What changed in this filing

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Item 1. Financial Statements

2026-05-07 compared with 2025-11-04 · 180 added, 333 removed, 497 unchanged (51% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

September 30,

Fixed maturities

13 unchanged sentences

Property and equipment, net

Accounts receivable - securities

Federal income taxes recoverable

12 unchanged sentences

Cash dividends declared to stockholders

Federal income taxes payable

Accounts payable - securities

18 unchanged sentences

Consolidated Statements of Income

Three Months Ended September 30,

Net premiums earned

Investment income, net of investment expenses

Net investment gains (includes ($ 1,472,009 ) and ($ 69,478 ) accumulated other comprehensive income reclassifications)

Installment payment fees

Total revenues

Net losses and loss expenses

Amortization of deferred policy acquisition costs

Other underwriting expenses

Policyholder dividends

Other expenses, net

Total expenses

Income before income tax expense

Income tax expense (includes $ 309,122 and $ 14,590 income tax benefit from reclassification items)

Net income per share:

Class A common stock - basic

Class A common stock - diluted

Class B common stock - basic and diluted

Donegal Group Inc.

and Subsidiaries

Consolidated Statements of Comprehensive Income

Three Months Ended September 30,

Other comprehensive income, net of tax

Unrealized income on securities:

Unrealized holding income during the period, net of income tax expense of $ 1,125,235 and $ 3,682,547

Reclassification adjustment for losses included in net income, net of income tax benefit of $ 309,122 and $ 14,590

Other comprehensive income

Comprehensive income

See accompanying notes to consolidated financial statements.

Donegal Group Inc.

and Subsidiaries

Consolidated Statements of Income

Nine Months Ended September 30,

Three Months Ended March 31,

Net premiums earned

Investment income, net of investment expenses

Net investment gains (includes ($ 2,787,258 ) and ($ 65,121 ) accumulated other comprehensive income reclassifications)

Net investment losses (includes $ 70,854 and $ 57,103 accumulated other comprehensive income reclassifications)

Installment payment fees

7 unchanged sentences

Income before income tax expense

Income tax expense (includes $ 585,324 and $ 13,675 income tax benefit from reclassification items)

Income tax expense (includes $ 14,879 and $ 11,992 income tax expense from reclassification items)

Net income per share:

5 unchanged sentences

Consolidated Statements of Comprehensive Income

Nine Months Ended September 30,

Other comprehensive income, net of tax

Unrealized income on securities:

Unrealized holding income during the period, net of income tax expense of $ 3,698,822 and $ 3,157,722

Reclassification adjustment for losses included in net income, net of income tax benefit of $ 585,324 and $ 13,675

Other comprehensive income

Three Months Ended March 31,

Other comprehensive (loss) income, net of tax

Unrealized (loss) income on securities:

Unrealized holding (loss) income during the period, net of income tax (benefit) expense of ($ 1,078,094 ) and $ 1,800,510

Reclassification adjustment for gains included in net income, net of income tax expense of $ 14,879 and $ 11,992

Other comprehensive (loss) income

Comprehensive income

3 unchanged sentences

Consolidated Statement of Stockholders’ Equity

Nine Months Ended September 30, 2025

Three Months Ended March 31, 2026

Paid-In Capital

7 unchanged sentences

Grant of stock options

Other comprehensive income

Other comprehensive loss

Balance, March 31, 2026

Issuance of common stock (stock compensation plans)

Share-based compensation

Cash dividends declared

Grant of stock options

Other comprehensive income

Balance, June 30, 2025

Issuance of common stock (stock compensation plans)

Share-based compensation

Cash dividends declared

Grant of stock options

Other comprehensive income

Balance, September 30, 2025

See accompanying notes to consolidated financial statements.

Donegal Group Inc.

1 unchanged sentence

Consolidated Statement of Stockholders’ Equity

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Paid-In Capital

Comprehensive

Treasury Stock

Stockholders’

4 unchanged sentences

Grant of stock options

Other comprehensive loss

Balance, March 31, 2024

Issuance of common stock (stock compensation plans)

Share-based compensation

Cash dividends declared

Grant of stock options

Other comprehensive loss

Balance, June 30, 2024

Issuance of common stock (stock compensation plans)

Share-based compensation

Cash dividends declared

Grant of stock options

Other comprehensive income

Balance, September 30, 2024

Balance, March 31, 2025

See accompanying notes to consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows from Operating Activities:

1 unchanged sentence

Depreciation, amortization and other non-cash items

Net investment gains

Net investment losses

Changes in assets and liabilities:

16 unchanged sentences

Purchases of fixed maturities, available for sale

( 211,471,122

( 103,059,218

Purchases of equity securities, available for sale

2 unchanged sentences

Available for sale

Sales of fixed maturities:

Available for sale

Sales of equity securities, available for sale

Net purchases of property and equipment

Net (purchases) sales of short-term investments

Net sales (purchases) of property and equipment

Net sales of short-term investments

Net cash used in investing activities

2 unchanged sentences

Issuance of common stock

Net cash used in financing activities

Net (decrease) increase in cash

Net cash (used in) provided by financing activities

Net increase in cash

Cash at beginning of period

1 unchanged sentence

Cash paid during period - Interest

Net cash paid during period - Taxes

Net cash paid (received) during period - Taxes

See accompanying notes to consolidated financial statements.

5 unchanged sentences

Our insurance subsidiaries and their affiliates write property and casualty insurance exclusively through a network of independent insurance agents in certain Mid-Atlantic, Midwestern, Southern and Southwestern states.

At September 30, 2025, we had three segments:

At March 31, 2026, we had three segments:

our investment function, our commercial lines of insurance and our personal lines of insurance.

1 unchanged sentence

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

At September 30, 2025, Donegal Mutual held approximately 44 % of our outstanding Class A common stock and approximately 84 % of our outstanding Class B common stock.

At March 31, 2026, Donegal Mutual held approximately 44 % of our outstanding Class A common stock and approximately 85 % of our outstanding Class B common stock.

This ownership provides Donegal Mutual with approximately 70 % of the total voting power of our common stock.

7 unchanged sentences

Donegal Mutual places its assumed business from these companies into the underwriting pool.

The same executive management and underwriting personnel administer products, classes of business underwritten, pricing practices and underwriting standards of Donegal Mutual and our insurance subsidiaries.

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.

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.

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.

In September 2025, we 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 we begin to non-renew all farm policies as they expire beginning in the second quarter of 2026.

We determined that the costs required to modernize our 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.

Atlantic States derives from the underwriting pool represents a significant percentage of our total consolidated revenues.

In September 2025, Donegal Mutual and Southern entered into a renewal rights agreement with an affiliate of a farm-focused Pennsylvania-based mutual insurance group to provide a continuation option for their farm policyholders when they begin to non-renew all farm policies as they expire beginning in the second quarter of 2026.

Donegal Mutual and Southern determined that the costs required to modernize their legacy farm product and systems were higher than the projected return on investment for this non-core line of business that represents approximately $ 6 million in premiums.

None of our other insurance subsidiaries offered farm policies.

We currently include farm policies within other commercial lines in our line of business reporting.

1 unchanged sentence

Our financial information for the interim periods included in this Form 10-Q Report is unaudited;

however, our financial information we include in this Form 10-Q Report reflects all adjustments, consisting only of

normal recurring adjustments that, in the opinion of our management, are necessary for a fair presentation of our financial position, results of operations and cash flows for those interim periods.

Our results of operations for the nine months

ended September 30, 2025 are not necessarily indicative of the results of operations we expect for the year ending December 31, 2025.

We recommend you read the interim financial statements we include in this Form 10-Q Report in conjunction with the financial statements and the notes to our financial statements contained in our Annual Report on Form

10-K for the year ended December 31, 2024 that we filed with the Securities and Exchange Commission (“SEC”) on March 10, 2025.

however, our financial information we include in this Form 10-Q Report reflects all adjustments,

consisting only of normal recurring adjustments that, in the opinion of our management, are necessary for a fair presentation of our financial position, results of operations and cash flows for those interim periods.

Our results of operations for the

three months ended March 31, 2026 are not necessarily indicative of the results of operations we expect for the year ending December 31, 2026.

We recommend you read the interim financial statements we include in this Form 10-Q Report in conjunction with the financial statements and the notes to our financial statements contained in our

Annual Report on Form 10-K for the year ended December 31, 2025 that we filed with the Securities and Exchange Commission (“SEC”) on March 6, 2026.

Net Income Per Share

4 unchanged sentences

The table below presents for the periods indicated a reconciliation of the numerators and denominators we used to compute basic and diluted net income per share for our Class A common stock and our Class B common stock:

Three Months Ended September 30,

(in thousands, except per share data)

Basic net income per share:

Allocation of net income

Weighted-average shares outstanding

Basic net income per share

Diluted net income per share:

Allocation of net income

Number of shares used in basic computation

Weighted-average shares effect of dilutive securities:

Director and employee stock options

Number of shares used in diluted computation

Diluted net income per share

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except per share data)

8 unchanged sentences

Director and employee stock options

Unvested restricted stock units

Number of shares used in diluted computation

Diluted net income per share

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

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Number of options to purchase Class A shares excluded

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

of our Class A common stock during the applicable periods.

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

1 unchanged sentence

Our insurance subsidiaries and Donegal Mutual participate in a consolidated third-party reinsurance program.

The coverage and parameters of the program are common to all of our insurance subsidiaries and Donegal

The program utilizes several different reinsurers.

They require their reinsurers to maintain an A.M.

The coverage and parameters of the program are common to all of our insurance

subsidiaries and Donegal Mutual.

The program utilizes several different reinsurers, all of which have an A.M.

Best rating of A- (Excellent) or better or, with respect to foreign reinsurers, have a financial condition that, in the opinion of our

1 unchanged sentence

The following information describes the external reinsurance Donegal Mutual and our insurance subsidiaries have in place for 2026:

• excess of loss reinsurance, under which Donegal Mutual and our insurance subsidiaries recover 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;

• catastrophe reinsurance, under which Donegal Mutual and our insurance subsidiaries recover 100 % of an accumulation of many losses resulting from a single event, including natural disasters, over a set retention of $ 25.0 million up to aggregate losses of $ 200.0 million per occurrence.

For property insurance, our insurance subsidiaries have excess of loss reinsurance that provides coverage of $ 36.0 million per loss over a set retention of $ 4.0 million.

For liability insurance, our insurance subsidiaries have excess of loss reinsurance that provides coverage of $ 69.0 million per occurrence over a set retention of $ 6.0 million.

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

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

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

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

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

2 unchanged sentences

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

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

In order to write automobile insurance in the state of Michigan, Atlantic States, MICO and The Peninsula Insurance Company are required to be members of the Michigan Catastrophic Claims Association (“MCCA”).

provides reinsurance to Atlantic States, MICO and The Peninsula Insurance Company for personal automobile and commercial automobile personal injury claims in the state of Michigan over a set retention.

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

treaty reinsurance.

In order to write automobile insurance in the state of Michigan, Atlantic States, MICO and The Peninsula Insurance Company are required to be members of the Michigan Catastrophic Claims Association

The MCCA provides reinsurance to Atlantic States, MICO and The Peninsula Insurance Company for personal automobile and commercial automobile personal injury claims in the state of Michigan over a set retention.

We report reinsurance receivable net of an allowance for expected credit losses.

We base the allowance upon our ongoing review of amounts outstanding, historical loss data, changes in reinsurer credit standing and

other relevant factors.

We base the allowance upon our ongoing review of amounts outstanding, historical loss data, changes in reinsurer

credit standing and other relevant factors.

We use a probability-of-default methodology, which reflects current and forecasted economic conditions, to estimate the allowance for expected credit losses.

The amortized cost and estimated fair values of our fixed maturities at September 30, 2025 were as follows:

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

Carrying Value

20 unchanged sentences

Mortgage-backed securities

At September 30, 2025, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $ 274.4 million and an amortized cost of $ 304.7 million.

Our holdings at September 30, 2025 also included special revenue bonds with an aggregate fair value of $ 145.4 million and an amortized cost of $ 158.4 million.

With respect to both categories of those bonds, we held no securities of any issuer that comprised more than 10 % of our holdings of either bond category at September 30, 2025.

Education bonds and water and sewer utility bonds represented 45 % and 32 %, respectively, of our total investments in special revenue bonds based on the carrying values of these investments at September 30, 2025.

Many of the issuers of the special revenue bonds we held at September 30, 2025 have the authority to impose ad valorem taxes.

At March 31, 2026, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $ 294.5 million and an amortized cost of $ 325.0 million.

Our holdings at March 31, 2026 also included special revenue bonds with an aggregate fair value of $ 161.8 million and an amortized cost of $ 175.5 million.

With respect to both categories of those bonds, we held no securities of any issuer that comprised more than 10 % of our holdings of either bond category at March 31, 2026.

Education bonds and water and sewer utility bonds represented 41 % and 35 %, respectively, of our total investments in special revenue bonds based on the carrying values of these investments at March 31, 2026.

Many of the issuers of the special revenue bonds we held at March 31, 2026 have the authority to impose ad valorem taxes.

In that respect, many of the special revenue bonds we held are similar to general obligation bonds.

30 unchanged sentences

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 $ 136,807 and $ 149,274 in other comprehensive income during the nine months ended September 30, 2025 and 2024, respectively.

At September 30, 2025 and December 31, 2024, net unrealized losses of $ 898,768 and $ 1.0 million, respectively, remained within accumulated other comprehensive loss.

We show below the amortized cost and estimated fair value of our fixed maturities at September 30, 2025 by contractual maturity.

We recorded amortization of $ 44,511 and $ 45,199 in other comprehensive (loss) income during the three months ended March 31, 2026 and 2025, respectively.

At March 31, 2026 and December 31, 2025, net unrealized losses of $ 809,195 and $ 853,706 , respectively, remained within accumulated other comprehensive loss.

We show below the amortized cost and estimated fair value of our fixed maturities at March 31, 2026 by contractual maturity.

Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

16 unchanged sentences

Total available for sale

The cost and estimated fair values of our equity securities at September 30, 2025 were as follows:

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

Estimated Fair

6 unchanged sentences

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Three Months Ended March 31,

(in thousands)

5 unchanged sentences

Equity securities

Net realized losses

Net realized gains

Gross unrealized gains on equity securities

1 unchanged sentence

Fixed maturities - credit impairment charges

Net investment gains

We held fixed maturities with unrealized losses representing declines that we considered temporary at September 30, 2025 as follows:

Net investment losses

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

Less Than 12 Months

35 unchanged sentences

We utilize a probability-of-default methodology, which reflects current and forecasted economic conditions, to estimate the allowance for expected credit losses and recognize changes to the allowance in our results of operations.

We held 692 debt securities that were in an unrealized loss position at September 30, 2025.

We held 715 debt securities that were in an unrealized loss position at March 31, 2026.

Based upon our analysis of general market conditions and underlying factors impacting these debt securities, we considered these declines in value to be temporary.

6 unchanged sentences

Using independent agents, our insurance subsidiaries market commercial lines of insurance to small and medium-sized businesses and personal lines of insurance to individuals.

Our chief operating decision maker is our Chief Executive Officer.

Our Chief Executive Officer evaluates the performance of the commercial lines and personal lines primarily based upon our insurance subsidiaries’

Our chief operating decision maker, who is our Chief Executive Officer, evaluates the performance of the commercial lines and personal lines primarily based upon our insurance subsidiaries’

underwriting results as determined under statutory accounting principles (“SAP”).

4 unchanged sentences

Financial data by segment is as follows:

Three Months Ended September 30, 2025

(in thousands)

Net premiums earned

Net investment income

Investment gains

Total segment revenues

Total revenues

Segment expenses:

Net losses and loss expenses

Other underwriting expenses

Policyholder dividends

Total segment expenses

SAP underwriting income

GAAP adjustments

GAAP underwriting income

Net investment income

Investment gains

Income before income tax expense

Three Months Ended September 30, 2024

Three Months Ended March 31, 2026

(in thousands)

1 unchanged sentence

Net investment income

Investment gains

Investment losses

Total segment revenues

5 unchanged sentences

Total segment expenses

SAP underwriting income (loss)

SAP underwriting (loss) income

GAAP adjustments

1 unchanged sentence

Net investment income

Investment gains

Investment losses

Income before income tax expense

Nine Months Ended September 30, 2025

Three Months Ended March 31, 2025

(in thousands)

1 unchanged sentence

Net investment income

Investment gains

Investment losses

Total segment revenues

5 unchanged sentences

Total segment expenses

SAP underwriting income

SAP underwriting (loss) income

GAAP adjustments

1 unchanged sentence

Net investment income

Investment gains

Income before income tax expense

Nine Months Ended September 30, 2024

(in thousands)

Net premiums earned

Net investment income

Investment gains

Total segment revenues

Total revenues

Segment expenses:

Net losses and loss expenses

Other underwriting expenses

Policyholder dividends

Total segment expenses

SAP underwriting loss

GAAP adjustments

GAAP underwriting loss

Net investment income

Investment gains

Investment losses

Income before income tax expense

2 unchanged sentences

The line of credit has no expiration date, no annual fees and no covenants.

At September 30, 2025, we had no outstanding borrowings from M&T and had the ability to borrow up to $ 20.0 million at an interest rate equal to the then-current Term SOFR rate plus 2.11 %.

At March 31, 2026, we had no outstanding borrowings from M&T and had the ability to borrow up to $ 20.0 million at an interest rate equal to the then-current Term SOFR rate plus 2.11 %.

Atlantic States is a member of the FHLB of Pittsburgh.

Through its membership, Atlantic States has the ability to issue debt to the FHLB of Pittsburgh in exchange for cash advances.

Atlantic States has a fixed-rate cash advance of $ 35.0 million that was outstanding at September 30, 2025.

Atlantic States has a fixed-rate cash advance of $ 35.0 million that was outstanding at March 31, 2026.

The cash advance carries a fixed interest rate of 3.806 % and is due in September 2026 .

The table below presents the amount of FHLB of Pittsburgh stock Atlantic States purchased, collateral pledged and assets related to Atlantic States’ membership in the FHLB of Pittsburgh at September 30, 2025.

FHLB of Pittsburgh stock purchased and owned

2 unchanged sentences

Share–Based Compensation

We measure all share-based payments to employees, including grants of stock options, and use a fair-value-based method for the recording of related compensation expense in our results of operations.

In determining

the expense we record for stock options granted to directors and employees of our subsidiaries and affiliates, we estimate the fair value of each option award on the date of grant using the Black-Scholes option pricing model.

The significant

assumptions we utilize in applying the Black-Scholes option pricing model are the risk-free interest rate, the expected term, the dividend yield and the expected volatility.

We recorded compensation expense related to our stock compensation plans of $ 296,162 and $ 209,496 for the three months ended September 30, 2025 and 2024, respectively, with a corresponding income tax benefit of $ 62,194 and $ 43,994 , respectively.

We recorded compensation expense related to our stock compensation plans of $ 893,154 and $ 773,834 for the nine months ended September 30, 2025 and 2024, respectively, with a corresponding income tax benefit of $ 187,562 and $ 162,505 , respectively.

At September 30, 2025, we had $ 1.0 million of unrecognized compensation expense related to nonvested share-based compensation granted under our stock compensation plans that we expect to recognize over a weighted average period of approximately 1.4 years.

We received cash from option exercises under our stock compensation plans during the three months ended September 30, 2025 and 2024 of $ 2.1 million and $ 3.7 million, respectively.

We received cash from option exercises under our stock compensation plans during the nine months ended September 30, 2025 and 2024 of $ 14.2 million and $ 4.0 million, respectively.

We realized actual tax benefits for the tax deductions related to those option exercises of $ 132,692 and $ 35,339 for the three months ended September 30, 2025 and 2024, respectively.

We realized actual tax benefits for the tax deductions related to those option exercises of $ 909,949 and $ 37,058 for the nine months ended September 30, 2025 and 2024, respectively.

We measure all share-based payments to employees, including grants of stock options, and use a fair-value-based method for the recording of related compensation expense in our results of

In determining the expense we record for stock options granted to directors and employees of our subsidiaries and affiliates, we estimate the fair value of each option award on the date of grant using the Black-Scholes option pricing

The significant assumptions we utilize in applying the Black-Scholes option pricing model are the risk-free interest rate, the expected term, the dividend yield and the expected volatility.

We historically granted stock options on an annual basis at our December board meeting, which occurs in the middle of December.

At its December 18, 2025 board meeting, our board of directors approved the recommendation of the compensation committee to change the form of equity awards we issue on an annual basis from stock options to restricted stock units and to delay issuance until the first day of the next calendar year.

Accordingly, on January 1, 2026, we granted 115,500 restricted stock units to our officers and the officers of Donegal Mutual that will vest in three equal annual installments.

We plan to grant restricted stock units on January 1 of each year.

This practice will allow vesting under each grant to occur on the same date and for the value of the shares our officers and the officers of Donegal Mutual receive upon vesting of multiple grants to be calculated consistently using the closing price of Class A common stock on the last trading day of the preceding year.

We recorded compensation expense related to our stock compensation plans of $ 326,859 and $ 296,936 for the three months ended March 31, 2026 and 2025, respectively, with a corresponding income tax benefit of $ 68,640 and $ 62,357 , respectively.

At March 31, 2026, we had $ 2.1 million of unrecognized compensation expense related to nonvested share-based compensation granted under our stock compensation plans that we expect to recognize over a weighted average period of approximately 2.3 years.

We received cash from option exercises under our stock compensation plans during the three months ended March 31, 2026 and 2025 of $ 232,330 and $ 6.3 million, respectively.

We realized actual tax benefits for the tax deductions related to those option exercises of $ 13,100 and $ 300,981 for the three months ended March 31, 2026 and 2025, respectively.

Fair Value Measurements

We account for financial assets using a framework that establishes a hierarchy that ranks the quality and reliability of the inputs, or assumptions, we use in the determination of fair value, and we classify

financial assets and liabilities carried at fair value in one of the following three categories:

We account for financial assets using a framework that establishes a hierarchy that ranks the quality and reliability of the inputs, or assumptions, we use in the determination of fair value, and

we classify financial assets and liabilities carried at fair value in one of the following three categories:

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

2 unchanged sentences

For investments that have quoted market prices in active markets, we use the quoted market price as fair value and include these investments in Level 1 of the fair value hierarchy.

We classify publicly-traded

equity securities as Level 1.

When quoted market prices in active markets are not available, we base fair values on quoted market prices of comparable instruments or price estimates we obtain from independent pricing services and include these

investments in Level 2 of the fair value hierarchy.

publicly-traded equity securities as Level 1.

When quoted market prices in active markets are not available, we base fair values on quoted market prices of comparable instruments or price estimates we obtain from independent pricing services and

include these investments in Level 2 of the fair value hierarchy.

We classify our fixed maturity investments and non-publicly traded equity securities as Level 2.

Our fixed maturity investments consist of U.S.

Treasury securities and obligations of U.S.

Treasury securities and obligations of

government corporations and agencies, obligations of states and political subdivisions, corporate securities and mortgage-backed securities.

We present our investments in available-for-sale fixed maturity and equity securities at estimated fair value.

The estimated fair value of a security may differ from the amount that could be realized if we sold the

security in a forced transaction.

In addition, the valuation of fixed maturity investments is more subjective when markets are less liquid, increasing the potential that the estimated fair value does not reflect the price at which an actual

transaction would occur.

The estimated fair value of a security may differ from the amount that could be

realized if we sold the security in a forced transaction.

In addition, the valuation of fixed maturity investments is more subjective when markets are less liquid, increasing the potential that the estimated fair value does not reflect the price at

which an actual transaction would occur.

We utilize nationally recognized independent pricing services to estimate fair values or obtain market quotations for substantially all of our fixed maturity and equity investments.

We generally obtain two prices per

We generally obtain two

prices per security.

These pricing services utilize market quotations for fixed maturity and equity securities that have quoted prices in active markets.

2 unchanged sentences

The pricing services do not use broker quotes in determining the fair values of our investments.

Our investment personnel review the estimates of fair

value the pricing services provide to verify that the estimates we obtain from the pricing services are representative of fair values based upon our investment personnel’s general knowledge of the market, their research findings related to

unusual fluctuations in value and their comparison of such values to execution prices for similar securities.

Our investment personnel monitor the market and are familiar with current trading ranges for similar securities and the pricing of

specific investments.

Our investment personnel review all pricing estimates that we receive from the pricing services against their expectations with respect to pricing based on fair market curves, security ratings, coupon rates, security types

and recent trading activity.

Our investment personnel periodically review documentation with respect to the pricing services’ pricing methodology that they obtain to determine if the primary pricing sources, market inputs and pricing frequency

for various security types are reasonable.

At September 30, 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 September 30, 2025, we did not identify any material discrepancies, and we did not make any adjustments to the estimates the pricing services provided.

Our investment personnel review the estimates of fair value

the pricing services provide to verify that the estimates we obtain from the pricing services are representative of fair values based upon our investment personnel’s general knowledge of the market, their research findings related to unusual

fluctuations in value and their comparison of such values to execution prices for similar securities.

Our investment personnel monitor the market and are familiar with current trading ranges for similar securities and the pricing of specific

trading activity.

security types are reasonable.

At March 31, 2026, we received two estimates per security from the pricing services, and we priced substantially all of our Level 1 and Level 2 investments using those prices.

In our review of the estimates the pricing

services provided at March 31, 2026, we did not identify any material discrepancies, and we did not make any adjustments to the estimates the pricing services provided.

We present our cash and short-term investments at estimated fair value.

We classify these items as Level 1.

The carrying values we report in our balance sheet for premium receivables, reinsurance receivables related to paid losses and loss expenses and reinsurance balances payable approximate their fair values.

carrying amounts we report in our balance sheets for our borrowings under lines of credit approximate their fair values.

The carrying values we report in our balance sheet for premium receivables, reinsurance receivables related to paid losses and loss expenses and reinsurance balances payable approximate their fair

The carrying amounts we report in our balance sheets for our borrowings under lines of credit approximate their fair values.

We classify these items as Level 3.

We evaluate our assets and liabilities to determine the appropriate level at which to classify them for each reporting period.

Based on our review of the methodology and summary of inputs the pricing services use,

we have concluded that our Level 1 and Level 2 investments were classified properly at September 30, 2025 and December 31, 2024.

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at September 30, 2025:

Based on our review of the methodology and summary of inputs the

pricing services use, we have concluded that our Level 1 and Level 2 investments were classified properly at March 31, 2026 and December 31, 2025.

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

Fair Value Measurements Using

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Equity securities

At September 30, 2025 and December 31, 2024, respectively, we had no material unrecognized tax benefits or accrued interest and penalties.

Total investments in the fair value hierarchy

At March 31, 2026 and December 31, 2025, respectively, we had no material unrecognized tax benefits or accrued interest and penalties.

In 2019, the Internal Revenue Service (“IRS”) began a federal income tax audit of our consolidated tax returns for tax years 2016 to 2018.

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We provide a valuation allowance when we believe it is more likely than not that we will not realize some portion of our tax assets.

We established a valuation allowance of $ 7.6 million for our net state operating loss carryforward, which will expire between 2025 and 2044.

We have determined that we are not required to establish a valuation allowance for our other deferred tax assets of $ 33.5 million and $ 37.5 million at September 30, 2025 and December 31, 2024, respectively, because it is more likely than not that we will realize these deferred tax assets through reversals of existing temporary differences, future taxable income and the implementation of tax planning strategies.

We established a valuation allowance of $ 7.5 million for our net state operating loss carryforward at March 31, 2026 and December 31, 2025, which will expire between 2026 and 2045.

We have determined that we are not required to establish a valuation allowance for our other deferred tax assets of $ 33.8 million and $ 31.8 million at March 31, 2026 and December 31, 2025, respectively, because it is more likely than not that we will realize these deferred tax assets through reversals of existing temporary differences, future taxable income and the implementation of tax planning strategies.

On July 4, 2025, a budget reconciliation package referred to as the One Big Beautiful Bill Act of 2025 (the “OBBBA”) was enacted.

We do not expect the tax provisions included within the OBBBA to have a material impact on our financial

position, results of operations or cash flows.

The tax provisions included within the OBBBA did not have a

material impact on our financial position, results of operations or cash flows.

Liabilities for Losses and Loss Expenses

The establishment of appropriate liabilities for losses and loss expenses is an inherently uncertain process, and we can provide no assurance that our insurance subsidiaries’ ultimate liabilities for losses and

loss expenses will not exceed their loss and loss expense reserves and have an adverse effect on our results of operations and financial condition.

losses and loss expenses will not exceed their loss and loss expense reserves and have an adverse effect on our results of operations and financial condition.

For example, legislative, judicial and regulatory actions may expand coverage definitions,

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adjustments to our insurance subsidiaries’ estimated future liabilities, because the historical conditions and events that serve as a basis for our insurance subsidiaries’ estimates of ultimate claim costs may change.

As is the case for

substantially all property and casualty insurance companies, our insurance subsidiaries have found it necessary in the past to increase their estimated future liabilities for losses and loss expenses in certain periods, and, in other periods,

their estimated future liabilities for losses and loss expenses have exceeded their actual liabilities for losses and loss expenses.

Changes in our insurance subsidiaries’ estimate of their liabilities for losses and loss expenses generally

reflect actual payments and their evaluation of information received subsequent to the prior reporting period.

As is the case for substantially

all property and casualty insurance companies, our insurance subsidiaries have found it necessary in the past to increase their estimated future liabilities for losses and loss expenses in certain periods, and, in other periods, their estimated

future liabilities for losses and loss expenses have exceeded their actual liabilities for losses and loss expenses.

Changes in our insurance subsidiaries’ estimate of their liabilities for losses and loss expenses generally reflect actual payments

and their evaluation of information received subsequent to the prior reporting period.

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

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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Balance at end of period

Our insurance subsidiaries recognized a decrease in their liabilities for losses and loss expenses of prior years of $ 12.5 million and $ 15.4 million for the nine months ended September 30, 2025 and 2024, respectively.

Our insurance subsidiaries recognized a decrease in their liabilities for losses and loss expenses of prior years of $5.7 million and $10.5 million for the three months ended March 31, 2026 and 2025, respectively.

Our insurance subsidiaries made no significant changes in their reserving philosophy or claims management personnel, and they have made no significant offsetting changes in estimates that increased or decreased their loss and loss expense reserves in those years.

The 2025 development represented 1.8 % of the December 31, 2024 net carried reserves and resulted from lower-than-expected loss emergence or severity primarily in the commercial multi-peril, commercial automobile, personal automobile, and homeowners lines of business, offset partially by unfavorable development in other commercial lines of business that we attribute to higher-than-anticipated case reserve development.

The majority of the 2025 development related to decreases in the liabilities for losses and loss expenses of prior years for Atlantic States and The Peninsula Insurance Company.

The 2024 development represented 2.2 % of the December 31, 2023 net carried reserves and resulted from lower-than-expected loss emergence or severity primarily in the commercial multi-peril, commercial automobile, personal automobile and other lines of business.

The majority of the 2024 development related to decreases in the liabilities for losses and loss expenses of prior years for Atlantic States.

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.

The 2026 development represented 0.8 % of the December 31, 2025 net carried reserves and resulted from lower-than-expected loss emergence or severity primarily in the commercial automobile and personal automobile lines of business, offset partially by unfavorable development in the commercial multi-peril and other commercial lines of business that we attribute to higher-than-anticipated case reserve development.

The majority of the 2026 development related to decreases in the liabilities for losses and loss expenses of prior years for MICO and Atlantic States.

The 2025 development represented 1.5 % of the December 31, 2024 net carried reserves and resulted from lower-than-expected loss emergence or severity primarily in the commercial automobile, commercial multi-peril, and personal automobile lines of business.

The majority of the 2025 development related to decreases in the liabilities for losses and loss expenses of prior years for Atlantic States and MICO.

Short-duration contracts are contracts for which our insurance subsidiaries receive premiums that they recognize as revenue over the period of the contract in proportion to the amount of insurance

protection our insurance subsidiaries provide.

Our insurance subsidiaries consider the policies they issue to be short-duration contracts.

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commercial automobile, commercial multi-peril and workers’ compensation.

Our insurance subsidiaries determine incurred but not reported (“IBNR”) reserves by subtracting the cumulative loss and loss expense amounts our insurance subsidiaries have paid and the case reserves our insurance

subsidiaries have established at the balance sheet date from their actuaries’ estimate of the ultimate cost of losses and loss expenses.

Accordingly, the IBNR reserves of our insurance subsidiaries include their actuaries’ projections of the

cost of unreported claims as well as their actuaries’ projected development of case reserves on known claims and reopened claims.

our insurance subsidiaries have established at the balance sheet date from their actuaries’ estimate of the ultimate cost of losses and loss expenses.

Accordingly, the IBNR reserves of our insurance subsidiaries include their actuaries’ projections

of the cost of unreported claims as well as their actuaries’ projected development of case reserves on known claims and reopened claims.

Our insurance subsidiaries’ methodology for estimating IBNR reserves has been in place for many years, and their

actuaries made no significant changes to that methodology during the nine months ended September 30, 2025.

actuaries made no significant changes to that methodology during the three months ended March 31, 2026.

The actuaries for our insurance subsidiaries generally prepare an initial estimate for ultimate losses and loss expenses for the current accident year by multiplying earned premium by an “ a priori ,” or expected, loss ratio for each line of business our insurance subsidiaries write.

Expected loss ratios represent the actuaries’ expectation of losses at the time our insurance subsidiaries price and write their

policies and before the emergence of any actual claims experience.

The actuaries determine an expected loss ratio by analyzing historical experience and adjusting for loss cost trends, loss frequency and severity trends, premium rate level

changes, reported and paid loss emergence patterns and other known or observed factors.

Expected loss ratios represent the actuaries’ expectation of losses at the time our insurance subsidiaries price and

write their policies and before the emergence of any actual claims experience.

The actuaries determine an expected loss ratio by analyzing historical experience and adjusting for loss cost trends, loss frequency and severity trends, premium rate

level changes, reported and paid loss emergence patterns and other known or observed factors.

The actuaries use a variety of actuarial methods to estimate the ultimate cost of losses and loss expenses.

These methods include paid loss development, incurred loss development and the Bornhuetter-Ferguson method

from which the actuaries select loss development factor assumptions.

These methods include paid loss development, incurred loss development and the

Bornhuetter-Ferguson method from which the actuaries select loss development factor assumptions.

The actuaries base their selection of a point estimate on a judgmental weighting of the estimates each of these methods produce.

The actuaries consider loss frequency and severity trends when they develop expected loss ratios and point estimates.

Loss frequency is a measure of the number of claims per unit of insured exposure, and loss

severity is a measure of the average size of claims.

Loss frequency is a measure of the number of claims per unit of insured exposure,

and loss severity is a measure of the average size of claims.

Factors that affect loss frequency include changes in weather patterns and economic activity.

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inflation rates and judicial interpretations.

Our insurance subsidiaries create a claim file when they receive notice of an actual demand for payment, an event that may lead to a demand for payment or when they otherwise determine that a demand for payment

could potentially lead to a future demand for payment on another coverage under the same policy or another policy they have issued.

In recent years, our insurance subsidiaries have noted an increase in the period of time between the occurrence

of a casualty loss event and the date at which they receive notice of a liability claim.

Our insurance subsidiaries create a claim file when they receive notice of an actual demand for payment, an event that may lead to a demand for payment or when they otherwise determine that a demand

for payment could potentially lead to a future demand for payment on another coverage under the same policy or another policy they have issued.

In recent years, our insurance subsidiaries have noted an increase in the period of time between the

occurrence of a casualty loss event and the date at which they receive notice of a liability claim.

Changes in the length of time between the loss occurrence date and the claim reporting date affect the actuaries’ ability to predict loss frequency

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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.

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

Our insurance subsidiaries accumulate the claim counts and report them by line of business.

Allowance for Expected Credit Losses

We make estimates with respect to the potential impairment of financial instruments and recognize expected credit losses as an allowance rather than impairments as credit losses are incurred.

We have established

allowances for expected credit losses with respect to held-to-maturity debt securities and reinsurance receivable.

established allowances for expected credit losses with respect to held-to-maturity debt securities and reinsurance receivable.

Held-to-Maturity Fixed-Maturity Securities

For held-to-maturity debt securities, we make estimates concerning expected credit losses at an aggregated level rather than monitoring individual debt securities for credit losses.

We establish an allowance for

expected credit losses based on an ongoing review of securities held, historical loss data, changes in issuer credit standing and other relevant factors.

We utilize a probability-of-default methodology, which reflects current and forecasted

economic conditions, to estimate the allowance for expected credit losses and recognize changes to the allowance in our results of operations.

The following table presents the balances for fixed maturities classified as held-to-maturity, net of the allowance for expected credit losses, at September 30, 2025 and 2024 and changes in the allowance for expected credit losses for the three and nine months ended September 30, 2025 and 2024.

We establish an

allowance for expected credit losses based on an ongoing review of securities held, historical loss data, changes in issuer credit standing and other relevant factors.

We utilize a probability-of-default methodology, which reflects current and

forecasted economic conditions, to estimate the allowance for expected credit losses and recognize changes to the allowance in our results of operations.

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

At and For the Three Months

Ended September 30, 2025

Ended March 31, 2026

At and For the Three Months

Ended September 30, 2024

Held-to-Maturity,

Net of Allowance

Credit Losses

Held-to-Maturity,

Net of Allowance

Credit Losses

(in thousands)

Balance at beginning of period

Current period change for expected credit losses

Balance at end of period

At and For the Nine Months Ended

September 30, 2025

At and For the Nine Months

Ended September 30, 2024

Ended March 31, 2025

Held-to-Maturity,

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Reinsurance Receivable

For reinsurance receivable, we establish an allowance for expected credit losses based upon our ongoing review of amounts outstanding, historical loss data, changes in reinsurer credit standing and other relevant

The following table presents the balances for reinsurance receivable, net of the allowance for expected credit losses, at September 30, 2025 and 2024, and the changes in the allowance for expected credit losses for the three and nine months ended September 30, 2025 and 2024.

For reinsurance receivable, we establish an allowance for expected credit losses based upon our ongoing review of amounts outstanding, historical loss data, changes in reinsurer credit standing and

other relevant factors.

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

At and For the Three Months Ended

September 30, 2025

March 31, 2026

At and For the Three Months Ended

September 30, 2024

Reinsurance Receivable,

Net of Allowance for

Expected Credit Losses

Credit Losses

Reinsurance Receivable,

Net of Allowance for

Expected Credit Losses

Credit Losses

(in thousands)

Balance at beginning of period

Current period change for expected credit losses

Balance at end of period

At and For the Nine Months Ended

September 30, 2025

At and For the Nine Months Ended

September 30, 2024

March 31, 2025

Reinsurance Receivable,

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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 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.

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

What changed 10-Q

Item 1. Financial Statements