DONEGAL GROUP INC 10-Q

Item 1. Financial Statements Donegal Group Inc. and Subsidiaries Consolidated Balance Sheets March 31, 2026 December 31, 2025 (Unaudited) Assets Investments Fixed maturities Held to maturity, at amortized cost (net of allowance for expected credit losses of $ 1,274,490 and $ 1,312,903 ) $ 783,951,953 $ 776,447,347 Available for sale, at fair value 649,110,503 640,722,775 Equity securities, at fair value 45,105,813 44,370,358 Short-term investments, at cost, which approximates fair value 26,016,894 38,712,341 Total investments 1,504,185,163 1,500,252,821 Cash 35,501,229 26,785,845 Accrued investment income 11,978,051 10,914,235 Premiums receivable 197,327,411 180,803,918 Reinsurance receivable (net of allowance for expected credit losses of $ 401,773 and $ 374,883 ) 418,091,102 398,582,136 Deferred policy acquisition costs 71,995,952 68,669,982 Deferred tax asset, net 14,843,359 13,287,301 Prepaid reinsurance premiums 179,320,225 171,083,219 Property and equipment, net 2,292,226 2,329,491 Federal income taxes recoverable 940,090 4,028,034 Due from affiliate 5,712,446 3,299,188 Goodwill 5,625,354 5,625,354 Other intangible assets 958,010 958,010 Other 9,918 9,918 Total assets $ 2,448,780,536 $ 2,386,629,452 Liabilities and Stockholders’ Equity Liabilities Losses and loss expenses $ 1,129,814,963 $ 1,100,049,937 Unearned premiums 617,210,414 591,040,451 Accrued expenses 2,311,032 2,220,800 Reinsurance balances payable 3,141,996 3,484,130 Borrowings under lines of credit 35,000,000 35,000,000 Cash dividends declared to stockholders — 6,647,482 Accounts payable - securities 4,350,228 — Other 7,859,267 7,768,573 Total liabilities 1,799,687,900 1,746,211,373 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 34,440,977 and 34,385,129 shares and outstanding 31,438,389 and 31,382,541 shares 344,410 343,852 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 393,244,272 391,811,397 Accumulated other comprehensive loss ( 12,407,401 ) ( 8,295,743 ) Retained earnings 309,081,220 297,728,438 Treasury stock, at cost ( 41,226,357 ) ( 41,226,357 ) Total stockholders’ equity 649,092,636 640,418,079 Total liabilities and stockholders’ equity $ 2,448,780,536 $ 2,386,629,452 See accompanying notes to consolidated financial statements. 1 Index Donegal Group Inc. and Subsidiaries Consolidated Statements of Income (Unaudited) Three Months Ended March 31, 2026 2025 Revenues: Net premiums earned $ 221,357,442 $ 232,701,889 Investment income, net of investment expenses 14,287,065 11,983,574 Net investment losses (includes $ 70,854 and $ 57,103 accumulated other comprehensive income reclassifications) ( 479,224 ) ( 470,861 ) Lease income 74,218 76,827 Installment payment fees 756,733 882,195 Total revenues 235,996,234 245,173,624 Expenses: Net losses and loss expenses 141,999,594 132,033,147 Amortization of deferred policy acquisition costs 36,297,000 39,231,000 Other underwriting expenses 42,014,492 41,194,994 Policyholder dividends 651,707 759,389 Interest 333,025 333,045 Other expenses, net 577,453 461,100 Total expenses 221,873,271 214,012,675 Income before income tax expense 14,122,963 31,160,949 Income tax expense (includes $ 14,879 and $ 11,992 income tax expense from reclassification items) 2,612,359 5,955,775 Net income $ 11,510,604 $ 25,205,174 Net income per share: Class A common stock - basic $ 0.32 $ 0.72 Class A common stock - diluted $ 0.31 $ 0.71 Class B common stock - basic and diluted $ 0.29 $ 0.65 Donegal Group Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended March 31, 2026 2025 Net income $ 11,510,604 $ 25,205,174 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 ( 4,055,683 ) 6,773,356 Reclassification adjustment for gains included in net income, net of income tax expense of $ 14,879 and $ 11,992 ( 55,975 ) ( 45,111 ) Other comprehensive (loss) income ( 4,111,658 ) 6,728,245 Comprehensive income $ 7,398,946 $ 31,933,419 See accompanying notes to consolidated financial statements. 2 Index Donegal Group Inc. and Subsidiaries Consolidated Statement of Stockholders’ Equity (Unaudited) Three Months Ended March 31, 2026 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, 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 Issuance of common stock (stock compensation plans) 39,583 — 395 — 723,690 — — — 724,085 Share-based compensation 16,265 — 163 — 559,026 — — — 559,189 Net income — — — — — — 11,510,604 — 11,510,604 Cash dividends declared — — — — — — ( 7,663 ) — ( 7,663 ) Grant of stock options — — — — 150,159 — ( 150,159 ) — — Other comprehensive loss — — — — — ( 4,111,658 ) — — ( 4,111,658 ) Balance, March 31, 2026 34,440,977 5,649,240 $ 344,410 $ 56,492 $ 393,244,272 $ ( 12,407,401 ) $ 309,081,220 $ ( 41,226,357 ) $ 649,092,636 Donegal Group Inc. and Subsidiaries Consolidated Statement of Stockholders’ Equity (Unaudited) Three Months Ended March 31, 2025 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, 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) 36,500 — 365 — 444,142 — — — 444,507 Share-based compensation 438,380 — 4,384 — 6,571,130 — — — 6,575,514 Net income — — — — — — 25,205,174 — 25,205,174 Cash dividends declared — — — — — — ( 6,556 ) — ( 6,556 ) Grant of stock options — — — — 168,699 — ( 168,699 ) — — Other comprehensive income — — — — — 6,728,245 — — 6,728,245 Balance, March 31, 2025 33,429,227 5,649,240 $ 334,293 $ 56,492 $ 376,863,917 $ ( 21,472,236 ) $ 270,166,906 $ ( 41,226,357 ) $ 584,723,015 See accompanying notes to consolidated financial statements. 3 Index Donegal Group Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2026 2025 Cash Flows from Operating Activities: Net income $ 11,510,604 $ 25,205,174 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other non-cash items 857,401 1,020,039 Net investment losses 479,224 470,861 Changes in assets and liabilities: Losses and loss expenses 29,765,026 ( 28,361,486 ) Unearned premiums 26,169,963 21,088,303 Premiums receivable ( 16,523,493 ) ( 12,868,607 ) Deferred acquisition costs ( 3,325,970 ) ( 2,847,365 ) Deferred income taxes ( 463,085 ) ( 88,129 ) Reinsurance receivable ( 19,508,966 ) 17,360,240 Prepaid reinsurance premiums ( 8,237,006 ) ( 6,697,810 ) Accrued investment income ( 1,063,816 ) ( 746,169 ) Due from affiliate ( 2,413,258 ) 5,511,873 Reinsurance balances payable ( 342,134 ) ( 515,651 ) Current income taxes 3,087,944 6,108,965 Accrued expenses 90,232 61,685 Other, net 90,649 1,047,840 Net adjustments 8,662,711 544,589 Net cash provided by operating activities 20,173,315 25,749,763 Cash Flows from Investing Activities: Purchases of fixed maturities, held to maturity ( 12,142,867 ) ( 8,795,740 ) Purchases of fixed maturities, available for sale ( 43,893,780 ) ( 37,872,046 ) Purchases of equity securities, available for sale ( 1,322,139 ) ( 2,502,170 ) Maturity of fixed maturities: Held to maturity 9,050,096 7,057,175 Available for sale 30,199,197 23,253,617 Net sales (purchases) of property and equipment 325 ( 100 ) Net sales of short-term investments 12,695,447 3,936,913 Net cash used in investing activities ( 5,413,721 ) ( 14,922,351 ) Cash Flows from Financing Activities: Cash dividends paid ( 6,655,145 ) ( 6,037,634 ) Issuance of common stock 610,935 6,599,404 Net cash (used in) provided by financing activities ( 6,044,210 ) 561,770 Net increase in cash 8,715,384 11,389,182 Cash at beginning of period 26,785,845 52,925,931 Cash at end of period $ 35,501,229 $ 64,315,113 Cash paid during period - Interest $ 333,025 $ 333,025 Net cash paid (received) during period - Taxes $ 50,050 $ ( 56,261 ) See accompanying notes to consolidated financial statements. 4 Index DONEGAL GROUP INC. AND SUBSIDIARIES (Unaudited) Notes to Consolidated Financial Statements 1 - Organization 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 property and casualty insurance exclusively through a network of independent insurance agents in certain Mid-Atlantic, Midwestern, Southern and Southwestern states. At March 31, 2026, 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 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. 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 100 % quota-share reinsurance agreements with Mountain States Commercial Insurance Company, Mountain States Indemnity Company and Southern Mutual Insurance Company. 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. 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. 5 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 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. 2 - Basis of Presentation 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 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. 3 - Net Income Per Share We have two classes of common stock, which we refer to as our Class A common stock and our Class B common stock. Our certificate of incorporation provides that whenever our board of directors declares a dividend on our Class B common stock, our board of directors shall simultaneously declare a dividend on our Class A common stock that is payable to the holders of our Class A common stock at the same time and as of the same record date at a rate that is at least 10 % greater than the rate at which our board of directors declared a dividend on our Class B common stock. Accordingly, we use the two-class method to compute our net income per share. The two-class method is an earnings allocation formula that determines net income per share separately for each class of common stock based on dividends we have declared and an allocation of our remaining undistributed net income using a participation percentage that reflects the dividend rights of each class. 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: 6 Index Three Months Ended March 31, 2026 2025 Class A Class B Class A Class B (in thousands, except per share data) Basic net income per share: Numerator: Allocation of net income $ 9,913 $ 1,598 $ 21,575 $ 3,630 Denominator: Weighted-average shares outstanding 31,428 5,577 30,121 5,577 Basic net income per share $ 0.32 $ 0.29 $ 0.72 $ 0.65 Diluted net income per share: Numerator: Allocation of net income $ 9,913 $ 1,598 $ 21,575 $ 3,630 Denominator: Number of shares used in basic computation 31,428 5,577 30,121 5,577 Weighted-average shares effect of dilutive securities: Director and employee stock options 386 — 309 — Unvested restricted stock units 114 — — — Number of shares used in diluted computation 31,928 5,577 30,430 5,577 Diluted net income per share $ 0.31 $ 0.29 $ 0.71 $ 0.65 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. 4 - Reinsurance 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. 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. 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 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 have in place for 2026: • 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; 7 Index • 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; and • 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. The agreement also provides 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. The purpose of the 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. 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”). 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 use a probability-of-default methodology, which reflects current and forecasted economic conditions, to estimate the allowance for expected credit losses. 5 - Investments The amortized cost and estimated fair values of our fixed maturities at March 31, 2026 were as follows: Carrying Value Allowance for Credit Losses Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Held to Maturity U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 73,787 $ 44 $ 73,831 $ 49 $ 5,123 $ 68,757 Obligations of states and political subdivisions 447,460 359 447,819 2,381 44,403 405,797 Corporate securities 255,159 867 256,026 1,040 9,305 247,761 Mortgage-backed securities 7,546 4 7,550 47 142 7,455 Totals $ 783,952 $ 1,274 $ 785,226 $ 3,517 $ 58,973 $ 729,770 8 Index Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Available for Sale U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 24,355 $ 43 $ 903 $ 23,495 Obligations of states and political subdivisions 52,679 383 2,593 50,469 Corporate securities 141,280 301 2,550 139,031 Mortgage-backed securities 445,694 1,749 11,327 436,116 Totals $ 664,008 $ 2,476 $ 17,373 $ 649,111 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. The amortized cost and estimated fair values of our fixed maturities at December 31, 2025 were as follows: Carrying Value Allowance for Credit Losses Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Held to Maturity U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 79,243 $ 47 $ 79,290 $ 84 $ 4,864 $ 74,510 Obligations of states and political subdivisions 436,802 357 437,159 3,221 39,248 401,132 Corporate securities 252,098 904 253,002 2,211 7,423 247,790 Mortgage-backed securities 8,304 5 8,309 66 148 8,227 Totals $ 776,447 $ 1,313 $ 777,760 $ 5,582 $ 51,683 $ 731,659 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (in thousands) Available for Sale U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 25,057 $ 107 $ 835 $ 24,329 Obligations of states and political subdivisions 49,982 505 1,936 48,551 Corporate securities 132,203 700 1,978 130,925 Mortgage-backed securities 443,128 3,091 9,301 436,918 Totals $ 650,370 $ 4,403 $ 14,050 $ 640,723 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. 9 Index 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 $ 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. Amortized Cost Estimated Fair Value (in thousands) Held to maturity Due in one year or less $ 7,075 $ 7,047 Due after one year through five years 223,356 212,535 Due after five years through ten years 224,875 212,680 Due after ten years 322,370 290,053 Mortgage-backed securities 7,550 7,455 Total held to maturity $ 785,226 $ 729,770 Available for sale Due in one year or less $ 13,280 $ 13,254 Due after one year through five years 71,676 69,981 Due after five years through ten years 80,378 78,148 Due after ten years 52,980 51,612 Mortgage-backed securities 445,694 436,116 Total available for sale $ 664,008 $ 649,111 The cost and estimated fair values of our equity securities at March 31, 2026 were as follows: Cost Gross Gains Gross Losses Estimated Fair Value (in thousands) Equity securities $ 28,560 $ 16,738 $ 192 $ 45,106 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 (in thousands) Equity securities $ 27,238 $ 17,193 $ 61 $ 44,370 10 Index 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 March 31, 2026 2025 (in thousands) Gross realized gains: Fixed maturities $ 71 $ 54 Equity securities — — 71 54 Gross realized losses: Fixed maturities 2 — Equity securities — — 2 — Net realized gains 69 54 Gross unrealized gains on equity securities 889 573 Gross unrealized losses on equity securities ( 1,476 ) ( 1,135 ) Fixed maturities - credit impairment charges 39 37 Net investment losses $ ( 479 ) $ ( 471 ) We held fixed maturities with unrealized losses representing declines that we considered temporary at March 31, 2026 as follows: Less Than 12 Months More Than 12 Months Fair Value Unrealized Losses Fair Value Unrealized Losses (in thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 13,581 $ 86 $ 70,266 $ 5,940 Obligations of states and political subdivisions 72,793 1,975 281,046 45,021 Corporate securities 110,730 1,833 175,475 10,022 Mortgage-backed securities 177,508 2,237 87,097 9,232 Totals $ 374,612 $ 6,131 $ 613,884 $ 70,215 We held fixed maturities with unrealized losses representing declines that we considered temporary at December 31, 2025 as follows: Less Than 12 Months More Than 12 Months Fair Value Unrealized Losses Fair Value Unrealized Losses (in thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 9,503 $ 46 $ 76,506 $ 5,654 Obligations of states and political subdivisions 34,778 697 287,717 40,487 Corporate securities 47,139 406 183,026 8,995 Mortgage-backed securities 102,104 540 88,887 8,908 Totals $ 193,524 $ 1,689 $ 636,136 $ 64,044 11 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 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. 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 realized investment gains and losses using the specific identification method. We amortize premiums and discounts on mortgage-backed debt securities using anticipated prepayments. 12 Index 6 - Segment Information We have three reportable segments, which consist of our investment function, our commercial lines of insurance and our personal lines of insurance. 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, 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”). This segmentation is consistent with the segmentation we utilize to manage our business. We make resource allocation decisions based upon historical underwriting results as well as perceived opportunities for future profitable growth within each segment. We operate only in the United States, and no single customer or agent provides 10 percent or more of our revenues. Financial data by segment is as follows: Three Months Ended March 31, 2026 Investments Commercial Lines Personal Lines Total (in thousands) Revenues: Net premiums earned $ — $ 138,963 $ 82,394 $ 221,357 Net investment income 14,287 — — 14,287 Investment losses ( 479 ) — — ( 479 ) Total segment revenues 13,808 138,963 82,394 235,165 Other 831 Total revenues $ 235,996 Segment expenses: Net losses and loss expenses — 95,358 46,109 141,467 Other underwriting expenses — 58,478 22,897 81,375 Policyholder dividends — 652 — 652 Total segment expenses — 154,488 69,006 223,494 SAP underwriting (loss) income — ( 15,525 ) 13,388 ( 2,137 ) GAAP adjustments 2,532 GAAP underwriting income 395 Net investment income 14,287 Investment losses ( 479 ) Other ( 80 ) Income before income tax expense $ 14,123 13 Index Three Months Ended March 31, 2025 Investments Commercial Lines Personal Lines Total (in thousands) Revenues: Net premiums earned $ — $ 136,216 $ 96,486 $ 232,702 Net investment income 11,984 — — 11,984 Investment losses ( 471 ) — — ( 471 ) Total segment revenues 11,513 136,216 96,486 244,215 Other 959 Total revenues $ 245,174 Segment expenses: Net losses and loss expenses — 81,321 50,708 132,029 Other underwriting expenses — 55,514 27,485 82,999 Policyholder dividends — 759 — 759 Total segment expenses — 137,594 78,193 215,787 SAP underwriting (loss) income — ( 1,378 ) 18,293 16,915 GAAP adjustments 2,568 GAAP underwriting income 19,483 Net investment income 11,984 Investment losses ( 471 ) Other 165 Income before income tax expense $ 31,161 7 - 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 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 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 March 31, 2026. FHLB of Pittsburgh stock purchased and owned $ 1,615,400 Collateral pledged, at par (carrying value $ 41,276,943 ) 43,069,261 Borrowing capacity currently available 4,005,219 14 Index 8 - 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 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. 9 - 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: 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 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. government corporations and agencies, obligations of states and political subdivisions, corporate securities and mortgage-backed securities. 15 Index 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. 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 security. These 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 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 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. 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 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 Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 23,495 $ — $ 23,495 $ — Obligations of states and political subdivisions 50,469 — 50,469 — Corporate securities 139,031 — 139,031 — Mortgage-backed securities 436,116 — 436,116 — Equity securities 45,106 42,969 2,137 — Total investments in the fair value hierarchy $ 694,217 $ 42,969 $ 651,248 $ — 16 Index 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) (in thousands) U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 24,329 $ — $ 24,329 $ — Obligations of states and political subdivisions 48,551 — 48,551 — Corporate securities 130,925 — 130,925 — Mortgage-backed securities 436,918 — 436,918 — Equity securities 44,370 42,233 2,137 — Total investments in the fair value hierarchy $ 685,093 $ 42,233 $ 642,860 $ — 10 - Income Taxes 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. No material issues have been raised and no adjustments have been proposed as a result of this ongoing audit. 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 $ 7.5 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. The tax provisions included within the OBBBA did not have a material impact on our financial position, results of operations or cash flows. 11 - 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. 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 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. 17 Index We summarize activity in our insurance subsidiaries’ liabilities for losses and loss expenses as follows: Three Months Ended March 31, 2026 2025 (in thousands) Balance at January 1 $ 1,100,050 $ 1,120,985 Less reinsurance recoverable ( 394,854 ) ( 416,621 ) Net balance at January 1 705,196 704,364 Incurred related to: Current year 147,724 142,546 Prior years ( 5,724 ) ( 10,513 ) Total incurred 142,000 132,033 Paid related to: Current year 41,722 42,926 Prior years 89,371 97,274 Total paid 131,093 140,200 Net balance at end of period 716,103 696,197 Plus reinsurance recoverable 413,712 396,427 Balance at end of period $ 1,129,815 $ 1,092,624 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 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. We consider the material lines of business of our insurance subsidiaries 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, 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 three months ended March 31, 2026. 18 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 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. 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. Factors that affect loss frequency include changes in weather patterns and 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 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 accurately 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. 12 - 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. 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 March 31, 2026 and 2025 and changes in the allowance for expected credit losses for the three months ended March 31, 2026 and 2025. 19 Index At and For the Three Months Ended March 31, 2026 At and For the Three Months Ended March 31, 2025 Held-to-Maturity, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses Held-to-Maturity, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses (in thousands) Balance at beginning of period $ 776,447 $ 1,313 $ 705,714 $ 1,388 Current period change for expected credit losses ( 39 ) ( 37 ) Balance at end of period $ 783,952 $ 1,274 $ 706,098 $ 1,351 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 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 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 March 31, 2026 At and For the Three Months Ended March 31, 2025 Reinsurance Receivable, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses Reinsurance Receivable, Net of Allowance for Expected Credit Losses Allowance for Expected Credit Losses (in thousands) Balance at beginning of period $ 398,582 $ 375 $ 420,742 $ 391 Current period change for expected credit losses 27 43 Balance at end of period $ 418,091 $ 402 $ 403,382 $ 434 20 Index 13 - Impact of New Accounting Standards In December 2023, the Financial Accounting Standards Board (“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. The guidance is effective for annual reporting periods beginning after December 15, 2024. The adoption of this guidance will 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 and interim 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. 21 Index