Executive Summary

Q3 2025 was solid: total revenues of $245.9M and GAAP diluted EPS of $0.55; the GAAP combined ratio improved to 95.9% from 96.4% YoY, aided by benign weather and lower expense ratio .
Against S&P Global consensus, DGICA delivered a modest beat: Primary EPS $0.52 vs $0.51 est and revenue $245.9M vs $243.9M est; note Primary EPS aligns to the company’s non-GAAP operating diluted EPS ($0.52) rather than GAAP ($0.55) *.
Personal lines premiums continue to decline intentionally to protect margins, while commercial lines showed renewal pricing strength and solid retention; management highlighted completion of major commercial and personal lines systems releases to support targeted growth .
Key catalysts: benign weather (lowest third-quarter weather loss ratio impact in 20 years), improved core loss ratios in personal lines, and higher investment income from yields; dividend maintained ($0.1825 A / $0.165 B) .

What Went Well and What Went Wrong

What Went Well

Core personal lines loss ratio improved materially (46.6% vs 52.5% YoY) on ongoing rate increases; overall GAAP combined ratio improved to 95.9% and statutory total lines to 95.5% .
Weather losses were subdued at $14.3M (6.2 pts of loss ratio), the lowest third-quarter impact in 20 years, supporting underwriting profitability .
Investment income rose 28.8% YoY to $13.9M on higher average yields; book value per share increased to $17.14, aided by $16.0M after-tax unrealized gains in AFS fixed maturities in 2025 .
Quote: “We are encouraged to see a continuation of favorable results… disciplined underwriting and ongoing strategic execution will provide sustained excellent financial performance over time.” – Kevin Burke, CEO .

What Went Wrong

Commercial core loss ratio worsened (54.0% vs 48.5% YoY) driven by higher casualty loss severity; large fire losses increased to $10.0M (4.4 pts), including homeowners fires .
Net premiums written fell 5.4% YoY as intentional pullback in personal lines (-15.9%) outweighed commercial growth (+3.4%); total net premiums earned declined 3.4% YoY .
Reserve development turned modestly unfavorable (+0.4 pts) vs favorable (-2.6 pts) a year ago on select claims in personal auto and other commercial lines for AY 2022/2024 .

Financial Results

Quarterly Performance vs Prior Quarters

Metric	Q1 2025	Q2 2025	Q3 2025
Total Revenues ($USD Millions)	$245.174	$247.148	$245.919
Net Income ($USD Millions)	$25.205	$16.866	$20.080
Diluted EPS – Class A ($)	$0.71	$0.46	$0.55
Non-GAAP Operating EPS – Class A ($)	$0.72	$0.43	$0.52
GAAP Combined Ratio (%)	91.6%	97.7%	95.9%
Loss Ratio (%)	56.7%	65.1%	62.1%
Expense Ratio (%)	34.6%	32.2%	33.5%
Dividend Ratio (%)	0.3%	0.4%	0.3%

Year-over-Year Q3 Comparison

Metric	Q3 2024	Q3 2025
Total Revenues ($USD Millions)	$251.738	$245.919
Net Premiums Earned ($USD Millions)	$237.957	$229.822
Net Income ($USD Millions)	$16.752	$20.080
Diluted EPS – Class A ($)	$0.51	$0.55
GAAP Combined Ratio (%)	96.4%	95.9%

Segment Breakdown (Net Premiums Earned)

Segment	Q1 2025 ($USD Millions)	Q2 2025 ($USD Millions)	Q3 2025 ($USD Millions)
Commercial Lines	$136.216	$138.527	$140.289
Personal Lines	$96.486	$93.248	$89.533
Total	$232.702	$231.775	$229.822

KPIs and Underwriting Drivers

KPI	Q1 2025	Q2 2025	Q3 2025
Core Loss Ratio (Total Lines)	54.4%	50.1%	51.1%
Weather Loss Impact (pts)	3.7	11.1	6.2
Large Fire Loss Impact (pts)	3.1	5.2	4.4
Reserve Development (pts)	-4.5	-1.3	+0.4
Investment Income ($USD Millions)	$11.984	$12.540	$13.943
Book Value per Share ($)	$16.24	$16.62	$17.14
Annualized ROAE (%)	17.8%	11.3%	13.0%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Personal lines premiums trajectory	2H 2025–2026	Focus on profitability; constrained new business	Expect modest declines through balance of 2025 and into 2026 as new business resumes gradually	Maintained cautious stance
Systems modernization – Commercial	2H 2025–1H 2026	Final major release deployed; rollout state-by-state in 2H 2025; completion 1H 2026	Fully deployed final major release; targeting profitable middle-market accounts	Execution progressing
Systems modernization – Personal	Through June 2027	Legacy conversion ongoing	Final major release deployed; conversion of remaining legacy policies to complete by June 2027	Timeline affirmed
Expense ratio – allocated modernization costs	FY 2025	~1.0 pt FY impact; 1.0 pt in Q2	~1.2 pts in Q3 and YTD; expected to subside gradually over several years	Slightly higher in Q3; downtrend expected
Dividend	Q4 2025	Quarterly dividend cadence maintained	$0.1825 (Class A), $0.165 (Class B) payable Nov 17, 2025	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2025)	Previous Mentions (Q1 2025)	Current Period (Q3 2025)	Trend
Technology modernization	Final commercial release deployed; rollout 2H 2025; single platform by 1H 2026	Ongoing modernization; impact on expense ratio peaking in 2024	Final releases deployed for both segments; personal lines conversion by June 2027	Execution progressing
Underwriting discipline	Commercial: mixed ratios; personal lines improving; intentional slowing in personal new business	Personal lines rate adequacy; constrained new business; improved combined ratio	Commercial renewal price increases; strong retention; targeted new business; personal lines focus on profitability	Stable/improving
Weather/catastrophe	Q2: elevated weather (11.1 pts); April wind/hail event	Q1: below-average weather impact (3.7 pts)	Q3: lowest third-quarter weather impact in 20 years (6.2 pts)	Favorable
Tariffs/inflation/social inflation	Noted as risk factors; loss costs pressure	Monitoring tariff/inflation impacts on loss costs	Continued macro risks cited in Safe Harbor	Persistent risk
Personal vs. commercial mix	Personal lines intentional decline; commercial modest growth	Personal constrained; commercial targeted growth	Personal declines continue; commercial retention/pricing strong	Mix shifting to commercial
Middle market focus	Targeting middle market with enhanced platform	Building capabilities	Expect enhanced ability to win profitable middle market accounts	Strengthening execution

Management Commentary

“We are encouraged to see a continuation of favorable results in the third quarter… We remain confident that our disciplined underwriting and ongoing strategic execution will provide sustained excellent financial performance over time.” – Kevin G. Burke, President & CEO .
“In our commercial lines… strong renewal price increases coupled with solid retention… systems transformation project… enhance our ability to target and win profitable middle market accounts.” .
“In our personal lines… focus on profitability and controlling new business… conversion of all remaining legacy policies… completed in June 2027… expect modest declines in personal lines premiums through the balance of 2025 and into 2026.” .

Q&A Highlights

The company hosted a pre-recorded webcast with a pre-recorded Q&A following formal remarks; questions were solicited by email ahead of the event (no public transcript available in our dataset) .
Management commentary addressed underwriting discipline, systems modernization milestones, and segment strategies (as reflected in press releases and 8-K) .
Investors should note the emphasis on measured commercial growth and guarded personal lines re-expansion in 2026, with expense ratio modernization costs expected to fade over time .

Estimates Context

Metric	Consensus (S&P Global)	Actual Reported	Beat/Miss
Primary EPS (Q3 2025)	$0.51*	$0.52* (Primary EPS; aligns with non-GAAP operating diluted EPS $0.52)	Beat
Revenue (Q3 2025)	$243.9M*	$245.9M	Beat
Primary EPS – # of Estimates	2*	—	—
Revenue – # of Estimates	1*	—	—

Values retrieved from S&P Global.*

Implications: With modest beats on both Primary EPS and revenue, estimate revisions are likely to bias slightly upward for FY 2025 operating EPS and potentially FY 2026 as personal lines stabilize and investment yields remain supportive *.

Key Takeaways for Investors

Q3 delivered improved underwriting results with combined ratio at 95.9% and a favorable weather backdrop; sustained expense discipline supported margin quality .
Personal lines remain intentionally constrained to preserve margins; expect modest declines through 2025–2026, with gradual re-acceleration post-platform conversion .
Commercial lines show healthy renewal pricing and retention; systems modernization positions DGICA to pursue profitable middle market growth in 2026 .
Investment income tailwind from higher yields continues; book value accretion supported by unrealized gains within fixed maturities .
Reserve development turned slightly unfavorable in Q3; watch casualty severity trends and large fire loss frequency into Q4 .
Dividend maintained ($0.1825 A / $0.165 B), signaling confidence in capital position and cash generation .
Trading setup: modest beats, benign cat activity, and margin resilience are supportive near-term; medium-term thesis hinges on execution of measured commercial growth and normalization of personal lines while modernization costs fade .

DONEGAL GROUP INC (DGICA)·Q3 2025 Earnings Summary