Executive Summary

Q2 2025 was solid: GAAP diluted EPS $0.46 and non-GAAP operating EPS $0.43, with a GAAP combined ratio of 97.7% as improved core loss ratios and higher net investment income offset above-average weather and slightly higher expenses .
Against S&P Global consensus, DGICA delivered a modest EPS beat (Primary EPS actual 0.43 vs 0.39) and essentially in-line revenue ($247.15M actual vs $247.21M estimate); note “Primary EPS” tracked by S&P aligns with the company’s non-GAAP operating EPS, not GAAP diluted EPS (see reconciliation) *.
Personal lines were intentionally slowed (NPW -15.3% YoY) to protect margins while commercial lines continued to grow modestly (+1.9% NPW), driving YoY loss ratio improvement (65.1% vs 70.6% last year) despite weather losses above the 5‑year average .
Strategic catalyst: completion of the final major commercial lines systems release with state-by-state rollout beginning in H2 2025; management expects to be on a single modern platform for middle market and small business products by H1 2026, a potential productivity and growth unlock .
Capital return steady: quarterly dividend of $0.1825 (Class A) and $0.165 (Class B), payable August 15, 2025; book value per share increased to $16.62 from $15.36 at year-end 2024 .

What Went Well and What Went Wrong

What Went Well

Core underwriting continued to improve: total core loss ratio fell to 50.1% from 55.0% YoY, with sizable improvement in personal lines core loss ratio (43.3% vs 55.3% YoY) as earned-rate increases flowed through .
Investment income tailwind: net investment income rose 13.3% YoY to $12.5M as portfolio yields stepped higher; book value benefited from both earnings and after-tax unrealized gains ($10.7M YTD) .
Technology milestone: “successful deployment of our final major commercial lines systems release,” with H2 2025 rollout; management emphasized underwriting discipline and targeting profitable middle market accounts: “we remain focused on disciplined execution...and operational excellence” .

What Went Wrong

Weather above trend: weather-related losses were $25.8M (11.1 pts of loss ratio) vs a 5‑year second-quarter average of $18.9M (9.2 pts) .
Expense ratio edged up: 32.2% vs 31.9% last year, reflecting higher underwriting-based incentive costs; systems modernization costs still contribute ~1.0 pt in 2025 (down from ~1.3 pts in 2024) .
Personal lines contraction by design: personal NPW fell 15.3% YoY as the company limited new business and executed non-renewals (offset partially by rate increases and retention); this tempers top-line growth near-term .

Financial Results

Headline metrics vs prior periods

Metric	Q2 2024	Q1 2025	Q2 2025
Total Revenues ($USD Millions)	$246.77	$245.17	$247.15
Net Income ($USD Millions)	$4.15	$25.21	$16.87
Diluted EPS – Class A ($)	$0.13	$0.71	$0.46
Non-GAAP Operating EPS – Class A ($)	$0.11	$0.72	$0.43
GAAP Combined Ratio (%)	103.0	91.6	97.7
Loss Ratio (%)	70.6	56.7	65.1
Expense Ratio (%)	31.9	34.6	32.2
Dividend Ratio (%)	0.5	0.3	0.4

Notes: Non-GAAP operating EPS excludes after-tax net investment gains/losses (reconciled in releases) .

Segment breakdown – Net Premiums Earned

Metric ($USD Millions)	Q2 2024	Q1 2025	Q2 2025
Commercial Lines NPE	$134.49	$136.22	$138.53
Personal Lines NPE	$99.82	$96.49	$93.25
Total NPE	$234.31	$232.70	$231.78

Net Premiums Written (NPW) by Segment

Metric ($USD Millions)	Q2 2024	Q1 2025	Q2 2025
Commercial Lines NPW	$142.25	$160.62	$144.91
Personal Lines NPW	$104.94	$86.47	$88.90
Total NPW	$247.19	$247.09	$233.81

KPIs and Loss Drivers

KPI	Q2 2024	Q1 2025	Q2 2025
Weather-Related Losses ($USD Millions)	$24.7	$8.6	$25.8
Large Fire Losses ($USD Millions)	$12.5	$7.7	$12.1
Net Prior-Year Reserve Development (pts)	-0.3 pts	-4.5 pts	-1.3 pts
Annualized ROAE (%)	3.4	17.8	11.3
Book Value per Share ($)	$14.48	$16.24	$16.62

Versus Estimates (S&P Global consensus)

Metric	Q2 2024	Q1 2025	Q2 2025
Primary EPS – Consensus Mean ($)	0.085*	0.345*	0.390*
Primary EPS – Actual ($)	0.110*	0.720*	0.430*
Revenue – Consensus Mean ($USD Millions)	241.93*	249.36*	247.21*
Revenue – Actual ($USD Millions)	246.77*	245.17*	247.15*

Values retrieved from S&P Global.*
Note: S&P’s “Primary EPS” actual for Q2 2025 (0.43) aligns with DGICA’s non-GAAP operating EPS; GAAP diluted EPS was $0.46 (see reconciliation) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Expense ratio impact from systems modernization	FY 2025	~1.0 percentage point (Q1 commentary)	~1.0 percentage point (Q2 commentary)	Maintained
Commercial platform rollout	H2 2025 – H1 2026	Deploy final major commercial lines release in July 2025 (then rollouts); personal lines legacy conversions through mid-2026; final legacy policy by mid-2027	Final commercial release deployed; begin state-by-state rollout H2 2025; single modern platform for middle market and small business by H1 2026	Timeline refined/affirmed
Dividend	Q3 2025 pay date	$0.1825 (A)/$0.165 (B) declared April 17 for May 15, 2025	$0.1825 (A)/$0.165 (B) declared July 17, payable Aug 15, 2025	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Systems modernization	Q4: two major releases pending; July 2025 commercial release planned; expense ratio peak in 2024; continued investment	Final major commercial release achieved; rollout H2 2025; single platform H1 2026	Execution progressing
Underwriting discipline/rate adequacy	Q4: double-digit rate (ex-WC); core loss ratio improved in all lines ; Q1: total rate +9.6% (10.6% ex-WC), strong personal lines core improvement	Personal lines slowed to protect margins; core ratio improvement maintained; continued pruning/targeting profitable classes	Sustained discipline
Personal lines strategy	Q4: intentional non-renewals, Maryland runoff; slow new business ; Q1: new business constrained, targeting stabilization later in 2025	Personal NPW -15.3% YoY; rate increases and retention partly offset decline	Contraction by design
Weather and CAT management	Q4: weather below 5-yr avg; CAT retention unchanged; added cat reinsurance limit	Weather losses above 5-yr avg; one April wind/hail event; managed via reinsurance	Mixed; elevated Q2
Social inflation/legal	Q4: watching auto liability severity; litigation trends ; Q1: monitoring social inflation; tools to mitigate	Risk factor reiterated in safe harbor; ongoing vigilance	Persistent external risk
Macro/tariffs	Q1: tariffs could impact auto/construction costs; ready to respond	Tariffs cited in risk factors	Ongoing watch item

Management Commentary

“A meaningful improvement in our core loss ratio for both periods underscores our commitment to disciplined risk management and sustainable profitability...we intentionally slowed new business writings in our personal lines...to protect underwriting margins” — Kevin G. Burke, CEO .
“We reached a significant milestone...with the successful deployment of our final major commercial lines systems release...During the second half of 2025, we will begin to roll out this enhanced platform...When the rollout is completed in the first half of 2026, we will be operating on a single modern technology platform...” .
Investment strategy remains conservative with 95.4% of investments in fixed maturities; average yield increased to 3.5% (tax-equivalent 3.6%) .

Q&A Highlights

There was no live earnings call transcript for Q2 2025; management provided a pre-recorded webcast and supplemental presentation, with questions submitted in advance .
Key clarifications conveyed in prepared materials: continued emphasis on underwriting margin over top-line in personal lines; expense ratio impact from modernization trending down to ~1.0 pt in 2025; staged platform rollout through H2 2025/H1 2026 .

Estimates Context

EPS beat: S&P Global “Primary EPS” actual of 0.43 vs 0.39 consensus (beat $0.04); note that S&P “Primary EPS” aligns with DGICA’s non-GAAP operating EPS ($0.43), while GAAP diluted EPS was $0.46 (benefiting $0.03 from after-tax investment gains) * .
Revenue in line: $247.15M actual vs $247.21M consensus (slight miss ~$0.06M) as higher investment income was the incremental driver of net income vs underwriting headwinds from weather .
Values retrieved from S&P Global.

Key Takeaways for Investors

Underwriting remains on track: core loss ratios improved YoY with personal lines margins benefiting from earned rates and portfolio pruning; watch for sustainability if weather normalizes and legal trends persist .
Earnings quality: EPS beat was driven by core underwriting improvement plus higher investment income; GAAP vs non-GAAP EPS gap ($0.46 vs $0.43) primarily reflects $0.03 after-tax investment gains .
Top-line trajectory: expect subdued personal lines growth near term given intentional constraints; commercial momentum should continue with improved capabilities post-platform rollout .
Cost curve: expense ratio headwind from modernization peaked in 2024 (~1.3 pts) and is ~1.0 pt in 2025, supporting medium-term combined ratio improvement as initiatives mature .
Capital strength: book value up to $16.62; dividend maintained ($0.1825/$0.165), underscoring capital discipline; investment portfolio remains high quality with improving yields .
Near-term catalysts: execution of H2 2025 commercial platform rollout; continued favorable core loss ratios; stabilization of personal lines premium base as 2025 progresses .
Estimate revisions: modest upward bias to near-term EPS given Q2 beat and yield tailwinds, tempered by elevated weather and social inflation risks; watch expense ratio trajectory and rate adequacy into H2 *.

Footnote: Values retrieved from S&P Global.*

DONEGAL GROUP INC (DGICA)·Q2 2025 Earnings Summary