UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

 

For the fiscal year ended December 31, 2025

 

OR

 

For the transition period from _________________ to _________________

 

Commission file number 0-15341

DONEGAL GROUP INC.

(Exact name of registrant as specified in its charter)

 

Registrant’s telephone number, including area code: (800) 877-0600

 

Securities registered pursuant to Section 12(b) of the Act:

 

Securities registered pursuant to Section 12(g) of the Act: None.

 

Indicate by check mark whether the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act: Yes ☐. No ☑.

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐. No ☑.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑. No ☐.

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑. No ☐.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Act. (Check one):

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐.

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☑. No ☐.

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐.

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to Section 240.10D-1(b). ☐.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐. No ☑.

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $355,484,764.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 31,426,189 shares of Class A common stock and 5,576,775 shares of Class B common stock outstanding on March 2, 2026.

 

Documents Incorporated by Reference

 

The registrant incorporates by reference portions of the registrant’s definitive proxy statement relating to registrant’s annual meeting of stockholders to be held April 16, 2026 into Part III of this report.

 

---

DONEGAL GROUP INC.

INDEX TO FORM 10-K REPORT

 

PART I

Item 1.

Business.

Introduction

Donegal Group Inc., or DGI, is an insurance holding company whose insurance subsidiaries and affiliates offer property and casualty insurance in 21 Mid-Atlantic, Midwestern, Southern and Southwestern states. DGI has no significant business operations and is separate and distinct from its insurance subsidiaries. As used in this Form 10-K Report, the terms “we,” “us” and “our” refer to Donegal Group Inc. and its insurance subsidiaries. Our Class A common stock and our Class B common stock trade on the NASDAQ Global Select Market under the symbols “DGICA” and “DGICB,” respectively.

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. Donegal Mutual’s ownership provides Donegal Mutual with approximately 70% of the combined voting power of our outstanding shares of Class A common stock and our outstanding shares of Class B common stock. Our insurance subsidiaries and Donegal Mutual have interrelated operations due to an intercompany pooling agreement and other intercompany agreements and transactions we describe in Note 3 of the Notes to Consolidated Financial Statements. While maintaining the separate corporate existence of each company, our insurance subsidiaries conduct business together with Donegal Mutual and its insurance subsidiaries as the Donegal Insurance Group. The Donegal Insurance Group is not a legal entity, is not an insurance company and does not issue or administer insurance policies. Rather, it is a trade name that refers to the group of insurance companies that are affiliated with Donegal Mutual.

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. The personal lines products of our insurance subsidiaries consist primarily of homeowners and private passenger automobile policies.

Our insurance subsidiaries and Donegal Mutual provide their policyholders with a selection of insurance products and pursue profitability by adhering to a strict underwriting discipline. Our insurance subsidiaries derive a substantial portion of their insurance business from smaller to mid-sized regional communities. We believe this focus provides our insurance subsidiaries with competitive advantages in terms of local market knowledge, marketing, underwriting, claims servicing and policyholder service. At the same time, we believe our insurance subsidiaries have cost advantages over many smaller regional insurers that result from economies of scale our insurance subsidiaries realize through centralized accounting, administrative, data processing, investment and other services.

We believe we have a substantial opportunity, as a well-capitalized regional insurance holding company with a solid business strategy, to grow profitably and compete effectively with larger national property and casualty insurers. 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. Over that time period, we have grown significantly in terms of revenue and financial strength, and the Donegal Insurance Group has developed an excellent reputation as a regional group of property and casualty insurers.

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. 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 geographical footprint.

Available Information

You may obtain our Annual Reports on Form 10-K, including this Form 10-K Report, our quarterly reports on Form 10-Q, our current reports on Form 8-K, our proxy statement and our other filings pursuant to the Securities Exchange Act of 1934, or the Exchange Act, without charge by viewing our website at www.donegalgroup.com. You may also view our Code of Business Conduct and Ethics and the charters of the executive committee, the audit committee, the compensation committee and the nominating committee of our board of directors on our website. Upon request to our corporate secretary, we will also provide printed copies of any of these documents to you without charge. We have provided the address of our website solely for the information of investors. We do not intend the reference to our website address to be an active link or to otherwise incorporate the contents of our website into this Form 10-K Report. In addition to our website, the Securities and Exchange Commission (the “SEC”) maintains an Internet site at www.sec.gov that contains our reports, proxy and information statements and other information that we electronically file with, or furnish to, the SEC.

History and Organizational Structure

In the mid-1980’s, Donegal Mutual, as a mutual insurance company, recognized the desirability of developing additional sources of capital and surplus so it could remain competitive, expand its business and ensure its long-term viability. Accordingly, Donegal Mutual determined that the implementation of a downstream holding company structure was a viable business strategy to accomplish that objective. Thus, in 1986, Donegal Mutual formed us as a downstream holding company, and we incorporated in the state of Delaware as Donegal Group Inc. After Donegal Mutual formed us, we in turn formed Atlantic States Insurance Company, or Atlantic States, as our wholly owned property and casualty insurance company subsidiary.

In connection with the formation of Atlantic States and the establishment of our downstream insurance holding company system, Donegal Mutual and Atlantic States entered into a proportional reinsurance agreement, or pooling agreement. Under the pooling agreement, Donegal Mutual and Atlantic States contribute substantially all of their respective premiums, losses and loss expenses to the underwriting pool, and the underwriting pool, acting through Donegal Mutual, then allocates 80% of the pooled business to Atlantic States. Thus, Donegal Mutual and Atlantic States share the underwriting results of the pooled business in proportion to their respective participation in the underwriting pool.

The member companies of the Donegal Insurance Group, which include our insurance subsidiaries, share a combined business plan to enhance market penetration and underwriting profitability objectives. We believe Donegal Mutual’s majority interest in the combined voting power of our Class A common stock and of our Class B common stock fosters our ability to implement our business philosophies, enjoy management continuity, maintain superior employee relations and provide a stable environment within which we can grow our businesses.

The products the member companies of the Donegal Insurance Group offer are generally complementary, which permits the Donegal Insurance Group to offer a broad range of products in a given market and to expand the Donegal Insurance Group’s ability to service an entire personal lines or commercial lines account. Distinctions within the products the member companies of the Donegal Insurance Group offer generally allow the member companies to manage certain risk segments through variations in coverage, policy terms and pricing. As a result, the underwriting profitability of the business the individual companies write directly will vary. 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.

As the capital of Atlantic States and our other insurance subsidiaries has increased, the underwriting capacity of our insurance subsidiaries has increased proportionately. The size of the underwriting pool has also increased substantially. Therefore, as we originally planned in the mid-1980s, Atlantic States has successfully raised the capital necessary to support the growth of its direct business as well as to accept increases in its allocation of business from the underwriting pool. The portion of the underwriting pool allocated to Atlantic States has increased from an initial allocation of 35% in 1986 to an 80% allocation since March 1, 2008. We do not anticipate any further change in the pooling agreement between Atlantic States and Donegal Mutual, including any change in the percentage participation of Atlantic States in the underwriting pool.

In addition to Atlantic States, our insurance subsidiaries are Michigan Insurance Company, or MICO, The Peninsula Insurance Company and its wholly owned subsidiary, Peninsula Indemnity Company, or collectively, Peninsula, and Southern Insurance Company of Virginia, or Southern. Donegal Mutual has a 100% quota-share reinsurance agreement with Southern Mutual Insurance Company, or Southern Mutual, and Donegal Mutual places its assumed business from Southern Mutual into the underwriting pool. Donegal Mutual wholly owns and has a 100% quota-share reinsurance agreement with Mountain States Indemnity Company and Mountain States Commercial Insurance Company (collectively, the “Mountain States insurance subsidiaries”), and Donegal Mutual places its assumed business from the Mountain States insurance subsidiaries into the underwriting pool.

The following chart depicts our organizational structure, including all of our property and casualty insurance subsidiaries and affiliates:

 

---

(1)          Because of the different relative voting power of our Class A common stock and our Class B common stock, our public stockholders hold approximately 30% of the combined voting power of our Class A common stock and our Class B common stock and Donegal Mutual holds approximately 70% of the combined voting power of our Class A common stock and our Class B common stock.

Relationship with Donegal Mutual

Donegal Mutual provides facilities, management and other services to us and our insurance subsidiaries. In addition, Donegal Mutual purchases and maintains the information technology systems that support the business of Donegal Mutual and our insurance subsidiaries. Donegal Mutual allocates certain related expenses to Atlantic States in accordance with the relative participation of Donegal Mutual and Atlantic States in the pooling agreement. Our insurance subsidiaries other than Atlantic States reimburse Donegal Mutual for allocated costs of services Donegal Mutual provides on their behalf based on their proportion of the total direct premiums written of the Donegal Insurance Group and other metrics. 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.

Donegal Mutual is the employer of record for all personnel who provide services for our insurance subsidiaries. Donegal Mutual strives to maintain a culture that is based on integrity and respect, with an environment designed to facilitate excellent service to the agents and customers of the Donegal Insurance Group. 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. The majority of Donegal Mutual’s employees follow a hybrid schedule that includes working several days in their assigned office to allow for enhanced collaboration and interaction with other employees. Donegal Mutual targets employee compensation that is competitive and consistent with an employee’s position, knowledge, experience and skill level. Donegal Mutual provides annual wage increases that are based on merit. Donegal Mutual provides an annual cash incentive plan for all of its employees that provides an opportunity for Donegal Mutual’s employees to earn a bonus as a percentage of their annual wages that varies based on the level of underwriting profit Donegal Insurance Group achieves for a calendar year. In addition, Donegal Mutual provides to its full-time employees a comprehensive employee benefits program, including medical, dental and vision insurance, paid time off, and a 401(k) retirement plan that includes company matching provisions. Donegal Mutual also provides substantial training, development and wellness programs and resources to its employees.

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. The purpose of the catastrophe reinsurance agreement is to lessen the effects of an accumulation of losses arising from one event to levels that are appropriate given each subsidiary’s size, underwriting profile and surplus.

Several of our insurance subsidiaries have a liability reinsurance agreement with Donegal Mutual, pursuant to which Donegal Mutual provides coverage for losses related to any liability claim occurrence over a set retention of $3.0 million for each participating insurance subsidiary. The purpose of the liability reinsurance agreement is to lessen the effect of a liability loss to a level that is appropriate given each subsidiary’s size, underwriting profile and surplus.

We and Donegal Mutual have maintained a coordinating committee since our formation in 1986. The coordinating committee consists of two members of our board of directors, neither of whom is a member of Donegal Mutual’s board of directors, and two members of Donegal Mutual’s board of directors, neither of whom is a member of our board of directors. The purpose of the coordinating committee is to establish and maintain a process for an ongoing evaluation of the transactions between Donegal Mutual, our insurance subsidiaries and us. The coordinating committee considers the fairness of each intercompany transaction to Donegal Mutual and its policyholders and to us and our stockholders.

A new agreement or any change to a previously approved agreement must receive coordinating committee approval. 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:

Our members on the coordinating committee, as of the date of this Form 10-K Report, are Barry C. Huber and David C. King. Donegal Mutual’s members on the coordinating committee as of such date are Michael W. Brubaker and Michael K. Callahan. 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.

We believe our relationships with Donegal Mutual offer us and our insurance subsidiaries a number of competitive advantages, including the following:

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.

Business Strategy

We and Donegal Mutual are focused on several primary strategies, including achieving sustained excellent financial performance, strategically modernizing our operations and processes to transform our business, capitalizing on opportunities to grow profitably and providing superior experiences to our agents, policyholders and employees. Our strategies are designed to provide financial security to the policyholders of Donegal Mutual and our respective insurance subsidiaries and, ultimately, to provide value to our stockholders. 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%.

 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:

 

---

We and Donegal Mutual believe we can continue to expand our insurance operations over time primarily through organic growth. Our insurance subsidiaries and Donegal Mutual seek to increase their premium base by making quality independent agency appointments, enhancing their competitive position within each agency, providing a comprehensive suite of insurance products and developing and maintaining automated systems to improve service, communications and efficiency.

A detailed review of our business strategies follows:

Our insurance subsidiaries seek to achieve excellent financial performance through a combination of consistent investment income and underwriting profitability. Underwriting profitability is a fundamental component of our long-term financial strength because it allows our insurance subsidiaries to generate profits without relying exclusively on their investment income for profitability.

Our insurance subsidiaries seek to enhance their underwriting results by:

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. In addition to appropriate pricing, our insurance subsidiaries seek to ensure that their premium rates are adequate relative to the risk exposures they insure. Our insurance subsidiaries review loss trends on a regular basis to identify changes in the frequency and severity of their claims and to assess the adequacy of their rates and underwriting standards. 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. Our insurance subsidiaries also carefully monitor and audit the information they use to price their policies for the purpose of enabling them to receive an adequate level of premiums for the risk they assume. For example, our insurance subsidiaries audit the payroll data of their workers’ compensation customers to verify that the assumptions used to price a particular policy were accurate. By implementing appropriate rate increases and understanding the risks our insurance subsidiaries agree to insure, our insurance subsidiaries seek to achieve consistent underwriting profitability.

Our insurance subsidiaries monitor the performance of the product lines they underwrite and the geographies in which they offer their insurance products. Our insurance subsidiaries take specific actions to remediate underperforming product lines or geographies that include pricing increases, underwriting adjustments, reunderwriting initiatives as well as discontinuing a given product or withdrawing from a geography when our insurance subsidiaries determine they cannot reasonably expect to generate targeted profitability over time. For example, our insurance subsidiaries exited the commercial lines markets in the states of Georgia and Alabama, including the non-renewal of all commercial lines accounts in those states, during 2023 and 2024. Our insurance subsidiaries took this action after determining that they could not reasonably expect to generate targeted profitability within a reasonable period of time for commercial lines of business in those states.

Our insurance subsidiaries have no material exposures to asbestos or environmental liabilities. Our insurance subsidiaries seek to provide more than one policy to a given personal lines or commercial lines customer because this “account selling” strategy diversifies their risk and has historically improved their underwriting results. Our insurance subsidiaries also use reinsurance to manage their exposure and limit their maximum net loss from large single risks or risks in concentrated areas.

Our insurance subsidiaries maintain stringent expense controls under direct supervision of their senior management. We centralize the processing and administrative activities of our insurance subsidiaries to realize operating synergies and better expense control. Our insurance subsidiaries utilize technology to automate much of their underwriting, claims and billing processes and to facilitate agency and policyholder communications on an efficient, timely and cost-effective basis. 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. 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. The investment strategy of our insurance subsidiaries is to generate an appropriate amount of after-tax income on invested assets while limiting the potential impact of equity market volatility and minimizing credit risk through investments in high-quality securities. As a result, our insurance subsidiaries seek to invest a high percentage of their assets in diversified, highly rated and marketable fixed-maturity instruments. The fixed-maturity portfolios of our insurance subsidiaries consist of both taxable and tax-exempt securities. Our insurance subsidiaries maintain a portion of their portfolios in short-term securities to provide liquidity for the payment of claims and operation of their respective businesses. Our insurance subsidiaries maintain a small percentage (3.0% at December 31, 2025) of their portfolios in equity securities.

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. The enterprise analytics team is responsible for core functions of rate-making, predictive analytics, data management and business intelligence. These responsibilities include the development and expansion of risk-based pricing segmentation, analytical innovation, predictive modeling solutions, formal data strategies, performance monitoring and enhanced reporting mechanisms. We developed and are executing a pricing and analytics roadmap that will continue to deliver data-driven insights to our underwriters. This roadmap includes ongoing development and enhancement of quality tools that allow us to operationalize pricing and underwriting predictive models, integrate internal and external data for better-informed pricing and underwriting decisions and enhance the automation and precision of our rate indication methodology. Our enterprise analytics team is continuing to develop new tools and solutions that are enhancing our product portfolio management capabilities, competitive intelligence, pricing sophistication and utilization of data to monitor and manage our operations. The team also generates reporting and analyses that enable us to draw business insights from data that drive actions to improve performance.

We are focused on process excellence and are executing a multi-year roadmap for addressing those opportunities. We are also expanding our data management capabilities to continually ensure the data upon which we rely for our business decisions and financial reporting is complete, accurate and secure. We have assigned an innovation task force the responsibility to research emerging technologies and identify potential technology solutions that might assist us in achieving our business strategies.

In 2018, Donegal Mutual initiated a multi-year systems modernization project to replace its remaining legacy systems, streamline business processes and workflows and enhance data analytics and modeling capabilities. In February 2020, Donegal Mutual implemented the first release of new systems related to the project, and our insurance subsidiaries began to issue workers’ compensation policies from the new systems in the second quarter of 2020. In August 2021, Donegal Mutual implemented the second release of new systems related to the project, including a new agency portal and the rating, underwriting and policy issuance capabilities necessary to support the launch of new personal lines products, and our insurance subsidiaries began to issue new personal lines products from the new systems in the fourth quarter of 2021. In 2023, Donegal Mutual implemented two additional major releases of new systems, which included three commercial lines of business with enhanced straight-through-processing capabilities as well as dwelling fire and conversion of legacy homeowners renewal policies in two initial states. 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. 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. This agile infrastructure will scale dynamically based on business demands and deliver real-time insights. The platform will enable highly efficient data processing through modular, metadata-driven frameworks, ensuring accelerated and reliable future data delivery within a secure, governed and compliant repository. 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”). Donegal Mutual implemented concurrently a formal data management program that aligns critical business processes and strategies with our technology. We expect these data-related investments will ensure easily accessible data for management reporting, position us to further enhance our data analytics, enable the future addition of new data sources and mitigate data integrity risk.

During 2025, Donegal Mutual conducted a detailed and thorough assessment of the benefits of migrating its on-premises Guidewire claims, billing and policy administration systems to the Guidewire cloud platform. These benefits include increased agility and faster time-to-market for new product launches and feature enhancements, reduced operational costs and complexity associated with maintaining in-house technology systems, enhanced tools and capabilities to better empower business users and secure access to a scalable, continuously evolving industry-leading insurance platform to support and enable future growth. With the support of experienced vendor partners, Donegal Mutual developed a comprehensive migration plan and initiated the first phase of the program in early 2026. The plan calls for the migration of its claims and billing applications to the cloud in early 2027. Migration activities for its policy administration system will commence closer to completion of legacy policy conversion activities in 2027, with completion of the migration expected in 2028. This phased strategy represents a risk-averse approach to the cloud migration while retaining capacity to deliver business-critical projects in parallel with those activities.

 Continued expansion of our insurance subsidiaries within their existing markets will be a key source of their continued premium growth, and maintaining an effective network of independent agencies is integral to this expansion. Our insurance subsidiaries seek to be among the top three insurers within each of the independent agencies for the lines of business our insurance subsidiaries write by providing a consistent, competitive and stable market for their products. We believe that the consistency of the product offerings of our insurance subsidiaries enables our insurance subsidiaries to compete effectively for independent agents with other insurers whose product offerings may fluctuate based on industry conditions. Our insurance subsidiaries offer a competitive compensation program to their independent agents that rewards them for producing profitable growth and maintaining profitable books of business with our insurance subsidiaries.

Our insurance subsidiaries execute a combined annual business plan with Donegal Mutual and its insurance subsidiaries. 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. As part of the planning process, we perform a detailed analysis of internal and external data with respect to each state within our operating regions. We assess state-specific marketing dynamics and opportunities, including an evaluation of the historical experience of our insurance subsidiaries. We then assign a strategic posture for each state and develop action plans to execute state-specific strategies for growth or reduction of premiums, agency distribution and enhanced profit generation over the next several years. As part of our property exposure management, we implemented tools that have allowed us to assign a strategic posture at a county level within each state. Our insurance subsidiaries utilize these tools to further manage and refine their concentrations of property risk exposure and to enhance their geographic risk diversification. We expect this strategy will reduce over time the overall impact of losses from severe weather events to the results of our insurance subsidiaries.

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. The national accounts team serves as a centralized point of contact for these groups and works directly with our regional sales and marketing teams to support and develop relationships with independent agents affiliated with national agency groups. 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.

Donegal Mutual and our insurance subsidiaries strive to maintain technology comparable to that of their larger competitors. “Ease of doing business” is a critically important component of an insurer’s value to an independent agency. Our insurance subsidiaries provide fully automated underwriting and policy issuance portals that substantially ease data entry and facilitate the quoting and issuance of policies for the independent agents of our insurance subsidiaries. As a result, applications of the independent agents for our insurance subsidiaries can result in policy issuance without further re-entry of information. These systems also interface with the agency management systems of the independent agents 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.

Our insurance subsidiaries also provide their independent agents with ongoing support to enable them to better attract and service customers, including:

Our insurance subsidiaries appoint independent agencies with a strong underwriting and growth track record. We believe that our insurance subsidiaries will drive continued long-term growth by carefully selecting, motivating and supporting their independent agencies.

We believe that excellent policyholder service is important in attracting new policyholders and retaining existing policyholders. Our insurance subsidiaries work closely with their independent agents to provide a consistently responsive level of claims service, underwriting and customer support. Our insurance subsidiaries seek to respond expeditiously and effectively to address customer and independent agent inquiries in a number of ways, including:

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. 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. While Donegal Mutual and we generally engage in preliminary discussions with potential direct or indirect acquisition candidates from time to time, neither Donegal Mutual nor we make any public disclosure regarding a proposed acquisition until Donegal Mutual or we have entered into a definitive acquisition agreement.

The following table highlights our and Donegal Mutual’s history of insurance company acquisitions and affiliations since 1998:

---

(1)

To reduce administrative and compliance costs and expenses, these subsidiaries subsequently merged into one of our existing insurance subsidiaries.

(2)

Control acquired by Donegal Mutual.

(3)

Donegal Mutual completed the merger of Mountain States Mutual Casualty Company with and into Donegal Mutual effective May 25, 2017. Donegal Mutual was the surviving company in the merger, and Mountain States insurance subsidiaries became insurance subsidiaries of Donegal Mutual upon completion of the merger. Donegal Mutual also entered into a 100% quota-share reinsurance agreement with the Mountain States insurance subsidiaries on the merger date. Beginning with policies effective in 2021, Donegal Mutual places the business of the Mountain States insurance subsidiaries into the underwriting pool.

Competition

The property and casualty insurance industry is highly competitive on the basis of both price and service. Numerous companies compete for business in the geographic areas where our insurance subsidiaries operate. Many of these other insurance companies are substantially larger and have greater financial resources than those of our insurance subsidiaries. In addition, because our insurance subsidiaries and Donegal Mutual market their respective insurance products exclusively through independent insurance agencies, most of which represent multiple insurance companies, our insurance subsidiaries face competition within agencies, as well as competition to appoint and retain qualified independent agents. Insurance companies that are substantially larger than our insurance subsidiaries benefit from access to larger pools of data upon which to base their underwriting and pricing decisions as well as realize cost synergies their larger scale affords to them. Insurance companies that market their products directly to end consumers generally incur lower relative acquisition costs compared to those of our insurance subsidiaries.

Products and Underwriting

We report the results of our insurance operations in two segments: commercial lines of insurance and personal lines of insurance. The commercial lines our insurance subsidiaries write consist primarily of commercial automobile, commercial multi-peril and workers’ compensation insurance. The personal lines our insurance subsidiaries write consist primarily of private passenger automobile and homeowners insurance. We describe these lines of insurance in greater detail below:

Commercial

Personal

The following table sets forth the net premiums written of our insurance subsidiaries by line of insurance for the periods indicated:

 

The commercial lines and personal lines underwriting departments of our insurance subsidiaries evaluate and select those risks that they believe will enable our insurance subsidiaries to achieve an underwriting profit. Within each of the underwriting departments, our insurance subsidiaries have dedicated product development and management teams responsible for the development of quality products at competitive prices to promote growth and profitability as well as the enhancement of our current products to meet targeted customer needs.

In order to achieve underwriting profitability on a consistent basis, our insurance subsidiaries:

Our insurance subsidiaries also review their existing portfolio of insured accounts to determine whether certain risks or classes of business continue to meet their underwriting guidelines and margin expectations. If a given account or class of business no longer meets those underwriting guidelines or margin expectations, our insurance subsidiaries will take appropriate action regarding that account or class of business, including raising premium rates or non-renewing policies to the extent applicable laws and regulations permit.

Distribution

Our insurance subsidiaries market their products primarily in the Mid-Atlantic, Midwestern, Southern and Southwestern regions through approximately 2,000 independent insurance agencies. 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). Donegal Mutual includes the business it writes directly and assumes from the Mountain States insurance subsidiaries in five Southwestern states (Arizona, Colorado, New Mexico, Texas and Utah) in the pooling agreement between Donegal Mutual and Atlantic States. We believe the relationships of our insurance subsidiaries with their independent agents are valuable in identifying, obtaining and retaining profitable business. Our insurance subsidiaries maintain a stringent agency selection procedure that emphasizes appointing agencies with proven marketing strategies for the development of profitable business, and our insurance subsidiaries only appoint agencies with a strong underwriting history and potential growth capabilities. Our insurance subsidiaries also regularly evaluate the independent agencies that represent them based on their profitability and performance in relation to the objectives of our insurance subsidiaries. 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.

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:

 

Our insurance subsidiaries employ a number of policies and procedures that we believe enable them to attract, retain and motivate their independent agents. We believe that the consistency of the product offerings of our insurance subsidiaries enables our insurance subsidiaries to compete effectively for independent agents with other insurers whose product offerings may fluctuate based upon industry conditions. 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. Our insurance subsidiaries have a competitive compensation program for their independent agents that includes base commissions, growth incentive plans and a profit-sharing plan, under which the independent agents may earn additional commissions based upon the volume of premiums produced and the profitability of the business our insurance subsidiaries receive from that agency. We have an agency stock purchase plan that allows our independent agents to purchase our Class A common stock at a discount to market prices to further align the interests of our independent agents with the interests of our stockholders.

Our insurance subsidiaries encourage their independent agents to focus on “account selling,” or serving all of a particular insured’s property and casualty insurance needs, which our insurance subsidiaries believe generally results in more favorable loss experience than covering a single risk for an individual insured.

As part of the effort of our insurance subsidiaries to maintain acceptable underwriting results, they conduct annual reviews of agencies that have failed to meet their underwriting profitability criteria. The review process includes an analysis of the underwriting and re-underwriting practices of the agency, the completeness and accuracy of the applications the agency submits, the adequacy of the training of the agency’s staff and the agency’s record of adherence to the underwriting guidelines and service standards of our insurance subsidiaries. Based on the results of this review process, the marketing and underwriting personnel of our insurance subsidiaries develop, together with the agency, a plan to improve its 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.

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. Donegal Mutual maintains disaster recovery and backup systems and tests these systems on a regular basis. 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. These systems enable our insurance subsidiaries to provide quality service to agents and policyholders by processing business in a timely and dependable manner, communicate and share data with agents and provide a variety of methods for the payment of premiums. These systems also allow for the accumulation and analysis of data and information for the management of our insurance subsidiaries. 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. Key components of these technology systems include agency interface systems, automated policy management systems, a claims processing system and a billing administration system. The agency interface systems provide our insurance subsidiaries with a comprehensive single source to facilitate data sharing both to and from agents’ systems. The agency interface systems also integrate with our automated policy management systems to provide agents with an integrated means of generating underwritten quotes and automatically issuing policies that meet the underwriting guidelines of our insurance subsidiaries with limited or no intervention by their personnel. The claims processing system allows our insurance subsidiaries to process claims efficiently and in an automated environment. The billing administration system allows our insurance subsidiaries to process premium billing and collection efficiently and in an automated environment.

We believe Donegal Mutual’s agency-facing technology systems compare well against those of many national property and casualty insurance carriers in terms of feature capabilities and service levels.

Claims

The management of claims is a critical component of the philosophy of our insurance subsidiaries to achieve underwriting profitability on a consistent basis and is fundamental to the successful operations of our insurance subsidiaries and their dedication to excellent service. Our senior claims management oversees the claims processing units of each of our insurance subsidiaries to assure consistency in the claims settlement process.

The claims departments of our insurance subsidiaries rigorously manage claims to assure that they settle legitimate claims quickly and fairly and that they identify questionable claims for defense. They provide various means of claims reporting on a 24-hours a day, seven-days a week basis, including toll-free numbers and electronic reporting through our website and mobile application. The claims departments strive to respond to notifications of claims promptly, generally within the day reported. By responding promptly to claims, they provide quality customer service and we believe minimize the ultimate cost of the claims. They engage independent adjusters as needed to handle claims in areas in which the typical volume of claims is not sufficient to justify the hiring of field staff. They also employ private investigators, structural experts and outside legal counsel to supplement their internal staff and to assist in the investigation of claims. Our insurance subsidiaries have a special investigative unit primarily staffed by former law enforcement officers that attempts to identify and prevent fraud and abuse and to investigate questionable claims.

The management of the claims departments of our insurance subsidiaries develops and implements policies and procedures for the establishment of adequate claim reserves. Our insurance subsidiaries employ an actuarial staff that regularly reviews their reserves for incurred but not reported claims. The management and staff of the claims departments resolve policy coverage issues, manage and process reinsurance recoveries and handle salvage and subrogation matters. The litigation and personal injury sections of our insurance subsidiaries manage all claims litigation. Claims above certain thresholds require management review and settlement authorization. Our insurance subsidiaries provide their claims adjusters reserving and settlement authority based upon their experience and demonstrated abilities. Larger or more complicated claims require consultation and approval of senior claims department management.

Liabilities for Losses and Loss Expenses

Liabilities for losses and loss expenses are estimates at a given point in time of the amounts an insurer expects to pay with respect to incurred policyholder claims based on facts and circumstances the insurer knows at that point in time. For example, legislative, judicial and regulatory actions may expand coverage definitions, retroactively mandate coverage or otherwise require our insurance subsidiaries to pay losses for damages that their policies explicitly excluded or did not intend to cover. At the time of establishing its estimates, an insurer recognizes that its ultimate liability for losses and loss expenses will exceed or be less than such estimates. Our insurance subsidiaries base their estimates of liabilities for losses and loss expenses on assumptions as to future loss trends, expected claims severity, judicial theories of liability and other factors. However, during the loss adjustment period, our insurance subsidiaries may learn additional facts regarding individual claims, and, consequently, it often becomes necessary for our insurance subsidiaries to refine and adjust their estimates for these liabilities. We reflect any adjustments to the liabilities for losses and loss expenses of our insurance subsidiaries in our consolidated results of operations in the period in which our insurance subsidiaries make adjustments to their estimates.

Our insurance subsidiaries maintain liabilities for the payment of losses and loss expenses with respect to both reported and unreported claims. Our insurance subsidiaries establish these liabilities for the purpose of covering the ultimate costs of settling all losses, including investigation and litigation costs. Our insurance subsidiaries base the amount of their liability for reported losses primarily upon a case-by-case evaluation of the type of risk involved, knowledge of the circumstances surrounding each claim and the insurance policy provisions relating to the type of loss the policyholder incurred. Our insurance subsidiaries determine the amount of their liability for unreported claims and loss expenses on the basis of historical information by line of insurance. Our insurance subsidiaries account for inflation in the reserving function through analysis of costs and trends and reviews of historical reserving results. Our insurance subsidiaries monitor their liabilities closely and recompute them periodically using new information on reported claims and a variety of statistical techniques. Our insurance subsidiaries do not discount their liabilities for losses and loss expenses.

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. For example, our insurance subsidiaries have experienced an increase in claims severity and a lengthening of the claim settlement periods on bodily injury claims during the past several years. 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. These trend changes caused significant disruption to historical loss patterns and gave rise to greater uncertainty as to the pattern of future loss settlements. 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. Assumptions related to our insurance subsidiaries’ external environment include the absence of significant changes in tort law and the legal environment that increase liability exposure, consistency in judicial interpretations of insurance coverage and policy provisions and the rate of loss cost inflation. Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business and consistency in reinsurance coverage and collectability of reinsured losses, among other items. 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. 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.

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. Furthermore, we cannot predict the timing, frequency and extent of adjustments to our insurance subsidiaries’ estimated future liabilities, because the historical conditions and events that serve as a basis for our insurance subsidiaries’ estimates of ultimate claim costs may change. As is the case for substantially all property and casualty insurance companies, our insurance subsidiaries have found it necessary in the past to increase their estimated future liabilities for losses and loss expenses in certain periods and, in other periods, their estimated future liabilities for losses and loss expenses have exceeded their actual liabilities for losses and loss expenses. Changes in our insurance subsidiaries’ estimates of their liability for losses and loss expenses generally reflect actual payments and their evaluation of information received subsequent to the prior reporting period. 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. Our insurance subsidiaries made no significant changes in their reserving philosophy or claims management personnel, and they have made no significant offsetting changes in estimates that increased or decreased their loss and loss expense reserves in those years. 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. The majority of the 2025 development related to decreases in the liability for losses and loss expenses of prior years for Southern and Peninsula. The 2024 development represented 2.2% of the December 31, 2023 net carried reserves and resulted primarily from lower-than-expected loss emergence in the commercial multi-peril, personal automobile and homeowner lines of business, offset partially by higher-than-expected loss emergence in the workers’ compensation and commercial automobile lines of business, for accident years prior to 2024. The majority of the 2024 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO. The 2023 development represented 2.5% of the December 31, 2022 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 2023. 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.

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. However, the amount of the average claim outstanding has increased gradually over the past several years due to various factors such as increased property and automobile repair and replacement costs, rising medical loss costs and increased litigation trends. We have also experienced a general slowing of settlement rates in litigated claims and lengthening of repair completion times for property and automobile claims. Our insurance subsidiaries could have to make further adjustments to their estimates in the future. 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.

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 business in the underwriting pool is homogeneous, and each company has a pro-rata share of the entire underwriting pool. 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.

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. These differences amounted to $36.6 million, $36.0 million and $32.4 million at December 31, 2025, 2024 and 2023, respectively.

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:

 

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. Loss data in the table includes business Atlantic States received from the underwriting pool.

“Net liability at end of year for unpaid losses and loss expenses” sets forth the estimated liability for net unpaid losses and loss expenses recorded at the balance sheet date for each of the indicated years. This liability represents the estimated amount of net losses and loss expenses for claims arising in the current and all prior years that are unpaid at the balance sheet date, including losses incurred but not reported.

The “Net liability re-estimated as of” portion of the table shows the re-estimated amount of the previously recorded liability based on experience for each succeeding year. The estimate increases or decreases as payments are made and more information becomes known about the severity of the remaining unpaid claims. 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.

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. An excess in liability means that the liability established in prior years exceeded the amount of actual payments and currently re-estimated unpaid liability remaining.

The “Cumulative amount of liability paid through” portion of the table shows the cumulative net losses and loss expense payments made in succeeding years for net losses incurred prior to the balance sheet date. For 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.

Third-Party Reinsurance

Our insurance subsidiaries and Donegal Mutual purchase certain third-party reinsurance on a combined basis. Our insurance subsidiaries use several different reinsurers, all of which, consistent with the requirements of our insurance subsidiaries and Donegal Mutual, have an A.M. Best rating of A- (Excellent) or better or, with respect to foreign reinsurers, have a financial condition that, in the opinion of our management, is equivalent to a company with at least an A- (Excellent) rating from A.M. Best.

The external reinsurance our insurance subsidiaries and Donegal Mutual purchased for 2025 included:

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. For workers’ compensation insurance, our insurance subsidiaries had excess of loss reinsurance that provided for coverage of $17.0 million on any one life over a set retention of $3.0 million. Our insurance subsidiaries and Donegal Mutual renewed their third-party reinsurance for 2026 with no changes to the coverage and retention amounts in effect for 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, 2025, 96.4% of all debt securities our insurance subsidiaries held had an investment-grade rating. The investment portfolios of our insurance subsidiaries did not contain any mortgage loans or any non-performing assets at December 31, 2025.

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:

 

---

Our insurance subsidiaries invest in both taxable and tax-exempt securities as part of their strategy to maximize after-tax income. Tax-exempt securities made up approximately 21.3%, 16.6% and 18.2% of the fixed-maturity securities in the combined investment portfolios of our insurance subsidiaries at December 31, 2025, 2024 and 2023, respectively.

The following table shows the classification of our investments and the investments of our insurance subsidiaries at December 31, 2025, 2024 and 2023 (at carrying value):

 

---

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:

 

---

As shown above, our insurance subsidiaries held investments in mortgage-backed securities having a carrying value of $445.2 million at December 31, 2025. 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. Our insurance subsidiaries perform an analysis of the underlying loans when evaluating a mortgage-backed security for purchase, and they select those securities that they believe will provide a return that properly reflects the prepayment risk associated with the underlying loans.

The following table sets forth the investment results of our insurance subsidiaries for the years ended December 31, 2025, 2024 and 2023:

 

---

A.M. Best Rating

Donegal Mutual and our insurance subsidiaries have an A.M. Best rating of A (Excellent), based upon the respective current financial condition and historical statutory results of operations of Donegal Mutual and our insurance subsidiaries. We believe that the A.M. Best rating of Donegal Mutual and our insurance subsidiaries is an important factor in their marketing of their products to their agents and customers. A.M. Best’s ratings are industry ratings based on a comparative analysis of the financial condition and operating performance of insurance companies. A.M. Best’s classifications are A++ and A+ (Superior), A and A- (Excellent), B++ and B+ (Good), B and B- (Fair), C++ and C+ (Marginal), C and C- (Weak), D (Poor), E (Under Regulatory Supervision), F (Liquidation) and S (Suspended). A.M. Best bases its ratings upon factors relevant to the payment of claims of policyholders and are not directed toward the protection of investors in insurance companies. According to A.M. Best, the “Excellent” rating that the Donegal Insurance Group maintains is assigned to those companies that, in A.M. Best’s opinion, have an excellent ability to meet their ongoing insurance obligations.

Regulation

The supervision and regulation of insurance companies consists primarily of the laws and regulations of the various states in which the insurance companies transact business, with the primary regulatory authority being the insurance regulatory authorities in the state of domicile of the insurance company. Such supervision and regulation relate to numerous aspects of an insurance company’s business and financial condition. The primary purpose of such supervision and regulation is the protection of policyholders. The authority of the state insurance departments includes the establishment of standards of solvency that insurers must meet and maintain, the licensing of insurers and insurance agents to do business, the nature of, and limitations on, investments, premium rates for property and casualty insurance, the provisions that insurers must make for current losses and future liabilities, the deposit of securities for the benefit of policyholders, the approval of policy forms, notice requirements for the cancellation of policies and the approval of certain changes in control. State insurance departments also conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other reports relating to the financial condition of insurance companies.

In addition to state-imposed insurance laws and regulations, the National Association of Insurance Commissioners, or the NAIC, maintains a risk-based capital system, or RBC, for assessing the adequacy of the statutory capital and surplus of insurance companies that augments the states’ current fixed dollar minimum capital requirements for insurance companies. 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.

Generally, every state has guaranty fund laws under which insurers licensed to do business in that state can be assessed on the basis of premiums written by the insurer in that state in order to fund policyholder liabilities of insolvent insurance companies. Under these laws in general, an insurer is subject to assessment, depending upon its market share of a given line of business, to assist in the payment of policyholder claims against insolvent insurers. Our insurance subsidiaries and Donegal Mutual have made accruals for their portion of assessments related to such insolvencies based upon the most current information furnished by the guaranty associations.

We are part of an insurance holding company system of which Donegal Mutual is the ultimate controlling person. All of the states in which our insurance companies and Donegal Mutual maintain a domicile have legislation that regulates insurance holding company systems. Each insurance company in the insurance holding company system must register with the insurance supervisory agency of its state of domicile and furnish information concerning the operations of companies within the insurance holding company system that may materially affect the operations, management or financial condition of the insurers within the system. Pursuant to these laws, the respective insurance departments in which our subsidiaries and Donegal Mutual maintain a domicile may examine our insurance subsidiaries or Donegal Mutual at any time, require disclosure of material transactions by the holding company with another member of the insurance holding company system and require prior notice or prior approval of certain transactions, such as “extraordinary dividends” from the insurance subsidiaries to the holding company. We have insurance subsidiaries domiciled in Michigan, Pennsylvania and Virginia.

The Pennsylvania Insurance Holding Companies Act, which generally applies to Donegal Mutual, us and our insurance subsidiaries, requires that all transactions within an insurance holding company system to which an insurer is a party must be fair and reasonable and that any charges or fees for services performed must be reasonable. Any management agreement, service agreement, cost sharing arrangement and material reinsurance agreement must be filed with the Pennsylvania Insurance Department, or the Department, and is subject to the Department’s review. We have filed with the Department the pooling agreement between Donegal Mutual and Atlantic States that established the underwriting pool and all material agreements between Donegal Mutual and our insurance subsidiaries.

Approval of the applicable insurance commissioner is also required prior to consummation of transactions affecting the control of an insurer. In virtually all states, including the states where our insurance subsidiaries are domiciled, the acquisition of 10% or more of the outstanding capital stock of an insurer or its holding company or the intent to acquire such an interest creates a rebuttable presumption of a change in control. Pursuant to an order issued in April 2003, the Department approved Donegal Mutual’s ownership of up to 70% of our outstanding Class A common stock and Donegal Mutual’s ownership of up to 100% of our outstanding Class B common stock.

Our insurance subsidiaries have the legal obligation under state insurance laws to participate in involuntary insurance programs for automobile insurance, as well as other property and casualty insurance lines, in the states in which they conduct business. These programs include joint underwriting associations, assigned risk plans, fair access to insurance requirements plans, reinsurance facilities, windstorm plans and tornado plans. Legislation establishing these programs requires all companies that write lines covered by these programs to provide coverage, either directly or through reinsurance, for insureds who are unable to obtain insurance in the voluntary market. The legislation creating these programs usually allocates a pro rata portion of risks attributable to such insureds to each company on the basis of the direct premiums it has written in that state or the number of automobiles it insures in that state. Generally, state law requires participation in these programs as a condition to obtaining a certificate of authority. Our loss ratio on insurance we write under these involuntary programs has traditionally been significantly greater than our loss ratio on insurance we voluntarily write in those states.

Regulatory requirements, including RBC requirements, may impact our insurance subsidiaries’ ability to pay dividends. 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. Generally, the maximum amount that one of our insurance subsidiaries may pay to us as ordinary dividends during any year after notice to, but without prior approval of, the insurance commissioner of its domiciliary state is limited to a stated percentage of that subsidiary’s statutory capital and surplus at December 31 of the preceding fiscal year or the net income of that subsidiary for its preceding fiscal year. 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.

 

Donegal Mutual Insurance Company

Donegal Mutual organized as a mutual fire insurance company in Pennsylvania in 1889. At December 31, 2025, Donegal Mutual had admitted assets of $822.2 million and policyholders’ surplus of $454.6 million. At December 31, 2025, Donegal Mutual had total liabilities of $367.6 million, including reserves for net losses and loss expenses of $150.1 million and unearned premiums of $72.4 million. 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. At December 31, 2025, Donegal Mutual owned 13,928,704 shares, or approximately 44%, of our Class A common stock, which Donegal Mutual carried on its books at $208.7 million, and 4,751,974 shares, or approximately 85%, of our Class B common stock, which Donegal Mutual carried on its books at $71.2 million. We present Donegal Mutual’s financial information in accordance with SAP as the NAIC Accounting Practices and Procedures Manual requires. Donegal Mutual does not, nor is it required to, prepare financial statements in accordance with GAAP.

Name		Age		Position
Kevin G. 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. 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.
Jeffery T. 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.
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.
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. 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. 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. 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. 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. 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. 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. 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. 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.

•

trends in claim frequency and severity;

•

changes in operations;

•

emerging economic and social trends;

•

economic and social inflation;

•

changes in the regulatory and litigation environments.

•

the availability of sufficient, reliable data;

•

the ability to conduct a complete and accurate analysis of available data;

•

the ability to recognize in a timely manner changes in trends and to project both the severity and frequency of losses with reasonable accuracy;

•

uncertainties generally inherent in estimates and assumptions;

•

the ability to project changes in certain operating expense levels with reasonable certainty;

•

the development, selection and application of appropriate rating formulae or other pricing methodologies;

•

the effective development, governance and appropriate use of modeling tools to assist with correctly and consistently achieving the intended results in underwriting and pricing;

•

the ability to innovate with new pricing strategies and the success of those innovations upon implementation;

•

the ability to secure regulatory approval of premium rates on an adequate and timely basis;

•

the ability to predict policyholder retention accurately;

•

unanticipated court decisions, legislation or regulatory action;

•

unanticipated changes in our claim settlement practices;

•

changes in driving patterns for auto exposures;

•

changes in weather patterns for property exposures;

•

changes in the medical sector of the economy that impact bodily injury loss costs;

•

changes in new and used car prices, auto repair costs and auto parts prices, including the increasing integration of sophisticated technology-related components;

•

the impact of emerging technologies, including driver assistance technologies and autonomous vehicles, on pricing, insurance coverages and loss costs;

•

the impact of inflation and other factors on the cost and availability of construction materials and labor;

•

the impact of medical advances on the cost and duration of bodily injury claims;

•

the ability to monitor property concentration in catastrophe-prone areas, such as hurricane, earthquake, wildfire and wind/hail regions; and

•

the general state of the economy in the states in which our insurance subsidiaries operate.

•

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.

•

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.

•

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 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.

•

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.

•

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.

•

elect all of the members of our board of directors, who determine our management and policies; and

•

control the outcome of any corporate transaction or other matter submitted to a vote of our stockholders for approval, including mergers or other acquisition proposals and the sale of all or substantially all of our assets, in each case regardless of how all of our stockholders other than Donegal Mutual vote their shares.

•

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.

Our insurance subsidiaries utilize the information systems Donegal Mutual maintains. Donegal Mutual has a robust information security program in place as a component of the enterprise-level risk management program of Donegal Mutual and us. The integration of Donegal Mutual’s information security program into the enterprise-level risk management program is intended to promote the inclusion of cybersecurity considerations in decision-making processes throughout Donegal Mutual. Donegal Mutual has implemented multiple layers of cybersecurity systems and related defensive measures that are intended to assist with assessing, identifying and managing material risks from cybersecurity threats to Donegal Mutual’s information systems. Examples of these systems and measures include firewalls, data encryption, intrusion detection and prevention systems, endpoint detection and response systems, data-loss prevention systems and multi-factor authentication requirements for remote and privileged access. Donegal Mutual also regularly evaluates the effectiveness of its information security program through enterprise risk assessments.

Donegal Mutual also requires annual cybersecurity awareness training for all employees who serve Donegal Mutual and our insurance subsidiaries. Donegal Mutual expects all employees to assist in safeguarding its information systems and to assist in the discovery and reporting of cybersecurity incidents. This enterprise-wide program is intended to identify and assess internal and external cyber and information security risks that may threaten the security or integrity of the information stored on Donegal Mutual’s information systems or those of third-party providers from unauthorized access, use or other malicious acts.

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. This process is designed to help Donegal Mutual’s information security personnel identify and mitigate risks related to data breaches or other cybersecurity incidents originating from third-party service providers in order to better protect Donegal Mutual’s information systems and information technology infrastructure.

Donegal Mutual and we are not aware of any cybersecurity incidents or risks from cybersecurity threats that have materially affected, or are reasonably likely to affect, our business strategy, results of operations or financial condition. While Donegal Mutual maintains cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. 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. In addition, the chief risk officer of Donegal Mutual and us has extensive experience in the field of risk management, which is helpful for developing and executing Donegal Mutual’s information security program in a manner that aligns with the overall enterprise-level risk management program of Donegal Mutual and us.

In connection with carrying out their overall oversight responsibilities, the boards of directors of Donegal Mutual and us have delegated certain cybersecurity oversight responsibilities to the joint audit committee of those boards. The joint audit committee meets at least quarterly and is central to the boards’ oversight of cybersecurity risks. A member of the joint audit committee has extensive information technology and cybersecurity experience in the insurance industry. The joint audit committee actively monitors these risks in order to assist in coordinating prevention and mitigation efforts by, among other things, participating in risk management committee meetings and receiving quarterly reports from the chief risk officer of Donegal Mutual and us on cybersecurity risks and related matters. Donegal Mutual’s information security officer also provides an annual cybersecurity report to the boards of directors of Donegal Mutual and us. The annual cybersecurity report encompasses a broad range of topics, including types of threats and attempted infiltrations, applicable regulatory developments, information security program activities and planned cybersecurity enhancements to address emerging threats.

Donegal Mutual and we also maintain a risk management committee that is comprised of our shared executive officers and other key management personnel. This committee meets quarterly and is responsible for our enterprise risk strategy and management, which includes identifying, assessing, addressing and monitoring cybersecurity risks. Donegal Mutual’s information security officer provides quarterly updates to the risk management committee. Those updates include current cybersecurity issues and trends and any relevant information related to the prevention, detection, mitigation and remediation of cybersecurity incidents.

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. Such disclosure did not stipulate a maximum number of shares that may be purchased under this program.

		2020				2021				2022				2023				2024				2025
Donegal Group Inc. 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

		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

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

		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

		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

(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

(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

(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 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.

		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

		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	%

(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

Index to Consolidated Financial Statements and Schedule
Consolidated Balance Sheets	65
Consolidated Statements of Income and Comprehensive Income	66
Consolidated Statements of Stockholders’ Equity	67
Consolidated Statements of Cash Flows	68
Notes to Consolidated Financial Statements	69
Report of Independent Registered Public Accounting Firm (KPMG LLP, PCAOB ID 185)	108
Schedule:
Schedule III — Supplementary Insurance Information	116

		December 31,
		2025				2024
Assets
Investments
Fixed maturities
Held to maturity, at amortized cost (fair value $731,659,323 and $631,568,929; net of allowance for expected credit losses of $1,312,903 and $1,388,240)		$	776,447,347			$	705,713,916
Available for sale, at fair value (amortized cost $650,370,011 and $652,564,965)			640,722,775				617,891,862
Equity securities, at fair value			44,370,358				36,807,810
Short-term investments, at cost, which approximates fair value			38,712,341				24,558,744
Total investments			1,500,252,821				1,384,972,332
Cash			26,785,845				52,925,931
Accrued investment income			10,914,235				10,361,959
Premiums receivable			180,803,918				181,106,519
Reinsurance receivable (net of allowance for expected credit losses of $374,883 and $391,432)			398,582,136				420,741,855
Deferred policy acquisition costs			68,669,982				73,346,967
Deferred tax asset, net			13,287,301				18,769,861
Prepaid reinsurance premiums			171,083,219				176,161,872
Property and equipment, net			2,329,491				2,479,183
Accounts receivable - securities			—				24,924
Federal income taxes recoverable			4,028,034				—
Due from affiliate			3,299,188				8,410,090
Goodwill			5,625,354				5,625,354
Other intangible assets			958,010				958,010
Other			9,918				147,126
Total assets		$	2,386,629,452			$	2,336,031,983
Liabilities and Stockholders’ Equity
Liabilities
Losses and loss expenses		$	1,100,049,937			$	1,120,985,050
Unearned premiums			591,040,451				612,476,068
Accrued expenses			2,220,800				2,916,705
Reinsurance balances payable			3,484,130				4,345,426
Borrowings under lines of credit			35,000,000				35,000,000
Cash dividends declared to stockholders			6,647,482				6,031,078
Federal income taxes payable			—				356,103
Other			7,768,573				8,145,422
Total liabilities			1,746,211,373				1,790,255,852
Stockholders’ Equity
Preferred stock, $.01 par value, authorized 2,000,000 shares; none issued			—				—
Class A common stock, $.01 par value, authorized 50,000,000 shares, issued 34,385,129 and 32,954,347 shares and outstanding 31,382,541 and 29,951,759 shares			343,852				329,544
Class B common stock, $.01 par value, authorized 10,000,000 shares, issued 5,649,240 shares and outstanding 5,576,775 shares			56,492				56,492
Additional paid-in capital			391,811,397				369,679,946
Accumulated other comprehensive loss			(8,295,743	)			(28,200,481	)
Retained earnings			297,728,438				245,136,987
Treasury stock, at cost			(41,226,357	)			(41,226,357	)
Total stockholders’ equity			640,418,079				545,776,131
Total liabilities and stockholders’ equity		$	2,386,629,452			$	2,336,031,983

		Years Ended December 31,
		2025				2024				2023
Statements of Income
Revenues
Net premiums earned (includes affiliated reinsurance of $244,601,249,  $239,521,005 and $237,903,029 - see note 3)		$	921,183,575			$	936,651,480			$	882,071,386
Investment income, net of investment expenses			52,626,715				44,918,162				40,853,215
Installment payment fees			3,282,581				2,740,505				894,137
Lease income			302,109				313,831				346,439
Net investment gains (includes ($5,224,178), ($174,302) and ($2,242,190) accumulated other comprehensive income reclassification)			619,342				4,981,072				3,172,807
Total revenues			978,014,322				989,605,050				927,337,984
Expenses
Net losses and loss expenses (includes affiliated reinsurance of $140,294,717, $136,662,558 and $150,198,479 - see note 3)			564,332,256				604,117,716				609,177,699
Amortization of deferred policy acquisition costs			152,783,000				160,311,000				154,214,000
Other underwriting expenses			158,384,631				155,253,685				151,747,579
Policyholder dividends			3,010,917				4,073,481				5,313,430
Interest			1,350,601				946,020				619,813
Other, net			559,940				2,564,216				1,201,987
Total expenses			880,421,345				927,266,118				922,274,508
Income before income tax expense			97,592,977				62,338,932				5,063,476
Income tax expense (includes $1,097,077, $36,603 and $470,860 income tax benefit from reclassification items)			18,252,237				11,476,680				637,972
Net income		$	79,340,740			$	50,862,252			$	4,425,504
Basic earnings per common share:
Class A common stock		$	2.22			$	1.53			$	0.14
Class B common stock		$	2.01			$	1.38			$	0.11
Diluted earnings per common share:
Class A common stock		$	2.18			$	1.53			$	0.14
Class B common stock		$	2.01			$	1.38			$	0.11
Statements of Comprehensive Income
Net income		$	79,340,740			$	50,862,252			$	4,425,504
Other comprehensive income, net of tax
Unrealized gain on securities:
Unrealized holding gain arising during the period, net of income tax expense of $4,196,548, $1,207,804 and $1,285,390			15,777,637				4,543,642				4,246,693
Reclassification adjustment for losses included in net income, net of income tax benefit of $1,097,077, $36,603 and $470,860			4,127,101				137,699				1,771,330
Other comprehensive income			19,904,738				4,681,341				6,018,023
Comprehensive income		$	99,245,478			$	55,543,593			$	10,443,527

		Common Stock
		Class A Shares				Class B Shares				Class A Amount				Class B Amount				Additional Paid-In Capital				Accumulated Other Comprehensive Loss				Retained Earnings				Treasury Stock				Total Stockholders’ Equity
Balance, January 1, 2023			30,120,263				5,649,240			$	301,203			$	56,492			$	325,601,647			$	(41,703,747	)		$	240,563,774			$	(41,226,357	)		$	483,593,012
Issuance of common stock (stock compensation plans)			150,426								1,504								2,081,186																2,082,690
Stock-based       compensation			493,866								4,939								7,683,782																7,688,721
Net income																											4,425,504								4,425,504
Cash dividends																											(22,166,694	)							(22,166,694	)
Grant of stock options																			327,863								(327,863	)							—
Cumulative effect of adoption of updated guidance for credit losses at January 1, 2023																											(1,895,902	)							(1,895,902	)
Reclassification of held-to-maturity transfer																							2,803,902				(2,803,902	)							—
Other comprehensive income																							6,018,023												6,018,023
Balance, December 31, 2023			30,764,555				5,649,240			$	307,646			$	56,492			$	335,694,478			$	(32,881,822	)		$	217,794,917			$	(41,226,357	)		$	479,745,354
Issuance of common stock (stock compensation plans)			153,366								1,534								2,006,136																2,007,670
Stock-based       compensation			2,036,426								20,364								31,621,452																31,641,816
Net income																											50,862,252								50,862,252
Cash dividends																											(23,162,302	)							(23,162,302	)
Grant of stock options																			357,880								(357,880	)							—
Other comprehensive income																							4,681,341												4,681,341
Balance, December 31, 2024			32,954,347				5,649,240			$	329,544			$	56,492			$	369,679,946			$	(28,200,481	)		$	245,136,987			$	(41,226,357	)		$	545,776,131
Issuance of common stock (stock compensation plans)			111,028								1,110								1,734,816																1,735,926
Stock-based       compensation			1,319,754								13,198								19,937,803																19,951,001
Net income																											79,340,740								79,340,740
Cash dividends																											(26,290,457	)							(26,290,457	)
Grant of stock options																			458,832								(458,832	)							—
Other comprehensive income																							19,904,738												19,904,738
Balance, December 31, 2025			34,385,129				5,649,240			$	343,852			$	56,492			$	391,811,397			$	(8,295,743	)		$	297,728,438			$	(41,226,357	)		$	640,418,079

		Years Ended December 31,
		2025				2024				2023
Cash Flows from Operating Activities:
Net income		$	79,340,740			$	50,862,252			$	4,425,504
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash items			3,075,115				3,873,161				4,326,446
Net investment gains			(619,342	)			(4,981,072	)			(3,172,807	)
Changes in Assets and Liabilities:
Losses and loss expenses			(20,935,113	)			(5,171,788	)			5,111,080
Unearned premiums			(21,435,617	)			13,064,600				21,758,338
Accrued expenses			(695,905	)			(1,030,269	)			(279,416	)
Premiums receivable			302,601				(1,514,698	)			(5,745,527	)
Deferred policy acquisition costs			4,676,985				1,696,437				(1,873,174	)
Deferred income taxes			188,935				(481,743	)			229,397
Reinsurance receivable			22,159,719				20,689,479				13,959,053
Accrued investment income			(552,276	)			(416,245	)			(1,084,422	)
Amounts due from affiliate			5,110,902				(6,502,563	)			(7,080,816	)
Reinsurance balances payable			(861,296	)			(4,413,550	)			5,263,152
Prepaid reinsurance premiums			5,078,653				(7,437,407	)			(8,133,066	)
Current income taxes			(4,384,137	)			8,458,424				408,576
Other, net			(250,498	)			745,019				511,426
Net adjustments			(9,141,274	)			16,577,785				24,198,240
Net cash provided by operating activities			70,199,466				67,440,037				28,623,744
Cash Flows from Investing Activities:
Purchases of fixed maturities:
Held to maturity			(115,295,761	)			(56,707,019	)			(25,226,609	)
Available for sale			(343,036,018	)			(147,736,805	)			(150,423,864	)
Purchases of equity securities			(2,512,570	)			(8,697,500	)			(5,128,994	)
Sales of fixed maturities:
Available for sale			189,710,482				7,184,635				28,154,556
Maturity of fixed maturities:
Held to maturity			43,456,162				30,548,257				32,923,991
Available for sale			148,552,675				116,612,046				58,277,402
Sales of equity securities			2,145,314				3,010,413				19,745,875
Net (purchases) sales of property and equipment			(425	)			743				(44,701	)
Net (purchases) sales of short-term investments			(14,153,597	)			7,746,664				25,015,703
Net cash used in investing activities			(91,133,738	)			(48,038,566	)			(16,706,641	)
Cash Flows from Financing Activities:
Issuance of common stock			20,468,239				32,433,403				8,645,530
Cash dividends paid			(25,674,053	)			(22,701,216	)			(21,893,692	)
Net cash (used in) provided by financing activities			(5,205,814	)			9,732,187				(13,248,162	)
Net (decrease) increase in cash			(26,140,086	)			29,133,658				(1,331,059	)
Cash at beginning of year			52,925,931				23,792,273				25,123,332
Cash at end of year		$	26,785,845			$	52,925,931			$	23,792,273