Q4 2025 Donegal Group Inc Pre-Recorded Earnings Call

February 19, 2026

Speaker #1: Good morning, and thank you for joining us today. This morning, DONEGAL Group issued its fourth-quarter and full-year 2025 earnings release, outlining its results. The release and a supplemental investor presentation are available in the Investor Relations section of DONEGAL's website, at www.donegalgroup.com.

Operator: Good morning, and thank you for joining us today. This morning, Donegal Group issued its Q4 and full year 2025 earnings release outlining its results. The release and a supplemental investor presentation are available in the Investor Relations section of Donegal's website at www.donegalgroup.com. Please be advised that today's conference was prerecorded and all participants are in listen-only mode. Speaking today will be President and Chief Executive Officer, Kevin Burke; Chief Financial Officer, Jeff Miller; Chief Underwriting Officer, Jeff Hay; Chief Operating Officer, Dan DeLamater, and Chief Investment Officer, Tony Viozzi. Please be aware that statements made during this call that are not historical facts are forward-looking statements and necessarily involve risks and uncertainties that could cause actual results to vary materially.

Speaker #1: Please be advised that today's conference was prerecorded and all participants are in listen-only mode. Speaking today will be President and Chief Executive Officer Kevin Burke, Chief Financial Officer Jeff Miller, Chief Underwriting Officer Jeff Hay, Chief Operating Officer Dan Delimeder, and Chief Investment Officer Tony Viazi.

Speaker #1: Please be aware that statements made during this call that are not historical facts are forward-looking statements and necessarily involve risks and uncertainties that could cause actual results to vary materially.

Speaker #1: These factors can be found in DONEGAL Group's filings with a Securities and Exchange Commission, including its annual report on Form 10-K and quarterly reports on Form 10-Q.

Operator: These factors can be found in Donegal Group's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and quarterly reports on Form 10-Q. The company disclaims any obligation to update or publicly announce the results of any revisions that they may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. With that, it is my pleasure to turn it over to Mr. Kevin Burke. Kevin?

Speaker #1: The company disclaims any obligation to update or publicly announce the results of any revisions that they may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Speaker #1: With that, it is my pleasure to turn it over to Mr. Kevin Burke. e. Kevin?

Speaker #2: Thank you, and welcome, everyone, to our fourth-quarter earnings webcast. We are pleased to provide an update today on our quarterly and full-year operating results, along with key accomplishments in 2025 and areas of focus for 2026.

Kevin Burke: Thank you, and welcome everyone, to our fourth quarter earnings webcast. We are pleased to provide an update today on our quarterly and full year operating results, along with key accomplishments in 2025 and areas of focus for 2026. We ended 2025 with a solid fourth quarter. The Combined Ratio of 96.3% reflected excellent underwriting profitability, despite the impact of lower Net Premiums Earned and a few large claims that prevented us from matching the record quarterly net income we achieved in the fourth quarter of 2024. We enjoyed a continuation of relatively favorable weather in our operating regions for the fourth quarter, resulting in a weather loss ratio that was lower than the fourth quarter average for the past 5 years.

Speaker #2: We ended 2025 with a solid fourth quarter. The combined ratio of a 96.3% reflected excellent underwriting profitability despite the impact of lower net premiums earned and a few large claims that prevented us from matching the record quarterly net income we achieved in the fourth quarter of 2024.

Speaker #2: We enjoyed a continuation of relatively favorable weather in our operating regions for the fourth quarter. Resulting in a weather loss ratio that was lower than the fourth-quarter average for the past five years.

Speaker #2: Similar to the first nine months of 2025, our core loss ratio for the fourth quarter remained below our target level, driven by excellent underlying results within our personal earnings segment.

Kevin Burke: Similar to the first nine months of 2025, our core loss ratio for Q4 remained below our target level, driven by excellent underlying results within our personal lines segment. For the full year of 2025, net income of $79.3 million represents the highest amount we've achieved. While we celebrate these results, we also recognize the need for quality premium growth in order to achieve economies of scale and sustain excellent financial performance over the long term. Jeff Hay and Dan DeLamater will provide further details about our plans to generate increased levels of premium growth.

Speaker #2: For the full year of 2025, net income of $79.3 million represents the highest amount we've achieved. While we celebrate these results, we also recognize the need for quality premium growth in order to achieve economies of scale, and sustain excellent financial performance over the long term.

Speaker #2: Jeff Hay and Dan Delimeder will provide further details about our plans to generate increased levels of premium growth. Our 2026 business plan includes strategies for engagement with our independent agents, and several initiatives that we expect will generate higher levels of new business submissions, particularly in commercial lines where we are actively pursuing quality mid-market and small business accounts that meet our underwriting criteria.

Kevin Burke: Our 2026 business plan includes strategies for engagement with our independent agents and several initiatives that we expect will generate higher levels of new business submissions, particularly in commercial lines, where we are actively pursuing quality mid-market and small business accounts that meet our underwriting criteria. As we shared last quarter, we completed all of the development efforts for the multi-year systems transformation project that we started back in 2018 to replace our legacy systems. We are continuing to follow a phased schedule for the automated conversion of all remaining legacy policies that will be fully completed by mid-2027. That process is on track and progressing well, with minimal disruption to our customers or the impact to policy retention levels to date.

Speaker #2: As we shared last quarter, we completed all of the development efforts for the multi-year systems transformation project that we started back in 2018 to replace our legacy systems.

Speaker #2: We are continuing to follow a phased schedule for the automated conversion of all remaining legacy policies, which will be fully completed by mid-2027. That process is on track and progressing well, with minimal disruption to our customers or impact to policy retention levels to date.

Speaker #2: The next step in our technology transformation is the migration of our guidewire claims, billing, and policy administration applications from on-premises systems to cloud-based versions of those applications.

Kevin Burke: The next step in our technology transformation is the migration of our Guidewire claims, billing, and policy administration applications from on-premises systems to cloud-based versions of those applications. We performed a detailed assessment that identified numerous benefits of migrating these applications to the cloud, and we've developed a very comprehensive plan to migrate our claims and billing applications in early 2027. Migrating to Guidewire Cloud will allow us to leverage the substantial investments of Guidewire and other vendors in the development and seamless deployment of GenAI tools and applications within our core business applications. Upon completion of this initiative, the technology modernization journey that we've been on since 2018 will be fully complete, and we will have access to the evolving operating platform that will support our current and future needs.

Speaker #2: We performed a detailed assessment that identified numerous benefits of migrating these applications to the cloud, and we've developed a very comprehensive plan to migrate our claims and billing applications in early 2027.

Speaker #2: Migrating to guidewire cloud will allow us to leverage the substantial investments of guidewire and other vendors in the development and seamless deployment of GenAI tools and applications within our core business applications.

Speaker #2: Upon completion of this initiative, the technology modernization journey that we've been on since 2018 will be fully complete, and we will have access to the evolving operating platform that will support our current and future needs.

Speaker #2: We are excited to move forward and thank all of the DONEGAL team members, and our vendor partners who have labored tirelessly for many years to put us in this very favorable position.

Kevin Burke: We are excited to move forward and thank all the Donegal team members and our vendor partners who have labored tirelessly for many years to put us in this very favorable position. At this point, I'll turn the call over to Jeff Miller for a review of our financial results for the quarter.

Speaker #2: At this point, I'll turn the call over to Jeff Miller, for a review of our financial results for the quarter.

Speaker #3: Thanks, Kevin. I will begin my comments with a discussion of the fourth-quarter results compared to the fourth quarter of 2024, and then provide highlights of the results for the full year compared to 2024.

Jeffrey Miller: Thanks, Kevin. I will begin my comments with a discussion of the fourth quarter results compared to the fourth quarter of 2024, and then provide highlights of the results for the full year compared to 2024. For the fourth quarter of 2025, net premiums earned of $226.9 million decreased 4.1%. Net premiums written decreased by 3.4%, following similar trend lines we described throughout 2025, as lower new business volume was offset partially by premium rate increases and solid retention levels. A 12.7% decrease in personal lines net premiums written was offset partially by 3.2% growth in commercial lines. Rate increases achieved during the fourth quarter of 2025 averaged 5.9% in total and 6.6% when excluding workers' compensation.

Speaker #3: For the fourth quarter of 2025, net premiums earned of $226.9 million decreased 4.1%. Net premiums written decreased by 3.4%, following similar trend lines we described throughout 2025, as lower new business volume was offset partially by premium rate increases and solid retention levels.

Speaker #3: A 12.7% decrease in personal lines net premiums written was offset partially by 3.2% growth in commercial lines. Rate increases achieved during the fourth quarter of 2025 averaged 5.9% in total and 6.6% when excluding workers' compensation.

Speaker #3: The combined ratio was 96.3% for the fourth quarter of 2025, compared to 92.9% for the prior year quarter. The increase reflected a 1.3 percentage point increase in the loss ratio, and a 2.1 percentage point increase in the expense ratio.

Jeffrey Miller: The combined ratio was 96.3% for Q4 of 2025, compared to 92.9% for the prior-year quarter. The increase reflected a 1.3 percentage point increase in the loss ratio and a 2.1 percentage point increase in the expense ratio. We monitor the loss ratio impact of several components, starting with the core loss ratio, which excludes the impact of weather-related losses, large fire losses, and net development of reserves for losses incurred in prior accident years. We experienced a 2 percentage point improvement in the core loss ratio. There was a 2.7 percentage point decrease in the commercial lines core loss ratio and a 1.6 percentage point decrease in the personal lines core loss ratio.

Speaker #3: We monitored the loss ratio impact of several components, starting with the core loss ratio, which excludes the impact of weather-related losses, large fire losses, and net development of reserves for losses incurred in prior accident years.

Speaker #3: We experienced a 2 percentage point improvement in the core loss ratio. There was a 2.7 percentage point decrease in the commercial lines core loss ratio, and a 1.6 percentage point decrease in the personal lines core loss ratio.

Speaker #3: Weather-related losses totaled 8.2 million dollars, or 3.6 percentage points, of the loss ratio for the fourth quarter of 2025. Increasing modestly from 7.7 million dollars, or 3.3 percentage points, for the prior year quarter.

Jeffrey Miller: Weather-related losses totaled $8.2 million, or 3.6 percentage points of the loss ratio for Q4 2025, increasing modestly from $7.7 million, or 3.3 percentage points for the prior year quarter. The quarterly weather claim impact was lower than the previous five-year average for Q4 of 5.2 percentage points. Our insurance subsidiaries did not incur losses from any catastrophic weather events in Q4 2025 or 2024. In terms of weather impact by segment, commercial property losses from severe weather totaled $2.4 million and contributed 4.4 percentage points to the quarterly loss ratio for the commercial multi-peril line of business.

Speaker #3: The quarterly weather claim impact was lower than the previous five-year average for the fourth quarter of 5.2 percentage points. Our insurance subsidiaries did not incur losses from any catastrophic weather events in the fourth quarter of 2025 or 2024.

Speaker #3: In terms of weather impact by segment, commercial property losses from severe weather totaled 2.4 million dollars, and contributed 4.4 percentage points to the quarterly loss ratio for the commercial multi-parallel line of business.

Speaker #3: For personal lines, the weather impact to the homeowner's line was 4.6 million dollars, or 14.6 percentage points of the homeowner's loss ratio. Large fire losses, which we define as over 50,000 dollars in damages, contributed 6.2 percentage points to the loss ratio for the fourth quarter of 2025, compared to 4 percentage points for the prior year quarter.

Jeffrey Miller: For personal lines, the weather impact to the homeowners line was $4.6 million or 14.6 percentage points of the homeowners' loss ratio. Large fire losses, which we define as over $50,000 in damages, contributed 6.2 percentage points to the loss ratio for the fourth quarter of 2025, compared to 4 percentage points for the prior year quarter. We experienced increases in the severity of both commercial and homeowners fire losses during the quarter. Our insurance subsidiaries experienced $2.2 million of net development of reserves for losses incurred in prior accident years, adding 1 percentage point to the loss ratio for the fourth quarter of 2025, compared to virtually no impact in the prior year quarter.

Speaker #3: We experienced increases in the severity of both commercial and homeowner's fire losses during the quarter. Our insurance subsidiaries experienced 2.2 million dollars of net development of reserves for losses incurred in prior accident years.

Speaker #3: Adding 1 percentage point to the loss ratio for the fourth quarter of 2025, compared to virtually no impact in the prior year quarter. Line of business detail for the fourth quarter of 2025 primarily included unfavorable development of 3.9 million dollars for other commercial, which is primarily umbrella liability, and 2.3 million dollars for commercial auto, primarily in accident years 2022 and 2024.

Jeffrey Miller: Lines of business detail for Q4 2025 primarily included unfavorable development of $3.9 million for other commercial, which is primarily umbrella liability, and $2.3 million for commercial auto, primarily in accident years 2022 and 2024. That was largely offset by favorable development of $1.6 million for personal auto, $1.4 million for commercial multi-peril, and $1.2 million for workers' compensation. The expense ratio of 34.9% for Q4 2025 increased compared to 32.8% for the prior year quarter. The increase was primarily related to the direction of year-end adjustments to our estimates for underwriting-based agency incentive costs, as well as the impact of the decline in net premiums earned upon which the expense ratio is based.

Speaker #3: That was largely offset by favorable development of $1.6 million for personal auto, $1.4 million for commercial multi-peril, and $1.2 million for workers' compensation.

Speaker #3: The expense ratio of 34.9% for the fourth quarter of 2025 increased compared to 32.8% for the prior year quarter. The increase was primarily related to the direction of year-end adjustments to our estimates for underwriting-based agency incentive costs.

Speaker #3: As well as the impact of the decline in net premiums earned upon which the expense ratio is based. Dan Delamater will provide more details about our ongoing focus on expense management later in the call.

Jeffrey Miller: Dan DeLamater will provide more details about our ongoing focus on expense management later in the call. Net investment income increased 17.5% to $14.2 million for Q4 2025, due primarily to higher average invested assets and an increase in average investment yield. Tony will provide further details about our favorable investment performance later in the call. We achieved net income of $17.2 million for Q4 2025, compared to $24 million for Q4 2024. The decrease was primarily due to lower net premiums earned and higher expenses incurred. Turning to the full year 2025 results, the loss ratio of 61.3% compared favorably to 64.5% for 2024, with a 2.6 percentage point improvement in the core loss ratio.

Speaker #3: Net investment income increased 17.5% to 14.2 million dollars for the fourth quarter of 2025, due primarily to higher average invested assets and an increase in average investment yield.

Speaker #3: Tony will provide further details about our favorable investment performance later in the call. We achieved net income of 17.2 million dollars for the fourth quarter of 2025, compared to 24 million dollars for the fourth quarter of 2024.

Speaker #3: The decrease was primarily due to lower net premiums earned and higher expenses incurred. Turning to the full year of 2025 results, the loss ratio of 61.3% compared favorably to 64.5% for 2024.

Speaker #3: With a 2.6 percentage point improvement in the core loss ratio. That improvement primarily reflected a 7.2 percentage point decrease in the personal lines core loss ratio, as the commercial lines core loss ratio for 2025 was in line with 2024.

Jeffrey Miller: That improvement primarily reflected a 7.2 percentage point decrease in the personal lines core loss ratio, as the commercial lines core loss ratio for 2025 was in line with 2024. Weather-related losses for the full year of 2025 were $56.9 million, or 6.2 percentage points of the loss ratio, comparing favorably to $67.7 million, or 7.2 percentage points of the loss ratio for the full year of 2024. Weather impact for 2025 was 1 percentage point lower than the previous 5-year average of 7.2 percentage points of the full year loss ratio. Large fire losses contributed 4.8 percentage points to the 2025 loss ratio, in line with 4.9 percentage points for 2024.

Speaker #3: Weather-related losses for the full year of 2025 were 56.9 million dollars, or 6.2 percentage points of the loss ratio. Comparing favorably to 67.7 million dollars, or 7.2 percentage points of the loss ratio for the full year of 2024.

Speaker #3: Weather impact for 2025 was 1 percentage point lower than the previous five-year average of 7.2 percentage points of the full-year loss ratio. Large fire losses contributed 4.8 percentage points to the 2025 loss ratio, in line with 4.9 percentage points for 2024.

Speaker #3: Net favorable development of reserves for losses incurred in prior accident years reduced the 2025 loss ratio by 1.1 percentage points. Slightly lower than the 1.6 percentage point reduction in 2024.

Jeffrey Miller: Net favorable development of reserves for losses incurred in prior accident years reduced the 2025 loss ratio by 1.1 percentage points, slightly lower than the 1.6 percentage point reduction in 2024. Details by line of business include favorable development of $7.9 million in commercial multi-peril, $4.3 million in personal auto, $2.2 million for commercial auto, $1.5 million for homeowners, $1.2 million for personal umbrella, and $1 million for workers' comp. That favorable development was partially offset by $7.9 million of unfavorable development in commercial umbrella, netting to a favorable development in total of $10.3 million. The favorable development related primarily to accident years 2021, 2023, and 2024....

Speaker #3: Details by line of business include favorable development of 7.9 million dollars in commercial multi-parallel, 4.3 million dollars in personal auto, 2.2 million dollars for commercial auto, 1.5 million dollars for homeowners, 1.2 million dollars for personal umbrella, and 1 million dollars for workers' comp.

Speaker #3: That favorable development was partially offset by $7.9 million of unfavorable development in commercial umbrella, netting to a favorable development in total of $10.3 million.

Speaker #3: The favorable development-related primarily to accident years 2021, 2023, and 2024, with unfavorable development for reserves in accident years 2020 and 2022 that resulted from higher-than-expected severity for a relatively small number of casualty claims.

Jeffrey Miller: with unfavorable development for reserves in accident years 2020 and 2022, that resulted from higher than expected severity for a relatively small number of casualty claims. The expense ratio was 33.8% for the full year of 2025, nearly unchanged from 33.7% for the full year of 2024. The combined ratio was 95.4% for 2025, comparing favorably to 98.6% for 2024. As Kevin highlighted earlier, the favorable underwriting results, coupled with a 17.2% increase in net investment income, contributed to a record $79.3 million in net income for 2025, increasing 56% compared to net income of $50.9 million for 2024. Before I close, I'll provide a brief summary of the renewal of our reinsurance program for 2026.

Speaker #3: The expense ratio was 33.8% for the full year of 2025, nearly unchanged from 33.7% for the full year of 2024. The combined ratio was 95.4% for 2025, comparing favorably to 98.6% for 2024.

Speaker #3: As Kevin highlighted earlier, the favorable underwriting results, coupled with a 17.2% increase in net investment income, contributed to a record $79.3 million in net income for 2025, increasing 56% compared to net income of $50.9 million for 2024.

Speaker #3: Before I close, I'll provide a brief summary of the renewal of our reinsurance program for 2026. We made no changes to the coverage limits or retention levels in place for 2025 under our third-party reinsurance program or the intercompany reinsurance agreements between our insurance subsidiaries and Donegal Mutual.

Jeffrey Miller: We made no changes to the coverage limits or retention levels in place for 2025 under our third-party reinsurance program or the intercompany reinsurance agreements between our insurance subsidiaries and Donegal Mutual. Due primarily to a decrease in property exposures during 2025 and lower property reinsurance rates, we project a $3 million decrease in reinsurance costs for 2026 compared to 2025. With that, I will now turn the call over to Jeff Hay to provide more details about our commercial and personal lines segment results.

Speaker #3: Due primarily to a decrease in property exposures during 2025 and lower property reinsurance rates, we project a $3 million decrease in reinsurance costs for 2026, compared to 2025.

Speaker #3: With that, I will now turn the call over to Jeff Hay to provide more details about our commercial and personal lines segment results.

Speaker #4: Thank you, Jeff. We are pleased to report favorable bottom line results this quarter and for the full year of 2025. And I continue to be confident that this improvement is not the product of random volatility in our results, but a direct outcome of the strategies and diligent action plans we have put in place over several years to transform our underwriting discipline.

Jeffery Hay: Thank you, Jeff. We are pleased to report favorable bottom-line results this quarter and for the full year of 2025, and I continue to be confident that this improvement is not the product of random volatility in our results, but a direct outcome of the strategies and diligent action plans we have put in place over several years to transform our underwriting discipline. Within our commercial lines of business, net premiums written increased modestly by 3.2 percentage points for the Q4 2025, and by 2.9 percentage points for the full year. As the market has selectively softened for new business, we continue to stand firm, maintaining underwriting and pricing discipline, and executing on targeted geographic and class strategies.

Speaker #4: Within our commercial lines of business, net premiums written increased modestly by 3.2 percentage points for the fourth quarter of 2025 and by 2.9 percentage points for the full year.

Speaker #4: As the market has selectively softened for new business, we continue to stand firm maintaining underwriting and pricing discipline and executing on targeted geographic and class strategies.

Speaker #4: With that, I'm pleased to report that in the fourth quarter, we experienced continued success in new business writings and strong retention on desired business.

Jeffery Hay: With that, I'm pleased to report that in Q4, we experienced continued success in new business writings and strong retention on desired business. The commercial lines new business aligns with our targeted geographic and class strategies that I have mentioned in previous calls, with the majority of new business written in our highly targeted classes with higher expected profitability. Our overall commercial rate and exposure increase, excluding workers' compensation, remained steady at 9.7% for Q4 and at 10.6% for the full year. We are generally rate adequate across our lines of business. As we strive to retain quality accounts, we also continue to emphasize driving rate in areas where the intersections of class, line of business, and geography continue to present challenges.

Speaker #4: The commercial lines new business aligns with our targeted geographic and class strategies that I have mentioned in previous calls, with the majority of new business written in our highly targeted classes with higher expected profitability.

Speaker #4: Our overall commercial rate and exposure increase excluding workers' compensation remains steady at 9.7% for the fourth quarter, and at 10.6% for the full year.

Speaker #4: We are generally rate adequate across our lines of business. As we strive to retain quality accounts, we also continue to emphasize driving rate in areas where the intersections of class, line of business, and geography continue to present challenges.

Speaker #4: Now, shifting to commercial lines loss trends in the fourth quarter, we continue to experience upward pressure on liability severity for both commercial auto liability and general liability coverages within our commercial multi-peril line of business.

Jeffery Hay: Now, shifting to commercial lines loss trends in Q4, we continue to experience upward pressure on liability severity for both commercial auto liability and general liability coverages within our commercial multi-peril line of business. Overall, property severity and frequency trend lines across all coverages remain relatively favorable. Q4 2025 impact from large fires increased nearly 6 percentage points on the commercial multi-peril loss ratio when compared to the same quarter in 2024. This increase was driven by a large increase in the severity of large fires, partially offset by a slight decrease in frequency. For the full year of 2025, large commercial fire losses decreased by $3.5 million, for a 2.5 percentage point decrease in the commercial multi-peril loss ratio.

Speaker #4: Overall, property severity and frequency trend lines across all coverages remain relatively favorable. Fourth quarter 2025 impact from large fires increased nearly 6 percentage points on the commercial multi-parallel loss ratio, when compared to the same quarter in 2024.

Speaker #4: This increase was driven by a large increase in the severity of large fires, partially offset by a slight decrease in frequency. For the full year of 2025, large commercial fire losses decreased by 3.5 million, for a 2.5 percentage point decrease in the commercial multi-parallel loss ratio.

Speaker #4: We experienced relative consistency in the impact of weather-related losses, with the change representing less than a percentage point of the commercial lines loss ratio in the fourth quarter and full year compared to the respective periods in 2024.

Jeffery Hay: We experienced relative consistency in the impact of weather-related losses, with the change representing less than a percentage point of the commercial lines loss ratio in Q4 and full year compared to the respective periods in 2024. Commercial lines' prior year reserve development was modestly adverse overall, increasing the loss ratio by 2.6 percentage points for Q4, driven by umbrella liability claim development in accident years 2022 and 2024. Reserve development was modestly favorable overall for the full year of 2025, reducing the commercial lines loss ratio by 0.6 percentage points. We're pleased to report that our commercial lines core loss ratio, which excludes the impact of large fires, weather, and prior year reserve development, decreased by 2.7 percentage points in Q4 of 2025 compared to the same quarter in 2024.

Speaker #4: Commercial lines prior year reserve development was modestly adverse overall, increasing the loss ratio by 2.6 percentage points for the fourth quarter. This was driven by umbrella liability claim development and accident years 2022 and 2024.

Speaker #4: Reserve development was modestly favorable overall for the full year of 2025, reducing the commercial lines loss ratio by 0.6 percentage points. We're pleased to report that our commercial lines core loss ratio, which excludes the impact of large fires, weather, and prior year reserve development, decreased by 2.7 percentage points in the fourth quarter of 2025 compared to the same quarter in 2024.

Speaker #4: Now, turning to our Personal Lines segment, for the fourth quarter, the decline in Personal Lines net premiums written improved slightly to minus 12.7% from minus 15.9% for the third quarter of 2025, and minus 13.6% for the full year of 2025.

Jeffery Hay: Now, turning to our personal lines segment. For Q4, the decline in personal lines net premiums written improved slightly to -12.7%, from -15.9% for Q3 of 2025, and -13.6% for the full year of 2025. New business written in Q4 totaled $1.3 million, an increase of 10.2 percentage points over Q3. New business written for the month of December was up 11.3 percentage points from December of 2024. We continue to remove new business restrictions to stabilize premiums in this segment, exercising caution to maintain the rate adequacy we have generally achieved across our footprint.

Speaker #4: New business written in the fourth quarter totaled $1.3 million, an increase of 10.2 percentage points over the third quarter. New business written for the month of December was up 11.3 percentage points from December of 2024.

Speaker #4: We continue to remove new business restrictions to stabilize premiums in this segment. Exercising caution to maintain the rate adequacy we have generally achieved across our footprint.

Speaker #4: I'm pleased to report that our real retention rate for fourth quarter 2025 increased to a very healthy 88.7%, with the intentional non-renewal of less profitable business, which I've mentioned in prior calls, now essentially complete.

Jeffery Hay: I'm pleased to report that our real retention rate for Q4 2025 increased to a very healthy 88.7%, with the intentional non-renewal of less profitable business, which I've mentioned in prior calls, now essentially complete. Rate and exposure slowed to +2.9% in Q4, driven by the achievement of rate adequacy across all lines, and came in at +3.6% for the full year of 2025. Moving to personal lines loss trends. Within the personal auto line of business, the loss ratio decreased in Q4 by 7.6 percentage points from Q4 of 2024.

Speaker #4: Rate and exposure slowed to plus 2.9% in the fourth quarter, driven by the achievement of rate adequacy across all lines, and came in at plus 3.6% for the full year of 2025.

Speaker #4: Moving to personal lines loss trends, within the personal auto line of business, the loss ratio decreased in the fourth quarter by 7.6 percentage points from the fourth quarter of 2024.

Speaker #4: This decrease was driven by a two-point improvement in the core loss ratio, coupled with three-point-one percentage points of favorable prior year development in the quarter.

Jeffery Hay: This decrease was driven by a 2-point improvement in the core loss ratio, coupled with 3.1 percentage points of favorable prior year development in the quarter, compared to 2.7 points of unfavorable prior year development in the fourth quarter of 2024. Frequency trends in personal auto remained in check, and physical damage severity continued to show signs of improvement, while bodily injury severity continued to trend moderately upward. The homeowners loss ratio saw a deterioration of 12.1 percentage points for the fourth quarter of 2025 compared to fourth quarter 2024. This increase was attributable to 4.1 percentage points of higher weather loss impact and 5.3 points of higher large fire experience, with relatively consistent core loss ratio experience.

Speaker #4: Compared to 2.7 points of unfavorable prior year development in the fourth quarter of 2024. Frequency trends in personal auto remained in check, and physical damage severity continued to show signs of improvement, while bodily injury severity continued to trend moderately upward.

Speaker #4: The homeowner's loss ratio saw a deterioration of 12.1 percentage points for the fourth quarter of 2025 compared to fourth quarter 2024. This increase was attributable to four-point-one percentage points of higher weather loss impact and five-point-three points of higher large fire experience, with relatively consistent core loss ratio experience.

Speaker #4: Overall, homeowners' frequency trends in the fourth quarter were favorable in property, with some pressure on non-weather severity driven by large fire experience. For the personal lines segment in total, we are pleased with the excellent profitability we achieved in 2025.

Jeffery Hay: Overall, homeowners' frequency trends in the fourth quarter were favorable in property, with some pressure on non-weather severity, driven by large fire experience. For the personal line segment in total, we are pleased with the excellent profitability we achieved in 2025, as reflected by the Statutory Combined Ratio of 88.5% for the fourth quarter and 89.3% for the full year. In summary, we've made significant progress during 2025 in the execution of our state-specific strategies, and we're pleased with the substantial improvement in our underwriting results. I will now turn the call over to Dan DeLamater for an update on our operational strategies and developments and more details about our positive outlook for 2026.

Speaker #4: As reflected by the statutory combined ratio of 88.5% for the fourth quarter and 89.3% for the full year, in summary, we've made significant progress during 2025 in the execution of our state-specific strategies and we're pleased with the substantial improvement in our underwriting results.

Speaker #4: I will now turn the call over to Dan Delimader for an update on our operational strategies and developments, and more details about our positive outlook for 2026.

Speaker #5: Thank you, Jeff. I'll start my discussion of our operational performance for 2025 by providing an update on the expense management initiatives we've discussed in previous calls.

W. Daniel DeLamater: Thank you, Jeff. I will start my discussion of our operational performance for 2025 by providing an update on the expense management initiatives we've discussed in previous calls. I'll then touch briefly on the high-level results of our business planning process for 2026 and our alignment on several tangible focus areas for the year ahead. We operated at an expense ratio of 34.9% for Q4 of 2025. Compared to our expense ratio of 32.8% for Q4 of 2024, the increase was a break from the downward trajectory we achieved over the past 5 quarters. This increase in expense ratio is not related to spending beyond our budget. In fact, our team achieved targeted spending reductions for 2025.

Daniel J. DeLamater: Thank you, Jeff. I will start my discussion of our operational performance for 2025 by providing an update on the expense management initiatives we've discussed in previous calls. I'll then touch briefly on the high-level results of our business planning process for 2026 and our alignment on several tangible focus areas for the year ahead. We operated at an expense ratio of 34.9% for Q4 of 2025. Compared to our expense ratio of 32.8% for Q4 of 2024, the increase was a break from the downward trajectory we achieved over the past 5 quarters. This increase in expense ratio is not related to spending beyond our budget. In fact, our team achieved targeted spending reductions for 2025.

Speaker #5: I'll then touch briefly on the high-level results of our business planning process for 2026 and our alignment on several: tangible focus areas for the year ahead.

Speaker #5: We operated at an expense ratio of 34.9% for the fourth quarter of 2025. Compared to our expense ratio of 32.8% for the fourth quarter of 2024, the increase was a break from the downward trajectory we achieved over the past five quarters.

Speaker #5: This increase in expense ratio was not related to spending beyond our budget. In fact, our team achieved targeted spending reductions for 2025. One of the primary factors that elevated our expense ratio for the fourth quarter was a three-point-one million dollar increase in performance-based incentives for our agents.

W. Daniel DeLamater: One of the primary factors that elevated our expense ratio for the fourth quarter was a $3.1 million increase in performance-based incentives for our agents, mostly related to higher amounts incurred for agency profit sharing. While this might seem counterintuitive, considering that our loss ratio was less favorable for the fourth quarter of 2025 compared to the prior year period, agency profit-sharing compensation is determined by individual agency experience, which resulted in a disproportionate comparative outcome for the quarter. Another primary driver of the increase in our fourth quarter expense ratio was lower premium volume that resulted from writing less new business and needing lower overall rate increases to achieve rate adequacy than originally planned for the year.

Daniel J. DeLamater: One of the primary factors that elevated our expense ratio for the fourth quarter was a $3.1 million increase in performance-based incentives for our agents, mostly related to higher amounts incurred for agency profit sharing. While this might seem counterintuitive, considering that our loss ratio was less favorable for the fourth quarter of 2025 compared to the prior year period, agency profit-sharing compensation is determined by individual agency experience, which resulted in a disproportionate comparative outcome for the quarter. Another primary driver of the increase in our fourth quarter expense ratio was lower premium volume that resulted from writing less new business and needing lower overall rate increases to achieve rate adequacy than originally planned for the year.

Speaker #5: Mostly related to higher amounts incurred for agency profit sharing. While this might seem counterintuitive considering that our loss ratio was less favorable for the fourth quarter of 2025 compared to the prior year period, agency profit sharing compensation is determined by individual agency experience, which resulted in a disproportionate comparative outcome for the quarter.

Speaker #5: Another primary driver of the increase in our fourth quarter expense ratio was lower premium volume that resulted from writing less new business and needing lower overall rate increases to achieve rate adequacy that originally planned for the year.

Speaker #5: Despite that top-line miss versus plan, we remain pleased with our organizational focus on budget discipline, and our ongoing commitment to realizing efficiencies from our recent systems and process modernization efforts.

W. Daniel DeLamater: Despite that top-line miss versus plan, we remain pleased with our organizational focus on budget discipline and our ongoing commitment to realizing efficiencies from our recent systems and process modernization efforts. For the full year of 2025, we performed at a 33.8% Expense Ratio, compared to 33.7% for the full year of 2024, with the reduction in Net Premiums Earned representing the overriding factor behind the slight uptick in that annual expense metric. As we look forward to 2026, we are operating from a position of strength, in that the efforts of our team have generated outstanding results through rate achievement, underwriting focus, expense discipline, and investment portfolio optimization. We are pleased to report six consecutive quarters of underwriting profitability, combined with investment strategies to increase our returns that were opportunistic, yet consistent with our conservative philosophy.

Daniel J. DeLamater: Despite that top-line miss versus plan, we remain pleased with our organizational focus on budget discipline and our ongoing commitment to realizing efficiencies from our recent systems and process modernization efforts. For the full year of 2025, we performed at a 33.8% Expense Ratio, compared to 33.7% for the full year of 2024, with the reduction in Net Premiums Earned representing the overriding factor behind the slight uptick in that annual expense metric. As we look forward to 2026, we are operating from a position of strength, in that the efforts of our team have generated outstanding results through rate achievement, underwriting focus, expense discipline, and investment portfolio optimization. We are pleased to report six consecutive quarters of underwriting profitability, combined with investment strategies to increase our returns that were opportunistic, yet consistent with our conservative philosophy.

Speaker #5: For the full year of 2025, we performed at a 33.8% expense ratio, compared to 33.7% for the full year of 2024, with the reduction in net earned premiums representing the overriding factor behind the slight uptick in the net annual expense metric.

Speaker #5: As we look forward to 2026, we are operating from a position of strength in that the efforts of our team have generated outstanding results through rate achievement, underwriting focus, expense discipline, and investment portfolio optimization.

Speaker #5: We are pleased to report six consecutive quarters of underwriting profitability, combined with investment strategies to increase our returns that were opportunistic yet consistent with our conservative philosophy.

Speaker #5: These results will allow us to be selectively aggressive in our pursuit of profitable growth in the year ahead, while being careful not to undermine the hard work of our team that led us to this favorable position.

W. Daniel DeLamater: These results will allow us to be selectively aggressive in our pursuit of profitable growth in the year ahead, while being careful not to undermine the hard work of our team that led us to this favorable position. We've entered 2026 intentionally focused on our strategic plan and priorities. Our regional teams have worked closely with independent agents across the country to build tangible and actionable new business and policy retention plans for 2026. This focus on product mix, rate strategy, marketing strategy, and growth objectives in every state and line of business has our teams aligned and ready to achieve our bottom line and top-line objectives in the year ahead. We have excellent insight into our performance versus plan at a granular level, thanks to our technical data and enterprise analytics teams.

Daniel J. DeLamater: These results will allow us to be selectively aggressive in our pursuit of profitable growth in the year ahead, while being careful not to undermine the hard work of our team that led us to this favorable position. We've entered 2026 intentionally focused on our strategic plan and priorities. Our regional teams have worked closely with independent agents across the country to build tangible and actionable new business and policy retention plans for 2026. This focus on product mix, rate strategy, marketing strategy, and growth objectives in every state and line of business has our teams aligned and ready to achieve our bottom line and top-line objectives in the year ahead. We have excellent insight into our performance versus plan at a granular level, thanks to our technical data and enterprise analytics teams.

Speaker #5: We've entered 2026 intentionally focused on our strategic plan and priorities. Our regional teams have worked closely with independent agents across the country to build tangible and actionable new business and policy retention plans for 2026.

Speaker #5: This focus on product mix, rate strategy, marketing strategy, and growth objectives in every state and line of business has our teams aligned and ready to achieve our bottom line and top line objectives in the year ahead.

Speaker #5: We have excellent insight into our performance versus plan at a granular level, thanks to our technical data and enterprise analytics teams. These teams distill and disseminate vast amounts of data to our business units, keeping them informed and positioning them to efficiently analyze results and take responsive action when required.

W. Daniel DeLamater: These teams distill and disseminate vast amounts of data to our business units, keeping them informed and positioning them to efficiently analyze results and take responsive action when required. These data-driven insights empower us to deepen our relationship and engagement with our independent agency partners. As a reminder, we distribute our products exclusively through independent agency channel, and we consider the relationship with our 2,000 independent agents across our 21 state footprint to be a core strength. As I close my remarks, I reiterate, we are proud to operate from a position of bottom-line strength. Jeff shared that we're pleased to achieve rate adequacy in 2025. Ongoing rate achievement remains vitally important to ensure that we maintain pace with loss cost trends.

Daniel J. DeLamater: These teams distill and disseminate vast amounts of data to our business units, keeping them informed and positioning them to efficiently analyze results and take responsive action when required. These data-driven insights empower us to deepen our relationship and engagement with our independent agency partners. As a reminder, we distribute our products exclusively through independent agency channel, and we consider the relationship with our 2,000 independent agents across our 21 state footprint to be a core strength. As I close my remarks, I reiterate, we are proud to operate from a position of bottom-line strength. Jeff shared that we're pleased to achieve rate adequacy in 2025. Ongoing rate achievement remains vitally important to ensure that we maintain pace with loss cost trends.

Speaker #5: These data-driven insights empower us to deepen our relationship and engagement with our independent agency partners. As a reminder, we distribute our products exclusively through independent agency channel, and we consider the relationship with our 2,000 independent agents across our 21 state footprint to be a core strength.

Speaker #5: As I close my remarks, I'll reiterate we are proud to operate from a position of bottom line strength. Jeff shared that we're pleased to achieve rate adequacy in 2025.

Speaker #5: Ongoing rate achievement remains vitally important to ensure that we maintain pace with lost cost trends. We continue to engage our marketing teams, our independent agents, and our analytics and underwriting teams to emphasize pricing discipline as we seek to identify profitable new business opportunities in states and classes that match our objectives.

Kevin Burke: ... We continue to engage our marketing teams, our independent agents, and our analytics and underwriting teams to emphasize pricing discipline as we seek to identify profitable new business opportunities in states and classes that match our objectives. With that, I'll turn it over to Tony Viozzi for an investment update. Tony?

Speaker #5: With that, I'll turn it over to Tony Viazzi for an investment update. Tony?

Speaker #6: Thanks, Dan. Throughout 2025, our investing approach focused on strategically increasing our bond portfolio yield and optimizing our portfolio mix. We were able to take advantage of higher market rates and move into more favorable asset classes that we expect will continue to perform well in the future.

V. Anthony Viozzi: Thanks, Dan. Throughout 2025, our investing approach focused on strategically increasing our bond portfolio yield and optimizing our portfolio mix. We were able to take advantage of higher market rates and move into more favorable asset classes that we expect will continue to perform well in the future. We had a strong Q4 2025, as net investment income was up 17.5%, resulting in $14.2 million versus $12.1 million for Q4 2024. The strong quarterly performance, coupled with actions taken in the prior quarters of 2025, allowed us to achieve a 17.2% increase to full year 2025 net investment income of $52.6 million, compared to $44.9 million for 2024.

Speaker #6: We had a strong fourth quarter of 2025 as net investment income was up 17.5%, resulting in 14.2 million dollars versus 12.1 million dollars for the fourth quarter of 2024.

Speaker #6: The strong quarterly performance coupled with actions taken in the prior quarters of 2025 allowed us to achieve a 17.2% increase to full year 2025 net investment income of 52.6 million dollars compared to 44.9 million dollars for 2024.

Speaker #6: The average tax equivalent yield for the fourth quarter of 2025 increased to 3.95% compared to 3.58% for the fourth quarter of 2024. In addition to actively managing the bond portfolio during the first nine months of 2025, we accelerated yield enhancement through strategic bond swaps in the fourth quarter.

V. Anthony Viozzi: The average Tax Equivalent Yield for Q4 2025 increased to 3.95%, compared to 3.58% for Q4 2024. In addition to actively managing the bond portfolio during the first nine months of 2025, we accelerated yield enhancement through strategic bond swaps in the fourth quarter. Proceeds from bonds that matured, were called, or were sold as part of swap strategies during the quarter totaled $155 million, yielding an average of 3.74%. Those funds were reinvested at an average yield of 5.17%, with the 143 basis point improvement projected to boost annual investment income by $2.2 million going forward.

Speaker #6: Proceeds from bonds that matured were called or were sold as part of swap strategies during their quarter totaled 155 million dollars yielding an average of 3.74%.

Speaker #6: Those funds were reinvested at an average yield of 5.17%, with the 143-basis-point improvement projected to boost annual investment income by $2.2 million going forward.

Speaker #6: We intentionally extended duration to 5.5 years to lock in what we viewed to be attractive yields for a longer-term horizon. We are now investing new money at yields north of 5%, and we anticipate the ongoing favorable market environment will provide modest additional bond swap opportunities in the near term.

V. Anthony Viozzi: We intentionally extended duration to 5.5 years to lock in what we viewed to be attractive yields for a longer-term horizon. We are now investing new money at yields north of 5%, and we anticipate the ongoing favorable market environment will provide modest additional bond swap opportunities in the near term. The net investment loss of $1.7 million for Q4 of 2025 reflected the losses we intentionally realized on bond sales, offset partially by a gain in the market value of our equity portfolio during the quarter. For the full year of 2025, we realized a net investment gain of $600,000 compared to $5 million for the full year of 2024.

Speaker #6: The net investment loss of $1.7 million for the fourth quarter of 2025 reflected the losses we intentionally realized on bond sales, offset partially by a gain in the market value of our equity portfolio during the quarter.

Speaker #6: For the full year of 2025, we realized a net investment gain of 600,000 dollars compared to 5 million dollars for the full year of 2024.

Speaker #6: We attribute the year-over-year decrease to the losses we realized on strategic bond sales in 2025 in order to boost investment income in future periods by amounts that will far exceed the one-time realized losses.

V. Anthony Viozzi: We attribute the year-over-year decrease to the losses we realized on strategic bond sales in 2025, in order to boost investment income in future periods by amounts that will far exceed the one-time realized losses. At December 31, 2025, our book value increased to $17.33, which was a 12.8% improvement over $15.36 as of December 31, 2024. The increase was driven primarily by net income and an increase in our market value of our available-for-sale bond portfolio, partially offset by cash dividends declared during the year. In closing, we are projecting about $100 million in portfolio cash flow over the next 12 months, with a current average yield of 4.40%.

Speaker #6: At December 31, 2025, our book value increased to 17 dollars and 33 cents, which was a 12.8% improvement over 15 dollars and 36 cents as of December 31, 2024.

Speaker #6: The increase was driven primarily by net income and an increase in our market value of our available sale bond portfolio. Partially offset by cash dividends declared during the year.

Speaker #6: In closing, we are projecting about 100 million dollars in portfolio cash flow over the next 12 months with a current average yield of 4.40%.

Speaker #6: Our current reinvestment rate is around

V. Anthony Viozzi: Our current reinvestment rate is around 5.25%, providing opportunity for further enhancement in investment income. We continue to optimize our portfolio mix as market opportunities arise. To that end, we are currently emphasizing tax-exempt bonds, mortgage-backed securities, and non-agency structured notes where we find rates most attractive. With that, I will now turn it back to Kevin for closing remarks.

Speaker #1: Around 5.25% , providing opportunity for further enhancement and investment income . We continue to optimize our portfolio mix as market opportunities arise To that end , we are currently emphasizing tax exempt bonds , mortgage backed securities and non-agency structured notes where we find rates most attractive .

Speaker #1: With that , I will now turn it back to Kevin for closing remarks .

Speaker #2: Thank you Tony . As we reflect on our accomplishments in 2025 and consider the challenges ahead in 2026 , I want to express my appreciation for the devoted team of Donegal professionals who are fully engaged in executing our strategies and fulfilling our mission .

Kevin Burke: Thank you, Tony. As we reflect on our accomplishments in 2025 and consider the challenges ahead in 2026, I want to express my appreciation for the devoted team of Donegal professionals who are fully engaged in executing our strategies and fulfilling our mission. I also want to recognize the dedication of our independent agency partners, who reciprocate our loyal commitment to them by submitting quality new business to us and entrusting us to serve the insurance needs of their customers. We look forward to continuing to enhance those relationships through increased engagement in the year ahead. And finally, I am grateful for the ongoing support of our stockholders, and we look forward to providing further updates to you in future calls. Thank you.

Speaker #2: I also want to recognize the dedication of our independent agency partners , who reciprocate our loyal commitment to them by submitting quality new business to us and entrusting us to serve the insurance needs of their customers .

Speaker #2: We look forward to continuing to enhance those relationships through increased engagement in the year ahead. And finally, I am grateful for the ongoing support of our stockholders, and we look forward to providing further updates to you in future calls.

Speaker #2: Thank you .

Speaker #3: Thank you, Kevin. While we requested and received questions in advance of today's call, we have worked answers to these questions into our prepared remarks.

Operator: Thank you, Kevin. While we've requested and received questions in advance of today's call, we have worked answers to these questions into our prepared remarks. If there are any additional questions, please feel free to reach out to us. This now concludes the Donegal Group Fourth Quarter 2025 Earnings Webcast. You may now disconnect.

Speaker #3: If there are any additional questions , please feel free to reach out to us . This now concludes the DONEGAL GROUP INC fourth quarter 2020 earnings webcast .

Q4 2025 Donegal Group Inc Pre-Recorded Earnings Call

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