Donegal Group第二季淨收入增32% 惟商業險承保虧損擴大

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, D.C. 20549

 
 

 FORM 10-Q

 
 

 (Mark One)

 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 For the quarterly period ended June 30, 2026

 

 

 OR

 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 For the transition period from    to    .

 

 

 Commission file number 0-15341

 

 

 
 

 Donegal Group Inc.

 

 

 (Exact name of registrant as specified in its charter)

 

 

 
 

 

 

 Delaware
   23-2424711
 
 (State or other jurisdiction of incorporation or organization)
   (I.R.S. Employer Identification No.)
 
 
 1195 River Road, P.O. Box 302, Marietta, PA 17547

 (Address of principal executive offices) (Zip code)

 

 

 (717) 426-1931

 (Registrant’s telephone number, including area code)

 

 

 Not applicable

 (Former name, former address and former fiscal year, if changed since last report)

 

 

 
 

 Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

 

 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

 

 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See
 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

   Large accelerated filer ☐
 Accelerated filer ☑
 Non-accelerated filer ☐
 Smaller reporting company ☐
   
   Emerging growth company ☐
         
 
 

 

 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
 provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

 

 Securities registered pursuant to Section 12(b) of the Act:

 

 

   Title of Each Class
 Trading Symbols
 Name of Each Exchange on Which Registered
   
           
   Class A Common Stock, $.01 par value
 DGICA
 The NASDAQ Global Select Market
   
           
   Class B Common Stock, $.01 par value
 DGICB
 The NASDAQ Global Select Market
   
 
 

 

 
 Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 31,542,507 shares of Class A Common Stock, par value $0.01 per share, and 5,576,775 shares of Class B Common Stock, par value $0.01 per share, outstanding on July 31, 2026.

 

 

 

 
 

 
 
 

 

 DONEGAL GROUP INC.

 INDEX TO FORM 10-Q REPORT

 

 
  
  
 
 Page

 
 

 
 
 PART I

 
 
 FINANCIAL INFORMATION

 
  
 

 
 
 Item 1.

 
 
 Financial Statements

 
 
 1

 
 

 
 
 Item 2.

 
 
 Management’s Discussion and Analysis of Financial Condition and Results of Operations

 
 
 26

 
 

 
 
 Item 3.

 
 
 Quantitative and Qualitative Disclosures About Market Risk

 
 
 37

 
 

 
 
 Item 4.

 
 
 Controls and Procedures

 
 
 37

 
 

 
  
  
  
 

 
 
 PART II

 
 
 OTHER INFORMATION

 
  
 

 
 
 Item 1.

 
 
 Legal Proceedings

 
 
 39

 
 

 
 
 Item 1A.

 
 
 Risk Factors

 
 
 39

 
 

 
 
 Item 2.

 
 
 Unregistered Sales of Equity Securities and Use of Proceeds

 
 
 39

 
 

 
 
 Item 3.

 
 
 Defaults upon Senior Securities

 
 
 39

 
 

 
 
 Item 4.

 
 
 Mine Safety Disclosure

 
 
 39

 
 

 
 
 Item 5.

 
 
 Other Information

 
 
 39

 
 

 
 
 Item 6.

 
 
 Exhibits

 
 
 40

 

 
 

 
 
 Signatures

 
 
 41

 
 

 
 

 

 
 
 

 
 Index

 

 

 
 PART I. FINANCIAL INFORMATION

 

 

 

 
 Item 1.
 
 Financial Statements

 
 

 
 

 

 Donegal Group Inc.

 

 Consolidated Balance Sheets

 

 
 
  

 
  
 
 June 30,

 2026

 
  
  
 
 December 31,

 2025

 
  
 

 
 
  

 
  
 
 (Unaudited)

 
  
  
  
  
 

 
 
 Assets

 
  
  
  
  
  
  
 

 
 
 Investments

 
  
  
  
  
  
  
 

 
 
 Fixed maturities

 
  
  
  
  
  
  
 

 
 Held to maturity, at amortized cost (fair value $754,765,403 and $731,659,323; 
 net of allowance for expected credit losses of $1,306,225 and $1,312,903)
 
 
  
 $
 
 803,294,965
 
  
  
 $
 
 776,447,347
 
  
 

 
 Available for sale, at fair value (amortized cost $650,458,942 and $650,370,011)
 
  
  
 636,519,616
 
  
  
  
 640,722,775
 
  
 

 
 
 Equity securities, at fair value

 
  
  
 48,879,905
 
  
  
  
 44,370,358
 
  
 

 
 
 Short-term investments, available for sale

 
  
  
 26,530,086
 
  
  
  
 38,712,341
 
  
 

 
 
 Total investments

 
  
  
 1,515,224,572
 
  
  
  
 1,500,252,821
 
  
 

 
 
 Cash

 
  
  
 23,722,355
 
  
  
  
 26,785,845
 
  
 

 
 
 Accrued investment income

 
  
  
 11,426,010
 
  
  
  
 10,914,235
 
  
 

 
 
 Premiums receivable

 
  
  
 217,819,143
 
  
  
  
 180,803,918
 
  
 

 
 Reinsurance receivable (net of allowance for expected credit losses of $390,961 and $374,883)
 
  
  
 413,118,569
 
  
  
  
 398,582,136
 
  
 

 
 
 Deferred policy acquisition costs

 
  
  
 71,900,055
 
  
  
  
 68,669,982
 
  
 

 
 
 Deferred tax asset, net

 
  
  
 14,075,860
 
  
  
  
 13,287,301
 
  
 

 
 
 Prepaid reinsurance premiums

 
  
  
 197,964,480
 
  
  
  
 171,083,219
 
  
 

 
 
 Property and equipment, net

 
  
  
 1,140,681
 
  
  
  
 2,329,491
 
  
 

 
 
 Federal income taxes recoverable

 
  
  
 2,692,615
 
  
  
  
 4,028,034
 
  
 

 
 
 Due from affiliate

 
  
  
 5,293,434
 
  
  
  
 3,299,188
 
  
 

 
 
 Goodwill

 
  
  
 5,625,354
 
  
  
  
 5,625,354
 
  
 

 
 
 Other intangible assets

 
  
  
 958,010
 
  
  
  
 958,010
 
  
 

 
 
 Other

 
  
  
 1,124,719
 
  
  
  
 9,918
 
  
 

 
 
 Total assets

 
  
 
 $

 
 2,482,085,857
 
  
  
 
 $

 
 2,386,629,452
 
  
 

 
 
 Liabilities and Stockholders’ Equity

 
  
  
  
  
  
  
  
  
 

 
 
 Liabilities

 
  
  
  
  
  
  
  
  
 

 
 
 Losses and loss expenses

 
  
 
 $

 
 1,129,134,908
 
  
  
 
 $

 
 1,100,049,937
 
  
 

 
 
 Unearned premiums

 
  
  
 639,691,636
 
  
  
  
 591,040,451
 
  
 

 
 
 Accrued expenses

 
  
  
 2,082,482
 
  
  
  
 2,220,800
 
  
 

 
 
 Reinsurance balances payable

 
  
  
 1,958,420
 
  
  
  
 3,484,130
 
  
 

 
 
 Borrowings

 

 
  
  
 35,000,000
 
  
  
  
 35,000,000
 
  
 

 
 
 Cash dividends declared to stockholders

 
  
  
 —
 
  
  
  
 6,647,482
 
  
 

 
 
 Other

 
  
  
 8,109,834
 
  
  
  
 7,768,573
 
  
 

 
 
 Total liabilities

 
  
  
 1,815,977,280
 
  
  
  
 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 34,478,816 and 34,385,129 shares and outstanding 31,476,228 and 31,382,541 shares
 
  
  
 344,789
 
  
  
  
 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

 
  
  
 394,280,322
 
  
  
  
 391,811,397
 
  
 

 
 
 Accumulated other comprehensive loss

 
  
  
 (11,616,681
 
 
 )

 
  
  
 (8,295,743
 
 
 )

 
 

 
 
 Retained earnings

 
  
  
 324,270,012
 
  
  
  
 297,728,438
 
  
 

 
 
 Treasury stock, at cost

 
  
  
 (41,226,357
 
 
 )

 
  
  
 (41,226,357
 
 
 )

 
 

 
 
 Total stockholders’ equity

 
  
  
 666,108,577
 
  
  
  
 640,418,079
 
  
 

 
 
 Total liabilities and stockholders’ equity

 
  
 
 $

 
 2,482,085,857
 
  
  
 
 $

 
 2,386,629,452
 
  
 

 
 

 

 See accompanying notes to consolidated financial statements.

 

 

 
 

 1

 
 

 
 Index

 

 

 Donegal Group Inc.

 

 Consolidated Statements of Income

 (Unaudited)

 

 
  
  
 
 Three Months Ended June 30,

 
  
 

 
 
  

 
  
 
 2026

 
  
  
 
 2025

 
  
 

 
 
 Revenues:

 
  
  
  
  
  
  
 

 
 
 Net premiums earned

 
  
 
 $

 
 222,574,233
 
  
  
 
 $

 
 231,774,594
 
  
 

 
 
 Investment income, net of investment expenses

 
  
  
 14,490,823
 
  
  
  
 12,540,362
 
  
 

 
 Net investment gains (includes ($1,351,958) and ($1,372,352) accumulated other comprehensive income reclassifications)
 
  
  
 3,267,408
 
  
  
  
 1,543,721
 
  
 

 
 
 Lease income

 
  
  
 74,095
 
  
  
  
 76,281
 
  
 

 
 
 Installment payment fees

 
  
  
 712,494
 
  
  
  
 844,315
 
  
 

 
 
 Other income, net

 
  
  
 —
 
  
  
  
 368,744
 
  
 

 
 
 Total revenues

 
  
  
 241,119,053
 
  
  
  
 247,148,017
 
  
 

 
 
 Expenses:

 
  
  
  
  
  
  
  
  
 

 
 
 Net losses and loss expenses

 
  
  
 132,555,779
 
  
  
  
 150,917,125
 
  
 

 
 
 Amortization of deferred policy acquisition costs

 
  
  
 36,123,000
 
  
  
  
 39,501,000
 
  
 

 
 
 Other underwriting expenses

 
  
  
 43,562,039
 
  
  
  
 35,149,888
 
  
 

 
 
 Policyholder dividends

 
  
  
 560,147
 
  
  
  
 818,942
 
  
 

 
 
 Interest

 
  
  
 336,725
 
  
  
  
 336,705
 
  
 

 
 
 Other expenses, net

 
  
  
 433,332
 
  
  
  
 —
 
  
 

 
 
 Total expenses

 
  
  
 213,571,022
 
  
  
  
 226,723,660
 
  
 

 
 
 Income before income tax expense

 
  
  
 27,548,031
 
  
  
  
 20,424,357
 
  
 

 
 Income tax expense (includes $283,911 and $288,194 income tax benefit from reclassification items)
 
  
  
 5,242,282
 
  
  
  
 3,558,237
 
  
 

 
 
 Net income

 
  
 
 $

 
 22,305,749
 
  
  
 
 $

 
 16,866,120
 
  
 

 
 
 Net income per share:

 
  
  
  
  
  
  
  
  
 

 
 
 Class A common stock - basic

 
  
 
 $

 
 0.61
 
  
  
 
 $

 
 0.47
 
  
 

 
 
 Class A common stock - diluted

 
  
 
 $

 
 0.60
 
  
  
 
 $

 
 0.46
 
  
 

 
 
 Class B common stock - basic and diluted

 
  
 
 $

 
 0.55
 
  
  
 
 $

 
 0.43
 
  
 

 
 

 

 Donegal Group Inc.

 

 Consolidated Statements of Comprehensive Income

 (Unaudited)

 

 
  
  
 
 Three Months Ended June 30,

 
  
 

 
  
  
 
 2026

 
  
  
 
 2025

 
  
 

 
 
 Net income

 
  
 
 $

 
 22,305,749
 
  
  
 
 $

 
 16,866,120
 
  
 

 
 
 Other comprehensive income, net of tax

 
  
  
  
  
  
  
  
  
 

 
 
 Unrealized (loss) income on securities:

 
  
  
  
  
  
  
  
  
 

 
 Unrealized holding (loss) income during the period, net of income tax (benefit) expense of ($73,719) and $773,077
 
  
  
 (277,327
 
 )
 
  
  
 2,871,090
 
  
 

 
 Reclassification adjustment for losses included in net income, net of income tax benefit of $283,911 and $288,194
 
  
  
 1,068,047
 
  
  
  
 1,084,158
 
  
 

 
 
 Other comprehensive income

 
  
  
 790,720
 
  
  
  
 3,955,248
 
  
 

 
 
 Comprehensive income

 
  
 
 $

 
 23,096,469
 
  
  
 
 $

 
 20,821,368
 
  
 

 
 

 

 See accompanying notes to consolidated financial statements.

 

 

 
 

 2

 
 

 
 Index

 

 

 Donegal Group Inc.

 Consolidated Statements of Income

 (Unaudited)

 

 

 

 
  
  
 
 Six Months Ended June 30,

 
  
 

 
  
  
 
 2026

 
  
  
 
 2025

 
  
 

 
 
 Revenues:

 
  
  
  
  
  
  
 

 
 
 Net premiums earned

 
  
 
 $

 
 443,931,675
 
  
  
 
 $

 
 464,476,483
 
  
 

 
 
 Investment income, net of investment expenses

 
  
  
 28,777,888
 
  
  
  
 24,523,936
 
  
 

 
 Net investment gains (includes ($1,281,104) and ($1,315,249) accumulated other comprehensive income reclassifications)
 
  
  
 2,788,184
 
  
  
  
 1,072,860
 
  
 

 
 
 Lease income

 
  
  
 148,313
 
  
  
  
 153,108
 
  
 

 
 
 Installment payment fees

 
  
  
 1,469,227
 
  
  
  
 1,726,510
 
  
 

 
 
 Total revenues

 
  
  
 477,115,287
 
  
  
  
 491,952,897
 
  
 

 
 
 Expenses:

 
  
  
  
  
  
  
  
  
 

 
 
 Net losses and loss expenses

 
  
  
 274,555,373
 
  
  
  
 282,950,272
 
  
 

 
 
 Amortization of deferred policy acquisition costs

 
  
  
 72,420,000
 
  
  
  
 78,732,000
 
  
 

 
 
 Other underwriting expenses

 
  
  
 85,576,531
 
  
  
  
 76,344,882
 
  
 

 
 
 Policyholder dividends

 
  
  
 1,211,854
 
  
  
  
 1,578,331
 
  
 

 
 
 Interest

 
  
  
 669,750
 
  
  
  
 669,750
 
  
 

 
 
 Other expenses, net

 
  
  
 1,010,785
 
  
  
  
 92,356
 
  
 

 
 
 Total expenses

 
  
  
 435,444,293
 
  
  
  
 440,367,591
 
  
 

 
 
 Income before income tax expense

 
  
  
 41,670,994
 
  
  
  
 51,585,306
 
  
 

 
 Income tax expense (includes $269,032 and $276,202 income tax benefit from reclassification items)
 
  
  
 7,854,641
 
  
  
  
 9,514,012
 
  
 

 
 
 Net income

 
  
 
 $

 
 33,816,353
 
  
  
 
 $

 
 42,071,294
 
  
 

 
 
 Net income per share:

 
  
  
  
  
  
  
  
  
 

 
 
 Class A common stock - basic

 
  
 
 $

 
 0.93
 
  
  
 
 $

 
 1.19
 
  
 

 
 
 Class A common stock - diluted

 
  
 
 $

 
 0.91
 
  
  
 
 $

 
 1.17
 
  
 

 
 
 Class B common stock - basic and diluted

 
  
 
 $

 
 0.84
 
  
  
 
 $

 
 1.08
 
  
 

 
 

 

 Donegal Group Inc.

 

 Consolidated Statements of Comprehensive Income

 (Unaudited)

 

 
  
  
 
 Six Months Ended June 30,

 
  
 

 
  
  
 
 2026

 
  
  
 
 2025

 
  
 

 
 
 Net income

 
  
 
 $

 
 33,816,353
 
  
  
 
 $

 
 42,071,294
 
  
 

 
 
 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 ($1,151,813) and $2,573,587
 
  
  
 (4,333,010
 
 )
 
  
  
 9,644,446
 
  
 

 
 Reclassification adjustment for losses included in net income, net of income tax benefit of $269,032 and $276,202
 
  
  
 1,012,072
 
  
  
  
 1,039,047
 
  
 

 
 
 Other comprehensive (loss) income

 
  
  
 (3,320,938
 
 
 )

 
  
  
 10,683,493
 
  
 

 
 
 Comprehensive income

 
  
 
 $

 
 30,495,415
 
  
  
 
 $

 
 52,754,787
 
  
 

 
 

 

 See accompanying notes to consolidated financial statements.

 

 

 
 

 3

 
 

 
 Index

 

 

 Donegal Group Inc.

 

 Consolidated Statement of Stockholders’ Equity

 (Unaudited)

 Six Months Ended June 30, 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
 
  
 

 
 
 Issuance of common stock (stock compensation plans)

 
  
  
 32,339
 
  
  
  
  
  
  
  
 324
 
  
  
  
  
  
  
  
 550,740
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 551,064
 
  
 

 
 
 Share-based    compensation

 
  
  
 5,500
 
  
  
  
  
  
  
  
 55
 
  
  
  
  
  
  
  
 402,809
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 402,864
 
  
 

 
 
 Net income

 
  
  
 
 —

 
  
  
  
 
 —

 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 22,305,749
 
  
  
  
 —
 
  
  
  
 22,305,749
 
  
 

 
 
 Cash dividends declared

 
  
  
 
 —

 
  
  
  
 
 —

 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 (7,034,456
 
 
 )

 
  
  
 —
 
  
  
  
 (7,034,456
 
 
 )

 
 

 
 
 Grant of stock options

 
  
  
 
 —

 
  
  
  
 
 —

 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 82,501
 
  
  
  
 —
 
  
  
  
 (82,501
 
 
 )

 
  
  
 —
 
  
  
  
 —
 
  
 

 
 
 Other comprehensive income

 
  
  
 
 —

 
  
  
  
 
 —

 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 790,720
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 790,720
 
  
 

 
 
 Balance,   June 30,  2026

 
  
  
 34,478,816
 
  
  
  
 5,649,240
 
  
  
 
 $

 
 344,789
 
  
  
 
 $

 
 56,492
 
  
  
 
 $

 
 394,280,322
 
  
  
 
 $

 
 (11,616,681
 
 
 )

 
  
 
 $

 
 324,270,012
 
  
  
 
 $

 
 (41,226,357
 
 
 )

 
  
 
 $

 
 666,108,577
 
  
 

 
 

 

 See accompanying notes to consolidated financial statements.

 

 

 
 

 4

 
 

 
 Index

 

 

 Donegal Group Inc.

 

 Consolidated Statement of Stockholders’ Equity

 (Unaudited)

 

 

 Six Months Ended June 30, 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
 
  
 

 
 
 Issuance of common stock (stock compensation plans)

 
  
  
 27,102
 
  
  
  
 —
 
  
  
  
 271
 
  
  
  
 —
 
  
  
  
 506,971
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 507,242
 
  
 

 
 
 Share-based    compensation

 
  
  
 406,085
 
  
  
  
 —
 
  
  
  
 4,061
 
  
  
  
 —
 
  
  
  
 6,099,313
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 6,103,374
 
  
 

 
 
 Net income

 
  
  
 
 —

 
  
  
  
 
 —

 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 16,866,120
 
  
  
  
 —
 
  
  
  
 16,866,120
 
  
 

 
 
 Cash dividends declared

 
  
  
 
 —

 
  
  
  
 
 —

 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 (6,485,554
 
 
 )

 
  
  
 —
 
  
  
  
 (6,485,554
 
 
 )

 
 

 
 
 Grant of stock options

 
  
  
 
 —

 
  
  
  
 
 —

 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 76,115
 
  
  
  
 —
 
  
  
  
 (76,115
 
 
 )

 
  
  
 —
 
  
  
  
 —
 
  
 

 
 
 Other comprehensive income

 
  
  
 
 —

 
  
  
  
 
 —

 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 3,955,248
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 3,955,248
 
  
 

 
 
 Balance,   June 30,  2025

 
  
  
 33,862,414
 
  
  
  
 5,649,240
 
  
  
  
 338,625
 
  
  
  
 56,492
 
  
  
  
 383,546,316
 
  
  
  
 (17,516,988
 
 
 )

 
  
  
 280,471,357
 
  
  
  
 (41,226,357
 
 
 )

 
  
  
 605,669,445
 
  
 

 
 

 

 See accompanying notes to consolidated financial statements.

 

 

 
 

 5

 
 

 
 Index

 

 

 Donegal Group Inc.

 

 Consolidated Statements of Cash Flows

 (Unaudited)

 

 
  
  
 
 Six Months Ended June 30,

 
  
 

 
  
  
 
 2026

 
  
  
 
 2025

 
  
 

 
 
 Cash Flows from Operating Activities:

 
  
  
  
  
  
  
 

 
 
 Net income

 
  
 
 $

 
 33,816,353
 
  
  
 
 $

 
 42,071,294
 
  
 

 
 
 Adjustments to reconcile net income to net cash provided by operating activities:

 
  
  
  
  
  
  
  
  
 

 
 
 Depreciation, amortization and other non-cash items

 
  
  
 1,371,151
 
  
  
  
 1,932,514
 
  
 

 
 
 Net investment gains

 
  
  
 (2,788,184
 
 
 )

 
  
  
 (1,072,860
 
 
 )

 
 

 
 
 Changes in assets and liabilities:

 
  
  
  
  
  
  
  
  
 

 
 
 Losses and loss expenses

 
  
  
 29,084,971
 
  
  
  
 (3,975,352
 
 
 )

 
 

 
 
 Unearned premiums

 
  
  
 48,651,185
 
  
  
  
 23,062,029
 
  
 

 
 
 Premiums receivable

 
  
  
 (37,015,225
 
 
 )

 
  
  
 (17,778,303
 
 
 )

 
 

 
 
 Deferred acquisition costs

 
  
  
 (3,230,073
 
 
 )

 
  
  
 (3,273,237
 
 
 )

 
 

 
 
 Deferred income taxes

 
  
  
 94,222
 
  
  
  
 341,554
 
  
 

 
 
 Reinsurance receivable

 
  
  
 (14,536,433
 
 
 )

 
  
  
 9,617,024
 
  
 

 
 
 Prepaid reinsurance premiums

 
  
  
 (26,881,261
 
 
 )

 
  
  
 (6,633,206
 
 
 )

 
 

 
 
 Accrued investment income

 
  
  
 (511,775
 
 
 )

 
  
  
 (231,469
 
 
 )

 
 

 
 
 Due from affiliate

 
  
  
 (1,994,246
 
 
 )

 
  
  
 1,557,386
 
  
 

 
 
 Reinsurance balances payable

 
  
  
 (1,525,710
 
 
 )

 
  
  
 (1,045,052
 
 
 )

 
 

 
 
 Current income taxes

 
  
  
 1,335,419
 
  
  
  
 (6,399,981
 
 
 )

 
 

 
 
 Accrued expenses

 
  
  
 (138,318
 
 
 )

 
  
  
 (183,779
 
 
 )

 
 

 
 
 Other, net

 
  
  
 341,261
 
  
  
  
 (107,301
 
 
 )

 
 

 
 
 Net adjustments

 
  
  
 (7,743,016
 
 
 )

 
  
  
 (4,190,033
 
 
 )

 
 

 
 
 Net cash provided by operating activities

 
  
  
 26,073,337
 
  
  
  
 37,881,261
 
  
 

 
 
 Cash Flows from Investing Activities:

 
  
  
  
  
  
  
  
  
 

 
 
 Purchases of fixed maturities, held to maturity

 
  
  
 (37,339,004
 
 
 )

 
  
  
 (48,228,392
 
 
 )

 
 

 
 
 Purchases of fixed maturities, available for sale

 
  
  
 (110,149,362
 
 
 )

 
  
  
 (93,483,260
 
 
 )

 
 

 
 
 Purchases of equity securities

 
  
  
 (1,421,238
 
 
 )

 
  
  
 (2,512,570
 
 
 )

 
 

 
 
 Maturity of fixed maturities:

 
  
  
  
  
  
  
  
  
 

 
 
 Held to maturity

 
  
  
 10,567,228
 
  
  
  
 15,298,111
 
  
 

 
 
 Available for sale

 
  
  
 77,654,245
 
  
  
  
 47,403,605
 
  
 

 
 
 Sales of fixed maturities:

 
  
  
  
  
  
  
  
  
 

 
 
 Available for sale

 
  
  
 30,895,776
 
  
  
  
 45,876,392
 
  
 

 
 
 Sales of equity securities

 
  
  
 976,059
 
  
  
  
 2,145,314
 
  
 

 
 
 Net sales (purchases) of property and equipment

 
  
  
 325
 
  
  
  
 (100
 
 
 )

 
 

 
 
 Net sales (purchases) of short-term investments, available for sale

 
  
  
 12,182,255
 
  
  
  
 (205,257
 
 
 )

 
 

 
 
 Net cash used in investing activities

 
  
  
 (16,633,716
 
 
 )

 
  
  
 (33,706,157
 
 
 )

 
 

 
 
 Cash Flows from Financing Activities:

 
  
  
  
  
  
  
  
  
 

 
 
 Cash dividends paid

 
  
  
 (13,689,601
 
 
 )

 
  
  
 (12,523,188
 
 
 )

 
 

 
 
 Issuance of common stock

 
  
  
 1,186,490
 
  
  
  
 12,859,239
 
  
 

 
 
 Net cash (used in) provided by financing activities

 
  
  
 (12,503,111
 
 
 )

 
  
  
 336,051
 
  
 

 
 
 Net (decrease) increase in cash

 
  
  
 (3,063,490
 
 
 )

 
  
  
 4,511,155
 
  
 

 
 
 Cash at beginning of period

 
  
  
 26,785,845
 
  
  
  
 52,925,931
 
  
 

 
 
 Cash at end of period

 
  
 
 $

 
 23,722,355
 
  
  
 
 $

 
 57,437,086
 
  
 

 
 
  

 
  
  
  
  
  
  
  
  
 

 
 
 Cash paid during period - Interest

 
  
 
 $

 
 684,551
 
  
  
 
 $

 
 677,151
 
  
 

 
 
 Net cash paid during period - Taxes

 
  
 
 $

 
 6,550,050
 
  
  
 
 $

 
 15,547,439
 
  
 

 
 

 

 See accompanying notes to consolidated financial statements.

 

 

 
 

 6

 
 

 
 Index

 

 

 DONEGAL GROUP INC.

 

 (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 June 30, 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 June 30, 2026, Donegal Mutual held approximately 45% of our outstanding Class A common stock and approximately 85% of our outstanding Class B common stock. This ownership provides Donegal Mutual with approximately 71% 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.

 

 

 
 

 7

 
 

 
 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 began to non-renew all farm policies as they started to 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 annual 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 statement of our financial position, results of operations and cash flows for those interim periods. Our results of operations for the interim period
 presented are not necessarily indicative of the results of operations we expect for the fiscal year.

 

 

 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.

 

 

 

 
 

 8

 
 

 
 Index

 

 

 
 
 

 
 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:

 

 

 

 
  
  
 
 Three Months Ended June 30,

 
  
 

 
  
  
 
 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

 
  
 
 $

 
 19,211
 
  
  
 
 $

 
 3,095
 
  
  
 
 $

 
 14,476
 
  
  
 
 $

 
 2,390
 
  
 

 
 
 Denominator:

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Weighted-average shares outstanding

 
  
  
 31,473
 
  
  
  
 5,577
 
  
  
  
 30,678
 
  
  
  
 5,577
 
  
 

 
 
 Basic net income per share

 
  
 
 $

 
 0.61
 
  
  
 
 $

 
 0.55
 
  
  
 
 $

 
 0.47
 
  
  
 
 $

 
 0.43
 
  
 

 
 
  

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Diluted net income per share:

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Numerator:

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Allocation of net income

 
  
 
 $

 
 19,211
 
  
  
 
 $

 
 3,095
 
  
  
 
 $

 
 14,476
 
  
  
 
 $

 
 2,390
 
  
 

 
 
 Denominator:

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Number of shares used in basic computation

 
  
  
 31,473
 
  
  
  
 5,577
 
  
  
  
 30,678
 
  
  
  
 5,577
 
  
 

 
 
 Weighted-average shares effect of dilutive securities:

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Director and employee stock options

 
  
  
 305
 
  
  
  
 —
 
  
  
  
 659
 
  
  
  
 —
 
  
 

 
 
 Unvested restricted stock units

 
  
  
 113
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
 

 
 
 Number of shares used in diluted computation

 
  
  
 31,891
 
  
  
  
 5,577
 
  
  
  
 31,337
 
  
  
  
 5,577
 
  
 

 
 
 Diluted net income per share

 
  
 
 $

 
 0.60
 
  
  
 
 $

 
 0.55
 
  
  
 
 $

 
 0.46
 
  
  
 
 $

 
 0.43
 
  
 

 
 

 

 

 
  
  
 
 Six Months Ended June 30,

 
  
 

 
  
  
 
 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

 
  
 
 $

 
 29,123
 
  
  
 
 $

 
 4,693
 
  
  
 
 $

 
 36,066
 
  
  
 
 $

 
 6,005
 
  
 

 
 
 Denominator:

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Weighted-average shares outstanding

 
  
  
 31,451
 
  
  
  
 5,577
 
  
  
  
 30,401
 
  
  
  
 5,577
 
  
 

 
 
 Basic net income per share

 
  
 
 $

 
 0.93
 
  
  
 
 $

 
 0.84
 
  
  
 
 $

 
 1.19
 
  
  
 
 $

 
 1.08
 
  
 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Diluted net income per share:

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Numerator:

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Allocation of net income

 
  
 
 $

 
 29,123
 
  
  
 
 $

 
 4,693
 
  
  
 
 $

 
 36,066
 
  
  
 
 $

 
 6,005
 
  
 

 
 
 Denominator:

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Number of shares used in basic computation

 
  
  
 31,451
 
  
  
  
 5,577
 
  
  
  
 30,401
 
  
  
  
 5,577
 
  
 

 
 
 Weighted-average shares effect of dilutive securities:

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 

 
 
 Director and employee stock options

 
  
  
 346
 
  
  
  
 —
 
  
  
  
 484
 
  
  
  
 —
 
  
 

 
 
 Unvested restricted stock units

 
  
  
 113
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 —
 
  
 

 
 
 Number of shares used in diluted computation

 
  
  
 31,910
 
  
  
  
 5,577
 
  
  
  
 30,885
 
  
  
  
 5,577
 
  
 

 
 
 Diluted net income per share

 
  
 
 $

 
 0.91
 
  
  
 
 $

 
 0.84
 
  
  
 
 $

 
 1.17
 
  
  
 
 $

 
 1.08
 
  
 

 
 

 

 
 

 9

 
 

 
 Index

 

 

 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;
 
 
 

 

 
 • 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.

 

 

 
 

 10

 
 

 
 Index

 

 

 

 
 5 -
 
 Investments

 
 

 
 

 

 The amortized cost and estimated fair values of our fixed maturities and short-term investments at June 30, 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

 
  
 
 $

 
 73,827
 
  
  
 
 $

 
 44
 
  
  
 
 $

 
 73,871
 
  
  
 
 $

 
 26
 
  
  
 
 $

 
 5,394
 
  
  
 
 $

 
 68,503
 
  
 

 
 
 Obligations of states and political subdivisions

 
  
  
 462,293
 
  
  
  
 372
 
  
  
  
 462,665
 
  
  
  
 3,864
 
  
  
  
 40,279
 
  
  
  
 426,250
 
  
 

 
 
 Corporate securities

 
  
  
 260,114
 
  
  
  
 886
 
  
  
  
 261,000
 
  
  
  
 1,066
 
  
  
  
 9,025
 
  
  
  
 253,041
 
  
 

 
 
 Mortgage-backed securities

 
  
  
 7,061
 
  
  
  
 4
 
  
  
  
 7,065
 
  
  
  
 55
 
  
  
  
 149
 
  
  
  
 6,971
 
  
 

 
 
 Totals

 
  
 
 $

 
 803,295
 
  
  
 
 $

 
 1,306
 
  
  
 
 $

 
 804,601
 
  
  
 
 $

 
 5,011
 
  
  
 
 $

 
 54,847
 
  
  
 
 $

 
 754,765
 
  
 

 
 

 

 

 
  
  
 
 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

 
  
 
 $

 
 21,354
 
  
  
 
 $

 
 4
 
  
  
 
 $

 
 960
 
  
  
 
 $

 
 20,398
 
  
 

 
 
 Obligations of states and political subdivisions

 
  
  
 51,450
 
  
  
  
 633
 
  
  
  
 1,824
 
  
  
  
 50,259
 
  
 

 
 
 Corporate securities

 
  
  
 129,527
 
  
  
  
 409
 
  
  
  
 1,942
 
  
  
  
 127,994
 
  
 

 
 
 Mortgage-backed securities

 
  
  
 448,128
 
  
  
  
 1,304
 
  
  
  
 11,563
 
  
  
  
 437,869
 
  
 

 
 
 Short-term investments

 
  
 

 
 26,530
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 26,530
  
 

 
 
 Totals

 
  
 
 $

 
 676,989
 
  
  
 
 $

 
 2,350
 
  
  
 
 $

 
 16,289
 
  
  
 
 $

 
 663,050
 
  
 

 
 

 

 At June 30, 2026, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $308.7 million and an amortized cost of $334.5 million. Our holdings at June 30, 2026 also included special revenue bonds with an aggregate fair value of $167.8 million and an amortized cost of $179.6 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 June 30, 2026. Education bonds and water and sewer utility bonds represented 41% and 34%, respectively, of our total investments in special revenue bonds based on the carrying values of these investments at June 30, 2026. Many of the issuers of the special revenue bonds we held at June 30, 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 and short-term investments 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
 
  
 

 
 

 

 
 

 11

 
 

 
 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

 
  
 
 $

 
 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
 
  
 

 
 
 Short-term investments

 
  
 

 
 38,712
 
  
  
  
 —
 
  
  
  
 —
 
  
  
  
 38,712
 
  
 

 
 
 Totals

 
  
 
 $

 
 689,082
 
  
  
 
 $

 
 4,403
 
  
  
 
 $

 
 14,050
 
  
  
 
 $

 
 679,435
 
  
 

 
 

 

 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.

 

 

 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 $88,725 and $91,108 in other comprehensive (loss) income during the six months ended June 30, 2026 and 2025, respectively. At June 30, 2026 and December 31, 2025, net unrealized losses of $764,981 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 June 30, 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

 
  
 
 $

 
 26,143
 
  
  
 
 $

 
 26,081
 
  
 

 
 
 Due after one year through five years

 
  
  
 187,684
 
  
  
  
 178,070
 
  
 

 
 
 Due after five years through ten years

 
  
  
 216,730
 
  
  
  
 207,507
 
  
 

 
 
 Due after ten years

 
  
  
 366,979
 
  
  
  
 336,136
 
  
 

 
 
 Mortgage-backed securities

 
  
  
 7,065
 
  
  
  
 6,971
 
  
 

 
 
 Total held to maturity

 
  
 
 $

 
 804,601
 
  
  
 
 $

 
 754,765