Donegal Group - 10-Q quarterly report FY

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 0-15341

Donegal Group Inc.

(Exact name of registrant as specified in its charter)

Delaware		23-2424711
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1195 River Road, P.O. Box 302, Marietta, PA 17547

(Address of principal executive offices) (Zip code)

(717) 426-1931

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether 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 and posted 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 and post 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 Exchange Act. (Check one):

	Large accelerated filer ☐	Accelerated filer ☑	Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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

Title of Each Class	Trading Symbols	Name of Each Exchange on Which Registered

Class A Common Stock, $.01 par value	DGICA	The NASDAQ Global Select Market

Class B Common Stock, $.01 par value	DGICB	The NASDAQ Global Select Market

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 31,472,828 shares of Class A Common Stock, par value $0.01 per share, and 5,576,775 shares of Class B Common Stock, par value $0.01 per share, outstanding on May 1, 2026.

DONEGAL GROUP INC.

INDEX TO FORM 10-Q REPORT

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults upon Senior Securities	32
Item 4.	Mine Safety Disclosure	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures		34

Index

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Donegal Group Inc. and Subsidiaries

Consolidated Balance Sheets

	March 31, 2026			December 31, 2025
	(Unaudited)
Assets
Investments
Fixed maturities
Held to maturity, at amortized cost (net of allowance for expected credit losses of $1,274,490 and $1,312,903)	$	783,951,953		$	776,447,347
Available for sale, at fair value		649,110,503			640,722,775
Equity securities, at fair value		45,105,813			44,370,358
Short-term investments, at cost, which approximates fair value		26,016,894			38,712,341
Total investments		1,504,185,163			1,500,252,821
Cash		35,501,229			26,785,845
Accrued investment income		11,978,051			10,914,235
Premiums receivable		197,327,411			180,803,918
Reinsurance receivable (net of allowance for expected credit losses of $401,773 and $374,883)		418,091,102			398,582,136
Deferred policy acquisition costs		71,995,952			68,669,982
Deferred tax asset, net		14,843,359			13,287,301
Prepaid reinsurance premiums		179,320,225			171,083,219
Property and equipment, net		2,292,226			2,329,491
Federal income taxes recoverable		940,090			4,028,034
Due from affiliate		5,712,446			3,299,188
Goodwill		5,625,354			5,625,354
Other intangible assets		958,010			958,010
Other		9,918			9,918
Total assets	$	2,448,780,536		$	2,386,629,452
Liabilities and Stockholders’ Equity
Liabilities
Losses and loss expenses	$	1,129,814,963		$	1,100,049,937
Unearned premiums		617,210,414			591,040,451
Accrued expenses		2,311,032			2,220,800
Reinsurance balances payable		3,141,996			3,484,130
Borrowings under lines of credit		35,000,000			35,000,000
Cash dividends declared to stockholders		—			6,647,482
Accounts payable - securities		4,350,228			—
Other		7,859,267			7,768,573
Total liabilities		1,799,687,900			1,746,211,373
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 34,440,977 and 34,385,129 shares and outstanding 31,438,389 and 31,382,541 shares		344,410			343,852
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		393,244,272			391,811,397
Accumulated other comprehensive loss		(12,407,401	)		(8,295,743	)
Retained earnings		309,081,220			297,728,438
Treasury stock, at cost		(41,226,357	)		(41,226,357	)
Total stockholders’ equity		649,092,636			640,418,079
Total liabilities and stockholders’ equity	$	2,448,780,536		$	2,386,629,452

See accompanying notes to consolidated financial statements.

Index

Donegal Group Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended March 31,
	2026			2025
Revenues:
Net premiums earned	$	221,357,442		$	232,701,889
Investment income, net of investment expenses		14,287,065			11,983,574
Net investment losses (includes $70,854 and $57,103 accumulated other comprehensive income reclassifications)		(479,224	)		(470,861	)
Lease income		74,218			76,827
Installment payment fees		756,733			882,195
Total revenues		235,996,234			245,173,624
Expenses:
Net losses and loss expenses		141,999,594			132,033,147
Amortization of deferred policy acquisition costs		36,297,000			39,231,000
Other underwriting expenses		42,014,492			41,194,994
Policyholder dividends		651,707			759,389
Interest		333,025			333,045
Other expenses, net		577,453			461,100
Total expenses		221,873,271			214,012,675
Income before income tax expense		14,122,963			31,160,949
Income tax expense (includes $14,879 and $11,992 income tax expense from reclassification items)		2,612,359			5,955,775
Net income	$	11,510,604		$	25,205,174
Net income per share:
Class A common stock - basic	$	0.32		$	0.72
Class A common stock - diluted	$	0.31		$	0.71
Class B common stock - basic and diluted	$	0.29		$	0.65

Donegal Group Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended March 31,
	2026			2025
Net income	$	11,510,604		$	25,205,174
Other comprehensive (loss) income, net of tax
Unrealized (loss) income on securities:
Unrealized holding (loss) income during the period, net of income tax (benefit) expense of ($1,078,094) and $1,800,510		(4,055,683	)		6,773,356
Reclassification adjustment for gains included in net income, net of income tax expense of $14,879 and $11,992		(55,975	)		(45,111	)
Other comprehensive (loss) income		(4,111,658	)		6,728,245
Comprehensive income	$	7,398,946		$	31,933,419

See accompanying notes to consolidated financial statements.

Index

Donegal Group Inc. and Subsidiaries

Consolidated Statement of Stockholders’ Equity

(Unaudited)

Three Months Ended March 31, 2026

	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, 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
Issuance of common stock (stock compensation plans)		39,583		—		395		—		723,690		—			—			—			724,085
Share-based compensation		16,265		—		163		—		559,026		—			—			—			559,189
Net income		—		—		—		—		—		—			11,510,604			—			11,510,604
Cash dividends declared		—		—		—		—		—		—			(7,663	)		—			(7,663	)
Grant of stock options		—		—		—		—		150,159		—			(150,159	)		—			—
Other comprehensive loss		—		—		—		—		—		(4,111,658	)		—			—			(4,111,658	)
Balance, March 31, 2026		34,440,977		5,649,240	$	344,410	$	56,492	$	393,244,272	$	(12,407,401	)	$	309,081,220		$	(41,226,357	)	$	649,092,636

Donegal Group Inc. and Subsidiaries

Consolidated Statement of Stockholders’ Equity

(Unaudited)

Three Months Ended March 31, 2025

	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, 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)		36,500		—		365		—		444,142		—			—			—			444,507
Share-based compensation		438,380		—		4,384		—		6,571,130		—			—			—			6,575,514
Net income		—		—		—		—		—		—			25,205,174			—			25,205,174
Cash dividends declared		—		—		—		—		—		—			(6,556	)		—			(6,556	)
Grant of stock options		—		—		—		—		168,699		—			(168,699	)		—			—
Other comprehensive income		—		—		—		—		—		6,728,245			—			—			6,728,245
Balance, March 31, 2025		33,429,227		5,649,240	$	334,293	$	56,492	$	376,863,917	$	(21,472,236	)	$	270,166,906		$	(41,226,357	)	$	584,723,015

See accompanying notes to consolidated financial statements.

Index

Donegal Group Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2026			2025
Cash Flows from Operating Activities:
Net income	$	11,510,604		$	25,205,174
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash items		857,401			1,020,039
Net investment losses		479,224			470,861
Changes in assets and liabilities:
Losses and loss expenses		29,765,026			(28,361,486	)
Unearned premiums		26,169,963			21,088,303
Premiums receivable		(16,523,493	)		(12,868,607	)
Deferred acquisition costs		(3,325,970	)		(2,847,365	)
Deferred income taxes		(463,085	)		(88,129	)
Reinsurance receivable		(19,508,966	)		17,360,240
Prepaid reinsurance premiums		(8,237,006	)		(6,697,810	)
Accrued investment income		(1,063,816	)		(746,169	)
Due from affiliate		(2,413,258	)		5,511,873
Reinsurance balances payable		(342,134	)		(515,651	)
Current income taxes		3,087,944			6,108,965
Accrued expenses		90,232			61,685
Other, net		90,649			1,047,840
Net adjustments		8,662,711			544,589
Net cash provided by operating activities		20,173,315			25,749,763
Cash Flows from Investing Activities:
Purchases of fixed maturities, held to maturity		(12,142,867	)		(8,795,740	)
Purchases of fixed maturities, available for sale		(43,893,780	)		(37,872,046	)
Purchases of equity securities, available for sale		(1,322,139	)		(2,502,170	)
Maturity of fixed maturities:
Held to maturity		9,050,096			7,057,175
Available for sale		30,199,197			23,253,617
Net sales (purchases) of property and equipment		325			(100	)
Net sales of short-term investments		12,695,447			3,936,913
Net cash used in investing activities		(5,413,721	)		(14,922,351	)
Cash Flows from Financing Activities:
Cash dividends paid		(6,655,145	)		(6,037,634	)
Issuance of common stock		610,935			6,599,404
Net cash (used in) provided by financing activities		(6,044,210	)		561,770
Net increase in cash		8,715,384			11,389,182
Cash at beginning of period		26,785,845			52,925,931
Cash at end of period	$	35,501,229		$	64,315,113

Cash paid during period - Interest	$	333,025		$	333,025
Net cash paid (received) during period - Taxes	$	50,050		$	(56,261	)

See accompanying notes to consolidated financial statements.

Index

DONEGAL GROUP INC. AND SUBSIDIARIES

(Unaudited)

Notes to Consolidated Financial Statements

1 -	Organization

Donegal Mutual Insurance Company (“Donegal Mutual”) organized us as an insurance holding company on August 26, 1986. Our insurance subsidiaries are Atlantic States Insurance Company (“Atlantic States”), Michigan Insurance Company (“MICO”), the Peninsula Insurance Group (“Peninsula”), which consists of The Peninsula Insurance Company and its wholly owned subsidiary Peninsula Indemnity Company, and Southern Insurance Company of Virginia (“Southern”). Our insurance subsidiaries and their affiliates write property and casualty insurance exclusively through a network of independent insurance agents in certain Mid-Atlantic, Midwestern, Southern and Southwestern states.

At March 31, 2026, we had three segments: our investment function, our commercial lines of insurance and our personal lines of insurance. 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.

At March 31, 2026, Donegal Mutual held approximately 44% of our outstanding Class A common stock and approximately 85% of our outstanding Class B common stock. This ownership provides Donegal Mutual with approximately 70% of the total voting power of our common stock. Our insurance subsidiaries and Donegal Mutual have interrelated operations due to a pooling agreement and other intercompany agreements and transactions. While each company maintains its separate corporate existence, our insurance subsidiaries and Donegal Mutual conduct business together as the Donegal Insurance Group. As such, Donegal Mutual and our insurance subsidiaries share the same business philosophy, the same management, the same employees and the same facilities and offer the same types of insurance products.

Atlantic States, our largest subsidiary, participates in a proportional reinsurance agreement (the “pooling agreement”) with Donegal Mutual. 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.

In addition, Donegal Mutual has 100% quota-share reinsurance agreements with Mountain States Commercial Insurance Company, Mountain States Indemnity Company and Southern Mutual Insurance Company. Donegal Mutual places its assumed business from these companies into the underwriting pool.

The same executive management and underwriting personnel administer products, classes of business underwritten, pricing practices and underwriting standards of Donegal Mutual and our insurance subsidiaries. In addition, as the Donegal Insurance Group, Donegal Mutual and our insurance subsidiaries share a combined business plan to achieve market penetration and underwriting profitability objectives. The products our insurance subsidiaries and Donegal Mutual market are generally complementary, thereby allowing the Donegal Insurance Group to offer a broader range of products to 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 of Donegal Mutual and our insurance subsidiaries generally allow the individual companies to manage certain risk segments through variations in coverage, terms and pricing. Therefore, 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. The business Atlantic States derives from the underwriting pool represents a significant percentage of our total consolidated revenues.

Index

In September 2025, Donegal Mutual and Southern entered into a renewal rights agreement with an affiliate of a farm-focused Pennsylvania-based mutual insurance group to provide a continuation option for their farm policyholders when they begin to non-renew all farm policies as they expire beginning in the second quarter of 2026. Donegal Mutual and Southern determined that the costs required to modernize their legacy farm product and systems were higher than the projected return on investment for this non-core line of business that represents approximately $6 million in premiums. None of our other insurance subsidiaries offered farm policies. We currently include farm policies within other commercial lines in our line of business reporting.

2 -	Basis of Presentation

Our financial information for the interim periods included in this Form 10-Q Report is unaudited; however, our financial information we include in this Form 10-Q Report reflects all adjustments, consisting only of normal recurring adjustments that, in the opinion of our management, are necessary for a fair presentation of our financial position, results of operations and cash flows for those interim periods. Our results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results of operations we expect for the year ending December 31, 2026.

We recommend you read the interim financial statements we include in this Form 10-Q Report in conjunction with the financial statements and the notes to our financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2025 that we filed with the Securities and Exchange Commission (“SEC”) on March 6, 2026.

3 -	Net Income Per Share

We have two classes of common stock, which we refer to as our Class A common stock and our Class B common stock. Our certificate of incorporation provides that whenever our board of directors declares a dividend on our Class B common stock, our board of directors shall simultaneously declare a dividend on our Class A common stock that is payable to the holders of our Class A common stock at the same time and as of the same record date at a rate that is at least 10% greater than the rate at which our board of directors declared a dividend on our Class B common stock. Accordingly, we use the two-class method to compute our net income per share. The two-class method is an earnings allocation formula that determines net income per share separately for each class of common stock based on dividends we have declared and an allocation of our remaining undistributed net income using a participation percentage that reflects the dividend rights of each class. The table below presents for the periods indicated a reconciliation of the numerators and denominators we used to compute basic and diluted net income per share for our Class A common stock and our Class B common stock:

Index

			Three Months Ended March 31,
	2026				2025
	Class A		Class B		Class A		Class B
	(in thousands, except per share data)
Basic net income per share:
Numerator:
Allocation of net income	$	9,913	$	1,598	$	21,575	$	3,630
Denominator:
Weighted-average shares outstanding		31,428		5,577		30,121		5,577
Basic net income per share	$	0.32	$	0.29	$	0.72	$	0.65

Diluted net income per share:
Numerator:
Allocation of net income	$	9,913	$	1,598	$	21,575	$	3,630
Denominator:
Number of shares used in basic computation		31,428		5,577		30,121		5,577
Weighted-average shares effect of dilutive securities:
Director and employee stock options		386		—		309		—
Unvested restricted stock units		114		—		—		—
Number of shares used in diluted computation		31,928		5,577		30,430		5,577
Diluted net income per share	$	0.31	$	0.29	$	0.71	$	0.65

We did not exclude any outstanding options to purchase shares of Class A common stock in our computation of diluted net income per share because the exercise price of the options did not exceed the average market price of our Class A common stock during the applicable periods.

4 -	Reinsurance

Atlantic States and Donegal Mutual have participated in a pooling agreement since 1986 under which they pool substantially all of their respective premiums, losses and loss expenses, and Atlantic States and Donegal Mutual then share the underwriting results of the pool in accordance with the terms of the pooling agreement. Atlantic States has an 80% share of the results of the pool, and Donegal Mutual has a 20% share of the results of the pool.

Our insurance subsidiaries and Donegal Mutual participate in a consolidated third-party reinsurance program. The coverage and parameters of the program are common to all of our insurance subsidiaries and Donegal Mutual. The program utilizes several different reinsurers, all of which 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- rating from A.M. Best. The following information describes the external reinsurance Donegal Mutual and our insurance subsidiaries have in place for 2026:

•

for property insurance, excess of loss reinsurance that provides for coverage of $36.0 million per loss over a set retention of $4.0 million and catastrophe reinsurance, under which they recover 100% of an accumulation of many losses resulting from a single event, including natural disasters, over a set retention of $25.0 million up to aggregate losses of $200.0 million per occurrence;

Index

•

for liability insurance, excess of loss reinsurance that provides for coverage of $69.0 million per occurrence over a set retention of $6.0 million; and

•

for workers’ compensation insurance, excess of loss reinsurance that provides for coverage of $17.0 million on any one life over a set retention of $3.0 million.

In addition to the pooling agreement and third-party reinsurance, our insurance subsidiaries have a catastrophe reinsurance agreement with Donegal Mutual, under which each of our insurance subsidiaries recovers 100% of an accumulation of multiple losses resulting from a single event, including natural disasters, over a set retention of $3.0 million up to aggregate losses of $22.0 million per occurrence. The agreement also provides additional coverage for an accumulation of losses from a single event including a combination of our insurance subsidiaries over a combined retention of $6.0 million. The purpose of the 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.

Southern, MICO and The Peninsula Insurance Company also have a liability reinsurance agreement with Donegal Mutual, under which each insurance subsidiary recovers up to $3.0 million per occurrence over a set retention of $3.0 million.

Our insurance subsidiaries and Donegal Mutual also purchase facultative reinsurance to cover certain exposures, including property exposures that exceeded the limits provided by their respective treaty reinsurance.

In order to write automobile insurance in the state of Michigan, Atlantic States, MICO and The Peninsula Insurance Company are required to be members of the Michigan Catastrophic Claims Association (“MCCA”). The MCCA provides reinsurance to Atlantic States, MICO and The Peninsula Insurance Company for personal automobile and commercial automobile personal injury claims in the state of Michigan over a set retention.

We report reinsurance receivable net of an allowance for expected credit losses. We base the allowance upon our ongoing review of amounts outstanding, historical loss data, changes in reinsurer credit standing and other relevant factors. We use a probability-of-default methodology, which reflects current and forecasted economic conditions, to estimate the allowance for expected credit losses.

5 -	Investments

The amortized cost and estimated fair values of our fixed maturities at March 31, 2026 were as follows:

	Carrying Value		Allowance for Credit Losses		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	73,787	$	44	$	73,831	$	49	$	5,123	$	68,757
Obligations of states and political subdivisions		447,460		359		447,819		2,381		44,403		405,797
Corporate securities		255,159		867		256,026		1,040		9,305		247,761
Mortgage-backed securities		7,546		4		7,550		47		142		7,455
Totals	$	783,952	$	1,274	$	785,226	$	3,517	$	58,973	$	729,770

Index

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	24,355	$	43	$	903	$	23,495
Obligations of states and political subdivisions		52,679		383		2,593		50,469
Corporate securities		141,280		301		2,550		139,031
Mortgage-backed securities		445,694		1,749		11,327		436,116
Totals	$	664,008	$	2,476	$	17,373	$	649,111

At March 31, 2026, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $294.5 million and an amortized cost of $325.0 million. Our holdings at March 31, 2026 also included special revenue bonds with an aggregate fair value of $161.8 million and an amortized cost of $175.5 million. With respect to both categories of those bonds, we held no securities of any issuer that comprised more than 10% of our holdings of either bond category at March 31, 2026. Education bonds and water and sewer utility bonds represented 41% and 35%, respectively, of our total investments in special revenue bonds based on the carrying values of these investments at March 31, 2026. Many of the issuers of the special revenue bonds we held at March 31, 2026 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held are similar to general obligation bonds.

The amortized cost and estimated fair values of our fixed maturities at December 31, 2025 were as follows:

	Carrying Value		Allowance for Credit Losses		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	79,243	$	47	$	79,290	$	84	$	4,864	$	74,510
Obligations of states and political subdivisions		436,802		357		437,159		3,221		39,248		401,132
Corporate securities		252,098		904		253,002		2,211		7,423		247,790
Mortgage-backed securities		8,304		5		8,309		66		148		8,227
Totals	$	776,447	$	1,313	$	777,760	$	5,582	$	51,683	$	731,659

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	25,057	$	107	$	835	$	24,329
Obligations of states and political subdivisions		49,982		505		1,936		48,551
Corporate securities		132,203		700		1,978		130,925
Mortgage-backed securities		443,128		3,091		9,301		436,918
Totals	$	650,370	$	4,403	$	14,050	$	640,723

At December 31, 2025, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $291.7 million and an amortized cost of $317.5 million. Our holdings also included special revenue bonds with an aggregate fair value of $158.0 million and an amortized cost of $169.6 million. With respect to both categories of bonds, we held no securities of any issuer that comprised more than 10% of that category at December 31, 2025. Education bonds and water and sewer utility bonds represented 42% and 32%, respectively, of our total investments in special revenue bonds based on their carrying values at December 31, 2025. Many of the issuers of the special revenue bonds we held at December 31, 2025 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held are similar to general obligation bonds.

Index

We have segregated within accumulated other comprehensive loss the net unrealized losses of $15.1 million arising prior to the November 30, 2013 reclassification date for fixed maturities reclassified from available for sale to held to maturity. We are amortizing this balance over the remaining life of the related securities as an adjustment of yield in a manner consistent with the accretion of discount on the same fixed maturities. We recorded amortization of $44,511 and $45,199 in other comprehensive (loss) income during the three months ended March 31, 2026 and 2025, respectively. At March 31, 2026 and December 31, 2025, net unrealized losses of $809,195 and $853,706, respectively, remained within accumulated other comprehensive loss.

We show below the amortized cost and estimated fair value of our fixed maturities at March 31, 2026 by contractual maturity. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Estimated Fair Value
	(in thousands)
Held to maturity
Due in one year or less	$	7,075	$	7,047
Due after one year through five years		223,356		212,535
Due after five years through ten years		224,875		212,680
Due after ten years		322,370		290,053
Mortgage-backed securities		7,550		7,455
Total held to maturity	$	785,226	$	729,770

Available for sale
Due in one year or less	$	13,280	$	13,254
Due after one year through five years		71,676		69,981
Due after five years through ten years		80,378		78,148
Due after ten years		52,980		51,612
Mortgage-backed securities		445,694		436,116
Total available for sale	$	664,008	$	649,111

The cost and estimated fair values of our equity securities at March 31, 2026 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	28,560	$	16,738	$	192	$	45,106

The cost and estimated fair values of our equity securities at December 31, 2025 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	27,238	$	17,193	$	61	$	44,370

Index

We present below gross gains and losses from investments and the change in the difference between fair value and cost of investments:

	Three Months Ended March 31,
	2026			2025
	(in thousands)
Gross realized gains:
Fixed maturities	$	71		$	54
Equity securities		—			—
		71			54
Gross realized losses:
Fixed maturities		2			—
Equity securities		—			—
		2			—
Net realized gains		69			54
Gross unrealized gains on equity securities		889			573
Gross unrealized losses on equity securities		(1,476	)		(1,135	)
Fixed maturities - credit impairment charges		39			37
Net investment losses	$	(479	)	$	(471	)

We held fixed maturities with unrealized losses representing declines that we considered temporary at March 31, 2026 as follows:

	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	13,581	$	86	$	70,266	$	5,940
Obligations of states and political subdivisions		72,793		1,975		281,046		45,021
Corporate securities		110,730		1,833		175,475		10,022
Mortgage-backed securities		177,508		2,237		87,097		9,232
Totals	$	374,612	$	6,131	$	613,884	$	70,215

We held fixed maturities with unrealized losses representing declines that we considered temporary at December 31, 2025 as follows:

	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	9,503	$	46	$	76,506	$	5,654
Obligations of states and political subdivisions		34,778		697		287,717		40,487
Corporate securities		47,139		406		183,026		8,995
Mortgage-backed securities		102,104		540		88,887		8,908
Totals	$	193,524	$	1,689	$	636,136	$	64,044

Index

We make estimates concerning the valuation of our investments and, as applicable, the recognition of declines in the value of our investments. For equity securities, we measure investments at fair value, and we recognize changes in fair value in our results of operations. With respect to an available-for-sale debt security that is in an unrealized loss position, we first assess if we intend to sell the debt security. If we determine we intend to sell the debt security, we recognize the impairment loss in our results of operations. If we do not intend to sell the debt security, we determine whether it is more likely than not that we will be required to sell the debt security prior to recovery. If we determine it is more likely than not that we will be required to sell the debt security prior to recovery, we recognize the impairment loss in our results of operations. If we determine it is more likely than not that we will not be required to sell the debt security prior to recovery, we then evaluate whether a credit loss has occurred with respect to that security. We determine whether a credit loss has occurred by comparing the amortized cost of the debt security to the present value of the cash flows we expect to collect. If we expect a cash flow shortfall, we consider that a credit loss has occurred. If we determine that a credit loss has occurred, we establish an allowance for credit loss. We then recognize the amount of the allowance in our results of operations, and we recognize the remaining portion of the impairment loss in our other comprehensive income, net of applicable taxes. We regularly review the allowance for credit losses and recognize changes in the allowance in our results of operations. In addition, we may write down securities in an unrealized loss position based on a number of other factors, including when the fair value of an investment is significantly below its cost, when the financial condition of the issuer of a security has deteriorated, the occurrence of industry, issuer or geographic events that have negatively impacted the value of a security and rating agency downgrades. For held-to-maturity debt securities, we make estimates concerning expected credit losses at an aggregated level rather than monitoring individual debt securities for credit losses. We establish an allowance for expected credit losses based on an ongoing review of securities held, historical loss data, changes in issuer credit standing and other relevant factors. We utilize a probability-of-default methodology, which reflects current and forecasted economic conditions, to estimate the allowance for expected credit losses and recognize changes to the allowance in our results of operations. We held 715 debt securities that were in an unrealized loss position at March 31, 2026. Based upon our analysis of general market conditions and underlying factors impacting these debt securities, we considered these declines in value to be temporary.

We amortize premiums and discounts on debt securities over the life of the security as an adjustment to yield using the effective interest method. We compute realized investment gains and losses using the specific identification method.

We amortize premiums and discounts on mortgage-backed debt securities using anticipated prepayments.

Index

6 -	Segment Information

We have three reportable segments, which consist of our investment function, our commercial lines of insurance and our personal lines of insurance. Using independent agents, our insurance subsidiaries market commercial lines of insurance to small and medium-sized businesses and personal lines of insurance to individuals.

Our chief operating decision maker, who is our Chief Executive Officer, evaluates the performance of the commercial lines and personal lines primarily based upon our insurance subsidiaries’ underwriting results as determined under statutory accounting principles (“SAP”). This segmentation is consistent with the segmentation we utilize to manage our business. We make resource allocation decisions based upon historical underwriting results as well as perceived opportunities for future profitable growth within each segment.

We operate only in the United States, and no single customer or agent provides 10 percent or more of our revenues.

Financial data by segment is as follows:

	Three Months Ended March 31, 2026
	Investments			Commercial Lines			Personal Lines		Total
	(in thousands)
Revenues:
Net premiums earned	$	—		$	138,963		$	82,394	$	221,357
Net investment income		14,287			—			—		14,287
Investment losses		(479	)		—			—		(479	)
Total segment revenues		13,808			138,963			82,394		235,165
Other										831
Total revenues									$	235,996
Segment expenses:
Net losses and loss expenses		—			95,358			46,109		141,467
Other underwriting expenses		—			58,478			22,897		81,375
Policyholder dividends		—			652			—		652
Total segment expenses		—			154,488			69,006		223,494
SAP underwriting (loss) income		—			(15,525	)		13,388		(2,137	)
GAAP adjustments										2,532
GAAP underwriting income										395
Net investment income										14,287
Investment losses										(479	)
Other										(80	)
Income before income tax expense									$	14,123

Index

	Three Months Ended March 31, 2025
	Investments			Commercial Lines			Personal Lines		Total
	(in thousands)
Revenues:
Net premiums earned	$	—		$	136,216		$	96,486	$	232,702
Net investment income		11,984			—			—		11,984
Investment losses		(471	)		—			—		(471	)
Total segment revenues		11,513			136,216			96,486		244,215
Other										959
Total revenues									$	245,174
Segment expenses:
Net losses and loss expenses		—			81,321			50,708		132,029
Other underwriting expenses		—			55,514			27,485		82,999
Policyholder dividends		—			759			—		759
Total segment expenses		—			137,594			78,193		215,787
SAP underwriting (loss) income		—			(1,378	)		18,293		16,915
GAAP adjustments										2,568
GAAP underwriting income										19,483
Net investment income										11,984
Investment losses										(471	)
Other										165
Income before income tax expense									$	31,161

7 -	Borrowings

Lines of Credit

In August 2020, we entered into a credit agreement with Manufacturers and Traders Trust Company (“M&T”) that related to a $20.0 million unsecured demand line of credit. The line of credit has no expiration date, no annual fees and no covenants. At March 31, 2026, we had no outstanding borrowings from M&T and had the ability to borrow up to $20.0 million at an interest rate equal to the then-current Term SOFR rate plus 2.11%.

Atlantic States is a member of the FHLB of Pittsburgh. Through its membership, Atlantic States has the ability to issue debt to the FHLB of Pittsburgh in exchange for cash advances. Atlantic States has a fixed-rate cash advance of $35.0 million that was outstanding at March 31, 2026. The cash advance carries a fixed interest rate of 3.806% and is due in September 2026. The table below presents the amount of FHLB of Pittsburgh stock Atlantic States purchased, collateral pledged and assets related to Atlantic States’ membership in the FHLB of Pittsburgh at March 31, 2026.

FHLB of Pittsburgh stock purchased and owned	$	1,615,400
Collateral pledged, at par (carrying value $41,276,943)		43,069,261
Borrowing capacity currently available		4,005,219

Index

8 -	Share–Based Compensation

We measure all share-based payments to employees, including grants of stock options, and use a fair-value-based method for the recording of related compensation expense in our results of operations. In determining the expense we record for stock options granted to directors and employees of our subsidiaries and affiliates, we estimate the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The significant assumptions we utilize in applying the Black-Scholes option pricing model are the risk-free interest rate, the expected term, the dividend yield and the expected volatility.

We historically granted stock options on an annual basis at our December board meeting, which occurs in the middle of December. At its December 18, 2025 board meeting, our board of directors approved the recommendation of the compensation committee to change the form of equity awards we issue on an annual basis from stock options to restricted stock units and to delay issuance until the first day of the next calendar year. Accordingly, on January 1, 2026, we granted 115,500 restricted stock units to our officers and the officers of Donegal Mutual that will vest in three equal annual installments. We plan to grant restricted stock units on January 1 of each year. This practice will allow vesting under each grant to occur on the same date and for the value of the shares our officers and the officers of Donegal Mutual receive upon vesting of multiple grants to be calculated consistently using the closing price of Class A common stock on the last trading day of the preceding year.

We recorded compensation expense related to our stock compensation plans of $326,859 and $296,936 for the three months ended March 31, 2026 and 2025, respectively, with a corresponding income tax benefit of $68,640 and $62,357, respectively. At March 31, 2026, we had $2.1 million of unrecognized compensation expense related to nonvested share-based compensation granted under our stock compensation plans that we expect to recognize over a weighted average period of approximately 2.3 years.

We received cash from option exercises under our stock compensation plans during the three months ended March 31, 2026 and 2025 of $232,330 and $6.3 million, respectively. We realized actual tax benefits for the tax deductions related to those option exercises of $13,100 and $300,981 for the three months ended March 31, 2026 and 2025, respectively.

9 -	Fair Value Measurements

We account for financial assets using a framework that establishes a hierarchy that ranks the quality and reliability of the inputs, or assumptions, we use in the determination of fair value, and we classify financial assets and liabilities carried at fair value in one of the following three categories:

Level 1 – quoted prices in active markets for identical assets and liabilities;

Level 2 – directly or indirectly observable inputs other than Level 1 quoted prices; and

Level 3 – unobservable inputs not corroborated by market data.

For investments that have quoted market prices in active markets, we use the quoted market price as fair value and include these investments in Level 1 of the fair value hierarchy. We classify publicly-traded equity securities as Level 1. When quoted market prices in active markets are not available, we base fair values on quoted market prices of comparable instruments or price estimates we obtain from independent pricing services and include these investments in Level 2 of the fair value hierarchy. We classify our fixed maturity investments and non-publicly traded equity securities as Level 2. Our fixed maturity investments consist of U.S. Treasury securities and obligations of U.S. government corporations and agencies, obligations of states and political subdivisions, corporate securities and mortgage-backed securities.

Index

We present our investments in available-for-sale fixed maturity and equity securities at estimated fair value. The estimated fair value of a security may differ from the amount that could be realized if we sold the security in a forced transaction. In addition, the valuation of fixed maturity investments is more subjective when markets are less liquid, increasing the potential that the estimated fair value does not reflect the price at which an actual transaction would occur. We utilize nationally recognized independent pricing services to estimate fair values or obtain market quotations for substantially all of our fixed maturity and equity investments. We generally obtain two prices per security. These pricing services utilize market quotations for fixed maturity and equity securities that have quoted prices in active markets. For fixed maturity securities that generally do not trade on a daily basis, the pricing services prepare estimates of fair value measurements based predominantly on observable market inputs. The pricing services do not use broker quotes in determining the fair values of our investments. Our investment personnel review the estimates of fair value the pricing services provide to verify that the estimates we obtain from the pricing services are representative of fair values based upon our investment personnel’s general knowledge of the market, their research findings related to unusual fluctuations in value and their comparison of such values to execution prices for similar securities. Our investment personnel monitor the market and are familiar with current trading ranges for similar securities and the pricing of specific investments. Our investment personnel review all pricing estimates that we receive from the pricing services against their expectations with respect to pricing based on fair market curves, security ratings, coupon rates, security types and recent trading activity. Our investment personnel periodically review documentation with respect to the pricing services’ pricing methodology that they obtain to determine if the primary pricing sources, market inputs and pricing frequency for various security types are reasonable. At March 31, 2026, we received two estimates per security from the pricing services, and we priced substantially all of our Level 1 and Level 2 investments using those prices. In our review of the estimates the pricing services provided at March 31, 2026, we did not identify any material discrepancies, and we did not make any adjustments to the estimates the pricing services provided.

We present our cash and short-term investments at estimated fair value. We classify these items as Level 1.

The carrying values we report in our balance sheet for premium receivables, reinsurance receivables related to paid losses and loss expenses and reinsurance balances payable approximate their fair values. The carrying amounts we report in our balance sheets for our borrowings under lines of credit approximate their fair values. We classify these items as Level 3.

We evaluate our assets and liabilities to determine the appropriate level at which to classify them for each reporting period. Based on our review of the methodology and summary of inputs the pricing services use, we have concluded that our Level 1 and Level 2 investments were classified properly at March 31, 2026 and December 31, 2025.

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at March 31, 2026:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
			(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	23,495	$	—	$	23,495	$	—
Obligations of states and political subdivisions		50,469		—		50,469		—
Corporate securities		139,031		—		139,031		—
Mortgage-backed securities		436,116		—		436,116		—
Equity securities		45,106		42,969		2,137		—
Total investments in the fair value hierarchy	$	694,217	$	42,969	$	651,248	$	—

Index

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at December 31, 2025:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
			(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	24,329	$	—	$	24,329	$	—
Obligations of states and political subdivisions		48,551		—		48,551		—
Corporate securities		130,925		—		130,925		—
Mortgage-backed securities		436,918		—		436,918		—
Equity securities		44,370		42,233		2,137		—
Total investments in the fair value hierarchy	$	685,093	$	42,233	$	642,860	$	—

10 -	Income Taxes

At March 31, 2026 and December 31, 2025, respectively, we had no material unrecognized tax benefits or accrued interest and penalties. In 2019, the Internal Revenue Service (“IRS”) began a federal income tax audit of our consolidated tax returns for tax years 2016 to 2018. No material issues have been raised and no adjustments have been proposed as a result of this ongoing audit. We provide a valuation allowance when we believe it is more likely than not that we will not realize some portion of our tax assets. We established a valuation allowance of $7.5 million for our net state operating loss carryforward at March 31, 2026 and December 31, 2025, which will expire between 2026 and 2045. We have determined that we are not required to establish a valuation allowance for our other deferred tax assets of $33.8 million and $31.8 million at March 31, 2026 and December 31, 2025, respectively, because it is more likely than not that we will realize these deferred tax assets through reversals of existing temporary differences, future taxable income and the implementation of tax planning strategies.

On July 4, 2025, a budget reconciliation package referred to as the One Big Beautiful Bill Act of 2025 (the “OBBBA”) was enacted. The tax provisions included within the OBBBA did not have a material impact on our financial position, results of operations or cash flows.

11 -	Liabilities for Losses and Loss Expenses

The establishment of appropriate liabilities for losses and loss expenses is an inherently uncertain process, and we can provide no assurance that our insurance subsidiaries’ ultimate liabilities for losses and loss expenses will not exceed their loss and loss expense reserves and have an adverse effect on our results of operations and financial condition. 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. 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’ estimate of their liabilities for losses and loss expenses generally reflect actual payments and their evaluation of information received subsequent to the prior reporting period.

Index

We summarize activity in our insurance subsidiaries’ liabilities for losses and loss expenses as follows:

	Three Months Ended March 31,
	2026			2025
	(in thousands)
Balance at January 1	$	1,100,050		$	1,120,985
Less reinsurance recoverable		(394,854	)		(416,621	)
Net balance at January 1		705,196			704,364
Incurred related to:
Current year		147,724			142,546
Prior years		(5,724	)		(10,513	)
Total incurred		142,000			132,033
Paid related to:
Current year		41,722			42,926
Prior years		89,371			97,274
Total paid		131,093			140,200
Net balance at end of period		716,103			696,197
Plus reinsurance recoverable		413,712			396,427
Balance at end of period	$	1,129,815		$	1,092,624

Our insurance subsidiaries recognized a decrease in their liabilities for losses and loss expenses of prior years of $5.7 million and $10.5 million for the three months ended March 31, 2026 and 2025, 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 2026 development represented 0.8% of the December 31, 2025 net carried reserves and resulted from lower-than-expected loss emergence or severity primarily in the commercial automobile and personal automobile lines of business, offset partially by unfavorable development in the commercial multi-peril and other commercial lines of business that we attribute to higher-than-anticipated case reserve development. The majority of the 2026 development related to decreases in the liabilities for losses and loss expenses of prior years for MICO and Atlantic States. The 2025 development represented 1.5% of the December 31, 2024 net carried reserves and resulted from lower-than-expected loss emergence or severity primarily in the commercial automobile, commercial multi-peril, and personal automobile lines of business. The majority of the 2025 development related to decreases in the liabilities for losses and loss expenses of prior years for Atlantic States and MICO.

Short-duration contracts are contracts for which our insurance subsidiaries receive premiums that they recognize as revenue over the period of the contract in proportion to the amount of insurance protection our insurance subsidiaries provide. Our insurance subsidiaries consider the policies they issue to be short-duration contracts. We consider the material lines of business of our insurance subsidiaries to be personal automobile, homeowners, commercial automobile, commercial multi-peril and workers’ compensation.

Our insurance subsidiaries determine incurred but not reported (“IBNR”) reserves by subtracting the cumulative loss and loss expense amounts our insurance subsidiaries have paid and the case reserves our insurance subsidiaries have established at the balance sheet date from their actuaries’ estimate of the ultimate cost of losses and loss expenses. Accordingly, the IBNR reserves of our insurance subsidiaries include their actuaries’ projections of the cost of unreported claims as well as their actuaries’ projected development of case reserves on known claims and reopened claims. Our insurance subsidiaries’ methodology for estimating IBNR reserves has been in place for many years, and their actuaries made no significant changes to that methodology during the three months ended March 31, 2026.

Index

The actuaries for our insurance subsidiaries generally prepare an initial estimate for ultimate losses and loss expenses for the current accident year by multiplying earned premium by an “a priori,” or expected, loss ratio for each line of business our insurance subsidiaries write. Expected loss ratios represent the actuaries’ expectation of losses at the time our insurance subsidiaries price and write their policies and before the emergence of any actual claims experience. The actuaries determine an expected loss ratio by analyzing historical experience and adjusting for loss cost trends, loss frequency and severity trends, premium rate level changes, reported and paid loss emergence patterns and other known or observed factors.

The actuaries use a variety of actuarial methods to estimate the ultimate cost of losses and loss expenses. These methods include paid loss development, incurred loss development and the Bornhuetter-Ferguson method from which the actuaries select loss development factor assumptions. The actuaries base their selection of a point estimate on a judgmental weighting of the estimates each of these methods produce.

The actuaries consider loss frequency and severity trends when they develop expected loss ratios and point estimates. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Factors that affect loss frequency include changes in weather patterns and economic activity. Factors that affect loss severity include changes in policy limits, reinsurance retentions, inflation rates and judicial interpretations.

Our insurance subsidiaries create a claim file when they receive notice of an actual demand for payment, an event that may lead to a demand for payment or when they otherwise determine that a demand for payment could potentially lead to a future demand for payment on another coverage under the same policy or another policy they have issued. In recent years, our insurance subsidiaries have noted an increase in the period of time between the occurrence of a casualty loss event and the date at which they receive notice of a liability claim. Changes in the length of time between the loss occurrence date and the claim reporting date affect the actuaries’ ability to predict loss frequency accurately and the amount of IBNR reserves our insurance subsidiaries require.

Our insurance subsidiaries generally create a claim file for a policy at the claimant level by type of coverage and generally recognize one count for each claim event. In certain lines of business where it is common for multiple parties to claim damages arising from a single claim event, our insurance subsidiaries recognize one count for each claimant involved in the event. Atlantic States recognizes one count for each claim event, or claimant involved in a multiple-party claim event, related to losses Atlantic States assumes through its participation in its pooling agreement with Donegal Mutual. Our insurance subsidiaries accumulate the claim counts and report them by line of business.

12 -	Allowance for Expected Credit Losses

We make estimates with respect to the potential impairment of financial instruments and recognize expected credit losses as an allowance rather than impairments as credit losses are incurred. We have established allowances for expected credit losses with respect to held-to-maturity debt securities and reinsurance receivable.

Held-to-Maturity Fixed-Maturity Securities

For held-to-maturity debt securities, we make estimates concerning expected credit losses at an aggregated level rather than monitoring individual debt securities for credit losses. We establish an allowance for expected credit losses based on an ongoing review of securities held, historical loss data, changes in issuer credit standing and other relevant factors. We utilize a probability-of-default methodology, which reflects current and forecasted economic conditions, to estimate the allowance for expected credit losses and recognize changes to the allowance in our results of operations.

The following table presents the balances for fixed maturities classified as held-to-maturity, net of the allowance for expected credit losses, at March 31, 2026 and 2025 and changes in the allowance for expected credit losses for the three months ended March 31, 2026 and 2025.

Index

	At and For the Three Months Ended March 31, 2026					At and For the Three Months Ended March 31, 2025
	Held-to-Maturity, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses			Held-to-Maturity, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses
	(in thousands)
Balance at beginning of period	$	776,447	$	1,313		$	705,714	$	1,388
Current period change for expected credit losses				(39	)				(37	)
Balance at end of period	$	783,952	$	1,274		$	706,098	$	1,351

Reinsurance Receivable

For reinsurance receivable, we establish an allowance for expected credit losses based upon our ongoing review of amounts outstanding, historical loss data, changes in reinsurer credit standing and other relevant factors. We utilize a probability-of-default methodology, which reflects current and forecasted economic conditions, to estimate the allowance for expected credit losses and recognize changes to the allowance in our results of operations.

The following table presents the balances for reinsurance receivable, net of the allowance for expected credit losses, at March 31, 2026 and 2025 and changes in the allowance for expected credit losses for the three months ended March 31, 2026 and 2025.

	At and For the Three Months Ended March 31, 2026				At and For the Three Months Ended March 31, 2025
	Reinsurance Receivable, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses		Reinsurance Receivable, Net of Allowance for Expected Credit Losses		Allowance for Expected Credit Losses
	(in thousands)
Balance at beginning of period	$	398,582	$	375	$	420,742	$	391
Current period change for expected credit losses				27				43
Balance at end of period	$	418,091	$	402	$	403,382	$	434

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13 -	Impact of New Accounting Standards

In December 2023, the Financial Accounting Standards Board (“FASB”) issued guidance to enhance the transparency and usefulness of income tax disclosures. The guidance requires disclosure of specific categories in the rate reconciliation table and additional information for reconciling items that meet a quantitative threshold of equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate. The guidance also requires disaggregated disclosure of the amount of income taxes paid for federal, state and foreign taxes. The guidance is effective for annual reporting periods beginning after December 15, 2024. The adoption of this guidance will not have an impact on our financial position, results of operations or cash flows.

In November 2024, the FASB issued guidance requiring disaggregated disclosure of income statement expenses in the notes to financial statements. The guidance requires disclosure of certain expenses, including employee compensation, depreciation and selling expenses. The guidance will not impact current income statement expense captions that industry-specific guidance requires. The guidance is effective for annual and interim reporting periods beginning after December 15, 2026. The adoption of this guidance will not have an impact on our financial position, results of operations or cash flows.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We recommend that you read the following information in conjunction with the historical financial information and the footnotes to that financial information we include in this Quarterly Report on Form 10-Q. We also recommend you read Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025.

Critical Accounting Policies and Estimates

We combine our financial statements with those of our insurance subsidiaries and present them on a consolidated basis in accordance with United States generally accepted accounting principles (“GAAP”).

Our insurance subsidiaries make estimates and assumptions that can have a significant effect on amounts and disclosures we report in our financial statements. The most significant estimates relate to the liabilities of our insurance subsidiaries for property and casualty insurance losses and loss expenses. While we believe our estimates and the estimates of our insurance subsidiaries are appropriate, the ultimate amounts may differ from the estimates we provided. We regularly review our methods for making these estimates and we reflect any adjustment we consider necessary in our results of operations for the period in which we make an adjustment.

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.

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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 subsequent years due to a number of factors, including supply chain disruption, higher new and used automobile values, increases in the cost of replacement automobile parts and rising labor rates. These trend changes caused significant disruption to historical loss patterns and give rise to greater uncertainty as to the pattern of future loss settlements. Related uncertainties regarding future trends include social inflation, availability and cost of replacement automobile parts and building materials (including due to tariffs), availability and cost of skilled labor, the rate of litigation (including specialized plaintiff attorney involvement) in claims, increasing plaintiff attorney utilization of litigation financing and its impact on litigation strategies 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 March 31, 2026. At March 31, 2026, 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 $7.2 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.

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 and lengthening of repair completion times for property and automobile claims. We have also experienced a general slowing of settlement rates in litigated 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 loss 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.

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Our insurance subsidiaries’ liabilities for losses and loss expenses by major line of business at March 31, 2026 and December 31, 2025 consisted of the following:

	March 31, 2026		December 31, 2025
	(in thousands)
Commercial lines:
Automobile	$	172,357	$	175,277
Workers’ compensation		132,918		130,429
Commercial multi-peril		226,144		215,476
Other		55,625		53,249
Total commercial lines		587,044		574,431
Personal lines:
Automobile		96,943		100,855
Homeowners		29,895		27,565
Other		2,221		2,345
Total personal lines		129,059		130,765
Total commercial and personal lines		716,103		705,196
Plus reinsurance recoverable		413,712		394,854
Total liabilities for losses and loss expenses	$	1,129,815	$	1,100,050

We have evaluated the effect on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we consider in establishing the loss and loss expense reserves of our insurance subsidiaries. We established the range of reasonably likely changes based on a review of changes in accident-year development by line of business and applied those changes to our insurance subsidiaries’ loss and loss expense reserves as a whole. The range we selected does not necessarily indicate what could be the potential best or worst case or the most likely scenario. The following table sets forth the estimated effect on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we considered in establishing the loss and loss expense reserves of our insurance subsidiaries:

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Percentage Change in Loss and Loss Expense Reserves Net of Reinsurance	Adjusted Loss and Loss Expense Reserves Net of Reinsurance at March 31, 2026	Percentage Change in Stockholders’ Equity at March 31, 2026(1)	Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2025	Percentage Change in Stockholders’ Equity at December 31, 2025(1)
(dollars in thousands)
(10.0)%	$644,493	8.7%	$634,676	8.7%
(7.5)	662,395	6.5	652,306	6.5
(5.0)	680,298	4.4	669,936	4.3
(2.5)	698,200	2.2	687,566	2.2
Base	716,103	—	705,196	—
2.5	734,006	(2.2)	722,826	(2.2)
5.0	751,908	(4.4)	740,456	(4.3)
7.5	769,811	(6.5)	758,086	(6.5)
10.0	787,713	(8.7)	775,716	(8.7)

(1)	Net of income tax effect.

Non-GAAP Information

We prepare our consolidated financial statements on the basis of GAAP. Our insurance subsidiaries also prepare financial statements based on statutory accounting principles state insurance regulators prescribe or permit (“SAP”). SAP financial measures are considered non-GAAP financial measures under applicable SEC rules because the SAP financial measures include or exclude certain items that the most comparable GAAP financial measures do not ordinarily include or exclude. Our calculation of non-GAAP financial measures may differ from similar measures other companies use, so investors should exercise caution when comparing our non-GAAP financial measures to the non-GAAP financial measures other companies use.

Because our insurance subsidiaries do not prepare GAAP financial statements, we evaluate the performance of our personal lines and commercial lines segments utilizing SAP financial measures that reflect the growth trends and underwriting results of our insurance subsidiaries. The SAP financial measures we utilize are net premiums written and statutory combined ratio.

Net Premiums Written

We define net premiums written as the amount of full-term premiums our insurance subsidiaries record for policies effective within a given period less premiums our insurance subsidiaries cede to reinsurers. Net premiums earned is the most comparable GAAP financial measure to net premiums written. Net premiums earned represent the sum of the amount of net premiums written and the change in net unearned premiums during a given period. Our insurance subsidiaries earn premiums and recognize them as revenue over the terms of their policies, which are one year or less in duration. Therefore, increases or decreases in net premiums earned generally reflect increases or decreases in net premiums written in the preceding 12-month period compared to the comparable period one year earlier.

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The following tables provide reconciliations of our net premiums earned to our net premiums written for the three months ended March 31, 2026 and 2025:

	Three Months Ended March 31, 2026
	Commercial Lines		Personal Lines			Total
(in thousands)
Net premiums earned	$	138,963	$	82,394		$	221,357
Change in net unearned premiums		25,144		(7,211	)		17,933
Net premiums written	$	164,107	$	75,183		$	239,290

	Three Months Ended March 31, 2025
	Commercial Lines		Personal Lines			Total
(in thousands)
Net premiums earned	$	136,216	$	96,486		$	232,702
Change in net unearned premiums		24,402		(10,012	)		14,390
Net premiums written	$	160,618	$	86,474		$	247,092

Statutory Combined Ratio

The combined ratio is a standard measurement of underwriting profitability for an insurance company. The combined ratio does not reflect investment income, net investment gains or losses, federal income taxes or other non-operating income or expense. A combined ratio of less than 100% generally indicates underwriting profitability.

The statutory combined ratio is a non-GAAP financial measure that is based upon amounts determined under SAP. We calculate our statutory combined ratio as the sum of:

•

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.

The calculation of our statutory combined ratio differs from the calculation of our GAAP combined ratio. In calculating our GAAP combined ratio, we do not deduct installment payment fees from incurred expenses, and we base the expense ratio on net premiums earned instead of net premiums written. Differences between our GAAP loss ratio and our statutory loss ratio result from anticipating salvage and subrogation recoveries for our GAAP loss ratio but not for our statutory loss ratio.

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Combined Ratios

The following table presents comparative details with respect to our GAAP and statutory combined ratios for the three months ended March 31, 2026 and 2025:

	Three Months Ended March 31,
	2026			2025
GAAP Combined Ratios (Total Lines)
Loss ratio - core losses		53.4	%		54.2	%
Loss ratio - weather-related losses		7.8			3.7
Loss ratio - large fire losses		5.5			3.3
Loss ratio - net prior-year reserve development		(2.6	)		(4.5	)
Loss ratio		64.1			56.7
Expense ratio		35.4			34.6
Dividend ratio		0.3			0.3
Combined ratio		99.8	%		91.6	%

Statutory Combined Ratios
Commercial lines:
Automobile		92.0	%		91.4	%
Workers’ compensation		112.9			117.6
Commercial multi-peril		113.9			90.3
Other		100.6			80.8
Total commercial lines		104.6			94.7
Personal lines:
Automobile		80.5			85.0
Homeowners		94.6			83.8
Other		78.4			56.6
Total personal lines		85.7			83.6
Total commercial and personal lines		97.9	%		90.3	%

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Results of Operations - Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the first quarter of 2026 were $221.4 million, a decrease of $11.3 million, or 4.9%, compared to $232.7 million for the first quarter of 2025, primarily reflecting lower new business writings, offset partially by solid premium retention and renewal premium increases in the preceding twelve-month period.

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the first quarter of 2026 were $239.3 million, a decrease of $7.8 million, or 3.2%, from the $247.1 million of net premiums written for the first quarter of 2025. Commercial lines net premiums written increased $3.5 million, or 2.2%, for the first quarter of 2026 compared to the first quarter of 2025. Personal lines net premiums written decreased $11.3 million, or 13.1%, for the first quarter of 2026 compared to the first quarter of 2025. We attribute the increase in commercial lines net premiums written primarily to new business writings, solid retention and a continuation of renewal premium increases in lines other than workers’ compensation. We attribute the decrease in personal lines net premiums written primarily to lower new business writings, offset partially by renewal premium rate increases and solid retention. We believe that the decrease in personal lines net premiums written will gradually taper over the course of 2026 as actions we have taken to slow the decline take effect.

Investment Income. Our net investment income was $14.3 million for the first quarter of 2026, an increase of $2.3 million, or 19.2%, compared to $12.0 million for the first quarter of 2025. We attribute the increase primarily to an increase in the average investment yield and higher average invested assets relative to the first quarter of 2025.

Net Investment Losses. Net investment losses for the first quarter of 2026 and 2025 were $479,224 and $470,861, respectively. The net investment losses for the first quarter of 2026 and 2025 were primarily related to decreases in the market value of the equity securities we held at the end of the respective periods. We did not recognize any impairment losses for individual securities in our investment portfolio during the first quarter of 2026 or 2025.

Losses and Loss Expenses. Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 64.1% for the first quarter of 2026, an increase from our insurance subsidiaries’ loss ratio of 56.7% for the first quarter of 2025. The core loss ratio, which excludes weather-related losses, large fire losses and net development of reserves for losses incurred in prior accident years, was 53.4% for the first quarter of 2026, a decrease from the core loss ratio of 54.2% for the first quarter of 2025. For the commercial lines segment, the core loss ratio of 57.6% for the first quarter of 2026 decreased from 58.3% for the first quarter of 2025. For the personal lines segment, the core loss ratio of 46.5% for the first quarter of 2026 decreased from 48.7% for the first quarter of 2025. We attribute the decrease in the commercial lines core loss ratio primarily as a result of ongoing premium rate increases in all lines except workers’ compensation. We attribute the decrease in the personal lines core loss ratio primarily to the favorable impact of premium rate increases on net premiums earned for the personal lines segment. Weather-related losses were $17.2 million, or 7.8 percentage points of the loss ratio, for the first quarter of 2026, compared to $8.6 million, or 3.7 percentage points of the loss ratio, for the first quarter of 2025. The impact of weather-related loss activity to the loss ratio for the first quarter of 2026 was higher than our previous five-year average of first quarter weather-related losses. Large fire losses, which we define as individual fire losses in excess of $50,000, for the first quarter of 2026 were $12.2 million, or 5.5 percentage points of the loss ratio, compared to $7.7 million, or 3.3 percentage points of the loss ratio, for the first quarter of 2025. We attribute the increase to higher loss frequency and severity compared to the prior-year quarter. Our insurance subsidiaries’ commercial lines loss ratio was 68.8% for the first quarter of 2026, compared to 59.7% for the first quarter of 2025, primarily due to increases in the commercial multi-peril and other commercial lines of business loss ratios, offset partially by a decrease in the workers’ compensation line of business loss ratio. The personal lines loss ratio of our insurance subsidiaries increased to 56.4% for the first quarter of 2026, compared to 52.5% for the first quarter of 2025. We attribute this increase primarily to an increase in the homeowners and other personal lines of business loss ratios, offset partially by a decrease in the personal automobile line of business loss ratio. Our insurance subsidiaries experienced net favorable loss reserve development for the first quarter of 2026 of $5.7 million that decreased the loss ratio by 2.6 percentage points, compared to $10.5 million of net favorable loss reserve development that decreased the loss ratio for the first quarter of 2025 by 4.5 percentage points. Our insurance subsidiaries experienced favorable development primarily in the commercial automobile and personal automobile lines of business, offset partially by unfavorable development in the commercial multi-peril and commercial other liability lines of business for the first quarter of 2026.

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Underwriting Expenses. The expense ratio for an insurance company is the ratio of policy acquisition costs and other underwriting expenses to premiums earned. The expense ratio of our insurance subsidiaries was 35.4% for the first quarter of 2026, compared to 34.6% for the first quarter of 2025. The increase in the expense ratio primarily reflected the impact of lower net premiums earned upon which the ratio is based. The impact from allocated costs from Donegal Mutual to our insurance subsidiaries related to the ongoing systems modernization project represented approximately 1.6 percentage points of the expense ratio for the first quarter of 2026. We expect that the expense ratio impact of allocated costs related to the project will be 1.4 percentage points for the full year of 2026, subsiding gradually over the next several years.

Combined Ratio. The combined ratio represents the sum of the loss ratio, the expense ratio and the dividend ratio, which is the ratio of policyholder dividends incurred to premiums earned. Our insurance subsidiaries’ combined ratios were 99.8% and 91.6% for the first quarter of 2026 and 2025, respectively. We attribute the increase in the combined ratio primarily to increases in the loss and expense ratios for the first quarter of 2026 compared to the first quarter of 2025.

Income Tax Expense. We recorded income tax expense of $2.6 million for the first quarter of 2026, representing an effective tax rate of 18.5%. We recorded income tax expense of $6.0 million for the first quarter of 2025, representing an effective tax rate of 19.1%. The income tax expense for the first quarter of 2026 and 2025 represented estimates based on our projected annual taxable income and effective tax rates.

Net Income and Net Income Per Share. Our net income for the first quarter of 2026 was $11.5 million, or $.31 per share of Class A common stock on a diluted basis and $.29 per share of Class B common stock, compared to $25.2 million, or $.71 per share of Class A common stock on a diluted basis and $.65 per share of Class B common stock, for the first quarter of 2025. We had 31.4 million and 30.4 million Class A shares outstanding at March 31, 2026 and 2025, respectively. We had 5.6 million Class B shares outstanding at the end of both periods.

Liquidity and Capital Resources

Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual obligations and operating needs as such obligations and needs arise. Our major sources of funds from operations are the net cash flows we generate from our insurance subsidiaries’ underwriting results, investment income and maturing investments.

We have historically generated sufficient net positive cash flow to fund our commitments and add to our investment portfolio, thereby increasing future investment returns. The impact of the pooling agreement between Donegal Mutual and Atlantic States has historically been cash-flow positive because of the consistent underwriting profitability of the underwriting pool. Because we settle the pool monthly, our cash flows are substantially similar to the cash flows that would result from the underwriting of direct business. We maintain a high degree of liquidity in our investment portfolio in the form of marketable fixed maturities, equity securities and short-term investments. We structure our fixed-maturity investment portfolio following a “laddering” approach, so that projected cash flows from investment income and principal maturities are evenly distributed from a timing perspective. This laddering approach provides an additional measure of liquidity to meet our obligations and the obligations of our insurance subsidiaries should an unexpected variation occur in the future. Net cash flows provided by operating activities in the first three months of 2026 and 2025 were $20.2 million and $25.7 million, respectively.

At March 31, 2026, we had no outstanding borrowings under our line of credit with M&T and had the ability to borrow up to $20.0 million at an interest rate equal to the then-current Term SOFR rate plus 2.11%. At March 31, 2026, Atlantic States had a $35.0 million outstanding advance with the FHLB of Pittsburgh that carries a fixed interest rate of 3.806% and is due in September 2026. We discuss in Note 7 – Borrowings our estimate of the timing of the amounts payable for the borrowings under our lines of credit based on their contractual maturities.

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We estimate the timing of claim payments associated with the liabilities for losses and loss expenses of our insurance subsidiaries based on historical experience and expectations of future payment patterns. Amounts Atlantic States assumes pursuant to the pooling agreement with Donegal Mutual represent a substantial portion of our insurance subsidiaries’ gross liabilities for losses and loss expenses, and amounts Atlantic States cedes pursuant to the pooling agreement represent a substantial portion of our insurance subsidiaries’ reinsurance recoverable on unpaid losses and loss expenses. We include cash settlement of Atlantic States’ assumed liabilities from the pool in monthly settlements of pooled activity, as we net amounts ceded to and assumed from the pool. Although Donegal Mutual and we do not anticipate any changes in the pool participation levels in the foreseeable future, any such change would be prospective in nature and therefore would not impact the timing of expected payments by Atlantic States for its percentage share of pooled losses occurring in periods prior to the effective date of such change.

On July 18, 2013, our board of directors authorized a share repurchase program pursuant to which we have the authority to purchase up to 500,000 shares of our Class A common stock at prices prevailing from time to time in the open market subject to the provisions of applicable rules of the SEC Rule 10b-18 and in privately negotiated transactions. We did not purchase any shares of our Class A common stock under this program during the three months ended March 31, 2026 or 2025. We have purchased a total of 57,658 shares of our Class A common stock under this program from its inception through March 31, 2026.

On April 16, 2026, our board of directors declared quarterly cash dividends of $0.1925 per share of our Class A common stock and $0.175 per share of our Class B common stock, payable on May 15, 2026 to our stockholders of record as of the close of business on May 1, 2026. There are no restrictions on our payment of dividends to our stockholders, although there are restrictions under applicable state laws on the payment of dividends from our insurance subsidiaries to us, which is a significant source of cash for payment of stockholder dividends by us. Our insurance subsidiaries are required by law to maintain minimum surplus on a statutory basis and are subject to regulations under which their payment of dividends from statutory surplus is restricted and may require prior approval of their domiciliary insurance regulatory authorities. Our insurance subsidiaries are also subject to risk based capital (“RBC”) requirements. The amount of statutory capital and surplus necessary for our insurance subsidiaries to satisfy regulatory requirements, including the RBC requirements, was not significant in relation to our insurance subsidiaries’ statutory capital and surplus at December 31, 2025. Our insurance subsidiaries did not pay any dividends to us during the first three months of 2026. Amounts remaining available for distribution to us as dividends from our insurance subsidiaries without prior approval of their domiciliary insurance regulatory authorities in 2026 are approximately $50.8 million from Atlantic States, $10.2 million from MICO and $5.4 million from Peninsula, or a total of approximately $66.4 million.

At March 31, 2026, we had no material commitments for capital expenditures.

Equity Price Risk

Our portfolio of marketable equity securities, which we carry on our consolidated balance sheets at estimated fair value, has exposure to the risk of loss resulting from an adverse change in prices. We manage this risk by having our investment personnel perform an analysis of prospective investments and regular reviews of our portfolio of equity securities.

Credit Risk

Our portfolio of fixed-maturity securities and, to a lesser extent, our portfolio of short-term investments is subject to credit risk, which we define as the potential loss in market value resulting from adverse changes in the borrower’s ability to repay its debt. We manage this risk by having our investment personnel perform an analysis of prospective investments and regular reviews of our portfolio of fixed-maturity securities. We also limit the percentage and amount of our total investment portfolio that we invest in the securities of any one issuer.

Our insurance subsidiaries provide property and casualty insurance coverages through independent insurance agencies. We bill the majority of this business directly to the insured, although we bill a portion of our commercial business through licensed insurance agents to whom our insurance subsidiaries extend credit in the normal course of business.

Because the pooling agreement does not relieve Atlantic States of primary liability as the originating insurer, Atlantic States is subject to a concentration of credit risk arising from the business it cedes to Donegal Mutual. Our insurance subsidiaries maintain reinsurance agreements with Donegal Mutual and with a number of other major unaffiliated authorized reinsurers.

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Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Our market risk generally represents the risk of gain or loss that may result from the potential change in the fair value of the securities we hold in our investment portfolio as a result of fluctuations in prices and interest rates and, to a lesser extent, our debt obligations. We manage our interest rate risk by maintaining an appropriate relationship between the average duration of our investment portfolio and the approximate duration of our liabilities, i.e., policy claims of our insurance subsidiaries and our debt obligations.

There have been no material changes to our quantitative or qualitative market risk exposure from December 31, 2025 through March 31, 2026.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, at March 31, 2026, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information we are required to disclose in the reports that we file or submit under the Exchange Act, and our disclosure controls and procedures were also effective to ensure that information we disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to affect materially, our internal control over financial reporting.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

We base all statements contained in this Quarterly Report on Form 10-Q that are not historic facts on our current expectations. Such statements are forward-looking in nature (as defined in the Private Securities Litigation Reform Act of 1995) and necessarily involve risks and uncertainties. Forward-looking statements we make may be identified by our use of words such as “will,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “seek,” “estimate” and similar expressions. Our actual results could vary materially from our forward-looking statements. The factors that could cause our actual results to vary materially from the forward-looking statements we have previously made include, but are not limited to, adverse litigation and other industry trends that could increase our loss costs (including distracted driving, higher rates of litigation, higher judicial awards and escalating medical, automobile and property repair costs, including due to tariffs), adverse and catastrophic weather events and other natural disasters (including from changing climate conditions), man-made disasters (such as terrorism), our ability to maintain profitable operations (including our ability to underwrite risks effectively and charge adequate premium rates), the adequacy of the loss and loss expense reserves of our insurance subsidiaries, the successful operation (including cost, security and availability) of the information technology systems our insurance subsidiaries utilize, the successful development and deployment of new technologies (including artificial intelligence, data modernization and cloud migration) to allow our insurance subsidiaries to compete effectively, the loss or significant restriction of the use of specific rating attributes, analytical models or technologies our insurance subsidiaries use in their pricing and underwriting, increases in assessments pursuant to guaranty fund laws, business and economic conditions in the areas in which we and our insurance subsidiaries operate (including from pandemics), interest rates and other factors impacting the investment portfolios of our insurance subsidiaries, competition from various insurance and other financial businesses (including changes in consumer preferences for insurance distribution channels), the availability and cost of reinsurance, legal and judicial developments, changes in regulatory requirements, our ability to attract and retain independent insurance agents (and their ability to maintain adequate levels of premium volume and quality), changes in our A.M. Best rating and the other risks that we describe from time to time in our filings with the Securities and Exchange Commission. We disclaim any obligation to update such statements or to announce publicly the results of any revisions that we may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Index

Part II. Other Information

Item 1.

Legal Proceedings.

None.

Item 1A.

Risk Factors.

Our business, results of operations and financial condition, and, therefore, the value of our Class A common stock and our Class B common stock, are subject to a number of risks. For a description of certain risks, we refer to “Risk Factors” in our 2025 Annual Report on Form 10-K that we filed with the SEC on March 6, 2026. There have been no material changes in the risk factors we disclosed in that Form 10-K Report during the three months ended March 31, 2026.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

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 January 1-31, 2026	Class A – None Class B – None	Class A – None Class B – None	Class A – None Class B – None	(1)

Month #2 February 1-28, 2026	Class A – None Class B – None	Class A – None Class B – None	Class A – None Class B – None	(1)

Month #3 March 1-31, 2026	Class A – 9,000 Class B – None	Class A – $17.63 Class B – None	Class A – 9,000 Class B – None	(1)

Total	Class A – 9,000 Class B – None	Class A – $17.63 Class B – None	Class A – 9,000 Class B – None

(1)

Donegal Mutual purchased these shares pursuant to its announcement 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 announcement did not stipulate a maximum number of shares that may be purchased under this program.

Item 3.

Defaults upon Senior Securities.

None.

Item 4.

Mine Safety Disclosure.

Not Applicable.

Item 5.

Other Information.

None.

Index

Item 6.

Exhibits.

Exhibit No.	Description	Reference


Other Exhibits

31.1	Rule 13a-14(a)/15(d)-14(a) Certification of Chief Executive Officer.	Filed herewith

31.2	Rule 13a-14(a)/15(d)-14(a) Certification of Chief Financial Officer.	Filed herewith

32.1	Section 1350 of Certification of Chief Executive Officer	Filed herewith

32.2	Section 1350 of Certification of Chief Financial Officer	Filed herewith

Exhibit 101.INS	XBRL Instance Document	Filed herewith

Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith

Exhibit 101.PRE	XBRL Taxonomy Presentation Linkbase Document	Filed herewith

Exhibit 101.CAL	XBRL Taxonomy Calculation Linkbase Document	Filed herewith

Exhibit 101.LAB	XBRL Taxonomy Label Linkbase Document	Filed herewith

Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith

Exhibit 104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	Filed herewith

Index

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DONEGAL GROUP INC.

May 7, 2026	By:	/s/ Kevin G. Burke
		Kevin G. Burke, President and Chief Executive Officer

May 7, 2026	By:	/s/ Jeffrey D. Miller
		Jeffrey D. Miller, Executive Vice President
		and Chief Financial Officer

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Donegal Group - 10-Q quarterly report FY

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