MARIETTA, PA — Donegal Group Inc. (NASDAQ: DGICA, DGICB) posted a sharp year-over-year increase in second-quarter profit, with net income rising to $16.9 million, or $0.46 per diluted Class A share, up from $4.2 million, or $0.13 per share, in the same period last year. The gain reflects improvements in underwriting and investment income, even as premium volumes declined and weather-related losses remained elevated.
The company’s combined ratio—a key measure of underwriting profitability—improved to 97.7% from 103.0% a year ago. Annualized return on average equity rose to 11.3%, compared to 3.4% in the prior-year period. Book value per share climbed to $16.62 as of June 30, up from $14.48 a year earlier.
President and CEO Kevin G. Burke said the results demonstrate the insurer’s ongoing commitment to disciplined underwriting and long-term profitability. “We are pleased with the progress we have made and the results we delivered for both the second quarter and first half of 2025,” Burke stated. He cited meaningful improvements in the core loss ratio and reaffirmed the company’s focus on high-quality growth and systems modernization.
Premiums and Underwriting Trends
Net premiums earned declined 1.1% to $231.8 million in the second quarter, while net premiums written fell 5.4%, reflecting a deliberate pullback in personal lines business and flat new commercial writings. Commercial lines premiums rose 1.9%, while personal lines dropped 15.3%, due largely to reduced new business volume and policy non-renewals.
The overall loss ratio improved to 65.1%, down from 70.6% in Q2 2024. Core loss ratios in commercial and personal lines declined to 54.5% and 43.3%, respectively, aided by premium rate increases and improved risk selection.
However, weather-related losses remained a drag, totaling $25.8 million, slightly above the $24.7 million recorded a year earlier and well above the company’s five-year second-quarter average of $18.9 million. Notably, Atlantic States Insurance Company incurred $3 million in net losses from an April wind and hail event, with Donegal Mutual absorbing excess losses under a reinsurance agreement.
Large fire losses totaled $12.1 million, roughly in line with last year, while net favorable reserve development reduced the loss ratio by 1.3 points—a meaningful improvement over the flat reserve impact in Q2 2024.
The expense ratio ticked up slightly to 32.2% from 31.9%, due mainly to increased performance-based compensation costs. Management expects the impact from its systems modernization project to gradually decline in coming years.
Investment Gains and Book Value Growth
Investment income rose 13.3% to $12.5 million, driven by higher yields on fixed-income securities. About 95% of Donegal’s portfolio remains invested in high-grade, marketable bonds. The company recorded $1.5 million in net investment gains, primarily from unrealized equity gains, helping lift book value by $1.26 per share since year-end.
Modernization Efforts and Strategic Outlook
Donegal reached a milestone in its multi-year technology overhaul by completing the final major release of its commercial lines platform. The rollout will continue state-by-state in the second half of 2025, with full integration expected by mid-2026. The new platform is designed to enhance the company’s competitiveness in the middle-market segment.
Looking forward, Burke emphasized the company’s focus on “disciplined execution, organizational alignment and operational excellence” as it seeks to strengthen its market position.
Dividend Declared
The board declared a quarterly dividend of $0.1825 per share for Class A stock and $0.165 for Class B, payable August 15 to shareholders of record as of August 1.
Despite market headwinds and weather volatility, Donegal’s second-quarter performance underscores the benefits of disciplined underwriting, cautious growth strategies, and steady investment management.
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