolidated Statements of Income
(unaudited; in thousands, except share data)
	Quarter Ended June 30,
		2025				2024
Net premiums earned	$	231,775			$	234,311
Investment income, net of expenses		12,540				11,068
Net investment gains		1,544				737
Lease income		76				78
Installment payment fees		844				579
Other income, net		369				-
Total revenues		247,148				246,773
Net losses and loss expenses		150,917				165,360
Amortization of deferred acquisition costs		39,501				40,656
Other underwriting expenses		35,150				34,037
Policyholder dividends		819				1,187
Interest		337				155
Other expenses, net		-				365
Total expenses		226,724				241,760
Income before income tax expense		20,424				5,013
Income tax expense		3,558				860
Net income	$	16,866			$	4,153
Net income per common share:
Class A - basic	$	0.47			$	0.13
Class A - diluted	$	0.46			$	0.13
Class B - basic and diluted	$	0.43			$	0.11
Supplementary Financial Analysts' Data
Weighted-average number of shares
outstanding:
Class A - basic		30,678,158				27,844,811
Class A - diluted		31,336,862				27,844,903
Class B - basic and diluted		5,576,775				5,576,775
Net premiums written	$	233,813			$	247,189
Book value per common share
at end of period	$	16.62			$	14.48
Annualized operating return on average equity		11.3	%			3.4	%

Donegal Group Inc.
Consolidated Statements of Income
(unaudited; in thousands, except share data)
	Six Months Ended June 30,
		2025				2024
Net premiums earned	$	464,476			$	462,060
Investment income, net of expenses		24,524				22,041
Net investment gains		1,073				2,850
Lease income		153				159
Installment payment fees		1,727				803
Total revenues		491,953				487,913
Net losses and loss expenses		282,950				316,257
Amortization of deferred acquisition costs		78,732				80,258
Other underwriting expenses		76,345				75,777
Policyholder dividends		1,578				2,241
Interest		670				309
Other expenses, net		93				810
Total expenses		440,368				475,652
Income before income tax expense		51,585				12,261
Income tax expense		9,514				2,153
Net income	$	42,071			$	10,108
Net income per common share:
Class A - basic	$	1.19			$	0.31
Class A - diluted	$	1.17			$	0.31
Class B - basic and diluted	$	1.08			$	0.28
Supplementary Financial Analysts' Data
Weighted-average number of shares
outstanding:
Class A - basic		30,400,944				27,828,062
Class A - diluted		30,884,992				27,845,608
Class B - basic and diluted		5,576,775				5,576,775
Net premiums written	$	480,905			$	498,631
Book value per common share
at end of period	$	16.62			$	14.48
Annualized operating return on average equity		14.6	%			4.2	%

Donegal Group Inc.
Consolidated Balance Sheets
(in thousands)
	June 30,				December 31,
		2025				2024
	(unaudited)
ASSETS
Investments:
Fixed maturities:
Held to maturity, at amortized cost	$	737,356			$	705,714
Available for sale, at fair value		626,107				617,892
Equity securities, at fair value		41,007				36,808
Short-term investments, at cost		24,764				24,558
Total investments		1,429,234				1,384,972
		57,437				52,926
Premiums receivable		198,885				181,107
Reinsurance receivable		411,125				420,742
Deferred policy acquisition costs		76,620				73,347
Prepaid reinsurance premiums		182,795				176,162
Other assets		51,739				46,776
Total assets	$	2,407,835			$	2,336,032
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss expenses	$	1,117,010			$	1,120,985
Unearned premiums		635,538				612,476
Borrowings under lines of credit		35,000				35,000
Other liabilities		14,618				21,795
Total liabilities		1,802,166				1,790,256
Stockholders' equity:
Class A common stock		339				329
Class B common stock		56				56
Additional paid-in capital		383,546				369,680
Accumulated other comprehensive loss		(17,517	)			(28,200	)
Retained earnings		280,471				245,137
Treasury stock		(41,226	)			(41,226	)
Total stockholders' equity		605,669				545,776
Total liabilities and stockholders' equity	$	2,407,835			$	2,336,032