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** |

Financial Performance - Donegal Group Inc. reported a net income of $16.9 million for Q2 2025, a significant increase of 306.1% compared to $4.2 million in Q2 2024 [1][3][32] - Total revenues for Q2 2025 were $247.1 million, slightly up by 0.2% from $246.8 million in Q2 2024 [1][3] - The company achieved a non-GAAP operating income of $15.6 million for Q2 2025, representing a 338.2% increase from $3.6 million in Q2 2024 [1][21] Premiums and Underwriting - Net premiums earned decreased by 1.1% to $231.8 million in Q2 2025 from $234.3 million in Q2 2024 [1][6] - The combined ratio improved to 97.7% in Q2 2025 from 103.0% in Q2 2024, indicating better underwriting performance [1][8] - The core loss ratio for commercial lines was 50.1% in Q2 2025, down from 55.0% in Q2 2024, reflecting improved risk management [8][9] Investment Performance - Net investment income increased by 13.3% to $12.5 million in Q2 2025 compared to $11.1 million in Q2 2024 [1][14] - Net investment gains for Q2 2025 were $1.5 million, a significant rise from $0.7 million in Q2 2024 [1][16] Book Value and Returns - Book value per share rose to $16.62 at June 30, 2025, compared to $14.48 at June 30, 2024, marking a 14.8% increase [1][17] - The annualized return on average equity was 11.3% for Q2 2025, up from 3.4% in Q2 2024 [1][9] Strategic Initiatives - The company is progressing with a multi-year systems modernization project, with the final major commercial lines systems release successfully deployed [4] - Management emphasized a focus on disciplined execution and operational excellence to enhance long-term competitive positioning [5]

Group 1 - Donegal Group Inc. plans to release its second quarter results for the period ended June 30, 2025, on July 24, 2025, before the NASDAQ market opens [1] - A supplemental investor presentation will be available on the company's website concurrently with the earnings press release [1] - A pre-recorded audio webcast featuring management commentary will be available on the company's website at approximately 8:30 am ET on July 24, 2025 [2] Group 2 - Donegal Group Inc. is an insurance holding company offering property and casualty insurance in 21 states across the Mid-Atlantic, Midwestern, Southern, and Southwestern regions [3] - The Donegal Insurance Group, which includes Donegal Mutual Insurance Company and its subsidiaries, holds an A.M. Best rating of A (Excellent) [3] - The company's Class A and Class B common stocks trade on the NASDAQ Global Select Market under the symbols DGICA and DGICB, respectively [4] Group 3 - The company focuses on achieving sustained excellent financial performance, modernizing operations, capitalizing on growth opportunities, and providing superior experiences to agents, customers, and employees [4]

Group 1 - The property and casualty insurance industry is experiencing increasing demand, reflected by an 8% compound annual growth rate (CAGR) over the past five years [1] - Insurers are responding to this surging demand with margin growth strategies [1] Group 2 - The article highlights the author's self-taught background in equity analysis and the use of data analytics to identify investment opportunities in the stock market [1] - The author's investment style focuses on value, high quality, and long/short mid and small-cap companies [1]

Financial Performance - Net premiums written for the three months ended March 31, 2025, totaled $247,092,000, compared to $251,442,000 for the same period in 2024, reflecting a decrease of approximately 1.4%[104][105] - Net premiums earned for Q1 2025 were $232.7 million, an increase of $5.0 million, or 2.2%, compared to $227.7 million in Q1 2024[110] - Net premiums written for Q1 2025 were $247.1 million, a decrease of $4.4 million, or 1.7%, from $251.4 million in Q1 2024[111] - Net investment income increased to $12.0 million in Q1 2025, up $1.0 million, or 9.2%, from $11.0 million in Q1 2024[112] - Net income for Q1 2025 was $25.2 million, or $0.71 per share, compared to $6.0 million, or $0.18 per share, in Q1 2024[119] - Net cash flows provided by operating activities were $25.7 million in Q1 2025, significantly higher than $4.8 million in Q1 2024[121] Loss and Expense Management - Total liabilities for losses and loss expenses as of March 31, 2025, amounted to $1,092,624,000, a decrease from $1,120,985,000 as of December 31, 2024[98] - The loss ratio for Q1 2025 was 56.7%, down from 66.3% in Q1 2024, attributed to decreased core losses and large fire losses[114] - The core loss ratio for Q1 2025 was 54.2%, compared to 58.7% in Q1 2024, reflecting ongoing premium rate increases[114] - The expense ratio for Q1 2025 was 34.6%, a decrease from 35.7% in Q1 2024, due to effective expense management initiatives[116] - The combined ratio improved to 91.6% in Q1 2025 from 102.4% in Q1 2024, primarily due to a decrease in the loss ratio[117] Claims and Reserves - The average claim amount has gradually increased over the past several years due to rising property and automobile repair costs, as well as increased medical loss costs[95] - The company has noted stable amounts in the number of claims incurred and outstanding relative to their premium base, excluding severe weather events and the COVID-19 pandemic[95] - For every 1% change in loss and loss expense reserves, the effect on pre-tax results of operations would be approximately $7,000,000[93] - The company’s insurance subsidiaries maintain liabilities for both reported and unreported claims, with a focus on covering ultimate costs including investigation and litigation[91] Capital and Dividends - The total amount available for distribution as dividends from insurance subsidiaries without prior approval in 2025 is approximately $53.3 million, comprising $40.7 million from Atlantic States, $7.8 million from MICO, and $4.7 million from Peninsula[125] - Atlantic States did not purchase any shares of its Class A common stock under the share repurchase program during the three months ended March 31, 2025, with a total of 57,658 shares purchased since the program's inception[124] - The insurance subsidiaries did not pay any dividends to Atlantic States during the first three months of 2025[125] Debt and Borrowing - As of March 31, 2025, Atlantic States had no outstanding borrowings under its line of credit with M&T, with the ability to borrow up to $20.0 million at interest rates equal to the current Term SOFR rate plus 2.11%[122] - Atlantic States had a $35.0 million outstanding advance with the FHLB of Pittsburgh at a fixed interest rate of 3.806%, due in September 2026[122] Risk Management - The company is monitoring the impact of tariffs and inflationary factors, which may lead to future increases in loss costs[93] - Atlantic States' insurance subsidiaries maintain reinsurance agreements with Donegal Mutual and other major unaffiliated authorized reinsurers, indicating a strategy to manage credit risk[130] - There have been no material changes to Atlantic States' quantitative or qualitative market risk exposure from December 31, 2024, through March 31, 2025[133] - The company manages interest rate risk by maintaining an appropriate relationship between the average duration of its investment portfolio and the duration of its liabilities[132] Business Operations - The total commercial lines liabilities as of March 31, 2025, were $556,596,000, slightly down from $558,175,000 as of December 31, 2024[98] - The total personal lines liabilities decreased from $146,189,000 as of December 31, 2024, to $139,601,000 as of March 31, 2025[98] - Atlantic States' insurance subsidiaries provide property and casualty insurance coverages primarily through independent insurance agencies, billing the majority of this business directly to the insured[129]

Financial Data and Key Metrics Changes - For Q1 2025, net premiums earned increased by 2.2% to $232.7 million, while net premiums written decreased by 1.7% due to lower new business volume and planned attrition [11][12] - The combined ratio improved significantly to 91.6% from 102.4% in the prior year quarter, with a core loss ratio decrease of 4.5 percentage points [12][17] - After-tax net income rose to $25.2 million, a substantial increase from $6 million in Q1 2024 [17] Business Line Data and Key Metrics Changes - Personal lines net premiums written decreased by 9.9%, while commercial lines saw a growth of 3.3% [11][12] - The commercial lines segment combined ratio improved to 94.7%, with a core loss ratio improvement of 0.7 percentage points [21][22] - The personal lines combined ratio improved by 16.7 percentage points to 83.6%, driven by a reduction in large fire losses and improved underwriting performance [34][35] Market Data and Key Metrics Changes - The average in-force policy premium across all commercial lines increased by 6% to $7,500 [21] - The real retention rate for personal lines, excluding the impact of non-renewals in Maryland, was a healthy 86.7% [33] - The company experienced a decrease in weather-related losses, with total weather claims impact lower than the previous five-year average for Q1 [14] Company Strategy and Development Direction - The company is focusing on strengthening underwriting practices and maintaining pricing discipline in a competitive market [19][20] - Ongoing systems modernization efforts are expected to enhance operational efficiency and competitive advantage [7][9] - The company is refining its technology roadmap to leverage data analytics for future success [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate economic uncertainties and inflationary pressures [6][41] - The company is prepared to respond to potential increases in claims costs with data-driven actions [6][7] - Management highlighted the importance of maintaining a balance between growth and profitability in the current market environment [5][39] Other Important Information - The company announced an increase in its quarterly cash dividend, reflecting confidence in its business strategies [56] - The investment strategy remains conservative, focusing on high credit quality and attractive spread products [49][50] Q&A Session Summary Question: What are the expectations for future premium growth? - The company is implementing strategies to stabilize personal lines premiums while emphasizing growth in commercial lines [33] Question: How is the company addressing inflationary pressures? - Management is closely monitoring economic inflation and its potential impacts on claims costs, ensuring disciplined pricing strategies [41][42]

Financial Performance - Q1 2025 - Net premiums earned reached $2327 million, a 22% increase compared to Q1 2024[20, 22] - Net investment income increased by 92% to $120 million[20, 26] - The loss ratio improved significantly by 96 percentage points to 567%[20, 22] - Net income saw a substantial increase of 3232% to $252 million[22] Premium Trends - Overall net premiums written decreased slightly by 17% to $2471 million[22, 23] - Commercial lines net premiums written increased by 33% to $1606 million, driven by solid retention and renewal premium increases[23, 24] - Personal lines net premiums written decreased by 99% to $865 million, primarily due to planned attrition and lower new business writings[23, 24] Portfolio and Strategy - The investment portfolio totaled $14 billion as of March 31, 2025, emphasizing high-quality fixed-income securities[25] - The company is focused on growing commercial lines while maintaining a profitable book of personal lines[8] - Renewal premium increases averaged approximately 106%, excluding workers' compensation[24]

[Financial & Operational Highlights](index=1&type=section&id=Donegal%20Group%20Inc.%20Announces%20First%20Quarter%202025%20Results) Donegal Group Inc. announced strong first quarter 2025 results, driven by significant improvements in underwriting and investment performance [Q1 2025 Financial Performance Summary](index=1&type=section&id=Financial%20Summary) Donegal Group reported record Q1 2025 earnings with net income surging 323.2% to $25.2 million and a combined ratio improving to 91.6% Q1 2025 Financial Performance | Financial Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Premiums Earned | $232.7M | $227.7M | 2.2% | | Total Revenues | $245.2M | $241.1M | 1.7% | | Net Income | $25.2M | $6.0M | 323.2% | | Non-GAAP Operating Income | $25.6M | $4.3M | 496.8% | | Net Income per Class A Share (diluted) | $0.71 | $0.18 | 294.4% | | Book Value per Share | $16.24 | $14.53 | 11.8% | - The combined ratio significantly improved to **91.6%** in Q1 2025, compared to **102.4%** in Q1 2024, indicating enhanced underwriting profitability[3](index=3&type=chunk) - The annualized return on average equity rose sharply to **17.8%** from **4.9%** in the prior-year quarter[3](index=3&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management attributed record earnings to strategic initiatives and operational discipline, focusing on sustained profitability and commercial growth - The company achieved record earnings for the second consecutive quarter, reflecting deliberate actions to prioritize sustained profitability[2](index=2&type=chunk) - The strategic focus in commercial lines is on growing the middle market segment, while personal lines strategy involves limiting new business and non-renewing a legacy Maryland book to maintain profitability[5](index=5&type=chunk) - Management expressed confidence in navigating the evolving insurance landscape and capitalizing on future growth opportunities to enhance shareholder value[5](index=5&type=chunk) [Insurance Operations Analysis](index=2&type=section&id=Insurance%20Operations) The company's insurance operations demonstrated improved underwriting profitability driven by a lower combined ratio and strategic premium adjustments [Premiums Analysis](index=2&type=section&id=Net%20Premiums%20Written) Net premiums earned increased by 2.2% to $232.7 million, while net premiums written decreased by 1.7% due to strategic shifts in personal lines Premiums (Q1 2025 vs Q1 2024) | Premiums (Q1 2025 vs Q1 2024) | Commercial Lines | Personal Lines | Total | | :--- | :--- | :--- | :--- | | Net Premiums Earned | $136.2M (+3.1%) | $96.5M (+0.9%) | $232.7M (+2.2%) | | Net Premiums Written | $160.6M (+3.3%) | $86.5M (-9.9%) | $247.1M (-1.7%) | - The decline in net premiums written was primarily due to a **$9.5 million** decrease in personal lines, attributed to planned attrition and lower new business writings[9](index=9&type=chunk) - Commercial lines net premiums written grew by **$5.1 million**, mainly from solid retention and renewal premium increases, partially offset by lower new business[9](index=9&type=chunk) [Underwriting Performance](index=3&type=section&id=Underwriting%20Performance) Underwriting profitability dramatically improved with the GAAP combined ratio falling to 91.6%, driven by lower loss ratios and favorable reserve development GAAP Combined Ratio Components | GAAP Combined Ratio Components | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Core Loss Ratio | 54.4% | 58.7% | | Weather-related Loss Ratio | 3.7% | 4.7% | | Large Fire Loss Ratio | 3.1% | 6.6% | | Net Prior-Year Reserve Development | -4.5% | -3.7% | | **Total Loss Ratio** | **56.7%** | **66.3%** | | Expense Ratio | 34.6% | 35.7% | | **Combined Ratio** | **91.6%** | **102.4%** | - Large fire losses decreased significantly to **$7.7 million** from **$15.0 million** in the prior-year quarter, primarily due to lower loss frequency and severity[12](index=12&type=chunk) - Net favorable development of prior-year reserves reduced the loss ratio by **4.5 percentage points**, an increase from the **3.7 percentage point** reduction in Q1 2024[13](index=13&type=chunk) - The expense ratio decreased to **34.6%** from **35.7%**, reflecting successful expense management initiatives[14](index=14&type=chunk) [Investment Operations](index=4&type=section&id=Investment%20Operations) The company's investment operations generated increased net investment income from a high-quality fixed-maturity portfolio, despite minor equity losses [Investment Portfolio and Strategy](index=4&type=section&id=Investment%20Portfolio) The investment strategy focuses on generating after-tax income from a $1.41 billion portfolio primarily composed of high-quality fixed-maturity securities - The investment strategy focuses on generating income from a high-quality securities portfolio, minimizing credit risk[15](index=15&type=chunk) Investment Portfolio Composition | Investment Type | % of Portfolio (Mar 31, 2025) | | :--- | :--- | | Corporate securities | 31.4% | | Obligations of states and political subdivisions | 29.3% | | Mortgage-backed securities | 22.5% | | U.S. Treasury and government agencies | 12.5% | | Equity securities | 2.9% | | Short-term investments | 1.5% | [Investment Results](index=5&type=section&id=Investment%20Results) Net investment income increased 9.2% to $12.0 million, though the company recorded net investment losses due to equity market value declines - Net investment income grew **9.2%** to **$12.0 million**, driven by an increase in average investment yield and higher average invested assets[17](index=17&type=chunk) - The company recorded net investment losses of **$0.5 million**, compared to net investment gains of **$2.1 million** in Q1 2024, due to market value declines in equity holdings[18](index=18&type=chunk) [Shareholder Information](index=5&type=section&id=Shareholder%20Information) Book value per share increased to $16.24, driven by strong net income and unrealized gains, alongside declared quarterly cash dividends [Book Value and Dividends](index=5&type=section&id=Book%20Value%20and%20Dividends) Book value per share increased to $16.24 due to strong net income and unrealized gains, with regular quarterly cash dividends declared - Book value per share rose to **$16.24** at March 31, 2025, from **$15.36** at December 31, 2024, an increase of **$0.88** per share[19](index=19&type=chunk) - On April 17, 2025, the company declared quarterly cash dividends of **$0.1825** per Class A share and **$0.165** per Class B share[25](index=25&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Definitions%20of%20Non-GAAP%20Financial%20Measures) This section defines and reconciles key non-GAAP measures, including operating income and net premiums written, providing additional performance insights - The company utilizes non-GAAP measures such as net premiums written, operating income or loss, and statutory combined ratio, which are common in the insurance industry, to provide additional perspective on performance[20](index=20&type=chunk)[21](index=21&type=chunk) Reconciliation of Net Income to Operating Income (in thousands) | Reconciliation (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Income to Operating Income** | | | | Net income | $25,205 | $5,956 | | Investment (losses) gains (after tax) | $372 | $(1,670) | | **Non-GAAP operating income** | **$25,577** | **$4,286** | Reconciliation of Net Premiums Earned to Written (in thousands) | Reconciliation (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Premiums Earned to Written** | | | | Net premiums earned | $232,702 | $227,749 | | Change in net unearned premiums | $14,390 | $23,693 | | **Net premiums written** | **$247,092** | **$251,442** | [Financial Statements](index=7&type=section&id=Financial%20Supplement) This section presents the unaudited Consolidated Statements of Income and Balance Sheets, detailing the company's financial performance and position - The Consolidated Statements of Income detail the components of revenue and expenses for the quarters ended March 31, 2025 and 2024[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - The Consolidated Balance Sheets present the company's financial position as of March 31, 2025, compared to December 31, 2024[35](index=35&type=chunk)[36](index=36&type=chunk)

Financial Performance - Donegal Group Inc. reported net premiums earned of $232.7 million for Q1 2025, a 2.2% increase from $227.7 million in Q1 2024 [1][3] - Total revenues for Q1 2025 were $245.2 million, up 1.7% from $241.1 million in Q1 2024 [1][34] - Net income surged to $25.2 million, or $0.71 per diluted Class A share, compared to $6.0 million, or $0.18 per diluted Class A share in the prior year, reflecting a 323.2% increase [1][34] - Non-GAAP operating income reached $25.6 million, a 496.8% increase from $4.3 million in Q1 2024 [1][34] Underwriting Performance - The combined ratio improved significantly to 91.6% in Q1 2025 from 102.4% in Q1 2024, indicating better underwriting profitability [3][9] - The core loss ratio decreased to 54.2% in Q1 2025 from 58.7% in Q1 2024, reflecting effective loss management strategies [10][12] - Weather-related losses were $8.6 million, contributing 3.7 percentage points to the loss ratio, down from $10.8 million and 4.7 percentage points in the previous year [13] Investment Operations - Net investment income for Q1 2025 was $12.0 million, a 9.2% increase from $11.0 million in Q1 2024, driven by higher average investment yield [19] - The company reported net investment losses of $0.5 million in Q1 2025, compared to net investment gains of $2.1 million in Q1 2024, attributed to a decrease in the market value of equity securities [20] Strategic Focus - The company is prioritizing sustained profitability while pursuing targeted premium growth, particularly in commercial lines [2][5] - In personal lines, growth was constrained by intentional strategies, including limiting new business volume and non-renewal of a legacy book of business [5][8] - Donegal Group aims to enhance operational capabilities and capitalize on future growth opportunities to increase shareholder value [5][31] Book Value and Equity - Book value per share increased to $16.24 at March 31, 2025, from $14.53 at March 31, 2024, reflecting strong financial performance [1][21] - The annualized return on average equity was 17.8% for Q1 2025, significantly higher than 4.9% in Q1 2024 [1][34]