What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-06 compared with 2023-03-06 · 232 added, 243 removed, 315 unchanged (60% of the section changed)

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Our insurance

subsidiaries, Atlantic States Insurance Company (“Atlantic States”), Southern Insurance Company of Virginia (“Southern”), The Peninsula Insurance Company and Peninsula Indemnity Company (collectively, “Peninsula”), and Michigan Insurance Company

(“MICO”) and their affiliates write commercial and personal lines of property and casualty coverages exclusively through a network of independent insurance agents in certain Mid-Atlantic, Midwest, New England, Southern and Southwestern states.

subsidiaries are Atlantic States Insurance Company (“Atlantic States”), Michigan Insurance Company (“MICO”), The Peninsula Insurance Company and its wholly owned subsidiary, Peninsula Indemnity Company (collectively, “Peninsula”), and Southern

Insurance Company of Virginia (“Southern”).

Our insurance subsidiaries and their affiliates write commercial and personal lines of property and casualty coverages exclusively through a network of independent insurance agents in certain

Mid-Atlantic, Midwest, New England, Southern and Southwestern states.

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.

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

At December 31, 2023, Donegal Mutual held approximately 44% of our outstanding Class A common stock and approximately 84% of our outstanding Class B common stock.

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share the underwriting results of the pooled business in proportion to their respective participation in the underwriting pool.

The operations of our insurance subsidiaries and Donegal Mutual are interrelated due to the pooling agreement and

other factors.

The operations of our insurance subsidiaries and Donegal Mutual are interrelated due to the pooling agreement and other

While maintaining the separate corporate existence of each company, our insurance subsidiaries conduct business together with Donegal Mutual and its insurance subsidiaries as the Donegal Insurance Group.

The Donegal Insurance Group

is not a legal entity, is not an insurance company and does not issue or administer insurance policies.

The Donegal Insurance Group is not

a legal entity, is not an insurance company and does not issue or administer insurance policies.

Rather, it is a trade name that refers to the group of insurance companies that are affiliated with Donegal Mutual.

See “Business -

Relationship with Donegal Mutual” for more information regarding the pooling agreement and other transactions with our affiliates.

See “Business - Relationship with

Donegal Mutual” for more information regarding the pooling agreement and other transactions with our affiliates.

Donegal Mutual and our insurance subsidiaries operate together as the Donegal Insurance Group and share a combined business plan designed to achieve market penetration and underwriting profitability objectives.

The products our insurance subsidiaries and Donegal Mutual offer are generally complementary, thereby allowing Donegal Insurance Group to offer a broader range of products to a given market and to expand 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 relate to specific risk profiles targeted within similar classes of business, such as

preferred tier products compared to standard tier products, but we do not allocate all of the standard risk gradients to one company.

products our insurance subsidiaries and Donegal Mutual offer are generally complementary, thereby allowing Donegal Insurance Group to offer a broader range of products to a given market and to expand 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 relate to specific risk profiles targeted within similar classes of business, such as preferred tier

products compared to standard tier products, but we do not allocate all of the standard risk gradients to one company.

Therefore, the underwriting profitability of the business the individual companies write directly will vary.

However, because the pool homogenizes the risk characteristics of the predominant percentage of the business Donegal Mutual and Atlantic States write directly and each company shares the underwriting results according to each company’s

participation percentage, each company realizes its percentage share of the underwriting results of the pool.

However, because the

pool homogenizes the risk characteristics of the predominant percentage of the business Donegal Mutual and Atlantic States write directly and each company shares the underwriting results according to each company’s participation percentage, each

company realizes its percentage share of the underwriting results of the pool.

Donegal Mutual completed the merger of Mountain States Mutual Casualty Company, or Mountain States, with and into Donegal Mutual effective May 25, 2017.

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began to place the business of the Mountain States Insurance Group into the underwriting pool.

As a result, our consolidated financial results through December 31, 2020 excluded the results of the Mountain States Insurance Group operations in

those Southwestern states.

In July 2013, our board of directors authorized a share repurchase program pursuant to which we have the authority to purchase up to 500,000 additional shares of our Class A common stock at prices prevailing from

time to time in the open market subject to the provisions of the SEC Rule 10b-18 and in privately negotiated transactions.

to time in the open market subject to the provisions 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 2023 or 2022.

We have purchased a

total of 57,658 shares of our Class A common stock under this program from its inception through December 31, 2022.

We have purchased a total of

57,658 shares of our Class A common stock under this program from its inception through December 31, 2023.

On April 29, 2022, Donegal Mutual disclosed that it will, at its discretion, purchase shares of our Class A common stock and our Class B common stock at market prices prevailing from time to time in the open market

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

During 2022, Donegal Mutual purchased 1,035,778 shares

of our Class A common stock and 54,231 shares of our Class B common stock.

In accordance with Section 12b-2 of the Exchange Act, we are no longer a “smaller reporting company” as of December 31, 2022.

However, under Item 10(f)(2)(i) of Regulation S-K, we are permitted to avail ourselves of

the scaled disclosure requirements available to smaller reporting companies in this Form 10-K Report.

Having ceased to be a smaller reporting company, we will no longer be able to avail ourselves of such scaled disclosure beginning with our

quarterly report on Form 10-Q for the quarterly period ending March 31, 2023.

We have historically not availed ourselves of most aspects of such scaled disclosure and do not expect any material increase in financial or legal expenses for

additional disclosure requirements as a result of the change in status.

Donegal Mutual purchased 516,620 and 1,035,778 shares of

our Class A common stock during 2023 and 2022, respectively.

Donegal Mutual did not purchase any shares of our Class B common stock during 2023.

Donegal Mutual purchased 54,231 shares of our Class B common stock during 2022.

Critical Accounting Policies and Estimates

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Liability 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.

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

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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.

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 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.

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.

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

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

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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 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, availability of skilled labor, the rate of plaintiff attorney involvement in

claims and the cost of medical technologies and procedures.

Assumptions related to our insurance subsidiaries’ external environment include the absence of significant changes in tort law and the legal environment that increase liability exposure,

consistency in judicial interpretations of insurance coverage and policy provisions and the rate of loss cost inflation.

Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of

claims, payment and case reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business and

consistency in reinsurance coverage and collectability of reinsured losses, among other items.

To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make

adjustments in their reserves that they consider appropriate for such changes.

Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at December 31, 2022.

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 $6.7 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.

While these trend changes have begun to normalize, they 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, availability of skilled labor, the rate of plaintiff attorney involvement in claims and the cost of medical technologies and procedures.

Assumptions related to our insurance subsidiaries’ external environment include the

absence of significant changes in tort law and the legal environment that increase liability exposure, consistency in judicial interpretations of insurance coverage and policy provisions and the rate of loss cost inflation.

Internal assumptions

include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in

the quality and characteristics of business written within a given line of business and consistency in reinsurance coverage and collectability of reinsured losses, among other items.

To the extent our insurance subsidiaries determine that

underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes.

Accordingly, our insurance subsidiaries’ ultimate liability for unpaid

losses and loss expenses will likely differ from the amount recorded at December 31, 2023.

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 $6.9 million.

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,

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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.

Changes in our insurance subsidiaries’ estimates of their liability for losses and loss expenses generally reflect actual payments and their evaluation of information received subsequent to the

prior reporting period.

Our insurance subsidiaries recognized a decrease in their liability for losses and loss expenses of prior years of $16.7 million, $44.8 million and $31.2 million in 2023, 2022 and 2021, respectively.

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The majority of the 2023 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO.

The 2021 development represented 5.6% of the December 31, 2020 net carried

reserves and resulted primarily from lower-than-expected loss emergence in the personal automobile, workers’ compensation and commercial automobile lines of business for accident years prior to 2021.

The majority of the 2021 development related

to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO.

The 2020 development represented 2.6% of the December 31, 2019 net carried reserves and resulted primarily from lower-than-expected severity

in the workers’ compensation and personal automobile lines of business, partially offset by higher-than-expected severity in the commercial automobile and commercial multi-peril lines of business, for accident years prior to 2020.

The majority of

the 2020 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO.

The 2022 development represented 7.2% of the December 31, 2021 net carried reserves

and resulted primarily from lower-than-expected loss emergence in the personal automobile and commercial automobile lines of business for accident years prior to 2022.

The majority of the 2022 development related to decreases in the liability for

losses and loss expenses of prior years for Atlantic States and MICO.

The 2021 development represented 5.6% of the December 31, 2020 net carried reserves and resulted primarily from lower-than-expected loss emergence in the personal automobile,

workers’ compensation and commercial automobile lines of business for accident years prior to 2021.

The majority of the 2021 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO.

Excluding the impact of severe weather events and the COVID-19 pandemic, our insurance subsidiaries have noted stable amounts in the number of claims incurred and the number of claims outstanding at period ends

relative to their premium base in recent years across most of their lines of business.

However, the amount of the average claim outstanding has increased gradually over the past several years due to various factors such as rising medical loss

costs and increased litigation trends.

However, the amount of the average claim outstanding has increased gradually over the past several years due to various factors such as increased property and

automobile repair and replacement costs, rising medical loss costs and increased litigation trends.

We have also experienced a general slowing of settlement rates in litigated claims.

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.

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 pool with Donegal Mutual exposes Atlantic States to adverse loss development on the business of Donegal Mutual that the pool includes.

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For the year ended December 31, 2022, the actuaries developed a range from a low of $621.6 million to a high of $721.6 million and selected a point estimate of $669.9 million.

The actuaries’ range

of estimates for commercial lines in 2021 was $442.8 million to $524.0 million, and the actuaries selected a point estimate of $481.7 million.

The actuaries’ range of estimates for personal lines in 2021 was $132.9 million to $157.5 million, and

the actuaries selected a point estimate of $144.7 million.

The actuaries’ range of estimates for commercial lines in 2022

was $486.4 million to $560.5 million, and the actuaries selected a point estimate of $522.0 million.

The actuaries’ range of estimates for personal lines in 2022 was $135.2 million to $161.1 million, and the actuaries selected a point estimate of

$147.9 million.

Our insurance subsidiaries seek to enhance their underwriting results by carefully selecting the product lines they underwrite.

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Our insurance subsidiaries have limited exposure to asbestos and other environmental liabilities.

Through the consistent application of this disciplined underwriting philosophy, our insurance subsidiaries have avoided

many of the “long-tail” issues other insurance companies have faced.

We consider workers’ compensation to be a “long-tail” line of business, in that workers’ compensation claims tend to be settled over a longer time frame than those in the other

lines of business of our insurance subsidiaries.

Through the consistent application of this disciplined underwriting philosophy, our insurance subsidiaries have avoided many

of the “long-tail” issues other insurance companies have faced.

We consider workers’ compensation to be a “long-tail” line of business, in that workers’ compensation claims tend to be settled over a longer time frame than those in the other lines

of business of our insurance subsidiaries.

The following table presents 2023 and 2022 claim count and payment amount information for workers’ compensation.

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Despite challenging insurance market conditions and increasing property and casualty loss severity trends that affected our results in recent years, we believe that our focused business strategy, including our

insurance subsidiaries’ ongoing implementation of premium rate increases and refinements to their disciplined underwriting practices, have positioned us well for 2023 and beyond.

insurance subsidiaries’ ongoing implementation of premium rate increases and refinements to their underwriting practices, have positioned us well for 2024 and beyond.

Because our insurance subsidiaries do not prepare GAAP financial statements, we evaluate the performance of our commercial lines and personal lines segments utilizing statutory accounting practices (“SAP”), which

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Net investment income

Investment (losses) gains

Investment gains (losses)

Total revenues

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(in thousands)

Components of net (loss) income:

Components of net income (loss):

Underwriting (loss) income:

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Personal lines

SAP underwriting (loss) income

SAP underwriting loss

GAAP adjustments

GAAP underwriting (loss) income

GAAP underwriting loss

Net investment income

Investment (losses) gains

(Loss) income before income tax (benefit) expense

Income tax (benefit) expense

Net (loss) income

Investment gains (losses)

Income (loss) before income tax expense (benefit)

Income tax expense (benefit)

Net income (loss)

Non-GAAP Information

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Net premiums written

The increase in the change in net unearned premiums for 2021 compared to 2020 primarily reflects the inclusion of the business of the Mountain States Insurance Group in the underwriting pool beginning with policies

effective in 2021.

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.

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.

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GAAP Combined Ratios (Total Lines)

Loss ratio (non-weather)

Loss ratio (weather-related)

Loss ratio - core losses

Loss ratio - weather-related losses

Loss ratio - large fire losses

Loss ratio - net prior-year reserve development

Expense ratio

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Net Premiums Earned

Our insurance subsidiaries’ net premiums earned increased to $822.5 million for 2022, an increase of $46.5 million, or 6.0%, compared to 2021, primarily reflecting solid

premium retention and renewal premium increases.

Our insurance subsidiaries’ net premiums earned increased to $882.1 million for 2023, an increase of $59.6 million, or 7.2%, compared to 2022, primarily reflecting solid premium

retention and renewal premium increases.

Our insurance subsidiaries earn premiums and recognize them as income over the terms of the policies they issue.

Such terms are generally one year or less in duration.

Therefore, increases or

decreases in net premiums earned generally reflect increases or decreases in net premiums written in the preceding twelve-month period compared to the same period one year earlier.

Therefore, increases or decreases in

net premiums earned generally reflect increases or decreases in net premiums written in the preceding twelve-month period compared to the same period one year earlier.

Net Premiums Written

Our insurance subsidiaries’ 2023 net premiums written increased 6.2% to $895.7 million, compared to $843.5 million for 2022.

Commercial lines net premiums written increased $18.0 million, or 3.6%, for 2022 compared

We attribute the increase in commercial lines net premiums written primarily to modest new business writings, strong premium retention and a continuation of renewal premium increases in lines other than workers’ compensation, offset

partially by planned attrition in regions we have targeted for profit improvement.

Personal lines net premiums written increased $21.3 million, or 7.0%, for 2022 compared to 2021.

We attribute the increase in personal lines net premiums written

primarily to renewal premium increases, strong policy retention and new business writings in certain states where we have introduced an updated suite of products.

Commercial lines net premiums written decreased $2.4 million, or 0.5%, for 2023 compared to

We attribute the decrease in commercial lines net premiums written primarily to planned attrition in states we are exiting or have targeted for profit improvement, lower new business writings and reinsurance reinstatement premiums on our

property excess of loss reinsurance program, offset partially by strong premium retention and a continuation of renewal premium increases in lines other than workers’ compensation.

Personal lines net premiums written increased $54.6 million, or

17.5%, for 2023 compared to 2022.

We attribute the increase in personal lines net premiums written primarily to renewal premium increases and strong policy retention.

Investment Income

For 2023, our net investment income increased 20.1% to $40.9 million, compared to $34.0 million for 2022, due primarily to higher average reinvestment yields and higher average invested assets for 2023 compared to

Net Investment (Losses) Gains

Our net investment losses for 2022 were $10.2 million.

Net Investment Gains (Losses)

Our net investment gains for 2023 were $3.2 million.

The net investment (losses) gains for 2022 and 2021 were primarily related to (decreases) increases in

unrealized (losses) gains within our equity securities portfolio.

Our net investment losses for 2022 were $10.2 million.

The net investment gains (losses) for 2023 and 2022 were primarily related to increases (decreases) in the

market value of the equity securities held at the end of the respective periods.

We did not recognize any impairment losses during 2023 or 2022.

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ratio decreased to 64.8% for 2023, compared to 67.1% for 2022.

This decrease resulted primarily from the commercial automobile loss ratio decreasing to 64.2% for 2022, compared to 75.0% for 2021.

The personal lines loss ratio increased to 71.0%

for 2022, compared to 64.8% for 2021.

The personal automobile loss ratio increased to 72.1% for 2022, compared to 65.6% for 2021, primarily due to an increase in automobile claim severity due to the ongoing impact of supply chain disruption and

labor shortages on the costs of repair and replacement vehicles.

The homeowners loss ratio increased to 76.1% for 2022, compared to 69.6% for 2021, primarily due to increased average claim severity due to the ongoing impact of supply chain

disruption and labor shortages on repair and replacement costs for homes.

Our insurance subsidiaries experienced favorable loss reserve development of approximately $44.8 million, or 5.4 percentage points

of the loss ratio, during 2022 in their reserves for prior accident years, compared to approximately $31.2 million, or 4.0 percentage points of the loss ratio, during 2021.

The favorable loss reserve development in 2022 resulted primarily from

lower-than-expected loss emergence in the personal automobile and commercial automobile lines of business for accident years prior to 2022.

Weather-related losses of $63.5 million, or 7.7 percentage points of the loss ratio, for 2022 increased

from $45.3 million, or 5.8 percentage points of the loss ratio, for 2021, with the increase primarily impacting the commercial multi-peril line of business.

Large fire losses, which we define as individual fire losses in excess of $50,000, were

$53.5 million, or 6.5 percentage points of the loss ratio, for 2022, compared to $45.6 million, or 5.9 percentage points of the loss ratio, for 2021.

The increase was related to increased average claim severity of both commercial property and

home fires in 2022 compared to 2021, which we attribute in part to inflationary repair cost increases.

This decrease resulted primarily from the commercial multi-peril loss ratio decreasing to 73.1% for 2023, compared to 79.2% for 2022, primarily due to a decrease in severity of

non-weather claims.

The personal lines loss ratio increased to 75.6% for 2023, compared to 71.0% for 2022.

The personal automobile loss ratio increased to 78.5% for 2023, compared to 72.1% for 2022, primarily due to an increase in automobile claim

severity due to the ongoing impact of supply chain disruption and labor shortages on the costs of repair and replacement vehicles.

Our insurance subsidiaries experienced favorable loss reserve development of approximately $16.7 million, or 1.9 percentage points of the loss ratio, during 2023 in their reserves for prior accident years, compared to approximately $44.8 million, or 5.4 percentage points of the loss ratio, during 2022.

The favorable loss

reserve development in 2023 resulted primarily from lower-than-expected loss emergence in the personal automobile and commercial automobile lines of business for accident years prior to 2023.

Weather-related losses of $72.9 million, or 8.3

percentage points of the loss ratio, for 2023 increased from $63.5 million, or 7.7 percentage points of the loss ratio, for 2022, with the increase primarily impacting the homeowners line of business.

Large fire losses, which we define as

individual fire losses in excess of $50,000, were $45.4 million, or 5.2 percentage points of the loss ratio, for 2023, compared to $53.5 million, or 6.5 percentage points of the loss ratio, for 2022.

The decrease was related to lower average claim

severity of both commercial property and home fires in 2023 compared to 2022.

Underwriting Expenses

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We attribute the modest increase

to higher technology system-related expenses for 2022 compared to 2021, offset somewhat by lower commercial growth incentive costs for our agents and decreased underwriting-based incentive costs for our employees for 2022 compared to 2021.

increase in technology systems-related expenses for 2022 was primarily due to an increased allocation of costs from Donegal Mutual to our insurance subsidiaries following the successful implementation of the second phase of our ongoing systems

modernization project in August 2021.

to higher technology system-related expenses for 2023 compared to 2022, offset somewhat by decreased underwriting-based incentive costs for our employees for 2023 compared to 2022.

The increase in technology systems-related expenses for 2023 was

primarily due to an increased allocation of costs from Donegal Mutual to our insurance subsidiaries following the successful implementation of two additional major releases of new systems as part of our ongoing systems modernization project in

We expect the impact from allocated costs from Donegal Mutual to our insurance subsidiaries related to the ongoing systems modernization project will peak at approximately 1.25 percentage points of the expense ratio in 2024 before beginning

to subside gradually in subsequent years.

Policyholder Dividends

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Our insurance subsidiaries’ combined ratio was 104.4% and 103.3% for 2023 and 2022, respectively.

The combined ratio represents the sum of the loss ratio, the expense ratio and the dividend ratio, which is the ratio

of workers’ compensation policy dividends incurred to premiums earned.

We attribute the increase in our combined ratio primarily to the increase in the loss ratio.

The combined ratio represents the sum of the loss ratio, the expense ratio and the dividend ratio, which is the ratio of

workers’ compensation policy dividends incurred to premiums earned.

We attribute the increase in our combined ratio primarily to the increases in the loss and expense ratios.

Interest Expense

Our interest expense for 2022 decreased to $620,558, compared to $895,605 for 2021.

We attribute the decrease to lower average borrowings under our lines of credit during 2022 compared to 2021.

Our income tax benefit was $1.7 million for 2022, compared to income tax expense of $5.1 million for 2021.

Our interest expense for 2023 decreased slightly to $619,813, compared to $620,558 for 2022.

Our income tax expense was $637,972 for 2023, compared to an income tax benefit of $1.7 million for 2022.

Our effective tax rate for 2023 was 12.6%.

Net (Loss) Income and (Loss) Earnings Per Share

Our net loss for 2022 was $2.0 million, or $.06 per share of Class A common stock and $.07 per share of Class B common stock, compared to net income for 2021 of $25.3 million, or $0.83 per share of Class A common

stock on a diluted basis and $0.74 per share of Class B common stock.

Net Income (Loss) and Earnings (Loss) Per Share

Our net income for 2023 was $4.4 million, or $0.14 per share of Class A common stock on a diluted basis and $0.11 per share of Class B common stock, compared to a net loss for 2022 of $2.0 million, or $0.06 per share

of Class A common stock and $0.07 per share of Class B common stock.

We had 27.8 million and 27.1 million Class A shares outstanding at December 31, 2023 and 2022, respectively.

We had 5.6 million Class B shares outstanding for both periods.

There are no outstanding securities that dilute our shares of Class B common stock.

are no outstanding securities that dilute our shares of Class B common stock.

Book Value Per Share

Our stockholders’ equity decreased by $47.4 million during 2022, primarily due to $45.4 million of after-tax unrealized losses within our available-for-sale fixed-maturity portfolio, resulting in a decrease in our

book value per share to $14.79 at December 31, 2022, compared to $16.95 a year earlier.

Our stockholders’ equity decreased by $3.8 million during 2023, primarily due to the cash dividends we declared exceeding our net income and other increases during the year, resulting in a decrease in our book value

per share to $14.39 at December 31, 2023, compared to $14.79 a year earlier.

YEAR ENDED DECEMBER 31, 2022 COMPARED TO YEAR ENDED DECEMBER 31, 2021

Net Premiums Earned

Our insurance subsidiaries’ net premiums earned increased to $776.0 million for 2021, an increase of $34.0 million, or 4.6%, compared to 2020, primarily reflecting the

inclusion of the business of the Mountain States Insurance Group in the underwriting pool beginning with policies effective in 2021, as well solid premium retention and renewal premium increases.

Our insurance subsidiaries earn premiums and

recognize them as income over the terms of the policies they issue.

Our insurance subsidiaries’ net premiums earned increased to $822.5 million for 2022, an increase of $46.5 million, or 6.0%, compared to 2021, primarily reflecting solid premium

retention and renewal premium increases.

Our insurance subsidiaries earn premiums and recognize them as income over the terms of the policies they issue.

Such terms are generally one year or less in duration.

Therefore, increases or decreases in net premiums earned generally reflect increases or decreases in net premiums written

in the preceding twelve-month period compared to the same period one year earlier.

Therefore, increases or decreases in

net premiums earned generally reflect increases or decreases in net premiums written in the preceding twelve-month period compared to the same period one year earlier.

Net Premiums Written

Our insurance subsidiaries’ 2022 net premiums written increased 4.9% to $843.5 million, compared to $804.3 million for 2021.

Commercial lines net premiums written increased $75.8 million, or 17.8%, for 2021 compared

We attribute the increase in commercial lines net premiums written primarily to the inclusion of the business of the Mountain States Insurance Group in the underwriting pool beginning with policies effective in 2021, as well as solid

premium retention and renewal premium increases.

Personal lines net premiums written decreased $13.7 million, or 4.3%, for 2021 compared to 2020.

We attribute the decrease in personal lines net premiums written primarily to net attrition as a

result of measures our insurance subsidiaries implemented to improve underwriting profitability, partially offset by the impact of premium rate increases.

Commercial lines net premiums written increased $18.0 million, or 3.6%, for 2022 compared to

by planned attrition in regions we have targeted for profit improvement.

Personal lines net premiums written increased $21.3 million, or 7.0%, for 2022 compared to 2021.

We attribute the increase in personal lines net premiums written primarily to

renewal premium increases, strong policy retention and new business writings in certain states where we have introduced an updated suite of products.

Investment Income

For 2021, our net investment income increased to $31.1 million, compared to $29.5 million for 2020, due primarily to higher average invested assets for 2021 compared to 2020.

Net Investment Gains

Our net investment gains for 2021 and 2020 were $6.5 million and $2.8 million, respectively.

The net investment gains for 2021 and 2020 were primarily related to increases in unrealized gains within our equity

securities portfolio.

For 2022, our net investment income increased 9.3% to $34.0 million, compared to $31.1 million for 2021, due primarily to higher average reinvestment yields and higher average invested assets for 2022 compared to 2021.

Net Investment (Losses) Gains

Our net investment losses for 2022 were $10.2 million.

Our net investment gains for 2021 were $6.5 million.

The net investment (losses) gains for 2022 and 2021 were primarily related to (decreases) increases in

unrealized (losses) gains within our equity securities portfolio.

We did not recognize any impairment losses during 2022 or 2021.

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Our insurance subsidiaries’ commercial lines loss

ratio increased to 68.6% for 2021, compared to 63.9% for 2020.

This increase resulted primarily from the workers’ compensation loss ratio increasing to 57.7% for 2021, compared to 51.1% for 2020, and the commercial multi-peril loss ratio

increasing to 76.9% for 2021, compared to 65.9% for 2020.

The personal lines loss ratio increased to 64.8% for 2021, compared to 59.5% for 2020.

The personal automobile loss ratio increased to 65.6% for 2021, compared to 60.1% for 2020, primarily

due to an increase in automobile claim frequency as driving activity generally returned to pre-pandemic levels.

The homeowners loss ratio increased to 69.6% for 2021, compared to 61.8% for 2020.

Our insurance subsidiaries experienced favorable

loss reserve development of approximately $31.2 million, or 4.0 percentage points of the loss ratio, during 2021 in their reserves for prior accident years, compared to favorable loss reserve development of

approximately $12.9 million, or 1.7 percentage points of the loss ratio, during 2020.

The favorable loss reserve development in 2021 resulted primarily from lower-than-expected loss emergence in the personal automobile, workers’ compensation and

commercial automobile lines of business for accident years prior to 2021.

Weather-related losses of $45.3 million, or 5.8 percentage points of the loss ratio, for 2021 decreased from $51.4 million, or 6.9 percentage points of the loss ratio, for

2020, with the decrease primarily impacting the commercial multi-peril line of business.

Large fire losses, which we define as individual fire losses in excess of $50,000, were $45.6 million, or 5.9 percentage points of the loss ratio, for 2021,

compared to $22.8 million, or 3.1 percentage points of the loss ratio, for 2020.

The significant increase was related to a higher incidence of both commercial property and home fires in 2021 compared to 2020.

ratio decreased to 67.1% for 2022, compared to 68.6% for 2021.

This decrease resulted primarily from the commercial automobile loss ratio decreasing to 64.2% for 2022, compared to 75.0% for 2021.

The personal lines loss ratio increased to 71.0% for

2022, compared to 64.8% for 2021.

shortages on the costs of repair and replacement vehicles.

The homeowners loss ratio increased to 76.1% for 2022, compared to 69.6% for 2021, primarily due to increased average claim severity due to the ongoing impact of supply chain disruption and

labor shortages on repair and replacement costs for homes.

Our insurance subsidiaries experienced favorable loss reserve development of approximately $44.8 million, or 5.4 percentage points of the loss ratio,

during 2022 in their reserves for prior accident years, compared to approximately $31.2 million, or 4.0 percentage points of the loss ratio, during 2021.

The favorable loss reserve development in 2022 resulted primarily from lower-than-expected

loss emergence in the personal automobile and commercial automobile lines of business for accident years prior to 2022.

Weather-related losses of $63.5 million, or 7.7 percentage points of the loss ratio, for 2022 increased from $45.3 million, or

5.8 percentage points of the loss ratio, for 2021, with the increase primarily impacting the commercial multi-peril line of business.

Large fire losses, which we define as individual fire losses in excess of $50,000, were $53.5 million, or 6.5

percentage points of the loss ratio, for 2022, compared to $45.6 million, or 5.9 percentage points of the loss ratio, for 2021.

The increase was related to increased average claim severity of both commercial property and home fires in 2022 compared

to 2021, which we attribute in part to inflationary repair cost increases.

Underwriting Expenses

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We attribute the modest increase

to higher technology system-related expenses for 2021 compared to 2020, offset somewhat by lower commercial growth incentive costs for our agents and decreased underwriting-based incentive costs for our agents and employees for 2021 compared to

The increase in technology systems-related expenses for 2021 was primarily due to an increased allocation of costs from Donegal Mutual to our insurance subsidiaries following the successful implementation of the second phase of our ongoing

systems modernization project in August 2021.

modernization project in August 2021.

Policyholder Dividends

Our insurance subsidiaries pay policyholder dividends primarily on workers’ compensation policies on a sliding scale based on the profitability of a given policy.

We attribute the decrease in dividends incurred for

2021 compared to 2020 to a modest decline in the profitability of the workers' compensation line of business over the respective periods to which the dividends applied.

Combined Ratio

Our insurance subsidiaries’ combined ratio was 103.3% and 101.0% for 2022 and 2021, respectively.

The combined ratio represents the sum of the loss ratio, the expense ratio and the dividend ratio, which is the ratio

of workers’ compensation policy dividends incurred to premiums earned.

The combined ratio represents the sum of the loss ratio, the expense ratio and the dividend ratio, which is the ratio of

workers’ compensation policy dividends incurred to premiums earned.

We attribute the increase in our combined ratio primarily to the increase in the loss ratio.

Interest Expense

Our interest expense for 2021 decreased to $895,605, compared to $1.2 million for 2020.

Our interest expense for 2022 decreased to $620,558, compared to $895,605 for 2021.

We attribute the decrease to lower average borrowings under our lines of credit during 2022 compared to 2021.

Our income tax expense was $5.1 million for 2021, compared to $10.5 million for 2020.

Our effective tax rate for 2021 was 16.8%, compared to 16.5% for 2020.

Our income tax

expense for 2020 included a $1.6 million income tax benefit related to the carryback of 2018 net operating losses to past tax years with higher statutory income tax rates than are currently in effect, as allowed under the Coronavirus Aid, Relief

and Economic Security Act that was enacted in March 2020.

Net Income and Earnings Per Share

Our net income for 2021 was $25.3 million, or $0.83 per share of Class A common stock on a diluted basis and $0.74 per share of Class B common stock, compared to net income for 2020 of $52.8 million, or $1.83 per

share of Class A common stock on a diluted basis and $1.65 per share of Class B common stock.

Our income tax benefit was $1.7 million for 2022, compared to income tax expense of $5.1 million for 2021.

Our effective tax rate for 2021 was 16.8%.

Net (Loss) Income and (Loss) Earnings Per Share

on a diluted basis and $0.74 per share of Class B common stock.

We had 27.1 million and 25.8 million Class A shares outstanding at December 31, 2022 and 2021, respectively.

We had 5.6 million Class B shares

outstanding for both periods.

There are no outstanding securities that dilute our shares of Class B common stock.

We had 5.6 million Class B shares outstanding for both periods.

no outstanding securities that dilute our shares of Class B common stock.

Book Value Per Share

Our stockholders’ equity increased by $13.3 million during 2021 as a result of our net income, offset somewhat by a reduction of net unrealized gains within our available-for-sale fixed maturity investments.

value per share decreased to $16.95 at December 31, 2021, compared to $17.13 a year earlier, primarily as a result of an increase in the number of Class A shares outstanding during the year.

value per share to $14.79 at December 31, 2022, compared to $16.95 a year earlier.

Financial Condition

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We have historically generated sufficient net positive cash flow from our operations to fund our commitments and build our investment portfolio, thereby increasing future investment returns.

The pooling agreement

with Donegal Mutual historically has been cash flow positive because of the 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.

The pooling agreement with

Donegal Mutual historically has been cash flow positive because of the 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 2022, 2021 and 2020 were $67.1 million, $76.7 million and $101.1 million,

respectively.

At December 31, 2022, we had no outstanding borrowings under our line of credit with M&T and had the ability to borrow up to $20.0 million at interest rates equal to the then-current LIBOR rate plus 2.00%.

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 2023, 2022 and 2021 were $28.6 million, $67.1 million and $76.7 million, respectively.

The decrease in

net cash flows provided by operating activities for 2023 was primarily related to higher cash outflows for claim payments compared to 2022 and 2021.

At December 31, 2023, we had no outstanding borrowings under our line of credit with M&T and had the ability to borrow up to $20.0 million at interest rates equal to the then-current Term SOFR rate plus 2.11%.

December 31, 2023, Atlantic States had a $35.0 million outstanding advance with the FHLB of Pittsburgh that carries a fixed interest rate of 1.74% and is due in August 2024.

In March 2020, Atlantic States issued $50.0 million of debt to the FHLB

of Pittsburgh in exchange for a cash advance in the same amount for contingent liquidity funding in light of uncertainty surrounding the economic impact of the COVID-19 pandemic.

In March 2020, Atlantic States issued $50.0 million of debt to the FHLB of

Pittsburgh in exchange for a cash advance in the same amount for contingent liquidity funding in light of uncertainty surrounding the economic impact of the COVID-19 pandemic.

Atlantic States repaid this advance when it became due in March 2021.

In September 2021, upon receipt of approval from the Michigan Department of Insurance and Financial Services, MICO repaid in full the $5.0 million surplus note held previously by Donegal Mutual, along with accrued interest of $178,082.

discuss in Note 9 – Borrowings our estimate of the timing of the amounts payable for the borrowings under our lines of credit based on their contractual maturities.

September 2021, upon receipt of approval from the Michigan Department of Insurance and Financial Services, MICO repaid in full the $5.0 million surplus note held previously by Donegal Mutual, along with accrued interest of $178,082.

We discuss in

Note 9 – Borrowings our estimate of the timing of the amounts payable for the borrowings under our lines of credit based on their contractual maturities.

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.

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.

The cash dividends we declared to our stockholders totaled $22.2 million, $20.9 million and $19.6 million in 2023, 2022 and 2021, respectively.

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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.

Our insurance subsidiaries are required by law to

maintain certain 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, 2022.

Our insurance subsidiaries are required by law to maintain

certain 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.

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, 2023.

Amounts available for distribution to us as dividends from our insurance subsidiaries without prior approval of insurance regulatory

authorities in 2023 are approximately $26.4 million from Atlantic States, $6.5 million from Southern, $6.0 million from Peninsula and $7.5 million from MICO, or a total of approximately $46.4 million.

At December 31, 2022 and 2021, our investment portfolio of primarily investment-grade bonds, common stock, short-term investments and cash totaled $1.3 billion, representing 58.2% and 59.2%, respectively, of our

total assets.

authorities in 2024 are approximately $27.4 million from Atlantic States, $7.2 million from MICO and $5.0 million from Peninsula, or a total of approximately $39.6 million.

At December 31, 2023 and 2022, our investment portfolio of primarily investment-grade bonds, common stock, short-term investments and cash totaled $1.3 billion, representing 58.6% and 58.2%, respectively, of our total

See “Business - Investments” for more information.

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Our fixed maturity investments consisted of high-quality marketable bonds, of which 95.2% were rated at investment-grade levels at December 31, 2023 and 2022, respectively.

At December 31, 2022, the net unrealized loss on our available-for-sale fixed maturity investments, net of deferred taxes, amounted to $38.0 million, compared to a net unrealized gain of $7.4 million at December 31,

At December 31, 2023, the net unrealized loss on our available-for-sale fixed maturity investments, net of deferred taxes, amounted to $31.9 million, compared to a net unrealized loss of $38.0 million at December 31,

Impact of Inflation

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from wildfires and flooding, incurred by the industry in recent years may be indicative of changing weather patterns due to climate change.

Should those patterns continue to emerge, increased weather-related catastrophes in the states in which

our insurance subsidiaries operate would lead to higher overall losses that they may be unable to offset through pricing actions.

Should those patterns continue to emerge, increased weather-related catastrophes in the states in which our

insurance subsidiaries operate would lead to higher overall losses that they may be unable to offset through pricing actions.

Our insurance subsidiaries seek to reduce their exposure to catastrophe losses through their underwriting strategies and their purchase of catastrophe reinsurance.

While the emerging science regarding climate change

and its connection to extreme weather events continues to be studied, climate change, to the extent it produces rising temperatures and changes in weather patterns, could 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.

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 rely on

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Such models might also be unable to anticipate the uncertain impact of changing climate conditions that tend to occur gradually over time.

the policies of our insurance subsidiaries renew not less frequently than annually, our insurance subsidiaries have the ability to respond to the impact of changing climate conditions through adjustments to their underwriting standards, pricing,

and policy terms and conditions, subject to applicable regulatory approvals.

policies of our insurance subsidiaries renew not less frequently than annually, our insurance subsidiaries have the ability to respond to the impact of changing climate conditions through adjustments to their underwriting standards, pricing, and

policy terms and conditions, subject to applicable regulatory approvals.

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

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Impact of New Accounting Standards

In September 2016, the FASB issued guidance that amends previous guidance on the impairment of financial instruments by adding an impairment model that requires an entity to recognize expected credit losses as an

In September 2016, the FASB issued guidance that amended previous guidance on the impairment of financial instruments by adding an impairment model that requires an entity to recognize expected credit losses as an

allowance rather than impairments as credit losses are incurred.

The intent of this guidance is to reduce complexity and result in a more timely recognition of expected credit losses.

In November 2019, the FASB issued guidance that delays the

In November 2019, the FASB issued guidance that delayed the

effective date for “smaller reporting companies,” as defined in Item 10(f)(1) of Regulation S-K, to annual and interim reporting periods beginning after December 15, 2022 from December 15, 2019.

We are a smaller reporting company and our adoption

of this guidance on January 1, 2023 will result in an after-tax adjustment to retained earnings estimated between $1.5 million and $2.5 million.

We do not expect the adoption of this guidance to have a significant impact on our results of

operations or cash flows.

We were a smaller reporting company at the time this

guidance was issued, and our adoption of this guidance on January 1, 2023 resulted in an after-tax decrease in retained earnings of $1.9 million.

The adoption of this guidance did not have a significant impact on our results of operations or cash

Off-Balance Sheet Arrangements

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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 7. Management’s Discussion and Analysis