MARIETTA, PA — Donegal Group Inc. (Nasdaq: DGICA, DGICB) reported a 9.6% decline in third-quarter profit as intensifying competition reduced insurance premium volume and higher weather-related losses pressured underwriting results, prompting the Pennsylvania insurer to pursue more selective growth.
Net income fell to $18.2 million, or 49 cents per diluted Class A share, for the quarter ended September 30, 2026, compared with $20.1 million, or 55 cents per share, a year earlier.
Net premiums earned declined 3% to $222.9 million, while total revenue decreased 3.4% to $237.7 million.
The company’s combined ratio, a measure of claims and underwriting expenses relative to premiums, increased to 96.5% from 95.9%. A ratio below 100% indicates an underwriting profit.
Donegal attributed the decline in premium volume to competitive pricing conditions that contributed to higher customer attrition and smaller renewal premium increases.
“As expected, we continued to experience soft market conditions throughout our operating regions in the third quarter of 2026,” Chief Executive Officer Kevin Burke stated.
Burke said the conditions continued to impede the company’s premium growth plans, although underwriting operations remained profitable.
Net premiums written, which measure premiums on policies written during the period after reinsurance, declined 4.5% to $209.7 million.
Commercial lines premiums written decreased 3.7% to $125.5 million, reflecting higher attrition and smaller renewal rate increases, partially offset by additional new business.
Personal lines premiums written fell 5.6% to $84.2 million, with personal automobile premiums declining 9% and homeowners premiums slipping 0.5%.
Donegal reintroduced 12-month policy terms for new personal automobile business during the quarter, replacing the six-month terms previously offered to those customers.
According to Burke, customers selected the longer term for the vast majority of new automobile policies written during the period, effectively doubling the premiums recorded for those policies compared with six-month contracts.
Despite that change, competitive pressures continued to constrain overall premium growth.
Commercial lines premiums earned increased 1.9% to $142.9 million, while personal lines premiums earned declined 10.7% to $80 million.
Underwriting results also reflected higher weather-related claims and unusually severe workers’ compensation losses.
Weather-related losses increased to $19.1 million from $14.3 million a year earlier, including $4.2 million associated with a severe convective storm in July.
The quarterly weather losses remained below Donegal’s five-year third-quarter average of $20.4 million.
Large fire losses declined to $5.8 million from $10 million, partially offsetting the increase in storm-related claims.
The company also recorded $3.5 million in favorable development of reserves established for prior-year claims, compared with $1 million in unfavorable development a year earlier.
Donegal’s overall loss ratio improved to 61.5% from 62.1%, but its expense ratio increased to 34.8% from 33.5%, primarily because expenses were spread across a smaller premium base.
The commercial insurance segment experienced greater underwriting pressure, with its statutory combined ratio increasing to 100.7% from 96.6%.
Workers’ compensation was a significant contributor, with its combined ratio rising to 128.1% from 103.9% as claim severity increased.
Commercial automobile underwriting improved, with its combined ratio declining to 96.9% from 100.9%.
Personal lines performed more favorably. The segment’s statutory combined ratio improved to 90.1% from 94.1%, supported by stronger homeowners and automobile underwriting results.
Investment income provided additional support to earnings.
Net investment income increased 5.4% to $14.7 million, reflecting higher yields on the company’s investment portfolio.
Donegal recorded $701,000 in net investment losses during the quarter, compared with $1.3 million in gains a year earlier. The current-period losses were primarily associated with sales of fixed-maturity securities.
Non-GAAP operating income, which excludes certain investment results and other items, declined 2.3% to $18.6 million, or 50 cents per diluted Class A share.
For the first nine months of 2026, net income decreased 16.4% to $52 million from $62.2 million a year earlier.
Nine-month net premiums earned declined 4% to $666.8 million, while total revenue fell 3.1% to $714.8 million.
The nine-month combined ratio increased to 97.3% from 95.1%, reflecting weaker underwriting profitability over the period.
Donegal reported an annualized return on average equity of 10.9% for the third quarter, down from 13% a year earlier.
Book value per share increased to $17.70 at September 30 from $17.14 a year earlier, despite $24.1 million in after-tax unrealized losses on available-for-sale fixed-maturity securities during the first nine months of 2026.
The company’s investment portfolio totaled approximately $1.49 billion at quarter-end, with 95% invested in fixed-maturity securities.
Management is working with independent insurance agents on plans for 2027, emphasizing underwriting discipline and selective new business rather than pursuing premium growth through more aggressive pricing.
Burke indicated that the company is targeting modest premium growth in recognition of prevailing competitive conditions.
Separately, Donegal declared quarterly cash dividends of 19.25 cents per Class A share and 17.5 cents per Class B share, payable November 16 to shareholders of record November 2.
Donegal Group operates property and casualty insurance businesses across 21 states through subsidiaries and affiliates that conduct business alongside Donegal Mutual Insurance Company as the Donegal Insurance Group.
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