Financial Performance - Net income for Q3 2025 was $20.1 million, or $0.55 per share, compared to $16.8 million, or $0.51 per share, in Q3 2024[131]. - Net income for the first nine months of 2025 was $62.2 million, or $1.72 per share, compared to $26.9 million, or $0.81 per share, in 2024[140]. - Net cash flows from operating activities were $60.2 million for the first nine months of 2025, up from $39.2 million in 2024[143]. Premiums and Underwriting - Net premiums written for the three months ended September 30, 2025, were $219,615,000, compared to $232,208,000 for the same period in 2024, indicating a decrease of about 5.4%[116]. - Net premiums earned for Q3 2025 were $229.8 million, a decrease of $8.2 million, or 3.4%, compared to Q3 2024[123]. - Net premiums written for Q3 2025 were $219.6 million, a decrease of $12.6 million, or 5.4%, from Q3 2024, with commercial lines increasing by 3.4% and personal lines decreasing by 15.9%[124]. - Net premiums earned for the first nine months of 2025 were $694.3 million, a decrease of $5.7 million, or 0.8%, compared to the same period in 2024[132]. - Net premiums written for the first nine months of 2025 were $700.5 million, a decrease of $30.3 million, or 4.1%, from the same period in 2024[133]. Loss Ratios and Reserves - The loss ratio for Q3 2025 was 62.1%, up from 61.5% in Q3 2024, with a core loss ratio of 51.1% compared to 50.1%[127]. - The loss ratio for the insurance subsidiaries was 61.3% for the first nine months of 2025, down from 66.1% in the same period of 2024[136]. - The core loss ratio, excluding weather-related losses, was 51.8% for the first nine months of 2025, compared to 54.5% for the same period in 2024[136]. - The establishment of loss reserves is inherently uncertain, and the ultimate liability may exceed current estimates, impacting financial results[108]. - For every 1% change in loss and loss expense reserves, the pre-tax impact on results of operations would be approximately $7.2 million[107]. Claims and Expenses - The average claim amount has gradually increased due to rising property and automobile repair costs, with significant impacts from inflation and litigation trends[109]. - The company’s insurance subsidiaries have experienced an increase in claims severity and longer settlement periods for bodily injury claims in recent years[107]. - The combined ratio for Q3 2025 was 95.9%, a decrease from 96.4% in Q3 2024, primarily due to a lower expense ratio[129]. - The expense ratio decreased to 33.4% for the first nine months of 2025 from 34.0% in 2024, reflecting expense management initiatives[137]. - The combined ratio improved to 95.1% for the first nine months of 2025, down from 100.6% in 2024, primarily due to a decrease in the loss ratio[138]. Investment Income - Net investment income for Q3 2025 was $13.9 million, an increase of $3.1 million, or 28.8%, compared to Q3 2024[125]. - Net investment income for the first nine months of 2025 was $38.5 million, an increase of $5.6 million, or 17.0%, compared to the same period in 2024[134]. - Net investment gains for the first nine months of 2025 were $2.3 million, down from $4.7 million in the same period of 2024[135]. Liabilities and Reserves - Total liabilities for losses and loss expenses as of September 30, 2025, amounted to $1,114,302,000, a slight decrease from $1,120,985,000 on December 31, 2024[111]. - The total commercial lines liabilities increased to $578,479,000 as of September 30, 2025, compared to $558,175,000 at the end of 2024, reflecting a growth of approximately 3.8%[111]. - The liabilities for reported losses are evaluated on a case-by-case basis, while unreported claims are based on historical data by line of insurance[106]. Weather and Other Losses - Weather-related losses were $48.7 million, contributing 7.0 percentage points to the loss ratio for the first nine months of 2025, down from $60.0 million and 8.6 percentage points in 2024[136]. - Large fire losses were $29.8 million for the first nine months of 2025, compared to $36.2 million in 2024[136]. Dividends and Borrowings - The insurance subsidiaries paid $10.0 million in dividends to the company during the first nine months of 2025[147]. - The company had no outstanding borrowings under its line of credit as of September 30, 2025, with the ability to borrow up to $20.0 million[144].

Core Viewpoint - The article emphasizes the importance of enabling Javascript and cookies in browsers to prevent access issues, particularly when ad-blockers are enabled [1] Group 1 - The article suggests that users may face restrictions if they have ad-blockers enabled, indicating a need for adjustments in browser settings to ensure smooth access [1]

Financial Performance - Donegal Group Inc. reported a net income of $20.1 million for Q3 2025, a 19.9% increase from $16.8 million in Q3 2024 [1][3] - Total revenues decreased by 2.3% to $245.9 million in Q3 2025 compared to $251.7 million in Q3 2024 [1][3] - Net premiums earned fell by 3.4% to $229.8 million in Q3 2025, while for the first nine months, it decreased by 0.8% to $694.3 million [1][3][7] Investment Income - Investment income increased by 28.8% to $13.9 million in Q3 2025, compared to $10.8 million in Q3 2024 [1][15] - Net investment gains for Q3 2025 were $1.3 million, down from $1.9 million in Q3 2024, primarily due to unrealized gains in equity securities [1][18] Underwriting Performance - The combined ratio improved to 95.9% in Q3 2025 from 96.4% in Q3 2024, indicating better underwriting profitability [1][8] - The core loss ratio for commercial lines increased to 54.0% in Q3 2025 from 48.5% in Q3 2024, attributed to higher casualty loss severity [10] - Personal lines core loss ratio decreased to 46.6% in Q3 2025 from 52.5% in Q3 2024, benefiting from premium rate increases [10] Premiums and Business Segments - Commercial lines net premiums earned increased by 2.9% to $140.3 million in Q3 2025, while personal lines decreased by 11.8% to $89.5 million [7][8] - The company experienced a 5.4% decrease in net premiums written in Q3 2025, driven by a 15.9% decline in personal lines [8][9] Book Value and Equity - Book value per share rose to $17.14 at September 30, 2025, compared to $15.22 at the end of 2024, reflecting net income and unrealized gains [1][19] - The annualized return on average equity was 13.0% for Q3 2025, slightly down from 13.4% in Q3 2024 [1][3] Strategic Initiatives - The company is focused on enhancing its underwriting approach and has completed a major systems transformation project to improve service capabilities [4][5] - Management expressed confidence in the company's strategic execution and disciplined underwriting to sustain financial performance [2][6]

Core Insights - The article emphasizes the effectiveness of the Zacks Rank system in identifying winning stocks through earnings estimates and revisions [1] - Value investing is highlighted as a popular and successful strategy across various market conditions, focusing on undervalued stocks using fundamental analysis [2] Company Analysis: Donegal Group (DGICA) - DGICA holds a Zacks Rank of 1 (Strong Buy) and an A for Value, indicating strong investment potential [4] - The stock has a P/E ratio of 9.36, significantly lower than the industry average of 27.19, suggesting it may be undervalued [4] - DGICA's Forward P/E has fluctuated between 9.13 and 18.88 over the past year, with a median of 14.42 [4] - The P/B ratio for DGICA is 1.16, compared to the industry average of 1.53, indicating a favorable valuation [5] - The P/S ratio stands at 0.7, well below the industry average of 1.22, reinforcing the perception of undervaluation [6] - DGICA's P/CF ratio is 6.98, significantly lower than the industry average of 12.67, suggesting strong cash flow relative to its market value [7] Company Analysis: Universal Insurance Holdings (UVE) - UVE is rated 2 (Buy) with a Value score of A, indicating solid investment potential [8] - The P/B ratio for UVE is 1.58, slightly above the industry average of 1.53, but still within a reasonable range [8] - UVE's P/B ratio has varied between 1.19 and 1.89 over the past year, with a median of 1.54 [8] Conclusion - Both Donegal Group and Universal Insurance Holdings are identified as potentially undervalued stocks, supported by strong earnings outlooks and favorable valuation metrics [9]

Core Points - Donegal Group Inc. plans to release its third quarter results for the period ended September 30, 2025, on October 30, 2025, before the market opens [1] - A supplemental investor presentation will be available on the company's website at the same time as the earnings press release [1] - A pre-recorded audio webcast featuring management commentary will be available on October 30, 2025, at approximately 8:30 am ET [2] Company Overview - Donegal Group Inc. is an insurance holding company with subsidiaries offering property and casualty insurance in 21 states across the Mid-Atlantic, Midwest, South, and Southwest regions [3] - The Donegal Insurance Group, which includes Donegal Mutual Insurance Company, has an A.M. Best rating of A (Excellent) [3] - The company's Class A and Class B common stocks trade on the NASDAQ under the symbols DGICA and DGICB, respectively [4] Strategic Focus - The company is focused on achieving sustained excellent financial performance, modernizing operations, capitalizing on profitable growth opportunities, and providing superior experiences to agents, customers, and employees [4]

Core Viewpoint - Value investing remains a preferred strategy for identifying strong stocks in various market conditions, utilizing established valuation metrics to assess potential investments [2][3]. Company Summary - Donegal Group (DGICA) is currently rated with a Zacks Rank of 1 (Strong Buy) and has received an "A" grade for Value, indicating it is among the best value stocks available [3]. - DGICA has a Price-to-Book (P/B) ratio of 1.16, which is attractive compared to the industry average of 1.57. Over the past year, DGICA's P/B ratio has fluctuated between 0.93 and 1.28, with a median of 1.08 [4]. - The company has a Price-to-Sales (P/S) ratio of 0.71, significantly lower than the industry average of 1.27, making it a favorable metric for value investors [5]. - DGICA's Price-to-Cash Flow (P/CF) ratio stands at 6.98, compared to the industry's average of 13.05. The P/CF ratio has varied from a low of 6.05 to a high of 37.36 over the past year, with a median of 8.11 [6]. - These valuation metrics suggest that Donegal Group is likely undervalued at present, supported by a strong earnings outlook, making it an attractive value stock [7].

Group 1 - Nabeel Bukhari is a law graduate specializing in company and corporate law, with self-taught expertise in financial analysis, providing a unique perspective on business dynamics [1] - His work has been published by respected platforms such as InvestorPlace and GuruFocus, and featured in well-known publications like Forbes, Yahoo Finance, and MSN [1] - Bukhari's integration of legal knowledge with financial insights makes him a valuable asset in the financial realm [1]

Company Overview - Donegal Group (DGICA) holds a Zacks Rank of 1 (Strong Buy) and a Value grade of A, indicating strong potential for value investors [3][8] - First American Financial (FAF) has a Zacks Rank of 2 (Buy) and a Value score of A, making it another attractive option in the Insurance - Property and Casualty sector [7][8] Valuation Metrics for Donegal Group (DGICA) - DGICA has a P/E ratio of 9.43, significantly lower than the industry average P/E of 27.82, suggesting it may be undervalued [3][8] - The company's P/B ratio is 1.17, compared to the industry's average P/B of 1.55, indicating a favorable valuation [4][8] - DGICA's P/S ratio stands at 0.71, well below the industry average P/S of 1.3, reinforcing its undervalued status [5][8] - The P/CF ratio for DGICA is 7.04, compared to the industry's average P/CF of 12.82, highlighting its attractive cash flow valuation [6][8] Valuation Metrics for First American Financial (FAF) - FAF has a P/B ratio of 1.33, which is lower than the industry's price-to-book ratio of 1.55, suggesting it is also undervalued [7][8]

PART I. FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements and management's discussion and analysis [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited consolidated financial statements and related notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity Consolidated Balance Sheets | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :----------------------------------- | :-------------------------- | :------------------ | | Total assets | $ 2,407,835,086 | $ 2,336,031,983 | | Total liabilities | $ 1,802,165,641 | $ 1,790,255,852 | | Total stockholders' equity | $ 605,669,445 | $ 545,776,131 | [Consolidated Statements of Income (Three Months Ended June 30)](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20%28Three%20Months%20Ended%20June%2030%29) This section reports financial performance for the three-month period, detailing revenues, expenses, and net income Consolidated Statements of Income (Three Months Ended June 30) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Total revenues | $ 247,148,017 | $ 246,772,546 | | Total expenses | $ 226,723,660 | $ 241,760,104 | | Income before income tax expense | $ 20,424,357 | $ 5,012,442 | | Income tax expense | $ 3,558,237 | $ 859,665 | | Net income | $ 16,866,120 | $ 4,152,777 | | Class A common stock - basic EPS | $ 0.47 | $ 0.13 | | Class A common stock - diluted EPS | $ 0.46 | $ 0.13 | | Class B common stock - basic and diluted EPS | $ 0.43 | $ 0.11 | [Consolidated Statements of Comprehensive Income (Three Months Ended June 30)](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Three%20Months%20Ended%20June%2030%29) This section presents comprehensive income for the three-month period, including net income and other comprehensive income Consolidated Statements of Comprehensive Income (Three Months Ended June 30) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net income | $ 16,866,120 | $ 4,152,777 | | Other comprehensive income (loss), net of tax | $ 3,955,248 | $ (376,452) | | Comprehensive income | $ 20,821,368 | $ 3,776,325 | [Consolidated Statements of Income (Six Months Ended June 30)](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20%28Six%20Months%20Ended%20June%2030%29) This section reports financial performance for the six-month period, detailing revenues, expenses, and net income Consolidated Statements of Income (Six Months Ended June 30) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $ 491,952,897 | $ 487,913,415 | | Total expenses | $ 440,367,591 | $ 475,652,577 | | Income before income tax expense | $ 51,585,306 | $ 12,260,838 | | Income tax expense | $ 9,514,012 | $ 2,152,510 | | Net income | $ 42,071,294 | $ 10,108,328 | | Class A common stock - basic EPS | $ 1.19 | $ 0.31 | | Class A common stock - diluted EPS | $ 1.17 | $ 0.31 | | Class B common stock - basic and diluted EPS | $ 1.08 | $ 0.28 | [Consolidated Statements of Comprehensive Income (Six Months Ended June 30)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Six%20Months%20Ended%20June%2030%29) This section presents comprehensive income for the six-month period, including net income and other comprehensive income Consolidated Statements of Comprehensive Income (Six Months Ended June 30) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net income | $ 42,071,294 | $ 10,108,328 | | Other comprehensive income (loss), net of tax | $ 10,683,493 | $ (1,977,742) | | Comprehensive income | $ 52,754,787 | $ 8,130,586 | [Consolidated Statement of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statement%20of%20Stockholders%27%20Equity) This section details changes in stockholders' equity, reflecting net income, dividends, and other comprehensive income Consolidated Statement of Stockholders' Equity | Metric | December 31, 2024 | June 30, 2025 | | :----------------------------------- | :------------------ | :------------------ | | Total Stockholders' Equity | $ 545,776,131 | $ 605,669,445 | | Net income (Q2 2025) | - | $ 16,866,120 | | Cash dividends declared (Q2 2025) | - | $ (6,485,554) | | Other comprehensive income (Q2 2025) | - | $ 3,955,248 | Consolidated Statement of Stockholders' Equity | Metric | December 31, 2023 | June 30, 2024 | | :----------------------------------- | :------------------ | :------------------ | | Total Stockholders' Equity | $ 479,745,354 | $ 484,075,867 | | Net income (Q2 2024) | - | $ 4,152,777 | | Cash dividends declared (Q2 2024) | - | $ (5,670,265) | | Other comprehensive loss (Q2 2024) | - | $ (376,452) | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash flows from operating, investing, and financing activities for the period Consolidated Statements of Cash Flows | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $ 37,881,261 | $ 26,497,697 | | Net cash used in investing activities | $ (33,706,157) | $ (15,950,641) | | Net cash provided by (used in) financing activities | $ 336,051 | $ (10,113,733) | | Net increase in cash | $ 4,511,155 | $ 433,323 | | Cash at end of period | $ 57,437,086 | $ 24,225,596 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements [1 - Organization](index=9&type=section&id=1%20-%20Organization) This note describes the company's structure, insurance operations, and significant ownership by Donegal Mutual Insurance Company - Donegal Group Inc. is an insurance holding company with subsidiaries (Atlantic States, MICO, Peninsula, Southern) writing property and casualty insurance through independent agents in Mid-Atlantic, Midwestern, Southern, and Southwestern states[28](index=28&type=chunk) - As of June 30, 2025, the company operates in three segments: investment function, commercial lines (commercial automobile, multi-peril, workers' compensation), and personal lines (homeowners, private passenger automobile)[29](index=29&type=chunk) - Donegal Mutual Insurance Company holds **significant voting power** (approximately **70%**) through its ownership of Class A (**44%**) and Class B (**84%**) common stock, and intercompany operations are integrated via a pooling agreement[30](index=30&type=chunk)[31](index=31&type=chunk) [2 - Basis of Presentation](index=10&type=section&id=2%20-%20Basis%20of%20Presentation) This note outlines the basis for preparing interim financial statements, emphasizing their unaudited nature and recurring adjustments - The interim financial information is unaudited and includes normal

[Executive Summary](index=1&type=section&id=1.%20Executive%20Summary) This section provides a high-level overview of Donegal Group Inc.'s financial performance and strategic initiatives for the second quarter and first half of 2025 [Second Quarter and First Half 2025 Financial Highlights](index=1&type=section&id=1.1.%20Second%20Quarter%20and%20First%20Half%202025%20Financial%20Highlights) Donegal Group Inc. reported substantial improvements in net income and non-GAAP operating income for both the second quarter and first half of 2025, driven by strong underwriting performance and increased investment income. The annualized return on average equity also saw significant growth **Financial Summary (Q2 and H1 2025 vs. 2024):** | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | % Change (QoQ) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | % Change (YoY) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :------------- | :-------------------------------------------- | :-------------------------------------------- | :------------- | | 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 income | $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 | | Net income – Class A (diluted) | $0.46 | $0.13 | 253.8% | $1.17 | $0.31 | 277.4% | | Book value per share (at period end) | $16.62 | $14.48 | 14.8% | $16.62 | $14.48 | 14.8% | [Management Commentary](index=1&type=section&id=1.2.%20Management%20Commentary) Management expressed satisfaction with the progress and results for Q2 and H1 2025, attributing success to strategic execution and underwriting discipline, evidenced by a meaningful improvement in the core loss ratio. The company intentionally slowed new business writings in personal lines to protect underwriting margins and successfully deployed a major commercial lines systems modernization project - Meaningful improvement in core loss ratio for both Q2 and H1 2025 underscores commitment to disciplined risk management and sustainable profitability[2](index=2&type=chunk) - Net premiums written declined due to lower new business writings and planned attrition, as the company proactively slowed new business in personal lines to protect underwriting margins[2](index=2&type=chunk)[4](index=4&type=chunk) - Successfully deployed the final major commercial lines systems release, marking a significant milestone in a multi-year systems modernization project. Rollout to states will begin in H2 2025, aiming for a single modern technology platform by H1 2026[5](index=5&type=chunk) [Insurance Operations Overview](index=2&type=section&id=2.%20Insurance%20Operations%20Overview) Donegal Group's insurance operations encompass property and casualty offerings across multiple states, demonstrating improved underwriting performance and strategic adjustments in premium writings [Business Description](index=2&type=section&id=2.1.%20Business%20Description) Donegal Group Inc. is an insurance holding company whose subsidiaries offer property and casualty insurance across Mid-Atlantic, Southern, Midwestern, and Southwestern states, operating collectively as the Donegal Insurance Group, which holds an A.M. Best rating of A (Excellent) - Donegal Group operates as an insurance holding company, with subsidiaries offering property and casualty lines in **21 states** across Mid-Atlantic, Southern, Midwestern, and Southwestern regions[6](index=6&type=chunk)[28](index=28&type=chunk) - The Donegal Insurance Group has an A.M. Best rating of **A (Excellent)**[28](index=28&type=chunk) [Net Premiums Earned and Written](index=2&type=section&id=2.2.%20Net%20Premiums%20Earned%20and%20Written) Net premiums earned saw a slight decrease of 1.1% in Q2 2025 but a modest increase of 0.5% for H1 2025. Net premiums written declined by 5.4% in Q2 and 3.6% in H1, primarily driven by a significant decrease in personal lines, partially offset by growth in commercial lines **Net Premiums Earned (Q2 and H1 2025 vs. 2024):** | Line | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | % Change (QoQ) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | % Change (YoY) | | :--------------- | :---------------------------------------------- | :---------------------------------------------- | :------------- | :-------------------------------------------- | :-------------------------------------------- | :------------- | | 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** | **$231,775** | **$234,311** | **-1.1%** | **$464,476** | **$462,060** | **0.5%** | **Net Premiums Written (Q2 and H1 2025 vs. 2024):** | Line | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | % Change (QoQ) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | % Change (YoY) | | :--------------- | :---------------------------------------------- | :---------------------------------------------- | :------------- | :-------------------------------------------- | :-------------------------------------------- | :------------- | | Commercial lines | $144,914 | $142,248 | 1.9% | $305,532 | $297,742 | 2.6% | | Personal lines | $88,899 | $104,941 | -15.3% | $175,373 | $200,889 | -12.7% | | **Total** | **$233,813** | **$247,189** | **-5.4%** | **$480,905** | **$498,631** | **-3.6%** | - The **$13.3 million** decrease in net premiums written for Q2 2025 was primarily due to a **$16.0 million** decrease in personal lines, attributed to planned attrition from lower new business writings and non-renewal actions, partially offset by a **$2.7 million** increase in commercial lines[8](index=8&type=chunk)[11](index=11&type=chunk) [Underwriting Performance](index=3&type=section&id=2.3.%20Underwriting%20Performance) Underwriting performance significantly improved, with the GAAP combined ratio decreasing to 97.7% in Q2 2025 (from 103.0% in Q2 2024) and to 94.6% for H1 2025 (from 102.7% for H1 2024), primarily driven by a lower loss ratio across total lines [Combined Ratios](index=3&type=section&id=2.3.1.%20Combined%20Ratios) The company achieved significant improvements in both GAAP and statutory combined ratios for Q2 and H1 2025, reflecting enhanced underwriting profitability across all lines **GAAP Combined Ratios (Total Lines - Q2 and H1 2025 vs. 2024):** | Metric | June 30, 2025 (Q2) | June 30, 2024 (Q2) | June 30, 2025 (H1) | June 30, 2024 (H1) | | :-------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | 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 (Q2 and H1 2025 vs. 2024):** | Line | June 30, 2025 (Q2) | June 30, 2024 (Q2) | June 30, 2025 (H1) | June 30, 2024 (H1) | | :-------------------- | :----------------- | :----------------- | :----------------- | :----------------- | | Commercial lines | 101.0% | 104.9% | 97.8% | 103.3% | | Personal lines | 91.7% | 98.6% | 87.5% | 99.4% | | **Total lines** | **97.4%** | **102.2%** | **93.9%** | **101.7%** | [Loss Ratio](index=3&type=section&id=2.3.2.%20Loss%20Ratio) The GAAP loss ratio decreased significantly in Q2 2025, primarily due to improvements in personal lines core loss ratio, despite higher weather-related losses - The GAAP loss ratio decreased to **65.1%** in Q2 2025 from **70.6%** in Q2 2024, primarily due to a significant improvement in the personal lines core loss ratio (from **55.3% to 43.3%**) driven by premium rate increases[10](index=10&type=chunk) - Weather-related losses were **$25.8 million** (**11.1 percentage points** of loss ratio) in Q2 2025, up from **$24.7 million** (**10.6 percentage points**) in Q2 2024, and higher than the five-year average[12](index=12&type=chunk) - Net favorable development of prior-year reserves reduced the loss ratio by **1.3 percentage points** in Q2 2025, mainly from personal automobile and homeowners lines, partially offset by adverse development in other commercial lines[14](index=14&type=chunk) [Expense Ratio](index=4&type=section&id=2.3.3.%20Expense%20Ratio) The expense ratio saw a slight increase in Q2 2025, mainly due to higher incentive costs and allocated expenses from the systems modernization project - The expense ratio increased slightly to **32.2%** in Q2 2025 from **31.9%** in Q2 2024, mainly due to higher underwriting-based incentive costs for agents and employees[15](index=15&type=chunk) - Allocated costs related to the systems modernization project represented approximately **1.0 percentage point** of the expense ratio for Q2 2025, and are expected to have a similar impact for the full year 2025, gradually subsiding over several years[15](index=15&type=chunk) [Investment Operations](index=4&type=section&id=3.%20Investment%20Operations) Donegal Group's investment strategy focuses on generating after-tax income with minimal credit risk through a portfolio primarily composed of high-quality fixed-maturity securities, leading to increased net investment income [Investment Strategy and Portfolio](index=4&type=section&id=3.1.%20Investment%20Strategy%20and%20Portfolio) Donegal Group's investment strategy prioritizes generating appropriate after-tax income while minimizing credit risk through investments in high-quality, diversified, and marketable fixed-maturity securities, which comprised 95.4% of the consolidated investment portfolio at June 30, 2025 - Investment strategy focuses on generating after-tax income with minimal credit risk by investing in high-quality securities[16](index=16&type=chunk) **Consolidated Investment Portfolio Composition (June 30, 2025 vs. December 31, 2024):** | Investment Type | June 30, 2025 (Amount in thousands) | June 30, 2025 (%) | December 31, 2024 (Amount in thousands) | December 31, 2024 (%) | | :------------------------------------------------ | :---------------------------------- | :---------------- | :------------------------------------ | :-------------------- | | Fixed maturities, at carrying value | $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% | | [Investment Income and Gains](index=5&type=section&id=3.2.%20Investment%20Income%20and%20Gains) Net investment income increased by 13.3% in Q2 2025, primarily due to a higher average investment yield. Net investment gains for Q2 2025 were mainly from unrealized gains in equity securities, partially offset by realized losses on fixed-maturity sales - Net investment income for Q2 2025 increased by **13.3%** to **$12.5 million**, primarily reflecting an increase in average investment yield[18](index=18&type=chunk) - Net investment gains of **$1.5 million** for Q2 2025 were mainly from unrealized gains in equity securities, partially offset by net realized investment losses on the sale of available-for-sale fixed-maturity securities[19](index=19&type=chunk) [Financial Position and Shareholder Value](index=1&type=section&id=4.%20Financial%20Position%20and%20Shareholder%20Value) Donegal Group's financial position strengthened with an increase in book value per share, supported by net income and unrealized investment gains, alongside consistent dividend declarations [Book Value Per Share](index=1&type=section&id=4.1.%20Book%20Value%20Per%20Share) Book value per share increased to $16.62 at June 30, 2025, from $14.48 at June 30, 2024, and $15.36 at December 31, 2024. This increase was driven by net income and after-tax unrealized gains in the available-for-sale fixed-maturity portfolio - Book value per share was **$16.62** at June 30, 2025, an increase from **$14.48** at June 30, 2024, and **$15.36** at December 31, 2024[1](index=1&type=chunk)[3](index=3&type=chunk)[20](index=20&type=chunk) - The increase in book value per share was related to net income and **$10.7 million** of after-tax unrealized gains within the available-for-sale fixed-maturity portfolio during 2025, which added **$0.31 per share**[20](index=20&type=chunk) [Dividend Information](index=6&type=section&id=4.2.%20Dividend%20Information) Donegal Group Inc. declared regular quarterly cash dividends of $0.1825 per share for Class A common stock and $0.165 per share for Class B common stock, payable on August 15, 2025 - Declared a regular quarterly cash dividend of **$0.1825 per share** for Class A common stock and **$0.165 per share** for Class B common stock, payable on August 15, 2025[26](index=26&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=5.%20Non-GAAP%20Financial%20Measures) Donegal Group provides non-GAAP financial measures, including net premiums written and operating income, with detailed reconciliations to GAAP for enhanced business analysis and peer comparison [Definitions and Reconciliations](index=5&type=section&id=5.1.%20Definitions%20and%20Reconciliations) Donegal Group utilizes non-GAAP financial measures such as net premiums written, operating income or loss, and statutory combined ratio to manage its business and for peer comparison. The company provides detailed reconciliations of these non-GAAP measures to their most directly comparable GAAP measures - Non-GAAP financial measures used include net premiums written, operating income or loss, and statutory combined ratio, which are defined and reconciled to GAAP[21](index=21&type=chunk)[22](index=22&type=chunk) **Reconciliation of Net Premiums Earned to Net Premiums Written (Q2 and H1 2025 vs. 2024):** | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | % Change (QoQ) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | % Change (YoY) | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :------------- | :-------------------------------------------- | :-------------------------------------------- | :------------- | | 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%** | **Reconciliation of Net Income to Non-GAAP Operating Income (Q2 and H1 2025 vs. 2024):** | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | % Change (QoQ) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | % Change (YoY) | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :------------- | :-------------------------------------------- | :-------------------------------------------- | :------------- | | 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%** | [Corporate Information](index=6&type=section&id=6.%20Corporate%20Information) Donegal Group Inc. is a NASDAQ-listed insurance holding company focused on financial performance, operational modernization, and stakeholder experience, with forward-looking statements subject to various risks [About the Company](index=6&type=section&id=6.1.%20About%20the%20Company) Donegal Group Inc. is an insurance holding company operating as the Donegal Insurance Group, listed on NASDAQ under DGICA and DGICB. The company focuses on achieving excellent financial performance, modernizing operations, profitable growth, and providing superior experiences to its agents, policyholders, and employees - Donegal Group Inc. trades on the NASDAQ Global Select Market under symbols **DGICA** and **DGICB**[29](index=29&type=chunk) - Primary strategies include achieving sustained excellent financial performance, strategically modernizing operations, capitalizing on profitable growth opportunities, and providing superior experiences to stakeholders[29](index=29&type=chunk) [Safe Harbor Statement](index=7&type=section&id=6.2.%20Safe%20Harbor%20Statement) The release contains forward-looking statements that involve risks and uncertainties, and actual results may differ materially from expectations. Factors influencing results include litigation, weather events, underwriting effectiveness, information technology systems, economic conditions, and regulatory changes. The company disclaims any obligation to update these statements - Statements in the release are forward-looking and involve risks and uncertainties, with actual results potentially varying materially[31](index=31&type=chunk) - Key risk factors include adverse litigation, catastrophic weather events, ability to maintain profitable operations, adequacy of loss reserves, availability and successful operation of IT systems, economic conditions, and regulatory changes[31](index=31&type=chunk) [Investor Relations Contacts](index=7&type=section&id=6.3.%20Investor%20Relations%20Contacts) Contact information for investor relations is provided, including Karin Daly (The Equity Group Inc.) and Jeffrey D. Miller (EVP & CFO of Donegal Group Inc.), with their respective phone numbers and email addresses - Investor Relations contacts are Karin Daly (The Equity Group Inc.) at **(212) 836-9623** / kdaly@theequitygroup.com and Jeffrey D. Miller (EVP & CFO) at **(717) 426-1931** / investors@donegalgroup.com[32](index=32&type=chunk) [Financial Statements](index=7&type=section&id=7.%20Financial%20Statements) The financial statements provide unaudited consolidated income statements and balance sheets for Donegal Group Inc., detailing financial performance and position for the specified periods [Consolidated Statements of Income](index=7&type=section&id=7.1.%20Consolidated%20Statements%20of%20Income) The consolidated statements of income present the unaudited financial results for the three and six months ended June 30, 2025, and 2024, detailing revenues, expenses, net income, and earnings per share for both Class A and Class B common stock **Consolidated Statements of Income (Three Months Ended June 30, 2025 vs. 2024):** | Metric | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Net premiums earned | $231,775 | $234,311 | | Investment income, net of expenses | $12,540 | $11,068 | | Net investment gains | $1,544 | $737 | | Total revenues | $247,148 | $246,773 | | Net losses and loss expenses | $150,917 | $165,360 | | 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 - diluted | $0.46 | $0.13 | | Net income per common share: Class B - basic and diluted | $0.43 | $0.11 | **Consolidated Statements of Income (Six Months Ended June 30, 2025 vs. 2024):** | Metric | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Net premiums earned | $464,476 | $462,060 | | Investment income, net of expenses | $24,524 | $22,041 | | Net investment gains | $1,073 | $2,850 | | Total revenues | $491,953 | $487,913 | | Net losses and loss expenses | $282,950 | $316,257 | | 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 - diluted | $1.17 | $0.31 | | Net income per common share: Class B - basic and diluted | $1.08 | $0.28 | [Consolidated Balance Sheets](index=9&type=section&id=7.2.%20Consolidated%20Balance%20Sheets) The consolidated balance sheets provide an unaudited snapshot of Donegal Group Inc.'s financial position as of June 30, 2025, compared to December 31, 2024, detailing assets, liabilities, and stockholders' equity **Consolidated Balance Sheets (June 30, 2025 vs. December 31, 2024):** | Item | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | | **ASSETS:** | | | | Total investments | $1,429,234 | $1,384,972 | | Premiums receivable | $57,437 | $52,926 | | Reinsurance receivable | $198,885 | $181,107 | | Deferred policy acquisition costs | $411,125 | $420,742 | | Prepaid reinsurance premiums | $76,620 | $73,347 | | Other assets | $182,795 | $176,162 | | **Total assets** | **$2,407,835** | **$2,336,032** | | **LIABILITIES AND STOCKHOLDERS' EQUITY:** | | | | 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** | | Total stockholders' equity | $605,669 | $545,776 | | **Total liabilities and stockholders' equity** | **$2,407,835** | **$2,336,032** |