What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-03-06 compared with 2023-03-06 · 143 added, 140 removed, 310 unchanged (48% of the section changed)

2 unchanged sentences

Industry trends, such as increasing loss severity due to higher rates of litigation against the insurance industry and individual insurers, the willingness of courts to expand

covered causes of loss, rising jury awards, escalating medical, automobile and property repair costs and other factors may contribute to increased costs and result in ultimate loss settlements that exceed the reserves of our insurance

subsidiaries.

Loss severity in the property and casualty insurance industry has increased in recent years, principally driven by factors such as distracted driving, larger court judgments, higher jury awards and increasing medical

25 unchanged sentences

affect the frequency and severity of weather events and other losses and thus impact the affordability and availability of catastrophe reinsurance coverage for our insurance subsidiaries.

Our insurance subsidiaries' ability to appropriately

manage catastrophe risk depends partially on catastrophe models, which may be affected by inaccurate or incomplete data, the uncertainty of the frequency and severity of future events and the uncertain impact of changing climate conditions that

tend to occur gradually over time.

Our insurance subsidiaries’ ability to appropriately manage

catastrophe risk depends partially on catastrophe models, which may be affected by inaccurate or incomplete data, the uncertainty of the frequency and severity of future events and the uncertain impact of changing climate conditions that tend to

occur gradually over time.

Changing climate conditions could lead to new or revised regulations with which our insurance subsidiaries would have to comply.

13 unchanged sentences

establish reserves for losses and loss expenses as balance sheet liabilities based upon estimates involving actuarial and statistical projections at a given time of what our insurance subsidiaries expect their ultimate liability to be.

Significant periods of time often elapse between the occurrence of an insured loss, the reporting of the loss and the settlement of that loss.

It is possible that our insurance subsidiaries’ ultimate liability could exceed these estimates because

of the future development of known losses, the existence of losses that have occurred but are currently unreported and larger than historical settlements of pending and unreported claims.

The process of estimating reserves is inherently

judgmental and can be influenced by a number of factors, including the following:

periods of time often elapse between the occurrence of an insured loss, the reporting of the loss and the settlement of that loss.

It is possible that our insurance subsidiaries’ ultimate liability could exceed these estimates because of the future

development of known losses, the existence of losses that have occurred but are currently unreported and larger than historical settlements of pending and unreported claims.

The process of estimating reserves is inherently judgmental and can be

influenced by a number of factors, including the following:

trends in claim frequency and severity;

34 unchanged sentences

frequency or severity of claims to be incorrect.

As a result, our insurance subsidiaries could underprice risks, which would negatively affect our margins, or our insurance subsidiaries could overprice risks, which could reduce their premium

volume and competitiveness.

As a result, our insurance subsidiaries could underprice risks, which would negatively affect our margins, or our insurance subsidiaries could overprice risks, which could reduce their premium volume

and competitiveness.

In either event, underpricing or overpricing risks could adversely impact our operating results, financial condition and cash flows.

1 unchanged sentence

changes in customer preferences and insurance needs, which could put our insurance subsidiaries at a competitive disadvantage and adversely affect their future profitability.

Innovation, recent technological developments, changing customer demographics and preferences, societal shifts and emerging technologies are greatly impacting the insurance industry.

Our insurance subsidiaries

compete with much larger insurers that are focused on implementing technology and innovative solutions to select and price risks, enhance the experience of their customers and improve their operations.

If our insurance subsidiaries are unable to

anticipate changes in customer expectations and keep pace with the technological changes their competitors implement, our insurance subsidiaries may not be able to attract and maintain quality accounts, adequately price risks or operate as

efficiently as their competitors.

In addition, emerging technologies such as electric and autonomous vehicles, driver-assistance and accident avoidance features on vehicles, sensor technology and other forms of automation may reduce the future

need for, or decrease the future pricing of, the insurance products our insurance subsidiaries offer.

Loss or significant restriction of the use of credit scoring in the pricing and underwriting of the personal lines insurance products by our insurance subsidiaries could

adversely affect their future profitability.

Innovation, recent technological developments, changing customer demographics and preferences, societal shifts and emerging technologies such as artificial intelligence are greatly impacting the insurance industry.

insurance subsidiaries compete with much larger insurers that are focused on implementing technology and innovative solutions to select and price risks, enhance the experience of their customers and improve their operations.

If our insurance

subsidiaries are unable to anticipate changes in customer expectations and keep pace with the technological changes their competitors implement, our insurance subsidiaries may not be able to attract and maintain quality accounts, adequately price

risks or operate as efficiently as their competitors.

In addition, emerging technologies such as electric and autonomous vehicles, driver-assistance and accident avoidance features on vehicles, sensor technology and other forms of automation may

reduce the future need for, or decrease the future pricing of, the insurance products our insurance subsidiaries offer.

Loss or significant restriction of the use of credit scoring in the pricing and underwriting of the personal lines insurance products by our insurance subsidiaries could adversely

affect their future profitability.

Our insurance subsidiaries use credit scoring as a factor in making risk selection and pricing decisions for personal lines insurance products where allowed by state law.

41 unchanged sentences

Risks Relating to Us and Our Business

The emergence of COVID-19 has affected the business operations of our insurance subsidiaries and Donegal Mutual, and economic disruption related to COVID-19 or a future

pandemic may adversely affect our revenues, profitability, results of operations, cash flows, liquidity and financial condition.

The COVID-19 pandemic affected the business operations of our insurance subsidiaries and Donegal Mutual, and economic disruption related to a future pandemic may adversely affect

our revenues, profitability, results of operations, cash flows, liquidity and financial condition.

During 2020 and 2021, the COVID-19 pandemic resulted in significant disruptions in economic activity throughout our operating regions.

We cannot predict at this time the ultimate impact that the economic and

financial disruption related to the ongoing COVID-19 pandemic or any other future pandemic will have on us.

Risks related to COVID-19 or a future pandemic include, but are not limited to, the following:

We cannot predict the ultimate impact that the economic and financial disruption

related to a pandemic may have on us.

Risks related to a pandemic include, but are not limited to, the following:

the business operations or a specific operational function of our insurance subsidiaries and Donegal Mutual could be disrupted by the illness of significant numbers of their employees and remedial efforts that would be required upon

12 unchanged sentences

our insurance subsidiaries may suffer declines in the market values of their investments as a result of financial market volatility related to pandemic concerns and related economic disruption;

economic disruption related to a pandemic could result in significant declines in the credit quality of issuers, ratings downgrades or changes in financial market conditions and regulatory changes that might adversely impact the value

of the fixed-maturity investments that our insurance subsidiaries own.

the fixed-maturity investments that our insurance subsidiaries own.

Donegal Mutual is our controlling stockholder.

6 unchanged sentences

These common directors and executive officers have a fiduciary duty to our stockholders and also have a fiduciary duty to the policyholders of Donegal Mutual.

Among the potential conflicts of interest that could arise from

these separate fiduciary duties are the following:

Among the potential conflicts of interest that could arise from these

separate fiduciary duties are the following:

we and Donegal Mutual periodically review the percentage participation of Atlantic States and Donegal Mutual in the underwriting pool that Donegal Mutual and Atlantic States have maintained since 1986;

4 unchanged sentences

Each share of our Class A common stock has one-tenth of a vote per share and generally votes as a single class with our Class B common stock.

Each share of our Class B common stock has one vote per share and

generally votes as a single class with our Class A common stock.

Donegal Mutual has the right to vote approximately 71% of the combined voting power of our Class A common stock and our Class B common stock

and has sufficient voting control to and has acted to:

Each share of our Class B common stock has one vote per share and generally

votes as a single class with our Class A common stock.

Donegal Mutual has the right to vote approximately 71% of the combined voting power of our Class A common stock and our Class B common stock and has

sufficient voting control to and has acted to:

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

control the outcome of any corporate transaction or other matter submitted to a vote of our stockholders for approval, including mergers or other acquisition proposals and the sale of all or substantially all of our assets, in each

case regardless of how all of our stockholders other than Donegal Mutual vote their shares.

regardless of how all of our stockholders other than Donegal Mutual vote their shares.

The interests of Donegal Mutual in maintaining this greater-than-majority voting control of us may have an adverse effect on the price of our Class A common stock and the price of our Class B common stock because of

2 unchanged sentences

remote that anyone could acquire actual control of us unless Donegal Mutual were in favor of another person’s acquisition of control of us.

Donegal Mutual’s majority voting control of us, certain anti-takeover provisions in our certificate of incorporation and by-laws and certain provisions of the Delaware General Corporation Law, or the DGCL, could

delay or prevent the removal of members of our board of directors and could make a merger, tender offer or proxy contest involving us more expensive as well as unlikely to succeed, even if such events were in the best interests of our

stockholders other than Donegal Mutual.

or prevent the removal of members of our board of directors and could make a merger, tender offer or proxy contest involving us more expensive as well as unlikely to succeed, even if such events were in the best interests of our stockholders other

than Donegal Mutual.

These factors could also discourage a third party from attempting to acquire control of us.

14 unchanged sentences

commissioners of the states of domicile of each of our insurance subsidiaries.

We own insurance subsidiaries domiciled in the states of Michigan, Pennsylvania and Virginia, and Donegal Mutual owns or controls insurance companies domiciled in Georgia and New Mexico.

The insurance laws of each of

these states provide that no person can acquire or seek to acquire a 10% or greater interest in us without first filing specified information with the insurance commissioners of those states and obtaining the prior approval of the proposed

acquisition of a 10% or greater interest in us by each of the state insurance commissioners based on statutory standards designed to protect the safety and soundness of us and our insurance subsidiaries.

We own insurance subsidiaries domiciled in the states of Michigan, Pennsylvania and Virginia, and Donegal Mutual is domiciled in Pennsylvania and owns or controls insurance companies domiciled in Georgia and New

The insurance laws of each of these states provide that no person can acquire or seek to acquire a 10% or greater interest in us without first filing specified information with the insurance commissioners of those states and obtaining the

prior approval of the proposed acquisition of a 10% or greater interest in us by each of the state insurance commissioners based on statutory standards designed to protect the safety and soundness of us and our insurance subsidiaries.

Our insurance subsidiaries and Donegal Mutual currently conduct business in a limited number of states, with a concentration of business in Pennsylvania, Michigan, Maryland,

Delaware, Virginia and Georgia.

Delaware and Virginia.

Any single catastrophe occurrence or other condition affecting losses in these states could adversely affect the results of operations of our insurance subsidiaries.

1 unchanged sentence

A substantial portion of their business

consists of private passenger and commercial automobile, homeowners, commercial multi-peril and workers’ compensation insurance in Pennsylvania, Michigan, Maryland, Delaware, Virginia and Georgia.

While our insurance subsidiaries and Donegal

Mutual actively manage their respective exposure to catastrophes through their underwriting processes and the purchase of reinsurance, a single catastrophic occurrence, destructive weather pattern, general economic trend, terrorist attack,

regulatory development or other condition affecting one or more of the states in which our insurance subsidiaries conduct substantial business could materially adversely affect their business, financial condition and results of operations.

catastrophic events include hurricanes, earthquakes, tornadoes, wind and hailstorms, fires and wildfires, explosions and severe winter storms.

consists of private passenger and commercial automobile, homeowners, commercial multi-peril and workers’ compensation insurance in Pennsylvania, Michigan, Maryland, Delaware and Virginia.

While our insurance subsidiaries and Donegal Mutual actively

manage their respective exposure to catastrophes through their underwriting processes and the purchase of reinsurance, a single catastrophic occurrence, destructive weather pattern, general economic trend, terrorist attack, regulatory development

or other condition affecting one or more of the states in which our insurance subsidiaries conduct substantial business could materially adversely affect their business, financial condition and results of operations.

Common catastrophic events

include hurricanes, earthquakes, tornadoes, wind and hailstorms, fires and wildfires, explosions and severe winter storms.

If the independent agents who market the products of our insurance subsidiaries and Donegal Mutual do not maintain their current levels of premium writing with us and Donegal

2 unchanged sentences

Our insurance subsidiaries and Donegal Mutual market their insurance products solely through a network of approximately 2,200 independent insurance agencies.

This agency distribution system is one of the most

important components of the competitive profile of our insurance subsidiaries and Donegal Mutual.

As a result, our insurance subsidiaries and Donegal Mutual depend to a material extent upon their independent agents, each of whom has the authority

to bind one or more of our insurance subsidiaries or Donegal Mutual to insurance coverage.

To the extent that such independent agents’ marketing efforts fail to result in the maintenance of their current levels of volume and quality or they bind

our insurance subsidiaries or Donegal Mutual to unacceptable insurance risks, fail to comply with the established underwriting guidelines of our insurance subsidiaries and Donegal Mutual or otherwise inappropriately market the products of our

insurance subsidiaries and Donegal Mutual, the business, financial condition and results of operations of our insurance subsidiaries could suffer.

This agency distribution system is one of the most important

components of the competitive profile of our insurance subsidiaries and Donegal Mutual.

As a result, our insurance subsidiaries and Donegal Mutual depend to a material extent upon their independent agents, each of whom has the authority to bind one

or more of our insurance subsidiaries or Donegal Mutual to insurance coverage.

To the extent that such independent agents’ marketing efforts fail to result in the maintenance of their current levels of volume and quality or they bind our insurance

subsidiaries or Donegal Mutual to unacceptable insurance risks, fail to comply with the established underwriting guidelines of our insurance subsidiaries and Donegal Mutual or otherwise inappropriately market the products of our insurance

subsidiaries and Donegal Mutual, the business, financial condition and results of operations of our insurance subsidiaries could suffer.

The business of our insurance subsidiaries and Donegal Mutual may not continue to grow and may be materially adversely affected if our insurance subsidiaries and Donegal Mutual

1 unchanged sentence

The ability of our insurance subsidiaries and Donegal Mutual to retain existing, and to attract new, independent agents is essential to the continued growth of the business of our insurance subsidiaries and Donegal

If independent agents find it easier to do business with the competitors of our insurance subsidiaries and Donegal Mutual, our insurance subsidiaries and Donegal Mutual could find it difficult to retain their existing business or to

attract new business.

While our insurance subsidiaries and Donegal Mutual believe they maintain good relationships with the independent agents they have appointed, our insurance subsidiaries and Donegal Mutual cannot be certain that these

independent agents will continue to sell the products of our insurance subsidiaries and Donegal Mutual to the consumers these independent agents represent.

Some of the factors that could adversely affect the ability of our insurance subsidiaries

and Donegal Mutual to retain existing, and attract new, independent agents include:

new business.

agents will continue to sell the products of our insurance subsidiaries and Donegal Mutual to the consumers these independent agents represent.

Some of the factors that could adversely affect the ability of our insurance subsidiaries and Donegal

Mutual to retain existing, and attract new, independent agents include:

the significant competition among insurance companies to attract independent agents;

4 unchanged sentences

insurance subsidiaries and Donegal Mutual do not have business relationships.

While our insurance subsidiaries and Donegal Mutual sell insurance to policyholders solely through their network of independent agencies, many competitors of our insurance subsidiaries and Donegal Mutual sell

insurance through a variety of delivery methods, including independent agencies, captive agencies and direct sales.

To the extent that current and potential policyholders change their distribution channel preference, the business, financial

condition and results of operations of our insurance subsidiaries may be adversely affected.

through a variety of delivery methods, including independent agencies, captive agencies and direct sales.

To the extent that current and potential policyholders change their distribution channel preference, the business, financial condition and

results of operations of our insurance subsidiaries may be adversely affected.

Dividends from our insurance subsidiaries are the primary source of funds for the payment of our operating expenses and dividends to our stockholders;

4 unchanged sentences

insurance subsidiaries can pay to us is subject to regulatory restrictions and depends on the amount of surplus our insurance subsidiaries maintain.

From time to time, the NAIC and various state insurance regulators consider modifying the method

of determining the amount of dividends that an insurance company may pay without prior regulatory approval.

From time to time, the NAIC and various state insurance regulators consider modifying the method of

determining the amount of dividends that an insurance company may pay without prior regulatory approval.

The maximum amount of ordinary dividends that our insurance subsidiaries can pay to us in 2024 without prior regulatory approval is

10 unchanged sentences

For example, certain lenders require customers to purchase insurance from an insurance carrier that has received an A.M.

Best rating that exceeds a certain

Best rating that exceeds a certain level.

Currently, Donegal Mutual and our insurance subsidiaries each have an A (Excellent) rating from A.M.

In March 2022, A.M.

In April 2023, A.M.

Best affirmed its A (Excellent) ratings of Donegal Mutual and our insurance subsidiaries.

However, if A.M.

were to downgrade the rating of Donegal Mutual or any of our insurance subsidiaries, it would adversely affect the competitive position of Donegal Mutual or that insurance subsidiary and make it more difficult for it to market its products and

retain its existing policyholders.

downgrade the rating of Donegal Mutual or any of our insurance subsidiaries, it would adversely affect the competitive position of Donegal Mutual or that insurance subsidiary and make it more difficult for it to market its products and retain its

existing policyholders.

The growth and profitability of our insurance subsidiaries depend, in part, on the effective maintenance and ongoing development of Donegal Mutual’s information technology

systems, and the allocation of related costs to our insurance subsidiaries may adversely impact their profitability.

Our insurance subsidiaries utilize Donegal Mutual’s information technology systems to conduct their insurance business, including policy quoting and issuance, claims processing, processing of incoming premium

payments and other important functions.

As a result, the ability of our insurance subsidiaries to grow their business and conduct profitable operations depends on Donegal Mutual’s ability to maintain its existing information technology systems

and to develop new technology systems that will support the business of Donegal Mutual and our insurance subsidiaries in a cost-efficient manner and provide information technology capabilities equivalent to those of our competitors.

allocation among our insurance subsidiaries and Donegal Mutual of the costs of developing and maintaining Donegal Mutual’s information technology systems may adversely impact our insurance subsidiaries’ expense ratio and underwriting

profitability, and such costs may exceed Donegal Mutual’s and our expectations.

Donegal Mutual is currently in the midst of a multi-year effort to modernize certain of its key infrastructure and applications systems, and the allocation of related costs to our insurance subsidiaries has resulted

in an increase to their expense ratio.

These new systems are intended to provide various benefits to the member companies of the Donegal Insurance Group, including streamlined workflows and business processes, service enhancements for their

agents and policyholders, opportunities to implement new product models and innovative business solutions, greater utilization of data analytics and operational efficiencies.

Our insurance subsidiaries began to issue workers’ compensation

policies from the new systems in the second quarter of 2020 and began to issue personal lines policies from the new systems, including a new personal lines agency portal, in the fourth quarter of 2021.

Over the next several years, Donegal Mutual

expects to implement new systems for the remaining lines of business that the Donegal Insurance Group offers currently, including three commercial lines of business with enhanced straight-through-processing capabilities beginning in the first

half of 2023.

Even with Donegal Mutual's and our best planning and efforts and the involvement of third-party experts, Donegal Mutual may not complete the implementation of these new systems within its planned timeframes or budget.

Donegal Mutual’s information technology systems may not deliver the benefits Donegal Mutual and we expect and may fail to keep pace with our competitors’ information technology systems.

As a result, Donegal Mutual and our insurance subsidiaries

may not have the ability to grow their business and meet their profitability objectives.

and other important functions.

develop new technology systems that will support the business of Donegal Mutual and our insurance subsidiaries in a cost-efficient manner and provide information technology capabilities equivalent to those of our competitors.

The allocation among

our insurance subsidiaries and Donegal Mutual of the costs of developing and maintaining Donegal Mutual’s information technology systems may adversely impact our insurance subsidiaries’ expense ratio and underwriting profitability, and such costs

may exceed Donegal Mutual’s and our expectations.

an increase to their expense ratio.

policyholders, opportunities to implement new product models and innovative business solutions, greater utilization of data analytics and operational efficiencies.

Our insurance subsidiaries began to issue workers’ compensation policies from the

new systems in the second quarter of 2020 and began to issue personal lines policies from the new systems, including a new personal lines agency portal, in the fourth quarter of 2021.

In 2023, Donegal Mutual implemented two additional major

releases of new systems, which included three commercial lines of business with enhanced straight-through-processing capabilities as well as dwelling fire and conversion of legacy homeowners renewal policies in two initial states.

Over the next two

years, Donegal Mutual expects to implement new systems for the remaining lines of business the Donegal Insurance Group issues currently and for the conversion of remaining legacy renewal policies of the Donegal Insurance Group.

Even with Donegal

Mutual’s and our best planning and efforts and the involvement of third-party experts, Donegal Mutual may not complete the implementation of these new systems within its planned timeframes or budget.

Further, Donegal Mutual’s information technology

systems may not deliver the benefits Donegal Mutual and we expect and may fail to keep pace with our competitors’ information technology systems.

As a result, Donegal Mutual and our insurance subsidiaries may not have the ability to grow their

business and meet their profitability objectives.

Our strategy to grow in part through acquisitions of other insurance companies exposes us to risks that could adversely affect our results of operations and financial condition.

5 unchanged sentences

conditions imposed by regulatory agencies that make the realization of cost-savings through integration of the operations of the other insurer with our operations more difficult;

our management's lack of familiarity with the geography, demographics and distribution systems in the markets the other insurer serves that cause the other insurer to fail to meet the growth and profitability objectives we anticipated

at the time of the acquisition or affiliation;

our management’s lack of familiarity with the geography, demographics and distribution systems in the markets the other insurer serves that cause the other insurer to fail to meet the growth and profitability objectives we anticipated at

the time of the acquisition or affiliation;

the need of the other insurer for additional capital that we did not anticipate at the time of the acquisition or affiliation;

2 unchanged sentences

Our strategy is to expand our business through the organic growth of our insurance subsidiaries and through our strategic acquisitions of regional insurance companies.

Our insurance subsidiaries may require

additional capital in the future to support this strategy.

Our insurance subsidiaries may require additional

capital in the future to support this strategy.

If we cannot obtain sufficient capital on satisfactory terms and conditions, we may not be able to expand the business of our insurance subsidiaries or to make future acquisitions.

ability to obtain additional financing will depend on a number of factors, many of which are beyond our control.

For example, we may not be able to obtain additional debt or equity financing because we or our insurance subsidiaries may already

have substantial debt at the time, because we or our insurance subsidiaries do not have sufficient cash flow to service or repay our existing or additional debt or because financial institutions are not making financing available.

any equity capital we obtain in the future could be dilutive to our existing stockholders.

Our ability to

obtain additional financing will depend on a number of factors, many of which are beyond our control.

For example, we may not be able to obtain additional debt or equity financing because we or our insurance subsidiaries may already have

substantial debt at the time, because we or our insurance subsidiaries do not have sufficient cash flow to service or repay our existing or additional debt or because financial institutions are not making financing available.

In addition, any

equity capital we obtain in the future could be dilutive to our existing stockholders.

Competition within the property and casualty insurance industry may adversely impact the revenues and profit margins of our insurance subsidiaries.

16 unchanged sentences

which have received substantial infusions of capital, that seek to disrupt traditional business platforms and distribution channels.

Our insurance subsidiaries and Donegal Mutual may not be able to maintain their current competitive position in

the markets in which they operate if their competitors offer prices for their products that are lower than the prices our insurance subsidiaries and Donegal Mutual are prepared to offer.

Moreover, if these competitors lower the price of their

products and our insurance subsidiaries and Donegal Mutual meet their pricing, the profit margins and revenues of our insurance subsidiaries and Donegal Mutual may decrease and their ratios of claims and expenses to premiums may increase.

these factors could materially adversely affect the financial condition and results of operations of our insurance subsidiaries and their A.M.

Our insurance subsidiaries and Donegal Mutual may not be able to maintain their current competitive position in the

markets in which they operate if their competitors offer prices for their products that are lower than the prices our insurance subsidiaries and Donegal Mutual are prepared to offer.

Moreover, if these competitors lower the price of their products

and our insurance subsidiaries and Donegal Mutual meet their pricing, the profit margins and revenues of our insurance subsidiaries and Donegal Mutual may decrease and their ratios of claims and expenses to premiums may increase.

factors could materially adversely affect the financial condition and results of operations of our insurance subsidiaries and their A.M.

Best ratings.

9 unchanged sentences

subsidiaries own, changes in market conditions and regulatory changes.

The fixed-income securities our insurance subsidiaries own consist primarily of securities issued by domestic entities that are backed by either the credit or collateral of

the underlying issuer.

Factors such as an economic downturn, disruption in the credit market or the availability of credit, a regulatory change pertaining to a particular issuer’s industry, a significant deterioration in the cash flows of the

issuer or a change in the issuer’s marketplace may adversely affect the ability of our insurance subsidiaries to collect principal and interest from the issuer in which they invest.

The fixed-income securities our insurance subsidiaries own consist primarily of securities issued by domestic entities that are backed by either the credit or collateral of the

underlying issuer.

a change in the issuer’s marketplace may adversely affect the ability of our insurance subsidiaries to collect principal and interest from the issuer in which they invest.

The investments of our insurance subsidiaries are also subject to risk resulting from interest rate fluctuations.

As we experienced when market interest rates increased significantly in 2022, increasing interest

rates or a widening in the spread between interest rates available on U.S.

As we experienced when market interest rates increased significantly in 2022, increasing interest rates

or a widening in the spread between interest rates available on U.S.

Treasury securities and corporate debt or asset-backed securities will typically have an adverse impact on the market values of fixed-rate securities.

If interest rates

decline, our insurance subsidiaries will generally have a lower overall rate of return on investments of cash their operations generate.

In addition, in the event of the call or maturity of investments in a low interest rate environment, our

insurance subsidiaries may not be able to reinvest the proceeds in securities with comparable interest rates.

If interest rates decline,

our insurance subsidiaries will generally have a lower overall rate of return on investments of cash their operations generate.

In addition, in the event of the call or maturity of investments in a low interest rate environment, our insurance

subsidiaries may not be able to reinvest the proceeds in securities with comparable interest rates.

Changes in interest rates may reduce both the profitability and the return on the invested capital of our insurance subsidiaries.

10 unchanged sentences

insurance subsidiaries face a risk of non-payment from their reinsurers as well as the non-availability of reinsurance in the future.

Our insurance subsidiaries rely on reinsurance agreements to limit their maximum net loss from large single catastrophic risks or excess of loss risks in areas where our insurance subsidiaries may have a

concentration of policyholders.

of policyholders.

Reinsurance also enables our insurance subsidiaries to increase their capacity to write insurance because it has the effect of leveraging the surplus of our insurance subsidiaries.

Although the reinsurance our

insurance subsidiaries maintain provides that the reinsurer is liable to them for any reinsured losses, the reinsurance agreements do not generally relieve our insurance subsidiaries from their primary liability to their policyholders if the

reinsurer fails to pay the reinsurance claims of our insurance subsidiaries.

Although the reinsurance our insurance

subsidiaries maintain provides that the reinsurer is liable to them for any reinsured losses, the reinsurance agreements do not generally relieve our insurance subsidiaries from their primary liability to their policyholders if the reinsurer fails

to pay the reinsurance claims of our insurance subsidiaries.

To the extent that a reinsurer is unable to pay losses for which it is liable to our insurance subsidiaries, our insurance subsidiaries remain liable for such losses.

December 31, 2022, our insurance subsidiaries had approximately $148.3 million of reinsurance receivables from third-party reinsurers relating to paid and unpaid losses.

Any insolvency or inability of these reinsurers to make timely payments to

our insurance subsidiaries under the terms of their reinsurance agreements would adversely affect the results of operations of our insurance subsidiaries.

At December 31,

2023, our insurance subsidiaries had approximately $117.4 million of reinsurance receivables from third-party reinsurers relating to paid and unpaid losses.

Any insolvency or inability of these reinsurers to make timely payments to our insurance

subsidiaries under the terms of their reinsurance agreements would adversely affect the results of operations of our insurance subsidiaries.

Michigan law requires MICO to provide certain medical benefits under the personal injury protection, or PIP, coverage of the personal automobile and commercial automobile policies it writes in the state of Michigan.

Michigan law also requires MICO to be a member of the Michigan Catastrophic Claims Association, or MCCA, in order to write automobile insurance.

The MCCA receives funding through assessments that its members collect from policyholders in the

state and provides reinsurance for PIP claims that exceed a set retention.

The MCCA receives funding through assessments that its members collect from policyholders in the state

and provides reinsurance for PIP claims that exceed a set retention.

At December 31, 2023, MICO had approximately $54.8 million of reinsurance receivables from MCCA relating to paid and unpaid losses.

The MCCA has generated significant

operating deficits in past years.

The MCCA has generated significant operating

deficits in past years.

While the MCCA generated an increase in surplus in recent years, the MCCA board approved the return of a significant portion of its accumulated surplus to policyholders in the form of cash refunds in early 2022.

Although we currently consider the risk to be remote, should the MCCA be unable to fulfill its payment obligations to MICO in the future, MICO’s financial condition and results of operations could be adversely affected.

In addition, our insurance subsidiaries face a risk of the non-availability of reinsurance or an increase in reinsurance costs that could adversely affect their ability to write business or their results of

Market conditions beyond the control of our insurance subsidiaries, such as the amount of surplus in the reinsurance market and the frequency and severity of natural and man-made catastrophes, affect both the availability and the cost

of the reinsurance our insurance subsidiaries purchase.

If our insurance subsidiaries cannot maintain their current level of reinsurance or purchase new reinsurance protection in amounts that our insurance subsidiaries consider sufficient, our

insurance subsidiaries would either have to accept an increase in their net risk retention or reduce their insurance writings, either of which could adversely affect them.

For example, due to increased reinsurance pricing and reduced reinsurance

market capacity, our insurance subsidiaries increased their net retentions under several of their reinsurance programs for 2023.

The disruption or failure of Donegal Mutual’s information technology systems or the compromise of the security of those systems that results in the theft or misuse of

confidential information could materially impact adversely the business of Donegal Mutual and our insurance subsidiaries.

currently consider the risk to be remote, should the MCCA be unable to fulfill its payment obligations to MICO in the future, MICO’s financial condition and results of operations could be adversely affected.

reinsurance our insurance subsidiaries purchase.

If our insurance subsidiaries cannot maintain their current level of reinsurance or purchase new reinsurance protection in amounts that our insurance subsidiaries consider sufficient, our insurance

subsidiaries would either have to accept an increase in their net risk retention or reduce their insurance writings, either of which could adversely affect them.

For example, due to increased reinsurance pricing and reduced reinsurance market

capacity, our insurance subsidiaries increased their net retentions under several of their reinsurance programs for 2023 and 2024.

The disruption or failure of Donegal Mutual’s information technology systems or the compromise of the security of those systems that results in the theft or misuse of confidential

information could materially impact adversely the business of Donegal Mutual and our insurance subsidiaries.

Our insurance subsidiaries’ business operations depend significantly upon the availability and successful operation of Donegal Mutual’s information technology systems.

27 unchanged sentences

directors could also have the effect of delaying or preventing a change in our control.

In addition, we have 2,000,000 authorized shares of preferred stock that we could issue in one or more series without stockholder approval, to the extent applicable law permits, and upon such terms and conditions,

In addition, we have 2.0 million authorized shares of preferred stock that we could issue in one or more series without stockholder approval, to the extent applicable law permits, and upon such terms and conditions,

and having such rights, privileges and preferences, as our board of directors may determine.

1 unchanged sentence

We have no current plans to issue any preferred stock.

Unresolved Staff Comments.

We have no unresolved written comments from the Securities and Exchange Commission staff regarding our filings under the Exchange Act.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors