DONEGAL GROUP INC 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31 , 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _________________ Commission file number 0-15341 DONEGAL GROUP INC . (Exact name of registrant as specified in its charter) Delaware 23-2424711 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1195 River Road , Marietta , Pennsylvania 17547 (Address of principal executive offices) (Zip code) Registrant’s telephone number, including area code: ( 800 ) 877-0600 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbols Name of Each Exchange on Which Registered Class A Common Stock, $.01 par value DGICA The NASDAQ Global Select Market Class B Common Stock, $.01 par value DGICB The NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act: Yes ☐. No ☑. Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐. No ☑. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑. No ☐. Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑. No ☐. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Act. (Check one): Large accelerated filer ☐ Accelerated filer ☑ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐. Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☑ . No ☐. If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ . Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to Section 240.10D-1(b). ☐. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐. No ☑ . State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $ 355,484,764 . Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 31,426,189 shares of Class A common stock and 5,576,775 shares of Class B common stock outstanding on March 2, 2026. Documents Incorporated by Reference The registrant incorporates by reference portions of the registrant’s definitive proxy statement relating to registrant’s annual meeting of stockholders to be held April 16, 2026 into Part III of this report. DONEGAL GROUP INC. INDEX TO FORM 10-K REPORT Page PART I Item 1. Business 1 Item 1A. Risk Factors 26 Item 1B. Unresolved Staff Comments 41 Item 1C. Cybersecurity 41 Item 2. Properties 42 Item 3. Legal Proceedings 43 Item 4. Mine Safety Disclosures 43 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 44 Item 6. [Reserved] 45 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 46 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62 Item 8. Financial Statements and Supplementary Data 64 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 110 Item 9A. Controls and Procedures 110 Item 9B. Other Information 110 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 110 PART III Item 10. Directors, Executive Officers and Corporate Governance 112 Item 11. Executive Compensation 112 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 112 Item 13. Certain Relationships and Related Transactions, and Director Independence 112 Item 14. Principal Accounting Fees and Services 112 PART IV Item 15. Exhibits, Financial Statement Schedules 113 Item 16. Form 10-K Summary 116 (i) Index PART I Item 1. Business. Introduction Donegal Group Inc., or DGI, is an insurance holding company whose insurance subsidiaries and affiliates offer property and casualty insurance in 21 Mid-Atlantic, Midwestern, Southern and Southwestern states. DGI has no significant business operations and is separate and distinct from its insurance subsidiaries. As used in this Form 10-K Report, the terms “we,” “us” and “our” refer to Donegal Group Inc. and its insurance subsidiaries. Our Class A common stock and our Class B common stock trade on the NASDAQ Global Select Market under the symbols “DGICA” and “DGICB,” respectively. Donegal Mutual Insurance Company, or Donegal Mutual, organized us as an insurance holding company on August 26, 1986. At December 31, 2025, Donegal Mutual held approximately 44% of our outstanding Class A common stock and approximately 85% of our outstanding Class B common stock. Donegal Mutual’s ownership provides Donegal Mutual with approximately 70% of the combined voting power of our outstanding shares of Class A common stock and our outstanding shares of Class B common stock. Our insurance subsidiaries and Donegal Mutual have interrelated operations due to an intercompany pooling agreement and other intercompany agreements and transactions we describe in Note 3 of the Notes to Consolidated Financial Statements. While maintaining the separate corporate existence of each company, our insurance subsidiaries conduct business together with Donegal Mutual and its insurance subsidiaries as the Donegal Insurance Group. The Donegal Insurance Group is not a legal entity, is not an insurance company and does not issue or administer insurance policies. Rather, it is a trade name that refers to the group of insurance companies that are affiliated with Donegal Mutual. At December 31, 2025, we had three segments: our investment function, our commercial lines of insurance and our personal lines of insurance. We set forth financial information about these segments in Note 18 of the Notes to Consolidated Financial Statements. The commercial lines products of our insurance subsidiaries consist primarily of commercial automobile, commercial multi-peril and workers’ compensation policies. The personal lines products of our insurance subsidiaries consist primarily of homeowners and private passenger automobile policies. Our insurance subsidiaries and Donegal Mutual provide their policyholders with a selection of insurance products and pursue profitability by adhering to a strict underwriting discipline. Our insurance subsidiaries derive a substantial portion of their insurance business from smaller to mid-sized regional communities. We believe this focus provides our insurance subsidiaries with competitive advantages in terms of local market knowledge, marketing, underwriting, claims servicing and policyholder service. At the same time, we believe our insurance subsidiaries have cost advantages over many smaller regional insurers that result from economies of scale our insurance subsidiaries realize through centralized accounting, administrative, data processing, investment and other services. We believe we have a substantial opportunity, as a well-capitalized regional insurance holding company with a solid business strategy, to grow profitably and compete effectively with larger national property and casualty insurers. Our downstream holding company structure, with Donegal Mutual holding approximately 70% of the combined voting power of our common stock, has proven its effectiveness and success over the 39 years of our existence. Over that time period, we have grown significantly in terms of revenue and financial strength, and the Donegal Insurance Group has developed an excellent reputation as a regional group of property and casualty insurers. Between 1998 and 2017, we and Donegal Mutual completed seven transactions involving acquisitions of property and casualty insurance companies or participation in the business of property and casualty insurance companies through Donegal Mutual’s entry into quota-share reinsurance agreements with them. We are currently placing less emphasis on pursuing acquisitions because Donegal Mutual and we believe there are opportunities for profitable organic growth in our desired markets and classes of business within our current geographical footprint. In September 2025, Donegal Mutual and Southern entered into a renewal rights agreement with a farm-focused Pennsylvania-based mutual insurance company to provide a continuation option for our farm policyholders when they begin to non-renew all farm policies as they expire beginning in the second quarter of 2026. Donegal Mutual and Southern determined that the costs required to modernize the legacy farm product and systems were higher than the projected return on investment for this non-core line of business that represents approximately $6 million in premiums. We currently include farm policies within other commercial lines in our line of business reporting. -1- Index Available Information You may obtain our Annual Reports on Form 10-K, including this Form 10-K Report, our quarterly reports on Form 10-Q, our current reports on Form 8-K, our proxy statement and our other filings pursuant to the Securities Exchange Act of 1934, or the Exchange Act, without charge by viewing our website at www.donegalgroup.com . You may also view our Code of Business Conduct and Ethics and the charters of the executive committee, the audit committee, the compensation committee and the nominating committee of our board of directors on our website. Upon request to our corporate secretary, we will also provide printed copies of any of these documents to you without charge. We have provided the address of our website solely for the information of investors. We do not intend the reference to our website address to be an active link or to otherwise incorporate the contents of our website into this Form 10-K Report. In addition to our website, the Securities and Exchange Commission (the “SEC”) maintains an Internet site at www.sec.gov that contains our reports, proxy and information statements and other information that we electronically file with, or furnish to, the SEC. History and Organizational Structure In the mid-1980’s, Donegal Mutual, as a mutual insurance company, recognized the desirability of developing additional sources of capital and surplus so it could remain competitive, expand its business and ensure its long-term viability. Accordingly, Donegal Mutual determined that the implementation of a downstream holding company structure was a viable business strategy to accomplish that objective. Thus, in 1986, Donegal Mutual formed us as a downstream holding company, and we incorporated in the state of Delaware as Donegal Group Inc. After Donegal Mutual formed us, we in turn formed Atlantic States Insurance Company, or Atlantic States, as our wholly owned property and casualty insurance company subsidiary. In connection with the formation of Atlantic States and the establishment of our downstream insurance holding company system, Donegal Mutual and Atlantic States entered into a proportional reinsurance agreement, or pooling agreement. Under the pooling agreement, Donegal Mutual and Atlantic States contribute substantially all of their respective premiums, losses and loss expenses to the underwriting pool, and the underwriting pool, acting through Donegal Mutual, then allocates 80% of the pooled business to Atlantic States. Thus, Donegal Mutual and Atlantic States share the underwriting results of the pooled business in proportion to their respective participation in the underwriting pool. The member companies of the Donegal Insurance Group, which include our insurance subsidiaries, share a combined business plan to enhance market penetration and underwriting profitability objectives. We believe Donegal Mutual’s majority interest in the combined voting power of our Class A common stock and of our Class B common stock fosters our ability to implement our business philosophies, enjoy management continuity, maintain superior employee relations and provide a stable environment within which we can grow our businesses. The products the member companies of the Donegal Insurance Group offer are generally complementary, which permits the Donegal Insurance Group to offer a broad range of products in a given market and to expand the Donegal Insurance Group’s ability to service an entire personal lines or commercial lines account. Distinctions within the products the member companies of the Donegal Insurance Group offer generally allow the member companies to manage certain risk segments through variations in coverage, policy terms and pricing. As a result, the underwriting profitability of the business the individual companies write directly will vary. However, the underwriting pool homogenizes the risk characteristics of all business that Donegal Mutual and Atlantic States write directly and all business that Donegal Mutual assumes from its affiliates and places into the underwriting pool. The business Atlantic States derives from the underwriting pool represents a significant percentage of our total consolidated revenues. -2- Index As the capital of Atlantic States and our other insurance subsidiaries has increased, the underwriting capacity of our insurance subsidiaries has increased proportionately. The size of the underwriting pool has also increased substantially. Therefore, as we originally planned in the mid-1980s, Atlantic States has successfully raised the capital necessary to support the growth of its direct business as well as to accept increases in its allocation of business from the underwriting pool. The portion of the underwriting pool allocated to Atlantic States has increased from an initial allocation of 35% in 1986 to an 80% allocation since March 1, 2008. We do not anticipate any further change in the pooling agreement between Atlantic States and Donegal Mutual, including any change in the percentage participation of Atlantic States in the underwriting pool. In addition to Atlantic States, our insurance subsidiaries are Michigan Insurance Company, or MICO, The Peninsula Insurance Company and its wholly owned subsidiary, Peninsula Indemnity Company, or collectively, Peninsula, and Southern Insurance Company of Virginia, or Southern. Donegal Mutual has a 100% quota-share reinsurance agreement with Southern Mutual Insurance Company, or Southern Mutual, and Donegal Mutual places its assumed business from Southern Mutual into the underwriting pool. Donegal Mutual wholly owns and has a 100% quota-share reinsurance agreement with Mountain States Indemnity Company and Mountain States Commercial Insurance Company (collectively, the “Mountain States insurance subsidiaries”), and Donegal Mutual places its assumed business from the Mountain States insurance subsidiaries into the underwriting pool. The following chart depicts our organizational structure, including all of our property and casualty insurance subsidiaries and affiliates: (1) Because of the different relative voting power of our Class A common stock and our Class B common stock, our public stockholders hold approximately 30% of the combined voting power of our Class A common stock and our Class B common stock and Donegal Mutual holds approximately 70% of the combined voting power of our Class A common stock and our Class B common stock. Relationship with Donegal Mutual Donegal Mutual provides facilities, management and other services to us and our insurance subsidiaries. In addition, Donegal Mutual purchases and maintains the information technology systems that support the business of Donegal Mutual and our insurance subsidiaries. Donegal Mutual allocates certain related expenses to Atlantic States in accordance with the relative participation of Donegal Mutual and Atlantic States in the pooling agreement. Our insurance subsidiaries other than Atlantic States reimburse Donegal Mutual for allocated costs of services Donegal Mutual provides on their behalf based on their proportion of the total direct premiums written of the Donegal Insurance Group and other metrics. Allocated expenses from Donegal Mutual for services it provided to Atlantic States and our other insurance subsidiaries totaled $224.8 million, $224.6 million, and $219.0 million for 2025, 2024 and 2023, respectively. -3- Index Donegal Mutual is the employer of record for all personnel who provide services for our insurance subsidiaries. Donegal Mutual strives to maintain a culture that is based on integrity and respect, with an environment designed to facilitate excellent service to the agents and customers of the Donegal Insurance Group. At December 31, 2025, Donegal Mutual had 851 employees, of which 422 were based in its Marietta, Pennsylvania headquarters and 429 were based in regional offices or were permanent remote employees. There were 831 full-time employees and 20 part-time employees. The majority of Donegal Mutual’s employees follow a hybrid schedule that includes working several days in their assigned office to allow for enhanced collaboration and interaction with other employees. Donegal Mutual targets employee compensation that is competitive and consistent with an employee’s position, knowledge, experience and skill level. Donegal Mutual provides annual wage increases that are based on merit. Donegal Mutual provides an annual cash incentive plan for all of its employees that provides an opportunity for Donegal Mutual’s employees to earn a bonus as a percentage of their annual wages that varies based on the level of underwriting profit Donegal Insurance Group achieves for a calendar year. In addition, Donegal Mutual provides to its full-time employees a comprehensive employee benefits program, including medical, dental and vision insurance, paid time off, and a 401(k) retirement plan that includes company matching provisions. Donegal Mutual also provides substantial training, development and wellness programs and resources to its employees. Our insurance subsidiaries have a catastrophe reinsurance agreement with Donegal Mutual, pursuant to which Donegal Mutual provides coverage for losses related to any catastrophic occurrence over a set retention of $3.0 million for each participating insurance subsidiary, with a combined retention of $6.0 million for a catastrophe involving a combination of participating insurance subsidiaries, up to the amount Donegal Mutual and our insurance subsidiaries retain under catastrophe reinsurance agreements with unaffiliated reinsurers. The purpose of the catastrophe reinsurance agreement is to lessen the effects of an accumulation of losses arising from one event to levels that are appropriate given each subsidiary’s size, underwriting profile and surplus. Several of our insurance subsidiaries have a liability reinsurance agreement with Donegal Mutual, pursuant to which Donegal Mutual provides coverage for losses related to any liability claim occurrence over a set retention of $3.0 million for each participating insurance subsidiary. The purpose of the liability reinsurance agreement is to lessen the effect of a liability loss to a level that is appropriate given each subsidiary’s size, underwriting profile and surplus. We and Donegal Mutual have maintained a coordinating committee since our formation in 1986. The coordinating committee consists of two members of our board of directors, neither of whom is a member of Donegal Mutual’s board of directors, and two members of Donegal Mutual’s board of directors, neither of whom is a member of our board of directors. The purpose of the coordinating committee is to establish and maintain a process for an ongoing evaluation of the transactions between Donegal Mutual, our insurance subsidiaries and us. The coordinating committee considers the fairness of each intercompany transaction to Donegal Mutual and its policyholders and to us and our stockholders. A new agreement or any change to a previously approved agreement must receive coordinating committee approval. The approval process for a new agreement between Donegal Mutual and us or one of our insurance subsidiaries or a change in such an agreement is as follows: • both of our members on the coordinating committee must determine that the new agreement or the change in an existing agreement is fair and equitable to us and in the best interests of our stockholders; • both of Donegal Mutual’s members on the coordinating committee must determine that the new agreement or the change in an existing agreement is fair and equitable to Donegal Mutual and in the best interests of its policyholders; • our board of directors must approve the new agreement or the change in an existing agreement; and -4- Index • Donegal Mutual’s board of directors must approve the new agreement or the change in an existing agreement. The coordinating committee also meets annually to review each existing agreement between Donegal Mutual and us or our insurance subsidiaries, including all reinsurance agreements between Donegal Mutual and our insurance subsidiaries. The purpose of this annual review is to examine the results of the agreements over the past year and, in the case of reinsurance agreements, over several years and to determine if the results of the existing agreements remain fair and equitable to us and our stockholders and fair and equitable to Donegal Mutual and its policyholders or if Donegal Mutual and we should mutually agree to certain adjustments to the terms of the agreements. In the case of reinsurance agreements, the annual adjustments take into account reinsurance Donegal Mutual and our insurance subsidiaries obtain from unaffiliated reinsurers and typically relate to the reinsurance premiums and loss retention amounts. These agreements are ongoing in nature and will continue in effect throughout 2026 in the ordinary course of our business. Our members on the coordinating committee, as of the date of this Form 10-K Report, are Barry C. Huber and David C. King. Donegal Mutual’s members on the coordinating committee as of such date are Michael W. Brubaker and Michael K. Callahan. We refer to our proxy statement for our annual meeting of stockholders to be held on April 16, 2026 for further information about the members of the coordinating committee. We believe our relationships with Donegal Mutual offer us and our insurance subsidiaries a number of competitive advantages, including the following: • enabling our stable management, the consistent underwriting discipline of our insurance subsidiaries, external growth, long-term profitability and financial strength; • creating operational and expense synergies from the combination of resources and integrated operations of the Donegal Insurance Group; • producing more stable and uniform underwriting results for our insurance subsidiaries over extended periods of time than we could achieve without our relationship with Donegal Mutual; • providing opportunities for growth because of the ability of Donegal Mutual to affiliate and enter into reinsurance agreements with, or otherwise acquire control of, mutual insurance companies and place the business it assumes into the underwriting pool; and • providing Atlantic States with a significantly larger underwriting capacity because of the underwriting pool Donegal Mutual and Atlantic States have maintained since 1986. In the first quarter of 2026, our board of directors and the board of directors of Donegal Mutual each undertook a review of the relationships between Donegal Mutual and DGI and determined that continuing the current relationships and the current corporate structure of Donegal Mutual and DGI is in the best interests of DGI and its various constituencies. Business Strategy We and Donegal Mutual are focused on several primary strategies, including achieving sustained excellent financial performance, strategically modernizing our operations and processes to transform our business, capitalizing on opportunities to grow profitably and providing superior experiences to our agents, policyholders and employees. Our strategies are designed to provide financial security to the policyholders of Donegal Mutual and our respective insurance subsidiaries and, ultimately, to provide value to our stockholders. The annual net premiums earned of our insurance subsidiaries have increased from $301.5 million in 2006 to $921.2 million in 2025, a compound annual growth rate of 6.1%. -5- Index The combined ratio of our insurance subsidiaries and that of the United States property and casualty insurance industry as computed using United States generally accepted accounting principles, or GAAP, and statutory accounting principles, or SAP, for the years 2021 through 2025 are shown in the following table: 2025 2024 2023 2022 2021 Our GAAP combined ratio 95.4 % 98.6 % 104.4 % 103.3 % 101.0 % Our SAP combined ratio 95.0 98.3 104.2 103.3 100.8 Industry SAP combined ratio (1) 95.0 97.1 101.9 103.1 100.0 (1) As reported (projected for 2025) by A.M. Best Company. We and Donegal Mutual believe we can continue to expand our insurance operations over time primarily through organic growth. Our insurance subsidiaries and Donegal Mutual seek to increase their premium base by making quality independent agency appointments, enhancing their competitive position within each agency, providing a comprehensive suite of insurance products and developing and maintaining automated systems to improve service, communications and efficiency. A detailed review of our business strategies follows: • Achieving sustained excellent financial performance. Our insurance subsidiaries seek to achieve excellent financial performance through a combination of consistent investment income and underwriting profitability. Underwriting profitability is a fundamental component of our long-term financial strength because it allows our insurance subsidiaries to generate profits without relying exclusively on their investment income for profitability. Our insurance subsidiaries seek to enhance their underwriting results by: • carefully selecting the product lines, classes of business and individual risks they underwrite; • executing localized strategies to achieve a mix of business they expect will generate targeted margins of profitability; • monitoring premium rate adequacy and adjusting premium rates to achieve targeted growth, returns and retention levels; • utilizing enhanced underwriting and technology tools to inform underwriting decisions and determine coverage availability; • utilizing data analytics and predictive modeling tools to inform risk selection and pricing decisions; • utilizing economic capital modeling tools to carefully manage their risk profile, including the geographic concentration of risks they underwrite; and • evaluating their claims history on a regular basis to ensure the adequacy of their underwriting guidelines and product pricing. -6- Index Our insurance subsidiaries maintain discipline in their pricing by effecting rate increases to sustain or improve their underwriting results without unduly affecting their customer retention. In addition to appropriate pricing, our insurance subsidiaries seek to ensure that their premium rates are adequate relative to the risk exposures they insure. Our insurance subsidiaries review loss trends on a regular basis to identify changes in the frequency and severity of their claims and to assess the adequacy of their rates and underwriting standards. Our insurance subsidiaries utilize integrated risk-specific catastrophe model results, a tool to estimate probable maximum fire loss, embedded building valuation models and aerial imagery enhanced by artificial intelligence (“AI”) to enhance their review and pricing of commercial property risks. Our insurance subsidiaries also carefully monitor and audit the information they use to price their policies for the purpose of enabling them to receive an adequate level of premiums for the risk they assume. For example, our insurance subsidiaries audit the payroll data of their workers’ compensation customers to verify that the assumptions used to price a particular policy were accurate. By implementing appropriate rate increases and understanding the risks our insurance subsidiaries agree to insure, our insurance subsidiaries seek to achieve consistent underwriting profitability. Our insurance subsidiaries monitor the performance of the product lines they underwrite and the geographies in which they offer their insurance products. Our insurance subsidiaries take specific actions to remediate underperforming product lines or geographies that include pricing increases, underwriting adjustments, reunderwriting initiatives as well as discontinuing a given product or withdrawing from a geography when our insurance subsidiaries determine they cannot reasonably expect to generate targeted profitability over time. For example, our insurance subsidiaries exited the commercial lines markets in the states of Georgia and Alabama, including the non-renewal of all commercial lines accounts in those states, during 2023 and 2024. Our insurance subsidiaries took this action after determining that they could not reasonably expect to generate targeted profitability within a reasonable period of time for commercial lines of business in those states. Our insurance subsidiaries have no material exposures to asbestos or environmental liabilities. Our insurance subsidiaries seek to provide more than one policy to a given personal lines or commercial lines customer because this “account selling” strategy diversifies their risk and has historically improved their underwriting results. Our insurance subsidiaries also use reinsurance to manage their exposure and limit their maximum net loss from large single risks or risks in concentrated areas. Our insurance subsidiaries maintain stringent expense controls under direct supervision of their senior management. We centralize the processing and administrative activities of our insurance subsidiaries to realize operating synergies and better expense control. Our insurance subsidiaries utilize technology to automate much of their underwriting, claims and billing processes and to facilitate agency and policyholder communications on an efficient, timely and cost-effective basis. During 2024 and 2025, Donegal Mutual and our insurance subsidiaries conducted a formal expense reduction initiative that included actions to optimize staffing levels, take advantage of technology-driven efficiency gains, align agency compensation to desired outcomes and reduce third-party vendor costs in several operational areas. Various actions will continue into 2026 to achieve targeted expense management goals. Our insurance subsidiaries have increased their annual premium per employee, a measure of efficiency that our insurance subsidiaries use to evaluate their operations, from approximately $470,000 in 1999 to approximately $1.3 million in 2025. Return on invested assets is an important element of the financial results of our insurance subsidiaries. The investment strategy of our insurance subsidiaries is to generate an appropriate amount of after-tax income on invested assets while limiting the potential impact of equity market volatility and minimizing credit risk through investments in high-quality securities. As a result, our insurance subsidiaries seek to invest a high percentage of their assets in diversified, highly rated and marketable fixed-maturity instruments. The fixed-maturity portfolios of our insurance subsidiaries consist of both taxable and tax-exempt securities. Our insurance subsidiaries maintain a portion of their portfolios in short-term securities to provide liquidity for the payment of claims and operation of their respective businesses. Our insurance subsidiaries maintain a small percentage (3.0% at December 31, 2025) of their portfolios in equity securities. • Advancing our operational and digital capabilities. We have an enterprise analytics department that is focused on integrating data and analytics into strategy and decision-making at all levels of our organization. The enterprise analytics team is responsible for core functions of rate-making, predictive analytics, data management and business intelligence. These responsibilities include the development and expansion of risk-based pricing segmentation, analytical innovation, predictive modeling solutions, formal data strategies, performance monitoring and enhanced reporting mechanisms. We developed and are executing a pricing and analytics roadmap that will continue to deliver data-driven insights to our underwriters. This roadmap includes ongoing development and enhancement of quality tools that allow us to operationalize pricing and underwriting predictive models, integrate internal and external data for better-informed pricing and underwriting decisions and enhance the automation and precision of our rate indication methodology. Our enterprise analytics team is continuing to develop new tools and solutions that are enhancing our product portfolio management capabilities, competitive intelligence, pricing sophistication and utilization of data to monitor and manage our operations. The team also generates reporting and analyses that enable us to draw business insights from data that drive actions to improve performance. -7- Index We are focused on process excellence and are executing a multi-year roadmap for addressing those opportunities. We are also expanding our data management capabilities to continually ensure the data upon which we rely for our business decisions and financial reporting is complete, accurate and secure. We have assigned an innovation task force the responsibility to research emerging technologies and identify potential technology solutions that might assist us in achieving our business strategies. In 2018, Donegal Mutual initiated a multi-year systems modernization project to replace its remaining legacy systems, streamline business processes and workflows and enhance data analytics and modeling capabilities. In February 2020, Donegal Mutual implemented the first release of new systems related to the project, and our insurance subsidiaries began to issue workers’ compensation policies from the new systems in the second quarter of 2020. In August 2021, Donegal Mutual implemented the second release of new systems related to the project, including a new agency portal and the rating, underwriting and policy issuance capabilities necessary to support the launch of new personal lines products, and our insurance subsidiaries began to issue new personal lines products from the new systems in the fourth quarter of 2021. In 2023, Donegal Mutual implemented two additional major releases of new systems, which included three commercial lines of business with enhanced straight-through-processing capabilities as well as dwelling fire and conversion of legacy homeowners renewal policies in two initial states. In 2024, Donegal Mutual implemented another major release that included dwelling fire and conversion of legacy homeowners renewal policies in the remaining eight states. In 2025, Donegal Mutual implemented new systems for the remaining lines of business the Donegal Insurance Group issues currently and for the conversion of remaining legacy renewal policies of the Donegal Insurance Group. Donegal Mutual is converting legacy renewal policies to the new systems on a state-by-state basis, currently projecting full completion in 2027. In 2023, Donegal Mutual began a multi-year data modernization initiative to implement a comprehensive cloud-based data infrastructure that will support critical future business processes and strategies. This agile infrastructure will scale dynamically based on business demands and deliver real-time insights. The platform will enable highly efficient data processing through modular, metadata-driven frameworks, ensuring accelerated and reliable future data delivery within a secure, governed and compliant repository. It will also incorporate robust security features, such as multi-factor authentication and data encryption, as well as other advanced data security and privacy measures. The platform will also facilitate seamless integration with analytics functions, artificial intelligence and machine learning models, and enable innovative business use cases for technologies such as Generative Artificial Intelligence (“GenAI”). Donegal Mutual implemented concurrently a formal data management program that aligns critical business processes and strategies with our technology. We expect these data-related investments will ensure easily accessible data for management reporting, position us to further enhance our data analytics, enable the future addition of new data sources and mitigate data integrity risk. During 2025, Donegal Mutual conducted a detailed and thorough assessment of the benefits of migrating its on-premises Guidewire claims, billing and policy administration systems to the Guidewire cloud platform. These benefits include increased agility and faster time-to-market for new product launches and feature enhancements, reduced operational costs and complexity associated with maintaining in-house technology systems, enhanced tools and capabilities to better empower business users and secure access to a scalable, continuously evolving industry-leading insurance platform to support and enable future growth. With the support of experienced vendor partners, Donegal Mutual developed a comprehensive migration plan and initiated the first phase of the program in early 2026. The plan calls for the migration of its claims and billing applications to the cloud in early 2027. Migration activities for its policy administration system will commence closer to completion of legacy policy conversion activities in 2027, with completion of the migration expected in 2028. This phased strategy represents a risk-averse approach to the cloud migration while retaining capacity to deliver business-critical projects in parallel with those activities. -8- Index In 2025, Donegal Mutual continued to explore GenAI capabilities through a combination of targeted third-party vendor engagements and internal development. Progress has been calculated, as Donegal Mutual carefully evaluated potential use cases and adoption opportunities for this transformative technology. Donegal Mutual has successfully deployed its first GenAI solution into production, with several additional pilot projects nearing completion in 2026. These solutions are focused on generating efficiencies within operational processes. The insights gained through these early efforts informed its evaluation of the artificial intelligence capabilities within the Guidewire cloud platform. Donegal Mutual is currently working to co-develop and launch new GenAI solutions to production as part of its claims system cloud migration. These solutions leverage the significant investments Guidewire and other strategic partners are making to deliver GenAI tools Donegal Mutual expects to seamlessly integrate into the core business systems that support the combined insurance operations of the Donegal Insurance Group. • Capitalizing on opportunities to grow profitably. Continued expansion of our insurance subsidiaries within their existing markets will be a key source of their continued premium growth, and maintaining an effective network of independent agencies is integral to this expansion. Our insurance subsidiaries seek to be among the top three insurers within each of the independent agencies for the lines of business our insurance subsidiaries write by providing a consistent, competitive and stable market for their products. We believe that the consistency of the product offerings of our insurance subsidiaries enables our insurance subsidiaries to compete effectively for independent agents with other insurers whose product offerings may fluctuate based on industry conditions. Our insurance subsidiaries offer a competitive compensation program to their independent agents that rewards them for producing profitable growth and maintaining profitable books of business with our insurance subsidiaries. Our insurance subsidiaries execute a combined annual business plan with Donegal Mutual and its insurance subsidiaries. Over the past several years, we enhanced the annual planning process to ensure that we are directing efforts and resources toward geographic regions, market segments, product lines and classes of business that will give us the best opportunities to achieve sustained growth and profitability. As part of the planning process, we perform a detailed analysis of internal and external data with respect to each state within our operating regions. We assess state-specific marketing dynamics and opportunities, including an evaluation of the historical experience of our insurance subsidiaries. We then assign a strategic posture for each state and develop action plans to execute state-specific strategies for growth or reduction of premiums, agency distribution and enhanced profit generation over the next several years. As part of our property exposure management, we implemented tools that have allowed us to assign a strategic posture at a county level within each state. Our insurance subsidiaries utilize these tools to further manage and refine their concentrations of property risk exposure and to enhance their geographic risk diversification. We expect this strategy will reduce over time the overall impact of losses from severe weather events to the results of our insurance subsidiaries. In recent years, the consolidation of independent agencies has accelerated, resulting in the acquisition of independent agencies from which our insurance subsidiaries and Donegal Mutual currently receive business by national cluster groups and aggregators. We have a dedicated national accounts team that is responsible for the management and expansion of our relationships with these national agency groups. The national accounts team serves as a centralized point of contact for these groups and works directly with our regional sales and marketing teams to support and develop relationships with independent agents affiliated with national agency groups. We believe our relationships with existing and emerging national agency groups will continue to expand and that these groups represent a sustainable source of profitable future growth. • Delivering a superior experience to our agents and policyholders. Donegal Mutual and our insurance subsidiaries strive to maintain technology comparable to that of their larger competitors. “Ease of doing business” is a critically important component of an insurer’s value to an independent agency. Our insurance subsidiaries provide fully automated underwriting and policy issuance portals that substantially ease data entry and facilitate the quoting and issuance of policies for the independent agents of our insurance subsidiaries. As a result, applications of the independent agents for our insurance subsidiaries can result in policy issuance without further re-entry of information. These systems also interface with the agency management systems of the independent agents of our insurance subsidiaries. In addition, we utilize agency relationship management tools to enhance the abilities of our insurance subsidiaries to manage their agency relationships and facilitate their agency communications and interactions. -9- Index Our insurance subsidiaries also provide their independent agents with ongoing support to enable them to better attract and service customers, including: • training programs; • marketing support; • availability of a personal lines service center that provides comprehensive service for our personal lines policyholders; • availability of a commercial lines small business unit to monitor straight-through processing results and enhance turnaround time for responses to agents for less complicated commercial risks; • availability of a commercial lines service center, which is an optional service enhancement for agencies who prefer that we interact directly with their customers for mid-term policy coverage changes and other service requests; and • accessibility to and regular interactions with marketing and underwriting personnel and senior management of our insurance subsidiaries. Our insurance subsidiaries appoint independent agencies with a strong underwriting and growth track record. We believe that our insurance subsidiaries will drive continued long-term growth by carefully selecting, motivating and supporting their independent agencies. We believe that excellent policyholder service is important in attracting new policyholders and retaining existing policyholders. Our insurance subsidiaries work closely with their independent agents to provide a consistently responsive level of claims service, underwriting and customer support. Our insurance subsidiaries seek to respond expeditiously and effectively to address customer and independent agent inquiries in a number of ways, including: • availability of a customer call center, secure website and mobile application for claims reporting; • availability of a secure website and mobile application for access to policy information and documents, payment processing and other features; • timely replies to information requests and policy submissions; and • prompt responses to, and processing of, claims. • Acquiring property and casualty insurance companies to augment the organic growth of our insurance subsidiaries. We have been an effective consolidator of smaller “main street” property and casualty insurance companies. We are currently placing less emphasis on pursuing acquisitions because Donegal Mutual and we believe there are opportunities for profitable organic growth in our desired markets and classes of business within our current geographic footprint. Between 1998 and 2017, we and Donegal Mutual completed seven transactions involving acquisitions of property and casualty insurance companies or participation in the business of property and casualty insurance companies through Donegal Mutual’s entry into quota-share reinsurance agreements with them. While Donegal Mutual and we generally engage in preliminary discussions with potential direct or indirect acquisition candidates from time to time, neither Donegal Mutual nor we make any public disclosure regarding a proposed acquisition until Donegal Mutual or we have entered into a definitive acquisition agreement. -10- Index The following table highlights our and Donegal Mutual’s history of insurance company acquisitions and affiliations since 1998: Company Name State of Domicile Year Control Acquired Method of Acquisition/Affiliation Southern Heritage Insurance Company (1) Georgia 1998 Purchase of stock by us in 1998. Le Mars Mutual Insurance Company of Iowa and then Le Mars Insurance Company (1) Iowa 2002 Surplus note investment by Donegal Mutual in 2002; conversion to stock company in 2004; acquisition of stock by us in 2004. Peninsula Insurance Group Maryland 2004 Purchase of stock by us in 2004. Sheboygan Falls Mutual Insurance Company and then Sheboygan Falls Insurance Company (1) Wisconsin 2007 Contribution note investment by Donegal Mutual in 2007; conversion to stock company in 2008; acquisition of stock by us in 2008. Southern Mutual Insurance Company (2) Georgia 2009 Surplus note investment by Donegal Mutual and quota-share reinsurance in 2009. Michigan Insurance Company Michigan 2010 Purchase of stock by us in 2010. Mountain States Mutual Casualty Company (3) New Mexico 2017 Merger with and into Donegal Mutual in 2017. (1) To reduce administrative and compliance costs and expenses, these subsidiaries subsequently merged into one of our existing insurance subsidiaries. (2) Control acquired by Donegal Mutual. (3) Donegal Mutual completed the merger of Mountain States Mutual Casualty Company with and into Donegal Mutual effective May 25, 2017. Donegal Mutual was the surviving company in the merger, and Mountain States insurance subsidiaries became insurance subsidiaries of Donegal Mutual upon completion of the merger. Donegal Mutual also entered into a 100% quota-share reinsurance agreement with the Mountain States insurance subsidiaries on the merger date. Beginning with policies effective in 2021, Donegal Mutual places the business of the Mountain States insurance subsidiaries into the underwriting pool. Competition The property and casualty insurance industry is highly competitive on the basis of both price and service. Numerous companies compete for business in the geographic areas where our insurance subsidiaries operate. Many of these other insurance companies are substantially larger and have greater financial resources than those of our insurance subsidiaries. In addition, because our insurance subsidiaries and Donegal Mutual market their respective insurance products exclusively through independent insurance agencies, most of which represent multiple insurance companies, our insurance subsidiaries face competition within agencies, as well as competition to appoint and retain qualified independent agents. Insurance companies that are substantially larger than our insurance subsidiaries benefit from access to larger pools of data upon which to base their underwriting and pricing decisions as well as realize cost synergies their larger scale affords to them. Insurance companies that market their products directly to end consumers generally incur lower relative acquisition costs compared to those of our insurance subsidiaries. Products and Underwriting We report the results of our insurance operations in two segments: commercial lines of insurance and personal lines of insurance. The commercial lines our insurance subsidiaries write consist primarily of commercial automobile, commercial multi-peril and workers’ compensation insurance. The personal lines our insurance subsidiaries write consist primarily of private passenger automobile and homeowners insurance. We describe these lines of insurance in greater detail below: Commercial • Commercial automobile — policies that provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured. -11- Index • Commercial multi-peril — policies that provide protection to businesses against many perils, usually combining liability and physical damage coverages. • Workers’ compensation — policies employers purchase to provide benefits to employees for injuries sustained during employment. The workers’ compensation laws of each state determine the extent of the coverage we provide. Personal • Private passenger automobile — policies that provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured. • Homeowners — policies that provide coverage for damage to residences and their contents from a broad range of perils, including fire, lightning, windstorm and theft. These policies also cover liability of the insured arising from injury to other persons or their property while on the insured’s property and under other specified conditions. In recent years, we have made intentional investments in systems, products and capabilities to enable us to grow our business profitably. We are executing state-specific strategies that include accelerating commercial lines growth in states and classes of business where we see opportunities for profitable growth and reducing exposures in states and classes of business we have targeted for profit improvement. While we expect to place greater emphasis on commercial growth for the foreseeable future, we desire to maintain a profitable book of personal business to provide enhanced stability across our product portfolio and enhance our brand value to our independent agents. Donegal Mutual and our insurance subsidiaries offer personal lines products in ten states through a modern, user-friendly online agency portal. These products feature comprehensive coverage options, modernized rating methodology, enhanced pricing segmentation, application of predictive analytical models and utilization of third-party data to augment pricing and risk selection. Due to inflationary pressures on loss costs, we carefully managed personal lines exposure growth in 2024, intentionally slowing the writing of new personal lines opportunities while implementing premium rate increases throughout the year. In 2025, we wrote a limited amount of new personal lines accounts despite taking various actions to improve the competitiveness of our new business pricing in several core personal lines states as the year progressed. We plan to continue taking actions in 2026 to allow us to attract new accounts at a targeted level that essentially offsets the impact of natural policy attrition within our book of business. We are continuing to manage pricing levels and exposures with a goal of maintaining rate adequacy and achieving sustained targeted profitability within our personal lines segment. -12- Index The following table sets forth the net premiums written of our insurance subsidiaries by line of insurance for the periods indicated: Year Ended December 31, 2025 2024 2023 (dollars in thousands) Amount % Amount % Amount % Commercial lines: Automobile $ 197,949 21.9 % $ 184,989 19.6 % $ 174,741 19.5 % Workers’ compensation 92,464 10.2 103,533 11.0 107,598 12.0 Commercial multi-peril 221,283 24.5 213,959 22.7 195,632 21.8 Other 52,295 5.7 45,439 4.9 50,458 5.7 Total commercial lines 563,991 62.3 547,920 58.2 528,429 59.0 Personal lines: Automobile 208,077 23.0 243,036 25.8 215,957 24.1 Homeowners 122,999 13.6 140,613 14.9 139,688 15.6 Other 9,760 1.1 10,712 1.1 11,623 1.3 Total personal lines 340,836 37.7 394,361 41.8 367,268 41.0 Total business $ 904,827 100.0 % $ 942,281 100.0 % $ 895,697 100.0 % The commercial lines and personal lines underwriting departments of our insurance subsidiaries evaluate and select those risks that they believe will enable our insurance subsidiaries to achieve an underwriting profit. Within each of the underwriting departments, our insurance subsidiaries have dedicated product development and management teams responsible for the development of quality products at competitive prices to promote growth and profitability as well as the enhancement of our current products to meet targeted customer needs. In order to achieve underwriting profitability on a consistent basis, our insurance subsidiaries: • assess and select primarily standard and preferred risks; • adhere to disciplined underwriting guidelines; • seek to price risks appropriately based on exposure, risk characteristics, utilization of predictive models and application of underwriting judgment; and • utilize various types of risk management and loss control services. Our insurance subsidiaries also review their existing portfolio of insured accounts to determine whether certain risks or classes of business continue to meet their underwriting guidelines and margin expectations. If a given account or class of business no longer meets those underwriting guidelines or margin expectations, our insurance subsidiaries will take appropriate action regarding that account or class of business, including raising premium rates or non-renewing policies to the extent applicable laws and regulations permit. Distribution Our insurance subsidiaries market their products primarily in the Mid-Atlantic, Midwestern, Southern and Southwestern regions through approximately 2,000 independent insurance agencies. At December 31, 2025, the Donegal Insurance Group actively wrote business in 21 states (Arizona, Colorado, Delaware, Georgia, Illinois, Indiana, Iowa, Maryland, Michigan, Nebraska, New Mexico, North Carolina, Ohio, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wisconsin). Donegal Mutual includes the business it writes directly and assumes from the Mountain States insurance subsidiaries in five Southwestern states (Arizona, Colorado, New Mexico, Texas and Utah) in the pooling agreement between Donegal Mutual and Atlantic States. We believe the relationships of our insurance subsidiaries with their independent agents are valuable in identifying, obtaining and retaining profitable business. Our insurance subsidiaries maintain a stringent agency selection procedure that emphasizes appointing agencies with proven marketing strategies for the development of profitable business, and our insurance subsidiaries only appoint agencies with a strong underwriting history and potential growth capabilities. Our insurance subsidiaries also regularly evaluate the independent agencies that represent them based on their profitability and performance in relation to the objectives of our insurance subsidiaries. Our insurance subsidiaries seek to be among the top three insurers within each of their agencies for the lines of business our insurance subsidiaries write. -13- Index The following table sets forth the percentage of direct premiums our insurance subsidiaries write, including 80% of the direct premiums Donegal Mutual and Atlantic States include in the underwriting pool, in each of the states where they conducted a significant portion of their business in 2025: Pennsylvania 38.3 % Michigan 16.6 Delaware 7.0 Maryland 6.9 Virginia 6.1 Ohio 3.8 Indiana 2.8 Wisconsin 2.5 North Carolina 2.4 Texas 2.4 Georgia 1.9 Other 9.3 Total 100.0 % Our insurance subsidiaries employ a number of policies and procedures that we believe enable them to attract, retain and motivate their independent agents. We believe that the consistency of the product offerings of our insurance subsidiaries enables our insurance subsidiaries to compete effectively for independent agents with other insurers whose product offerings may fluctuate based upon industry conditions. Our multi-year systems modernization project has further enhanced the ability of our insurance subsidiaries to conduct business with their independent agents and to develop and implement new products. Our insurance subsidiaries have a competitive compensation program for their independent agents that includes base commissions, growth incentive plans and a profit-sharing plan, under which the independent agents may earn additional commissions based upon the volume of premiums produced and the profitability of the business our insurance subsidiaries receive from that agency. We have an agency stock purchase plan that allows our independent agents to purchase our Class A common stock at a discount to market prices to further align the interests of our independent agents with the interests of our stockholders. Our insurance subsidiaries encourage their independent agents to focus on “account selling,” or serving all of a particular insured’s property and casualty insurance needs, which our insurance subsidiaries believe generally results in more favorable loss experience than covering a single risk for an individual insured. As part of the effort of our insurance subsidiaries to maintain acceptable underwriting results, they conduct annual reviews of agencies that have failed to meet their underwriting profitability criteria. The review process includes an analysis of the underwriting and re-underwriting practices of the agency, the completeness and accuracy of the applications the agency submits, the adequacy of the training of the agency’s staff and the agency’s record of adherence to the underwriting guidelines and service standards of our insurance subsidiaries. Based on the results of this review process, the marketing and underwriting personnel of our insurance subsidiaries develop, together with the agency, a plan to improve its underwriting profitability. Our insurance subsidiaries monitor the agency’s compliance with the plan and take other measures as required in the judgment of our insurance subsidiaries, including the termination, to the extent applicable laws and regulations permit, of agencies that are unable to achieve acceptable underwriting profitability. -14- Index Technology Donegal Mutual owns and manages the technology that our insurance subsidiaries utilize on a daily basis. The technology is comprised of highly integrated agency-facing and back-end processing systems that operate within an advanced, modernized infrastructure that provides high service levels for performance, reliability, security and availability. Donegal Mutual maintains disaster recovery and backup systems and tests these systems on a regular basis. Our insurance subsidiaries bear their proportionate share of information services expenses based on their respective percentage of the total net premiums written of the Donegal Insurance Group. The business strategy and ultimate success of our insurance subsidiaries depends on the effectiveness of efficient and integrated business systems and technology infrastructure. These systems enable our insurance subsidiaries to provide quality service to agents and policyholders by processing business in a timely and dependable manner, communicate and share data with agents and provide a variety of methods for the payment of premiums. These systems also allow for the accumulation and analysis of data and information for the management of our insurance subsidiaries. Donegal Mutual is currently in the midst of a multi-year effort to modernize certain of its key infrastructure and applications systems we describe in more detail under “Business - Business Strategy - Advancing our operational and digital capabilities.” The modernized proficiency of these integrated technology systems facilitates high service levels for the agents and policyholders of our insurance subsidiaries, increased efficiencies in processing the business of our insurance subsidiaries and lower operating costs. Key components of these technology systems include agency interface systems, automated policy management systems, a claims processing system and a billing administration system. The agency interface systems provide our insurance subsidiaries with a comprehensive single source to facilitate data sharing both to and from agents’ systems. The agency interface systems also integrate with our automated policy management systems to provide agents with an integrated means of generating underwritten quotes and automatically issuing policies that meet the underwriting guidelines of our insurance subsidiaries with limited or no intervention by their personnel. The claims processing system allows our insurance subsidiaries to process claims efficiently and in an automated environment. The billing administration system allows our insurance subsidiaries to process premium billing and collection efficiently and in an automated environment. We believe Donegal Mutual’s agency-facing technology systems compare well against those of many national property and casualty insurance carriers in terms of feature capabilities and service levels. Claims The management of claims is a critical component of the philosophy of our insurance subsidiaries to achieve underwriting profitability on a consistent basis and is fundamental to the successful operations of our insurance subsidiaries and their dedication to excellent service. Our senior claims management oversees the claims processing units of each of our insurance subsidiaries to assure consistency in the claims settlement process. The claims departments of our insurance subsidiaries rigorously manage claims to assure that they settle legitimate claims quickly and fairly and that they identify questionable claims for defense. They provide various means of claims reporting on a 24-hours a day, seven-days a week basis, including toll-free numbers and electronic reporting through our website and mobile application. The claims departments strive to respond to notifications of claims promptly, generally within the day reported. By responding promptly to claims, they provide quality customer service and we believe minimize the ultimate cost of the claims. They engage independent adjusters as needed to handle claims in areas in which the typical volume of claims is not sufficient to justify the hiring of field staff. They also employ private investigators, structural experts and outside legal counsel to supplement their internal staff and to assist in the investigation of claims. Our insurance subsidiaries have a special investigative unit primarily staffed by former law enforcement officers that attempts to identify and prevent fraud and abuse and to investigate questionable claims. The management of the claims departments of our insurance subsidiaries develops and implements policies and procedures for the establishment of adequate claim reserves. Our insurance subsidiaries employ an actuarial staff that regularly reviews their reserves for incurred but not reported claims. The management and staff of the claims departments resolve policy coverage issues, manage and process reinsurance recoveries and handle salvage and subrogation matters. The litigation and personal injury sections of our insurance subsidiaries manage all claims litigation. Claims above certain thresholds require management review and settlement authorization. Our insurance subsidiaries provide their claims adjusters reserving and settlement authority based upon their experience and demonstrated abilities. Larger or more complicated claims require consultation and approval of senior claims department management. -15- Index Liabilities for Losses and Loss Expenses Liabilities for losses and loss expenses are estimates at a given point in time of the amounts an insurer expects to pay with respect to incurred policyholder claims based on facts and circumstances the insurer knows at that point in time. For example, legislative, judicial and regulatory actions may expand coverage definitions, retroactively mandate coverage or otherwise require our insurance subsidiaries to pay losses for damages that their policies explicitly excluded or did not intend to cover. At the time of establishing its estimates, an insurer recognizes that its ultimate liability for losses and loss expenses will exceed or be less than such estimates. Our insurance subsidiaries base their estimates of liabilities for losses and loss expenses on assumptions as to future loss trends, expected claims severity, judicial theories of liability and other factors. However, during the loss adjustment period, our insurance subsidiaries may learn additional facts regarding individual claims, and, consequently, it often becomes necessary for our insurance subsidiaries to refine and adjust their estimates for these liabilities. We reflect any adjustments to the liabilities for losses and loss expenses of our insurance subsidiaries in our consolidated results of operations in the period in which our insurance subsidiaries make adjustments to their estimates. Our insurance subsidiaries maintain liabilities for the payment of losses and loss expenses with respect to both reported and unreported claims. Our insurance subsidiaries establish these liabilities for the purpose of covering the ultimate costs of settling all losses, including investigation and litigation costs. Our insurance subsidiaries base the amount of their liability for reported losses primarily upon a case-by-case evaluation of the type of risk involved, knowledge of the circumstances surrounding each claim and the insurance policy provisions relating to the type of loss the policyholder incurred. Our insurance subsidiaries determine the amount of their liability for unreported claims and loss expenses on the basis of historical information by line of insurance. Our insurance subsidiaries account for inflation in the reserving function through analysis of costs and trends and reviews of historical reserving results. Our insurance subsidiaries monitor their liabilities closely and recompute them periodically using new information on reported claims and a variety of statistical techniques. Our insurance subsidiaries do not discount their liabilities for losses and loss expenses. Reserve estimates can change over time because of unexpected changes in assumptions related to our insurance subsidiaries’ external environment and, to a lesser extent, assumptions related to our insurance subsidiaries’ internal operations. For example, our insurance subsidiaries have experienced an increase in claims severity and a lengthening of the claim settlement periods on bodily injury claims during the past several years. In addition, the COVID-19 pandemic and related government mandates and restrictions resulted in various changes from historical claims reporting and settlement trends during 2020 and resulted in significant increases in loss costs in several following years due to a number of factors, including supply chain disruption, higher new and used automobile values, increases in the cost of replacement automobile parts and rising labor rates. These trend changes caused significant disruption to historical loss patterns and gave rise to greater uncertainty as to the pattern of future loss settlements. Uncertainties regarding future trends include social inflation, availability and cost of replacement automobile parts and building materials, availability and cost of skilled labor, the rate of specialized plaintiff attorney involvement in claims, plaintiff attorney utilization of litigation financing and the cost of medical technologies and procedures. Assumptions related to our insurance subsidiaries’ external environment include the absence of significant changes in tort law and the legal environment that increase liability exposure, consistency in judicial interpretations of insurance coverage and policy provisions and the rate of loss cost inflation. Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business and consistency in reinsurance coverage and collectability of reinsured losses, among other items. To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes. Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at December 31, 2025. For every 1% change in our insurance subsidiaries’ loss and loss expense reserves, net of reinsurance recoverable, the effect on our pre-tax results of operations would be approximately $7.1 million. -16- Index The establishment of appropriate liabilities is an inherently uncertain process and we can provide no assurance that our insurance subsidiaries’ ultimate liability will not exceed our insurance subsidiaries’ loss and loss expense reserves and have an adverse effect on our results of operations and financial condition. Furthermore, we cannot predict the timing, frequency and extent of adjustments to our insurance subsidiaries’ estimated future liabilities, because the historical conditions and events that serve as a basis for our insurance subsidiaries’ estimates of ultimate claim costs may change. As is the case for substantially all property and casualty insurance companies, our insurance subsidiaries have found it necessary in the past to increase their estimated future liabilities for losses and loss expenses in certain periods and, in other periods, their estimated future liabilities for losses and loss expenses have exceeded their actual liabilities for losses and loss expenses. Changes in our insurance subsidiaries’ estimates of their liability for losses and loss expenses generally reflect actual payments and their evaluation of information received subsequent to the prior reporting period. Our insurance subsidiaries recognized a decrease in their liability for losses and loss expenses of prior years of $10.3 million, $15.0 million and $16.7 million in 2025, 2024 and 2023, respectively. Our insurance subsidiaries made no significant changes in their reserving philosophy or claims management personnel, and they have made no significant offsetting changes in estimates that increased or decreased their loss and loss expense reserves in those years. The 2025 development represented 1.5% of the December 31, 2024 net carried reserves and resulted primarily from lower-than-expected loss emergence in all lines of business except other commercial lines (which is primarily commercial umbrella liability) for accident years prior to 2025. The majority of the 2025 development related to decreases in the liability for losses and loss expenses of prior years for Southern and Peninsula. The 2024 development represented 2.2% of the December 31, 2023 net carried reserves and resulted primarily from lower-than-expected loss emergence in the commercial multi-peril, personal automobile and homeowner lines of business, offset partially by higher-than-expected loss emergence in the workers’ compensation and commercial automobile lines of business, for accident years prior to 2024. The majority of the 2024 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO. The 2023 development represented 2.5% of the December 31, 2022 net carried reserves and resulted primarily from lower-than-expected loss emergence in the personal automobile and commercial automobile lines of business for accident years prior to 2023. The majority of the 2023 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO. Excluding the impact of severe weather events and the COVID-19 pandemic, our insurance subsidiaries have noted stable amounts in the number of claims incurred and the number of claims outstanding at period ends relative to their premium base in recent years across most of their lines of business. However, the amount of the average claim outstanding has increased gradually over the past several years due to various factors such as increased property and automobile repair and replacement costs, rising medical loss costs and increased litigation trends. We have also experienced a general slowing of settlement rates in litigated claims and lengthening of repair completion times for property and automobile claims. Our insurance subsidiaries could have to make further adjustments to their estimates in the future. However, on the basis of our insurance subsidiaries’ internal procedures, which analyze, among other things, their prior assumptions, their experience with similar cases and historical trends such as reserving patterns, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, economic conditions and public attitudes, we believe that our insurance subsidiaries have made adequate provision for their liability for losses and loss expenses. Atlantic States’ participation in the underwriting pool with Donegal Mutual exposes Atlantic States to adverse loss development on the business that Donegal Mutual contributes to the underwriting pool. However, pooled business represents the predominant percentage of the net underwriting activity of both companies, and Donegal Mutual and Atlantic States share proportionately any adverse risk development relating to the pooled business. The business in the underwriting pool is homogeneous, and each company has a pro-rata share of the entire underwriting pool. Since the predominant percentage of the business of Atlantic States and Donegal Mutual is pooled and the results shared by each company according to its participation level under the terms of the pooling agreement, the intent of the underwriting pool is to produce a more uniform and stable underwriting result from year to year for each company than either would experience individually and to spread the risk of loss between the companies. -17- Index Differences between liabilities reported in our financial statements prepared on a GAAP basis and our insurance subsidiaries’ financial statements prepared on a SAP basis result from anticipating salvage and subrogation recoveries for GAAP but not for SAP. These differences amounted to $36.6 million, $36.0 million and $32.4 million at December 31, 2025, 2024 and 2023, respectively. The following table sets forth a reconciliation of the beginning and ending GAAP net liability of our insurance subsidiaries for unpaid losses and loss expenses for the periods indicated: Year Ended December 31, (in thousands) 2025 2024 2023 Gross liability for unpaid losses and loss expenses at beginning of year $ 1,120,985 $ 1,126,157 $ 1,121,046 Less reinsurance recoverable 416,621 437,014 451,184 Cumulative effect of adoption of updated accounting guidance for credit losses at January 1 — — 1,132 Net liability for unpaid losses and loss expenses at beginning of year 704,364 689,143 670,994 Provision for net losses and loss expenses for claims incurred in the current year 574,599 619,090 625,831 Change in provision for estimated net losses and loss expenses for claims incurred in prior years (10,267 ) (14,972 ) (16,653 ) Total incurred 564,332 604,118 609,178 Net losses and loss expense payments for claims incurred during: The current year 286,140 319,196 330,290 Prior years 277,360 269,701 260,739 Total paid 563,500 588,897 591,029 Net liability for unpaid losses and loss expenses at end of year 705,196 704,364 689,143 Plus reinsurance recoverable 394,854 416,621 437,014 Gross liability for unpaid losses and loss expenses at end of year $ 1,100,050 $ 1,120,985 $ 1,126,157 The following table sets forth the development of the liability for net unpaid losses and loss expenses of our insurance subsidiaries from 2015 to 2025. Loss data in the table includes business Atlantic States received from the underwriting pool. “Net liability at end of year for unpaid losses and loss expenses” sets forth the estimated liability for net unpaid losses and loss expenses recorded at the balance sheet date for each of the indicated years. This liability represents the estimated amount of net losses and loss expenses for claims arising in the current and all prior years that are unpaid at the balance sheet date, including losses incurred but not reported. The “Net liability re-estimated as of” portion of the table shows the re-estimated amount of the previously recorded liability based on experience for each succeeding year. The estimate increases or decreases as payments are made and more information becomes known about the severity of the remaining unpaid claims. For example, the 2015 liability has developed a deficiency after ten years because we expect the re-estimated net losses and loss expenses to be $20.7 million more than the estimated liability we initially established in 2015 of $322.0 million. The “Cumulative deficiency (excess)” shows the cumulative deficiency or excess at December 31, 2025 of the liability estimate shown on the top line of the corresponding column. A deficiency in liability means that the liability established in prior years was less than the amount of actual payments and currently re-estimated remaining unpaid liability. An excess in liability means that the liability established in prior years exceeded the amount of actual payments and currently re-estimated unpaid liability remaining. The “Cumulative amount of liability paid through” portion of the table shows the cumulative net losses and loss expense payments made in succeeding years for net losses incurred prior to the balance sheet date. For example, the 2015 column indicates that at December 31, 2025 payments equal to $333.1 million of the currently re-estimated ultimate liability for net losses and loss expenses of $342.7 million had been made. -18- Index Year Ended December 31, (in thousands) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Net liability at end of year for unpaid losses and loss expenses $ 322,054 $ 347,518 $ 383,401 $ 475,398 $ 506,906 $ 557,189 $ 626,359 $ 669,862 $ 689,143 $ 704,364 $ 705,196 Net liability re-estimated as of: One year later 325,043 354,139 419,032 462,466 493,961 525,981 581,538 653,209 674,171 694,097 Two years later 329,115 375,741 413,535 450,862 479,927 498,724 564,326 638,428 670,481 Three years later 338,118 376,060 404,902 440,168 463,441 490,177 550,972 638,823 Four years later 339,228 372,230 398,560 432,027 459,835 480,865 545,874 Five years later 338,020 370,960 396,695 431,115 455,494 484,462 Six years later 338,200 372,346 396,748 429,865 457,859 Seven years later 339,625 371,859 396,167 432,179 Eight years later 340,191 372,477 398,727 Nine years later 340,800 374,756 Ten years later 342,742 Cumulative deficiency (excess) 20,688 27,238 15,326 (43,219 ) (49,047 ) (72,727 ) (80,485 ) (31,039 ) (18,662 ) (10,267 ) Cumulative amount of liability paid through: One year later $ 149,746 $ 163,005 $ 175,883 $ 195,956 $ 172,497 $ 182,223 $ 218,304 $ 260,739 $ 269,701 $ 277,360 Two years later 228,506 250,678 276,331 275,993 276,069 297,860 346,107 405,216 430,824 Three years later 274,235 306,338 317,447 335,310 343,912 374,043 426,648 500,744 Four years later 300,715 324,628 342,583 371,231 393,068 418,283 471,484 Five years later 309,630 337,946 362,061 394,251 414,690 441,368 Six years later 315,105 349,496 372,584 404,251 429,045 Seven years later 321,777 355,809 378,937 412,667 Eight years later 326,617 359,527 384,380 Nine years later 329,651 363,581 Ten years later 333,148 Year Ended December 31, (in thousands) 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gross liability at end of year $ 676,672 $ 814,665 $ 869,674 $ 962,007 $ 1,077,620 $ 1,121,046 $ 1,126,157 $ 1,120,985 $ 1,100,050 Reinsurance recoverable 293,271 339,266 362,768 404,818 451,261 451,184 437,014 416,621 394,854 Net liability at end of year 383,401 475,398 506,906 557,189 626,359 669,862 689,143 704,364 705,196 Gross re-estimated liability 678,947 752,587 787,256 868,967 924,582 1,000,930 1,051,463 1,079,093 Re-estimated recoverable 280,220 320,408 329,397 384,505 378,708 362,107 380,982 384,996 Net re-estimated liability 398,727 432,179 457,859 484,462 545,874 638,823 670,481 694,097 Gross cumulative deficiency (excess) 2,275 (62,078 ) (82,418 ) (93,040 ) (153,038 ) (120,116 ) (74,694 ) (41,892 ) -19- Index Third-Party Reinsurance Our insurance subsidiaries and Donegal Mutual purchase certain third-party reinsurance on a combined basis. Our insurance subsidiaries use several different reinsurers, all of which, consistent with the requirements of our insurance subsidiaries and Donegal Mutual, have an A.M. Best rating of A- (Excellent) or better or, with respect to foreign reinsurers, have a financial condition that, in the opinion of our management, is equivalent to a company with at least an A- (Excellent) rating from A.M. Best. The external reinsurance our insurance subsidiaries and Donegal Mutual purchased for 2025 included: • excess of loss reinsurance, under which Donegal Mutual and our insurance subsidiaries recovered losses over a set retention of $4.0 million for all property losses, $6.0 million for all liability losses except workers’ compensation losses and $3.0 million for all workers’ compensation losses; and • catastrophe reinsurance, under which Donegal Mutual and our insurance subsidiaries recovered 100% of an accumulation of many losses resulting from a single event, including natural disasters, over a set retention of $25.0 million up to aggregate losses of $200.0 million per occurrence. For property insurance, our insurance subsidiaries had excess of loss reinsurance that provided for coverage of $36.0 million per loss over a set retention of $4.0 million. For liability insurance, our insurance subsidiaries had excess of loss reinsurance that provided for coverage of $69.0 million per occurrence over a set retention of $6.0 million. For workers’ compensation insurance, our insurance subsidiaries had excess of loss reinsurance that provided for coverage of $17.0 million on any one life over a set retention of $3.0 million. Our insurance subsidiaries and Donegal Mutual renewed their third-party reinsurance for 2026 with no changes to the coverage and retention amounts in effect for 2025. Our insurance subsidiaries and Donegal Mutual also purchased facultative reinsurance to cover certain exposures, including property exposures that exceeded the limits provided by their respective treaty reinsurance. Investments At December 31, 2025, 96.4% of all debt securities our insurance subsidiaries held had an investment-grade rating. The investment portfolios of our insurance subsidiaries did not contain any mortgage loans or any non-performing assets at December 31, 2025. The following table shows the composition of the debt securities (at carrying value) in the investment portfolios of our insurance subsidiaries, excluding short-term investments, by rating at December 31, 2025: (dollars in thousands) December 31, 2025 Rating (1) Amount Percent U.S. Treasury and U.S. agency securities (2) $ 548,846 38.7 % Aaa or AAA 33,668 2.4 Aa or AA 399,203 28.2 A 208,188 14.7 BBB 177,150 12.5 BB 51,428 3.6 Allowance for expected credit losses (1,313 ) (0.1 ) Total $ 1,417,170 100.0 % (1) Ratings assigned by Moody’s Investors Services, Inc. or Standard & Poor’s Corporation. (2) Includes mortgage-backed securities of $445.2 million. -20- Index Our insurance subsidiaries invest in both taxable and tax-exempt securities as part of their strategy to maximize after-tax income. Tax-exempt securities made up approximately 21.3%, 16.6% and 18.2% of the fixed-maturity securities in the combined investment portfolios of our insurance subsidiaries at December 31, 2025, 2024 and 2023, respectively. The following table shows the classification of our investments and the investments of our insurance subsidiaries at December 31, 2025, 2024 and 2023 (at carrying value): December 31, 2025 2024 2023 Percent of Percent of Percent of (dollars in thousands) Amount Total Amount Total Amount Total Fixed maturities (1) : Held to maturity: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 79,242 5.3 % $ 86,579 6.3 % $ 91,517 6.9 % Obligations of states and political subdivisions 436,802 29.1 371,896 26.9 376,898 28.4 Corporate securities 252,099 16.8 236,550 17.0 201,847 15.2 Mortgage-backed securities 8,304 0.6 10,689 0.8 9,235 0.7 Total held to maturity 776,447 51.8 705,714 51.0 679,497 51.2 Available for sale: U.S. Treasury securities and obligations of U.S. government corporations and agencies 24,329 1.6 83,793 6.0 85,419 6.4 Obligations of states and political subdivisions 48,551 3.3 37,404 2.7 38,116 2.9 Corporate securities 130,925 8.7 202,932 14.7 196,793 14.8 Mortgage-backed securities 436,918 29.1 293,763 21.2 269,020 20.3 Total available for sale 640,723 42.7 617,892 44.6 589,348 44.4 Total fixed maturities 1,417,170 94.5 1,323,606 95.6 1,268,845 95.6 Equity securities (2) 44,370 3.0 36,808 2.6 25,903 2.0 Short-term investments (3) 38,713 2.5 24,558 1.8 32,306 2.4 Total investments $ 1,500,253 100.0 % $ 1,384,972 100.0 % $ 1,327,054 100.0 % (1) We refer to Notes 1 and 4 to our Consolidated Financial Statements. We value those fixed maturities we classify as held to maturity at amortized cost; we value those fixed maturities we classify as available for sale at fair value. The total fair value of fixed maturities we classified as held to maturity was $731.7 million at December 31, 2025, $631.6 million at December 31, 2024 and $611.5 million at December 31, 2023. The amortized cost of fixed maturities we classified as available for sale was $650.4 million at December 31, 2025, $652.6 million at December 31, 2024 and $629.7 million at December 31, 2023. (2) We value equity securities at fair value. The total cost of equity securities was $27.2 million at December 31, 2025, $24.7 million at December 31, 2024 and $18.8 million at December 31, 2023. (3) We value short-term investments at cost, which approximates fair value. -21- Index The following table sets forth the maturities (at carrying value) in the fixed maturity portfolio of our insurance subsidiaries at December 31, 2025, 2024 and 2023: December 31, 2025 2024 2023 Percent of Percent of Percent of (dollars in thousands) Amount Total Amount Total Amount Total Due in (1) : One year or less $ 28,609 2.0 % $ 56,914 4.3 % $ 54,392 4.3 % Over one year through three years 76,958 5.4 210,184 15.9 130,158 10.3 Over three years through five years 140,580 9.9 175,577 13.3 141,994 11.2 Over five years through ten years 323,870 22.9 318,912 24.1 347,035 27.3 Over ten years through fifteen years 234,181 16.6 208,445 15.7 201,585 15.9 Over fifteen years 169,058 11.9 50,503 3.8 116,747 9.2 Mortgage-backed securities 445,227 31.4 304,459 23.0 278,260 21.9 Allowance for expected credit losses (1,313 ) (0.1 ) (1,388 ) (0.1 ) (1,326 ) (0.1 ) $ 1,417,170 100.0 % $ 1,323,606 100.0 % $ 1,268,845 100.0 % (1) Based on stated maturity dates with no prepayment assumptions. Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. As shown above, our insurance subsidiaries held investments in mortgage-backed securities having a carrying value of $445.2 million at December 31, 2025. The mortgage-backed securities consist primarily of investments in governmental agency balloon pools with stated maturities between one and 50 years. The stated maturities of these investments limit the exposure of our insurance subsidiaries to extension risk in the event that interest rates rise and prepayments decline. Our insurance subsidiaries perform an analysis of the underlying loans when evaluating a mortgage-backed security for purchase, and they select those securities that they believe will provide a return that properly reflects the prepayment risk associated with the underlying loans. The following table sets forth the investment results of our insurance subsidiaries for the years ended December 31, 2025, 2024 and 2023: Year Ended December 31, (dollars in thousands) 2025 2024 2023 Invested assets (1) $ 1,442,613 $ 1,356,013 $ 1,315,855 Investment income (2) 52,627 44,918 40,853 Average yield 3.6 % 3.3 % 3.1 % Average tax-equivalent yield 3.7 3.4 3.2 (1) Average of the aggregate invested amounts at the beginning and end of the period. (2) Investment income is net of investment expenses and does not include investment gains or losses or provision for income taxes. A.M. Best Rating Donegal Mutual and our insurance subsidiaries have an A.M. Best rating of A (Excellent), based upon the respective current financial condition and historical statutory results of operations of Donegal Mutual and our insurance subsidiaries. We believe that the A.M. Best rating of Donegal Mutual and our insurance subsidiaries is an important factor in their marketing of their products to their agents and customers. A.M. Best’s ratings are industry ratings based on a comparative analysis of the financial condition and operating performance of insurance companies. A.M. Best’s classifications are A++ and A+ (Superior), A and A- (Excellent), B++ and B+ (Good), B and B- (Fair), C++ and C+ (Marginal), C and C- (Weak), D (Poor), E (Under Regulatory Supervision), F (Liquidation) and S (Suspended). A.M. Best bases its ratings upon factors relevant to the payment of claims of policyholders and are not directed toward the protection of investors in insurance companies. According to A.M. Best, the “Excellent” rating that the Donegal Insurance Group maintains is assigned to those companies that, in A.M. Best’s opinion, have an excellent ability to meet their ongoing insurance obligations. -22- Index Regulation The supervision and regulation of insurance companies consists primarily of the laws and regulations of the various states in which the insurance companies transact business, with the primary regulatory authority being the insurance regulatory authorities in the state of domicile of the insurance company. Such supervision and regulation relate to numerous aspects of an insurance company’s business and financial condition. The primary purpose of such supervision and regulation is the protection of policyholders. The authority of the state insurance departments includes the establishment of standards of solvency that insurers must meet and maintain, the licensing of insurers and insurance agents to do business, the nature of, and limitations on, investments, premium rates for property and casualty insurance, the provisions that insurers must make for current losses and future liabilities, the deposit of securities for the benefit of policyholders, the approval of policy forms, notice requirements for the cancellation of policies and the approval of certain changes in control. State insurance departments also conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other reports relating to the financial condition of insurance companies. In addition to state-imposed insurance laws and regulations, the National Association of Insurance Commissioners, or the NAIC, maintains a risk-based capital system, or RBC, for assessing the adequacy of the statutory capital and surplus of insurance companies that augments the states’ current fixed dollar minimum capital requirements for insurance companies. At December 31, 2025, our insurance subsidiaries and Donegal Mutual each exceeded the minimum levels of statutory capital the RBC rules require by a substantial margin. Generally, every state has guaranty fund laws under which insurers licensed to do business in that state can be assessed on the basis of premiums written by the insurer in that state in order to fund policyholder liabilities of insolvent insurance companies. Under these laws in general, an insurer is subject to assessment, depending upon its market share of a given line of business, to assist in the payment of policyholder claims against insolvent insurers. Our insurance subsidiaries and Donegal Mutual have made accruals for their portion of assessments related to such insolvencies based upon the most current information furnished by the guaranty associations. We are part of an insurance holding company system of which Donegal Mutual is the ultimate controlling person. All of the states in which our insurance companies and Donegal Mutual maintain a domicile have legislation that regulates insurance holding company systems. Each insurance company in the insurance holding company system must register with the insurance supervisory agency of its state of domicile and furnish information concerning the operations of companies within the insurance holding company system that may materially affect the operations, management or financial condition of the insurers within the system. Pursuant to these laws, the respective insurance departments in which our subsidiaries and Donegal Mutual maintain a domicile may examine our insurance subsidiaries or Donegal Mutual at any time, require disclosure of material transactions by the holding company with another member of the insurance holding company system and require prior notice or prior approval of certain transactions, such as “extraordinary dividends” from the insurance subsidiaries to the holding company. We have insurance subsidiaries domiciled in Michigan, Pennsylvania and Virginia. The Pennsylvania Insurance Holding Companies Act, which generally applies to Donegal Mutual, us and our insurance subsidiaries, requires that all transactions within an insurance holding company system to which an insurer is a party must be fair and reasonable and that any charges or fees for services performed must be reasonable. Any management agreement, service agreement, cost sharing arrangement and material reinsurance agreement must be filed with the Pennsylvania Insurance Department, or the Department, and is subject to the Department’s review. We have filed with the Department the pooling agreement between Donegal Mutual and Atlantic States that established the underwriting pool and all material agreements between Donegal Mutual and our insurance subsidiaries. -23- Index Approval of the applicable insurance commissioner is also required prior to consummation of transactions affecting the control of an insurer. In virtually all states, including the states where our insurance subsidiaries are domiciled, the acquisition of 10% or more of the outstanding capital stock of an insurer or its holding company or the intent to acquire such an interest creates a rebuttable presumption of a change in control. Pursuant to an order issued in April 2003, the Department approved Donegal Mutual’s ownership of up to 70% of our outstanding Class A common stock and Donegal Mutual’s ownership of up to 100% of our outstanding Class B common stock. Our insurance subsidiaries have the legal obligation under state insurance laws to participate in involuntary insurance programs for automobile insurance, as well as other property and casualty insurance lines, in the states in which they conduct business. These programs include joint underwriting associations, assigned risk plans, fair access to insurance requirements plans, reinsurance facilities, windstorm plans and tornado plans. Legislation establishing these programs requires all companies that write lines covered by these programs to provide coverage, either directly or through reinsurance, for insureds who are unable to obtain insurance in the voluntary market. The legislation creating these programs usually allocates a pro rata portion of risks attributable to such insureds to each company on the basis of the direct premiums it has written in that state or the number of automobiles it insures in that state. Generally, state law requires participation in these programs as a condition to obtaining a certificate of authority. Our loss ratio on insurance we write under these involuntary programs has traditionally been significantly greater than our loss ratio on insurance we voluntarily write in those states. Regulatory requirements, including RBC requirements, may impact our insurance subsidiaries’ ability to pay dividends. The amount of statutory capital and surplus necessary for our insurance subsidiaries to satisfy regulatory requirements, including RBC requirements, was not significant in relation to our insurance subsidiaries’ statutory capital and surplus at December 31, 2025. Generally, the maximum amount that one of our insurance subsidiaries may pay to us as ordinary dividends during any year after notice to, but without prior approval of, the insurance commissioner of its domiciliary state is limited to a stated percentage of that subsidiary’s statutory capital and surplus at December 31 of the preceding fiscal year or the net income of that subsidiary for its preceding fiscal year. Our insurance subsidiaries paid dividends to us of $10.0 million,$15.0 million and $13.0 million in 2025, 2024 and 2023, respectively. At December 31, 2025, the amount of ordinary dividends our insurance subsidiaries could pay to us during 2026, without the prior approval of their respective domiciliary insurance commissioners, is shown in the following table. Name of Insurance Subsidiary Ordinary Dividend Amount Atlantic States $ 50,777,668 MICO 10,179,273 Peninsula 5,395,109 Southern — Total $ 66,352,050 Donegal Mutual Insurance Company Donegal Mutual organized as a mutual fire insurance company in Pennsylvania in 1889. At December 31, 2025, Donegal Mutual had admitted assets of $822.2 million and policyholders’ surplus of $454.6 million. At December 31, 2025, Donegal Mutual had total liabilities of $367.6 million, including reserves for net losses and loss expenses of $150.1 million and unearned premiums of $72.4 million. Donegal Mutual’s investment portfolio of $622.8 million at December 31, 2025 consisted primarily of investment-grade bonds of $203.2 million and its investment in our Class A common stock and our Class B common stock. At December 31, 2025, Donegal Mutual owned 13,928,704 shares, or approximately 44%, of our Class A common stock, which Donegal Mutual carried on its books at $208.7 million, and 4,751,974 shares, or approximately 85%, of our Class B common stock, which Donegal Mutual carried on its books at $71.2 million. We present Donegal Mutual’s financial information in accordance with SAP as the NAIC Accounting Practices and Procedures Manual requires. Donegal Mutual does not, nor is it required to, prepare financial statements in accordance with GAAP. -24- Index Information about Our Executive Officers The following table sets forth information regarding the executive officers of Donegal Mutual and the Registrant as of the date of this Form 10-K Report: Name Age Position Kevin G. Burke 60 President and Chief Executive Officer of us since 2015; President and Chief Executive Officer of Donegal Mutual since 2018; Executive Vice President and Chief Operating Officer of Donegal Mutual from 2014 to 2018; Senior Vice President of Human Resources of Donegal Mutual and us from 2005 to 2014; other positions from 2000 to 2005. W. Daniel DeLamater 53 Executive Vice President and Chief Operating Officer of Donegal Mutual and us since 2024; Senior Vice President of us from 2022 to 2024; Senior Vice President and Head of Field Operations & National Accounts of Donegal Mutual from 2022 to 2024; Senior Vice President of National Accounts for Donegal Mutual from 2020 to 2022; President of Southern Mutual Insurance Company since 2016; other positions at Southern Mutual Insurance Company from 2000 to 2016. Jeffery T. Hay 51 Executive Vice President and Chief Underwriting Officer of Donegal Mutual and us since 2025; Senior Vice President and Chief Underwriting Officer of Donegal Mutual and Senior Vice President of us from 2021 to 2025; Senior Director of Willis Towers Watson from 2018 to 2021; Head of Personal Lines Product Management of The Hartford from 2015 to 2018; other positions at The Hartford from 2005 to 2015. Jeffrey D. Miller 61 Executive Vice President and Chief Financial Officer of Donegal Mutual and us since 2014; Senior Vice President and Chief Financial Officer of Donegal Mutual and us from 2005 to 2014; other positions from 1993 to 2005. Sanjay Pandey 59 Executive Vice President and Chief Information Officer of Donegal Mutual and us since 2025; Senior Vice President and Chief Information Officer of Donegal Mutual and us from 2013 to 2025; other positions from 2000 to 2013. Kristi S. Altshuler 45 Senior Vice President and Chief Analytics Officer of us since 2020; Senior Vice President and Chief Analytics Officer of Donegal Mutual since 2019; Director of Willis Towers Watson from 2018 to 2019; Director of Pricing Innovation of USAA from 2014 to 2018; other positions at USAA from 2001 to 2014. David B. Bawel 39 Senior Vice President and Chief Accounting Officer of Donegal Mutual and us since 2024; Vice President of Financial Reporting and Analysis of Donegal Mutual and Vice President of us from 2018 to 2024; Assistant Vice President of Internal Audit of Donegal Mutual from 2012 to 2018. Noland R. Deas, Jr. 58 Senior Vice President of Field Operations & National Accounts of Donegal Mutual and Senior Vice President of us since 2024; Senior Regional Vice President of Donegal Mutual from 2022 to 2024 and Regional Vice President of Donegal Mutual from 2020 to 2022; other positions with Donegal Mutual from 2006 to 2020. William A. Folmar 67 Senior Vice President of Claims of Donegal Mutual and Senior Vice President of us since 2019; Vice President of Claims of Donegal Mutual from 2010 to 2019; other positions from 1998 to 2010. Rick J. Hecker 38 Senior Vice President and General Counsel of Donegal Mutual and us since 2025; Senior Vice President and General Counsel of Conestoga Title Insurance Company from 2022 to 2024; Vice President and General Counsel of Conestoga Title Insurance Company from 2021 to 2022. Christina M. Hoffman 51 Senior Vice President and Chief Risk Officer of Donegal Mutual and us since 2019; Senior Vice President of Internal Audit of Donegal Mutual and Senior Vice President of us from 2013 to 2019; Vice President of Internal Audit of Donegal Mutual and Vice President of us from 2009 to 2013. David W. Sponic 61 Senior Vice President of Personal Lines of Donegal Mutual and Senior Vice President of us since 2022; Vice President of Personal Lines of Donegal Mutual from 2008 to 2022; other positions from 1990 to 2008. V. Anthony Viozzi 52 Senior Vice President and Chief Investment Officer of Donegal Mutual and us since 2012; Vice President of Investments of Donegal Mutual and us from 2007 to 2012. -25- Index Cautionary Statement Regarding Forward-Looking Statements This Form 10-K Report and the documents we incorporate by reference in this Form 10-K Report contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include certain discussions relating to underwriting, premium and investment income volumes, business strategies, reserves, profitability, our expense reduction initiatives, Donegal Mutual’s ongoing information systems and data modernization implementations, business relationships and our other business activities during 2025 and beyond. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “objective,” “project,” “predict,” “potential,” “goal” and similar expressions. These forward-looking statements reflect our current views about future events and our current assumptions, and are subject to known and unknown risks and uncertainties that may cause our results, performance or achievements to differ materially from those we anticipate or imply by our forward-looking statements. We cannot control or predict many of the factors that could determine our future financial condition or results of operations. Such factors may include those we describe under “Risk Factors.” The forward-looking statements contained in this Form 10-K Report reflect our views and assumptions only as of the date of this Form 10-K Report. Except as required by law, we do not intend to update, and we assume no responsibility for updating, any forward-looking statements we have made. We qualify all of our forward-looking statements by these cautionary statements. Item 1A. Risk Factors. Risk Factors Risks Relating to the Property and Casualty Insurance Industry Industry trends, such as increasing loss severity due to higher rates of litigation against the insurance industry and individual insurers, the willingness of courts to expand covered causes of loss, rising jury awards, escalating medical, automobile and property repair costs and other factors may contribute to increased costs and result in ultimate loss settlements that exceed the reserves of our insurance subsidiaries. Loss severity in the property and casualty insurance industry has increased in recent years, principally driven by factors such as distracted driving, larger court judgments, higher jury awards and increasing medical and automobile and property repair costs, including increases due to inflation and supply chain disruption. In particular, future cost volatility for automobile replacement costs and repair parts could occur because of exposure to governmental trade policies, including tariffs, or geopolitical events. In addition, many classes of complainants have brought legal actions and proceedings, some of which may be funded by third-party litigation financing, that tend to increase the size of judgments. The propensity of policyholders and third-party claimants to utilize specialized plaintiff firms and litigate and the willingness of courts to expand causes of loss and the size of awards, to eliminate exclusions and to increase coverage limits may result in ultimate settlements of current and future losses that exceed the loss reserves of our insurance subsidiaries. Our insurance subsidiaries are subject to catastrophe losses and losses from other severe weather events, which are unpredictable and may adversely affect our results of operations, liquidity and financial condition. The underwriting results of our insurance subsidiaries are subject to weather and other conditions that may adversely affect our financial condition, liquidity or results of operations. Because the occurrence and severity of catastrophes are inherently unpredictable and may vary significantly from year to year and region to region, our historical results of operations may not be indicative of our future results of operations. Our property and casualty insurance operations expose us to claims arising from catastrophic events affecting multiple policyholders. Such catastrophic events consist of various natural disasters, including, but not limited to, hurricanes, tropical storms, tornadoes, windstorms, hailstorms, fires and wildfires, flooding, landslides, earthquakes, severe winter weather events and man-made disasters such as terrorist attacks, explosions and infrastructure failures. Historically, our insurance subsidiaries have experienced weather-related losses from hurricanes and tropical storms in Mid-Atlantic and Southern states, tornadoes and hailstorms in Mid-Atlantic, Midwestern and Southern states and severe winter weather events in Mid-Atlantic and Midwestern states. -26- Index Losses from catastrophic events are a function of both the extent of our insurance subsidiaries’ exposures, the frequency and severity of the events themselves and the level of reinsurance coverage our insurance subsidiaries purchase. The increased frequency and severity of weather-related catastrophes and other losses, such as 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. Our insurance subsidiaries seek to reduce their exposure to catastrophe losses through their underwriting strategies and their purchase of catastrophe reinsurance. Advancements in economic capital modeling and catastrophe risk modeling assist our insurance subsidiaries in measuring risk concentrations and inform their reinsurance purchase decisions. Nevertheless, reinsurance may prove inadequate under certain circumstances. 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. Our insurance subsidiaries’ ability to appropriately manage catastrophe risk depends partially on catastrophe models, which may be affected by inaccurate or incomplete data, the uncertainty of the frequency and severity of future events and the uncertain impact of changing climate conditions that tend to occur gradually over time. Changing climate conditions could lead to new or revised regulations with which our insurance subsidiaries would have to comply. Such regulations could impact the ability of our insurance subsidiaries to manage their exposures in areas impacted by increased weather activity, require our insurance companies to alter the terms and conditions of their policies or impact the ability of our insurance subsidiaries to obtain sufficient pricing increases to offset higher loss activity. Our insurance subsidiaries must establish premium rates and loss and loss expense reserves from forecasts of the ultimate costs they expect will arise from risks underwritten during the policy period, and the profitability of our insurance subsidiaries could be adversely affected if their premium rates or reserves are insufficient to satisfy their ultimate costs. One of the distinguishing features of the property and casualty insurance industry is that it prices its products before it knows its costs, since insurers generally establish their premium rates before they know the amount of losses they will incur. Accordingly, our insurance subsidiaries establish premium rates from forecasts of the ultimate costs they expect to arise from risks they have underwritten during the policy period. Proposed increases in premium rates are subject to regulatory approval on a state-by-state basis, and there is a lag between the time that our insurance subsidiaries file for such approval and the date upon which our insurance subsidiaries can implement any such approved premium rate increase across their book of business for a product in a particular state. The premium rates our insurance subsidiaries charge may not be sufficient to cover the ultimate losses they incur. Further, our insurance subsidiaries must establish reserves for losses and loss expenses as balance sheet liabilities based upon estimates involving actuarial and statistical projections at a given time of what our insurance subsidiaries expect their ultimate liability to be. Significant periods of time often elapse between the occurrence of an insured loss, the reporting of the loss and the settlement of that loss. It is possible that our insurance subsidiaries’ ultimate liability could exceed these estimates because of the future development of known losses, the existence of losses that have occurred but are currently unreported and larger than historical settlements of pending and unreported claims. The process of estimating reserves is inherently judgmental and can be influenced by a number of factors, including the following: • trends in claim frequency and severity; • changes in operations; • emerging economic and social trends; • economic and social inflation; • the level of insurance fraud; and • changes in the regulatory and litigation environments. -27- Index If our insurance subsidiaries determine that their reserves are insufficient to cover their ultimate liability, they will increase their reserves. An increase in reserves results in an increase in losses and a reduction in net income for the period in which our insurance subsidiaries recognize a deficiency in reserves. Accordingly, an increase in reserves may adversely impact the business, liquidity, financial condition and results of operations of our insurance subsidiaries. The financial results of our insurance subsidiaries depend primarily on their ability to underwrite risks effectively and to charge adequate rates to policyholders. The financial condition, cash flows and results of operations of our insurance subsidiaries depend on their ability to underwrite and set rates accurately for a full spectrum of risks across a number of lines of insurance. Rate adequacy is necessary to generate sufficient premium to pay losses, loss adjustment expenses and underwriting expenses and to realize a profit. The ability to underwrite and set rates effectively is subject to a number of risks and uncertainties, including those related to: • the availability of sufficient, reliable data; • the ability to conduct a complete and accurate analysis of available data; • the ability to recognize in a timely manner changes in trends and to project both the severity and frequency of losses with reasonable accuracy; • uncertainties generally inherent in estimates and assumptions; • the ability to project changes in certain operating expense levels with reasonable certainty; • the development, selection and application of appropriate rating formulae or other pricing methodologies; • the effective development, governance and appropriate use of modeling tools to assist with correctly and consistently achieving the intended results in underwriting and pricing; • the ability to innovate with new pricing strategies and the success of those innovations upon implementation; • the ability to secure regulatory approval of premium rates on an adequate and timely basis; • the ability to predict policyholder retention accurately; • unanticipated court decisions, legislation or regulatory action; • unanticipated changes in our claim settlement practices; • changes in driving patterns for auto exposures; • changes in weather patterns for property exposures; • changes in the medical sector of the economy that impact bodily injury loss costs; • changes in new and used car prices, auto repair costs and auto parts prices, including the increasing integration of sophisticated technology-related components; -28- Index • the impact of emerging technologies, including driver assistance technologies and autonomous vehicles, on pricing, insurance coverages and loss costs; • the impact of inflation and other factors on the cost and availability of construction materials and labor; • the impact of medical advances on the cost and duration of bodily injury claims; • the ability to monitor property concentration in catastrophe-prone areas, such as hurricane, earthquake, wildfire and wind/hail regions; and • the general state of the economy in the states in which our insurance subsidiaries operate. Such risks may result in our insurance subsidiaries basing their premium rates on inadequate or inaccurate data or inappropriate assumptions or methodologies and may cause our estimates of future changes in the frequency or severity of claims to be incorrect. As a result, our insurance subsidiaries could underprice risks, which would negatively affect our margins, or our insurance subsidiaries could overprice risks, which could reduce their premium volume and competitiveness. In either event, underpricing or overpricing risks could adversely impact our operating results, financial condition and cash flows. We face risks associated with technological change, including artificial intelligence, data modernization and cloud migration, and the profitability of our insurance subsidiaries could be adversely affected if their competitors deploy such technologies more effectively or at greater scale. The insurance industry is undergoing rapid technological change, including the expanded use of artificial intelligence, machine learning, advanced analytics, process automation and GenAI. Since 2018, Donegal Mutual has undertaken a multi-year modernization of its core systems, including replacement of legacy policy administration systems, implementation of a cloud-based data infrastructure and, beginning in 2026, migration of its Guidewire claims, billing and policy administration systems to the Guidewire cloud platform. Donegal Mutual has also begun deploying and piloting certain GenAI-enabled solutions to provide operating efficiencies and data-driven insights. These initiatives involve significant cost, operational complexity and reliance on third-party vendors. They may result in implementation delays, cost overruns, data migration errors, system integration challenges, cybersecurity vulnerabilities, service disruptions or diversion of management attention. These initiatives may not be completed as planned or achieve intended operational efficiencies or other benefits. Any disruption or failure could adversely affect the underwriting, billing or claims operations of our insurance subsidiaries and materially adversely affect our results of operations and financial condition. In addition, competitors, including larger insurers and technology-enabled companies, may have greater financial resources, broader data assets and more advanced analytical capabilities, enabling them to develop and scale artificial intelligence, automation and cloud-based solutions more rapidly or effectively than our insurance subsidiaries can. If competitors more effectively utilize technology to enhance risk selection, refine pricing, reduce expenses, improve claims handling or strengthen customer and agent experience, they may achieve superior underwriting performance or market share. More sophisticated use of data and analytics by competitors could also increase adverse selection risks for insurers with comparatively less advanced capabilities. Our increasing reliance on third-party cloud platforms and technology providers exposes our insurance subsidiaries to vendor dependency and concentration risks. Any service disruption, cybersecurity incident or strategic misalignment involving a key vendor could impair the operations of our insurance subsidiaries or increase their costs. -29- Index The use of artificial intelligence and GenAI presents additional operational, regulatory and reputational risks. Artificial intelligence models may produce inaccurate or unintended results, and evolving legal and regulatory standards governing artificial intelligence, data usage and algorithmic decision-making may increase compliance costs or restrict certain practices. Use of GenAI may also create unforeseen exposures or coverage issues under the policies our insurance subsidiaries issue or introduce new forms of claims fraud or cybercrime. If our insurance subsidiaries are unable to adapt to technological developments or compete effectively with organizations that deploy such technologies at greater scale, their competitive position and financial performance could be materially adversely affected. Loss or significant restriction of the use of specific rating attributes, analytical models or technologies in the pricing and underwriting of insurance products by our insurance subsidiaries could adversely affect their future profitability. Our insurance subsidiaries consider a variety of rating attributes in making risk selection and pricing decisions for personal lines insurance products where allowed by state law. There is increasing regulatory debate as to whether use of certain rating attributes is unfairly discriminatory. For example, consumer groups and regulators often call for the prohibition or restriction on the use of credit scoring in underwriting and pricing. In addition, there is increasing regulatory attention on the governance over and use of analytical models and technologies, including artificial intelligence systems, to ensure that such technologies comply with laws that address unfair trade practices and unfair discrimination. Laws or regulations that significantly curtail the use of specific rating attributes or other analytical models and technologies in the underwriting process could reduce the future profitability of our insurance subsidiaries. Changes in applicable insurance laws or regulations or changes in the way insurance regulators administer those laws or regulations could adversely affect the operating environment of our insurance subsidiaries and increase their exposure to loss or put them at a competitive disadvantage. Property and casualty insurers are subject to extensive supervision in their domiciliary states and in the states in which they do business. This regulatory oversight includes matters relating to: • licensing and examination; • approval of premium rates; • market conduct; • policy forms; • limitations on the nature and amount of certain investments; • claims practices; • mandated participation in involuntary markets and guaranty funds; • reserve adequacy; • insurer solvency; • transactions between affiliates; • the amount of dividends that insurers may pay; and • restrictions on underwriting standards. Such regulation and supervision are primarily for the benefit and protection of policyholders rather than stockholders. -30- Index The NAIC and state insurance regulators re-examine existing laws and regulations from time to time, specifically focusing on areas such as: • insurance company investments; • issues relating to the solvency of insurance companies; • risk-based capital guidelines; • restrictions on the terms and conditions included in insurance policies; • certain methods of accounting; • reserves for unearned premiums, losses and other purposes; • the values at which insurance companies may carry investment securities and the definition of other-than-temporary impairment of investment securities; and • interpretations of existing laws and the development of new laws. Changes in state laws and regulations, as well as changes in the way state regulators view related-party transactions in particular, could change the operating environment of our insurance subsidiaries and have an adverse effect on their business. Insurance companies are subject to assessments, based on their market share in a given line of business, to assist in the payment of unpaid claims and related costs of insolvent insurance companies. Such assessments could adversely affect the financial condition of our insurance subsidiaries. Our insurance subsidiaries are subject to assessments pursuant to the guaranty fund laws of the various states in which they conduct business. Generally, under these laws, our insurance subsidiaries can be assessed, depending upon the market share of our insurance subsidiaries in a given line of insurance business, to assist in the payment of unpaid claims and related costs of insolvent insurance companies in those states. We cannot predict the number and magnitude of future insurance company failures in the states in which our insurance subsidiaries conduct business, but future assessments could adversely affect the business, financial condition and results of operations of our insurance subsidiaries. Risks Relating to Our Business Our insurance subsidiaries and Donegal Mutual currently conduct business in a limited number of states, with a concentration of business in Pennsylvania, Michigan, Delaware, Maryland and Virginia. Any single catastrophe occurrence or other condition affecting losses in these states could adversely affect the results of operations of our insurance subsidiaries. Our insurance subsidiaries and Donegal Mutual conduct business in 21 states located primarily in the Mid-Atlantic, Midwestern, Southern and Southwestern regions of the country. A substantial portion of their business consists of private passenger and commercial automobile, homeowners, commercial multi-peril and workers’ compensation insurance in Pennsylvania, Michigan, Delaware, Maryland and Virginia. While our insurance subsidiaries and Donegal Mutual actively manage their respective exposure to catastrophes through their underwriting processes and the purchase of reinsurance, a single catastrophic occurrence, destructive weather pattern, general economic trend, terrorist attack, regulatory development or other condition affecting one or more of the states in which our insurance subsidiaries conduct substantial business could materially adversely affect their business, financial condition and results of operations. Common catastrophic events include hurricanes, earthquakes, tornadoes, wind and hailstorms, fires and wildfires, explosions and severe winter storms. -31- Index If the independent agents who market the products of our insurance subsidiaries and Donegal Mutual do not maintain their current levels of premium writing with us and Donegal Mutual, fail to comply with established underwriting guidelines of our insurance subsidiaries and Donegal Mutual or otherwise inappropriately market the products of our insurance subsidiaries and Donegal Mutual, the business, financial condition and results of operations of our insurance subsidiaries could be adversely affected. Our insurance subsidiaries and Donegal Mutual market their insurance products solely through a network of approximately 2,000 independent insurance agencies. This agency distribution system is one of the most important components of the competitive profile of our insurance subsidiaries and Donegal Mutual. As a result, our insurance subsidiaries and Donegal Mutual depend to a material extent upon their independent agents, each of whom has the authority to bind one or more of our insurance subsidiaries or Donegal Mutual to insurance coverage. To the extent that such independent agents’ marketing efforts fail to result in the maintenance of their current levels of volume and quality or they bind our insurance subsidiaries or Donegal Mutual to unacceptable insurance risks, fail to comply with the established underwriting guidelines of our insurance subsidiaries and Donegal Mutual or otherwise inappropriately market the products of our insurance subsidiaries and Donegal Mutual, the business, financial condition and results of operations of our insurance subsidiaries could suffer. The business of our insurance subsidiaries and Donegal Mutual may not continue to grow and may be materially adversely affected if our insurance subsidiaries and Donegal Mutual cannot retain existing, and attract new, independent agents or if insurance consumers increase their use of insurance distribution channels other than independent agents. The ability of our insurance subsidiaries and Donegal Mutual to retain existing, and to attract new, independent agents is essential to the continued growth of the business of our insurance subsidiaries and Donegal Mutual. If independent agents find it easier to do business with the competitors of our insurance subsidiaries and Donegal Mutual, our insurance subsidiaries and Donegal Mutual could find it difficult to retain their existing business or to attract new business. While our insurance subsidiaries and Donegal Mutual believe they maintain good relationships with the independent agents they have appointed, our insurance subsidiaries and Donegal Mutual cannot be certain that these independent agents will continue to sell the products of our insurance subsidiaries and Donegal Mutual to the consumers these independent agents represent. Some of the factors that could adversely affect the ability of our insurance subsidiaries and Donegal Mutual to retain existing, and attract new, independent agents include: • the significant competition among insurance companies to attract independent agents; • the labor-intensive and time-consuming process of selecting new independent agents; • the insistence of our insurance subsidiaries and Donegal Mutual that independent agents adhere to certain standards; • the ability of our insurance subsidiaries and Donegal Mutual to pay competitive and attractive commissions, bonuses and other incentives to independent agents; and • the ongoing consolidation of independent agencies, which may result in the acquisition of independent agencies from which our insurance subsidiaries and Donegal Mutual currently receive business by larger entities with which our insurance subsidiaries and Donegal Mutual do not have business relationships. While our insurance subsidiaries and Donegal Mutual sell insurance to policyholders solely through their network of independent agencies, many competitors of our insurance subsidiaries and Donegal Mutual sell insurance through a variety of delivery methods, including independent agencies, captive agencies and direct sales. To the extent that current and potential policyholders change their distribution channel preference, the business, financial condition and results of operations of our insurance subsidiaries may be adversely affected. -32- Index Competition within the property and casualty insurance industry may adversely impact the revenues and profit margins of our insurance subsidiaries. The property and casualty insurance industry is intensely competitive, and the pricing of insurance products is subject to significant fluctuations and uncertainties. Competition can be based on many factors, including: • the perceived financial strength of the insurer; • premium rates; • policy terms and conditions; • policyholder service; • reputation; and • experience. Our insurance subsidiaries and Donegal Mutual compete with many regional and national property and casualty insurance companies, including direct sellers of insurance products, insurers having their own agency organizations and other insurers represented by independent agents. Many of these insurers have greater capital than our insurance subsidiaries and Donegal Mutual, have substantially greater financial, technical and operating resources, have substantially greater exposure and access to potential customers and have equal or higher ratings from A.M. Best than our insurance subsidiaries and Donegal Mutual. In addition, our competitors may become increasingly better capitalized in the future as the property and casualty insurance industry continues to consolidate. The greater capitalization of many of the competitors of our insurance subsidiaries and Donegal Mutual enables them to operate with lower profit margins and, therefore, allows them to market their products more aggressively, to take advantage more quickly of new marketing opportunities and to offer lower premium rates. In addition to established insurers, our insurance subsidiaries and Donegal Mutual compete with a growing number of start-ups, some of which have received substantial infusions of capital, that seek to disrupt traditional business platforms and distribution channels. Our insurance subsidiaries and Donegal Mutual may not be able to maintain their current competitive position in the markets in which they operate if their competitors offer prices for their products that are lower than the prices our insurance subsidiaries and Donegal Mutual are prepared to offer. Moreover, if these competitors lower the price of their products and our insurance subsidiaries and Donegal Mutual meet their pricing, the profit margins and revenues of our insurance subsidiaries and Donegal Mutual may decrease and their ratios of claims and expenses to premiums may increase. All of these factors could materially adversely affect the financial condition and results of operations of our insurance subsidiaries and their A.M. Best ratings. If A.M. Best downgrades the rating it has assigned to Donegal Mutual or any of our insurance subsidiaries, it would adversely affect their competitive position. Industry ratings are a factor in establishing and maintaining the competitive position of insurance companies. A.M. Best, an industry-accepted source of insurance company financial strength ratings, rates Donegal Mutual and our insurance subsidiaries. A.M. Best ratings provide an independent opinion of an insurance company’s financial health and its ability to meet its obligations to its policyholders. We believe that the financial strength rating of A.M. Best is material to the operations of Donegal Mutual and our insurance subsidiaries. For example, certain lenders require customers to purchase insurance from an insurance carrier that has received an A.M. Best rating that exceeds a certain level. Currently, Donegal Mutual and our insurance subsidiaries each have an A (Excellent) rating from A.M. Best. In May 2025, A.M. Best affirmed its A (Excellent) ratings of Donegal Mutual and our insurance subsidiaries. However, if A.M. Best were to downgrade the rating of Donegal Mutual or any of our insurance subsidiaries, it would adversely affect the competitive position of Donegal Mutual or that insurance subsidiary and make it more difficult for it to market its products and retain its existing policyholders. -33- Index Economic disruption related to a future pandemic may adversely affect our revenues, profitability, results of operations, cash flows, liquidity and financial condition. We cannot predict the ultimate impact that the economic and financial disruption related to a pandemic may have on us. Risks related to a pandemic include, but are not limited to, the following: • the business operations or a specific operational function of our insurance subsidiaries and Donegal Mutual could be disrupted by the illness of significant numbers of their employees and remedial efforts that would be required upon discovery of exposure to a communicable illness within their facilities; • the business operations of our insurance subsidiaries and Donegal Mutual are dependent upon technology systems for which regular physical access is required to maintain critical operational capabilities, and the business operations of our insurance subsidiaries and Donegal Mutual would be adversely impacted by government mandates requiring closure of facilities where those technology systems are located or restricting physical access to such facilities; • the revenues of our insurance subsidiaries and Donegal Mutual may decrease as a result of reduced demand for their insurance products as economic disruption adversely impacts current and potential insurance customers; • our insurance subsidiaries and Donegal Mutual may incur an increase in their losses and loss expenses in certain lines of business as a result of a pandemic and related economic disruption, and such losses and loss expenses may exceed the reserves our insurance subsidiaries and Donegal Mutual have established or may establish in the future; • our insurance subsidiaries and Donegal Mutual may incur increased costs related to legal disputes over policy coverages or exclusions and their defense against litigation related to a pandemic; • legislative, judicial and regulatory actions may expand coverage definitions, retroactively mandate coverage or otherwise require our insurance subsidiaries and Donegal Mutual to pay losses for damages that their policies explicitly excluded or did not intend to cover; • legislative, judicial and regulatory actions may require our insurance subsidiaries and Donegal Mutual to reduce or refund premiums, suspend cancellation of policies for non-payment of premiums or otherwise grant extended grace periods and time allowances for the payment of premium balances due to them; • our insurance subsidiaries and Donegal Mutual may not be able to collect premium balances due to them, resulting in reduced operating cash flows and an increase in premium write-offs that would increase their operating expenses; • our insurance subsidiaries may suffer declines in the market values of their investments as a result of financial market volatility related to pandemic concerns and related economic disruption; and • economic disruption related to a pandemic could result in significant declines in the credit quality of issuers, ratings downgrades or changes in financial market conditions and regulatory changes that might adversely impact the value of the fixed-maturity investments that our insurance subsidiaries own. Dividends from our insurance subsidiaries are a significant source of funds for the payment of our operating expenses and dividends to our stockholders; however, there are regulatory restrictions and business considerations that may limit the amount of dividends our insurance subsidiaries may pay to us. As a holding company, we rely on dividends from our insurance subsidiaries as a significant source of funds to meet our corporate obligations and to pay dividends to our stockholders. The amount of dividends our insurance subsidiaries can pay to us is subject to regulatory restrictions and depends on the amount of surplus our insurance subsidiaries maintain. From time to time, the NAIC and various state insurance regulators consider modifying the method of determining the amount of dividends that an insurance company may pay without prior regulatory approval. The maximum amount of ordinary dividends that our insurance subsidiaries can pay to us in 2026 without prior regulatory approval is approximately $66.4 million. Other business and regulatory considerations, such as the impact of dividends on surplus that could affect the ratings of our insurance subsidiaries, competitive conditions, RBC requirements, the investment results of our insurance subsidiaries and the amount of premiums that our insurance subsidiaries write could also adversely impact the ability of our insurance subsidiaries to pay dividends to us. -34- Index The growth and profitability of our insurance subsidiaries depend, in part, on the effective maintenance and ongoing development of Donegal Mutual’s information technology systems, and the allocation of related costs to our insurance subsidiaries may adversely impact their profitability. Our insurance subsidiaries utilize Donegal Mutual’s information technology systems to conduct their insurance business, including policy quoting and issuance, claims processing, processing of incoming premium payments and other important functions. As a result, the ability of our insurance subsidiaries to grow their business and conduct profitable operations depends on Donegal Mutual’s ability to maintain its existing information technology systems and to develop new technology systems that will support the business of Donegal Mutual and our insurance subsidiaries in a cost-efficient manner and provide information technology capabilities equivalent to those of our competitors. The allocation among our insurance subsidiaries and Donegal Mutual of the costs of developing and maintaining Donegal Mutual’s information technology systems may adversely impact our insurance subsidiaries’ expense ratio and underwriting profitability, and such costs may exceed Donegal Mutual’s and our expectations. Donegal Mutual is currently in the midst of a multi-year effort to modernize certain of its key infrastructure and applications systems, and the allocation of related costs to our insurance subsidiaries has resulted in an increase to their expense ratio. These new systems are intended to provide various benefits to the member companies of the Donegal Insurance Group, including streamlined workflows and business processes, service enhancements for their agents and policyholders, opportunities to implement new product models and innovative business solutions, greater utilization of data analytics and operational efficiencies. From 2020 to 2024, we implemented five major releases of new systems. In 2025, Donegal Mutual implemented the final two major releases of new systems for the remaining lines of business the Donegal Insurance Group issues currently and for the conversion of remaining legacy renewal policies of the Donegal Insurance Group. The conversion process will continue into 2027 as legacy policies renew on a state-by-state rollout schedule. During 2025, Donegal Mutual also began planning for the migration of its claims, billing and policy administration application systems from on-premise versions to cloud-based versions of these applications that we expect will occur in a phased approach over the next two years. Even with Donegal Mutual’s and our best planning and efforts and the involvement of third-party experts, Donegal Mutual may not complete the implementation of these new systems within its planned timeframes or budget. Further, Donegal Mutual’s information technology systems may not deliver the benefits Donegal Mutual and we expect and may fail to keep pace with our competitors’ information technology systems. As a result, Donegal Mutual and our insurance subsidiaries may not have the ability to grow their business and meet their profitability objectives. -35- Index While we are currently placing less emphasis on pursuing acquisitions because Donegal Mutual and we believe there are opportunities for profitable organic growth, our strategy to grow in part through acquisitions of other insurance companies exposes us to risks that could adversely affect our results of operations and financial condition. The affiliation with, and acquisition of, other insurance companies involves risks that could adversely affect our results of operations and financial condition. The risks associated with these affiliations and acquisitions include: • the potential inadequacy of reserves for losses and loss expenses of the other insurer; • the need to supplement management of the other insurer with additional experienced personnel; • conditions imposed by regulatory agencies that make the realization of cost-savings through integration of the operations of the other insurer with our operations more difficult; • our management’s lack of familiarity with the geography, demographics and distribution systems in the markets the other insurer serves that cause the other insurer to fail to meet the growth and profitability objectives we anticipated at the time of the acquisition or affiliation; • potential difficulties with integration of information technology systems and other operations; • the need of the other insurer for additional capital that we did not anticipate at the time of the acquisition or affiliation; and • the use of more of our management’s time in improving the operations of the other insurer than we originally anticipated. If we cannot obtain sufficient capital to fund the organic growth of our insurance subsidiaries and to make acquisitions, we may not be able to expand our business. Our strategy is to expand our business through the organic growth of our insurance subsidiaries and through our strategic acquisitions of regional insurance companies. Our insurance subsidiaries may require additional capital in the future to support this strategy. If we cannot obtain sufficient capital on satisfactory terms and conditions, we may not be able to expand the business of our insurance subsidiaries or to make future acquisitions. Our ability to obtain additional financing will depend on a number of factors, many of which are beyond our control. For example, we may not be able to obtain additional debt or equity financing because we or our insurance subsidiaries may already have substantial debt at the time, because we or our insurance subsidiaries do not have sufficient cash flow to service or repay our existing or additional debt or because financial institutions are not making financing available. In addition, any equity capital we obtain in the future could be dilutive to our existing stockholders. -36- Index The investment portfolios of our insurance subsidiaries consist primarily of fixed-income securities; therefore, the investment income and the fair value of the investment portfolios of our insurance subsidiaries could decrease as a result of a number of factors. Our insurance subsidiaries invest the premiums they receive from their policyholders and maintain investment portfolios that consist primarily of fixed-income securities. The effective management of these investment portfolios is an important component of the profitability of our insurance subsidiaries. Our insurance subsidiaries derive a significant portion of their operating income from the income they receive on their invested assets. A number of factors may affect the quality and/or yield of their investment portfolios, including the general economic and business environment, government monetary policy, changes in the credit quality of the issuers of the fixed-income securities our insurance subsidiaries own, changes in market conditions and regulatory changes. The fixed-income securities our insurance subsidiaries own consist primarily of securities issued by domestic entities that are backed by either the credit or collateral of the underlying issuer. Factors such as an economic downturn, disruption in the credit market or the availability of credit, a regulatory change pertaining to a particular issuer’s industry, a significant deterioration in the cash flows of the issuer or a change in the issuer’s marketplace may adversely affect the ability of our insurance subsidiaries to collect principal and interest from the issuer in which they invest. The investments of our insurance subsidiaries are also subject to risk resulting from interest rate fluctuations. As we experienced when market interest rates increased significantly in 2022, increasing interest rates or a widening in the spread between interest rates available on U.S. Treasury securities and corporate debt or asset-backed securities will typically have an adverse impact on the market values of fixed-rate securities. If interest rates decline, our insurance subsidiaries will generally have a lower overall rate of return on investments of cash their operations generate. In addition, in the event of the call or maturity of investments in a low interest rate environment, our insurance subsidiaries may not be able to reinvest the proceeds in securities with comparable interest rates. Changes in interest rates may reduce both the profitability and the return on the invested capital of our insurance subsidiaries. -37- Index We and our insurance subsidiaries depend on key personnel. The loss of any member of our executive management or the senior management of our insurance subsidiaries could negatively affect the continuation of our business strategies and achievement of our growth objectives. The loss of, or failure to attract, key personnel could significantly impede our financial plans, growth, marketing and other objectives and those of our insurance subsidiaries. The continued success of our insurance subsidiaries depends to a substantial extent on the ability and experience of their senior management. Our insurance subsidiaries and we believe that our future success is dependent on our ability to attract and retain additional skilled and qualified personnel and to expand, train and manage our employees. We and Donegal Mutual have employment agreements with our senior officers, including all of our named executive officers. The reinsurance agreements on which our insurance subsidiaries rely do not relieve our insurance subsidiaries from their primary liability to their policyholders, and our insurance subsidiaries face a risk of non-payment from their reinsurers as well as the non-availability of reinsurance in the future. Our insurance subsidiaries rely on reinsurance agreements to limit their maximum net loss from large single catastrophic risks or excess of loss risks in areas where our insurance subsidiaries may have a concentration of policyholders. Reinsurance also enables our insurance subsidiaries to increase their capacity to write insurance because it has the effect of leveraging the surplus of our insurance subsidiaries. Although the reinsurance our insurance subsidiaries maintain provides that the reinsurer is liable to them for any reinsured losses, the reinsurance agreements do not generally relieve our insurance subsidiaries from their primary liability to their policyholders if the reinsurer fails to pay the reinsurance claims of our insurance subsidiaries. To the extent that a reinsurer is unable to pay losses for which it is liable to our insurance subsidiaries, our insurance subsidiaries remain liable for such losses. At December 31, 2025, our insurance subsidiaries had approximately $90.7 million of reinsurance receivables from third-party reinsurers relating to paid and unpaid losses. Any insolvency or inability of these reinsurers to make timely payments to our insurance subsidiaries under the terms of their reinsurance agreements would adversely affect the results of operations of our insurance subsidiaries. Michigan law requires several of our insurance subsidiaries to provide certain medical benefits under the personal injury protection, or PIP, coverage of the personal automobile and commercial automobile policies they write in the state of Michigan. Michigan law also requires those insurance subsidiaries to be members of the Michigan Catastrophic Claims Association, or MCCA, in order to write automobile insurance. MCCA receives funding through assessments that its members collect from policyholders in the state and provides reinsurance for PIP claims that exceed a set retention. At December 31, 2025, our insurance subsidiaries had approximately $45.5 million of reinsurance receivables from MCCA relating to paid and unpaid losses. The MCCA has generated significant operating deficits in recent years, and applicable Michigan law allows MCCA to assess its member companies for all losses and deficits through adjustments to future assessments. Although we currently consider the risk to be remote, should MCCA be unable to fulfill its payment obligations to our insurance subsidiaries in the future, the financial condition and results of operations of our insurance subsidiaries could be adversely affected. In addition, our insurance subsidiaries face a risk of the non-availability of reinsurance or an increase in reinsurance costs that could adversely affect their ability to write business or their results of operations. Market conditions beyond the control of our insurance subsidiaries, such as the amount of surplus in the reinsurance market and the frequency and severity of natural and man-made catastrophes, affect both the availability and the cost of the reinsurance our insurance subsidiaries purchase. If our insurance subsidiaries cannot maintain their current level of reinsurance or purchase new reinsurance protection in amounts that our insurance subsidiaries consider sufficient, our insurance subsidiaries would either have to accept an increase in their net risk retention or reduce their insurance writings, either of which could adversely affect them. For example, due to increased reinsurance pricing and reduced reinsurance market capacity, our insurance subsidiaries increased their net retentions under several of their reinsurance programs for 2024 and 2025. -38- Index The disruption or failure of Donegal Mutual’s information technology systems or the compromise of the security of those systems that results in the theft or misuse of confidential information could materially impact adversely the business of Donegal Mutual and our insurance subsidiaries. Our insurance subsidiaries’ business operations depend significantly upon the availability and successful operation of Donegal Mutual’s information technology systems. In addition, in the normal course of their operations, Donegal Mutual and our insurance subsidiaries collect, utilize and maintain confidential information regarding individuals and businesses. While Donegal Mutual has established various security measures to protect its information technology systems and confidential data, unanticipated computer viruses, malware, ransomware, power outages, unauthorized access or other cyberattacks could disrupt those systems or result in the misappropriation or loss of confidential data. Donegal Mutual could experience technology system failures or other outages that would impact the availability of its information technology systems. Donegal Mutual has experienced brief disruptions of systems in the past, including those systems that allow underwriting and processing of new policies. Disruption in the availability of Donegal Mutual’s information technology systems could affect the ability of Donegal Mutual and our insurance subsidiaries to underwrite and process their policies timely, process and settle claims promptly and provide expected levels of customer service to agents and policyholders. While Donegal Mutual has identified threats to the security of its information technology systems, Donegal Mutual and we are unaware of any significant breach of the security measures Donegal Mutual maintains. A significant breach of the security of Donegal Mutual’s information technology systems that results in the misappropriation or misuse of confidential information could damage the business reputation of Donegal Mutual and our insurance subsidiaries and could expose Donegal Mutual and our insurance subsidiaries to litigation. The financial impact to Donegal Mutual, us and our insurance subsidiaries of a significant breach could be material. Risks Relating to Us and Our Common Stock The price of our common stock may be adversely affected by its low trading volume. Our Class A common stock and our Class B common stock have limited liquidity. Reported average daily trading volume for our Class A common stock and our Class B common stock for the year ended December 31, 2025 was approximately 128,268 shares and approximately 1,288 shares, respectively. This limited liquidity could subject our shares of Class A common stock and our shares of Class B common stock to greater price volatility. Donegal Mutual is our controlling stockholder. Donegal Mutual and its directors and executive officers have potential conflicts of interest between the best interests of our stockholders and the best interests of the policyholders of Donegal Mutual. Donegal Mutual controls the election of all of the members of our board of directors. Six of the ten members of our board of directors are also directors of Donegal Mutual. Donegal Mutual and we share the same executive officers. These common directors and executive officers have a fiduciary duty to our stockholders and also have a fiduciary duty to the policyholders of Donegal Mutual. Among the potential conflicts of interest that could arise from these separate fiduciary duties are the following: • we and Donegal Mutual periodically review the percentage participation of Atlantic States and Donegal Mutual in the underwriting pool that Donegal Mutual and Atlantic States have maintained since 1986; • our insurance subsidiaries and Donegal Mutual annually review and then establish the terms of certain reinsurance agreements between our insurance subsidiaries and Donegal Mutual; • we and Donegal Mutual allocate certain shared expenses among ourselves and our insurance subsidiaries in accordance with various inter-company expense-sharing agreements; and • we and our insurance subsidiaries may enter into other transactions or contractual relationships with Donegal Mutual. -39- Index Donegal Mutual has sufficient voting power to determine the outcome of substantially all matters submitted to our stockholders for approval. Each share of our Class A common stock has one-tenth of a vote per share and generally votes as a single class with our Class B common stock. Each share of our Class B common stock has one vote per share and generally votes as a single class with our Class A common stock. Donegal Mutual has the right to vote approximately 70% of the combined voting power of our Class A common stock and our Class B common stock and has sufficient voting control to and has acted to: • elect all of the members of our board of directors, who determine our management and policies; and • control the outcome of any corporate transaction or other matter submitted to a vote of our stockholders for approval, including mergers or other acquisition proposals and the sale of all or substantially all of our assets, in each case regardless of how all of our stockholders other than Donegal Mutual vote their shares. The interests of Donegal Mutual in maintaining this greater-than-majority voting control of us may have an adverse effect on the price of our Class A common stock and the price of our Class B common stock because of the absence of any potential “takeover” premium and may, therefore, be inconsistent with the interests of our stockholders other than Donegal Mutual. Donegal Mutual’s majority voting control of us, certain provisions of our certificate of incorporation and by-laws and certain provisions of Delaware law make it remote that anyone could acquire actual control of us unless Donegal Mutual were in favor of another person’s acquisition of control of us. Donegal Mutual’s majority voting control of us, certain anti-takeover provisions in our certificate of incorporation and by-laws and certain provisions of the Delaware General Corporation Law, or the DGCL, could delay or prevent the removal of members of our board of directors and could make a merger, tender offer or proxy contest involving us more expensive as well as unlikely to succeed, even if such events were in the best interests of our stockholders other than Donegal Mutual. These factors could also discourage a third party from attempting to acquire control of us. In particular, our certificate of incorporation and by-laws include the following anti-takeover provisions: • our board of directors is classified into three classes, so that our stockholders elect only one-third of the members of our board of directors each year; • our stockholders may remove our directors only for cause; • our stockholders may not take stockholder action except at an annual or special meeting of our stockholders; • the request of stockholders holding at least 20% of the combined voting power of our Class A common stock and our Class B common stock is required for a stockholder to call a special meeting of our stockholders; • our by-laws require that stockholders provide advance notice to us to nominate candidates for election to our board of directors or to propose any other item of stockholder business at a stockholders’ meeting; • we do not permit cumulative voting rights in the election of our directors; • our certificate of incorporation does not provide for preemptive rights in connection with any issuance of securities by us; and • our board of directors may issue, without stockholder approval unless otherwise required by law, preferred stock with such terms as our board of directors may determine. -40- Index We have authorized preferred stock that we could issue without stockholder approval to make it more difficult for a third party to acquire us. We have 2.0 million authorized shares of preferred stock that we could issue in one or more series without further stockholder approval, unless the DGCL or the rules of the NASDAQ Global Select Market otherwise require, and upon such terms and conditions, and having such rights, privileges and preferences, as our board of directors may determine. Our potential issuance of preferred stock may make it more difficult for a third party to acquire control of us. Because we are an insurance holding company, no person can acquire or seek to acquire a 10% or greater interest in us without first obtaining approval of the insurance commissioners of the states of domicile of each of our insurance subsidiaries. We own insurance subsidiaries domiciled in the states of Michigan, Pennsylvania and Virginia, and Donegal Mutual is domiciled in Pennsylvania and owns or controls insurance companies domiciled in Georgia and New Mexico. The insurance laws of each of these states provide that no person can acquire or seek to acquire a 10% or greater interest in us without first filing specified information with the insurance commissioners of those states and obtaining the prior approval of the proposed acquisition of a 10% or greater interest in us by each of the state insurance commissioners based on statutory standards designed to protect the safety and soundness of us and our insurance subsidiaries. These approval requirements may make it more difficult for a third party to acquire control of us. Item 1B. Unresolved Staff Comments. We have no unresolved written comments from the Securities and Exchange Commission staff regarding our filings under the Exchange Act. Item 1C. Cybersecurity. Our insurance subsidiaries utilize the information systems Donegal Mutual maintains. Donegal Mutual has a robust information security program in place as a component of the enterprise-level risk management program of Donegal Mutual and us. The integration of Donegal Mutual’s information security program into the enterprise-level risk management program is intended to promote the inclusion of cybersecurity considerations in decision-making processes throughout Donegal Mutual. Donegal Mutual has implemented multiple layers of cybersecurity systems and related defensive measures that are intended to assist with assessing, identifying and managing material risks from cybersecurity threats to Donegal Mutual’s information systems. Examples of these systems and measures include firewalls, data encryption, intrusion detection and prevention systems, endpoint detection and response systems, data-loss prevention systems and multi-factor authentication requirements for remote and privileged access. Donegal Mutual also regularly evaluates the effectiveness of its information security program through enterprise risk assessments. Donegal Mutual also requires annual cybersecurity awareness training for all employees who serve Donegal Mutual and our insurance subsidiaries. Donegal Mutual expects all employees to assist in safeguarding its information systems and to assist in the discovery and reporting of cybersecurity incidents. This enterprise-wide program is intended to identify and assess internal and external cyber and information security risks that may threaten the security or integrity of the information stored on Donegal Mutual’s information systems or those of third-party providers from unauthorized access, use or other malicious acts. Donegal Mutual employs a third-party security operations center that provides after-hours alert services to help ensure continuous monitoring for cybersecurity threats. On an annual basis, Donegal Mutual also engages third-party cybersecurity consultants to perform cyberattack and penetration testing on its information systems and to conduct tabletop exercises to enhance preparedness of its crisis management team. This crisis management team includes technical and senior-level management personnel, and the exercises are intended to help maintain their readiness by reviewing the roles they will be expected to perform and the procedures they will be expected to follow in the event of a cybersecurity incident, including the assessment of reporting requirements. These consultants advise Donegal Mutual on the effectiveness of its cybersecurity processes and assist Donegal Mutual in remediating any identified vulnerabilities and implementing any recommended measures to improve its cybersecurity defenses and readiness. -41- Index In addition to monitoring cybersecurity threats to Donegal Mutual’s information systems and information technology infrastructure, Donegal Mutual and we also assess and monitor the information security posture of third-party service providers whose services we deem critical to our operations. This process is designed to help Donegal Mutual’s information security personnel identify and mitigate risks related to data breaches or other cybersecurity incidents originating from third-party service providers in order to better protect Donegal Mutual’s information systems and information technology infrastructure. Donegal Mutual and we are not aware of any cybersecurity incidents or risks from cybersecurity threats that have materially affected, or are reasonably likely to affect, our business strategy, results of operations or financial condition. While Donegal Mutual maintains cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. For more information regarding the risks Donegal Mutual and we face from cybersecurity threats, see “Risk Factors - Risks Relating to Our Business - The disruption or failure of Donegal Mutual’s information technology systems or the compromise of the security of those systems that results in the theft or misuse of confidential information could materially impact adversely the business of Donegal Mutual and our insurance subsidiaries.” Donegal Mutual employs an information security officer who has relevant experience and expertise in information security and holds the management position that is primarily responsible for assessing and managing cybersecurity risks. In addition, the chief risk officer of Donegal Mutual and us has extensive experience in the field of risk management, which is helpful for developing and executing Donegal Mutual’s information security program in a manner that aligns with the overall enterprise-level risk management program of Donegal Mutual and us. In connection with carrying out their overall oversight responsibilities, the boards of directors of Donegal Mutual and us have delegated certain cybersecurity oversight responsibilities to the joint audit committee of those boards. The joint audit committee meets at least quarterly and is central to the boards’ oversight of cybersecurity risks. A member of the joint audit committee has extensive information technology and cybersecurity experience in the insurance industry. The joint audit committee actively monitors these risks in order to assist in coordinating prevention and mitigation efforts by, among other things, participating in risk management committee meetings and receiving quarterly reports from the chief risk officer of Donegal Mutual and us on cybersecurity risks and related matters. Donegal Mutual’s information security officer also provides an annual cybersecurity report to the boards of directors of Donegal Mutual and us. The annual cybersecurity report encompasses a broad range of topics, including types of threats and attempted infiltrations, applicable regulatory developments, information security program activities and planned cybersecurity enhancements to address emerging threats. Donegal Mutual and we also maintain a risk management committee that is comprised of our shared executive officers and other key management personnel. This committee meets quarterly and is responsible for our enterprise risk strategy and management, which includes identifying, assessing, addressing and monitoring cybersecurity risks. Donegal Mutual’s information security officer provides quarterly updates to the risk management committee. Those updates include current cybersecurity issues and trends and any relevant information related to the prevention, detection, mitigation and remediation of cybersecurity incidents. Item 2. Properties. We and our insurance subsidiaries share administrative headquarters with Donegal Mutual in a building in Marietta, Pennsylvania that Donegal Mutual owns. The Marietta headquarters has approximately 270,000 square feet of office space. Southern owns a facility of approximately 10,000 square feet in Glen Allen, Virginia. In addition, Donegal Mutual leases office space in Albuquerque, New Mexico, MICO leases office space in Grand Rapids, Michigan, and Southern Mutual owns a building in Athens, Georgia. Donegal Mutual and our insurance subsidiaries share property-related expenses proportionately under a services allocation agreement. -42- Index Item 3. Legal Proceedings. Our insurance subsidiaries are parties to routine litigation that arises in the ordinary course of their insurance business. We believe that the resolution of these lawsuits will not have a material adverse effect on the financial condition or results of operations of our insurance subsidiaries. However, regardless of outcome, litigation and related matters could have an adverse impact on us and our insurance subsidiaries due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors. Item 4. Mine Safety Disclosures. Not applicable. -43- Index PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our Class A common stock and Class B common stock trade on the NASDAQ Global Select Market under the symbols “DGICA” and “DGICB,” respectively. At the close of business on March 2, 2026, we had approximately 1,403 holders of record of our Class A common stock and approximately 196 holders of record of our Class B common stock. We declared dividends of $0.73 per share on our Class A common stock and $0.66 per share on our Class B common stock in 2025, compared to $0.69 per share on our Class A common stock and $0.62 per share on our Class B common stock in 2024. Unregistered Sales of Equity Securities and Use of Proceeds. Between October 1, 2025 and December 31, 2025, Donegal Mutual purchased shares of our Class A common stock as set forth in the table below: Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs Month #1 October 1-31, 2025 Class A – None Class B – None Class A – None Class B – None Class A – None Class B – None Month #2 November 1-30, 2025 Class A – 150,782 Class B – 43,404 Class A – $19.60 Class B – $17.50 Class A – 150,782 Class B – 43,404 (1) Month #3 December 1-31, 2025 Class A – 123,343 Class B – None Class A – $19.90 Class B – None Class A – 123,343 Class B – None (1) Total Class A – 274,125 Class B – 43,404 Class A – $19.73 Class B – $17.50 Class A – 274,125 Class B – 43,404 (1) Donegal Mutual purchased these shares pursuant to its disclosure on April 29, 2022 that it will, at its discretion, purchase shares of our Class A common stock and Class B common stock at market prices prevailing from time to time in the open market subject to the provisions of SEC Rule 10b-18 and in privately negotiated transactions. Such disclosure did not stipulate a maximum number of shares that may be purchased under this program. -44- Index Stock Performance Chart. The following graph provides an indicator of cumulative total stockholder returns on our Class A common stock and our Class B common stock for the period beginning on December 31, 2020 and ending on December 31, 2025, compared to the Russell 2000 Index and a peer group comprised of six property and casualty insurance companies over the same period. The peer group consists of Cincinnati Financial Corp., Hanover Insurance Group Inc., Horace Mann Educators Corp., Kemper Corp., Selective Insurance Group Inc. and United Fire Group Inc. The graph shows the change in value of an initial $100 investment on December 31, 2020, assuming reinvestment of all dividends. 2020 2021 2022 2023 2024 2025 Donegal Group Inc. Class A $ 100.00 $ 105.99 $ 110.28 $ 113.81 $ 131.99 $ 177.72 Donegal Group Inc. Class B 100.00 118.61 149.27 139.09 141.29 184.97 Russell 2000 100.00 114.82 91.35 106.82 119.14 134.40 Peer Group 100.00 116.90 113.00 115.68 151.35 163.65 Research Data Group prepared the foregoing performance graph and data. The performance graph and accompanying data shall not be deemed “filed” as part of this Form 10-K Report for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section and should not be deemed incorporated by reference into any other filing we make under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate the performance graph and accompanying data by reference into such filing. Item 6. [Reserved] -45- Index Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Donegal Mutual Insurance Company (“Donegal Mutual”) organized us as an insurance holding company on August 26, 1986. See “Business - History and Organizational Structure” for more information. Our insurance 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, 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. At December 31, 2025, Donegal Mutual held approximately 44% of our outstanding Class A common stock and approximately 85% of our outstanding Class B common stock. This ownership provides Donegal Mutual with approximately 70% of the combined voting power of our outstanding shares of Class A common stock and our outstanding shares of Class B common stock. Donegal Mutual and Atlantic States have participated in a proportional reinsurance agreement, or pooling agreement, since 1986. Under the pooling agreement, Donegal Mutual and Atlantic States contribute substantially all of their respective premiums, losses and loss expenses to the underwriting pool, and the underwriting pool, acting through Donegal Mutual, then allocates 80% of the pooled business to Atlantic States. Thus, Donegal Mutual and Atlantic States share the underwriting results of the pooled business in proportion to their respective participation in the underwriting pool. The operations of our insurance subsidiaries and Donegal Mutual are interrelated due to the pooling agreement and other factors. While maintaining the separate corporate existence of each company, our insurance subsidiaries conduct business together with Donegal Mutual and its insurance subsidiaries as the Donegal Insurance Group. The Donegal Insurance Group is not a legal entity, is not an insurance company and does not issue or administer insurance policies. Rather, it is a trade name that refers to the group of insurance companies that are affiliated with Donegal Mutual. 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 allow the individual companies to manage certain risk segments through variations in coverage, terms and pricing. Therefore, the underwriting profitability of the business the individual companies write directly will vary. However, 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. 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. We did not purchase any shares of our Class A common stock under this program during 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 December 31, 2025. 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 subject to the provisions of SEC Rule 10b-18 and in privately negotiated transactions. Such disclosure did not stipulate a maximum number of shares that may be purchased under this program. Donegal Mutual purchased 776,332 and 1,057,282 shares of our Class A common stock during 2025 and 2024, respectively. Donegal Mutual purchased 43,404 shares of our Class B common stock during 2025. Donegal Mutual did not purchase any shares of our Class B common stock during 2024. -46- Index In September 2025, Donegal Mutual and Southern entered into a renewal rights agreement with an affiliate of a farm-focused Pennsylvania-based mutual insurance group to provide a continuation option for their farm policyholders when they begin to non-renew all farm policies as they expire beginning in the second quarter of 2026. Donegal Mutual and Southern determined that the costs required to modernize the legacy farm product and systems were higher than the projected return on investment for this non-core line of business that represents approximately $6 million in premiums. None of our other insurance subsidiaries offered farm policies. We currently include farm policies within other commercial lines in our line of business reporting. 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 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. 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. 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. -47- 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 several following years due to a number of factors, including supply chain disruption, higher new and used automobile values, increases in the cost of replacement automobile parts and rising labor rates. These trend changes caused significant disruption to historical loss patterns and gave rise to greater uncertainty as to the pattern of future loss settlements. Uncertainties regarding future trends include social inflation, availability and cost of replacement automobile parts and building materials, availability and cost of skilled labor, the rate of specialized plaintiff attorney involvement in claims, plaintiff attorney utilization of litigation financing and the cost of medical technologies and procedures. Assumptions related to our insurance subsidiaries’ external environment include the absence of significant changes in tort law and the legal environment that increase liability exposure, consistency in judicial interpretations of insurance coverage and policy provisions and the rate of loss cost inflation. Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business and consistency in reinsurance coverage and collectability of reinsured losses, among other items. To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes. Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at December 31, 2025. For every 1% change in our insurance subsidiaries’ loss and loss expense reserves, net of reinsurance recoverable, the effect on our pre-tax results of operations would be approximately $7.1 million. The establishment of appropriate liabilities is an inherently uncertain process and we can provide no assurance that our insurance subsidiaries’ ultimate liability will not exceed our insurance subsidiaries’ loss and loss expense reserves and have an adverse effect on our results of operations and financial condition. Furthermore, we cannot predict the timing, frequency and extent of adjustments to our insurance subsidiaries’ estimated future liabilities, because the historical conditions and events that serve as a basis for our insurance subsidiaries’ estimates of ultimate claim costs may change. As is the case for substantially all property and casualty insurance companies, our insurance subsidiaries have found it necessary in the past to increase their estimated future liabilities for losses and loss expenses in certain periods and, in other periods, their estimated future liabilities for losses and loss expenses have exceeded their actual liabilities for losses and loss expenses. Changes in our insurance subsidiaries’ estimates of their liability for losses and loss expenses generally reflect actual payments and their evaluation of information received subsequent to the prior reporting period. Our insurance subsidiaries recognized a decrease in their liability for losses and loss expenses of prior years of $10.3 million, $15.0 million and $16.7 million in 2025, 2024 and 2023, respectively. Our insurance subsidiaries made no significant changes in their reserving philosophy or claims management personnel, and they have made no significant offsetting changes in estimates that increased or decreased their loss and loss expense reserves in those years. The 2025 development represented 1.5% of the December 31, 2024 net carried reserves and resulted primarily from lower-than-expected loss emergence in all lines of business except other commercial lines (which is primarily commercial umbrella liability) for accident years prior to 2025. The majority of the 2025 development related to decreases in the liability for losses and loss expenses of prior years for Southern and Peninsula. The 2024 development represented 2.2% of the December 31, 2023 net carried reserves and resulted primarily from lower-than-expected loss emergence in the commercial multi-peril, personal automobile and homeowner lines of business, offset partially by higher-than-expected loss emergence in the workers’ compensation and commercial automobile lines of business, for accident years prior to 2024. The majority of the 2024 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO. The 2023 development represented 2.5% of the December 31, 2022 net carried reserves and resulted primarily from lower-than-expected loss emergence in the personal automobile and commercial automobile lines of business for accident years prior to 2023. The majority of the 2023 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO. -48- Index Excluding the impact of severe weather events and the COVID-19 pandemic, our insurance subsidiaries have noted stable amounts in the number of claims incurred and the number of claims outstanding at period ends relative to their premium base in recent years across most of their lines of business. However, the amount of the average claim outstanding has increased gradually over the past several years due to various factors such as increased property and automobile repair and replacement costs, rising medical loss costs and increased litigation trends and lengthening of repair completion times for property and automobile claims. We have also experienced a general slowing of settlement rates in litigated claims. Our insurance subsidiaries could have to make further adjustments to their estimates in the future. However, on the basis of our insurance subsidiaries’ internal procedures, which analyze, among other things, their prior assumptions, their experience with similar cases and historical trends such as reserving patterns, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, economic conditions and public attitudes, we believe that our insurance subsidiaries have made adequate provision for their liability for losses and loss expenses. Atlantic States’ participation in the underwriting pool with Donegal Mutual exposes Atlantic States to adverse loss development on the business that Donegal Mutual contributes to the underwriting pool. However, pooled business represents the predominant percentage of the net underwriting activity of both companies, and Donegal Mutual and Atlantic States share proportionately any adverse 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. -49- Index Our insurance subsidiaries’ liability for losses and loss expenses by major line of business at December 31, 2025 and 2024 consisted of the following: 2025 2024 (in thousands) Commercial lines: Automobile $ 175,277 $ 180,757 Workers’ compensation 130,429 129,406 Commercial multi-peril 215,476 208,676 Other 53,249 39,336 Total commercial lines 574,431 558,175 Personal lines: Automobile 100,855 116,693 Homeowners 27,565 26,591 Other 2,345 2,905 Total personal lines 130,765 146,189 Total commercial and personal lines 705,196 704,364 Plus reinsurance recoverable 394,854 416,621 Total liability for losses and loss expenses $ 1,100,050 $ 1,120,985 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 loss and loss expense reserves. We established the range of reasonably likely changes based on a review of changes in accident year development by line of business and applied it to our insurance subsidiaries’ loss reserves as a whole. The selected range does not necessarily indicate what could be the potential best or worst case or the most-likely scenario. The following table sets forth 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 considered in establishing loss and loss expense reserves: Change in Loss and Loss Expense Reserves Net of Reinsurance Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2025 Percentage Change in Equity at December 31, 2025(1) Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2024 Percentage Change in Equity at December 31, 2024(1) (dollars in thousands) -10.0 % $ 634,676 8.7 % $ 633,928 10.2 % -7.5 652,306 6.5 651,537 7.6 -5.0 669,936 4.3 669,146 5.1 -2.5 687,566 2.2 686,755 2.5 Base 705,196 — 704,364 — 2.5 722,826 -2.2 721,973 -2.5 5.0 740,456 -4.3 739,582 -5.1 7.5 758,086 -6.5 757,191 -7.6 10.0 775,716 -8.7 774,800 -10.2 (1) Net of income tax effect. -50- Index Our insurance subsidiaries base their reserves for unpaid losses and loss expenses on current trends in loss and loss expense development and reflect their best estimates for future amounts needed to pay losses and loss expenses with respect to incurred events currently known to them plus incurred but not reported (“IBNR”) claims. Our insurance subsidiaries develop their reserve estimates based on an assessment of known facts and circumstances, review of historical loss settlement patterns, estimates of trends in claims severity, frequency, legal and regulatory changes and other assumptions. Our insurance subsidiaries consistently apply actuarial loss reserving techniques and assumptions, which rely on historical information as adjusted to reflect current conditions, including consideration of recent case reserve activity. Our insurance subsidiaries use the point estimate their actuaries select. For the year ended December 31, 2025, the actuaries developed a range from a low of $666.6 million to a high of $746.1 million and selected a point estimate of $705.2 million. The actuaries’ range of estimates for commercial lines in 2025 was $543.0 million to $607.8 million, and the actuaries selected a point estimate of $574.4 million. The actuaries’ range of estimates for personal lines in 2025 was $123.5 million to $138.3 million, and the actuaries selected a point estimate of $130.8 million. For the year ended December 31, 2024, the actuaries developed a range from a low of $672.1 million to a high of $740.4 million and selected a point estimate of $704.4 million. The actuaries’ range of estimates for commercial lines in 2024 was $533.0 million to $587.5 million, and the actuaries selected a point estimate of $558.2 million. The actuaries’ range of estimates for personal lines in 2024 was $139.1 million to $153.0 million, and the actuaries selected a point estimate of $146.2 million. Our insurance subsidiaries seek to enhance their underwriting results by carefully selecting the product lines they underwrite. For personal lines products, our insurance subsidiaries insure standard and preferred risks in private passenger automobile and homeowners lines. For commercial lines products, the commercial risks that our insurance subsidiaries primarily insure are business offices, wholesalers, service providers, contractors, artisans and light manufacturing operations. 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. The following table presents 2025 and 2024 claim count and payment amount information for workers’ compensation. Workers’ compensation losses primarily consist of indemnity and medical costs for injured workers. For the Year Ended December 31, (dollars in thousands) 2025 2024 Number of claims pending, beginning of period 2,832 3,144 Number of claims reported 4,408 5,066 Number of claims settled or dismissed 4,762 5,378 Number of claims pending, end of period 2,478 2,832 Losses paid $ 52,449 $ 54,597 Loss expenses paid $ 10,216 $ 10,953 Management Evaluation of Operating Results We believe that our focused business strategy has positioned us well for 2026 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 include financial measures that reflect the growth trends and underwriting results of our insurance subsidiaries. -51- Index We use the following financial data to monitor and evaluate our operating results: Year Ended December 31, (in thousands) 2025 2024 2023 Net premiums written: Commercial lines: Automobile $ 197,949 $ 184,989 $ 174,741 Workers’ compensation 92,464 103,533 107,598 Commercial multi-peril 221,283 213,959 195,632 Other 52,295 45,439 50,458 Total commercial lines 563,991 547,920 528,429 Personal lines: Automobile 208,077 243,036 215,957 Homeowners 122,999 140,613 139,688 Other 9,760 10,712 11,623 Total personal lines 340,836 394,361 367,268 Total net premiums written $ 904,827 $ 942,281 $ 895,697 Components of combined ratio: Loss ratio 61.3 % 64.5 % 69.1 % Expense ratio 33.8 33.7 34.7 Dividend ratio 0.3 0.4 0.6 Combined ratio 95.4 % 98.6 % 104.4 % Revenues: Net premiums earned: Commercial lines $ 555,873 $ 539,683 $ 533,029 Personal lines 365,311 396,968 349,042 Total net premiums earned 921,184 936,651 882,071 Net investment income 52,627 44,918 40,853 Investment gains 619 4,981 3,173 Other 3,584 3,055 1,241 Total revenues $ 978,014 $ 989,605 $ 927,338 Year Ended December 31, (in thousands) 2025 2024 2023 Components of net income: Underwriting income (loss): Commercial lines $ 4,672 $ 5,826 $ (6,998 ) Personal lines 43,850 5,739 (35,118 ) SAP underwriting income (loss) 48,522 11,565 (42,116 ) GAAP adjustments (5,849 ) 1,331 3,735 GAAP underwriting income (loss) 42,673 12,896 (38,381 ) Net investment income 52,627 44,918 40,853 Investment gains 619 4,981 3,173 Other 1,674 (456 ) (582 ) Income before income tax expense 97,593 62,339 5,063 Income tax expense 18,252 11,477 637 Net income $ 79,341 $ 50,862 $ 4,426 -52- Index Non-GAAP Information We prepare our consolidated financial statements on the basis of GAAP. Our insurance subsidiaries prepare financial statements based on 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. As a result, investors should exercise caution when comparing our non-GAAP financial measures to the non-GAAP financial measures other companies use. 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 2025: (in thousands) Commercial Lines Personal Lines Total Net premiums earned $ 555,873 $ 365,311 $ 921,184 Change in net unearned premiums 8,118 (24,475 ) (16,357 ) Net premiums written $ 563,991 $ 340,836 $ 904,827 The following table provides a reconciliation of our net premiums earned to our net premiums written for 2024: (in thousands) Commercial Lines Personal Lines Total Net premiums earned $ 539,683 $ 396,968 $ 936,651 Change in net unearned premiums 8,237 (2,607 ) 5,630 Net premiums written $ 547,920 $ 394,361 $ 942,281 The following table provides a reconciliation of our net premiums earned to our net premiums written for 2023: (in thousands) Commercial Lines Personal Lines Total Net premiums earned $ 533,029 $ 349,042 $ 882,071 Change in net unearned premiums (4,600 ) 18,226 13,626 Net premiums written $ 528,429 $ 367,268 $ 895,697 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: -53- Index • 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. The following table presents comparative details with respect to our GAAP and statutory combined ratios for the years ended December 31, 2025, 2024 and 2023: Year Ended December 31, 2025 2024 2023 GAAP Combined Ratios (Total Lines) Loss ratio - core losses 51.4 % 54.0 % 57.5 % Loss ratio - weather-related losses 6.2 7.2 8.3 Loss ratio - large fire losses 4.8 4.9 5.2 Loss ratio - net prior-year reserve development -1.1 -1.6 -1.9 Loss ratio 61.3 64.5 69.1 Expense ratio 33.8 33.7 34.7 Dividend ratio 0.3 0.4 0.6 Combined ratio 95.4 % 98.6 % 104.4 % Statutory Combined Ratios Commercial lines: Automobile 97.9 % 102.6 % 97.3 % Workers’ compensation 105.5 104.4 96.6 Commercial multi-peril 94.0 95.0 112.3 Other 106.3 80.0 85.5 Total commercial lines 98.5 98.2 101.6 Personal lines: Automobile 86.4 97.4 109.7 Homeowners 96.9 99.6 108.6 Other 55.0 99.5 75.8 Total personal lines 89.3 98.3 108.2 Total commercial and personal lines 95.0 98.3 104.2 -54- Index Results of Operations YEAR ENDED DECEMBER 31, 2025 COMPARED TO YEAR ENDED DECEMBER 31, 2024 Net Premiums Earned Our insurance subsidiaries’ net premiums earned decreased to $921.2 million for 2025, a decrease of $15.5 million, or 1.7%, compared to 2024, primarily reflecting lower new business writings, offset partially by 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. Net Premiums Written Our insurance subsidiaries’ 2025 net premiums written decreased 4.0% to $904.8 million, compared to $942.3 million for 2024. Commercial lines net premiums written increased $16.0 million, or 2.9%, for 2025 compared to 2024. We attribute the increase in commercial lines net premiums written primarily to solid premium retention and a continuation of renewal premium increases in lines other than workers’ compensation, offset partially by lower new business writings. Personal lines net premiums written decreased $53.5 million, or 13.6%, for 2025 compared to 2024. We attribute the decrease in personal lines net premiums written primarily to planned attrition due to lower new business writings and strategic non-renewal actions, offset partially by a continuation of renewal premium rate increases and solid retention. Investment Income For 2025, our net investment income increased 17.2% to $52.6 million, compared to $44.9 million for 2024, due primarily to higher average invested assets and an increase in the average investment yield compared to the prior year. Net Investment Gains Our net investment gains for 2025 were $619,342, compared to $5.0 million for 2024. The net investment gains for 2025 and 2024 were primarily related to increases in the market value of the equity securities held at the end of the respective periods, with the increase in 2025 offset largely by net realized investment losses on the strategic sales of available-for-sale fixed-maturity securities. We did not recognize any impairment losses during 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 61.3% for 2025, compared to 64.5% for 2024. Our insurance subsidiaries’ commercial lines loss ratio increased slightly to 62.1% for 2025, compared to 62.0% for 2024. The commercial multi-peril loss ratio decreased to 56.4% for 2025, compared to 57.5% for 2024. The commercial automobile loss ratio decreased to 63.5% for 2025, compared to 68.5% for 2024. The workers’ compensation loss ratio decreased to 67.4% for 2025, compared to 67.7% for 2024. The personal lines loss ratio decreased to 60.0% for 2025, compared to 68.0% for 2024, due primarily to the continued benefit of earned premium rate increases and lower weather-related losses. The personal automobile loss ratio decreased to 57.7% for 2025, compared to 68.5% for 2024. The homeowners loss ratio decreased to 66.0% for 2025, compared to 66.7% for 2024. Our insurance subsidiaries experienced favorable loss reserve development of approximately $10.3 million, or 1.1 percentage points of the loss ratio, during 2025 in their reserves for prior accident years, compared to approximately $15.0 million, or 1.6 percentage points of the loss ratio, during 2024. The favorable loss reserve development in 2025 resulted primarily from lower-than-expected loss emergence in the commercial multi-peril, personal automobile, commercial automobile, homeowners, other personal lines and workers’ compensation lines of business, offset partially by unfavorable development in the other commercial lines of business (which is primarily umbrella liability). Weather-related losses of $56.9 million, or 6.2 percentage points of the loss ratio, for 2025 decreased from $67.7 million, or 7.2 percentage points of the loss ratio, for 2024, with the decrease primarily impacting the commercial multi-peril and homeowners lines of business. Large fire losses, which we define as individual fire losses in excess of $50,000, were $43.9 million, or 4.8 percentage points of the loss ratio, for 2025, compared to $45.8 million, or 4.9 percentage points of the loss ratio, for 2024. -55- Index Underwriting Expenses Our insurance subsidiaries’ expense ratio, which is the ratio of policy acquisition and other underwriting expenses to premiums earned, was 33.8% for 2025, compared to 33.7% for 2024. The impact from costs that Donegal Mutual Insurance Company allocated to our insurance subsidiaries related to its systems modernization project represented approximately 1.2 percentage points of the expense ratio for 2025. 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. Combined Ratio Our insurance subsidiaries’ combined ratio was 95.4% and 98.6% for 2025 and 2024, 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 decrease in our combined ratio primarily to the decrease in the loss ratio. Interest Expense Our interest expense for 2025 increased to $1.4 million, compared to $946,020 for 2024. We attribute the increase to higher interest rates on borrowings under our lines of credit during 2025 compared to 2024. Income Taxes Our income tax expense was $18.3 million for 2025, compared to $11.5 million for 2024. Our effective tax rate for 2025 and 2024 was 18.7% and 18.4%, respectively. Net Income and Earnings Per Share Our net income for 2025 was $79.3 million, or $2.18 per share of Class A common stock on a diluted basis and $2.01 per share of Class B common stock, compared to $50.9 million, or $1.53 per share of Class A common stock on a diluted basis and $1.38 per share of Class B common stock, for 2024. We had 31.4 million and 30.0 million Class A shares outstanding at December 31, 2025 and 2024, 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. Book Value Per Share Our stockholders’ equity increased by $94.6 million during 2025, primarily due to our net income, after-tax unrealized gains within our available-for-sale fixed-maturity portfolio and other increases, offset partially by the cash dividends we declared during the year, resulting in an increase in our book value per share to $17.33 at December 31, 2025, compared to $15.36 a year earlier. -56- Index YEAR ENDED DECEMBER 31, 2024 COMPARED TO YEAR ENDED DECEMBER 31, 2023 Net Premiums Earned Our insurance subsidiaries’ net premiums earned increased to $936.7 million for 2024, an increase of $54.6 million, or 6.2%, compared to 2023, 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. Net Premiums Written Our insurance subsidiaries’ 2024 net premiums written increased 5.2% to $942.3 million, compared to $895.7 million for 2023. Commercial lines net premiums written increased $19.5 million, or 3.7%, for 2024 compared to 2023. We attribute the increase in commercial lines net premiums written primarily to strong premium retention and a continuation of renewal premium increases in lines other than workers’ compensation, offset partially by planned attrition in states we exited or classes of business we have targeted for profit improvement. Personal lines net premiums written increased $27.1 million, or 7.4%, for 2024 compared to 2023. We attribute the increase in personal lines net premiums written primarily to renewal premium rate increases and solid policy retention, offset partially by planned attrition due to non-renewal actions and lower new business writings. Investment Income For 2024, our net investment income increased 10.0% to $44.9 million, compared to $40.9 million for 2023, due primarily to higher average reinvestment yields and higher average invested assets for 2024 compared to 2023. Net Investment Gains Our net investment gains for 2024 were $5.0 million, compared to $3.2 million for 2023. The net investment gains for 2024 and 2023 were primarily related to increases in the market value of the equity securities held at the end of the respective periods. We did not recognize any impairment losses during 2024 or 2023. Losses and Loss Expenses Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 64.5% for 2024, compared to 69.1% for 2023. Our insurance subsidiaries’ commercial lines loss ratio decreased to 62.0% for 2024, compared to 64.8% for 2023. This decrease resulted primarily from the commercial multi-peril loss ratio decreasing to 57.5% for 2024, compared to 73.1% for 2023, primarily due to a decrease in severity of non-weather claims, offset partially by increases in the commercial automobile and workers’ compensation loss ratios due primarily to increases in loss emergence for prior accident years. The commercial automobile loss ratio increased to 68.5% for 2024, compared to 63.0% for 2023. The workers’ compensation loss ratio increased to 67.7% for 2024, compared to 59.0% for 2023. The personal lines loss ratio decreased to 68.0% for 2024, compared to 75.6% for 2023, due primarily to increases in net premiums earned related to premium rate increases. The personal automobile loss ratio decreased to 68.5% for 2024, compared to 78.5% for 2023. The homeowners loss ratio decreased to 66.7% for 2024, compared to 73.6% for 2023. Our insurance subsidiaries experienced favorable loss reserve development of approximately $15.0 million, or 1.6 percentage points of the loss ratio, during 2024 in their reserves for prior accident years, compared to approximately $16.7 million, or 1.9 percentage points of the loss ratio, during 2023. The favorable loss reserve development in 2024 resulted primarily from lower-than-expected loss emergence in the commercial multi-peril, personal automobile and homeowner lines of business, offset partially by higher-than-expected loss emergence in the workers’ compensation and commercial automobile lines of business, for accident years prior to 2024. Weather-related losses of $67.7 million, or 7.2 percentage points of the loss ratio, for 2024 increased from $72.9 million, or 8.3 percentage points of the loss ratio, for 2023, with the decrease primarily impacting the commercial multi-peril and homeowners lines of business. Large fire losses, which we define as individual fire losses in excess of $50,000, were $45.8 million, or 4.9 percentage points of the loss ratio, for 2024, compared to $45.4 million, or 5.2 percentage points of the loss ratio, for 2023. -57- Index Underwriting Expenses Our insurance subsidiaries’ expense ratio, which is the ratio of policy acquisition and other underwriting expenses to premiums earned, was 33.7% for 2024, compared to 34.7% for 2023. We attribute the decrease to the impacts of various expense reduction initiatives, including agency incentive program revisions, commission schedule adjustments, targeted staffing reductions, and hiring restrictions for open employment positions, among others. These impacts were offset partially by an increase in underwriting-based incentive costs as well as higher technology systems-related expenses that were primarily due to increased costs related to our ongoing systems modernization project, a portion of which Donegal Mutual Insurance Company allocates to our insurance subsidiaries. We expect the impact from allocated costs from Donegal Mutual Insurance Company to our insurance subsidiaries related to the ongoing systems modernization project peaked at approximately 1.3 percentage points of the expense ratio for 2024 and will subside gradually in 2025 and subsequent years. 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. Combined Ratio Our insurance subsidiaries’ combined ratio was 98.6% and 104.4% for 2024 and 2023, 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 decrease in our combined ratio primarily to the decreases in the loss and expense ratios. Interest Expense Our interest expense for 2024 increased to $946,020, compared to $619,813 for 2023. We attribute the increase to higher interest rates on borrowings under our lines of credit during 2024 compared to 2023. Income Taxes Our income tax expense was $11.5 million for 2024, compared to $637,972 for 2023. Our effective tax rate for 2024 and 2023 was 18.4% and 12.6%, respectively. Net Income and Earnings Per Share Our net income for 2024 was $50.9 million, or $1.53 per share of Class A common stock on a diluted basis and $1.38 per share of Class B common stock, compared to $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, for 2023. We had 30.0 million and 27.8 million Class A shares outstanding at December 31, 2024 and 2023, 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. Book Value Per Share Our stockholders’ equity increased by $66.0 million during 2024, primarily due to our net income, stock issuances under our stock compensation plans and other increases exceeding the cash dividends we declared during the year and resulting in an increase in our book value per share to $15.36 at December 31, 2024, compared to $14.39 a year earlier. -58- Index Financial Condition 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 generated from our insurance subsidiaries’ underwriting results, investment income and maturing investments. 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. 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 2025, 2024 and 2023 were $70.2 million, $67.4 million and $28.6 million, respectively. At December 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 December 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 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. The cash dividends we declared to our stockholders totaled $26.3 million, $23.2 million and $22.2 million in 2025, 2024 and 2023, respectively. 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 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, 2025. Amounts available for distribution to us as dividends from our insurance subsidiaries without prior approval of insurance regulatory authorities in 2026 are approximately $50.8 million from Atlantic States, $10.2 million from MICO and $5.4 million from Peninsula, or a total of approximately $66.4 million. -59- Index Investments At December 31, 2025 and 2024, our investment portfolio of primarily investment-grade bonds, common stock, short-term investments and cash totaled $1.5 billion and $1.4 billion, respectively, representing 64.0% and 61.6%, respectively, of our total assets. See “Business - Investments” for more information. December 31, 2025 2024 Percent of Percent of (dollars in thousands) Amount Total Amount Total Fixed maturities: Total held to maturity $ 776,447 51.8 % $ 705,714 51.0 % Total available for sale 640,723 42.7 617,892 44.6 Total fixed maturities 1,417,170 94.5 1,323,606 95.6 Equity securities 44,370 3.0 36,808 2.6 Short-term investments 38,713 2.5 24,558 1.8 Total investments $ 1,500,253 100.0 % $ 1,384,972 100.0 % The carrying value of our fixed maturity investments represented 94.5% and 95.6% of our total invested assets at December 31, 2025 and 2024, respectively. Our fixed maturity investments consisted of high-quality marketable bonds, of which 96.4% and 95.6% were rated at investment-grade levels at December 31, 2025 and 2024, respectively. At December 31, 2025, the net unrealized loss on our available-for-sale fixed maturity investments, net of deferred taxes, amounted to $7.6 million, compared to $27.4 million at December 31, 2024. Impact of Inflation Our insurance subsidiaries establish their property and casualty insurance premium rates before they know the amount of losses and loss settlement expenses or the extent to which inflation may impact such expenses. Consequently, our insurance subsidiaries attempt, in establishing rates, to anticipate the potential future impact of inflation. Our insurance subsidiaries account for inflation in the reserving function through analysis of costs and trends and reviews of historical reserving results. Impact of Changing Climate Conditions Insured losses from severe weather events could significantly impact the underwriting results of our insurance subsidiaries. Losses from catastrophic events are a function of both the extent of our insurance subsidiaries’ exposures, the frequency and severity of the events themselves and the level of reinsurance coverage our insurance subsidiaries purchase. The increased frequency and severity of weather-related catastrophes and other losses, such as 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. 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. Our insurance subsidiaries’ ability to appropriately manage catastrophe risk depends partially on catastrophe models, which rely on historical data that might not be representative of the frequency and severity of future events. Such models might also be unable to anticipate the uncertain impact of changing climate conditions that tend to occur gradually over time. Because 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. -60- Index Changing climate conditions could lead to new or revised regulations with which our insurance subsidiaries would have to comply. Such regulations could impact the ability of our insurance subsidiaries to manage their exposures in areas impacted by increased weather activity, require our insurance companies to alter the terms and conditions of their policies or impact the ability of our insurance subsidiaries to obtain sufficient pricing increases to offset higher loss activity. Impact of New Accounting Standards In September 2016, the Financial Accounting Standards Board (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 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 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 flows. In November 2023, the FASB issued guidance that amended previous guidance on the disclosure of reportable segments. The guidance requires disclosure of incremental segment information including the title and position of the individual identified as the chief operating decision maker, a narrative explanation of how the chief operating decision maker uses each reported measure of a segment’s profit or loss in assessing performance and determining how to allocate resources, as well as quantification of significant segment expenses and other items. We refer to Note 18 - Segment Information for further information and disclosure of items required within the amended and enhanced guidance. The adoption of this guidance did not have an impact on our financial position, results of operations or cash flows. In December 2023, the FASB issued guidance to enhance the transparency and usefulness of income tax disclosures. The guidance requires disclosure of specific categories in the rate reconciliation table and additional information for reconciling items that meet a quantitative threshold of equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate. The guidance also requires disaggregated disclosure of the amount of income taxes paid for federal, state and foreign taxes. We refer to Note 11- Income Taxes for further information and disclosure of items required within the amended and enhanced guidance. The adoption of this guidance did not have an impact on our financial position, results of operations or cash flows. In November 2024, the FASB issued guidance requiring disaggregated disclosure of income statement expenses in the notes to financial statements. The guidance requires disclosure of certain expenses, including employee compensation, depreciation and selling expenses. The guidance will not impact current income statement expense captions that industry-specific guidance requires. The guidance is effective for annual reporting periods beginning after December 15, 2026. The adoption of this guidance will not have an impact on our financial position, results of operations or cash flows. Off-Balance Sheet Arrangements As of December 31, 2025 and 2024, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. -61- Index Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to the impact of interest rate changes, to changes in fair values of investments and to credit risk. In the normal course of business, we employ established policies and procedures to manage our exposure to changes in interest rates, fluctuations in the fair market value of our debt and equity securities and credit risk. We seek to mitigate these risks by various actions we describe below. Interest Rate Risk Our exposure to market risk for a change in interest rates is concentrated in our investment portfolio. We monitor this exposure through periodic reviews of our asset and liability positions. We regularly monitor estimates of cash flows and the impact of interest rate fluctuations relating to our investment portfolio. Generally, we do not hedge our exposure to interest rate risk because we have the capacity to, and do, hold fixed-maturity investments to maturity. Principal cash flows and related weighted-average interest rates by stated maturity dates for the financial instruments we held at December 31, 2025 that are sensitive to interest rates are as follows: (in thousands) Principal Cash Flows Weighted-Average Interest Rate Fixed-maturity and short-term investments: 2026 $ 28,623 4.33 % 2027 35,649 3.86 2028 44,613 4.61 2029 67,058 3.49 2030 75,024 3.82 Thereafter 1,191,581 4.01 Total $ 1,442,548 Fair value $ 1,411,094 Debt: 2026 $ 35,000 3.81 % Total $ 35,000 Fair value $ 35,000 Actual cash flows from investments may differ from those depicted above as a result of calls and prepayments. Equity Price Risk Our portfolio of equity securities, which we carry on our consolidated balance sheets at estimated fair value, has exposure to price risk, which is the risk of potential loss in estimated fair value resulting from an adverse change in prices. Our objective is to mitigate this risk and to earn competitive relative returns by investing in a diverse portfolio of high-quality, liquid securities. Credit Risk Our objective is to earn competitive returns by investing in a diversified portfolio of securities. Our portfolio of fixed maturity securities and, to a lesser extent, short-term investments is subject to credit risk. We define this risk as the potential loss in fair value resulting from adverse changes in the borrower’s ability to repay the debt. We manage this risk by performing an analysis of prospective investments and through regular reviews of our portfolio by our investment personnel. We also limit the amount of our total investment portfolio that we invest in any one security. -62- Index Our insurance subsidiaries provide property and liability insurance coverages through independent insurance agencies located throughout their operating areas. Our insurance subsidiaries bill the majority of this business directly to the insured, although our insurance subsidiaries bill a portion of their commercial business through their agents, to whom they 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 Atlantic States cedes to Donegal Mutual. Our insurance subsidiaries maintain reinsurance agreements with Donegal Mutual and with a number of other major unaffiliated authorized reinsurers. To the extent that a reinsurer cannot pay losses for which it is liable under the terms of a reinsurance agreement with one or more of our insurance subsidiaries, our insurance subsidiaries retain continued liability for such losses. -63- Index Item 8. Financial Statements and Supplementary Data. Index to Consolidated Financial Statements and Schedule Consolidated Balance Sheets 65 Consolidated Statements of Income and Comprehensive Income 66 Consolidated Statements of Stockholders’ Equity 67 Consolidated Statements of Cash Flows 68 Notes to Consolidated Financial Statements 69 Report of Independent Registered Public Accounting Firm ( KPMG LLP , PCAOB ID 185 ) 108 Schedule: Schedule III — Supplementary Insurance Information 116 -64- Index Donegal Group Inc. Consolidated Balance Sheets December 31, 2025 2024 Assets Investments Fixed maturities Held to maturity, at amortized cost (fair value $ 731,659,323 and $ 631,568,929 ; net of allowance for expected credit losses of $ 1,312,903 and $ 1,388,240 ) $ 776,447,347 $ 705,713,916 Available for sale, at fair value (amortized cost $ 650,370,011 and $ 652,564,965 ) 640,722,775 617,891,862 Equity securities, at fair value 44,370,358 36,807,810 Short-term investments, at cost, which approximates fair value 38,712,341 24,558,744 Total investments 1,500,252,821 1,384,972,332 Cash 26,785,845 52,925,931 Accrued investment income 10,914,235 10,361,959 Premiums receivable 180,803,918 181,106,519 Reinsurance receivable (net of allowance for expected credit losses of $ 374,883 and $ 391,432 ) 398,582,136 420,741,855 Deferred policy acquisition costs 68,669,982 73,346,967 Deferred tax asset, net 13,287,301 18,769,861 Prepaid reinsurance premiums 171,083,219 176,161,872 Property and equipment, net 2,329,491 2,479,183 Accounts receivable - securities — 24,924 Federal income taxes recoverable 4,028,034 — Due from affiliate 3,299,188 8,410,090 Goodwill 5,625,354 5,625,354 Other intangible assets 958,010 958,010 Other 9,918 147,126 Total assets $ 2,386,629,452 $ 2,336,031,983 Liabilities and Stockholders’ Equity Liabilities Losses and loss expenses $ 1,100,049,937 $ 1,120,985,050 Unearned premiums 591,040,451 612,476,068 Accrued expenses 2,220,800 2,916,705 Reinsurance balances payable 3,484,130 4,345,426 Borrowings under lines of credit 35,000,000 35,000,000 Cash dividends declared to stockholders 6,647,482 6,031,078 Federal income taxes payable — 356,103 Other 7,768,573 8,145,422 Total liabilities 1,746,211,373 1,790,255,852 Stockholders’ Equity Preferred stock, $ .01 par value, authorized 2,000,000 shares; none issued — — Class A common stock, $ .01 par value, authorized 50,000,000 shares, issued 34,385,129 and 32,954,347 shares and outstanding 31,382,541 and 29,951,759 shares 343,852 329,544 Class B common stock, $ .01 par value, authorized 10,000,000 shares, issued 5,649,240 shares and outstanding 5,576,775 shares 56,492 56,492 Additional paid-in capital 391,811,397 369,679,946 Accumulated other comprehensive loss ( 8,295,743 ) ( 28,200,481 ) Retained earnings 297,728,438 245,136,987 Treasury stock, at cost ( 41,226,357 ) ( 41,226,357 ) Total stockholders’ equity 640,418,079 545,776,131 Total liabilities and stockholders’ equity $ 2,386,629,452 $ 2,336,031,983 See accompanying notes to consolidated financial statements. -65- Index Donegal Group Inc. Consolidated Statements of Income and Comprehensive Income Years Ended December 31, 2025 2024 2023 Statements of Income Revenues Net premiums earned (includes affiliated reinsurance of $ 244,601,249 , $ 239,521,005 and $ 237,903,029 - see note 3) $ 921,183,575 $ 936,651,480 $ 882,071,386 Investment income, net of investment expenses 52,626,715 44,918,162 40,853,215 Installment payment fees 3,282,581 2,740,505 894,137 Lease income 302,109 313,831 346,439 Net investment gains (includes ($ 5,224,178 ), ($ 174,302 ) and ($ 2,242,190 ) accumulated other comprehensive income reclassification) 619,342 4,981,072 3,172,807 Total revenues 978,014,322 989,605,050 927,337,984 Expenses Net losses and loss expenses (includes affiliated reinsurance of $ 140,294,717 , $ 136,662,558 and $ 150,198,479 - see note 3) 564,332,256 604,117,716 609,177,699 Amortization of deferred policy acquisition costs 152,783,000 160,311,000 154,214,000 Other underwriting expenses 158,384,631 155,253,685 151,747,579 Policyholder dividends 3,010,917 4,073,481 5,313,430 Interest 1,350,601 946,020 619,813 Other, net 559,940 2,564,216 1,201,987 Total expenses 880,421,345 927,266,118 922,274,508 Income before income tax expense 97,592,977 62,338,932 5,063,476 Income tax expense (includes $ 1,097,077 , $ 36,603 and $ 470,860 income tax benefit from reclassification items) 18,252,237 11,476,680 637,972 Net income $ 79,340,740 $ 50,862,252 $ 4,425,504 Basic earnings per common share: Class A common stock $ 2.22 $ 1.53 $ 0.14 Class B common stock $ 2.01 $ 1.38 $ 0.11 Diluted earnings per common share: Class A common stock $ 2.18 $ 1.53 $ 0.14 Class B common stock $ 2.01 $ 1.38 $ 0.11 Statements of Comprehensive Income Net income $ 79,340,740 $ 50,862,252 $ 4,425,504 Other comprehensive income, net of tax Unrealized gain on securities: Unrealized holding gain arising during the period, net of income tax expense of $ 4,196,548 , $ 1,207,804 and $ 1,285,390 15,777,637 4,543,642 4,246,693 Reclassification adjustment for losses included in net income, net of income tax benefit of $ 1,097,077 , $ 36,603 and $ 470,860 4,127,101 137,699 1,771,330 Other comprehensive income 19,904,738 4,681,341 6,018,023 Comprehensive income $ 99,245,478 $ 55,543,593 $ 10,443,527 See accompanying notes to consolidated financial statements. -66- Index Donegal Group Inc. Consolidated Statements of Stockholders’ Equity Common Stock Class A Shares Class B Shares Class A Amount Class B Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total Stockholders’ Equity Balance, January 1, 2023 30,120,263 5,649,240 $ 301,203 $ 56,492 $ 325,601,647 $ ( 41,703,747 ) $ 240,563,774 $ ( 41,226,357 ) $ 483,593,012 Issuance of common stock (stock compensation plans) 150,426 1,504 2,081,186 2,082,690 Stock-based compensation 493,866 4,939 7,683,782 7,688,721 Net income 4,425,504 4,425,504 Cash dividends ( 22,166,694 ) ( 22,166,694 ) Grant of stock options 327,863 ( 327,863 ) — Cumulative effect of adoption of updated guidance for credit losses at January 1, 2023 ( 1,895,902 ) ( 1,895,902 ) Reclassification of held-to-maturity transfer 2,803,902 ( 2,803,902 ) — Other comprehensive income 6,018,023 6,018,023 Balance, December 31, 2023 30,764,555 5,649,240 $ 307,646 $ 56,492 $ 335,694,478 $ ( 32,881,822 ) $ 217,794,917 $ ( 41,226,357 ) $ 479,745,354 Issuance of common stock (stock compensation plans) 153,366 1,534 2,006,136 2,007,670 Stock-based compensation 2,036,426 20,364 31,621,452 31,641,816 Net income 50,862,252 50,862,252 Cash dividends ( 23,162,302 ) ( 23,162,302 ) Grant of stock options 357,880 ( 357,880 ) — Other comprehensive income 4,681,341 4,681,341 Balance, December 31, 2024 32,954,347 5,649,240 $ 329,544 $ 56,492 $ 369,679,946 $ ( 28,200,481 ) $ 245,136,987 $ ( 41,226,357 ) $ 545,776,131 Issuance of common stock (stock compensation plans) 111,028 1,110 1,734,816 1,735,926 Stock-based compensation 1,319,754 13,198 19,937,803 19,951,001 Net income 79,340,740 79,340,740 Cash dividends ( 26,290,457 ) ( 26,290,457 ) Grant of stock options 458,832 ( 458,832 ) — Other comprehensive income 19,904,738 19,904,738 Balance, December 31, 2025 34,385,129 5,649,240 $ 343,852 $ 56,492 $ 391,811,397 $ ( 8,295,743 ) $ 297,728,438 $ ( 41,226,357 ) $ 640,418,079 See accompanying notes to consolidated financial statements. -67- Index Donegal Group Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2025 2024 2023 Cash Flows from Operating Activities: Net income $ 79,340,740 $ 50,862,252 $ 4,425,504 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other non-cash items 3,075,115 3,873,161 4,326,446 Net investment gains ( 619,342 ) ( 4,981,072 ) ( 3,172,807 ) Changes in Assets and Liabilities: Losses and loss expenses ( 20,935,113 ) ( 5,171,788 ) 5,111,080 Unearned premiums ( 21,435,617 ) 13,064,600 21,758,338 Accrued expenses ( 695,905 ) ( 1,030,269 ) ( 279,416 ) Premiums receivable 302,601 ( 1,514,698 ) ( 5,745,527 ) Deferred policy acquisition costs 4,676,985 1,696,437 ( 1,873,174 ) Deferred income taxes 188,935 ( 481,743 ) 229,397 Reinsurance receivable 22,159,719 20,689,479 13,959,053 Accrued investment income ( 552,276 ) ( 416,245 ) ( 1,084,422 ) Amounts due from affiliate 5,110,902 ( 6,502,563 ) ( 7,080,816 ) Reinsurance balances payable ( 861,296 ) ( 4,413,550 ) 5,263,152 Prepaid reinsurance premiums 5,078,653 ( 7,437,407 ) ( 8,133,066 ) Current income taxes ( 4,384,137 ) 8,458,424 408,576 Other, net ( 250,498 ) 745,019 511,426 Net adjustments ( 9,141,274 ) 16,577,785 24,198,240 Net cash provided by operating activities 70,199,466 67,440,037 28,623,744 Cash Flows from Investing Activities: Purchases of fixed maturities: Held to maturity ( 115,295,761 ) ( 56,707,019 ) ( 25,226,609 ) Available for sale ( 343,036,018 ) ( 147,736,805 ) ( 150,423,864 ) Purchases of equity securities ( 2,512,570 ) ( 8,697,500 ) ( 5,128,994 ) Sales of fixed maturities: Available for sale 189,710,482 7,184,635 28,154,556 Maturity of fixed maturities: Held to maturity 43,456,162 30,548,257 32,923,991 Available for sale 148,552,675 116,612,046 58,277,402 Sales of equity securities 2,145,314 3,010,413 19,745,875 Net (purchases) sales of property and equipment ( 425 ) 743 ( 44,701 ) Net (purchases) sales of short-term investments ( 14,153,597 ) 7,746,664 25,015,703 Net cash used in investing activities ( 91,133,738 ) ( 48,038,566 ) ( 16,706,641 ) Cash Flows from Financing Activities: Issuance of common stock 20,468,239 32,433,403 8,645,530 Cash dividends paid ( 25,674,053 ) ( 22,701,216 ) ( 21,893,692 ) Net cash (used in) provided by financing activities ( 5,205,814 ) 9,732,187 ( 13,248,162 ) Net (decrease) increase in cash ( 26,140,086 ) 29,133,658 ( 1,331,059 ) Cash at beginning of year 52,925,931 23,792,273 25,123,332 Cash at end of year $ 26,785,845 $ 52,925,931 $ 23,792,273 See accompanying notes to consolidated financial statements. -68- Index Donegal Group Inc. Notes to Consolidated Financial Statements 1 - Summary of Significant Accounting Policies Organization and Business Donegal Mutual Insurance Company (“Donegal Mutual”) organized us as an insurance holding company on August 26, 1986. Our insurance subsidiaries are Atlantic States Insurance Company (“Atlantic States”), Michigan Insurance Company (“MICO”), the Peninsula Insurance Group (“Peninsula”), which consists of The Peninsula Insurance Company and its wholly owned subsidiary Peninsula Indemnity Company, and Southern Insurance Company of Virginia (“Southern”). Our insurance subsidiaries and their affiliates write commercial and personal lines of property and casualty coverages exclusively through a network of independent insurance agents in certain Mid-Atlantic, Midwestern, Southern and Southwestern states. At December 31, 2025, we had three segments: our investment function, our commercial lines of insurance and our personal lines of insurance. The commercial lines products of our insurance subsidiaries consist primarily of commercial automobile, commercial multi-peril and workers’ compensation policies. The personal lines products of our insurance subsidiaries consist primarily of homeowners and private passenger automobile policies. At December 31, 2025, Donegal Mutual held approximately 44 % of our outstanding Class A common stock and approximately 85 % of our outstanding Class B common stock. This ownership provides Donegal Mutual with approximately 70 % of the total voting power of our common stock. Our insurance subsidiaries and Donegal Mutual have interrelated operations due to a pooling agreement and other intercompany agreements and transactions. While each company maintains its separate corporate existence, our insurance subsidiaries and Donegal Mutual conduct business together as the Donegal Insurance Group. As such, Donegal Mutual and our insurance subsidiaries share the same business philosophy, the same management, the same employees and the same facilities and offer the same types of insurance products. Atlantic States, our largest subsidiary, participates in a proportional reinsurance agreement (the “pooling agreement”) with Donegal Mutual. Under the pooling agreement, Donegal Mutual and Atlantic States contribute substantially all of their respective premiums, losses and loss expenses to the underwriting pool, and the underwriting pool, acting through Donegal Mutual, then allocates 80 % of the pooled business to Atlantic States. Thus, Donegal Mutual and Atlantic States share the underwriting results of the pooled business in proportion to their respective participation in the underwriting pool. In addition, Donegal Mutual has a 100 % quota-share reinsurance agreement with Southern Mutual Insurance Company (“Southern Mutual”). Donegal Mutual places its assumed business from Southern Mutual into the underwriting pool. Donegal Mutual also has a 100 % quota-share reinsurance agreement with Mountain States Indemnity Company and Mountain States Commercial Insurance Company (collectively, the “Mountain States insurance subsidiaries”). Donegal Mutual places its assumed business from the Mountain States insurance subsidiaries into the underwriting pool. The same executive management and underwriting personnel administer products, classes of business underwritten, pricing practices and underwriting standards of Donegal Mutual and our insurance subsidiaries. In addition, as the Donegal Insurance Group, Donegal Mutual and our insurance subsidiaries share a combined business plan to achieve market penetration and underwriting profitability objectives. The products our insurance subsidiaries and Donegal Mutual market are generally complementary, thereby allowing the Donegal Insurance Group to offer a broader range of products to a given market and to expand the Donegal Insurance Group’s ability to service an entire personal lines or commercial lines account. Distinctions within the products of Donegal Mutual and our insurance subsidiaries generally allow the individual companies to manage certain risk segments through variations in coverage, terms and pricing. Therefore, the underwriting profitability of the business the individual companies write directly will vary. However, the underwriting pool homogenizes the risk characteristics of all business that Donegal Mutual and Atlantic States write directly. The business Atlantic States derives from the underwriting pool represents a significant percentage of our total consolidated revenues. We refer to Note 3 - Transactions with Affiliates for more information regarding the pooling agreement. -69- Index In September 2025, Donegal Mutual and Southern entered into a renewal rights agreement with an affiliate of a farm-focused Pennsylvania-based mutual insurance group to provide a continuation option for their farm policyholders when they begin to non-renew all farm policies as they expire beginning in the second quarter of 2026. Donegal Mutual and Southern determined that the costs required to modernize the legacy farm product and systems were higher than the projected return on investment for this non-core line of business that represents approximately $ 6 million in premiums. None of our other insurance subsidiaries offered farm policies. We currently include farm policies within other commercial lines in our line of business reporting. Basis of Consolidation Our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), include our accounts and those of our wholly owned subsidiaries. We have eliminated all significant inter-company accounts and transactions in consolidation. The terms “we,” “us,” “our” or the “Company” as we use them in the notes to our consolidated financial statements refer to the consolidated entity. Use of Estimates In preparing our consolidated financial statements, our management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet and revenues and expenses for the period then ended. Actual results could differ significantly from those estimates. We make estimates and assumptions that could have a significant effect on amounts and disclosures we report in our consolidated financial statements. The most significant estimates relate to our insurance subsidiaries’ reserves 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 provided. We regularly review our methods for making these estimates as well as the continuing appropriateness of the estimated amounts, and we reflect any adjustment we consider necessary in our current results of operations. Reclassification We have made certain reclassifications in our prior period financial statements to conform to the current year presentation. Investments We classify our debt securities into the following categories: Held to Maturity - Debt securities that we have the positive intent and ability to hold to maturity; reported at amortized cost. Available for Sale - Debt securities not classified as held to maturity; reported at fair value, with unrealized gains and losses excluded from income and reported as a separate component of stockholders’ equity (net of tax effects). Short-term investments are carried at amortized cost, which approximates fair value. -70- Index We make estimates concerning the valuation of our investments and, as applicable, the recognition of declines in the value of our investments. For equity securities, we measure investments at fair value, and we recognize changes in fair value in our results of operations. With respect to an available-for-sale debt security that is in an unrealized loss position, we first assess if we intend to sell the debt security. If we determine we intend to sell the debt security, we recognize the impairment loss in our results of operations. If we do not intend to sell the debt security, we determine whether it is more likely than not that we will be required to sell the debt security prior to recovery. If we determine it is more likely than not that we will be required to sell the debt security prior to recovery, we recognize the impairment loss in our results of operations. If we determine it is more likely than not that we will not be required to sell the debt security prior to recovery, we then evaluate whether a credit loss has occurred with respect to that security. We determine whether a credit loss has occurred by comparing the amortized cost of the debt security to the present value of the cash flows we expect to collect. If we expect a cash flow shortfall, we consider that a credit loss has occurred. If we determine that a credit loss has occurred, we establish an allowance for credit loss. We then recognize the amount of the allowance in our results of operations, and we recognize the remaining portion of the impairment loss in our other comprehensive income, net of applicable taxes. We regularly review the allowance for credit losses and recognize changes in the allowance in our results of operations. In addition, we may write down securities in an unrealized loss position based on a number of other factors, including when the fair value of an investment is significantly below its cost, when the financial condition of the issuer of a security has deteriorated, the occurrence of industry, issuer or geographic events that have negatively impacted the value of a security and rating agency downgrades. For held-to-maturity debt securities, we make estimates concerning expected credit losses at an aggregated level rather than monitoring individual debt securities for credit losses. We establish an allowance for expected credit losses based on an ongoing review of securities held, historical loss data, changes in issuer credit standing and other relevant factors. We utilize a probability-of-default methodology, which reflects current and forecasted economic conditions, to estimate the allowance for expected credit losses and recognize changes to the allowance in our results of operations. We amortize premiums and discounts on debt securities over the life of the security as an adjustment to yield using the effective interest method. We compute investment gains and losses using the specific identification method. We amortize premiums and discounts for mortgage-backed debt securities using anticipated prepayments. Fair Values of Financial Instruments We use the following methods and assumptions in estimating our fair value disclosures: Investments - We present our investments in available-for-sale fixed maturity and equity securities at estimated fair value. The estimated fair value of a security may differ from the amount that we could realize if we sold the security in a forced transaction. In addition, the valuation of fixed maturity investments is more subjective when markets are less liquid, increasing the potential that the estimated fair value does not reflect the price at which an actual transaction would occur. We utilize nationally recognized independent pricing services to estimate fair values for our fixed maturity and equity investments. We generally obtain two prices per security. The pricing services utilize market quotations for fixed maturity and equity securities that have quoted prices in active markets. For fixed maturity securities that generally do not trade on a daily basis, the pricing services prepare estimates of fair value measurements based predominantly on observable market inputs. The pricing services do not use broker quotes in determining the fair values of our investments. Our investment personnel review the estimates of fair value the pricing services provide to determine if the estimates we obtain are representative of fair values based upon the general knowledge of our investment personnel of the market, their research findings related to unusual fluctuations in value and their comparison of such values to execution prices for similar securities. Our investment personnel monitor the market and are familiar with current trading ranges for similar securities and the pricing of specific investments. Our investment personnel review all pricing estimates that we receive from the pricing services against their expectations with respect to pricing based on fair market curves, security ratings, coupon rates, security type and recent trading activity. Our investment personnel review documentation with respect to the pricing services’ pricing methodology that they obtain periodically to determine if the primary pricing sources, market inputs and pricing frequency for various security types are reasonable. We refer to Note 5 - Fair Value Measurements for more information regarding our methods and assumptions in estimating fair values. Cash and Short-Term Investments - The carrying amounts we report in the balance sheet for these instruments approximate their fair values. Premiums and Reinsurance Receivables and Payables - The carrying amounts we report in the balance sheet for these instruments related to premiums and paid losses and loss expenses approximate their fair values. -71- Index Revenue Recognition Our insurance subsidiaries recognize insurance premiums as income over the terms of the policies they issue. Our insurance subsidiaries calculate unearned premiums on a daily pro-rata basis. Policy Acquisition Costs We defer our insurance subsidiaries’ policy acquisition costs, consisting primarily of commissions, premium taxes and certain other underwriting costs, reduced by ceding commissions, related directly to the successful acquisition of new or renewal insurance contracts. We amortize these deferred policy acquisition costs over the period in which our insurance subsidiaries earn the premiums. The method we follow in computing deferred policy acquisition costs limits the amount of such deferred costs to their estimated realizable value, which gives effect to the premium to be earned, related investment income, losses and loss expenses and certain other costs we expect to incur as our insurance subsidiaries earn the premium. Estimates in the calculation of policy acquisition costs have not shown material variability because of uncertainties in applying accounting principles or as a result of sensitivities to changes in key assumptions. Property and Equipment We report property and equipment at depreciated cost that we compute using the straight-line method based upon estimated useful lives of the assets. 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. -72- 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, increasing plaintiff attorney utilization of litigation financing and its impact on litigation strategies and the cost of medical technologies and procedures. Assumptions related to our insurance subsidiaries’ external environment include the absence of significant changes in tort law and the legal environment that increase liability exposure, consistency in judicial interpretations of insurance coverage and policy provisions and the rate of loss cost inflation. Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business and consistency in reinsurance coverage and collectability of reinsured losses, among other items. To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes. Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at December 31, 2025. Our insurance subsidiaries seek to enhance their underwriting results by carefully selecting the product lines they underwrite. Our insurance subsidiaries’ personal lines products primarily include standard and preferred risks in private passenger automobile and homeowners lines. Our insurance subsidiaries’ commercial lines products primarily include business offices, wholesalers, service providers, contractors, artisans and light manufacturing operations. Our insurance subsidiaries have limited exposure to asbestos and other environmental liabilities. Income Taxes We currently file a consolidated federal income tax return that includes us and our insurance subsidiaries. We account for income taxes using the asset and liability method. The objective of the asset and liability method is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of our assets and liabilities at enacted tax rates we expect to be in effect when we realize or settle such amounts. Credit Risk Our objective is to earn competitive returns by investing in a diversified portfolio of securities. Our portfolio of fixed maturity securities and, to a lesser extent, short-term investments is subject to credit risk. We define this risk as the potential loss in fair value resulting from adverse changes in the borrower’s ability to repay its debt to us. We manage this risk by performing an analysis of prospective investments and through regular reviews of our portfolio by our investment personnel. We also limit the amount of our total investment portfolio that we invest in any one security. Our insurance subsidiaries provide property and liability insurance coverages through independent insurance agencies located throughout their operating areas. Our insurance subsidiaries bill the majority of this business directly to their policyholders, although our insurance subsidiaries bill a portion of their commercial business through their agents, to whom they extend credit in the normal course of business. Our insurance subsidiaries have reinsurance agreements with Donegal Mutual and with a number of major unaffiliated reinsurers. -73- Index Reinsurance Accounting and Reporting Our insurance subsidiaries rely upon reinsurance agreements to limit their maximum net loss from large single risks or risks in concentrated areas and to increase their capacity to write insurance. Reinsurance does not relieve our insurance subsidiaries from liability to their respective policyholders. To the extent that a reinsurer cannot pay losses for which it is liable under the terms of a reinsurance agreement with one or more of our insurance subsidiaries, our insurance subsidiaries retain continued liability for such losses. However, in an effort to reduce the risk of non-payment, our insurance subsidiaries require all of their reinsurers to have an A.M. Best rating of A- or better or, with respect to foreign reinsurers, to have a financial condition that, in the opinion of our management, is equivalent to a company with an A.M. Best rating of A- or better. We refer to Note 10 - Reinsurance for more information regarding the reinsurance agreements of our insurance subsidiaries. We report reinsurance receivable net of an allowance for expected credit losses. We establish an allowance for expected credit losses based upon our ongoing review of amounts outstanding, historical loss data, changes in reinsurer credit standing and other relevant factors. We utilize a probability-of-default methodology, which reflects current and forecasted economic conditions, to estimate the allowance for expected credit losses and recognize changes to the allowance in our results of operations. Stock-Based Compensation We measure all share-based payments to our directors and the directors and employees of our subsidiaries and affiliates, including grants of stock options, using a fair-value-based method and record such expense in our results of operations. In determining the expense we record for stock options we grant to our directors and the directors and employees of our subsidiaries and affiliates, we estimate the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The significant assumptions we utilize in applying the Black-Scholes option pricing model are the risk-free interest rate, expected term, dividend yield and expected volatility. In 2025, 2024 and 2023, we realized $ 1,271,177 , $ 370,644 and $ 139,135 , respectively, in tax benefits upon the exercise of stock options. Earnings Per Share We calculate basic earnings per share by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. We have two classes of common stock, which we refer to as Class A common stock and Class B common stock. Our Class A common stock is entitled to the declaration and payment of cash dividends that are at least 10 % higher than those we declare and pay on our Class B common stock. Accordingly, we use the two-class method for the computation of earnings per common share. The two-class method is an earnings allocation formula that determines earnings per share separately for each class of common stock based on dividends declared and an allocation of remaining undistributed earnings using a participation percentage that reflects the dividend rights of each class. Goodwill and Other Intangible Assets Goodwill represents the excess of the purchase price over the underlying fair value of acquired entities. When completing acquisitions, we seek also to identify separately identifiable intangible assets that we have acquired. We assess goodwill and intangible assets with an indefinite useful life for impairment annually. We also assess goodwill and other intangible assets for impairment upon the occurrence of certain events. In making our assessment, we consider a number of factors including operating results, business plans, economic projections, anticipated future cash flows and current market data. Inherent uncertainties exist with respect to these factors and to our judgment in applying them when we make our assessment. Impairment of goodwill and other intangible assets could result from changes in economic and operating conditions in future periods. -74- Index 2 - Impact of New Accounting Standards In September 2016, the Financial Accounting Standards Board (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 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 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 flows. In November 2023, the FASB issued guidance that amended previous guidance on the disclosure of reportable segments. The guidance requires disclosure of incremental segment information including the title and position of the individual identified as the chief operating decision maker, a narrative explanation of how the chief operating decision maker uses each reported measure of a segment’s profit or loss in assessing performance and determining how to allocate resources, as well as quantification of significant segment expenses and other items. We refer to Note 18 - Segment Information for further information and disclosure of items required within the amended and enhanced guidance. The adoption of this guidance did not have an impact on our financial position, results of operations or cash flows. In December 2023, the FASB issued guidance to enhance the transparency and usefulness of income tax disclosures. The guidance requires disclosure of specific categories in the rate reconciliation table and additional information for reconciling items that meet a quantitative threshold of equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate. The guidance also requires disaggregated disclosure of the amount of income taxes paid for federal, state and foreign taxes. We refer to Note 11- Income Taxes for further information and disclosure of items required within the amended and enhanced guidance. The adoption of this guidance did not have an impact on our financial position, results of operations or cash flows. In November 2024, the FASB issued guidance requiring disaggregated disclosure of income statement expenses in the notes to financial statements. The guidance requires disclosure of certain expenses, including employee compensation, depreciation and selling expenses. The guidance will not impact current income statement expense captions that industry-specific guidance requires. The guidance is effective for annual reporting periods beginning after December 15, 2026. The adoption of this guidance will not have an impact on our financial position, results of operations or cash flows. 3 - Transactions with Affiliates Our insurance subsidiaries conduct business and have various agreements with Donegal Mutual that we describe in the following subparagraphs: a. Reinsurance Pooling and Other Reinsurance Arrangements Atlantic States, our largest insurance subsidiary, and Donegal Mutual have a pooling agreement under which both companies contribute substantially all of their direct written business to the pool and receive an allocated percentage of the pooled underwriting results, excluding certain reinsurance Donegal Mutual assumes from our insurance subsidiaries. In addition, Donegal Mutual has 100 % quota-share reinsurance agreements with Southern Mutual and the Mountain States insurance subsidiaries, and Donegal Mutual places the business of Southern Mutual and the Mountain States insurance subsidiaries into the underwriting pool. Atlantic States has an 80 % share of the results of the pool, and Donegal Mutual has a 20 % share of the results of the pool. The intent of the pooling agreement is to produce more uniform and stable underwriting results from year to year for each pool participant than they would experience individually and to spread the risk of loss between the participants based on each participant’s relative amount of surplus and relative access to capital. Each participant in the pool has at its disposal the capacity of the entire pool, rather than being limited to policy exposures of a size commensurate with its own capital and surplus. -75- Index The following amounts represent reinsurance Atlantic States ceded to the pool during 2025, 2024 and 2023: 2025 2024 2023 Premiums earned $ 358,244,537 $ 358,062,827 $ 332,272,662 Losses and loss expenses 201,642,149 201,030,943 238,055,099 Prepaid reinsurance premiums 164,949,115 169,621,545 161,991,511 Liability for losses and loss expenses 297,962,299 297,955,741 299,947,390 The following amounts represent reinsurance Atlantic States assumed from the pool during 2025, 2024 and 2023: 2025 2024 2023 Premiums earned $ 617,234,831 $ 611,864,614 $ 583,559,746 Losses and loss expenses 345,976,565 354,052,955 409,051,306 Unearned premiums 289,441,497 297,493,977 286,147,727 Liability for losses and loss expenses 518,833,183 517,975,350 507,527,839 Donegal Mutual and MICO had a quota-share reinsurance agreement under which Donegal Mutual assumed 25 % of the premiums and losses related to the business of MICO for policies effective through December 31, 2021. Donegal Mutual and MICO terminated this reinsurance agreement on a run-off basis effective January 1, 2022. Donegal Mutual and Peninsula had a quota-share reinsurance agreement under which Donegal Mutual assumed 100 % of the premiums and losses related to the workers’ compensation product line of Peninsula in certain states for policies effective through December 31, 2021. Donegal Mutual and Peninsula terminated this reinsurance agreement on a run-off basis effective January 1, 2022. Donegal Mutual places its assumed business from MICO and Peninsula into the underwriting pool. The following amounts represent reinsurance ceded to Donegal Mutual pursuant to these quota-share reinsurance agreements during 2025, 2024 and 2023: 2025 2024 2023 Premiums earned $ ( 32,160 ) $ 19,517 $ 168,243 Losses and loss expenses 2,383,014 ( 3,095,130 ) 2,902,422 Liability for losses and loss expenses 8,814,047 10,450,447 17,852,153 In 2025, 2024, and 2023, each of our insurance subsidiaries had a catastrophe reinsurance agreement with Donegal Mutual that provided coverage under any one catastrophic occurrence above a set retention of $ 3,000,000 , with a combined retention of $ 6,000,000 for a catastrophe involving a combination of our insurance subsidiaries, up to the amount Donegal Mutual and our insurance subsidiaries retained under catastrophe reinsurance agreements with unaffiliated reinsurers. In 2025, Southern, MICO and The Peninsula Insurance Company also had a liability reinsurance agreement with Donegal Mutual that provided coverage up to $ 3,000,000 per occurrence over a set retention of $3,000,000. The following amounts represent reinsurance that our insurance subsidiaries ceded to Donegal Mutual pursuant to these reinsurance agreements during 2025, 2024 and 2023: 2025 2024 2023 Premiums earned $ 14,421,205 $ 14,261,265 $ 13,215,814 Losses and loss expenses 1,656,685 19,454,584 17,895,306 Liability for losses and loss expenses 1,474,118 6,876,255 2,497,244 -76- Index The following amounts represent the effect of affiliated reinsurance transactions on net premiums our insurance subsidiaries earned during 2025, 2024 and 2023: 2025 2024 2023 Assumed $ 617,234,831 $ 611,864,614 $ 583,559,746 Ceded ( 372,633,582 ) ( 372,343,609 ) ( 345,656,717 ) Net $ 244,601,249 $ 239,521,005 $ 237,903,029 The following amounts represent the effect of affiliated reinsurance transactions on net losses and loss expenses our insurance subsidiaries incurred during 2025, 2024 and 2023: 2025 2024 2023 Assumed $ 345,976,565 $ 354,052,955 $ 409,051,306 Ceded ( 205,681,848 ) ( 217,390,397 ) ( 258,852,827 ) Net $ 140,294,717 $ 136,662,558 $ 150,198,479 b. Expense Sharing Donegal Mutual provides facilities, management and other services to us and our insurance subsidiaries. In addition, Donegal Mutual purchases and maintains the information technology systems that support the business of Donegal Mutual and our insurance subsidiaries. Donegal Mutual allocates certain related expenses to Atlantic States in relation to the relative participation of Atlantic States and Donegal Mutual in the pooling agreement. Our insurance subsidiaries other than Atlantic States reimburse Donegal Mutual for allocated costs of services Donegal Mutual provides on their behalf based on their proportion of the total direct premiums written of the Donegal Insurance Group and other metrics. Donegal Mutual allocates costs related to its development and maintenance of information technology systems over the estimated useful life of those systems (generally five years) and charges a proportionate share of those costs to our insurance subsidiaries based on their percentage of the total net premiums written of the Donegal Insurance Group. Allocated expenses from Donegal Mutual for services it provided to our insurance subsidiaries totaled $ 224,811,543 , $ 224,565,390 and $ 218,974,132 for 2025, 2024 and 2023, respectively. Donegal Mutual completed all major development activities related to the multi-year effort to modernize certain of its key technology infrastructure and application systems. Donegal Mutual placed several releases of new systems into service beginning in 2020 and ending with the two final releases in 2025. Donegal Mutual allocated $ 11.3 million, $ 12.3 million and $ 10.5 million of related costs to our insurance subsidiaries in 2025, 2024 and 2023, respectively. Donegal Mutual will allocate to our insurance subsidiaries their proportionate share of the remaining $ 45.6 million of related costs over the next five years. Our management believes that the allocation methods Donegal Mutual utilizes are reasonable. In addition, Donegal Mutual and we maintain a coordinating committee that consists of two members of our board of directors, neither of whom is a member of Donegal Mutual’s board of directors, and two members of Donegal Mutual’s board of directors, neither of whom is a member of our board of directors. The purpose of the coordinating committee is to maintain a process for an ongoing evaluation of the fairness of the terms of all transactions between Donegal Mutual and our insurance subsidiaries. c. Lease Agreement We lease office equipment with terms ranging from 3 to 10 years to Donegal Mutual under a lease agreement effective January 1, 2020. -77- Index 4 - Investments The amortized cost and estimated fair values of our fixed maturities at December 31, 2025 and 2024 are as follows: 2025 Carrying Value Allowance for Credit Losses Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Held to Maturity U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 79,242,467 $ 47,257 $ 79,289,724 $ 84,055 $ 4,864,438 $ 74,509,341 Obligations of states and political subdivisions 436,802,311 357,188 437,159,499 3,221,019 39,248,172 401,132,346 Corporate securities 252,098,474 903,506 253,001,980 2,211,196 7,422,745 247,790,431 Mortgage-backed securities 8,304,095 4,952 8,309,047 66,156 147,998 8,227,205 Totals $ 776,447,347 $ 1,312,903 $ 777,760,250 $ 5,582,426 $ 51,683,353 $ 731,659,323 2025 Available for Sale Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 25,057,361 $ 107,304 $ 835,267 $ 24,329,398 Obligations of states and political subdivisions 49,982,079 504,540 1,935,902 48,550,717 Corporate securities 132,203,204 699,686 1,978,429 130,924,461 Mortgage-backed securities 443,127,367 3,091,284 9,300,452 436,918,199 Totals $ 650,370,011 $ 4,402,814 $ 14,050,050 $ 640,722,775 2024 Carrying Value Allowance for Credit Losses Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Held to Maturity U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 86,579,024 $ 51,632 $ 86,630,656 $ — $ 8,484,505 $ 78,146,151 Obligations of states and political subdivisions 371,895,483 259,896 372,155,379 649,770 54,062,089 318,743,060 Corporate securities 236,550,262 1,070,337 237,620,599 272,817 13,607,632 224,285,784 Mortgage-backed securities 10,689,147 6,375 10,695,522 — 301,588 10,393,934 Totals $ 705,713,916 $ 1,388,240 $ 707,102,156 $ 922,587 $ 76,455,814 $ 631,568,929 2024 Available for Sale Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 87,514,016 $ 50,451 $ 3,771,832 $ 83,792,635 Obligations of states and political subdivisions 41,693,772 9,435 4,298,787 37,404,420 Corporate securities 211,059,119 141,685 8,269,108 202,931,696 Mortgage-backed securities 312,298,058 216,549 18,751,496 293,763,111 Totals $ 652,564,965 $ 418,120 $ 35,091,223 $ 617,891,862 -78- Index At December 31, 2025, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $ 291.7 million and an amortized cost of $ 317.5 million. Our holdings also included special revenue bonds with an aggregate fair value of $ 158.0 million and an amortized cost of $ 169.6 million. With respect to both categories of bonds, we held no securities of any issuer that comprised more than 10 % of that category at December 31, 2025. Education bonds and water and sewer utility bonds represented 42 % and 32 %, respectively, of our total investments in special revenue bonds based on their carrying values at December 31, 2025. Many of the issuers of the special revenue bonds we held at December 31, 2025 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held are similar to general obligation bonds. At December 31, 2024, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $ 233.1 million and an amortized cost of $ 272.5 million. Our holdings also included special revenue bonds with an aggregate fair value of $ 123.0 million and an amortized cost of $ 141.3 million. With respect to both categories of bonds, we held no securities of any issuer that comprised more than 10 % of that category at December 31, 2024. Education bonds and water and sewer utility bonds represented 44 % and 37 %, respectively, of our total investments in special revenue bonds based on their carrying values at December 31, 2024. Many of the issuers of the special revenue bonds we held at December 31, 2024 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held are similar to general obligation bonds. We have segregated within accumulated other comprehensive loss the net unrealized losses of $ 15.1 million arising prior to the November 30, 2013 reclassification date for fixed maturities reclassified from available for sale to held to maturity. We are amortizing this balance over the remaining life of the related securities as an adjustment of yield in a manner consistent with the accretion of discount on the same fixed maturities. We recorded amortization of $ 181,869 , $ 219,583 and $ 284,095 in other comprehensive income in 2025, 2024 and 2023, respectively. At December 31, 2025 and 2024, net unrealized losses of $ 853,706 and $ 1.0 million, respectively, remained within accumulated other comprehensive loss. We set forth below the amortized cost and estimated fair value of fixed maturities at December 31, 2025 by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Cost Estimated Fair Value Held to maturity Due in one year or less $ 9,858,728 $ 9,844,359 Due after one year through five years 169,072,060 163,642,082 Due after five years through ten years 239,817,355 231,085,406 Due after ten years 350,703,060 318,860,271 Mortgage-backed securities 8,309,047 8,227,205 Total held to maturity $ 777,760,250 $ 731,659,323 Available for sale Due in one year or less $ 18,784,118 $ 18,750,756 Due after one year through five years 48,817,652 48,465,558 Due after five years through ten years 86,158,680 84,052,777 Due after ten years 53,482,194 52,535,485 Mortgage-backed securities 443,127,367 436,918,199 Total available for sale $ 650,370,011 $ 640,722,775 -79- Index The cost and estimated fair values of our equity securities at December 31, 2025 were as follows: Cost Gross Gains Gross Losses Estimated Fair Value Equity securities $ 27,238,146 $ 17,193,576 $ 61,364 $ 44,370,358 The cost and estimated fair values of our equity securities at December 31, 2024 were as follows: Cost Gross Gains Gross Losses Estimated Fair Value Equity securities $ 24,725,576 $ 12,087,227 $ 4,993 $ 36,807,810 The amortized cost of fixed maturities on deposit with various regulatory authorities at December 31, 2025 and 2024 amounted to $ 10,316,907 and $ 10,323,629 , respectively. We derived net investment income, consisting primarily of interest and dividends, from the following sources: 2025 2024 2023 Fixed maturities $ 50,881,739 $ 44,450,895 $ 40,445,697 Equity securities 814,239 710,333 765,881 Short-term investments 5,165,683 3,621,766 2,471,998 Other 29,250 29,250 29,250 Investment income 56,890,911 48,812,244 43,712,826 Investment expenses ( 4,264,196 ) ( 3,894,082 ) ( 2,859,611 ) Net investment income $ 52,626,715 $ 44,918,162 $ 40,853,215 We present below gross gains and losses from investments and the change in the difference between fair value and cost of investments: 2025 2024 2023 Gross realized gains: Fixed maturities $ 1,217,434 $ 113,699 $ 1,059,244 Equity securities 686,981 289,840 2,662,661 1,904,415 403,539 3,721,905 Gross realized losses: Fixed maturities 6,410,388 288,008 3,300,351 Equity securities — 95,290 732,940 6,410,388 383,298 4,033,291 Net realized (losses) gains ( 4,505,973 ) 20,241 ( 311,386 ) Gross unrealized gains on equity securities 5,111,342 5,028,206 3,651,125 Gross unrealized losses on equity securities ( 61,364 ) ( 4,982 ) ( 109,125 ) Decrease (increase) in allowance for credit losses 75,337 ( 62,393 ) ( 57,807 ) Net investment gains $ 619,342 $ 4,981,072 $ 3,172,807 Change in difference between fair value and cost of investments: Fixed maturities $ 54,458,167 $ ( 530,513 ) $ 28,839,658 Equity securities 5,049,978 5,023,207 2,724,820 Totals $ 59,508,145 $ 4,492,694 $ 31,564,478 -80- Index We held fixed maturities with unrealized losses representing declines that we considered temporary at December 31, 2025 as follows: Less than 12 months 12 months or longer Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 9,502,823 $ 45,722 $ 76,505,619 $ 5,653,983 Obligations of states and political subdivisions 34,777,933 697,410 287,717,398 40,486,664 Corporate securities 47,139,104 405,757 183,025,525 8,995,417 Mortgage-backed securities 102,103,532 540,325 88,886,762 8,908,125 Totals $ 193,523,392 $ 1,689,214 $ 636,135,304 $ 64,044,189 We held fixed maturities with unrealized losses representing declines that we considered temporary at December 31, 2024 as follows: Less than 12 months 12 months or longer Fair Value Unrealized Losses Fair Value Unrealized Losses U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 37,528,341 $ 349,573 $ 112,322,114 $ 11,906,764 Obligations of states and political subdivisions 37,674,513 824,487 292,851,970 57,536,389 Corporate securities 83,342,468 1,505,512 311,435,364 20,371,228 Mortgage-backed securities 112,950,244 1,261,878 153,960,179 17,791,206 Totals $ 271,495,566 $ 3,941,450 $ 870,569,627 $ 107,605,587 We held 638 debt securities that were in an unrealized loss position at December 31, 2025. Based upon our analysis of general market conditions and underlying factors impacting these debt securities, we considered these declines in value to be temporary. We did no t recognize any impairment losses on specific securities in 2025, 2024 or 2023. We had no sales or transfers from our held to maturity portfolio in 2025, 2024 or 2023. We had no derivative instruments or hedging activities during 2025, 2024 or 2023. 5 - Fair Value Measurements We account for financial assets using a framework that establishes a hierarchy that ranks the quality and reliability of inputs, or assumptions, used in the determination of fair value, and we classify financial assets and liabilities carried at fair value in one of the following three categories: Level 1 - quoted prices in active markets for identical assets and liabilities; Level 2 - directly or indirectly observable inputs other than Level 1 quoted prices; and Level 3 - unobservable inputs not corroborated by market data. For investments that have quoted market prices in active markets, we use the quoted market price as fair value and include these investments in Level 1 of the fair value hierarchy. We classify publicly traded equity securities as Level 1. When quoted market prices in active markets are not available, we base fair values on quoted market prices of comparable instruments or price estimates we obtain from independent pricing services. We classify our fixed maturity investments and non-publicly traded equity securities as Level 2. Our fixed maturity investments consist of U.S. Treasury securities and obligations of U.S. government corporations and agencies, obligations of states and political subdivisions, corporate securities and mortgage-backed securities. -81- Index At December 31, 2025, we received two estimates per security from the pricing services, and we priced substantially all of our Level 1 and Level 2 investments using those prices. In our review of the estimates the pricing services provided at December 31, 2025, we did not identify any material discrepancies, and we did not make any adjustments to the estimates the pricing services provided. We present our cash and short-term investments at estimated fair value. The carrying values in our balance sheet for premium receivables, reinsurance receivables related to paid losses and loss expenses and reinsurance balances payable approximate their fair values. The carrying amounts reported in the balance sheet for our borrowings under lines of credit approximate their fair values. We classify these items as Level 3. We evaluate our assets and liabilities on a regular basis to determine the appropriate level at which to classify them for each reporting period. Based on our review of the methodology and summary of inputs the pricing services use, we have concluded that our Level 1 and Level 2 investments were classified properly at December 31, 2025 and 2024. The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at December 31, 2025: Fair Value Measurements Using Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 24,329,398 $ — $ 24,329,398 $ — Obligations of states and political subdivisions 48,550,717 — 48,550,717 — Corporate securities 130,924,461 — 130,924,461 — Mortgage-backed securities 436,918,199 — 436,918,199 — Equity securities 44,370,358 42,233,030 2,137,328 — Total investments in the fair value hierarchy $ 685,093,133 $ 42,233,030 $ 642,860,103 $ — The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at December 31, 2024: Fair Value Measurements Using Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 83,792,635 $ — $ 83,792,635 $ — Obligations of states and political subdivisions 37,404,420 — 37,404,420 — Corporate securities 202,931,696 — 202,931,696 — Mortgage-backed securities 293,763,111 — 293,763,111 — Equity securities 36,807,810 34,707,981 2,099,829 — Total investments in the fair value hierarchy $ 654,699,672 $ 34,707,981 $ 619,991,691 $ — -82- Index 6 - Deferred Policy Acquisition Costs Changes in our insurance subsidiaries’ deferred policy acquisition costs are as follows: 2025 2024 2023 Balance, January 1 $ 73,346,967 $ 75,043,404 $ 73,170,230 Acquisition costs deferred 148,106,015 158,614,563 156,087,174 Amortization charged to earnings ( 152,783,000 ) ( 160,311,000 ) ( 154,214,000 ) Balance, December 31 $ 68,669,982 $ 73,346,967 $ 75,043,404 7 - Property and Equipment Property and equipment at December 31, 2025 and 2024 consisted of the following: 2025 2024 Estimated Useful Life Office equipment $ 8,289,413 $ 8,288,988 3 - 15 years Automobiles 42,794 42,794 5 years Real estate 2,575,207 2,575,207 5 - 50 years Software 1,386,936 1,386,936 5 years 12,294,350 12,293,925 Accumulated depreciation ( 9,964,859 ) ( 9,814,742 ) $ 2,329,491 $ 2,479,183 Depreciation expense for 2025, 2024 and 2023 amounted to $ 150,117 , $ 153,480 and $ 166,400 , respectively. 8 - Liability for Losses and Loss Expenses The establishment of an appropriate liability for losses and loss expenses is an inherently uncertain process, and we can provide no assurance that our insurance subsidiaries’ ultimate liability will not exceed their loss and loss expense reserves and have an adverse effect on our results of operations and financial condition. For example, legislative, judicial and regulatory actions may expand coverage definitions, retroactively mandate coverage or otherwise require our insurance subsidiaries to pay losses for damages that their policies explicitly excluded or did not intend to cover. Furthermore, we cannot predict the timing, frequency and extent of adjustments to our insurance subsidiaries’ estimated future liabilities, because the historical conditions and events that serve as a basis for our insurance subsidiaries’ estimates of ultimate claim costs may change. As is the case for substantially all property and casualty insurance companies, our insurance subsidiaries have found it necessary in the past to increase their estimated future liabilities for losses and loss expenses in certain periods, and, in other periods, their estimates have exceeded their actual liabilities. Changes in our insurance subsidiaries’ estimate of their liability for losses and loss expenses generally reflect actual payments and their evaluation of information received since the prior reporting date. -83- Index We summarize activity in our insurance subsidiaries’ liability for losses and loss expenses as follows: 2025 2024 2023 Balance at January 1 $ 1,120,985,050 $ 1,126,156,838 $ 1,121,045,758 Less reinsurance recoverable ( 416,621,377 ) ( 437,013,974 ) ( 451,184,222 ) Cumulative effect of adoption of updated accounting guidance for credit losses at January 1 — — 1,131,836 Net balance at January 1 704,363,673 689,142,864 670,993,372 Incurred related to: Current year 574,599,658 619,089,646 625,831,043 Prior years ( 10,267,402 ) ( 14,971,930 ) ( 16,653,344 ) Total incurred 564,332,256 604,117,716 609,177,699 Paid related to: Current year 286,140,139 319,195,507 330,290,039 Prior years 277,359,789 269,701,400 260,738,168 Total paid 563,499,928 588,896,907 591,028,207 Net balance at December 31 705,196,001 704,363,673 689,142,864 Plus reinsurance recoverable 394,853,936 416,621,377 437,013,974 Balance at December 31 $ 1,100,049,937 $ 1,120,985,050 $ 1,126,156,838 Our insurance subsidiaries recognized a decrease in their liability for losses and loss expenses of prior years of $ 10.3 million, $ 15.0 million and $ 16.7 million in 2025, 2024 and 2023, respectively. Our insurance subsidiaries made no significant changes in their reserving philosophy or claims management personnel, and they have made no significant offsetting changes in estimates that increased or decreased their loss and loss expense reserves in those years. The 2025 development represented 1.5 % of the December 31, 2024 net carried reserves and resulted primarily from lower-than-expected loss emergence in all lines of business except other commercial lines (which is primarily commercial umbrella liability) for accident years prior to 2025. The majority of the 2025 development related to decreases in the liability for losses and loss expenses of prior years for Southern and Peninsula. The 2024 development represented 2.2 % of the December 31, 2023 net carried reserves and resulted primarily from lower-than-expected loss emergence in the commercial multi-peril, personal automobile and homeowners lines of business, offset partially by higher-than-expected loss emergence in the workers’ compensation and commercial automobile lines of business, for accident years prior to 2024. The majority of the 2024 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO. The 2023 development represented 2.5 % of the December 31, 2022 net carried reserves and resulted primarily from lower-than-expected loss emergence in the personal automobile and commercial automobile lines of business for accident years prior to 2023. The majority of the 2023 development related to decreases in the liability for losses and loss expenses of prior years for Atlantic States and MICO. Short-duration contracts are contracts for which our insurance subsidiaries receive premiums that they recognize as revenue over the period of the contract in proportion to the amount of insurance protection our insurance subsidiaries provide. Our insurance subsidiaries consider the policies they issue to be short-duration contracts. We consider our insurance subsidiaries’ material lines of business to be personal automobile, homeowners, commercial automobile, commercial multi-peril and workers’ compensation. Our insurance subsidiaries determine incurred but not reported (“IBNR”) reserves by subtracting the cumulative loss and loss expense amounts our insurance subsidiaries have paid and the case reserves our insurance subsidiaries have established at the balance sheet date from their actuaries’ estimate of the ultimate cost of losses and loss expenses. Accordingly, our insurance subsidiaries’ IBNR reserves include their actuaries’ projections of the cost of unreported claims as well as their actuaries’ projected development of case reserves on known claims and reopened claims. Our insurance subsidiaries’ methodology for estimating IBNR reserves has been in place for many years, and their actuaries made no significant changes to that methodology during 2025. -84- Index The actuaries for our insurance subsidiaries generally prepare an initial estimate for ultimate losses and loss expenses for the current accident year by multiplying earned premium by an “ a priori ,” or expected, loss ratio for each line of business our insurance subsidiaries write. Expected loss ratios represent the actuaries’ expectation of losses at the time our insurance subsidiaries price and write their policies, before the emergence of any actual claims experience. The actuaries determine an expected loss ratio by analyzing historical experience and adjusting for loss cost trends, loss frequency and severity trends, premium rate level changes, reported and paid loss emergence patterns and other known or observed factors. The actuaries use a variety of actuarial methods to estimate the ultimate cost of losses and loss expenses. These methods include paid loss development, incurred loss development and the Bornhuetter-Ferguson method from which the actuaries select loss development factor assumptions. The actuaries base their selection of a point estimate on a judgmental weighting of estimates each of these methods produce. The actuaries consider loss frequency and severity trends when they develop expected loss ratios and point estimates. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Factors that affect loss frequency include changes in weather patterns or economic activity. Factors that affect loss severity include changes in policy limits, reinsurance retentions, inflation rates and judicial interpretations. Our insurance subsidiaries create a claim file when they receive notice of an actual demand for payment, an event that may lead to a demand for payment or when they otherwise determine that a demand for payment could potentially lead to a future demand for payment on another coverage under the same policy or another policy they have issued. In recent years, our insurance subsidiaries have noted an increase in the period of time between the occurrence of a casualty loss event and the date on which they receive notice of a liability claim. Changes in the length of time between the loss occurrence date and the claim reporting date affect the actuaries’ ability to accurately predict loss frequency and the amount of IBNR reserves our insurance subsidiaries require. Our insurance subsidiaries generally create a claim file for a policy at the claimant level by type of coverage and generally recognize one count for each claim event. In certain lines of business where it is common for multiple parties to claim damages arising from a single claim event, our insurance subsidiaries recognize one count for each claimant involved in the event. Atlantic States recognizes one count for each claim event, or claimant involved in a multiple-party claim event, related to losses Atlantic States assumes through its participation in its pooling agreement with Donegal Mutual. Our insurance subsidiaries accumulate the claim counts and report them by line of business. For purposes of the claim development tables we present below, our insurance subsidiaries count claims on policies they issue even if they eventually close such claims without making a loss payment. Claims our insurance subsidiaries close without making a loss payment typically generate loss expenses. The methods our insurance subsidiaries have used to summarize claim counts have not changed significantly over the time periods we report in the tables below. The following tables present information about incurred and paid claims development as of December 31, 2025, net of reinsurance, as well as cumulative claim frequency and the total of IBNR reserves plus expected development on reported claims that our insurance subsidiaries included within their net incurred claims amounts. The tables include unaudited information about incurred and paid claims development for the years ended December 31, 2016 through 2024, which we present as supplementary information. -85- Index Personal Automobile At December 31, 2025 Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims Unaudited (dollars and reported claims in thousands) 2016 150,216 153,937 157,516 157,943 156,935 156,436 156,227 155,834 155,822 $ 156,148 $ 58 73 2017 166,690 176,728 175,939 174,784 173,730 173,032 172,712 172,376 172,427 138 79 2018 186,580 183,358 181,558 180,787 179,732 178,990 178,799 178,836 178 81 2019 161,056 157,689 156,300 154,805 153,883 153,253 152,896 495 68 2020 111,483 103,585 100,339 99,253 98,506 98,271 553 43 2021 119,364 118,752 114,707 114,874 113,681 922 47 2022 126,203 134,834 136,073 136,349 1,942 50 2023 152,740 155,260 155,617 3,733 52 2024 153,403 153,248 6,835 46 2025 119,272 24,651 38 Total $ 1,436,745 Personal Automobile Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Unaudited (in thousands) 2016 102,433 129,507 143,321 151,159 153,521 154,769 155,521 155,505 155,602 $ 155,630 2017 111,964 142,372 159,879 166,099 169,190 170,895 171,513 171,863 171,861 2018 115,585 150,175 163,036 169,651 173,922 176,233 177,367 178,152 2019 103,101 127,187 141,004 146,667 150,017 150,842 151,806 2020 66,084 81,783 89,736 94,094 96,277 96,837 2021 76,477 93,998 103,427 109,052 111,044 2022 83,616 109,845 125,624 131,267 2023 99,574 127,752 142,721 2024 101,227 128,410 2025 81,565 Total 1,349,293 All outstanding liabilities before 2016, net of reinsurance 1,525 Liabilities for claims and claims adjustment expenses, net of reinsurance $ 88,977 -86- Index Homeowners At December 31, 2025 Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims Unaudited (dollars and reported claims in thousands) 2016 62,443 64,064 63,735 63,355 63,279 63,409 63,472 63,478 63,462 $ 63,441 $ — 12 2017 79,283 79,911 79,305 79,247 79,065 78,815 78,819 78,687 78,706 — 17 2018 81,965 83,385 82,905 82,566 82,058 81,977 81,930 81,938 26 19 2019 73,294 73,554 73,234 72,168 72,176 71,785 71,644 41 16 2020 61,633 62,718 61,595 61,495 61,285 61,340 28 14 2021 67,677 66,996 65,451 64,425 64,292 162 11 2022 82,433 82,045 81,838 81,795 539 10 2023 86,693 87,047 86,676 975 11 2024 85,975 85,392 1,357 10 2025 80,685 7,675 8 Total $ 755,909 Homeowners Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Unaudited (in thousands) 2016 50,125 61,145 62,760 63,144 63,162 63,217 63,266 63,296 63,302 $ 63,393 2017 67,077 77,663 78,006 78,127 78,454 78,528 78,556 78,662 78,676 2018 70,385 79,892 80,905 81,464 81,568 81,826 81,833 81,841 2019 58,074 69,145 70,416 70,884 71,209 71,446 71,563 2020 51,226 60,348 60,809 61,189 61,181 61,268 2021 52,161 63,920 64,124 64,258 64,190 2022 63,107 79,187 80,132 80,673 2023 67,636 84,194 85,683 2024 67,702 82,242 2025 61,894 Total 731,423 All outstanding liabilities before 2016, net of reinsurance 85 Liabilities for claims and claims adjustment expenses, net of reinsurance $ 24,571 -87- Index Commercial Automobile At December 31, 2025 Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims Unaudited (dollars and reported claims in thousands) 2016 54,302 57,353 65,905 67,127 66,894 66,085 65,922 65,602 65,537 $ 65,471 $ 5 13 2017 61,484 67,927 67,697 67,249 65,310 64,631 65,022 64,821 65,161 9 14 2018 79,307 81,396 82,313 83,043 82,226 82,368 82,234 82,020 33 16 2019 88,864 91,245 90,290 86,140 84,566 83,709 84,241 76 16 2020 90,367 87,766 85,016 83,590 83,590 83,484 311 14 2021 109,824 99,231 96,947 97,903 97,070 983 15 2022 115,287 108,690 109,314 109,030 3,560 15 2023 112,135 110,821 109,817 8,281 15 2024 115,327 112,635 16,435 12 2025 115,112 40,776 13 Total $ 924,041 Commercial Automobile Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Unaudited (in thousands) 2016 27,033 38,237 48,837 57,237 60,485 64,421 65,076 65,273 65,315 $ 65,314 2017 28,707 40,213 49,703 57,128 59,889 62,187 64,074 64,219 64,950 2018 33,862 47,941 57,451 69,487 74,421 79,308 80,375 80,922 2019 36,948 53,026 63,575 72,139 80,617 81,647 83,000 2020 31,884 46,459 60,665 70,669 78,974 80,812 2021 39,851 56,101 69,908 80,595 90,382 2022 46,242 67,367 81,554 93,641 2023 45,387 65,131 83,722 2024 43,206 67,633 2025 45,908 Total 756,284 All outstanding liabilities before 2016, net of reinsurance 42 Liabilities for claims and claims adjustment expenses, net of reinsurance $ 167,799 -88- Index Commercial Multi-Peril At December 31, 2025 Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims Unaudited (dollars and reported claims in thousands) 2016 43,005 46,988 48,267 48,871 48,732 48,823 48,802 48,374 48,213 $ 48,217 $ — 6 2017 56,185 56,043 56,517 54,812 55,076 54,244 55,002 54,475 54,497 9 7 2018 66,265 66,470 67,749 67,810 65,911 65,900 65,727 66,012 93 7 2019 71,865 73,836 76,326 75,821 76,015 74,995 75,181 247 7 2020 83,195 79,910 76,490 74,796 72,624 72,330 811 8 2021 116,827 117,574 119,321 116,202 109,817 4,240 7 2022 142,395 141,935 139,486 142,993 7,931 7 2023 129,069 125,596 124,791 14,549 6 2024 119,376 114,326 23,922 5 2025 116,509 40,152 5 Total $ 924,673 Commercial Multi-Peril Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Unaudited (in thousands) 2016 19,660 29,402 34,612 41,193 43,435 44,944 47,432 48,048 48,169 $ 48,181 2017 27,399 36,926 42,691 46,361 49,488 51,494 52,422 53,886 54,025 2018 30,597 42,296 48,050 54,913 59,118 62,253 63,040 63,911 2019 28,210 41,266 47,522 55,951 63,156 69,762 71,638 2020 34,729 46,193 52,646 58,754 66,669 69,114 2021 46,768 69,735 82,580 94,484 99,812 2022 57,641 86,664 100,931 117,583 2023 56,238 82,006 94,243 2024 45,663 63,806 2025 43,100 Total 725,413 All outstanding liabilities before 2016, net of reinsurance 471 Liabilities for claims and claims adjustment expenses, net of reinsurance $ 199,731 -89- Index Workers’ Compensation At December 31, 2025 Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total IBNR Plus Expected Development on Reported Claims Cumulative Number of Reported Claims Unaudited (dollars and reported claims in thousands) 2016 58,814 49,802 47,883 44,969 44,098 43,559 43,484 43,447 43,610 $ 43,580 $ 89 6 2017 60,450 56,351 52,687 51,464 49,557 48,802 48,668 48,504 48,362 358 6 2018 62,197 55,291 52,514 47,912 47,007 46,742 46,552 46,046 478 6 2019 60,998 59,624 57,728 56,480 55,893 56,121 55,867 690 7 2020 57,172 57,850 57,384 56,714 56,605 58,499 693 6 2021 67,035 65,530 64,225 64,445 65,088 1,380 7 2022 67,046 67,331 69,467 68,715 2,522 7 2023 62,401 65,137 64,746 4,616 6 2024 60,522 57,859 8,365 5 2025 59,470 18,836 4 Total $ 568,232 Workers’ Compensation Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance For the Year Ended December 31, Accident Year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Unaudited (in thousands) 2016 14,709 30,344 37,178 40,570 41,208 41,543 41,809 42,195 42,486 $ 42,782 2017 15,581 31,990 39,684 42,954 44,242 45,174 45,935 46,339 46,573 2018 17,644 31,928 37,072 41,611 43,279 44,359 44,624 45,046 2019 16,939 33,009 41,740 47,121 50,079 51,944 53,155 2020 14,591 32,817 44,089 48,259 50,928 52,900 2021 20,931 42,633 51,781 56,162 57,950 2022 18,643 41,225 51,916 58,828 2023 17,546 39,922 49,171 2024 15,800 33,111 2025 16,074 Total 455,590 All outstanding liabilities before 2016, net of reinsurance 7,435 Liabilities for claims and claims adjustment expenses, net of reinsurance $ 120,077 -90- Index The following table presents a reconciliation of the net incurred and paid claims development tables to the liability for claims and claims adjustment expenses in our consolidated balance sheet: (in thousands) At December 31, 2025 Net outstanding liabilities: Personal automobile $ 88,977 Homeowners 24,571 Commercial automobile 167,799 Commercial multi-peril 199,731 Workers ’ compensation 120,077 Other 48,533 649,688 Reinsurance recoverable: Personal automobile 83,481 Homeowners 12,015 Commercial automobile 94,996 Commercial multi-peril 97,061 Workers ’ compensation 79,691 Other 12,187 379,431 Unallocated loss adjustment expenses 70,931 Gross liability for unpaid losses and loss expenses $ 1,100,050 The following table presents supplementary information about average historical claims duration as of December 31, 2025: Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Years 1 2 3 4 5 6 7 8 9 10 Personal automobile 65.7 % 17.4 % 9.1 % 4.2 % 2.0 % 0.8 % 0.5 % 0.2 % — % — % Homeowners 80.7 16.3 1.2 0.5 0.2 0.2 0.1 0.1 — 0.1 Commercial automobile 41.2 18.3 14.5 11.9 7.6 3.8 1.7 0.4 0.6 — Commercial multi-peril 42.8 18.5 9.9 10.4 7.0 4.7 2.6 1.8 0.3 — Workers’ compensation 30.0 32.4 15.2 8.3 3.4 2.3 1.2 0.9 0.6 0.7 9 - Borrowings Lines of Credit In August 2020, we entered into a credit agreement with Manufacturers and Traders Trust Company (“M&T”) that related to a $ 20.0 million unsecured demand line of credit. The line of credit has no expiration date, no annual fees and no covenants. At December 31, 2025, we had no outstanding borrowings from 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 %. Atlantic States is a member of the FHLB of Pittsburgh. Through its membership, Atlantic States has the ability to issue debt to the FHLB of Pittsburgh in exchange for cash advances. Atlantic States has a fixed-rate cash advance of $ 35.0 million that was outstanding at December 31, 2025. The cash advance carries a fixed interest rate of 3.806 % and is due in September 2026 . -91- Index The table below presents the amount of FHLB of Pittsburgh stock Atlantic States purchased, collateral pledged and assets related to Atlantic States’ membership in the FHLB of Pittsburgh at December 31, 2025. FHLB stock purchased and owned as part of the agreement $ 1,615,400 Collateral pledged, at par (carrying value $ 39,761,155 ) 41,599,555 Borrowing capacity currently available 2,727,041 The following table reflects interest we paid during 2025, 2024 and 2023: 2025 2024 2023 Interest $ 1,350,601 $ 969,089 $ 618,519 10 - Reinsurance Unaffiliated Reinsurers Our insurance subsidiaries and Donegal Mutual participate in a consolidated third-party reinsurance program, for which the coverage and parameters are common to all of our insurance subsidiaries and Donegal Mutual. The program utilizes several different reinsurers, all of which have an A.M. Best rating of A- (Excellent) or better or, with respect to foreign reinsurers, have a financial condition that, in the opinion of our management, is equivalent to a company with at least an A- rating from A.M. Best. The following information describes the external reinsurance Donegal Mutual and our insurance subsidiaries had in place for 2025: • for property insurance, excess of loss reinsurance that provided for coverage of $ 36.0 million per loss over a set retention of $ 4.0 million and catastrophe reinsurance, under which they recovered 100 % of an accumulation of many losses resulting from a single event, including natural disasters, over a set retention of $ 25.0 million up to aggregate losses of $ 200.0 million per occurrence; • for liability insurance, excess of loss reinsurance that provided for coverage of $ 69.0 million per occurrence over a set retention of $ 6.0 million; and • for workers' compensation insurance, excess of loss reinsurance that provided for coverage of $ 17.0 million on any one life over a set retention of $ 3.0 million. For property insurance, our insurance subsidiaries had excess of loss reinsurance that provided for coverage of $ 36.0 million per loss over a set retention of $ 4.0 million. For liability insurance, our insurance subsidiaries had excess of loss reinsurance that provided for coverage of $ 69.0 million per occurrence over a set retention of $ 6.0 million. For workers’ compensation insurance, our insurance subsidiaries had excess of loss reinsurance that provided for coverage of $ 17.0 million on any one life over a set retention of $ 3.0 million. As many as 30 reinsurers provided coverage for 2025 on any one treaty with no reinsurer taking more than 17 % of any one treaty. The amount of coverage provided under each of these types of reinsurance depended upon the amount, nature, size and location of the risks being reinsured. In order to write automobile insurance in the State of Michigan, several of our insurance subsidiaries are required to be members of the Michigan Catastrophic Claims Association (“MCCA”). MCCA provides reinsurance to those insurance subsidiaries for personal automobile and commercial automobile personal injury claims in the state of Michigan over a set retention. In addition to the pooling agreement and third-party reinsurance, our insurance subsidiaries had a catastrophe reinsurance agreement with Donegal Mutual, under which each of our insurance subsidiaries recovered 100 % of an accumulation of multiple losses resulting from a single event, including natural disasters, over a set retention of $ 3.0 million up to aggregate losses of $ 22.0 million per occurrence. The agreement also provided additional coverage for an accumulation of losses from a single event including a combination of our insurance subsidiaries over a combined retention of $ 6.0 million. Several of our insurance subsidiaries also had a liability reinsurance agreement with Donegal Mutual, under which each of those participating insurance subsidiaries recovered 100 % of losses related to any liability claim over a set retention of $ 3.0 million up to losses of $ 3.0 million per occurrence. -92- Index Our insurance subsidiaries and Donegal Mutual also purchased facultative reinsurance to cover certain exposures, including property exposures in excess of the covered limits of their respective treaty reinsurance. The following amounts represent ceded reinsurance transactions with unaffiliated reinsurers during 2025, 2024 and 2023: 2025 2024 2023 Premiums written $ 32,093,676 $ 38,495,838 $ 43,030,879 Premiums earned 32,499,899 38,688,465 42,416,710 Losses and loss expenses ( 3,178,091 ) ( 2,537,221 ) 16,318,760 Prepaid reinsurance premiums 6,134,104 6,540,327 6,732,955 Liability for losses and loss expenses 86,978,777 101,730,415 116,717,187 Total Reinsurance The following amounts represent total ceded reinsurance transactions with both affiliated and unaffiliated reinsurers during 2025, 2024 and 2023: 2025 2024 2023 Premiums earned $ 405,133,479 $ 411,032,074 $ 388,073,427 Losses and loss expenses 202,503,757 214,853,176 275,171,587 Prepaid reinsurance premiums 171,083,219 176,161,872 168,724,466 Liability for losses and loss expenses 395,229,241 417,012,858 437,013,974 The following amounts represent the effect of reinsurance on premiums written for 2025, 2024 and 2023: 2025 2024 2023 Direct $ 695,699,115 $ 737,539,403 $ 702,227,408 Assumed 609,182,350 623,210,848 589,675,724 Ceded ( 400,054,828 ) ( 418,469,480 ) ( 396,206,492 ) Net premiums written $ 904,826,637 $ 942,280,771 $ 895,696,640 The following amounts represent the effect of reinsurance on premiums earned for 2025, 2024 and 2023: 2025 2024 2023 Direct $ 709,082,223 $ 735,818,955 $ 686,584,907 Assumed 617,234,831 611,864,599 583,559,906 Ceded ( 405,133,479 ) ( 411,032,074 ) ( 388,073,427 ) Net premiums earned $ 921,183,575 $ 936,651,480 $ 882,071,386 Percentage of assumed premiums earned to net premiums earned 67.0 % 65.3 % 66.2 % -93- Index 11 - Income Taxes Our provision for income tax expense for 2025, 2024 and 2023 consisted of the following: 2025 2024 2023 Current income tax expense: U.S. federal $ 17,813,302 $ 11,708,424 $ 158,575 State 250,000 250,000 250,000 Deferred income tax expense (benefit): U.S. federal 188,935 $ ( 481,744 ) $ 229,397 Total income tax expense included in the consolidated statements of income $ 18,252,237 $ 11,476,680 $ 637,972 The state income tax expense category was comprised of state taxes in Delaware. Our effective tax rate is different from the amount computed at the U.S. federal statutory rate of 21 %. The reasons for such difference and the related tax effects are as follows: 2025 2024 2023 Income before income tax expense $ 97,592,977 $ 62,338,932 $ 5,063,476 Tax at U.S. federal statutory rate 20,494,525 21.0 % 13,091,176 21.0 % 1,063,330 21.0 % State income taxes, net of federal income tax effect 250,000 0.3 250,000 0.4 250,000 4.9 Nontaxable or nondeductible items: Tax-exempt interest ( 1,506,919 ) ( 1.5 ) ( 1,260,114 ) ( 2.0 ) ( 1,328,312 ) ( 26.2 ) Proration 392,676 0.4 329,468 0.5 351,415 6.9 Dividends received deduction ( 63,786 ) ( 0.1 ) ( 57,759 ) ( 0.1 ) ( 77,348 ) ( 1.5 ) Stock options ( 895,639 ) ( 0.9 ) 101,600 0.2 595,602 11.8 Fixed-maturity dispositions — — ( 585,845 ) ( 0.9 ) — — Other adjustments: Unrealized gain on equity securities ( 1,060,494 ) ( 1.1 ) ( 1,054,875 ) ( 1.7 ) ( 572,213 ) ( 11.3 ) Additional tax paid for prior year 179,457 0.2 ( 5,157 ) ( 0.1 ) 159,261 3.1 Other, net 462,417 0.4 668,186 1.1 196,237 3.9 Income tax expense $ 18,252,237 18.7 % $ 11,476,680 18.4 % $ 637,972 12.6 % Income taxes paid were as follows: 2025 2024 2023 U.S. federal $ 22,447,439 $ 3,500,000 $ — State 250,050 250,050 250,050 Total $ 22,697,489 $ 3,750,050 $ 250,050 -94- Index The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are as follows: 2025 2024 Deferred tax assets: Unearned premium $ 17,690,466 $ 18,377,475 Loss reserves 11,054,832 10,579,697 Net unrealized losses 2,205,197 7,498,822 Net state operating loss carryforward - DGI Parent 7,508,094 7,581,066 Other 850,843 1,035,322 Total gross deferred tax assets 39,309,432 45,072,382 Less valuation allowance ( 7,508,094 ) ( 7,581,066 ) Net deferred tax assets 31,801,338 37,491,316 Deferred tax liabilities: Deferred policy acquisition costs 14,420,695 15,402,863 Loss reserve transition adjustment — 271,738 Other 4,093,342 3,046,854 Total gross deferred tax liabilities 18,514,037 18,721,455 Net deferred tax asset $ 13,287,301 $ 18,769,861 We provide a valuation allowance when we believe it is more likely than not that we will not realize some portion of a deferred tax asset. At December 31, 2025 and 2024, we established a valuation allowance of $ 7.5 million and $ 7.6 million, respectively, for our net state operating loss carryforward. We determined that we were not required to establish a valuation allowance for the other net deferred tax assets of $ 31.8 million and $ 37.5 million at December 31, 2025 and 2024, respectively, since it is more likely than not that we will realize these deferred tax assets through reversals of existing temporary differences, future taxable income and our implementation of tax-planning strategies. We are no longer subject to income tax examinations for tax years prior to 2016. In 2019, the Internal Revenue Service (“IRS”) began a federal income tax audit of our consolidated tax returns for tax years 2016 to 2018. No material issues have been raised and no adjustments have been proposed as a result of this ongoing audit. On July 4, 2025, a budget reconciliation package referred to as the One Big Beautiful Bill Act of 2025 (the “OBBBA”) was enacted. The tax provisions included within the OBBBA did not have a material impact on our financial position, results of operations or cash flows. 12 - Stockholders’ Equity Each share of our Class A common stock outstanding at the time of the declar