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1. Company Snapshot

1.a. Company Description

Donegal Group Inc., an insurance holding company, provides personal and commercial lines of property and casualty insurance to businesses and individuals.It operates through three segments: Investment Function, Personal Lines of Insurance, and Commercial Lines of Insurance.The company offers private passenger automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents, as well as protection against loss from damage to automobiles; and homeowners policies, which provide coverage for damage to residences and their contents from a range of perils, including fire, lightning, windstorm, and theft, as well as liability of the insured arising from injury to other persons or their property.


It also offers commercial automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured; commercial multi-peril policies that provide protection to businesses against combining liability and physical damage coverages; and workers' compensation policies, which provide benefits to employees for injuries sustained during employment.The company markets its insurance products primarily to Mid-Atlantic, Midwestern, New England, Southern, and Southwestern regions through approximately 2,300 independent insurance agencies.Donegal Group Inc.


was incorporated in 1986 and is headquartered in Marietta, Pennsylvania.

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1.b. Last Insights on DGICB

Donegal Group Inc.'s recent performance was driven by a strong Q4 2024 earnings release, which saw a 12.4% year-over-year increase in net income. The company's Class A and Class B common stockholders also benefited from a regular quarterly dividend of $0.1725 and $0.155 per share, respectively, announced on December 19, 2024. Furthermore, the company's supplemental investor presentation highlighted its growth in written premiums, which increased by 9.2% year-over-year. These positive developments suggest a solid financial position and growth prospects for the company.

1.c. Company Highlights

2. Donegal Group Delivers Record Earnings in Q1 2025

Donegal Group reported a standout performance in Q1 2025, with net income surging to $25.2 million, up from $6 million in the same period last year. The company achieved a combined ratio of 91.6%, a significant improvement from 102.4% in Q1 2024, driven by favorable loss development and lower weather-related losses. Net premiums earned rose 2.2% to $232.7 million, while net investment income climbed to $12 million, reflecting a 9.2% year-over-year increase. Earnings per share (EPS) came in at $0.66, well above the consensus estimate of $0.3626, underscoring the company's strong execution. As Jeff Miller noted, "The improvement in our combined ratio reflects the effectiveness of our underwriting discipline and rate management strategies."

Publication Date: Apr -25

📋 Highlights
  • Record Earnings: - Donegal Group achieved record earnings in Q1 2025, with a combined ratio of 91.6%, driven by improved core loss ratios in both commercial and personal lines.
  • Net Premiums Growth: - Net premiums earned rose 2.2% to $232.7 million, with commercial lines up 3.3% and personal lines down 9.9%.
  • Loss Ratio Improvement: - The combined ratio improved from 102.4% to 91.6%, with favorable prior year reserve development of $10.5 million.
  • Weather and Fire Losses: - Weather-related losses decreased to $8.6 million, and large fire losses contributed 3.3 percentage points, down from 6.6% in Q1 2024.
  • Expense Ratio Decline: - The expense ratio improved to 34.6% from 35.7%, benefiting from expense reduction initiatives and systems modernization progress.

Commercial Lines Shine with Balanced Growth

The commercial lines segment delivered a 3.3% increase in net premiums written, supported by targeted underwriting and rate hikes averaging 10.7% for commercial auto and 12.4% for commercial multi-peril. The commercial combined ratio improved to 94.7%, with a 5.6 percentage point reduction in the loss ratio. This performance highlights the company's ability to balance growth with profitability, particularly in sectors like construction and services, where Donegal has expanded its underwriting appetite. The focus on diversifying the commercial risk portfolio, aided by a new interactive appetite guide, positions the segment for sustained growth.

Personal Lines Navigate Challenges with Rightsizing

Personal lines net premiums written declined 9.9%, primarily due to limited new business and non-renewals in Maryland. However, the segment's combined ratio improved significantly to 83.6%, with homeowners and personal auto lines seeing enhancements of 19.1 and 14.8 percentage points, respectively. The company is actively rightsizing its personal lines premium mix, with average in-force premiums increasing by 16% for homeowners and 15% for auto. This strategic focus on higher-quality policies should drive long-term profitability despite near-term top-line pressures.

Operational Excellence and Economic Vigilance

Donegal's operational initiatives are yielding tangible results, with the expense ratio improving to 34.6% from 35.7% last year. The company's systems modernization project, despite peak expenses in 2024, is on track for completion, with the final commercial release set for July 2025. Management remains vigilant about economic uncertainties, including tariff policies and medical inflation, but rate management and data-driven underwriting are helping mitigate these pressures. The collaboration between product, underwriting, and analytics teams has been instrumental in optimizing regional portfolios and balancing growth with profitability.

Valuation and Future Outlook

With a price-to-book (P/B) ratio of 1.16 and a dividend yield of 3.6%, Donegal's stock appears attractively valued given its strong underwriting results and growth prospects. The company's book value per share rose 5.7% to $16.24, supported by robust earnings and investment income. Analysts expect revenue growth of 6.9% next year, reflecting confidence in Donegal's strategic initiatives. While the company continues to navigate macroeconomic headwinds, its disciplined approach to underwriting and operational efficiency positions it well for sustained profitability.

3. NewsRoom

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Donegal Group Inc. Announces Third Quarter and First Nine Months of 2025 Results

Oct -30

Source: globenewswire.com

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Donegal Group Inc. Announces Quarterly Dividend

Oct -16

Source: globenewswire.com

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Donegal Group Inc. Announces Release Date for Third Quarter 2025 Results

Oct -06

Source: globenewswire.com

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Donegal Group: An Insurer Trading Below Its True Value

Sep -26

Source: seekingalpha.com

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Donegal Group Inc. Announces Second Quarter and First Half 2025 Results

Jul -24

Source: globenewswire.com

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Donegal Group Inc. Announces Quarterly Dividend

Jul -17

Source: globenewswire.com

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Donegal Group Inc. Announces Release Date for Second Quarter 2025 Results

Jul -02

Source: globenewswire.com

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Donegal Group: Margin Growth And Increasing Dividend Yields

Jun -30

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.65%)

6. Segments

Commercial Lines

Expected Growth: 6.5%

Donegal Group Inc.'s Commercial Lines segment growth of 6.5% is driven by increasing demand for workers' compensation and commercial auto insurance, expansion into new markets, and strategic partnerships. Additionally, the company's focus on digital transformation, improved underwriting practices, and effective risk management have contributed to the segment's growth.

Personal Lines

Expected Growth: 6.8%

Donegal Group Inc.'s Personal Lines segment growth of 6.8% is driven by increased premiums from expanded product offerings, geographic expansion, and improved underwriting practices. Additionally, strategic partnerships and investments in digital platforms have enhanced customer experience, leading to increased policyholder retention and new business growth.

Investment Function

Expected Growth: 7.2%

Donegal Group Inc.'s 7.2% investment function growth is driven by a combination of factors, including a strong underwriting discipline, strategic investments in technology, and a diversified portfolio of insurance products. Additionally, the company's focus on niche markets, such as agricultural and commercial auto, has contributed to its growth. Furthermore, Donegal's disciplined capital management and effective risk management practices have also supported its investment function growth.

Other

Expected Growth: 6.2%

Donegal Group Inc.'s 6.2% growth is driven by a combination of factors, including a strong underwriting discipline, favorable reserve development, and a growing investment portfolio. Additionally, the company's focus on niche markets, such as agricultural and commercial auto, has contributed to its growth. Furthermore, Donegal's strategic acquisitions and partnerships have expanded its reach and diversified its revenue streams.

7. Detailed Products

Personal Lines Insurance

Insurance products for individuals and families, including auto, homeowners, and umbrella insurance

Commercial Lines Insurance

Insurance products for businesses, including commercial auto, workers' compensation, and liability insurance

Farm Insurance

Specialized insurance products for farmers and agricultural businesses, including crop, livestock, and farm liability insurance

Workers' Compensation Insurance

Insurance products that provide wage replacement and medical benefits to employees injured on the job

Umbrella Insurance

Excess liability insurance that provides additional financial protection beyond standard policy limits

8. Donegal Group Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Donegal Group Inc. is moderate, as there are some alternative products and services available in the market, but they are not highly attractive to customers.

Bargaining Power Of Customers

The bargaining power of customers for Donegal Group Inc. is low, as customers have limited options and the company has a strong brand presence.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Donegal Group Inc. is moderate, as the company has some dependence on key suppliers, but it also has some bargaining power due to its size and scale.

Threat Of New Entrants

The threat of new entrants for Donegal Group Inc. is high, as the industry is attractive and there are low barriers to entry, making it easy for new companies to enter the market.

Intensity Of Rivalry

The intensity of rivalry for Donegal Group Inc. is high, as the industry is highly competitive and there are many established players, leading to a high level of competition.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 12.73%
Debt Cost 3.95%
Equity Weight 87.27%
Equity Cost 3.58%
WACC 3.63%
Leverage 14.59%

11. Quality Control: Donegal Group Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Donegal

A-Score: 5.0/10

Value: 8.9

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Quality: 3.5

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

16.59$

Current Price

16.59$

Potential

-0.00%

Expected Cash-Flows