Item 2. Management’s Discussion and Analysis
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
We recommend that you read the following information in conjunction with the historical financial information and the footnotes to that financial information we include in this Quarterly Report on Form 10-Q. We
also recommend you read Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024.
Critical Accounting Policies and Estimates
We combine our financial statements with those of our insurance subsidiaries and present them on a consolidated basis in accordance with United States generally accepted accounting principles (“GAAP”).
Our insurance subsidiaries make estimates and assumptions that can have a significant effect on amounts and disclosures we report in our financial statements. The most significant estimates relate to the reserves
of our insurance subsidiaries for property and casualty insurance unpaid losses and loss expenses. While we believe our estimates and the estimates of our insurance subsidiaries are appropriate, the ultimate amounts may differ from the estimates
we provided. We regularly review our methods for making these estimates and we reflect any adjustment we consider necessary in our results of operations for the period in which we make an adjustment.
Liabilities for Losses and Loss Expenses
Liabilities for losses and loss expenses are estimates at a given point in time of the amounts an insurer expects to pay with respect to incurred policyholder claims based on facts and circumstances the insurer
knows at that point in time. For example, legislative, judicial and regulatory actions may expand coverage definitions, retroactively mandate coverage or otherwise require our insurance subsidiaries to pay losses for damages that their policies
explicitly excluded or did not intend to cover. At the time of establishing its estimates, an insurer recognizes that its ultimate liability for losses and loss expenses will exceed or be less than such estimates. Our insurance subsidiaries base
their estimates of liabilities for losses and loss expenses on assumptions as to future loss trends, expected claims severity, judicial theories of liability and other factors. However, during the loss adjustment period, our insurance
subsidiaries may learn additional facts regarding individual claims, and, consequently, it often becomes necessary for our insurance subsidiaries to refine and adjust their estimates for these liabilities. We reflect any adjustments to the
liabilities for losses and loss expenses of our insurance subsidiaries in our consolidated results of operations in the period in which our insurance subsidiaries make adjustments to their estimates.
Our insurance subsidiaries maintain liabilities for the payment of losses and loss expenses with respect to both reported and unreported claims. Our insurance subsidiaries establish these liabilities for the
purpose of covering the ultimate costs of settling all losses, including investigation and litigation costs. Our insurance subsidiaries base the amount of their liability for reported losses primarily upon a case-by-case evaluation of the type of
risk involved, knowledge of the circumstances surrounding each claim and the insurance policy provisions relating to the type of loss the policyholder incurred. Our insurance subsidiaries determine the amount of their liability for unreported
claims and loss expenses on the basis of historical information by line of insurance. Our insurance subsidiaries account for inflation in the reserving function through analysis of costs and trends and reviews of historical reserving results. Our
insurance subsidiaries monitor their liabilities closely and recompute them periodically using new information on reported claims and a variety of statistical techniques. Our insurance subsidiaries do not discount their liabilities for losses and
loss expenses.
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Index
Reserve estimates can change over time because of unexpected changes in assumptions related to our insurance subsidiaries’ external environment and, to a lesser extent, assumptions related to our insurance
subsidiaries’ internal operations. For example, our insurance subsidiaries have experienced an increase in claims severity and a lengthening of the claim settlement periods on bodily injury claims during the past several years. In addition, the
COVID-19 pandemic and related government mandates and restrictions resulted in various changes from historical claims reporting and settlement trends during 2020 and resulted in significant increases in loss costs in subsequent years due to a
number of factors, including supply chain disruption, higher new and used automobile values, increases in the cost of replacement automobile parts and rising labor rates. These trend changes caused significant disruption to historical loss
patterns and give rise to greater uncertainty as to the pattern of future loss settlements. Related uncertainties regarding future trends include social inflation, availability and cost of replacement automobile parts and building materials,
availability and cost of skilled labor, the rate of specialized plaintiff attorney involvement in claims, plaintiff attorney utilization of litigation financing and the cost of medical technologies and procedures. While we did not see a material
impact in the first quarter of 2025, we are monitoring the impact of tariffs and other inflationary factors, which may result in increases in loss costs in the future. Assumptions related to our insurance subsidiaries’ external environment
include the absence of significant changes in tort law and the legal environment that increase liability exposure, consistency in judicial interpretations of insurance coverage and policy provisions and the rate of loss cost inflation. Internal
assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions,
consistency in the quality and characteristics of business written within a given line of business and consistency in reinsurance coverage and collectability of reinsured losses, among other items. To the extent our insurance subsidiaries
determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes. Accordingly, our insurance subsidiaries’ ultimate liability
for unpaid losses and loss expenses will likely differ from the amount recorded at March 31, 2025. For every 1% change in our insurance subsidiaries’ loss and loss expense reserves, net of reinsurance recoverable, the effect on our pre-tax
results of operations would be approximately $7.0 million.
The establishment of appropriate liabilities is an inherently uncertain process and we can provide no assurance that our insurance subsidiaries’ ultimate liability will not exceed our insurance subsidiaries’ loss
and loss expense reserves and have an adverse effect on our results of operations and financial condition. Furthermore, we cannot predict the timing, frequency and extent of adjustments to our insurance subsidiaries’ estimated future liabilities,
because the historical conditions and events that serve as a basis for our insurance subsidiaries’ estimates of ultimate claim costs may change. As is the case for substantially all property and casualty insurance companies, our insurance
subsidiaries have found it necessary in the past to increase their estimated future liabilities for losses and loss expenses in certain periods and, in other periods, their estimated future liabilities for losses and loss expenses have exceeded
their actual liabilities for losses and loss expenses. Changes in our insurance subsidiaries’ estimates of their liability for losses and loss expenses generally reflect actual payments and their evaluation of information received subsequent to
the prior reporting period.
Excluding the impact of severe weather events and the COVID-19 pandemic, our insurance subsidiaries have noted stable amounts in the number of claims incurred and the number of claims outstanding at period ends
relative to their premium base in recent years across most of their lines of business. However, the amount of the average claim outstanding has increased gradually over the past several years due to various factors such as increased property and
automobile repair and replacement costs, rising medical loss costs and increased litigation trends and lengthening of repair completion times for property and automobile claims. We have also experienced a general slowing of settlement rates in
litigated claims and lengthening of repair completion times for property and automobile claims. Our insurance subsidiaries could have to make further adjustments to their estimates in the future. However, on the basis of our insurance
subsidiaries’ internal procedures, which analyze, among other things, their prior assumptions, their experience with similar cases and historical trends such as reserving patterns, loss payments, pending levels of unpaid claims and product mix,
as well as court decisions, economic conditions and public attitudes, we believe that our insurance subsidiaries have made adequate provision for their liability for losses and loss expenses.
Atlantic States’ participation in the underwriting pool with Donegal Mutual exposes Atlantic States to adverse loss development on the business that Donegal Mutual contributes to the underwriting pool. However,
pooled business represents the predominant percentage of the net underwriting activity of both companies, and Donegal Mutual and Atlantic States share proportionately any adverse risk development relating to the pooled business. The business in
the underwriting pool is homogeneous and each company has a pro-rata share of the entire underwriting pool. Since the predominant percentage of the business of Atlantic States and Donegal Mutual is pooled and the results shared by each company
according to its participation level under the terms of the pooling agreement, the intent of the underwriting pool is to produce a more uniform and stable underwriting result from year to year for each company than either would experience
individually and to spread the risk of loss between the companies.
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Index
Our insurance subsidiaries’ liabilities for losses and loss expenses by major line of business at March 31, 2025 and December 31, 2024 consisted of the following:
March 31,
2025
December 31,
2024
(in thousands)
Commercial lines:
Automobile
$
172,468
$
180,757
Workers’ compensation
132,456
129,406
Commercial multi-peril
212,283
208,676
Other
39,389
39,336
Total commercial lines
556,596
558,175
Personal lines:
Automobile
110,817
116,693
Homeowners
25,760
26,591
Other
3,024
2,905
Total personal lines
139,601
146,189
Total commercial and personal lines
696,197
704,364
Plus reinsurance recoverable
396,427
416,621
Total liabilities for losses and loss expenses
$
1,092,624
$
1,120,985
We have evaluated the effect on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we consider
in establishing the loss and loss expense reserves of our insurance subsidiaries. We established the range of reasonably likely changes based on a review of changes in accident-year development by line of business and applied those changes to our
insurance subsidiaries’ loss and loss expense reserves as a whole. The range we selected does not necessarily indicate what could be the potential best or worst case or the most likely scenario. The following table sets forth the estimated effect
on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we considered in establishing the loss and loss expense reserves of our insurance subsidiaries:
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Index
Percentage Change in Loss
and Loss Expense Reserves
Net of Reinsurance
Adjusted Loss and Loss
Expense Reserves Net of
Reinsurance at
March 31, 2025
Percentage Change
in Stockholders’ Equity at
March 31, 2025(1)
Adjusted Loss and Loss
Expense Reserves Net of
Reinsurance at
December 31, 2024
Percentage Change
in Stockholders’ Equity at
December 31, 2024(1)
(dollars in thousands)
(10.0)%
$626,577
9.4%
$633,928
10.2%
(7.5)
643,982
7.1
651,537
7.6
(5.0)
661,387
4.7
669,146
5.1
(2.5)
678,792
2.4
686,755
2.5
Base
696,197
—
704,364
—
2.5
713,602
(2.4)
721,973
(2.5)
5.0
731,007
(4.7)
739,582
(5.1)
7.5
748,412
(7.1)
757,191
(7.6)
10.0
765,817
(9.4)
774,800
(10.2)
(1)
Net of income tax effect.
Non-GAAP Information
We prepare our consolidated financial statements on the basis of GAAP. Our insurance subsidiaries also prepare financial statements based on statutory accounting principles state insurance regulators prescribe or
permit (“SAP”). SAP financial measures are considered non-GAAP financial measures under applicable SEC rules because the SAP financial measures include or exclude certain items that the most comparable GAAP financial measures do not ordinarily
include or exclude. Our calculation of non-GAAP financial measures may differ from similar measures other companies use, so investors should exercise caution when comparing our non-GAAP financial measures to the non-GAAP financial measures other
companies use.
Because our insurance subsidiaries do not prepare GAAP financial statements, we evaluate the performance of our personal lines and commercial lines segments utilizing SAP financial measures that reflect the growth
trends and underwriting results of our insurance subsidiaries. The SAP financial measures we utilize are net premiums written and statutory combined ratio.
Net Premiums Written
We define net premiums written as the amount of full-term premiums our insurance subsidiaries record for policies effective within a given period less premiums our insurance subsidiaries cede to reinsurers. Net
premiums earned is the most comparable GAAP financial measure to net premiums written. Net premiums earned represent the sum of the amount of net premiums written and the change in net unearned premiums during a given period. Our insurance
subsidiaries earn premiums and recognize them as revenue over the terms of their policies, which are one year or less in duration. Therefore, increases or decreases in net premiums earned generally reflect increases or decreases in net premiums
written in the preceding 12-month period compared to the comparable period one year earlier.
The following table provides a reconciliation of our net premiums earned to our net premiums written for the three months ended March 31, 2025:
Commercial
Lines
Personal
Lines
Total
(in thousands)
Net premiums earned
$
136,216
$
96,486
$
232,702
Change in net unearned premiums
24,402
(10,012
)
14,390
Net premiums written
$
160,618
$
86,474
$
247,092
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Index
The following table provides a reconciliation of our net premiums earned to our net premiums written for the three months ended March 31, 2024:
Commercial
Lines
Personal
Lines
Total
(in thousands)
Net premiums earned
$
132,092
$
95,657
$
227,749
Change in net unearned premiums
23,402
291
23,693
Net premiums written
$
155,494
$
95,948
$
251,442
Statutory Combined Ratio
The combined ratio is a standard measurement of underwriting profitability for an insurance company. The combined ratio does not reflect investment income, net investment gains or losses,
federal income taxes or other non-operating income or expense. A combined ratio of less than 100% generally indicates underwriting profitability.
The statutory combined ratio is a non-GAAP financial measure that is based upon amounts determined under SAP. We calculate our statutory combined ratio as the sum of:
•
the statutory loss ratio, which is the ratio of calendar-year net incurred losses and loss expenses to net premiums earned;
•
the statutory expense ratio, which is the ratio of expenses incurred for net commissions, premium taxes and underwriting expenses to net premiums written; and
•
the statutory dividend ratio, which is the ratio of dividends to holders of workers’ compensation policies to net premiums earned.
The calculation of our statutory combined ratio differs from the calculation of our GAAP combined ratio. In calculating our GAAP combined ratio, we do not deduct installment payment fees from
incurred expenses, and we base the expense ratio on net premiums earned instead of net premiums written. Differences between our GAAP loss ratio and our statutory loss ratio result from anticipating salvage and subrogation recoveries for our GAAP
loss ratio but not for our statutory loss ratio.
Combined Ratios
The following table presents comparative details with respect to our GAAP and statutory combined ratios for the three months ended March 31, 2025 and 2024:
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Index
Three Months Ended March 31,
2025
2024
GAAP Combined Ratios (Total Lines)
Loss ratio - core losses
54.2
%
58.7
%
Loss ratio - weather-related losses
3.7
4.7
Loss ratio - large fire losses
3.3
6.6
Loss ratio - net prior-year reserve development
(4.5
)
(3.7
)
Loss ratio
56.7
66.3
Expense ratio
34.6
35.7
Dividend ratio
0.3
0.4
Combined ratio
91.6
%
102.4
%
Statutory Combined Ratios
Commercial lines:
Automobile
91.4
%
99.6
%
Workers’ compensation
117.6
111.2
Commercial multi-peril
90.3
102.7
Other
80.8
82.2
Total commercial lines
94.7
101.6
Personal lines:
Automobile
85.0
99.8
Homeowners
83.8
102.9
Other
56.6
85.2
Total personal lines
83.6
100.3
Total commercial and personal lines
90.3
101.2
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Index
Results of Operations - Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the first quarter of 2025 were $232.7 million, an increase of $5.0 million, or 2.2%, compared to
$227.7 million for the first quarter of 2024, primarily reflecting solid premium retention and renewal premium increases.
Net Premiums Written. Our insurance subsidiaries’ net premiums written for the first quarter of 2025 were $247.1 million, a decrease of $4.4 million, or 1.7%, from the
$251.4 million of net premiums written for the first quarter of 2024. Commercial lines net premiums written increased $5.1 million, or 3.3%, for the first quarter of 2025 compared to the first quarter of 2024. Personal lines net premiums written
decreased $9.5 million, or 9.9%, for the first quarter of 2025 compared to the first quarter of 2024. We attribute the increase in commercial lines net premiums written primarily to solid retention and a continuation of renewal premium increases
in lines other than workers’ compensation, offset partially by lower new business writings. We attribute the decrease in personal lines net premiums written primarily to planned attrition due to lower new business writings and non-renewal
actions, offset partially by a continuation of renewal premium rate increases and solid retention.
Investment Income. Our net investment income was $12.0 million for the first quarter of 2025, an increase of $1.0 million, or 9.2%, compared to $11.0 million for the first
quarter of 2024. We attribute the increase primarily to an increase in the average investment yield and higher average invested assets relative to the first quarter of 2024.
Net Investment (Losses) Gains. Net investment losses for the first quarter of 2025 were $470,861, compared to net investment gains of $2.1 million for the first quarter of
2024. The net investment losses for the first quarter of 2025 resulted primarily from the net change in unrealized gains and losses within our equity securities portfolio at March 31, 2025. We did not recognize any impairment losses for
individual securities in our investment portfolio during the first quarter of 2025 or 2024.
Losses and Loss Expenses. Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 56.7% for the first
quarter of 2025, a decrease from our insurance subsidiaries’ loss ratio of 66.3% for the first quarter of 2024. We attribute this decrease primarily to decreased core losses and large fire losses, which we define as individual fire losses in
excess of $50,000. The core loss ratio, which excludes weather-related losses, large fire losses and net favorable development of reserves for losses incurred in prior accident years, was 54.2% for the first quarter of 2025, compared to 58.7% for
the first quarter of 2024. For the commercial lines segment, the core loss ratio of 58.3% for the first quarter of 2025 decreased modestly from 59.0% for the first quarter of 2024. For the personal lines segment, the core loss ratio of 48.7% for
the first quarter of 2025 decreased significantly from 58.1% for the first quarter of 2024, due largely to the favorable impact of ongoing premium rate increases on net premiums earned for that segment. Weather-related losses were $8.6 million,
or 3.7 percentage points of the loss ratio, for the first quarter of 2025, compared to $10.8 million, or 4.7 percentage points of the loss ratio, for the first quarter of 2024. The impact of weather-related loss activity to the loss ratio for the
first quarter of 2025 was modestly lower than our previous five-year first-quarter average of 4.6 percentage points of the loss ratio. Large fire losses for the first quarter of 2025 were $7.7 million, or 3.3 percentage points of the loss ratio,
compared to $15.0 million, or 6.6 percentage points of the loss ratio, for the first quarter of 2024. Our insurance subsidiaries’ commercial lines loss ratio was 59.7% for the first quarter of 2025, compared to 65.4% for the first quarter of
2024, primarily due to decreases in commercial multi-peril and commercial automobile loss ratios, offset by an increase in the workers’ compensation loss ratio. The personal lines loss ratio of our insurance subsidiaries decreased to 52.5% for
the first quarter of 2025, compared to 67.6% for the first quarter of 2024. We attribute this decrease primarily to decreases in the homeowners and personal automobile loss ratios. Our insurance subsidiaries experienced favorable loss reserve
development for the first quarter of 2025 of approximately $10.5 million that decreased the loss ratio by 4.5 percentage points, compared to $8.4 million that decreased the loss ratio for the first quarter of 2024 by 3.7 percentage points. Our
insurance subsidiaries experienced favorable development primarily in the commercial automobile, commercial multi-peril and personal automobile lines of business, offset partially by modest unfavorable development in workers’ compensation for the
first quarter of 2025.
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Index
Underwriting Expenses. The expense ratio for an insurance company is the ratio of policy acquisition costs and other underwriting expenses to premiums earned. The expense
ratio of our insurance subsidiaries was 34.6% for the first quarter of 2025, compared to 35.7% for the first quarter of 2024. The decrease in the expense ratio primarily reflected the favorable impact of ongoing expense management initiatives,
offset partially by higher underwriting-based incentive costs for agents and employees. The impact from costs that Donegal Mutual Insurance Company allocated to our insurance subsidiaries related to its ongoing systems modernization project
peaked at approximately 1.3 percentage points of the full year 2024 expense ratio, and we expect that impact to subside gradually over the next several years. Allocated costs related to that project represented approximately 1.2 percentage points
of the expense ratio for the first quarter of 2025, and we expect the full year 2025 expense ratio impact will be approximately 1.0 percentage point.
Combined Ratio. The combined ratio represents the sum of the loss ratio, the expense ratio and the dividend ratio, which is the ratio of policyholder dividends incurred to
premiums earned. Our insurance subsidiaries’ combined ratios were 91.6% and 102.4% for the first quarter of 2025 and 2024, respectively. We attribute the decrease in the combined ratio primarily to the decrease in the loss ratio for the first
quarter of 2025 compared to the first quarter of 2024.
Income Tax Expense. We recorded income tax expense of $6.0 million for the first quarter of 2025, representing an effective tax rate of 19.1%. We recorded income tax
expense of $1.3 million for the first quarter of 2024, representing an effective tax rate of 17.8%. The income tax tax expense for the first quarter of 2025 and 2024 represented estimates based on our projected annual taxable income and effective
tax rates.
Net Income and Net Income Per Share. Our net income for the first quarter of 2025 was $25.2 million, or $.71 per share of Class A common stock on a diluted basis and $.65
per share of Class B common stock, compared to $6.0 million, or $.18 per share of Class A common stock on a diluted basis and $.16 per share of Class B common stock, for the first quarter of 2024. We had 30.4 million and 27.8 million Class A
shares outstanding at March 31, 2025 and 2024, respectively. We had 5.6 million Class B shares outstanding at the end of both periods.
Liquidity and Capital Resources
Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual obligations and operating needs as they arise. Our major sources of funds from operations are the net cash flows we
generate from our insurance subsidiaries’ underwriting results, investment income and maturing investments.
We have historically generated sufficient net positive cash flow to fund our commitments and add to our investment portfolio, thereby increasing future investment returns. The 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 the first three months of 2025 and 2024 were $25.7 million and $4.8 million, respectively.
At March 31, 2025, we had no outstanding borrowings under our line of credit with M&T and had the ability to borrow up to $20.0 million at interest rates equal to the then-current Term SOFR rate plus 2.11%. At
March 31, 2025, Atlantic States had a $35.0 million outstanding advance with the FHLB of Pittsburgh that carries a fixed interest rate of 3.806% and is due in September 2026. We discuss in Note 7 – 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.
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Index
On July 18, 2013, our board of directors authorized a share repurchase program pursuant to which we have the authority to purchase up to 500,000 shares of our Class A common stock at prices prevailing from time to
time in the open market subject to the provisions of the SEC Rule 10b-18 and in privately negotiated transactions. We did not purchase any shares of our Class A common stock under this program during the three months ended March 31, 2025 or 2024.
We have purchased a total of 57,658 shares of our Class A common stock under this program from its inception through March 31, 2025.
On April 17, 2025, our board of directors declared quarterly cash dividends of $.1825 per share of our Class A common stock and $.165 per share of our Class B common stock,
payable on May 15, 2025 to our stockholders of record as of the close of business on May 1, 2025. There are no regulatory restrictions on our payment of dividends to our stockholders, although there are restrictions under applicable state laws on
the payment of dividends from our insurance subsidiaries to us, which is a significant source of cash for payment of stockholder dividends by us. Our insurance subsidiaries are required by law to maintain minimum surplus on a statutory basis and
are subject to regulations under which their payment of dividends from statutory surplus is restricted and may require prior approval of their domiciliary insurance regulatory authorities. Our insurance subsidiaries are also subject to risk based
capital (“RBC”) requirements. The amount of statutory capital and surplus necessary for our insurance subsidiaries to satisfy regulatory requirements, including the RBC requirements, was not significant in relation to our insurance subsidiaries’
statutory capital and surplus at December 31, 2024. Our insurance subsidiaries did not pay any dividends to us during the first three months of 2025. Amounts remaining available for distribution to us as dividends from our insurance subsidiaries
without prior approval of their domiciliary insurance regulatory authorities in 2025 are $40.7 million from Atlantic States, $7.8 million from MICO and $4.7 million from Peninsula, or a total of approximately $53.3 million.
At March 31, 2025, we had no material commitments for capital expenditures.
Equity Price Risk
Our portfolio of marketable equity securities, which we carry on our consolidated balance sheets at estimated fair value, has exposure to the risk of loss resulting from an adverse change in prices. We manage this
risk by having our investment personnel perform an analysis of prospective investments and regular reviews of our portfolio of equity securities.
Credit Risk
Our portfolio of fixed-maturity securities and, to a lesser extent, our portfolio of short-term investments is subject to credit risk, which we define as the potential loss in market value resulting from adverse
changes in the borrower’s ability to repay its debt. We manage this risk by having our investment personnel perform an analysis of prospective investments and regular reviews of our portfolio of fixed-maturity securities. We also limit the
percentage and amount of our total investment portfolio that we invest in the securities of any one issuer.
Our insurance subsidiaries provide property and casualty insurance coverages through independent insurance agencies. We bill the majority of this business directly to the insured, although we bill a portion of our
commercial business through licensed insurance agents to whom our insurance subsidiaries extend credit in the normal course of business.
Because the pooling agreement does not relieve Atlantic States of primary liability as the originating insurer, Atlantic States is subject to a concentration of credit risk arising from the business it cedes to
Donegal Mutual. Our insurance subsidiaries maintain reinsurance agreements with Donegal Mutual and with a number of other major unaffiliated authorized reinsurers.
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Index
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.