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What changed in DONEGAL GROUP INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of DONEGAL GROUP INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+264 added−264 removedSource: 10-K (2026-03-06) vs 10-K (2025-03-10)

Top changes in DONEGAL GROUP INC's 2025 10-K

264 paragraphs added · 264 removed · 218 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

100 edited+17 added−15 removed186 unchanged
Biggest changeFor example, the 2014 column indicates that at December 31, 2024 payments equal to $306.0 million of the currently re-estimated ultimate liability for net losses and loss expenses of $314.5 million had been made. -18- Index Year Ended December 31, (in thousands) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Net liability at end of year for unpaid losses and loss expenses $ 292,301 $ 322,054 $ 347,518 $ 383,401 $ 475,398 $ 506,906 $ 557,189 $ 626,359 $ 669,862 $ 689,143 $ 704,364 Net liability re-estimated as of: One year later 299,501 325,043 354,139 419,032 462,466 493,961 525,981 581,538 653,209 674,171 Two years later 299,919 329,115 375,741 413,535 450,862 479,927 498,724 564,326 638,428 Three years later 304,855 338,118 376,060 404,902 440,168 463,441 490,177 550,972 Four years later 307,840 339,228 372,230 398,560 432,027 459,835 480,865 Five years later 310,354 338,020 370,960 396,695 431,115 455,494 Six years later 310,380 338,200 372,346 396,748 429,865 Seven years later 311,594 339,625 371,859 396,167 Eight years later 313,354 340,191 372,477 Nine years later 313,539 340,800 Ten years later 314,490 Cumulative deficiency (excess) 22,189 18,746 24,959 12,766 (45,533 ) (51,412 ) (76,324 ) (75,387 ) (31,434 ) (14,972 ) Cumulative amount of liability paid through: One year later $ 131,779 $ 149,746 $ 163,005 $ 175,883 $ 195,956 $ 172,497 $ 182,223 $ 218,304 $ 260,739 $ 269,701 Two years later 206,637 228,506 250,678 276,331 275,993 276,069 297,860 346,107 405,216 Three years later 251,654 274,235 306,338 317,447 335,310 343,912 374,043 426,648 Four years later 274,248 300,715 324,628 342,583 371,231 393,068 418,283 Five years later 287,178 309,630 337,946 362,061 394,251 414,690 Six years later 292,327 315,105 349,496 372,584 404,251 Seven years later 295,106 321,777 355,809 378,937 Eight years later 300,306 326,617 359,527 Nine years later 303,708 329,651 Ten years later 306,019 Year Ended December 31, (in thousands) 2016 2017 2018 2019 2020 2021 2022 2023 2024 Gross liability at end of year $ 606,665 $ 676,672 $ 814,665 $ 869,674 $ 962,007 $ 1,077,620 $ 1,121,046 $ 1,126,157 $ 1,120,985 Reinsurance recoverable 259,147 293,271 339,266 362,768 404,818 451,261 451,184 437,014 416,621 Net liability at end of year 347,518 383,401 475,398 506,906 557,189 626,359 669,862 689,143 704,364 Gross re-estimated liability 621,200 674,826 751,479 787,575 869,571 938,746 1,011,779 1,072,359 Re-estimated recoverable 248,723 278,659 321,614 332,081 388,706 387,774 373,351 398,188 Net re-estimated liability 372,477 396,167 429,865 455,494 480,865 550,972 638,428 674,171 Gross cumulative deficiency (excess) 14,535 (1,846 ) (63,186 ) (82,099 ) (92,436 ) (138,874 ) (109,267 ) (53,798 ) -19- Index Third-Party Reinsurance Our insurance subsidiaries and Donegal Mutual purchase certain third-party reinsurance on a combined basis.
Biggest changeFor example, the 2015 column indicates that at December 31, 2025 payments equal to $333.1 million of the currently re-estimated ultimate liability for net losses and loss expenses of $342.7 million had been made. -18- Index Year Ended December 31, (in thousands) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Net liability at end of year for unpaid losses and loss expenses $ 322,054 $ 347,518 $ 383,401 $ 475,398 $ 506,906 $ 557,189 $ 626,359 $ 669,862 $ 689,143 $ 704,364 $ 705,196 Net liability re-estimated as of: One year later 325,043 354,139 419,032 462,466 493,961 525,981 581,538 653,209 674,171 694,097 Two years later 329,115 375,741 413,535 450,862 479,927 498,724 564,326 638,428 670,481 Three years later 338,118 376,060 404,902 440,168 463,441 490,177 550,972 638,823 Four years later 339,228 372,230 398,560 432,027 459,835 480,865 545,874 Five years later 338,020 370,960 396,695 431,115 455,494 484,462 Six years later 338,200 372,346 396,748 429,865 457,859 Seven years later 339,625 371,859 396,167 432,179 Eight years later 340,191 372,477 398,727 Nine years later 340,800 374,756 Ten years later 342,742 Cumulative deficiency (excess) 20,688 27,238 15,326 (43,219 ) (49,047 ) (72,727 ) (80,485 ) (31,039 ) (18,662 ) (10,267 ) Cumulative amount of liability paid through: One year later $ 149,746 $ 163,005 $ 175,883 $ 195,956 $ 172,497 $ 182,223 $ 218,304 $ 260,739 $ 269,701 $ 277,360 Two years later 228,506 250,678 276,331 275,993 276,069 297,860 346,107 405,216 430,824 Three years later 274,235 306,338 317,447 335,310 343,912 374,043 426,648 500,744 Four years later 300,715 324,628 342,583 371,231 393,068 418,283 471,484 Five years later 309,630 337,946 362,061 394,251 414,690 441,368 Six years later 315,105 349,496 372,584 404,251 429,045 Seven years later 321,777 355,809 378,937 412,667 Eight years later 326,617 359,527 384,380 Nine years later 329,651 363,581 Ten years later 333,148 Year Ended December 31, (in thousands) 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gross liability at end of year $ 676,672 $ 814,665 $ 869,674 $ 962,007 $ 1,077,620 $ 1,121,046 $ 1,126,157 $ 1,120,985 $ 1,100,050 Reinsurance recoverable 293,271 339,266 362,768 404,818 451,261 451,184 437,014 416,621 394,854 Net liability at end of year 383,401 475,398 506,906 557,189 626,359 669,862 689,143 704,364 705,196 Gross re-estimated liability 678,947 752,587 787,256 868,967 924,582 1,000,930 1,051,463 1,079,093 Re-estimated recoverable 280,220 320,408 329,397 384,505 378,708 362,107 380,982 384,996 Net re-estimated liability 398,727 432,179 457,859 484,462 545,874 638,823 670,481 694,097 Gross cumulative deficiency (excess) 2,275 (62,078 ) (82,418 ) (93,040 ) (153,038 ) (120,116 ) (74,694 ) (41,892 ) -19- Index Third-Party Reinsurance Our insurance subsidiaries and Donegal Mutual purchase certain third-party reinsurance on a combined basis.
Between 1998 and 2017, we and Donegal Mutual completed seven transactions involving acquisitions of property and casualty insurance companies or participation in the business of property and casualty insurance companies through Donegal Mutual’s entry into quota-share reinsurance agreements with them.
Between 1998 and 2017, we and Donegal Mutual completed seven transactions involving acquisitions of property and casualty insurance companies or participation in the business of property and casualty insurance companies through Donegal Mutual’s entry into quota-share reinsurance agreements with them.
For every 1% change in our insurance subsidiaries’ loss and loss expense reserves, net of reinsurance recoverable, the effect on our pre-tax results of operations would be approximately $7.0 million. -16- Index The establishment of appropriate liabilities is an inherently uncertain process and we can provide no assurance that our insurance subsidiaries’ ultimate liability will not exceed our insurance subsidiaries’ loss and loss expense reserves and have an adverse effect on our results of operations and financial condition.
For every 1% change in our insurance subsidiaries’ loss and loss expense reserves, net of reinsurance recoverable, the effect on our pre-tax results of operations would be approximately $7.1 million. -16- Index The establishment of appropriate liabilities is an inherently uncertain process and we can provide no assurance that our insurance subsidiaries’ ultimate liability will not exceed our insurance subsidiaries’ loss and loss expense reserves and have an adverse effect on our results of operations and financial condition.
We have been an effective consolidator of smaller “main street” property and casualty insurance companies. We are currently placing less emphasis on pursuing acquisitions because Donegal Mutual and we believe there are significant opportunities for profitable organic growth in our desired markets and classes of business within our current geographic footprint.
We have been an effective consolidator of smaller “main street” property and casualty insurance companies. We are currently placing less emphasis on pursuing acquisitions because Donegal Mutual and we believe there are opportunities for profitable organic growth in our desired markets and classes of business within our current geographic footprint.
Our insurance subsidiaries utilize integrated risk-specific catastrophe model results, a tool to estimate probable maximum fire loss, embedded building valuation models and aerial imagery enhanced by artificial intelligence to enhance their review and pricing of commercial property risks.
Our insurance subsidiaries utilize integrated risk-specific catastrophe model results, a tool to estimate probable maximum fire loss, embedded building valuation models and aerial imagery enhanced by artificial intelligence (“AI”) to enhance their review and pricing of commercial property risks.
Related uncertainties regarding future trends include social inflation, availability and cost of replacement automobile parts and building materials, availability and cost of skilled labor, the rate of specialized plaintiff attorney involvement in claims, plaintiff attorney utilization of litigation financing and the cost of medical technologies and procedures.
Uncertainties regarding future trends include social inflation, availability and cost of replacement automobile parts and building materials, availability and cost of skilled labor, the rate of specialized plaintiff attorney involvement in claims, plaintiff attorney utilization of litigation financing and the cost of medical technologies and procedures.
Due to ongoing inflationary pressures on loss costs, we carefully managed personal lines exposure growth in 2024, intentionally slowing the writing of new personal lines opportunities while implementing premium rate increases throughout the year.
Due to inflationary pressures on loss costs, we carefully managed personal lines exposure growth in 2024, intentionally slowing the writing of new personal lines opportunities while implementing premium rate increases throughout the year.
The external reinsurance our insurance subsidiaries and Donegal Mutual purchased for 2024 included: • excess of loss reinsurance, under which Donegal Mutual and our insurance subsidiaries recovered losses over a set retention of $4.0 million for all property losses and $3.0 million for all liability and workers’ compensation losses for 2024 (set retention of $4.0 million for all property losses, $6.0 million for all liability losses except workers’ compensation losses and $3.0 million for all workers’ compensation losses for 2025); and • catastrophe reinsurance, under which Donegal Mutual and our insurance subsidiaries recovered 100% of an accumulation of many losses resulting from a single event, including natural disasters, over a set retention of $25.0 million up to aggregate losses of $175.0 million ($200.0 million for 2025) per occurrence.
The external reinsurance our insurance subsidiaries and Donegal Mutual purchased for 2025 included: • excess of loss reinsurance, under which Donegal Mutual and our insurance subsidiaries recovered losses over a set retention of $4.0 million for all property losses, $6.0 million for all liability losses except workers’ compensation losses and $3.0 million for all workers’ compensation losses; and • catastrophe reinsurance, under which Donegal Mutual and our insurance subsidiaries recovered 100% of an accumulation of many losses resulting from a single event, including natural disasters, over a set retention of $25.0 million up to aggregate losses of $200.0 million per occurrence.
To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes. Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at December 31, 2024.
To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes. Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at December 31, 2025.
The “Cumulative deficiency (excess)” shows the cumulative deficiency or excess at December 31, 2024 of the liability estimate shown on the top line of the corresponding column. A deficiency in liability means that the liability established in prior years was less than the amount of actual payments and currently re-estimated remaining unpaid liability.
The “Cumulative deficiency (excess)” shows the cumulative deficiency or excess at December 31, 2025 of the liability estimate shown on the top line of the corresponding column. A deficiency in liability means that the liability established in prior years was less than the amount of actual payments and currently re-estimated remaining unpaid liability.
At December 31, 2024, the Donegal Insurance Group actively wrote business in 21 states (Arizona, Colorado, Delaware, Georgia, Illinois, Indiana, Iowa, Maryland, Michigan, Nebraska, New Mexico, North Carolina, Ohio, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wisconsin).
At December 31, 2025, the Donegal Insurance Group actively wrote business in 21 states (Arizona, Colorado, Delaware, Georgia, Illinois, Indiana, Iowa, Maryland, Michigan, Nebraska, New Mexico, North Carolina, Ohio, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wisconsin).
Within the past several years, we enhanced the annual planning process to ensure that we are directing efforts and resources toward geographic regions, market segments, product lines and classes of business that will give us the best opportunities to achieve sustained growth and profitability.
Over the past several years, we enhanced the annual planning process to ensure that we are directing efforts and resources toward geographic regions, market segments, product lines and classes of business that will give us the best opportunities to achieve sustained growth and profitability.
The mortgage-backed securities consist primarily of investments in governmental agency balloon pools with stated maturities between one and 33 years. The stated maturities of these investments limit the exposure of our insurance subsidiaries to extension risk in the event that interest rates rise and prepayments decline.
The mortgage-backed securities consist primarily of investments in governmental agency balloon pools with stated maturities between one and 50 years. The stated maturities of these investments limit the exposure of our insurance subsidiaries to extension risk in the event that interest rates rise and prepayments decline.
These forward-looking statements include certain discussions relating to underwriting, premium and investment income volumes, business strategies, reserves, profitability, our expense reduction initiatives, Donegal Mutual’s ongoing information systems and data modernization implementations, business relationships and our other business activities during 2024 and beyond.
These forward-looking statements include certain discussions relating to underwriting, premium and investment income volumes, business strategies, reserves, profitability, our expense reduction initiatives, Donegal Mutual’s ongoing information systems and data modernization implementations, business relationships and our other business activities during 2025 and beyond.
Hay 50 Executive Vice President and Chief Underwriting Officer of Donegal Mutual and us since 2025; Senior Vice President and Chief Underwriting Officer of Donegal Mutual and Senior Vice President of us from 2021 to 2025; Senior Director of Willis Towers Watson from 2018 to 2021; Head of Personal Lines Product Management of The Hartford from 2015 to 2018; other positions at The Hartford from 2005 to 2015.
Hay 51 Executive Vice President and Chief Underwriting Officer of Donegal Mutual and us since 2025; Senior Vice President and Chief Underwriting Officer of Donegal Mutual and Senior Vice President of us from 2021 to 2025; Senior Director of Willis Towers Watson from 2018 to 2021; Head of Personal Lines Product Management of The Hartford from 2015 to 2018; other positions at The Hartford from 2005 to 2015.
Our insurance subsidiaries bear their proportionate share of information services expenses based on their respective percentage of the total net premiums written of the Donegal Insurance Group. -14- Index The business strategy and ultimate success of our insurance subsidiaries depends on the effectiveness of efficient and integrated business systems and technology infrastructure.
Our insurance subsidiaries bear their proportionate share of information services expenses based on their respective percentage of the total net premiums written of the Donegal Insurance Group. The business strategy and ultimate success of our insurance subsidiaries depends on the effectiveness of efficient and integrated business systems and technology infrastructure.
Daniel DeLamater 52 Executive Vice President and Chief Operating Officer of Donegal Mutual and us since 2024; Senior Vice President of us from 2022 to 2024; Senior Vice President and Head of Field Operations & National Accounts of Donegal Mutual from 2022 to 2024; Senior Vice President of National Accounts for Donegal Mutual from 2020 to 2022; President of Southern Mutual Insurance Company since 2016; other positions at Southern Mutual Insurance Company from 2000 to 2016.
Daniel DeLamater 53 Executive Vice President and Chief Operating Officer of Donegal Mutual and us since 2024; Senior Vice President of us from 2022 to 2024; Senior Vice President and Head of Field Operations & National Accounts of Donegal Mutual from 2022 to 2024; Senior Vice President of National Accounts for Donegal Mutual from 2020 to 2022; President of Southern Mutual Insurance Company since 2016; other positions at Southern Mutual Insurance Company from 2000 to 2016.
In addition, the COVID-19 pandemic and related government mandates and restrictions resulted in various changes from historical claims reporting and settlement trends during 2020 and resulted in significant increases in loss costs in subsequent years due to a number of factors, including supply chain disruption, higher new and used automobile values, increases in the cost of replacement automobile parts and rising labor rates.
In addition, the COVID-19 pandemic and related government mandates and restrictions resulted in various changes from historical claims reporting and settlement trends during 2020 and resulted in significant increases in loss costs in several following years due to a number of factors, including supply chain disruption, higher new and used automobile values, increases in the cost of replacement automobile parts and rising labor rates.
The following table shows the composition of the debt securities (at carrying value) in the investment portfolios of our insurance subsidiaries, excluding short-term investments, by rating at December 31, 2024: (dollars in thousands) December 31, 2024 Rating (1) Amount Percent U.S.
The following table shows the composition of the debt securities (at carrying value) in the investment portfolios of our insurance subsidiaries, excluding short-term investments, by rating at December 31, 2025: (dollars in thousands) December 31, 2025 Rating (1) Amount Percent U.S.
Altshuler 44 Senior Vice President and Chief Analytics Officer of us since 2020; Senior Vice President and Chief Analytics Officer of Donegal Mutual since 2019; Director of Willis Towers Watson from 2018 to 2019; Director of Pricing Innovation of USAA from 2014 to 2018; other positions at USAA from 2001 to 2014. David B.
Altshuler 45 Senior Vice President and Chief Analytics Officer of us since 2020; Senior Vice President and Chief Analytics Officer of Donegal Mutual since 2019; Director of Willis Towers Watson from 2018 to 2019; Director of Pricing Innovation of USAA from 2014 to 2018; other positions at USAA from 2001 to 2014. David B.
Our insurance subsidiaries have a catastrophe reinsurance agreement with Donegal Mutual, pursuant to which Donegal Mutual provides coverage for losses related to any catastrophic occurrence over a set retention of $3.0 million ($2.0 million for 2022) for each participating insurance subsidiary, with a combined retention of $6.0 million ($5.0 million for 2022) for a catastrophe involving a combination of participating insurance subsidiaries, up to the amount Donegal Mutual and our insurance subsidiaries retain under catastrophe reinsurance agreements with unaffiliated reinsurers.
Our insurance subsidiaries have a catastrophe reinsurance agreement with Donegal Mutual, pursuant to which Donegal Mutual provides coverage for losses related to any catastrophic occurrence over a set retention of $3.0 million for each participating insurance subsidiary, with a combined retention of $6.0 million for a catastrophe involving a combination of participating insurance subsidiaries, up to the amount Donegal Mutual and our insurance subsidiaries retain under catastrophe reinsurance agreements with unaffiliated reinsurers.
In the first quarter of 2025, our board of directors and the board of directors of Donegal Mutual each undertook a review of the relationships between Donegal Mutual and DGI and determined that continuing the current relationships and the current corporate structure of Donegal Mutual and DGI is in the best interests of DGI and its various constituencies.
In the first quarter of 2026, our board of directors and the board of directors of Donegal Mutual each undertook a review of the relationships between Donegal Mutual and DGI and determined that continuing the current relationships and the current corporate structure of Donegal Mutual and DGI is in the best interests of DGI and its various constituencies.
In recent years, the consolidation of independent agencies has accelerated, resulting in the acquisition of independent agencies from which our insurance subsidiaries and Donegal Mutual currently receive business by national cluster groups and aggregators. We have expanded our national accounts team that is responsible for the management and expansion of our relationships with these national agency groups.
In recent years, the consolidation of independent agencies has accelerated, resulting in the acquisition of independent agencies from which our insurance subsidiaries and Donegal Mutual currently receive business by national cluster groups and aggregators. We have a dedicated national accounts team that is responsible for the management and expansion of our relationships with these national agency groups.
It will also incorporate robust security features, such as multi-factor authentication and data encryption, as well as other advanced data security and privacy measures. The platform will also facilitate seamless integration with analytics functions, artificial intelligence and machine learning models, and enable innovative business use cases for technologies such as Generative Artificial Intelligence (“Gen AI”).
It will also incorporate robust security features, such as multi-factor authentication and data encryption, as well as other advanced data security and privacy measures. The platform will also facilitate seamless integration with analytics functions, artificial intelligence and machine learning models, and enable innovative business use cases for technologies such as Generative Artificial Intelligence (“GenAI”).
The amount of statutory capital and surplus necessary for our insurance subsidiaries to satisfy regulatory requirements, including RBC requirements, was not significant in relation to our insurance subsidiaries’ statutory capital and surplus at December 31, 2024.
The amount of statutory capital and surplus necessary for our insurance subsidiaries to satisfy regulatory requirements, including RBC requirements, was not significant in relation to our insurance subsidiaries’ statutory capital and surplus at December 31, 2025.
Deas, Jr. 57 Senior Vice President of Field Operations & National Accounts of Donegal Mutual and Senior Vice President of us since 2024; Senior Regional Vice President of Donegal Mutual from 2022 to 2024 and Regional Vice President of Donegal Mutual from 2020 to 2022; other positions with Donegal Mutual from 2006 to 2020. William A.
Deas, Jr. 58 Senior Vice President of Field Operations & National Accounts of Donegal Mutual and Senior Vice President of us since 2024; Senior Regional Vice President of Donegal Mutual from 2022 to 2024 and Regional Vice President of Donegal Mutual from 2020 to 2022; other positions with Donegal Mutual from 2006 to 2020. William A.
Our downstream holding company structure, with Donegal Mutual holding approximately 70% of the combined voting power of our common stock, has proven its effectiveness and success over the 38 years of our existence.
Our downstream holding company structure, with Donegal Mutual holding approximately 70% of the combined voting power of our common stock, has proven its effectiveness and success over the 39 years of our existence.
Burke 59 President and Chief Executive Officer of us since 2015; President and Chief Executive Officer of Donegal Mutual since 2018; Executive Vice President and Chief Operating Officer of Donegal Mutual from 2014 to 2018; Senior Vice President of Human Resources of Donegal Mutual and us from 2005 to 2014; other positions from 2000 to 2005. W.
Burke 60 President and Chief Executive Officer of us since 2015; President and Chief Executive Officer of Donegal Mutual since 2018; Executive Vice President and Chief Operating Officer of Donegal Mutual from 2014 to 2018; Senior Vice President of Human Resources of Donegal Mutual and us from 2005 to 2014; other positions from 2000 to 2005. W.
Bawel 38 Senior Vice President and Chief Accounting Officer of Donegal Mutual and us since 2024; Vice President of Financial Reporting and Analysis of Donegal Mutual and Vice President of us from 2018 to 2024; Assistant Vice President of Internal Audit of Donegal Mutual from 2012 to 2018. Noland R.
Bawel 39 Senior Vice President and Chief Accounting Officer of Donegal Mutual and us since 2024; Vice President of Financial Reporting and Analysis of Donegal Mutual and Vice President of us from 2018 to 2024; Assistant Vice President of Internal Audit of Donegal Mutual from 2012 to 2018. Noland R.
The team also generates reporting and analyses that enable us to draw business insights from data that drive actions to improve performance. -7- Index We are focused on process excellence and have prepared a multi-year roadmap for addressing those opportunities.
The team also generates reporting and analyses that enable us to draw business insights from data that drive actions to improve performance. -7- Index We are focused on process excellence and are executing a multi-year roadmap for addressing those opportunities.
At December 31, 2024, our insurance subsidiaries and Donegal Mutual each exceeded the minimum levels of statutory capital the RBC rules require by a substantial margin.
At December 31, 2025, our insurance subsidiaries and Donegal Mutual each exceeded the minimum levels of statutory capital the RBC rules require by a substantial margin.
Sanjay Pandey 58 Executive Vice President and Chief Information Officer of Donegal Mutual and us since 2025; Senior Vice President and Chief Information Officer of Donegal Mutual and us from 2013 to 2025; other positions from 2000 to 2013. Kristi S.
Sanjay Pandey 59 Executive Vice President and Chief Information Officer of Donegal Mutual and us since 2025; Senior Vice President and Chief Information Officer of Donegal Mutual and us from 2013 to 2025; other positions from 2000 to 2013. Kristi S.
Hecker 37 Senior Vice President and General Counsel of Donegal Mutual and us since 2025; Senior Vice President and General Counsel of Conestoga Title Insurance Company from 2022 to 2024; Vice President and General Counsel of Conestoga Title Insurance Company from 2021 to 2022. Christina M.
Hecker 38 Senior Vice President and General Counsel of Donegal Mutual and us since 2025; Senior Vice President and General Counsel of Conestoga Title Insurance Company from 2022 to 2024; Vice President and General Counsel of Conestoga Title Insurance Company from 2021 to 2022. Christina M.
Jeffrey D. Miller 60 Executive Vice President and Chief Financial Officer of Donegal Mutual and us since 2014; Senior Vice President and Chief Financial Officer of Donegal Mutual and us from 2005 to 2014; other positions from 1993 to 2005.
Jeffrey D. Miller 61 Executive Vice President and Chief Financial Officer of Donegal Mutual and us since 2014; Senior Vice President and Chief Financial Officer of Donegal Mutual and us from 2005 to 2014; other positions from 1993 to 2005.
Distribution Our insurance subsidiaries market their products primarily in the Mid-Atlantic, Midwestern, Southern and Southwestern regions through approximately 2,100 independent insurance agencies.
Distribution Our insurance subsidiaries market their products primarily in the Mid-Atlantic, Midwestern, Southern and Southwestern regions through approximately 2,000 independent insurance agencies.
Hoffman 50 Senior Vice President and Chief Risk Officer of Donegal Mutual and us since 2019; Senior Vice President of Internal Audit of Donegal Mutual and Senior Vice President of us from 2013 to 2019; Vice President of Internal Audit of Donegal Mutual and Vice President of us from 2009 to 2013. David W.
Hoffman 51 Senior Vice President and Chief Risk Officer of Donegal Mutual and us since 2019; Senior Vice President of Internal Audit of Donegal Mutual and Senior Vice President of us from 2013 to 2019; Vice President of Internal Audit of Donegal Mutual and Vice President of us from 2009 to 2013. David W.
The annual net premiums earned of our insurance subsidiaries have increased from $301.5 million in 2006 to $936.7 million in 2024, a compound annual growth rate of 6.5%. -5- Index The combined ratio of our insurance subsidiaries and that of the United States property and casualty insurance industry as computed using United States generally accepted accounting principles, or GAAP, and statutory accounting principles, or SAP, for the years 2020 through 2024 are shown in the following table: 2024 2023 2022 2021 2020 Our GAAP combined ratio 98.6 % 104.4 % 103.3 % 101.0 % 96.0 % Our SAP combined ratio 98.3 104.2 103.3 100.8 95.4 Industry SAP combined ratio (1) 98.9 101.9 103.1 100.0 98.8 (1) As reported (projected for 2024) by A.M.
The annual net premiums earned of our insurance subsidiaries have increased from $301.5 million in 2006 to $921.2 million in 2025, a compound annual growth rate of 6.1%. -5- Index The combined ratio of our insurance subsidiaries and that of the United States property and casualty insurance industry as computed using United States generally accepted accounting principles, or GAAP, and statutory accounting principles, or SAP, for the years 2021 through 2025 are shown in the following table: 2025 2024 2023 2022 2021 Our GAAP combined ratio 95.4 % 98.6 % 104.4 % 103.3 % 101.0 % Our SAP combined ratio 95.0 98.3 104.2 103.3 100.8 Industry SAP combined ratio (1) 95.0 97.1 101.9 103.1 100.0 (1) As reported (projected for 2025) by A.M.
The investment portfolios of our insurance subsidiaries did not contain any mortgage loans or any non-performing assets at December 31, 2024.
The investment portfolios of our insurance subsidiaries did not contain any mortgage loans or any non-performing assets at December 31, 2025.
Folmar 66 Senior Vice President of Claims of Donegal Mutual and Senior Vice President of us since 2019; Vice President of Claims of Donegal Mutual from 2010 to 2019; other positions from 1998 to 2010. Rick J.
Folmar 67 Senior Vice President of Claims of Donegal Mutual and Senior Vice President of us since 2019; Vice President of Claims of Donegal Mutual from 2010 to 2019; other positions from 1998 to 2010. Rick J.
Sponic 60 Senior Vice President of Personal Lines of Donegal Mutual and Senior Vice President of us since 2022; Vice President of Personal Lines of Donegal Mutual from 2008 to 2022; other positions from 1990 to 2008. V.
Sponic 61 Senior Vice President of Personal Lines of Donegal Mutual and Senior Vice President of us since 2022; Vice President of Personal Lines of Donegal Mutual from 2008 to 2022; other positions from 1990 to 2008. V.
At December 31, 2024, we had three segments: our investment function, our commercial lines of insurance and our personal lines of insurance. We set forth financial information about these segments in Note 19 of the Notes to Consolidated Financial Statements. The commercial lines products of our insurance subsidiaries consist primarily of commercial automobile, commercial multi-peril and workers’ compensation policies.
At December 31, 2025, we had three segments: our investment function, our commercial lines of insurance and our personal lines of insurance. We set forth financial information about these segments in Note 18 of the Notes to Consolidated Financial Statements. The commercial lines products of our insurance subsidiaries consist primarily of commercial automobile, commercial multi-peril and workers’ compensation policies.
Our insurance subsidiaries have increased their annual premium per employee, a measure of efficiency that our insurance subsidiaries use to evaluate their operations, from approximately $470,000 in 1999 to approximately $1.4 million in 2024. Return on invested assets is an important element of the financial results of our insurance subsidiaries.
Our insurance subsidiaries have increased their annual premium per employee, a measure of efficiency that our insurance subsidiaries use to evaluate their operations, from approximately $470,000 in 1999 to approximately $1.3 million in 2025. Return on invested assets is an important element of the financial results of our insurance subsidiaries.
We developed and began executing a pricing and analytics roadmap that will continue to deliver data-driven insights to our underwriters.
We developed and are executing a pricing and analytics roadmap that will continue to deliver data-driven insights to our underwriters.
In 2024, Donegal Mutual implemented another major release that included dwelling fire and conversion of legacy homeowners renewal policies in the remaining eight states. During 2025, Donegal Mutual expects to implement new systems for the remaining lines of business the Donegal Insurance Group issues currently and for the conversion of remaining legacy renewal policies of the Donegal Insurance Group.
In 2024, Donegal Mutual implemented another major release that included dwelling fire and conversion of legacy homeowners renewal policies in the remaining eight states. In 2025, Donegal Mutual implemented new systems for the remaining lines of business the Donegal Insurance Group issues currently and for the conversion of remaining legacy renewal policies of the Donegal Insurance Group.
During 2024, Donegal Mutual and our insurance subsidiaries initiated a formal expense reduction initiative that included actions to optimize staffing levels, take advantage of technology-driven efficiency gains, align agency compensation to desired outcomes and reduce third-party vendor costs in several operational areas. This initiative will continue into 2025 to achieve targeted expense reduction goals.
During 2024 and 2025, Donegal Mutual and our insurance subsidiaries conducted a formal expense reduction initiative that included actions to optimize staffing levels, take advantage of technology-driven efficiency gains, align agency compensation to desired outcomes and reduce third-party vendor costs in several operational areas. Various actions will continue into 2026 to achieve targeted expense management goals.
We believe our relationships with existing and emerging national agency groups will continue to expand and that these groups represent a significant opportunity for profitable future growth. • Delivering a superior experience to our agents and policyholders. Donegal Mutual and our insurance subsidiaries strive to maintain technology comparable to that of their larger competitors.
We believe our relationships with existing and emerging national agency groups will continue to expand and that these groups represent a sustainable source of profitable future growth. • Delivering a superior experience to our agents and policyholders. Donegal Mutual and our insurance subsidiaries strive to maintain technology comparable to that of their larger competitors.
Allocated expenses from Donegal Mutual for services it provided to Atlantic States and our other insurance subsidiaries totaled $224.6 million, $219.0 million and $199.2 million for 2024, 2023 and 2022, respectively. -3- Index Donegal Mutual is the employer of record for all personnel who provide services for our insurance subsidiaries.
Allocated expenses from Donegal Mutual for services it provided to Atlantic States and our other insurance subsidiaries totaled $224.8 million, $224.6 million, and $219.0 million for 2025, 2024 and 2023, respectively. -3- Index Donegal Mutual is the employer of record for all personnel who provide services for our insurance subsidiaries.
Donegal Mutual Insurance Company, or Donegal Mutual, organized us as an insurance holding company on August 26, 1986. At December 31, 2024, Donegal Mutual held approximately 44% of our outstanding Class A common stock and approximately 84% of our outstanding Class B common stock.
Donegal Mutual Insurance Company, or Donegal Mutual, organized us as an insurance holding company on August 26, 1986. At December 31, 2025, Donegal Mutual held approximately 44% of our outstanding Class A common stock and approximately 85% of our outstanding Class B common stock.
These continuing trend changes caused significant disruption to historical loss patterns and give rise to greater uncertainty as to the pattern of future loss settlements.
These trend changes caused significant disruption to historical loss patterns and gave rise to greater uncertainty as to the pattern of future loss settlements.
Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. As shown above, our insurance subsidiaries held investments in mortgage-backed securities having a carrying value of $304.5 million at December 31, 2024.
Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. As shown above, our insurance subsidiaries held investments in mortgage-backed securities having a carrying value of $445.2 million at December 31, 2025.
Our insurance subsidiaries and Donegal Mutual also purchased facultative reinsurance to cover certain exposures, including property exposures that exceeded the limits provided by their respective treaty reinsurance. Investments At December 31, 2024, 95.6% of all debt securities our insurance subsidiaries held had an investment-grade rating.
Our insurance subsidiaries and Donegal Mutual also purchased facultative reinsurance to cover certain exposures, including property exposures that exceeded the limits provided by their respective treaty reinsurance. Investments At December 31, 2025, 96.4% of all debt securities our insurance subsidiaries held had an investment-grade rating.
Our insurance subsidiaries also provide their independent agents with ongoing support to enable them to better attract and service customers, including: • training programs; • marketing support; • availability of a personal lines service center that provides comprehensive service for our personal lines policyholders; -9- Index • availability of a commercial lines small business unit to monitor straight-through processing results and enhance turnaround time for responses to agents for less complicated commercial risks; • availability of a commercial lines service center, which is an optional service enhancement for agencies who prefer that we interact directly with their customers for mid-term policy coverage changes and other service requests; and • accessibility to and regular interactions with marketing and underwriting personnel and senior management of our insurance subsidiaries.
In addition, we utilize agency relationship management tools to enhance the abilities of our insurance subsidiaries to manage their agency relationships and facilitate their agency communications and interactions. -9- Index Our insurance subsidiaries also provide their independent agents with ongoing support to enable them to better attract and service customers, including: • training programs; • marketing support; • availability of a personal lines service center that provides comprehensive service for our personal lines policyholders; • availability of a commercial lines small business unit to monitor straight-through processing results and enhance turnaround time for responses to agents for less complicated commercial risks; • availability of a commercial lines service center, which is an optional service enhancement for agencies who prefer that we interact directly with their customers for mid-term policy coverage changes and other service requests; and • accessibility to and regular interactions with marketing and underwriting personnel and senior management of our insurance subsidiaries.
Our multi-year systems modernization project is further enhancing the ability of our insurance subsidiaries to conduct business with their independent agents and to develop and implement new products.
Our multi-year systems modernization project has further enhanced the ability of our insurance subsidiaries to conduct business with their independent agents and to develop and implement new products.
Donegal Mutual is currently in the midst of a multi-year effort to modernize certain of its key infrastructure and applications systems we describe in more detail under “Business - Business Strategy - Strategically modernizing our operations and processes to transform our business.” The modernized proficiency of these integrated technology systems facilitates high service levels for the agents and policyholders of our insurance subsidiaries, increased efficiencies in processing the business of our insurance subsidiaries and lower operating costs.
Donegal Mutual is currently in the midst of a multi-year effort to modernize certain of its key infrastructure and applications systems we describe in more detail under “Business - Business Strategy - Advancing our operational and digital capabilities.” The modernized proficiency of these integrated technology systems facilitates high service levels for the agents and policyholders of our insurance subsidiaries, increased efficiencies in processing the business of our insurance subsidiaries and lower operating costs.
We refer to our proxy statement for our annual meeting of stockholders to be held on April 17, 2025 for further information about the members of the coordinating committee.
We refer to our proxy statement for our annual meeting of stockholders to be held on April 16, 2026 for further information about the members of the coordinating committee.
The approval process for a new agreement between Donegal Mutual and us or one of our insurance subsidiaries or a change in such an agreement is as follows: • both of our members on the coordinating committee must determine that the new agreement or the change in an existing agreement is fair and equitable to us and in the best interests of our stockholders; • both of Donegal Mutual’s members on the coordinating committee must determine that the new agreement or the change in an existing agreement is fair and equitable to Donegal Mutual and in the best interests of its policyholders; • our board of directors must approve the new agreement or the change in an existing agreement; and • Donegal Mutual’s board of directors must approve the new agreement or the change in an existing agreement. -4- Index The coordinating committee also meets annually to review each existing agreement between Donegal Mutual and us or our insurance subsidiaries, including all reinsurance agreements between Donegal Mutual and our insurance subsidiaries.
The approval process for a new agreement between Donegal Mutual and us or one of our insurance subsidiaries or a change in such an agreement is as follows: • both of our members on the coordinating committee must determine that the new agreement or the change in an existing agreement is fair and equitable to us and in the best interests of our stockholders; • both of Donegal Mutual’s members on the coordinating committee must determine that the new agreement or the change in an existing agreement is fair and equitable to Donegal Mutual and in the best interests of its policyholders; • our board of directors must approve the new agreement or the change in an existing agreement; and -4- Index • Donegal Mutual’s board of directors must approve the new agreement or the change in an existing agreement.
The following table sets forth the investment results of our insurance subsidiaries for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, (dollars in thousands) 2024 2023 2022 Invested assets (1) $ 1,356,013 $ 1,315,855 $ 1,290,752 Investment income (2) 44,918 40,853 34,016 Average yield 3.3 % 3.1 % 2.6 % Average tax-equivalent yield 3.4 3.2 2.7 (1) Average of the aggregate invested amounts at the beginning and end of the period.
The following table sets forth the investment results of our insurance subsidiaries for the years ended December 31, 2025, 2024 and 2023: Year Ended December 31, (dollars in thousands) 2025 2024 2023 Invested assets (1) $ 1,442,613 $ 1,356,013 $ 1,315,855 Investment income (2) 52,627 44,918 40,853 Average yield 3.6 % 3.3 % 3.1 % Average tax-equivalent yield 3.7 3.4 3.2 (1) Average of the aggregate invested amounts at the beginning and end of the period.
The amortized cost of fixed maturities we classified as available for sale was $652.6 million at December 31, 2024, $629.7 million at December 31, 2023 and $571.9 million at December 31, 2022. (2) We value equity securities at fair value.
The amortized cost of fixed maturities we classified as available for sale was $650.4 million at December 31, 2025, $652.6 million at December 31, 2024 and $629.7 million at December 31, 2023. (2) We value equity securities at fair value.
Our insurance subsidiaries seek to enhance their underwriting results by: • carefully selecting the product lines, classes of business and individual risks they underwrite; • executing localized strategies to achieve a mix of business they expect will generate targeted margins of profitability; • monitoring premium rate adequacy and adjusting premium rates to achieve targeted growth, returns and retention levels; • utilizing enhanced underwriting and technology tools to inform underwriting decisions and determine coverage availability; • utilizing data analytics and predictive modeling tools to inform risk selection and pricing decisions; • utilizing economic capital modeling tools to carefully manage the geographic concentration of risks they underwrite; and • evaluating their claims history on a regular basis to ensure the adequacy of their underwriting guidelines and product pricing.
Our insurance subsidiaries seek to enhance their underwriting results by: • carefully selecting the product lines, classes of business and individual risks they underwrite; • executing localized strategies to achieve a mix of business they expect will generate targeted margins of profitability; • monitoring premium rate adequacy and adjusting premium rates to achieve targeted growth, returns and retention levels; • utilizing enhanced underwriting and technology tools to inform underwriting decisions and determine coverage availability; • utilizing data analytics and predictive modeling tools to inform risk selection and pricing decisions; • utilizing economic capital modeling tools to carefully manage their risk profile, including the geographic concentration of risks they underwrite; and • evaluating their claims history on a regular basis to ensure the adequacy of their underwriting guidelines and product pricing. -6- Index Our insurance subsidiaries maintain discipline in their pricing by effecting rate increases to sustain or improve their underwriting results without unduly affecting their customer retention.
The following table sets forth the percentage of direct premiums our insurance subsidiaries write, including 80% of the direct premiums Donegal Mutual and Atlantic States include in the underwriting pool, in each of the states where they conducted a significant portion of their business in 2024: -13- Index Pennsylvania 37.6 % Michigan 15.9 Maryland 8.2 Delaware 6.6 Virginia 6.1 Ohio 4.0 Wisconsin 2.9 Indiana 2.7 Georgia 2.6 North Carolina 2.3 Texas 2.2 Other 8.9 Total 100.0 % Our insurance subsidiaries employ a number of policies and procedures that we believe enable them to attract, retain and motivate their independent agents.
Our insurance subsidiaries seek to be among the top three insurers within each of their agencies for the lines of business our insurance subsidiaries write. -13- Index The following table sets forth the percentage of direct premiums our insurance subsidiaries write, including 80% of the direct premiums Donegal Mutual and Atlantic States include in the underwriting pool, in each of the states where they conducted a significant portion of their business in 2025: Pennsylvania 38.3 % Michigan 16.6 Delaware 7.0 Maryland 6.9 Virginia 6.1 Ohio 3.8 Indiana 2.8 Wisconsin 2.5 North Carolina 2.4 Texas 2.4 Georgia 1.9 Other 9.3 Total 100.0 % Our insurance subsidiaries employ a number of policies and procedures that we believe enable them to attract, retain and motivate their independent agents.
Our insurance subsidiaries recognized a decrease in their liability for losses and loss expenses of prior years of $15.0 million, $16.7 million and $44.8 million in 2024, 2023 and 2022, respectively.
Our insurance subsidiaries recognized a decrease in their liability for losses and loss expenses of prior years of $10.3 million, $15.0 million and $16.7 million in 2025, 2024 and 2023, respectively.
The total fair value of fixed maturities we classified as held to maturity was $631.6 million at December 31, 2024, $611.5 million at December 31, 2023 and $598.0 million at December 31, 2022.
The total fair value of fixed maturities we classified as held to maturity was $731.7 million at December 31, 2025, $631.6 million at December 31, 2024 and $611.5 million at December 31, 2023.
For liability insurance, our insurance subsidiaries had excess of loss reinsurance that provided for coverage of $72.0 million per occurrence over a set retention of $3.0 million ($69.0 million per occurrence over a set retention of $6.0 million for 2025).
For property insurance, our insurance subsidiaries had excess of loss reinsurance that provided for coverage of $36.0 million per loss over a set retention of $4.0 million. For liability insurance, our insurance subsidiaries had excess of loss reinsurance that provided for coverage of $69.0 million per occurrence over a set retention of $6.0 million.
Donegal Mutual plans to perform the conversion of legacy renewal policies on a state-by-state basis, currently projecting full completion in 2026. In 2023, Donegal Mutual began a multi-year data modernization initiative to implement a comprehensive cloud-based data infrastructure that will support critical future business processes and strategies.
Donegal Mutual is converting legacy renewal policies to the new systems on a state-by-state basis, currently projecting full completion in 2027. In 2023, Donegal Mutual began a multi-year data modernization initiative to implement a comprehensive cloud-based data infrastructure that will support critical future business processes and strategies.
The total cost of equity securities was $24.7 million at December 31, 2024, $18.8 million at December 31, 2023 and $30.8 million at December 31, 2022.
The total cost of equity securities was $27.2 million at December 31, 2025, $24.7 million at December 31, 2024 and $18.8 million at December 31, 2023.
For example, the 2014 liability has developed a deficiency after ten years because we expect the re-estimated net losses and loss expenses to be $22.2 million more than the estimated liability we initially established in 2014 of $292.3 million.
For example, the 2015 liability has developed a deficiency after ten years because we expect the re-estimated net losses and loss expenses to be $20.7 million more than the estimated liability we initially established in 2015 of $322.0 million.
At December 31, 2024, the amount of ordinary dividends our insurance subsidiaries could pay to us during 2025, without the prior approval of their respective domiciliary insurance commissioners, is shown in the following table.
Our insurance subsidiaries paid dividends to us of $10.0 million,$15.0 million and $13.0 million in 2025, 2024 and 2023, respectively. At December 31, 2025, the amount of ordinary dividends our insurance subsidiaries could pay to us during 2026, without the prior approval of their respective domiciliary insurance commissioners, is shown in the following table.
(3) We value short-term investments at cost, which approximates fair value. -21- Index The following table sets forth the maturities (at carrying value) in the fixed maturity portfolio of our insurance subsidiaries at December 31, 2024, 2023 and 2022: December 31, 2024 2023 2022 Percent of Percent of Percent of (dollars in thousands) Amount Total Amount Total Amount Total Due in (1) : One year or less $ 56,914 4.3 % $ 54,392 4.3 % $ 39,094 3.2 % Over one year through three years 210,184 15.9 130,158 10.3 107,689 8.9 Over three years through five years 175,577 13.3 141,994 11.2 133,068 11.0 Over five years through ten years 318,912 24.1 347,035 27.3 357,114 29.5 Over ten years through fifteen years 208,445 15.7 201,585 15.9 191,118 15.8 Over fifteen years 50,503 3.8 116,747 9.2 154,840 12.7 Mortgage-backed securities 304,459 23.0 278,260 21.9 229,308 18.9 Allowance for expected credit losses (1,388 ) (0.1 ) (1,326 ) (0.1 ) — — $ 1,323,606 100.0 % $ 1,268,845 100.0 % $ 1,212,231 100.0 % (1) Based on stated maturity dates with no prepayment assumptions.
(3) We value short-term investments at cost, which approximates fair value. -21- Index The following table sets forth the maturities (at carrying value) in the fixed maturity portfolio of our insurance subsidiaries at December 31, 2025, 2024 and 2023: December 31, 2025 2024 2023 Percent of Percent of Percent of (dollars in thousands) Amount Total Amount Total Amount Total Due in (1) : One year or less $ 28,609 2.0 % $ 56,914 4.3 % $ 54,392 4.3 % Over one year through three years 76,958 5.4 210,184 15.9 130,158 10.3 Over three years through five years 140,580 9.9 175,577 13.3 141,994 11.2 Over five years through ten years 323,870 22.9 318,912 24.1 347,035 27.3 Over ten years through fifteen years 234,181 16.6 208,445 15.7 201,585 15.9 Over fifteen years 169,058 11.9 50,503 3.8 116,747 9.2 Mortgage-backed securities 445,227 31.4 304,459 23.0 278,260 21.9 Allowance for expected credit losses (1,313 ) (0.1 ) (1,388 ) (0.1 ) (1,326 ) (0.1 ) $ 1,417,170 100.0 % $ 1,323,606 100.0 % $ 1,268,845 100.0 % (1) Based on stated maturity dates with no prepayment assumptions.
Our insurance subsidiaries monitor the agency’s compliance with the plan and take other measures as required in the judgment of our insurance subsidiaries, including the termination, to the extent applicable laws and regulations permit, of agencies that are unable to achieve acceptable underwriting profitability.
Our insurance subsidiaries monitor the agency’s compliance with the plan and take other measures as required in the judgment of our insurance subsidiaries, including the termination, to the extent applicable laws and regulations permit, of agencies that are unable to achieve acceptable underwriting profitability. -14- Index Technology Donegal Mutual owns and manages the technology that our insurance subsidiaries utilize on a daily basis.
At December 31, 2024, Donegal Mutual had 851 employees, of which 423 were based in its Marietta, Pennsylvania headquarters and 428 were based in regional offices or were permanent remote employees. There were 833 full-time employees and 18 part-time employees.
At December 31, 2025, Donegal Mutual had 851 employees, of which 422 were based in its Marietta, Pennsylvania headquarters and 429 were based in regional offices or were permanent remote employees. There were 831 full-time employees and 20 part-time employees.
However, the underwriting pool homogenizes the risk characteristics of all business that Donegal Mutual and Atlantic States write directly and all business that Donegal Mutual assumes from its affiliates and places into the underwriting pool. The business Atlantic States derives from the underwriting pool represents a significant percentage of our total consolidated revenues.
However, the underwriting pool homogenizes the risk characteristics of all business that Donegal Mutual and Atlantic States write directly and all business that Donegal Mutual assumes from its affiliates and places into the underwriting pool.
Wagner 64 Senior Vice President and Treasurer of Donegal Mutual and us since 2005; other positions from 1987 to 2005. -25- Index Cautionary Statement Regarding Forward-Looking Statements This Form 10-K Report and the documents we incorporate by reference in this Form 10-K Report contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Anthony Viozzi 52 Senior Vice President and Chief Investment Officer of Donegal Mutual and us since 2012; Vice President of Investments of Donegal Mutual and us from 2007 to 2012. -25- Index Cautionary Statement Regarding Forward-Looking Statements This Form 10-K Report and the documents we incorporate by reference in this Form 10-K Report contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
Technology Donegal Mutual owns and manages the technology that our insurance subsidiaries utilize on a daily basis. The technology is comprised of highly integrated agency-facing and back-end processing systems that operate within an advanced, modernized infrastructure that provides high service levels for performance, reliability, security and availability.
The technology is comprised of highly integrated agency-facing and back-end processing systems that operate within an advanced, modernized infrastructure that provides high service levels for performance, reliability, security and availability. Donegal Mutual maintains disaster recovery and backup systems and tests these systems on a regular basis.
Treasury securities and obligations of U.S. government corporations and agencies $ 86,579 6.3 % $ 91,517 6.9 % $ 103,362 7.9 % Obligations of states and political subdivisions 371,896 26.9 376,898 28.4 382,097 29.3 Corporate securities 236,550 17.0 201,847 15.2 190,949 14.6 Mortgage-backed securities 10,689 0.8 9,235 0.7 12,031 1.0 Total held to maturity 705,714 51.0 679,497 51.2 688,439 52.8 Available for sale: U.S.
Treasury securities and obligations of U.S. government corporations and agencies $ 79,242 5.3 % $ 86,579 6.3 % $ 91,517 6.9 % Obligations of states and political subdivisions 436,802 29.1 371,896 26.9 376,898 28.4 Corporate securities 252,099 16.8 236,550 17.0 201,847 15.2 Mortgage-backed securities 8,304 0.6 10,689 0.8 9,235 0.7 Total held to maturity 776,447 51.8 705,714 51.0 679,497 51.2 Available for sale: U.S.
The majority of the 2022 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO.
The majority of the 2025 development related to decreases in the liability for losses and loss expenses of prior years for Southern and Peninsula.
Treasury securities and obligations of U.S. government corporations and agencies 83,793 6.0 85,419 6.4 63,521 4.9 Obligations of states and political subdivisions 37,404 2.7 38,116 2.9 40,156 3.1 Corporate securities 202,932 14.7 196,793 14.8 202,838 15.5 Mortgage-backed securities 293,763 21.2 269,020 20.3 217,277 16.6 Total available for sale 617,892 44.6 589,348 44.4 523,792 40.1 Total fixed maturities 1,323,606 95.6 1,268,845 95.6 1,212,231 92.9 Equity securities (2) 36,808 2.6 25,903 2.0 35,105 2.7 Short-term investments (3) 24,558 1.8 32,306 2.4 57,321 4.4 Total investments $ 1,384,972 100.0 % $ 1,327,054 100.0 % $ 1,304,657 100.0 % (1) We refer to Notes 1 and 4 to our Consolidated Financial Statements.
Treasury securities and obligations of U.S. government corporations and agencies 24,329 1.6 83,793 6.0 85,419 6.4 Obligations of states and political subdivisions 48,551 3.3 37,404 2.7 38,116 2.9 Corporate securities 130,925 8.7 202,932 14.7 196,793 14.8 Mortgage-backed securities 436,918 29.1 293,763 21.2 269,020 20.3 Total available for sale 640,723 42.7 617,892 44.6 589,348 44.4 Total fixed maturities 1,417,170 94.5 1,323,606 95.6 1,268,845 95.6 Equity securities (2) 44,370 3.0 36,808 2.6 25,903 2.0 Short-term investments (3) 38,713 2.5 24,558 1.8 32,306 2.4 Total investments $ 1,500,253 100.0 % $ 1,384,972 100.0 % $ 1,327,054 100.0 % (1) We refer to Notes 1 and 4 to our Consolidated Financial Statements.
Since the predominant percentage of the business of Atlantic States and Donegal Mutual is pooled and the results shared by each company according to its participation level under the terms of the pooling agreement, the intent of the underwriting pool is to produce a more uniform and stable underwriting result from year to year for each company than either would experience individually and to spread the risk of loss between the companies.
Since the predominant percentage of the business of Atlantic States and Donegal Mutual is pooled and the results shared by each company according to its participation level under the terms of the pooling agreement, the intent of the underwriting pool is to produce a more uniform and stable underwriting result from year to year for each company than either would experience individually and to spread the risk of loss between the companies. -17- Index Differences between liabilities reported in our financial statements prepared on a GAAP basis and our insurance subsidiaries’ financial statements prepared on a SAP basis result from anticipating salvage and subrogation recoveries for GAAP but not for SAP.
Donegal Mutual’s investment portfolio of $574.1 million at December 31, 2024 consisted primarily of investment-grade bonds of $206.3 million and its investment in our Class A common stock and our Class B common stock.
Donegal Mutual’s investment portfolio of $622.8 million at December 31, 2025 consisted primarily of investment-grade bonds of $203.2 million and its investment in our Class A common stock and our Class B common stock.
Our insurance subsidiaries maintain a small percentage (2.6% at December 31, 2024) of their portfolios in equity securities. • Strategically modernizing our operations and processes to transform our business. We have an enterprise analytics department that is focused on integrating data and analytics into strategy and decision-making at all levels of our organization.
Our insurance subsidiaries maintain a small percentage (3.0% at December 31, 2025) of their portfolios in equity securities. • Advancing our operational and digital capabilities. We have an enterprise analytics department that is focused on integrating data and analytics into strategy and decision-making at all levels of our organization.
These differences amounted to $36.0 million, $32.4 million and $28.7 million at December 31, 2024, 2023 and 2022, respectively. -17- Index The following table sets forth a reconciliation of the beginning and ending GAAP net liability of our insurance subsidiaries for unpaid losses and loss expenses for the periods indicated: Year Ended December 31, (in thousands) 2024 2023 2022 Gross liability for unpaid losses and loss expenses at beginning of year $ 1,126,157 $ 1,121,046 $ 1,077,620 Less reinsurance recoverable 437,014 451,184 451,261 Cumulative effect of adoption of updated accounting guidance for credit losses at January 1 — 1,132 — Net liability for unpaid losses and loss expenses at beginning of year 689,143 670,994 626,359 Provision for net losses and loss expenses for claims incurred in the current year 619,090 625,831 608,900 Change in provision for estimated net losses and loss expenses for claims incurred in prior years (14,972 ) (16,653 ) (44,821 ) Total incurred 604,118 609,178 564,079 Net losses and loss expense payments for claims incurred during: The current year 319,196 330,290 302,272 Prior years 269,701 260,739 218,304 Total paid 588,897 591,029 520,576 Net liability for unpaid losses and loss expenses at end of year 704,364 689,143 669,862 Plus reinsurance recoverable 416,621 437,014 451,184 Gross liability for unpaid losses and loss expenses at end of year $ 1,120,985 $ 1,126,157 $ 1,121,046 The following table sets forth the development of the liability for net unpaid losses and loss expenses of our insurance subsidiaries from 2014 to 2024.
The following table sets forth a reconciliation of the beginning and ending GAAP net liability of our insurance subsidiaries for unpaid losses and loss expenses for the periods indicated: Year Ended December 31, (in thousands) 2025 2024 2023 Gross liability for unpaid losses and loss expenses at beginning of year $ 1,120,985 $ 1,126,157 $ 1,121,046 Less reinsurance recoverable 416,621 437,014 451,184 Cumulative effect of adoption of updated accounting guidance for credit losses at January 1 — — 1,132 Net liability for unpaid losses and loss expenses at beginning of year 704,364 689,143 670,994 Provision for net losses and loss expenses for claims incurred in the current year 574,599 619,090 625,831 Change in provision for estimated net losses and loss expenses for claims incurred in prior years (10,267 ) (14,972 ) (16,653 ) Total incurred 564,332 604,118 609,178 Net losses and loss expense payments for claims incurred during: The current year 286,140 319,196 330,290 Prior years 277,360 269,701 260,739 Total paid 563,500 588,897 591,029 Net liability for unpaid losses and loss expenses at end of year 705,196 704,364 689,143 Plus reinsurance recoverable 394,854 416,621 437,014 Gross liability for unpaid losses and loss expenses at end of year $ 1,100,050 $ 1,120,985 $ 1,126,157 The following table sets forth the development of the liability for net unpaid losses and loss expenses of our insurance subsidiaries from 2015 to 2025.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+19 added−16 removed88 unchanged
Biggest changeFor example, certain lenders require customers to purchase insurance from an insurance carrier that has received an A.M. Best rating that exceeds a certain level. Currently, Donegal Mutual and our insurance subsidiaries each have an A (Excellent) rating from A.M. Best. In May 2024, A.M. Best affirmed its A (Excellent) ratings of Donegal Mutual and our insurance subsidiaries.
Biggest changeWe believe that the financial strength rating of A.M. Best is material to the operations of Donegal Mutual and our insurance subsidiaries. For example, certain lenders require customers to purchase insurance from an insurance carrier that has received an A.M. Best rating that exceeds a certain level.
Risks related to a pandemic include, but are not limited to, the following: • the business operations or a specific operational function of our insurance subsidiaries and Donegal Mutual could be disrupted by the illness of significant numbers of their employees and remedial efforts that would be required upon discovery of exposure to a communicable illness within their facilities; • the business operations of our insurance subsidiaries and Donegal Mutual are dependent upon technology systems for which regular physical access is required to maintain critical operational capabilities, and the business operations of our insurance subsidiaries and Donegal Mutual would be adversely impacted by government mandates requiring closure of facilities where those technology systems are located or restricting physical access to such facilities; • the revenues of our insurance subsidiaries and Donegal Mutual may decrease as a result of reduced demand for their insurance products as economic disruption adversely impacts current and potential insurance customers; • our insurance subsidiaries and Donegal Mutual may incur an increase in their losses and loss expenses in certain lines of business as a result of a pandemic and related economic disruption, and such losses and loss expenses may exceed the reserves our insurance subsidiaries and Donegal Mutual have established or may establish in the future; • our insurance subsidiaries and Donegal Mutual may incur increased costs related to legal disputes over policy coverages or exclusions and their defense against litigation related to a pandemic; • legislative, judicial and regulatory actions may expand coverage definitions, retroactively mandate coverage or otherwise require our insurance subsidiaries and Donegal Mutual to pay losses for damages that their policies explicitly excluded or did not intend to cover; • legislative, judicial and regulatory actions may require our insurance subsidiaries and Donegal Mutual to reduce or refund premiums, suspend cancellation of policies for non-payment of premiums or otherwise grant extended grace periods and time allowances for the payment of premium balances due to them; • our insurance subsidiaries and Donegal Mutual may not be able to collect premium balances due to them, resulting in reduced operating cash flows and an increase in premium write-offs that would increase their operating expenses; -31- Index • our insurance subsidiaries may suffer declines in the market values of their investments as a result of financial market volatility related to pandemic concerns and related economic disruption; and • economic disruption related to a pandemic could result in significant declines in the credit quality of issuers, ratings downgrades or changes in financial market conditions and regulatory changes that might adversely impact the value of the fixed-maturity investments that our insurance subsidiaries own.
Risks related to a pandemic include, but are not limited to, the following: • the business operations or a specific operational function of our insurance subsidiaries and Donegal Mutual could be disrupted by the illness of significant numbers of their employees and remedial efforts that would be required upon discovery of exposure to a communicable illness within their facilities; • the business operations of our insurance subsidiaries and Donegal Mutual are dependent upon technology systems for which regular physical access is required to maintain critical operational capabilities, and the business operations of our insurance subsidiaries and Donegal Mutual would be adversely impacted by government mandates requiring closure of facilities where those technology systems are located or restricting physical access to such facilities; • the revenues of our insurance subsidiaries and Donegal Mutual may decrease as a result of reduced demand for their insurance products as economic disruption adversely impacts current and potential insurance customers; • our insurance subsidiaries and Donegal Mutual may incur an increase in their losses and loss expenses in certain lines of business as a result of a pandemic and related economic disruption, and such losses and loss expenses may exceed the reserves our insurance subsidiaries and Donegal Mutual have established or may establish in the future; • our insurance subsidiaries and Donegal Mutual may incur increased costs related to legal disputes over policy coverages or exclusions and their defense against litigation related to a pandemic; • legislative, judicial and regulatory actions may expand coverage definitions, retroactively mandate coverage or otherwise require our insurance subsidiaries and Donegal Mutual to pay losses for damages that their policies explicitly excluded or did not intend to cover; • legislative, judicial and regulatory actions may require our insurance subsidiaries and Donegal Mutual to reduce or refund premiums, suspend cancellation of policies for non-payment of premiums or otherwise grant extended grace periods and time allowances for the payment of premium balances due to them; • our insurance subsidiaries and Donegal Mutual may not be able to collect premium balances due to them, resulting in reduced operating cash flows and an increase in premium write-offs that would increase their operating expenses; • our insurance subsidiaries may suffer declines in the market values of their investments as a result of financial market volatility related to pandemic concerns and related economic disruption; and • economic disruption related to a pandemic could result in significant declines in the credit quality of issuers, ratings downgrades or changes in financial market conditions and regulatory changes that might adversely impact the value of the fixed-maturity investments that our insurance subsidiaries own.
Some of the factors that could adversely affect the ability of our insurance subsidiaries and Donegal Mutual to retain existing, and attract new, independent agents include: -32- Index • the significant competition among insurance companies to attract independent agents; • the labor-intensive and time-consuming process of selecting new independent agents; • the insistence of our insurance subsidiaries and Donegal Mutual that independent agents adhere to certain standards; • the ability of our insurance subsidiaries and Donegal Mutual to pay competitive and attractive commissions, bonuses and other incentives to independent agents; and • the ongoing consolidation of independent agencies, which may result in the acquisition of independent agencies from which our insurance subsidiaries and Donegal Mutual currently receive business by larger entities with which our insurance subsidiaries and Donegal Mutual do not have business relationships.
Some of the factors that could adversely affect the ability of our insurance subsidiaries and Donegal Mutual to retain existing, and attract new, independent agents include: • the significant competition among insurance companies to attract independent agents; • the labor-intensive and time-consuming process of selecting new independent agents; • the insistence of our insurance subsidiaries and Donegal Mutual that independent agents adhere to certain standards; • the ability of our insurance subsidiaries and Donegal Mutual to pay competitive and attractive commissions, bonuses and other incentives to independent agents; and • the ongoing consolidation of independent agencies, which may result in the acquisition of independent agencies from which our insurance subsidiaries and Donegal Mutual currently receive business by larger entities with which our insurance subsidiaries and Donegal Mutual do not have business relationships.
The process of estimating reserves is inherently judgmental and can be influenced by a number of factors, including the following: • trends in claim frequency and severity; • changes in operations; • emerging economic and social trends; • economic and social inflation; and • changes in the regulatory and litigation environments. -27- Index If our insurance subsidiaries determine that their reserves are insufficient to cover their ultimate liability, they will increase their reserves.
The process of estimating reserves is inherently judgmental and can be influenced by a number of factors, including the following: • trends in claim frequency and severity; • changes in operations; • emerging economic and social trends; • economic and social inflation; • the level of insurance fraud; and • changes in the regulatory and litigation environments. -27- Index If our insurance subsidiaries determine that their reserves are insufficient to cover their ultimate liability, they will increase their reserves.
This regulatory oversight includes matters relating to: -29- Index • licensing and examination; • approval of premium rates; • market conduct; • policy forms; • limitations on the nature and amount of certain investments; • claims practices; • mandated participation in involuntary markets and guaranty funds; • reserve adequacy; • insurer solvency; • transactions between affiliates; • the amount of dividends that insurers may pay; and • restrictions on underwriting standards.
This regulatory oversight includes matters relating to: • licensing and examination; • approval of premium rates; • market conduct; • policy forms; • limitations on the nature and amount of certain investments; • claims practices; • mandated participation in involuntary markets and guaranty funds; • reserve adequacy; • insurer solvency; • transactions between affiliates; • the amount of dividends that insurers may pay; and • restrictions on underwriting standards.
Our insurance subsidiaries and Donegal Mutual conduct business in 21 states located primarily in the Mid-Atlantic, Midwestern, Southern and Southwestern states. A substantial portion of their business consists of private passenger and commercial automobile, homeowners, commercial multi-peril and workers’ compensation insurance in Pennsylvania, Michigan, Maryland, Delaware and Virginia.
Our insurance subsidiaries and Donegal Mutual conduct business in 21 states located primarily in the Mid-Atlantic, Midwestern, Southern and Southwestern regions of the country. A substantial portion of their business consists of private passenger and commercial automobile, homeowners, commercial multi-peril and workers’ compensation insurance in Pennsylvania, Michigan, Delaware, Maryland and Virginia.
Each share of our Class B common stock has one vote per share and generally votes as a single class with our Class A common stock.
Each share of our Class A common stock has one-tenth of a vote per share and generally votes as a single class with our Class B common stock. Each share of our Class B common stock has one vote per share and generally votes as a single class with our Class A common stock.
The financial impact to Donegal Mutual, us and our insurance subsidiaries of a significant breach could be material. -37- Index Risks Relating to Us and Our Common Stock The price of our common stock may be adversely affected by its low trading volume. Our Class A common stock and our Class B common stock have limited liquidity.
The financial impact to Donegal Mutual, us and our insurance subsidiaries of a significant breach could be material. Risks Relating to Us and Our Common Stock The price of our common stock may be adversely affected by its low trading volume. Our Class A common stock and our Class B common stock have limited liquidity.
Our insurance subsidiaries and Donegal Mutual market their insurance products solely through a network of approximately 2,100 independent insurance agencies. This agency distribution system is one of the most important components of the competitive profile of our insurance subsidiaries and Donegal Mutual.
Our insurance subsidiaries and Donegal Mutual market their insurance products solely through a network of approximately 2,000 independent insurance agencies. This agency distribution system is one of the most important components of the competitive profile of our insurance subsidiaries and Donegal Mutual.
Our insurance subsidiaries and Donegal Mutual currently conduct business in a limited number of states, with a concentration of business in Pennsylvania, Michigan, Maryland, Delaware and Virginia. Any single catastrophe occurrence or other condition affecting losses in these states could adversely affect the results of operations of our insurance subsidiaries.
Risks Relating to Our Business Our insurance subsidiaries and Donegal Mutual currently conduct business in a limited number of states, with a concentration of business in Pennsylvania, Michigan, Delaware, Maryland and Virginia. Any single catastrophe occurrence or other condition affecting losses in these states could adversely affect the results of operations of our insurance subsidiaries.
To the extent that a reinsurer is unable to pay losses for which it is liable to our insurance subsidiaries, our insurance subsidiaries remain liable for such losses. At December 31, 2024, our insurance subsidiaries had approximately $99.7 million of reinsurance receivables from third-party reinsurers relating to paid and unpaid losses.
To the extent that a reinsurer is unable to pay losses for which it is liable to our insurance subsidiaries, our insurance subsidiaries remain liable for such losses. At December 31, 2025, our insurance subsidiaries had approximately $90.7 million of reinsurance receivables from third-party reinsurers relating to paid and unpaid losses.
In particular, our certificate of incorporation and by-laws include the following anti-takeover provisions: • our board of directors is classified into three classes, so that our stockholders elect only one-third of the members of our board of directors each year; • our stockholders may remove our directors only for cause; • our stockholders may not take stockholder action except at an annual or special meeting of our stockholders; • the request of stockholders holding at least 20% of the combined voting power of our Class A common stock and our Class B common stock is required for a stockholder to call a special meeting of our stockholders; • our by-laws require that stockholders provide advance notice to us to nominate candidates for election to our board of directors or to propose any other item of stockholder business at a stockholders’ meeting; • we do not permit cumulative voting rights in the election of our directors; • our certificate of incorporation does not provide for preemptive rights in connection with any issuance of securities by us; and • our board of directors may issue, without stockholder approval unless otherwise required by law, preferred stock with such terms as our board of directors may determine.
In particular, our certificate of incorporation and by-laws include the following anti-takeover provisions: • our board of directors is classified into three classes, so that our stockholders elect only one-third of the members of our board of directors each year; • our stockholders may remove our directors only for cause; • our stockholders may not take stockholder action except at an annual or special meeting of our stockholders; • the request of stockholders holding at least 20% of the combined voting power of our Class A common stock and our Class B common stock is required for a stockholder to call a special meeting of our stockholders; • our by-laws require that stockholders provide advance notice to us to nominate candidates for election to our board of directors or to propose any other item of stockholder business at a stockholders’ meeting; • we do not permit cumulative voting rights in the election of our directors; • our certificate of incorporation does not provide for preemptive rights in connection with any issuance of securities by us; and • our board of directors may issue, without stockholder approval unless otherwise required by law, preferred stock with such terms as our board of directors may determine. -40- Index We have authorized preferred stock that we could issue without stockholder approval to make it more difficult for a third party to acquire us.
These approval requirements may make it more difficult for a third party to acquire control of us. -39- Index
These approval requirements may make it more difficult for a third party to acquire control of us.
Seven of the eleven members of our board of directors are also directors of Donegal Mutual. Donegal Mutual and we share the same executive officers. These common directors and executive officers have a fiduciary duty to our stockholders and also have a fiduciary duty to the policyholders of Donegal Mutual.
Six of the ten members of our board of directors are also directors of Donegal Mutual. Donegal Mutual and we share the same executive officers. These common directors and executive officers have a fiduciary duty to our stockholders and also have a fiduciary duty to the policyholders of Donegal Mutual.
From time to time, the NAIC and various state insurance regulators consider modifying the method of determining the amount of dividends that an insurance company may pay without prior regulatory approval. The maximum amount of ordinary dividends that our insurance subsidiaries can pay to us in 2025 without prior regulatory approval is approximately $53.3 million.
From time to time, the NAIC and various state insurance regulators consider modifying the method of determining the amount of dividends that an insurance company may pay without prior regulatory approval. The maximum amount of ordinary dividends that our insurance subsidiaries can pay to us in 2026 without prior regulatory approval is approximately $66.4 million.
The NAIC and state insurance regulators re-examine existing laws and regulations from time to time, specifically focusing on areas such as: • insurance company investments; • issues relating to the solvency of insurance companies; • risk-based capital guidelines; • restrictions on the terms and conditions included in insurance policies; • certain methods of accounting; • reserves for unearned premiums, losses and other purposes; • the values at which insurance companies may carry investment securities and the definition of other-than-temporary impairment of investment securities; and • interpretations of existing laws and the development of new laws.
Such regulation and supervision are primarily for the benefit and protection of policyholders rather than stockholders. -30- Index The NAIC and state insurance regulators re-examine existing laws and regulations from time to time, specifically focusing on areas such as: • insurance company investments; • issues relating to the solvency of insurance companies; • risk-based capital guidelines; • restrictions on the terms and conditions included in insurance policies; • certain methods of accounting; • reserves for unearned premiums, losses and other purposes; • the values at which insurance companies may carry investment securities and the definition of other-than-temporary impairment of investment securities; and • interpretations of existing laws and the development of new laws.
Although we currently consider the risk to be remote, should the MCCA be unable to fulfill its payment obligations to MICO in the future, MICO’s financial condition and results of operations could be adversely affected.
Although we currently consider the risk to be remote, should MCCA be unable to fulfill its payment obligations to our insurance subsidiaries in the future, the financial condition and results of operations of our insurance subsidiaries could be adversely affected.
The risks associated with these affiliations and acquisitions include: • the potential inadequacy of reserves for losses and loss expenses of the other insurer; • the need to supplement management of the other insurer with additional experienced personnel; • conditions imposed by regulatory agencies that make the realization of cost-savings through integration of the operations of the other insurer with our operations more difficult; • our management’s lack of familiarity with the geography, demographics and distribution systems in the markets the other insurer serves that cause the other insurer to fail to meet the growth and profitability objectives we anticipated at the time of the acquisition or affiliation; • potential difficulties with integration of information technology systems and other operations; • the need of the other insurer for additional capital that we did not anticipate at the time of the acquisition or affiliation; and • the use of more of our management’s time in improving the operations of the other insurer than we originally anticipated. -34- Index If we cannot obtain sufficient capital to fund the organic growth of our insurance subsidiaries and to make acquisitions, we may not be able to expand our business.
The risks associated with these affiliations and acquisitions include: • the potential inadequacy of reserves for losses and loss expenses of the other insurer; • the need to supplement management of the other insurer with additional experienced personnel; • conditions imposed by regulatory agencies that make the realization of cost-savings through integration of the operations of the other insurer with our operations more difficult; • our management’s lack of familiarity with the geography, demographics and distribution systems in the markets the other insurer serves that cause the other insurer to fail to meet the growth and profitability objectives we anticipated at the time of the acquisition or affiliation; • potential difficulties with integration of information technology systems and other operations; • the need of the other insurer for additional capital that we did not anticipate at the time of the acquisition or affiliation; and • the use of more of our management’s time in improving the operations of the other insurer than we originally anticipated.
These new systems are intended to provide various benefits to the member companies of the Donegal Insurance Group, including streamlined workflows and business processes, service enhancements for their agents and policyholders, opportunities to implement new product models and innovative business solutions, greater utilization of data analytics and operational efficiencies. Since 2020, we have implemented five major releases of new systems.
These new systems are intended to provide various benefits to the member companies of the Donegal Insurance Group, including streamlined workflows and business processes, service enhancements for their agents and policyholders, opportunities to implement new product models and innovative business solutions, greater utilization of data analytics and operational efficiencies.
Donegal Mutual’s majority voting control of us, certain provisions of our certificate of incorporation and by-laws and certain provisions of Delaware law make it remote that anyone could acquire actual control of us unless Donegal Mutual were in favor of another person’s acquisition of control of us. -38- Index Donegal Mutual’s majority voting control of us, certain anti-takeover provisions in our certificate of incorporation and by-laws and certain provisions of the Delaware General Corporation Law, or the DGCL, could delay or prevent the removal of members of our board of directors and could make a merger, tender offer or proxy contest involving us more expensive as well as unlikely to succeed, even if such events were in the best interests of our stockholders other than Donegal Mutual.
Donegal Mutual’s majority voting control of us, certain anti-takeover provisions in our certificate of incorporation and by-laws and certain provisions of the Delaware General Corporation Law, or the DGCL, could delay or prevent the removal of members of our board of directors and could make a merger, tender offer or proxy contest involving us more expensive as well as unlikely to succeed, even if such events were in the best interests of our stockholders other than Donegal Mutual.
Reported average daily trading volume for our Class A common stock and our Class B common stock for the year ended December 31, 2024 was approximately 64,806 shares and approximately 1,190 shares, respectively. This limited liquidity could subject our shares of Class A common stock and our shares of Class B common stock to greater price volatility.
Reported average daily trading volume for our Class A common stock and our Class B common stock for the year ended December 31, 2025 was approximately 128,268 shares and approximately 1,288 shares, respectively. This limited liquidity could subject our shares of Class A common stock and our shares of Class B common stock to greater price volatility.
Among the potential conflicts of interest that could arise from these separate fiduciary duties are the following: • we and Donegal Mutual periodically review the percentage participation of Atlantic States and Donegal Mutual in the underwriting pool that Donegal Mutual and Atlantic States have maintained since 1986; • our insurance subsidiaries and Donegal Mutual annually review and then establish the terms of certain reinsurance agreements between our insurance subsidiaries and Donegal Mutual; • we and Donegal Mutual allocate certain shared expenses among ourselves and our insurance subsidiaries in accordance with various inter-company expense-sharing agreements; and • we and our insurance subsidiaries may enter into other transactions or contractual relationships with Donegal Mutual.
Among the potential conflicts of interest that could arise from these separate fiduciary duties are the following: • we and Donegal Mutual periodically review the percentage participation of Atlantic States and Donegal Mutual in the underwriting pool that Donegal Mutual and Atlantic States have maintained since 1986; • our insurance subsidiaries and Donegal Mutual annually review and then establish the terms of certain reinsurance agreements between our insurance subsidiaries and Donegal Mutual; • we and Donegal Mutual allocate certain shared expenses among ourselves and our insurance subsidiaries in accordance with various inter-company expense-sharing agreements; and • we and our insurance subsidiaries may enter into other transactions or contractual relationships with Donegal Mutual. -39- Index Donegal Mutual has sufficient voting power to determine the outcome of substantially all matters submitted to our stockholders for approval.
Such assessments could adversely affect the financial condition of our insurance subsidiaries. Our insurance subsidiaries are subject to assessments pursuant to the guaranty fund laws of the various states in which they conduct business.
Our insurance subsidiaries are subject to assessments pursuant to the guaranty fund laws of the various states in which they conduct business.
In addition, in the event of the call or maturity of investments in a low interest rate environment, our insurance subsidiaries may not be able to reinvest the proceeds in securities with comparable interest rates. Changes in interest rates may reduce both the profitability and the return on the invested capital of our insurance subsidiaries.
In addition, in the event of the call or maturity of investments in a low interest rate environment, our insurance subsidiaries may not be able to reinvest the proceeds in securities with comparable interest rates.
While we are currently placing less emphasis on pursuing acquisitions because Donegal Mutual and we believe there are significant opportunities for profitable organic growth, our strategy to grow in part through acquisitions of other insurance companies exposes us to risks that could adversely affect our results of operations and financial condition.
As a result, Donegal Mutual and our insurance subsidiaries may not have the ability to grow their business and meet their profitability objectives. -35- Index While we are currently placing less emphasis on pursuing acquisitions because Donegal Mutual and we believe there are opportunities for profitable organic growth, our strategy to grow in part through acquisitions of other insurance companies exposes us to risks that could adversely affect our results of operations and financial condition.
If the independent agents who market the products of our insurance subsidiaries and Donegal Mutual do not maintain their current levels of premium writing with us and Donegal Mutual, fail to comply with established underwriting guidelines of our insurance subsidiaries and Donegal Mutual or otherwise inappropriately market the products of our insurance subsidiaries and Donegal Mutual, the business, financial condition and results of operations of our insurance subsidiaries could be adversely affected.
Common catastrophic events include hurricanes, earthquakes, tornadoes, wind and hailstorms, fires and wildfires, explosions and severe winter storms. -31- Index If the independent agents who market the products of our insurance subsidiaries and Donegal Mutual do not maintain their current levels of premium writing with us and Donegal Mutual, fail to comply with established underwriting guidelines of our insurance subsidiaries and Donegal Mutual or otherwise inappropriately market the products of our insurance subsidiaries and Donegal Mutual, the business, financial condition and results of operations of our insurance subsidiaries could be adversely affected.
To the extent that current and potential policyholders change their distribution channel preference, the business, financial condition and results of operations of our insurance subsidiaries may be adversely affected.
To the extent that current and potential policyholders change their distribution channel preference, the business, financial condition and results of operations of our insurance subsidiaries may be adversely affected. -32- Index Competition within the property and casualty insurance industry may adversely impact the revenues and profit margins of our insurance subsidiaries.
We and our insurance subsidiaries depend on key personnel. The loss of any member of our executive management or the senior management of our insurance subsidiaries could negatively affect the continuation of our business strategies and achievement of our growth objectives.
The loss of any member of our executive management or the senior management of our insurance subsidiaries could negatively affect the continuation of our business strategies and achievement of our growth objectives. The loss of, or failure to attract, key personnel could significantly impede our financial plans, growth, marketing and other objectives and those of our insurance subsidiaries.
Competition can be based on many factors, including: • the perceived financial strength of the insurer; • premium rates; • policy terms and conditions; • policyholder service; • reputation; and • experience.
The property and casualty insurance industry is intensely competitive, and the pricing of insurance products is subject to significant fluctuations and uncertainties. Competition can be based on many factors, including: • the perceived financial strength of the insurer; • premium rates; • policy terms and conditions; • policyholder service; • reputation; and • experience.
Further, Donegal Mutual’s information technology systems may not deliver the benefits Donegal Mutual and we expect and may fail to keep pace with our competitors’ information technology systems. As a result, Donegal Mutual and our insurance subsidiaries may not have the ability to grow their business and meet their profitability objectives.
Further, Donegal Mutual’s information technology systems may not deliver the benefits Donegal Mutual and we expect and may fail to keep pace with our competitors’ information technology systems.
If we cannot obtain sufficient capital on satisfactory terms and conditions, we may not be able to expand the business of our insurance subsidiaries or to make future acquisitions. Our ability to obtain additional financing will depend on a number of factors, many of which are beyond our control.
Our insurance subsidiaries may require additional capital in the future to support this strategy. If we cannot obtain sufficient capital on satisfactory terms and conditions, we may not be able to expand the business of our insurance subsidiaries or to make future acquisitions.
Changes in state laws and regulations, as well as changes in the way state regulators view related-party transactions in particular, could change the operating environment of our insurance subsidiaries and have an adverse effect on their business. -30- Index Insurance companies are subject to assessments, based on their market share in a given line of business, to assist in the payment of unpaid claims and related costs of insolvent insurance companies.
Changes in state laws and regulations, as well as changes in the way state regulators view related-party transactions in particular, could change the operating environment of our insurance subsidiaries and have an adverse effect on their business.
Other business and regulatory considerations, such as the impact of dividends on surplus that could affect the ratings of our insurance subsidiaries, competitive conditions, RBC requirements, the investment results of our insurance subsidiaries and the amount of premiums that our insurance subsidiaries write could also adversely impact the ability of our insurance subsidiaries to pay dividends to us. If A.M.
Other business and regulatory considerations, such as the impact of dividends on surplus that could affect the ratings of our insurance subsidiaries, competitive conditions, RBC requirements, the investment results of our insurance subsidiaries and the amount of premiums that our insurance subsidiaries write could also adversely impact the ability of our insurance subsidiaries to pay dividends to us. -34- Index The growth and profitability of our insurance subsidiaries depend, in part, on the effective maintenance and ongoing development of Donegal Mutual’s information technology systems, and the allocation of related costs to our insurance subsidiaries may adversely impact their profitability.
The disruption or failure of Donegal Mutual’s information technology systems or the compromise of the security of those systems that results in the theft or misuse of confidential information could materially impact adversely the business of Donegal Mutual and our insurance subsidiaries.
For example, due to increased reinsurance pricing and reduced reinsurance market capacity, our insurance subsidiaries increased their net retentions under several of their reinsurance programs for 2024 and 2025. -38- Index The disruption or failure of Donegal Mutual’s information technology systems or the compromise of the security of those systems that results in the theft or misuse of confidential information could materially impact adversely the business of Donegal Mutual and our insurance subsidiaries.
Best ratings. -35- Index The investment portfolios of our insurance subsidiaries consist primarily of fixed-income securities; therefore, the investment income and the fair value of the investment portfolios of our insurance subsidiaries could decrease as a result of a number of factors.
In addition, any equity capital we obtain in the future could be dilutive to our existing stockholders. -36- Index The investment portfolios of our insurance subsidiaries consist primarily of fixed-income securities; therefore, the investment income and the fair value of the investment portfolios of our insurance subsidiaries could decrease as a result of a number of factors.
Best downgrades the rating it has assigned to Donegal Mutual or any of our insurance subsidiaries, it would adversely affect their competitive position. Industry ratings are a factor in establishing and maintaining the competitive position of insurance companies. A.M. Best, an industry-accepted source of insurance company financial strength ratings, rates Donegal Mutual and our insurance subsidiaries. A.M.
Industry ratings are a factor in establishing and maintaining the competitive position of insurance companies. A.M. Best, an industry-accepted source of insurance company financial strength ratings, rates Donegal Mutual and our insurance subsidiaries. A.M. Best ratings provide an independent opinion of an insurance company’s financial health and its ability to meet its obligations to its policyholders.
In addition, many classes of complainants have brought legal actions and proceedings, some of which may be funded by third-party litigation financing, that tend to increase the size of judgments.
In particular, future cost volatility for automobile replacement costs and repair parts could occur because of exposure to governmental trade policies, including tariffs, or geopolitical events. In addition, many classes of complainants have brought legal actions and proceedings, some of which may be funded by third-party litigation financing, that tend to increase the size of judgments.
Our insurance subsidiaries and we believe that our future success is dependent on our ability to attract and retain additional skilled and qualified personnel and to expand, train and manage our employees. We and Donegal Mutual have employment agreements with our senior officers, including all of our named executive officers.
The continued success of our insurance subsidiaries depends to a substantial extent on the ability and experience of their senior management. Our insurance subsidiaries and we believe that our future success is dependent on our ability to attract and retain additional skilled and qualified personnel and to expand, train and manage our employees.
Best were to downgrade the rating of Donegal Mutual or any of our insurance subsidiaries, it would adversely affect the competitive position of Donegal Mutual or that insurance subsidiary and make it more difficult for it to market its products and retain its existing policyholders. -33- Index The growth and profitability of our insurance subsidiaries depend, in part, on the effective maintenance and ongoing development of Donegal Mutual’s information technology systems, and the allocation of related costs to our insurance subsidiaries may adversely impact their profitability.
Best were to downgrade the rating of Donegal Mutual or any of our insurance subsidiaries, it would adversely affect the competitive position of Donegal Mutual or that insurance subsidiary and make it more difficult for it to market its products and retain its existing policyholders. -33- Index Economic disruption related to a future pandemic may adversely affect our revenues, profitability, results of operations, cash flows, liquidity and financial condition.
Our strategy is to expand our business through the organic growth of our insurance subsidiaries and through our strategic acquisitions of regional insurance companies. Our insurance subsidiaries may require additional capital in the future to support this strategy.
If we cannot obtain sufficient capital to fund the organic growth of our insurance subsidiaries and to make acquisitions, we may not be able to expand our business. Our strategy is to expand our business through the organic growth of our insurance subsidiaries and through our strategic acquisitions of regional insurance companies.
All of these factors could materially adversely affect the financial condition and results of operations of our insurance subsidiaries and their A.M.
All of these factors could materially adversely affect the financial condition and results of operations of our insurance subsidiaries and their A.M. Best ratings. If A.M. Best downgrades the rating it has assigned to Donegal Mutual or any of our insurance subsidiaries, it would adversely affect their competitive position.
Any insolvency or inability of these reinsurers to make timely payments to our insurance subsidiaries under the terms of their reinsurance agreements would adversely affect the results of operations of our insurance subsidiaries. -36- Index Michigan law requires MICO to provide certain medical benefits under the personal injury protection, or PIP, coverage of the personal automobile and commercial automobile policies it writes in the state of Michigan.
Any insolvency or inability of these reinsurers to make timely payments to our insurance subsidiaries under the terms of their reinsurance agreements would adversely affect the results of operations of our insurance subsidiaries.
Michigan law also requires MICO to be a member of the Michigan Catastrophic Claims Association, or MCCA, in order to write automobile insurance. The MCCA receives funding through assessments that its members collect from policyholders in the state and provides reinsurance for PIP claims that exceed a set retention.
MCCA receives funding through assessments that its members collect from policyholders in the state and provides reinsurance for PIP claims that exceed a set retention. At December 31, 2025, our insurance subsidiaries had approximately $45.5 million of reinsurance receivables from MCCA relating to paid and unpaid losses.
In 2025, Donegal Mutual expects to implement new systems for the remaining lines of business the Donegal Insurance Group issues currently and for the conversion of remaining legacy renewal policies of the Donegal Insurance Group. The conversion process will continue into 2026 as legacy policies renew on a state-by-state rollout schedule.
From 2020 to 2024, we implemented five major releases of new systems. In 2025, Donegal Mutual implemented the final two major releases of new systems for the remaining lines of business the Donegal Insurance Group issues currently and for the conversion of remaining legacy renewal policies of the Donegal Insurance Group.
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The pace of innovation within the insurance industry is rapidly increasing, and our insurance subsidiaries may be unable to effectively implement new technologies and anticipate changes in customer preferences and insurance needs, which could put our insurance subsidiaries at a competitive disadvantage and adversely affect their future profitability.
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We face risks associated with technological change, including artificial intelligence, data modernization and cloud migration, and the profitability of our insurance subsidiaries could be adversely affected if their competitors deploy such technologies more effectively or at greater scale.
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Innovation, recent technological developments, changing customer demographics and preferences, societal shifts and emerging technologies such as artificial intelligence are greatly impacting the insurance industry.
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The insurance industry is undergoing rapid technological change, including the expanded use of artificial intelligence, machine learning, advanced analytics, process automation and GenAI.
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Our insurance subsidiaries compete with much larger insurers that are focused on implementing technology and innovative solutions to select and price risks, identify and target potential customers, enhance the experience of their customers and improve their operations.
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Since 2018, Donegal Mutual has undertaken a multi-year modernization of its core systems, including replacement of legacy policy administration systems, implementation of a cloud-based data infrastructure and, beginning in 2026, migration of its Guidewire claims, billing and policy administration systems to the Guidewire cloud platform.
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If our insurance subsidiaries are unable to anticipate changes in customer expectations and keep pace with the technological changes their competitors implement, our insurance subsidiaries may not be able to attract and maintain quality accounts, adequately price risks or operate as efficiently as their competitors.
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Donegal Mutual has also begun deploying and piloting certain GenAI-enabled solutions to provide operating efficiencies and data-driven insights. These initiatives involve significant cost, operational complexity and reliance on third-party vendors. They may result in implementation delays, cost overruns, data migration errors, system integration challenges, cybersecurity vulnerabilities, service disruptions or diversion of management attention.
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In addition, emerging technologies such as electric and autonomous vehicles, driver-assistance and accident avoidance features on vehicles, sensor technology and other forms of automation may reduce the future need for, or decrease the future pricing of, the insurance products our insurance subsidiaries offer.
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These initiatives may not be completed as planned or achieve intended operational efficiencies or other benefits. Any disruption or failure could adversely affect the underwriting, billing or claims operations of our insurance subsidiaries and materially adversely affect our results of operations and financial condition.
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Such regulation and supervision are primarily for the benefit and protection of policyholders rather than stockholders.
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In addition, competitors, including larger insurers and technology-enabled companies, may have greater financial resources, broader data assets and more advanced analytical capabilities, enabling them to develop and scale artificial intelligence, automation and cloud-based solutions more rapidly or effectively than our insurance subsidiaries can.
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Risks Relating to Our Business The COVID-19 pandemic affected the business operations of our insurance subsidiaries and Donegal Mutual, and economic disruption related to a future pandemic may adversely affect our revenues, profitability, results of operations, cash flows, liquidity and financial condition. During 2020 and 2021, the COVID-19 pandemic resulted in significant disruptions in economic activity throughout our operating regions.
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If competitors more effectively utilize technology to enhance risk selection, refine pricing, reduce expenses, improve claims handling or strengthen customer and agent experience, they may achieve superior underwriting performance or market share. More sophisticated use of data and analytics by competitors could also increase adverse selection risks for insurers with comparatively less advanced capabilities.
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Common catastrophic events include hurricanes, earthquakes, tornadoes, wind and hailstorms, fires and wildfires, explosions and severe winter storms.
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Our increasing reliance on third-party cloud platforms and technology providers exposes our insurance subsidiaries to vendor dependency and concentration risks. Any service disruption, cybersecurity incident or strategic misalignment involving a key vendor could impair the operations of our insurance subsidiaries or increase their costs. -29- Index The use of artificial intelligence and GenAI presents additional operational, regulatory and reputational risks.
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Best ratings provide an independent opinion of an insurance company’s financial health and its ability to meet its obligations to its policyholders. We believe that the financial strength rating of A.M. Best is material to the operations of Donegal Mutual and our insurance subsidiaries.
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Artificial intelligence models may produce inaccurate or unintended results, and evolving legal and regulatory standards governing artificial intelligence, data usage and algorithmic decision-making may increase compliance costs or restrict certain practices. Use of GenAI may also create unforeseen exposures or coverage issues under the policies our insurance subsidiaries issue or introduce new forms of claims fraud or cybercrime.
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In addition, any equity capital we obtain in the future could be dilutive to our existing stockholders. Competition within the property and casualty insurance industry may adversely impact the revenues and profit margins of our insurance subsidiaries. The property and casualty insurance industry is intensely competitive.
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If our insurance subsidiaries are unable to adapt to technological developments or compete effectively with organizations that deploy such technologies at greater scale, their competitive position and financial performance could be materially adversely affected.
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The loss of, or failure to attract, key personnel could significantly impede our financial plans, growth, marketing and other objectives and those of our insurance subsidiaries. The continued success of our insurance subsidiaries depends to a substantial extent on the ability and experience of their senior management.
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Insurance companies are subject to assessments, based on their market share in a given line of business, to assist in the payment of unpaid claims and related costs of insolvent insurance companies. Such assessments could adversely affect the financial condition of our insurance subsidiaries.
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At December 31, 2024, MICO had approximately $46.3 million of reinsurance receivables from MCCA relating to paid and unpaid losses. The MCCA has generated significant operating deficits in past years.
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Currently, Donegal Mutual and our insurance subsidiaries each have an A (Excellent) rating from A.M. Best. In May 2025, A.M. Best affirmed its A (Excellent) ratings of Donegal Mutual and our insurance subsidiaries. However, if A.M.
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While the MCCA generated an increase in surplus in recent years, the MCCA board approved the return of a significant portion of its accumulated surplus to policyholders in the form of cash refunds in early 2022.
Added
The conversion process will continue into 2027 as legacy policies renew on a state-by-state rollout schedule. During 2025, Donegal Mutual also began planning for the migration of its claims, billing and policy administration application systems from on-premise versions to cloud-based versions of these applications that we expect will occur in a phased approach over the next two years.
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For example, due to increased reinsurance pricing and reduced reinsurance market capacity, our insurance subsidiaries increased their net retentions under several of their reinsurance programs for 2024 and 2025.
Added
Our ability to obtain additional financing will depend on a number of factors, many of which are beyond our control.
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Donegal Mutual has sufficient voting power to determine the outcome of substantially all matters submitted to our stockholders for approval. Each share of our Class A common stock has one-tenth of a vote per share and generally votes as a single class with our Class B common stock.
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Changes in interest rates may reduce both the profitability and the return on the invested capital of our insurance subsidiaries. -37- Index We and our insurance subsidiaries depend on key personnel.
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We have authorized preferred stock that we could issue without stockholder approval to make it more difficult for a third party to acquire us.
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We and Donegal Mutual have employment agreements with our senior officers, including all of our named executive officers.
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Michigan law requires several of our insurance subsidiaries to provide certain medical benefits under the personal injury protection, or PIP, coverage of the personal automobile and commercial automobile policies they write in the state of Michigan. Michigan law also requires those insurance subsidiaries to be members of the Michigan Catastrophic Claims Association, or MCCA, in order to write automobile insurance.
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The MCCA has generated significant operating deficits in recent years, and applicable Michigan law allows MCCA to assess its member companies for all losses and deficits through adjustments to future assessments.
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Donegal Mutual’s majority voting control of us, certain provisions of our certificate of incorporation and by-laws and certain provisions of Delaware law make it remote that anyone could acquire actual control of us unless Donegal Mutual were in favor of another person’s acquisition of control of us.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition to monitoring cybersecurity threats to Donegal Mutual’s information systems and information technology infrastructure, Donegal Mutual and we also assess and monitor the information security posture of third-party service providers whose services we deem critical to our operations.
Biggest changeThese consultants advise Donegal Mutual on the effectiveness of its cybersecurity processes and assist Donegal Mutual in remediating any identified vulnerabilities and implementing any recommended measures to improve its cybersecurity defenses and readiness. -41- Index In addition to monitoring cybersecurity threats to Donegal Mutual’s information systems and information technology infrastructure, Donegal Mutual and we also assess and monitor the information security posture of third-party service providers whose services we deem critical to our operations.
For more information regarding the risks Donegal Mutual and we face from cybersecurity threats, see “Risk Factors - Risks Relating to Our Business- The disruption or failure of Donegal Mutual’s information technology systems or the compromise of the security of those systems that results in the theft or misuse of confidential information could materially impact adversely the business of Donegal Mutual and our insurance subsidiaries.” -40- Index Donegal Mutual employs an information security officer who has relevant experience and expertise in information security and holds the management position that is primarily responsible for assessing and managing cybersecurity risks.
For more information regarding the risks Donegal Mutual and we face from cybersecurity threats, see “Risk Factors - Risks Relating to Our Business - The disruption or failure of Donegal Mutual’s information technology systems or the compromise of the security of those systems that results in the theft or misuse of confidential information could materially impact adversely the business of Donegal Mutual and our insurance subsidiaries.” Donegal Mutual employs an information security officer who has relevant experience and expertise in information security and holds the management position that is primarily responsible for assessing and managing cybersecurity risks.
This crisis management team includes technical and senior-level management personnel, and the exercises are intended to help maintain their readiness by reviewing the roles they will be expected to perform and the procedures they will be expected to follow in the event of a cybersecurity incident.
This crisis management team includes technical and senior-level management personnel, and the exercises are intended to help maintain their readiness by reviewing the roles they will be expected to perform and the procedures they will be expected to follow in the event of a cybersecurity incident, including the assessment of reporting requirements.
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These consultants advise Donegal Mutual on the effectiveness of its cybersecurity processes and assist Donegal Mutual in remediating any identified vulnerabilities and implementing any recommended measures to improve its cybersecurity defenses and readiness.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition, Donegal Mutual leases office space in Albuquerque, New Mexico, MICO leases office space in Grand Rapids, Michigan, and Southern Mutual owns a building in Athens, Georgia. Donegal Mutual and our insurance subsidiaries share property-related expenses proportionately under a services allocation agreement.
Biggest changeIn addition, Donegal Mutual leases office space in Albuquerque, New Mexico, MICO leases office space in Grand Rapids, Michigan, and Southern Mutual owns a building in Athens, Georgia. Donegal Mutual and our insurance subsidiaries share property-related expenses proportionately under a services allocation agreement. -42- Index

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, regardless of outcome, litigation and related matters could have an adverse impact on us and our insurance subsidiaries due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors. Item 4. Mine Safety Disclosures. Not applicable. PART II
Biggest changeHowever, regardless of outcome, litigation and related matters could have an adverse impact on us and our insurance subsidiaries due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur Class A common stock and Class B common stock trade on the NASDAQ Global Select Market under the symbols “DGICA” and “DGICB,” respectively. -41- Index At the close of business on March 3, 2025, we had approximately 1,477 holders of record of our Class A common stock and approximately 204 holders of record of our Class B common stock.
Biggest changeAt the close of business on March 2, 2026, we had approximately 1,403 holders of record of our Class A common stock and approximately 196 holders of record of our Class B common stock.
The peer group consists of Cincinnati Financial Corp., Hanover Insurance Group Inc., Horace Mann Educators Corp., Kemper Corp., Selective Insurance Group Inc. and United Fire Group Inc. The graph shows the change in value of an initial $100 investment on December 31, 2019, assuming reinvestment of all dividends. 2019 2020 2021 2022 2023 2024 Donegal Group Inc.
The peer group consists of Cincinnati Financial Corp., Hanover Insurance Group Inc., Horace Mann Educators Corp., Kemper Corp., Selective Insurance Group Inc. and United Fire Group Inc. The graph shows the change in value of an initial $100 investment on December 31, 2020, assuming reinvestment of all dividends. 2020 2021 2022 2023 2024 2025 Donegal Group Inc.
Such disclosure did not stipulate a maximum number of shares that may be purchased under this program. -42- Index Stock Performance Chart.
Such disclosure did not stipulate a maximum number of shares that may be purchased under this program. -44- Index Stock Performance Chart.
The following graph provides an indicator of cumulative total stockholder returns on our Class A common stock and our Class B common stock for the period beginning on December 31, 2019 and ending on December 31, 2024, compared to the Russell 2000 Index and a peer group comprised of six property and casualty insurance companies over the same period.
The following graph provides an indicator of cumulative total stockholder returns on our Class A common stock and our Class B common stock for the period beginning on December 31, 2020 and ending on December 31, 2025, compared to the Russell 2000 Index and a peer group comprised of six property and casualty insurance companies over the same period.
We declared dividends of $0.69 per share on our Class A common stock and $0.62 per share on our Class B common stock in 2024, compared to $0.68 per share on our Class A common stock and $0.61 per share on our Class B common stock in 2023. Unregistered Sales of Equity Securities and Use of Proceeds.
We declared dividends of $0.73 per share on our Class A common stock and $0.66 per share on our Class B common stock in 2025, compared to $0.69 per share on our Class A common stock and $0.62 per share on our Class B common stock in 2024. Unregistered Sales of Equity Securities and Use of Proceeds.
Between October 1, 2024 and December 31, 2024, Donegal Mutual purchased shares of our Class A common stock as set forth in the table below: Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs Month #1 October 1-31, 2024 Class A – 150,432 Class B – None Class A – $15.49 Class B – None Class A – 150,432 Class B – None (1) Month #2 November 1-30, 2024 Class A – 235,884 Class B – None Class A – $15.88 Class B – None Class A – 235,884 Class B – None (1) Month #3 December 1-31, 2024 Class A – 414,122 Class B – None Class A – $16.63 Class B – None Class A – 414,122 Class B – None (1) Total Class A – 800,438 Class B – None Class A – $16.20 Class B – None Class A – 800,438 Class B – None (1) Donegal Mutual purchased these shares pursuant to its disclosure on April 29, 2022 that it will, at its discretion, purchase shares of our Class A common stock and Class B common stock at market prices prevailing from time to time in the open market subject to the provisions of SEC Rule 10b-18 and in privately negotiated transactions.
Between October 1, 2025 and December 31, 2025, Donegal Mutual purchased shares of our Class A common stock as set forth in the table below: Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs Month #1 October 1-31, 2025 Class A – None Class B – None Class A – None Class B – None Class A – None Class B – None Month #2 November 1-30, 2025 Class A – 150,782 Class B – 43,404 Class A – $19.60 Class B – $17.50 Class A – 150,782 Class B – 43,404 (1) Month #3 December 1-31, 2025 Class A – 123,343 Class B – None Class A – $19.90 Class B – None Class A – 123,343 Class B – None (1) Total Class A – 274,125 Class B – 43,404 Class A – $19.73 Class B – $17.50 Class A – 274,125 Class B – 43,404 (1) Donegal Mutual purchased these shares pursuant to its disclosure on April 29, 2022 that it will, at its discretion, purchase shares of our Class A common stock and Class B common stock at market prices prevailing from time to time in the open market subject to the provisions of SEC Rule 10b-18 and in privately negotiated transactions.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our Class A common stock and Class B common stock trade on the NASDAQ Global Select Market under the symbols “DGICA” and “DGICB,” respectively.
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Class A $100.00 $98.98 $104.91 $109.16 $112.65 $130.65 Donegal Group Inc. Class B 100.00 96.57 114.54 144.15 134.32 136.44 Russell 2000 100.00 119.96 137.74 109.59 128.14 142.93 Peer Group 100.00 90.33 105.60 102.08 104.50 136.71 Research Data Group prepared the foregoing performance graph and data.
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Class A $ 100.00 $ 105.99 $ 110.28 $ 113.81 $ 131.99 $ 177.72 Donegal Group Inc. Class B 100.00 118.61 149.27 139.09 141.29 184.97 Russell 2000 100.00 114.82 91.35 106.82 119.14 134.40 Peer Group 100.00 116.90 113.00 115.68 151.35 163.65 Research Data Group prepared the foregoing performance graph and data.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeBecause our insurance subsidiaries do not prepare GAAP financial statements, we evaluate the performance of our commercial lines and personal lines segments utilizing statutory accounting practices (“SAP”), which include financial measures that reflect the growth trends and underwriting results of our insurance subsidiaries. -49- Index We use the following financial data to monitor and evaluate our operating results: Year Ended December 31, (in thousands) 2024 2023 2022 Net premiums written: Commercial lines: Automobile $ 184,989 $ 174,741 $ 167,774 Workers’ compensation 103,533 107,598 111,892 Commercial multi-peril 213,959 195,632 200,045 Other 45,439 50,458 51,135 Total commercial lines 547,920 528,429 530,846 Personal lines: Automobile 243,036 215,957 181,129 Homeowners 140,613 139,688 120,087 Other 10,712 11,623 11,468 Total personal lines 394,361 367,268 312,684 Total net premiums written $ 942,281 $ 895,697 $ 843,530 Components of combined ratio: Loss ratio 64.5 % 69.1 % 68.6 % Expense ratio 33.7 34.7 34.1 Dividend ratio 0.4 0.6 0.6 Combined ratio 98.6 % 104.4 % 103.3 % Revenues: Net premiums earned: Commercial lines $ 539,683 $ 533,029 $ 521,227 Personal lines 396,968 349,042 301,263 Total net premiums earned 936,651 882,071 822,490 Net investment income 44,918 40,853 34,016 Investment gains (losses) 4,981 3,173 (10,185 ) Other 3,055 1,241 1,900 Total revenues $ 989,605 $ 927,338 $ 848,221 Year Ended December 31, (in thousands) 2024 2023 2022 Components of net income (loss): Underwriting income (loss): Commercial lines $ 5,826 $ (6,998 ) $ (22,665 ) Personal lines 5,739 (35,118 ) (13,506 ) SAP underwriting income (loss) 11,565 (42,116 ) (36,171 ) GAAP adjustments 1,331 3,735 8,667 GAAP underwriting income (loss) 12,896 (38,381 ) (27,504 ) Net investment income 44,918 40,853 34,016 Investment gains (losses) 4,981 3,173 (10,185 ) Other (456 ) (582 ) 35 Income (loss) before income tax expense (benefit) 62,339 5,063 (3,638 ) Income tax expense (benefit) 11,477 637 (1,679 ) Net income (loss) $ 50,862 $ 4,426 $ (1,959 ) -50- Index Non-GAAP Information We prepare our consolidated financial statements on the basis of GAAP.
Biggest changeBecause our insurance subsidiaries do not prepare GAAP financial statements, we evaluate the performance of our commercial lines and personal lines segments utilizing statutory accounting practices (“SAP”), which include financial measures that reflect the growth trends and underwriting results of our insurance subsidiaries. -51- Index We use the following financial data to monitor and evaluate our operating results: Year Ended December 31, (in thousands) 2025 2024 2023 Net premiums written: Commercial lines: Automobile $ 197,949 $ 184,989 $ 174,741 Workers’ compensation 92,464 103,533 107,598 Commercial multi-peril 221,283 213,959 195,632 Other 52,295 45,439 50,458 Total commercial lines 563,991 547,920 528,429 Personal lines: Automobile 208,077 243,036 215,957 Homeowners 122,999 140,613 139,688 Other 9,760 10,712 11,623 Total personal lines 340,836 394,361 367,268 Total net premiums written $ 904,827 $ 942,281 $ 895,697 Components of combined ratio: Loss ratio 61.3 % 64.5 % 69.1 % Expense ratio 33.8 33.7 34.7 Dividend ratio 0.3 0.4 0.6 Combined ratio 95.4 % 98.6 % 104.4 % Revenues: Net premiums earned: Commercial lines $ 555,873 $ 539,683 $ 533,029 Personal lines 365,311 396,968 349,042 Total net premiums earned 921,184 936,651 882,071 Net investment income 52,627 44,918 40,853 Investment gains 619 4,981 3,173 Other 3,584 3,055 1,241 Total revenues $ 978,014 $ 989,605 $ 927,338 Year Ended December 31, (in thousands) 2025 2024 2023 Components of net income: Underwriting income (loss): Commercial lines $ 4,672 $ 5,826 $ (6,998 ) Personal lines 43,850 5,739 (35,118 ) SAP underwriting income (loss) 48,522 11,565 (42,116 ) GAAP adjustments (5,849 ) 1,331 3,735 GAAP underwriting income (loss) 42,673 12,896 (38,381 ) Net investment income 52,627 44,918 40,853 Investment gains 619 4,981 3,173 Other 1,674 (456 ) (582 ) Income before income tax expense 97,593 62,339 5,063 Income tax expense 18,252 11,477 637 Net income $ 79,341 $ 50,862 $ 4,426 -52- Index Non-GAAP Information We prepare our consolidated financial statements on the basis of GAAP.
Related uncertainties regarding future trends include social inflation, availability and cost of replacement automobile parts and building materials, availability and cost of skilled labor, the rate of specialized plaintiff attorney involvement in claims, plaintiff attorney utilization of litigation financing and the cost of medical technologies and procedures.
Uncertainties regarding future trends include social inflation, availability and cost of replacement automobile parts and building materials, availability and cost of skilled labor, the rate of specialized plaintiff attorney involvement in claims, plaintiff attorney utilization of litigation financing and the cost of medical technologies and procedures.
For every 1% change in our insurance subsidiaries’ loss and loss expense reserves, net of reinsurance recoverable, the effect on our pre-tax results of operations would be approximately $7.0 million.
For every 1% change in our insurance subsidiaries’ loss and loss expense reserves, net of reinsurance recoverable, the effect on our pre-tax results of operations would be approximately $7.1 million.
Large fire losses, which we define as individual fire losses in excess of $50,000, were $45.8 million, or 4.9 percentage points of the loss ratio, for 2024, compared to $45.4 million, or 5.2 percentage points of the loss ratio, for 2023. -53- Index Underwriting Expenses Our insurance subsidiaries’ expense ratio, which is the ratio of policy acquisition and other underwriting expenses to premiums earned, was 33.7% for 2024, compared to 34.7% for 2023.
Large fire losses, which we define as individual fire losses in excess of $50,000, were $45.8 million, or 4.9 percentage points of the loss ratio, for 2024, compared to $45.4 million, or 5.2 percentage points of the loss ratio, for 2023. -57- Index Underwriting Expenses Our insurance subsidiaries’ expense ratio, which is the ratio of policy acquisition and other underwriting expenses to premiums earned, was 33.7% for 2024, compared to 34.7% for 2023.
At December 31, 2024, Atlantic States had a $35.0 million outstanding advance with the FHLB of Pittsburgh that carries a fixed interest rate of 3.806% and is due in September 2026. We discuss in Note 9 – Borrowings our estimate of the timing of the amounts payable for the borrowings under our lines of credit based on their contractual maturities.
At December 31, 2025, Atlantic States had a $35.0 million outstanding advance with the FHLB of Pittsburgh that carries a fixed interest rate of 3.806% and is due in September 2026. We discuss in Note 9 – Borrowings our estimate of the timing of the amounts payable for the borrowings under our lines of credit based on their contractual maturities.
Because the policies of our insurance subsidiaries renew not less frequently than annually, our insurance subsidiaries have the ability to respond to the impact of changing climate conditions through adjustments to their underwriting standards, pricing, and policy terms and conditions, subject to applicable regulatory approvals. -58- Index Changing climate conditions could lead to new or revised regulations with which our insurance subsidiaries would have to comply.
Because the policies of our insurance subsidiaries renew not less frequently than annually, our insurance subsidiaries have the ability to respond to the impact of changing climate conditions through adjustments to their underwriting standards, pricing, and policy terms and conditions, subject to applicable regulatory approvals. -60- Index Changing climate conditions could lead to new or revised regulations with which our insurance subsidiaries would have to comply.
We refer to Note 19 - Segment Information for further information and disclosure of items required within the amended and enhanced guidance. The adoption of this guidance did not have an impact on our financial position, results of operations or cash flows. In December 2023, the FASB issued guidance to enhance the transparency and usefulness of income tax disclosures.
We refer to Note 18 - Segment Information for further information and disclosure of items required within the amended and enhanced guidance. The adoption of this guidance did not have an impact on our financial position, results of operations or cash flows. In December 2023, the FASB issued guidance to enhance the transparency and usefulness of income tax disclosures.
To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes. Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at December 31, 2024.
To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes. Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at December 31, 2025.
We consider workers’ compensation to be a “long-tail” line of business, in that workers’ compensation claims tend to be settled over a longer time frame than those in the other lines of business of our insurance subsidiaries. The following table presents 2024 and 2023 claim count and payment amount information for workers’ compensation.
We consider workers’ compensation to be a “long-tail” line of business, in that workers’ compensation claims tend to be settled over a longer time frame than those in the other lines of business of our insurance subsidiaries. The following table presents 2025 and 2024 claim count and payment amount information for workers’ compensation.
We calculate our statutory combined ratio as the sum of: -51- Index • the statutory loss ratio, which is the ratio of calendar-year net incurred losses and loss expenses to net premiums earned; • the statutory expense ratio, which is the ratio of expenses incurred for net commissions, premium taxes and underwriting expenses to net premiums written; and • the statutory dividend ratio, which is the ratio of dividends to holders of workers’ compensation policies to net premiums earned.
We calculate our statutory combined ratio as the sum of: -53- Index • the statutory loss ratio, which is the ratio of calendar-year net incurred losses and loss expenses to net premiums earned; • the statutory expense ratio, which is the ratio of expenses incurred for net commissions, premium taxes and underwriting expenses to net premiums written; and • the statutory dividend ratio, which is the ratio of dividends to holders of workers’ compensation policies to net premiums earned.
Our major sources of funds from operations are the net cash flows generated from our insurance subsidiaries’ underwriting results, investment income and maturing investments. -56- Index We have historically generated sufficient net positive cash flow from our operations to fund our commitments and build our investment portfolio, thereby increasing future investment returns.
Our major sources of funds from operations are the net cash flows generated from our insurance subsidiaries’ underwriting results, investment income and maturing investments. We have historically generated sufficient net positive cash flow from our operations to fund our commitments and build our investment portfolio, thereby increasing future investment returns.
Our insurance subsidiaries do not discount their liabilities for losses and loss expenses. -45- Index Reserve estimates can change over time because of unexpected changes in assumptions related to our insurance subsidiaries’ external environment and, to a lesser extent, assumptions related to our insurance subsidiaries’ internal operations.
Our insurance subsidiaries do not discount their liabilities for losses and loss expenses. -47- Index Reserve estimates can change over time because of unexpected changes in assumptions related to our insurance subsidiaries’ external environment and, to a lesser extent, assumptions related to our insurance subsidiaries’ internal operations.
At December 31, 2024, we had no outstanding borrowings under our line of credit with M&T and had the ability to borrow up to $20.0 million at interest rates equal to the then-current Term SOFR rate plus 2.11%.
At December 31, 2025, we had no outstanding borrowings under our line of credit with M&T and had the ability to borrow up to $20.0 million at interest rates equal to the then-current Term SOFR rate plus 2.11%.
In addition, the COVID-19 pandemic and related government mandates and restrictions resulted in various changes from historical claims reporting and settlement trends during 2020 and resulted in significant increases in loss costs in subsequent years due to a number of factors, including supply chain disruption, higher new and used automobile values, increases in the cost of replacement automobile parts and rising labor rates.
In addition, the COVID-19 pandemic and related government mandates and restrictions resulted in various changes from historical claims reporting and settlement trends during 2020 and resulted in significant increases in loss costs in several following years due to a number of factors, including supply chain disruption, higher new and used automobile values, increases in the cost of replacement automobile parts and rising labor rates.
We did not purchase any shares of our Class A common stock under this program during 2024 or 2023. We have purchased a total of 57,658 shares of our Class A common stock under this program from its inception through December 31, 2024.
We did not purchase any shares of our Class A common stock under this program during 2025 or 2024. We have purchased a total of 57,658 shares of our Class A common stock under this program from its inception through December 31, 2025.
The amount of statutory capital and surplus necessary for our insurance subsidiaries to satisfy regulatory requirements, including the RBC requirements, was not significant in relation to our insurance subsidiaries’ statutory capital and surplus at December 31, 2024.
The amount of statutory capital and surplus necessary for our insurance subsidiaries to satisfy regulatory requirements, including the RBC requirements, was not significant in relation to our insurance subsidiaries’ statutory capital and surplus at December 31, 2025.
These trend changes caused significant disruption to historical loss patterns and give rise to greater uncertainty as to the pattern of future loss settlements.
These trend changes caused significant disruption to historical loss patterns and gave rise to greater uncertainty as to the pattern of future loss settlements.
This laddering approach provides an additional measure of liquidity to meet our obligations and the obligations of our insurance subsidiaries should an unexpected variation occur in the future. Net cash flows provided by operating activities in 2024, 2023 and 2022 were $67.4 million, $28.6 million and $67.1 million, respectively.
This laddering approach provides an additional measure of liquidity to meet our obligations and the obligations of our insurance subsidiaries should an unexpected variation occur in the future. Net cash flows provided by operating activities in 2025, 2024 and 2023 were $70.2 million, $67.4 million and $28.6 million, respectively.
The personal lines products of our insurance subsidiaries consist primarily of homeowners and private passenger automobile policies. At December 31, 2024, Donegal Mutual held approximately 44% of our outstanding Class A common stock and approximately 84% of our outstanding Class B common stock.
The personal lines products of our insurance subsidiaries consist primarily of homeowners and private passenger automobile policies. At December 31, 2025, Donegal Mutual held approximately 44% of our outstanding Class A common stock and approximately 85% of our outstanding Class B common stock.
Our fixed maturity investments consisted of high-quality marketable bonds, of which 95.6% and 95.2% were rated at investment-grade levels at December 31, 2024 and 2023, respectively. At December 31, 2024, the net unrealized loss on our available-for-sale fixed maturity investments, net of deferred taxes, amounted to $27.4 million, compared to $31.9 million at December 31, 2023.
Our fixed maturity investments consisted of high-quality marketable bonds, of which 96.4% and 95.6% were rated at investment-grade levels at December 31, 2025 and 2024, respectively. At December 31, 2025, the net unrealized loss on our available-for-sale fixed maturity investments, net of deferred taxes, amounted to $7.6 million, compared to $27.4 million at December 31, 2024.
Off-Balance Sheet Arrangements As of December 31, 2024 and 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. -59- Index
Off-Balance Sheet Arrangements As of December 31, 2025 and 2024, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. -61- Index
Our insurance subsidiaries recognized a decrease in their liability for losses and loss expenses of prior years of $15.0 million, $16.7 million and $44.8 million in 2024, 2023 and 2022, respectively.
Our insurance subsidiaries recognized a decrease in their liability for losses and loss expenses of prior years of $10.3 million, $15.0 million and $16.7 million in 2025, 2024 and 2023, respectively.
Amounts available for distribution to us as dividends from our insurance subsidiaries without prior approval of insurance regulatory authorities in 2025 are approximately $40.7 million from Atlantic States, $7.8 million from MICO and $4.7 million from Peninsula, or a total of approximately $53.3 million. -57- Index Investments At December 31, 2024 and 2023, our investment portfolio of primarily investment-grade bonds, common stock, short-term investments and cash totaled $1.4 billion and $1.3 billion, respectively, representing 61.6% and 58.6%, respectively, of our total assets.
Amounts available for distribution to us as dividends from our insurance subsidiaries without prior approval of insurance regulatory authorities in 2026 are approximately $50.8 million from Atlantic States, $10.2 million from MICO and $5.4 million from Peninsula, or a total of approximately $66.4 million. -59- Index Investments At December 31, 2025 and 2024, our investment portfolio of primarily investment-grade bonds, common stock, short-term investments and cash totaled $1.5 billion and $1.4 billion, respectively, representing 64.0% and 61.6%, respectively, of our total assets.
Such disclosure did not stipulate a maximum number of shares that may be purchased under this program. Donegal Mutual purchased 1,057,282 and 516,620 shares of our Class A common stock during 2024 and 2023, respectively.
Such disclosure did not stipulate a maximum number of shares that may be purchased under this program. Donegal Mutual purchased 776,332 and 1,057,282 shares of our Class A common stock during 2025 and 2024, respectively. Donegal Mutual purchased 43,404 shares of our Class B common stock during 2025.
However, on the basis of our insurance subsidiaries’ internal procedures, which analyze, among other things, their prior assumptions, their experience with similar cases and historical trends such as reserving patterns, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, economic conditions and public attitudes, we believe that our insurance subsidiaries have made adequate provision for their liability for losses and loss expenses. -46- Index Atlantic States’ participation in the underwriting pool with Donegal Mutual exposes Atlantic States to adverse loss development on the business that Donegal Mutual contributes to the underwriting pool.
However, on the basis of our insurance subsidiaries’ internal procedures, which analyze, among other things, their prior assumptions, their experience with similar cases and historical trends such as reserving patterns, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, economic conditions and public attitudes, we believe that our insurance subsidiaries have made adequate provision for their liability for losses and loss expenses.
The cash dividends we declared to our stockholders totaled $23.2 million, $22.2 million and $20.9 million in 2024, 2023 and 2022, respectively.
The cash dividends we declared to our stockholders totaled $26.3 million, $23.2 million and $22.2 million in 2025, 2024 and 2023, respectively.
The following table presents comparative details with respect to our GAAP and statutory combined ratios for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 GAAP Combined Ratios (Total Lines) Loss ratio - core losses 54.0 % 57.5 % 59.8 % Loss ratio - weather-related losses 7.2 8.3 7.7 Loss ratio - large fire losses 4.9 5.2 6.5 Loss ratio - net prior-year reserve development -1.6 -1.9 -5.4 Loss ratio 64.5 69.1 68.6 Expense ratio 33.7 34.7 34.1 Dividend ratio 0.4 0.6 0.6 Combined ratio 98.6 % 104.4 % 103.3 % Statutory Combined Ratios Commercial lines: Automobile 102.6 % 97.3 % 98.0 % Workers’ compensation 104.4 96.6 97.3 Commercial multi-peril 95.0 112.3 116.9 Other 80.0 85.5 80.8 Total commercial lines 98.2 101.6 103.7 Personal lines: Automobile 97.4 109.7 103.8 Homeowners 99.6 108.6 111.0 Other 99.5 75.8 52.1 Total personal lines 98.3 108.2 102.8 Total commercial and personal lines 98.3 104.2 103.3 Results of Operations YEAR ENDED DECEMBER 31, 2024 COMPARED TO YEAR ENDED DECEMBER 31, 2023 Net Premiums Earned Our insurance subsidiaries’ net premiums earned increased to $936.7 million for 2024, an increase of $54.6 million, or 6.2%, compared to 2023, primarily reflecting solid premium retention and renewal premium increases.
The following table presents comparative details with respect to our GAAP and statutory combined ratios for the years ended December 31, 2025, 2024 and 2023: Year Ended December 31, 2025 2024 2023 GAAP Combined Ratios (Total Lines) Loss ratio - core losses 51.4 % 54.0 % 57.5 % Loss ratio - weather-related losses 6.2 7.2 8.3 Loss ratio - large fire losses 4.8 4.9 5.2 Loss ratio - net prior-year reserve development -1.1 -1.6 -1.9 Loss ratio 61.3 64.5 69.1 Expense ratio 33.8 33.7 34.7 Dividend ratio 0.3 0.4 0.6 Combined ratio 95.4 % 98.6 % 104.4 % Statutory Combined Ratios Commercial lines: Automobile 97.9 % 102.6 % 97.3 % Workers’ compensation 105.5 104.4 96.6 Commercial multi-peril 94.0 95.0 112.3 Other 106.3 80.0 85.5 Total commercial lines 98.5 98.2 101.6 Personal lines: Automobile 86.4 97.4 109.7 Homeowners 96.9 99.6 108.6 Other 55.0 99.5 75.8 Total personal lines 89.3 98.3 108.2 Total commercial and personal lines 95.0 98.3 104.2 -54- Index Results of Operations YEAR ENDED DECEMBER 31, 2025 COMPARED TO YEAR ENDED DECEMBER 31, 2024 Net Premiums Earned Our insurance subsidiaries’ net premiums earned decreased to $921.2 million for 2025, a decrease of $15.5 million, or 1.7%, compared to 2024, primarily reflecting lower new business writings, offset partially by solid premium retention and renewal premium increases.
Commercial lines net premiums written increased $19.5 million, or 3.7%, for 2024 compared to 2023.
Net Premiums Written Our insurance subsidiaries’ 2024 net premiums written increased 5.2% to $942.3 million, compared to $895.7 million for 2023. Commercial lines net premiums written increased $19.5 million, or 3.7%, for 2024 compared to 2023.
We had 27.8 million and 27.1 million Class A shares outstanding at December 31, 2023 and 2022, respectively. We had 5.6 million Class B shares outstanding for both periods. There are no outstanding securities that dilute our shares of Class B common stock.
We had 31.4 million and 30.0 million Class A shares outstanding at December 31, 2025 and 2024, respectively. We had 5.6 million Class B shares outstanding for both periods. There are no outstanding securities that dilute our shares of Class B common stock.
The following table sets forth the effect on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables considered in establishing loss and loss expense reserves: Change in Loss and Loss Expense Reserves Net of Reinsurance Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2024 Percentage Change in Equity at December 31, 2024(1) Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2023 Percentage Change in Equity at December 31, 2023(1) (dollars in thousands) -10.0% $633,928 10.2% $620,229 11.3% -7.5 651,537 7.6 637,457 8.5 -5.0 669,146 5.1 654,686 5.7 -2.5 686,755 2.5 671,914 2.8 Base 704,364 — 689,143 — 2.5 721,973 -2.5 706,372 -2.8 5.0 739,582 -5.1 723,600 -5.7 7.5 757,191 -7.6 740,829 -8.5 10.0 774,800 -10.2 758,057 -11.3 (1) Net of income tax effect. -48- Index Our insurance subsidiaries base their reserves for unpaid losses and loss expenses on current trends in loss and loss expense development and reflect their best estimates for future amounts needed to pay losses and loss expenses with respect to incurred events currently known to them plus incurred but not reported (“IBNR”) claims.
The following table sets forth the effect on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables considered in establishing loss and loss expense reserves: Change in Loss and Loss Expense Reserves Net of Reinsurance Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2025 Percentage Change in Equity at December 31, 2025(1) Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2024 Percentage Change in Equity at December 31, 2024(1) (dollars in thousands) -10.0 % $ 634,676 8.7 % $ 633,928 10.2 % -7.5 652,306 6.5 651,537 7.6 -5.0 669,936 4.3 669,146 5.1 -2.5 687,566 2.2 686,755 2.5 Base 705,196 — 704,364 — 2.5 722,826 -2.2 721,973 -2.5 5.0 740,456 -4.3 739,582 -5.1 7.5 758,086 -6.5 757,191 -7.6 10.0 775,716 -8.7 774,800 -10.2 (1) Net of income tax effect. -50- Index Our insurance subsidiaries base their reserves for unpaid losses and loss expenses on current trends in loss and loss expense development and reflect their best estimates for future amounts needed to pay losses and loss expenses with respect to incurred events currently known to them plus incurred but not reported (“IBNR”) claims.
Combined Ratio Our insurance subsidiaries’ combined ratio was 104.4% and 103.3% for 2023 and 2022, respectively. The combined ratio represents the sum of the loss ratio, the expense ratio and the dividend ratio, which is the ratio of workers’ compensation policy dividends incurred to premiums earned.
Combined Ratio Our insurance subsidiaries’ combined ratio was 95.4% and 98.6% for 2025 and 2024, respectively. The combined ratio represents the sum of the loss ratio, the expense ratio and the dividend ratio, which is the ratio of workers’ compensation policy dividends incurred to premiums earned.
Since the predominant percentage of the business of Atlantic States and Donegal Mutual is pooled and the results shared by each company according to its participation level under the terms of the pooling agreement, the intent of the underwriting pool is to produce a more uniform and stable underwriting result from year to year for each company than either would experience individually and to spread the risk of loss between the companies. -47- Index Our insurance subsidiaries’ liability for losses and loss expenses by major line of business at December 31, 2024 and 2023 consisted of the following: 2024 2023 (in thousands) Commercial lines: Automobile $ 180,757 $ 168,749 Workers’ compensation 129,406 122,473 Commercial multi-peril 208,676 217,292 Other 39,336 27,167 Total commercial lines 558,175 535,681 Personal lines: Automobile 116,693 112,509 Homeowners 26,591 28,001 Other 2,905 12,952 Total personal lines 146,189 153,462 Total commercial and personal lines 704,364 689,143 Plus reinsurance recoverable 416,621 437,014 Total liability for losses and loss expenses $ 1,120,985 $ 1,126,157 We have evaluated the effect on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we consider in establishing loss and loss expense reserves.
Since the predominant percentage of the business of Atlantic States and Donegal Mutual is pooled and the results shared by each company according to its participation level under the terms of the pooling agreement, the intent of the underwriting pool is to produce a more uniform and stable underwriting result from year to year for each company than either would experience individually and to spread the risk of loss between the companies. -49- Index Our insurance subsidiaries’ liability for losses and loss expenses by major line of business at December 31, 2025 and 2024 consisted of the following: 2025 2024 (in thousands) Commercial lines: Automobile $ 175,277 $ 180,757 Workers’ compensation 130,429 129,406 Commercial multi-peril 215,476 208,676 Other 53,249 39,336 Total commercial lines 574,431 558,175 Personal lines: Automobile 100,855 116,693 Homeowners 27,565 26,591 Other 2,345 2,905 Total personal lines 130,765 146,189 Total commercial and personal lines 705,196 704,364 Plus reinsurance recoverable 394,854 416,621 Total liability for losses and loss expenses $ 1,100,050 $ 1,120,985 We have evaluated the effect on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we consider in establishing loss and loss expense reserves.
For the year ended December 31, 2024, the actuaries developed a range from a low of $672.1 million to a high of $740.4 million and selected a point estimate of $704.4 million. The actuaries’ range of estimates for commercial lines in 2024 was $533.0 million to $587.5 million, and the actuaries selected a point estimate of $558.2 million.
The actuaries’ range of estimates for personal lines in 2025 was $123.5 million to $138.3 million, and the actuaries selected a point estimate of $130.8 million. For the year ended December 31, 2024, the actuaries developed a range from a low of $672.1 million to a high of $740.4 million and selected a point estimate of $704.4 million.
Excluding the impact of severe weather events and the COVID-19 pandemic, our insurance subsidiaries have noted stable amounts in the number of claims incurred and the number of claims outstanding at period ends relative to their premium base in recent years across most of their lines of business.
The majority of the 2023 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO. -48- Index Excluding the impact of severe weather events and the COVID-19 pandemic, our insurance subsidiaries have noted stable amounts in the number of claims incurred and the number of claims outstanding at period ends relative to their premium base in recent years across most of their lines of business.
The majority of the 2023 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO.
The majority of the 2025 development related to decreases in the liability for losses and loss expenses of prior years for Southern and Peninsula.
Book Value Per Share Our stockholders’ equity increased by $66.0 million during 2024, primarily due to our net income, stock issuances under our stock compensation plans and other increases exceeding the cash dividends we declared during the year and resulting in an increase in our book value per share to $15.36 at December 31, 2024, compared to $14.39 a year earlier.
Book Value Per Share Our stockholders’ equity increased by $66.0 million during 2024, primarily due to our net income, stock issuances under our stock compensation plans and other increases exceeding the cash dividends we declared during the year and resulting in an increase in our book value per share to $15.36 at December 31, 2024, compared to $14.39 a year earlier. -58- Index Financial Condition Liquidity and Capital Resources Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual obligations and operating needs as they arise.
The following table provides a reconciliation of our net premiums earned to our net premiums written for 2024: (in thousands) Commercial Lines Personal Lines Total Net premiums earned $ 539,683 $ 396,968 $ 936,651 Change in net unearned premiums 8,237 (2,607 ) 5,630 Net premiums written $ 547,920 $ 394,361 $ 942,281 The following table provides a reconciliation of our net premiums earned to our net premiums written for 2023: (in thousands) Commercial Lines Personal Lines Total Net premiums earned $ 533,029 $ 349,042 $ 882,071 Change in net unearned premiums (4,600 ) 18,226 13,626 Net premiums written $ 528,429 $ 367,268 $ 895,697 The following table provides a reconciliation of our net premiums earned to our net premiums written for 2022: (in thousands) Commercial Lines Personal Lines Total Net premiums earned $ 521,227 $ 301,263 $ 822,490 Change in net unearned premiums 9,619 11,421 21,040 Net premiums written $ 530,846 $ 312,684 $ 843,530 Statutory Combined Ratio The combined ratio is a standard measurement of underwriting profitability for an insurance company.
The following table provides a reconciliation of our net premiums earned to our net premiums written for 2025: (in thousands) Commercial Lines Personal Lines Total Net premiums earned $ 555,873 $ 365,311 $ 921,184 Change in net unearned premiums 8,118 (24,475 ) (16,357 ) Net premiums written $ 563,991 $ 340,836 $ 904,827 The following table provides a reconciliation of our net premiums earned to our net premiums written for 2024: (in thousands) Commercial Lines Personal Lines Total Net premiums earned $ 539,683 $ 396,968 $ 936,651 Change in net unearned premiums 8,237 (2,607 ) 5,630 Net premiums written $ 547,920 $ 394,361 $ 942,281 The following table provides a reconciliation of our net premiums earned to our net premiums written for 2023: (in thousands) Commercial Lines Personal Lines Total Net premiums earned $ 533,029 $ 349,042 $ 882,071 Change in net unearned premiums (4,600 ) 18,226 13,626 Net premiums written $ 528,429 $ 367,268 $ 895,697 Statutory Combined Ratio The combined ratio is a standard measurement of underwriting profitability for an insurance company.
Our insurance subsidiaries earn premiums and recognize them as income over the terms of the policies they issue. Such terms are generally one year or less in duration.
Our insurance subsidiaries earn premiums and recognize them as income over the terms of the policies they issue. Such terms are generally one year or less in duration. Therefore, increases or decreases in net premiums earned generally reflect increases or decreases in net premiums written in the preceding twelve-month period compared to the same period one year earlier.
Our insurance subsidiaries earn premiums and recognize them as income over the terms of the policies they issue. Such terms are generally one year or less in duration.
Our insurance subsidiaries earn premiums and recognize them as income over the terms of the policies they issue. Such terms are generally one year or less in duration. Therefore, increases or decreases in net premiums earned generally reflect increases or decreases in net premiums written in the preceding twelve-month period compared to the same period one year earlier.
The net investment gains (losses) for 2023 and 2022 were primarily related to increases (decreases) in the market value of the equity securities held at the end of the respective periods. We did not recognize any impairment losses during 2023 or 2022.
The net investment gains for 2025 and 2024 were primarily related to increases in the market value of the equity securities held at the end of the respective periods, with the increase in 2025 offset largely by net realized investment losses on the strategic sales of available-for-sale fixed-maturity securities. We did not recognize any impairment losses during 2025 or 2024.
Our insurance subsidiaries experienced favorable loss reserve development of approximately $16.7 million, or 1.9 percentage points of the loss ratio, during 2023 in their reserves for prior accident years, compared to approximately $44.8 million, or 5.4 percentage points of the loss ratio, during 2022.
Our insurance subsidiaries experienced favorable loss reserve development of approximately $10.3 million, or 1.1 percentage points of the loss ratio, during 2025 in their reserves for prior accident years, compared to approximately $15.0 million, or 1.6 percentage points of the loss ratio, during 2024.
December 31, 2024 2023 Percent of Percent of (dollars in thousands) Amount Total Amount Total Fixed maturities: Total held to maturity $ 705,714 51.0 % $ 679,497 51.2 % Total available for sale 617,892 44.6 589,348 44.4 Total fixed maturities 1,323,606 95.6 1,268,845 95.6 Equity securities 36,808 2.6 25,903 2.0 Short-term investments 24,558 1.8 32,306 2.4 Total investments $ 1,384,972 100.0 % $ 1,327,054 100.0 % The carrying value of our fixed maturity investments represented 95.6% of our total invested assets at December 31, 2024 and 2023.
December 31, 2025 2024 Percent of Percent of (dollars in thousands) Amount Total Amount Total Fixed maturities: Total held to maturity $ 776,447 51.8 % $ 705,714 51.0 % Total available for sale 640,723 42.7 617,892 44.6 Total fixed maturities 1,417,170 94.5 1,323,606 95.6 Equity securities 44,370 3.0 36,808 2.6 Short-term investments 38,713 2.5 24,558 1.8 Total investments $ 1,500,253 100.0 % $ 1,384,972 100.0 % The carrying value of our fixed maturity investments represented 94.5% and 95.6% of our total invested assets at December 31, 2025 and 2024, respectively.
However, pooled business represents the predominant percentage of the net underwriting activity of both companies, and Donegal Mutual and Atlantic States share proportionately any adverse risk development relating to the pooled business. The business in the underwriting pool is homogeneous and each company has a pro-rata share of the entire underwriting pool.
Atlantic States’ participation in the underwriting pool with Donegal Mutual exposes Atlantic States to adverse loss development on the business that Donegal Mutual contributes to the underwriting pool. However, pooled business represents the predominant percentage of the net underwriting activity of both companies, and Donegal Mutual and Atlantic States share proportionately any adverse risk development relating to the pooled business.
The 2022 development represented 7.2% of the December 31, 2021 net carried reserves and resulted primarily from lower-than-expected loss emergence in the personal automobile and commercial automobile lines of business for accident years prior to 2022.
The 2025 development represented 1.5% of the December 31, 2024 net carried reserves and resulted primarily from lower-than-expected loss emergence in all lines of business except other commercial lines (which is primarily commercial umbrella liability) for accident years prior to 2025.
We expect the impact from allocated costs from Donegal Mutual to our insurance subsidiaries related to the ongoing systems modernization project will peak at approximately 1.25 percentage points of the expense ratio in 2024 before beginning to subside gradually in subsequent years. -55- Index Policyholder Dividends Our insurance subsidiaries pay policyholder dividends primarily on workers’ compensation policies on a sliding scale based on the profitability of a given policy.
The impact from costs that Donegal Mutual Insurance Company allocated to our insurance subsidiaries related to its systems modernization project represented approximately 1.2 percentage points of the expense ratio for 2025. Policyholder Dividends Our insurance subsidiaries pay policyholder dividends primarily on workers’ compensation policies on a sliding scale based on the profitability of a given policy.
The actuaries’ range of estimates for commercial lines in 2023 was $507.2 million to $565.4 million, and the actuaries selected a point estimate of $535.7 million. The actuaries’ range of estimates for personal lines in 2023 was $144.0 million to $163.3 million, and the actuaries selected a point estimate of $153.5 million.
The actuaries’ range of estimates for commercial lines in 2024 was $533.0 million to $587.5 million, and the actuaries selected a point estimate of $558.2 million. The actuaries’ range of estimates for personal lines in 2024 was $139.1 million to $153.0 million, and the actuaries selected a point estimate of $146.2 million.
Losses and Loss Expenses Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 69.1% for 2023, compared to 68.6% for 2022. Our insurance subsidiaries’ commercial lines loss ratio decreased to 64.8% for 2023, compared to 67.1% for 2022.
Losses and Loss Expenses Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 61.3% for 2025, compared to 64.5% for 2024. Our insurance subsidiaries’ commercial lines loss ratio increased slightly to 62.1% for 2025, compared to 62.0% for 2024.
The guidance also requires disaggregated disclosure of the amount of income taxes paid for federal, state and foreign taxes. The guidance is effective for annual periods beginning after December 15, 2024. The adoption of this guidance will not have an impact on our financial position, results of operations or cash flows.
The guidance also requires disaggregated disclosure of the amount of income taxes paid for federal, state and foreign taxes. We refer to Note 11- Income Taxes for further information and disclosure of items required within the amended and enhanced guidance. The adoption of this guidance did not have an impact on our financial position, results of operations or cash flows.
The actuaries’ range of estimates for personal lines in 2024 was $139.1 million to $153.0 million, and the actuaries selected a point estimate of $146.2 million. For the year ended December 31, 2023, the actuaries developed a range from a low of $651.1 million to a high of $728.7 million and selected a point estimate of $689.1 million.
For the year ended December 31, 2025, the actuaries developed a range from a low of $666.6 million to a high of $746.1 million and selected a point estimate of $705.2 million. The actuaries’ range of estimates for commercial lines in 2025 was $543.0 million to $607.8 million, and the actuaries selected a point estimate of $574.4 million.
For the Year Ended December 31, (dollars in thousands) 2024 2023 Number of claims pending, beginning of period 3,144 3,366 Number of claims reported 5,066 5,928 Number of claims settled or dismissed 5,378 6,150 Number of claims pending, end of period 2,832 3,144 Losses paid $ 54,597 $ 54,336 Loss expenses paid $ 10,953 $ 12,292 Management Evaluation of Operating Results Despite challenging insurance market conditions and increasing property and casualty loss severity trends that affected our results in recent years, we believe that our focused business strategy, including our insurance subsidiaries’ ongoing implementation of premium rate increases and refinements to their underwriting practices, have positioned us well for 2025 and beyond.
For the Year Ended December 31, (dollars in thousands) 2025 2024 Number of claims pending, beginning of period 2,832 3,144 Number of claims reported 4,408 5,066 Number of claims settled or dismissed 4,762 5,378 Number of claims pending, end of period 2,478 2,832 Losses paid $ 52,449 $ 54,597 Loss expenses paid $ 10,216 $ 10,953 Management Evaluation of Operating Results We believe that our focused business strategy has positioned us well for 2026 and beyond.
Net Income (Loss) and Earnings (Loss) Per Share Our net income for 2023 was $4.4 million, or $0.14 per share of Class A common stock on a diluted basis and $0.11 per share of Class B common stock, compared to a net loss for 2022 of $2.0 million, or $0.06 per share of Class A common stock and $0.07 per share of Class B common stock.
Net Income and Earnings Per Share Our net income for 2025 was $79.3 million, or $2.18 per share of Class A common stock on a diluted basis and $2.01 per share of Class B common stock, compared to $50.9 million, or $1.53 per share of Class A common stock on a diluted basis and $1.38 per share of Class B common stock, for 2024.
We attribute the decrease in commercial lines net premiums written primarily to planned attrition in states we are exiting or have targeted for profit improvement, lower new business writings and reinsurance reinstatement premiums on our property excess of loss reinsurance program, offset partially by strong premium retention and a continuation of renewal premium increases in lines other than workers’ compensation.
We attribute the increase in commercial lines net premiums written primarily to solid premium retention and a continuation of renewal premium increases in lines other than workers’ compensation, offset partially by lower new business writings. Personal lines net premiums written decreased $53.5 million, or 13.6%, for 2025 compared to 2024.
The favorable loss reserve development in 2023 resulted primarily from lower-than-expected loss emergence in the personal automobile and commercial automobile lines of business for accident years prior to 2023.
The favorable loss reserve development in 2025 resulted primarily from lower-than-expected loss emergence in the commercial multi-peril, personal automobile, commercial automobile, homeowners, other personal lines and workers’ compensation lines of business, offset partially by unfavorable development in the other commercial lines of business (which is primarily umbrella liability).
Commercial lines net premiums written decreased $2.4 million, or 0.5%, for 2023 compared to 2022.
Net Premiums Written Our insurance subsidiaries’ 2025 net premiums written decreased 4.0% to $904.8 million, compared to $942.3 million for 2024. Commercial lines net premiums written increased $16.0 million, or 2.9%, for 2025 compared to 2024.
Large fire losses, which we define as individual fire losses in excess of $50,000, were $45.4 million, or 5.2 percentage points of the loss ratio, for 2023, compared to $53.5 million, or 6.5 percentage points of the loss ratio, for 2022.
Large fire losses, which we define as individual fire losses in excess of $50,000, were $43.9 million, or 4.8 percentage points of the loss ratio, for 2025, compared to $45.8 million, or 4.9 percentage points of the loss ratio, for 2024. -55- Index Underwriting Expenses Our insurance subsidiaries’ expense ratio, which is the ratio of policy acquisition and other underwriting expenses to premiums earned, was 33.8% for 2025, compared to 33.7% for 2024.
Donegal Mutual did not purchase any shares of our Class B common stock during 2024 or 2023. -44- Index Critical Accounting Policies and Estimates We combine our financial statements with those of our insurance subsidiaries and present them on a consolidated basis in accordance with GAAP.
We currently include farm policies within other commercial lines in our line of business reporting. Critical Accounting Policies and Estimates We combine our financial statements with those of our insurance subsidiaries and present them on a consolidated basis in accordance with GAAP.
Weather-related losses of $72.9 million, or 8.3 percentage points of the loss ratio, for 2023 increased from $63.5 million, or 7.7 percentage points of the loss ratio, for 2022, with the increase primarily impacting the homeowners line of business.
Weather-related losses of $56.9 million, or 6.2 percentage points of the loss ratio, for 2025 decreased from $67.7 million, or 7.2 percentage points of the loss ratio, for 2024, with the decrease primarily impacting the commercial multi-peril and homeowners lines of business.
Investment Income For 2023, our net investment income increased 20.1% to $40.9 million, compared to $34.0 million for 2022, due primarily to higher average reinvestment yields and higher average invested assets for 2023 compared to 2022. Net Investment Gains (Losses) Our net investment gains for 2023 were $3.2 million. Our net investment losses for 2022 were $10.2 million.
Investment Income For 2025, our net investment income increased 17.2% to $52.6 million, compared to $44.9 million for 2024, due primarily to higher average invested assets and an increase in the average investment yield compared to the prior year. Net Investment Gains Our net investment gains for 2025 were $619,342, compared to $5.0 million for 2024.
Book Value Per Share Our stockholders’ equity decreased by $3.8 million during 2023, primarily due to the cash dividends we declared exceeding our net income and other increases during the year, resulting in a decrease in our book value per share to $14.39 at December 31, 2023, compared to $14.79 a year earlier.
Book Value Per Share Our stockholders’ equity increased by $94.6 million during 2025, primarily due to our net income, after-tax unrealized gains within our available-for-sale fixed-maturity portfolio and other increases, offset partially by the cash dividends we declared during the year, resulting in an increase in our book value per share to $17.33 at December 31, 2025, compared to $15.36 a year earlier. -56- Index YEAR ENDED DECEMBER 31, 2024 COMPARED TO YEAR ENDED DECEMBER 31, 2023 Net Premiums Earned Our insurance subsidiaries’ net premiums earned increased to $936.7 million for 2024, an increase of $54.6 million, or 6.2%, compared to 2023, primarily reflecting solid premium retention and renewal premium increases.
Removed
The majority of the 2022 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO.
Added
Donegal Mutual did not purchase any shares of our Class B common stock during 2024. -46- Index In September 2025, Donegal Mutual and Southern entered into a renewal rights agreement with an affiliate of a farm-focused Pennsylvania-based mutual insurance group to provide a continuation option for their farm policyholders when they begin to non-renew all farm policies as they expire beginning in the second quarter of 2026.
Removed
Therefore, increases or decreases in net premiums earned generally reflect increases or decreases in net premiums written in the preceding twelve-month period compared to the same period one year earlier. -52- Index Net Premiums Written Our insurance subsidiaries’ 2024 net premiums written increased 5.2% to $942.3 million, compared to $895.7 million for 2023.
Added
Donegal Mutual and Southern determined that the costs required to modernize the legacy farm product and systems were higher than the projected return on investment for this non-core line of business that represents approximately $6 million in premiums. None of our other insurance subsidiaries offered farm policies.
Removed
YEAR ENDED DECEMBER 31, 2023 COMPARED TO YEAR ENDED DECEMBER 31, 2022 Net Premiums Earned Our insurance subsidiaries’ net premiums earned increased to $882.1 million for 2023, an increase of $59.6 million, or 7.2%, compared to 2022, primarily reflecting solid premium retention and renewal premium increases.
Added
The business in the underwriting pool is homogeneous and each company has a pro-rata share of the entire underwriting pool.
Removed
Therefore, increases or decreases in net premiums earned generally reflect increases or decreases in net premiums written in the preceding twelve-month period compared to the same period one year earlier. -54- Index Net Premiums Written Our insurance subsidiaries’ 2023 net premiums written increased 6.2% to $895.7 million, compared to $843.5 million for 2022.
Added
We attribute the decrease in personal lines net premiums written primarily to planned attrition due to lower new business writings and strategic non-renewal actions, offset partially by a continuation of renewal premium rate increases and solid retention.
Removed
Personal lines net premiums written increased $54.6 million, or 17.5%, for 2023 compared to 2022. We attribute the increase in personal lines net premiums written primarily to renewal premium increases and strong policy retention.
Added
The commercial multi-peril loss ratio decreased to 56.4% for 2025, compared to 57.5% for 2024. The commercial automobile loss ratio decreased to 63.5% for 2025, compared to 68.5% for 2024. The workers’ compensation loss ratio decreased to 67.4% for 2025, compared to 67.7% for 2024.
Removed
This decrease resulted primarily from the commercial multi-peril loss ratio decreasing to 73.1% for 2023, compared to 79.2% for 2022, primarily due to a decrease in severity of non-weather claims. The personal lines loss ratio increased to 75.6% for 2023, compared to 71.0% for 2022.
Added
The personal lines loss ratio decreased to 60.0% for 2025, compared to 68.0% for 2024, due primarily to the continued benefit of earned premium rate increases and lower weather-related losses. The personal automobile loss ratio decreased to 57.7% for 2025, compared to 68.5% for 2024. The homeowners loss ratio decreased to 66.0% for 2025, compared to 66.7% for 2024.
Removed
The personal automobile loss ratio increased to 78.5% for 2023, compared to 72.1% for 2022, primarily due to an increase in automobile claim severity due to the ongoing impact of supply chain disruption and labor shortages on the costs of repair and replacement vehicles.
Added
We attribute the decrease in our combined ratio primarily to the decrease in the loss ratio. Interest Expense Our interest expense for 2025 increased to $1.4 million, compared to $946,020 for 2024. We attribute the increase to higher interest rates on borrowings under our lines of credit during 2025 compared to 2024.
Removed
The decrease was related to lower average claim severity of both commercial property and home fires in 2023 compared to 2022. Underwriting Expenses Our insurance subsidiaries’ expense ratio, which is the ratio of policy acquisition and other underwriting expenses to premiums earned, was 34.7% for 2023, compared to 34.1% for 2022.
Added
Income Taxes Our income tax expense was $18.3 million for 2025, compared to $11.5 million for 2024. Our effective tax rate for 2025 and 2024 was 18.7% and 18.4%, respectively.
Removed
We attribute the modest increase to higher technology system-related expenses for 2023 compared to 2022, offset somewhat by decreased underwriting-based incentive costs for our employees for 2023 compared to 2022.
Removed
The increase in technology systems-related expenses for 2023 was primarily due to an increased allocation of costs from Donegal Mutual to our insurance subsidiaries following the successful implementation of two additional major releases of new systems as part of our ongoing systems modernization project in 2023.
Removed
We attribute the increase in our combined ratio primarily to the increases in the loss and expense ratios. Interest Expense Our interest expense for 2023 decreased slightly to $619,813, compared to $620,558 for 2022. Income Taxes Our income tax expense was $637,972 for 2023, compared to an income tax benefit of $1.7 million for 2022.
Removed
Our effective tax rate for 2023 was 12.6%.
Removed
Financial Condition Liquidity and Capital Resources Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual obligations and operating needs as they arise.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+1 added−0 removed8 unchanged
Biggest changeGenerally, we do not hedge our exposure to interest rate risk because we have the capacity to, and do, hold fixed-maturity investments to maturity. -60- Index Principal cash flows and related weighted-average interest rates by stated maturity dates for the financial instruments we held at December 31, 2024 that are sensitive to interest rates are as follows: (in thousands) Principal Cash Flows Weighted- Average Interest Rate Fixed-maturity and short-term investments: 2025 $ 82,064 4.18 % 2026 65,538 3.93 2027 73,054 3.92 2028 84,203 4.27 2029 88,485 3.78 Thereafter 998,456 3.52 Total $ 1,391,800 Fair value $ 1,274,020 Debt: 2026 $ 35,000 3.81 % Total $ 35,000 Fair value $ 35,000 Actual cash flows from investments may differ from those depicted above as a result of calls and prepayments.
Biggest changePrincipal cash flows and related weighted-average interest rates by stated maturity dates for the financial instruments we held at December 31, 2025 that are sensitive to interest rates are as follows: (in thousands) Principal Cash Flows Weighted-Average Interest Rate Fixed-maturity and short-term investments: 2026 $ 28,623 4.33 % 2027 35,649 3.86 2028 44,613 4.61 2029 67,058 3.49 2030 75,024 3.82 Thereafter 1,191,581 4.01 Total $ 1,442,548 Fair value $ 1,411,094 Debt: 2026 $ 35,000 3.81 % Total $ 35,000 Fair value $ 35,000 Actual cash flows from investments may differ from those depicted above as a result of calls and prepayments.
We also limit the amount of our total investment portfolio that we invest in any one security. Our insurance subsidiaries provide property and liability insurance coverages through independent insurance agencies located throughout their operating areas.
We also limit the amount of our total investment portfolio that we invest in any one security. -62- Index Our insurance subsidiaries provide property and liability insurance coverages through independent insurance agencies located throughout their operating areas.
To the extent that a reinsurer cannot pay losses for which it is liable under the terms of a reinsurance agreement with one or more of our insurance subsidiaries, our insurance subsidiaries retain continued liability for such losses. -61- Index
To the extent that a reinsurer cannot pay losses for which it is liable under the terms of a reinsurance agreement with one or more of our insurance subsidiaries, our insurance subsidiaries retain continued liability for such losses. -63- Index
Added
Generally, we do not hedge our exposure to interest rate risk because we have the capacity to, and do, hold fixed-maturity investments to maturity.

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