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 March 31, 2025

☐	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: 30,519,896 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 May 1, 2025.

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	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults upon Senior Securities	31
Item 4.	Mine Safety Disclosure	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		33

Index

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Donegal Group Inc. and Subsidiaries

Consolidated Balance Sheets

	March 31, 2025			December 31, 2024
	(Unaudited)
Assets
Investments
Fixed maturities
Held to maturity, at amortized cost (net of allowance for expected credit losses of $1,350,820 and $1,388,240)	$	706,097,889		$	705,713,916
Available for sale, at fair value		640,456,492			617,891,862
Equity securities, at fair value		40,206,038			36,807,810
Short-term investments, at cost, which approximates fair value		20,621,831			24,558,744
Total investments		1,407,382,250			1,384,972,332
Cash		64,315,113			52,925,931
Accrued investment income		11,108,128			10,361,959
Premiums receivable		193,975,126			181,106,519
Reinsurance receivable (net of allowance for expected credit losses of $433,614 and $391,432)		403,381,615			420,741,855
Deferred policy acquisition costs		76,194,332			73,346,967
Deferred tax asset, net		17,069,472			18,769,861
Prepaid reinsurance premiums		182,859,682			176,161,872
Property and equipment, net		2,441,407			2,479,183
Accounts receivable - securities		21,612			24,924
Due from affiliate		2,898,217			8,410,090
Goodwill		5,625,354			5,625,354
Other intangible assets		958,010			958,010
Other		46,861			147,126
Total assets	$	2,368,277,179		$	2,336,031,983
Liabilities and Stockholders’ Equity
Liabilities
Losses and loss expenses	$	1,092,623,564		$	1,120,985,050
Unearned premiums		633,564,371			612,476,068
Accrued expenses		2,978,390			2,916,705
Reinsurance balances payable		3,829,775			4,345,426
Borrowings under lines of credit		35,000,000			35,000,000
Cash dividends declared to stockholders		—			6,031,078
Federal income taxes payable		6,465,068			356,103
Other		9,092,996			8,145,422
Total liabilities		1,783,554,164			1,790,255,852
Stockholders’ Equity
Preferred stock, $0.01 par value, authorized 2,000,000 shares; none issued		—			—
Class A common stock, $0.01 par value, authorized 50,000,000 shares, issued 33,429,227 and 32,954,347 shares and outstanding 30,426,639 and 29,951,759 shares		334,293			329,544
Class B common stock, $0.01 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		376,863,917			369,679,946
Accumulated other comprehensive loss		(21,472,236	)		(28,200,481	)
Retained earnings		270,166,906			245,136,987
Treasury stock, at cost		(41,226,357	)		(41,226,357	)
Total stockholders’ equity		584,723,015			545,776,131
Total liabilities and stockholders’ equity	$	2,368,277,179		$	2,336,031,983

See accompanying notes to consolidated financial statements.

Index

Donegal Group Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended March 31,
	2025			2024
Revenues:
Net premiums earned	$	232,701,889		$	227,748,679
Investment income, net of investment expenses		11,983,574			10,972,327
Net investment (losses) gains (includes $57,103 and ($77,051) accumulated other comprehensive income reclassifications)		(470,861	)		2,113,378
Lease income		76,827			81,823
Installment payment fees		882,195			224,662
Total revenues		245,173,624			241,140,869
Expenses:
Net losses and loss expenses		132,033,147			150,896,415
Amortization of deferred policy acquisition costs		39,231,000			39,602,000
Other underwriting expenses		41,194,994			41,739,868
Policyholder dividends		759,389			1,054,659
Interest		333,045			154,597
Other expenses, net		461,100			444,934
Total expenses		214,012,675			233,892,473
Income before income tax expense		31,160,949			7,248,396
Income tax expense (includes $11,992 and ($16,181) income tax expense (benefit) from reclassification items)		5,955,775			1,292,845
Net income	$	25,205,174		$	5,955,551
Net income per share:
Class A common stock - basic	$	0.72		$	0.18
Class A common stock - diluted	$	0.71		$	0.18
Class B common stock - basic and diluted	$	0.65		$	0.16

Donegal Group Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended March 31,
	2025			2024
Net income	$	25,205,174		$	5,955,551
Other comprehensive income (loss), net of tax
Unrealized income (loss) on securities:
Unrealized holding income (loss) during the period, net of income tax expense (benefit) of $1,800,510 and ($441,850)		6,773,356			(1,662,160	)
Reclassification adjustment for (gains) losses included in net income, net of income tax expense (benefit) of $11,992 and ($16,181)		(45,111	)		60,870
Other comprehensive income (loss)		6,728,245			(1,601,290	)
Comprehensive income	$	31,933,419		$	4,354,261

See accompanying notes to consolidated financial statements.

Index

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

Three Months Ended March 31, 2024

	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, 2023		30,764,555		5,649,240	$	307,646	$	56,492	$	335,694,478	$	(32,881,822	)	$	217,794,917		$	(41,226,357	)	$	479,745,354
Issuance of common stock (stock compensation plans)		38,287		—		383		—		472,740		—			—			—			473,123
Share-based compensation		16,400		—		164		—		522,460		—			—			—			522,624
Net income		—		—		—		—		—		—			5,955,551			—			5,955,551
Cash dividends declared		—		—		—		—		—		—			(8,888	)		—			(8,888	)
Grant of stock options		—		—		—		—		128,267		—			(128,267	)		—			—
Other comprehensive loss		—		—		—		—		—		(1,601,290	)		—			—			(1,601,290	)
Balance, March 31, 2024		30,819,242		5,649,240	$	308,193	$	56,492	$	336,817,945	$	(34,483,112	)	$	223,613,313		$	(41,226,357	)	$	485,086,474

See accompanying notes to consolidated financial statements.

Index

Donegal Group Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2025			2024
Cash Flows from Operating Activities:
Net income	$	25,205,174		$	5,955,551
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash items		1,020,039			966,911
Net investment losses (gains)		470,861			(2,113,378	)
Changes in assets and liabilities:
Losses and loss expenses		(28,361,486	)		(1,704,647	)
Unearned premiums		21,088,303			34,725,153
Premiums receivable		(12,868,607	)		(13,568,339	)
Deferred acquisition costs		(2,847,365	)		(3,813,704	)
Deferred income taxes		(88,129	)		474,439
Reinsurance receivable		17,360,240			5,926,208
Prepaid reinsurance premiums		(6,697,810	)		(11,033,297	)
Accrued investment income		(746,169	)		(551,627	)
Due from affiliate		5,511,873			(6,933,651	)
Reinsurance balances payable		(515,651	)		(4,742,896	)
Current income taxes		6,108,965			830,906
Accrued expenses		61,685			(261,440	)
Other, net		1,047,840			661,955
Net adjustments		544,589			(1,137,407	)
Net cash provided by operating activities		25,749,763			4,818,144
Cash Flows from Investing Activities:
Purchases of fixed maturities, held to maturity		(8,795,740	)		(11,911,672	)
Purchases of fixed maturities, available for sale		(37,872,046	)		(46,490,362	)
Purchases of equity securities, available for sale		(2,502,170	)		(786,680	)
Maturity of fixed maturities:
Held to maturity		7,057,175			8,008,034
Available for sale		23,253,617			30,922,241
Sales of fixed maturities:
Available for sale		—			2,995,648
Net purchases of property and equipment		(100	)		—
Net sales of short-term investments		3,936,913			13,445,378
Net cash used in investing activities		(14,922,351	)		(3,817,413	)
Cash Flows from Financing Activities:
Cash dividends paid		(6,037,634	)		(5,578,880	)
Issuance of common stock		6,599,404			590,916
Net cash provided by (used in) financing activities		561,770			(4,987,964	)
Net increase (decrease) in cash		11,389,182			(3,987,233	)
Cash at beginning of period		52,925,931			23,792,273
Cash at end of period	$	64,315,113		$	19,805,040

Cash paid during period - Interest	$	333,025		$	156,292
Net cash received during period - Taxes	$	56,261		$	—

See accompanying notes to consolidated financial statements.

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, 2025, we had three segments: our investment function, our commercial lines of insurance and our personal lines of insurance. The commercial lines products of our insurance subsidiaries consist primarily of commercial automobile, commercial multi-peril and workers’ compensation policies. The personal lines products of our insurance subsidiaries consist primarily of homeowners and private passenger automobile policies.

At March 31, 2025, Donegal Mutual held approximately 44% of our outstanding Class A common stock and approximately 84% 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.

Index

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

We recommend you read the interim financial statements we include in this Form 10-Q Report in conjunction with the financial statements and the notes to our financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2024 that we filed with the Securities and Exchange Commission (“SEC”) on March 10, 2025.

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 March 31,
	2025				2024
	Class A		Class B		Class A		Class B
	(in thousands, except per share data)
Basic net income per share:
Numerator:
Allocation of net income	$	21,575	$	3,630	$	5,039	$	917
Denominator:
Weighted-average shares outstanding		30,121		5,577		27,811		5,577
Basic net income per share	$	0.72	$	0.65	$	0.18	$	0.16

Diluted net income per share:
Numerator:
Allocation of net income	$	21,575	$	3,630	$	5,039	$	917
Denominator:
Number of shares used in basic computation		30,121		5,577		27,811		5,577
Weighted-average shares effect of dilutive securities:
Director and employee stock options		309		—		35		—
Number of shares used in diluted computation		30,430		5,577		27,846		5,577
Diluted net income per share	$	0.71	$	0.65	$	0.18	$	0.16

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

Index

	Three Months Ended March 31,
	2025		2024

Number of options to purchase Class A shares excluded		—		1,693,904

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. They require their reinsurers to maintain 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 2025:

•

excess of loss reinsurance, under which Donegal Mutual and our insurance subsidiaries recover losses over a set retention of $4.0 million for all property losses, $6.0 million for all liability losses except workers’ compensation losses and $3.0 million for all workers’ compensation losses; and

•

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

For property insurance, our insurance subsidiaries have excess of loss reinsurance that provides coverage of $36.0 million per loss over a set retention of $4.0 million. For liability insurance, our insurance subsidiaries have excess of loss reinsurance that provides coverage of $69.0 million per occurrence over a set retention of $6.0 million. For workers’ compensation insurance, our insurance subsidiaries have excess of loss reinsurance that provides coverage of $17.0 million on any one life over a set retention of $3.0 million.

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.

Index

In order to write automobile insurance in the state of Michigan, Atlantic States, MICO and Peninsula are required to be members of the Michigan Catastrophic Claims Association (“MCCA”). The MCCA provides reinsurance to Atlantic States, MICO and Peninsula 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, 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		$	86,119		$	51		$	86,170		$	49		$	6,856		$	79,363
Obligations of states and political subdivisions			369,481			264			369,745			653			51,774			318,624
Corporate securities			239,967			1,030			240,997			461			11,261			230,197
Mortgage-backed securities			10,531			6			10,537			36			265			10,308
Totals		$	706,098		$	1,351		$	707,449		$	1,199		$	70,156		$	638,492

	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	$	89,394	$	266	$	2,779	$	86,881
Obligations of states and political subdivisions	$	42,642		13		4,249		38,406
Corporate securities		210,863		373		6,208		205,028
Mortgage-backed securities		323,759		1,117		14,735		310,141
Totals	$	666,658	$	1,769	$	27,971	$	640,456

At March 31, 2025, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $229.6 million and an amortized cost of $268.0 million. Our holdings at March 31, 2025 also included special revenue bonds with an aggregate fair value of $127.4 million and an amortized cost of $144.4 million. With respect to both categories of bonds, we held no securities of any issuer that comprised more than 10% of that category at March 31, 2025. Education bonds and water and sewer utility bonds represented 46% and 37%, respectively, of our total investments in special revenue bonds based on the carrying values of these investments at March 31, 2025. Many of the issuers of the special revenue bonds we held at March 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.

Index

The amortized cost and estimated fair values of our fixed maturities at December 31, 2024 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		$	86,579		$	52		$	86,631		$	—		$	8,484		$	78,147
Obligations of states and political subdivisions			371,896			260			372,155			650			54,062			318,743
Corporate securities			236,550			1,070			237,621			273			13,608			224,286
Mortgage-backed securities			10,689			6			10,695			—			302			10,393
Totals		$	705,714		$	1,388		$	707,102		$	923		$	76,456		$	631,569

	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	$	87,514	$	51	$	3,772	$	83,793
Obligations of states and political subdivisions		41,694		9		4,299		37,404
Corporate securities		211,059		142		8,269		202,932
Mortgage-backed securities		312,298		216		18,751		293,763
Totals	$	652,565	$	418	$	35,091	$	617,892

At December 31, 2024, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $233.1 million and an amortized cost of $272.5 million. Our holdings also included special revenue bonds with an aggregate fair value of $123.0 million and an amortized cost of $141.3 million. With respect to both categories of bonds, we held no securities of any issuer that comprised more than 10% of that category at December 31, 2024. Education bonds and water and sewer utility bonds represented 44% and 37%, respectively, of our total investments in special revenue bonds based on their carrying values at December 31, 2024. Many of the issuers of the special revenue bonds we held at December 31, 2024 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held are similar to general obligation bonds.

We have segregated within accumulated other comprehensive loss the net unrealized losses of $15.1 million arising prior to the November 30, 2013 reclassification date for fixed maturities reclassified from available for sale to held to maturity. We are amortizing this balance over the remaining life of the related securities as an adjustment of yield in a manner consistent with the accretion of discount on the same fixed maturities. We recorded amortization of $45,199 and $48,577 in other comprehensive income (loss) during the three months ended March 31, 2025 and 2024, respectively. At March 31, 2025 and December 31, 2024, net unrealized losses of $1.0 million remained within accumulated other comprehensive loss.

Index

We show below the amortized cost and estimated fair value of our fixed maturities at March 31, 2025 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	$	27,291	$	27,192
Due after one year through five years		135,440		129,487
Due after five years through ten years		256,131		239,308
Due after ten years		278,050		232,197
Mortgage-backed securities		10,537		10,308
Total held to maturity	$	707,449	$	638,492

Available for sale
Due in one year or less	$	40,789	$	40,437
Due after one year through five years		157,989		153,196
Due after five years through ten years		119,738		115,449
Due after ten years		24,383		21,233
Mortgage-backed securities		323,759		310,141
Total available for sale	$	666,658	$	640,456

The cost and estimated fair values of our equity securities at March 31, 2025 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	28,686	$	11,592	$	72	$	40,206

The cost and estimated fair values of our equity securities at December 31, 2024 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	24,726	$	12,087	$	5	$	36,808

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,
	2025			2024
	(in thousands)
Gross realized gains:
Fixed maturities	$	54		$	4
Equity securities		—			—
		54			4
Gross realized losses:
Fixed maturities		—			81
Equity securities		—			—
		—			81
Net realized gains (losses)		54			(77	)
Gross unrealized gains on equity securities		573			2,256
Gross unrealized losses on equity securities		(1,135	)		(63	)
Fixed maturities - credit impairment charges		37			(3	)
Net investment (losses) gains	$	(471	)	$	2,113

We held fixed maturities with unrealized losses representing declines that we considered temporary at March 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	$	15,685	$	40	$	112,772	$	9,595
Obligations of states and political subdivisions		38,566		995		289,182		55,028
Corporate securities		59,540		607		304,416		16,862
Mortgage-backed securities		46,849		349		149,315		14,651
Totals	$	160,640	$	1,991	$	855,685	$	96,136

We held fixed maturities with unrealized losses representing declines that we considered temporary at December 31, 2024 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	$	37,528	$	350	$	112,322	$	11,907
Obligations of states and political subdivisions		37,675		824		292,852		57,537
Corporate securities		83,343		1,505		311,436		20,371
Mortgage-backed securities		112,950		1,262		153,960		17,791
Totals	$	271,496	$	3,941	$	870,570	$	107,606

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 841 debt securities that were in an unrealized loss position at March 31, 2025. Based upon our analysis of general market conditions and underlying factors impacting these debt securities, we considered these declines in value to be temporary.

We 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.

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, which 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.

Index

Financial data by segment is as follows:

	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

Index

	Three Months Ended March 31, 2024
	Investments		Commercial Lines			Personal Lines			Total
	(in thousands)
Revenues:
Net premiums earned	$	—	$	132,092		$	95,657		$	227,749
Net investment income		10,972		—			—			10,972
Investment gains		2,113		—			—			2,113
Total segment revenues		13,085		132,092			95,657			240,834
Other										307
Total revenues									$	241,141
Segment expenses:
Net losses and loss expenses		—		87,230			65,499			152,729
Other underwriting expenses		—		54,178			30,690			84,868
Policyholder dividends		—		1,055			—			1,055
Total segment expenses		—		142,463			96,189			238,652
SAP underwriting loss		—		(10,371	)		(532	)		(10,903	)
GAAP adjustments										5,359
GAAP underwriting loss										(5,544	)
Net investment income										10,972
Investment gains										2,113
Other										(293	)
Income before income tax expense									$	7,248

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

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, 2025. 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, 2025.

FHLB of Pittsburgh stock purchased and owned	$	1,605,000
Collateral pledged, at par (carrying value $44,095,307)		46,733,730
Borrowing capacity currently available		6,614,599

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.

Index

We recorded compensation expense related to our stock compensation plans of $296,936 and $286,001 for the three months ended March 31, 2025 and 2024, respectively, with a corresponding income tax benefit of $62,357 and $60,060, respectively. At March 31, 2025, we had $1.5 million of unrecognized compensation expense related to nonvested share-based compensation granted under our stock compensation plans that we expect to recognize over a weighted average period of approximately 1.8 years.

We received cash from option exercises under all stock compensation plans during the three months ended March 31, 2025 and 2024 of $6.3 million and $236,624, respectively. We realized actual tax benefits for the tax deductions related to those option exercises of $300,981 and $1,719 for the three months ended March 31, 2025 and 2024, 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.

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, 2025, we received two estimates per security from the pricing services, and we priced substantially all of our Level 1 and Level 2 investments using those prices. In our review of the estimates the pricing services provided at March 31, 2025, we did not identify any material discrepancies, and we did not make any adjustments to the estimates the pricing services provided.

Index

We present our cash and short-term investments at estimated fair value. We classify these items as Level 1.

The carrying values in our balance sheet for premium receivables, reinsurance receivables related to paid losses and loss expenses and reinsurance balances payable approximate their fair values. The carrying amounts reported in the balance sheet for our borrowings under lines of credit approximate their fair values. We classify these items as Level 3.

We evaluate our assets and liabilities on a regular basis to determine the appropriate level at which to classify them for each reporting period. Based on our review of the methodology and summary of inputs the pricing services use, we have concluded that our Level 1 and Level 2 investments were classified properly at March 31, 2025 and December 31, 2024.

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at March 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	$	86,881	$	—	$	86,881	$	—
Obligations of states and political subdivisions		38,406		—		38,406		—
Corporate securities		205,028		—		205,028		—
Mortgage-backed securities		310,141		—		310,141		—
Equity securities		40,206		38,106		2,100		—
Total investments in the fair value hierarchy	$	680,662	$	38,106	$	642,556	$	—

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at December 31, 2024:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
U.S. Treasury securities and obligations of U.S.government corporations and agencies	$	83,793	$	—	$	83,793	$	—
Obligations of states and political subdivisions		37,404		—		37,404		—
Corporate securities		202,932		—		202,932		—
Mortgage-backed securities		293,763		—		293,763		—
Equity securities		36,808		34,708		2,100		—
Totals	$	654,700	$	34,708	$	619,992	$	—

Index

10 -	Income Taxes

At March 31, 2025 and December 31, 2024, 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 $7.6 million for our net state operating loss carryforward, which will expire between 2025 and 2044. We have determined that we are not required to establish a valuation allowance for our other deferred tax assets of $36.0 million and $37.5 million at March 31, 2025 and December 31, 2024, respectively, because it is more likely than not that we will realize these deferred tax assets through reversals of existing temporary differences, future taxable income and the implementation of tax planning strategies.

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.

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

	Three Months Ended March 31,
	2025			2024
	(in thousands)
Balance at January 1	$	1,120,985		$	1,126,157
Less reinsurance recoverable		(416,621	)		(437,014	)
Net balance at January 1		704,364			689,143
Incurred related to:
Current year		142,546			159,289
Prior years		(10,513	)		(8,393	)
Total incurred		132,033			150,896
Paid related to:
Current year		42,926			47,886
Prior years		97,274			98,197
Total paid		140,200			146,083
Net balance at end of period		696,197			693,956
Plus reinsurance recoverable		396,427			430,496
Balance at end of period	$	1,092,624		$	1,124,452

Our insurance subsidiaries recognized a decrease in their liabilities for losses and loss expenses of prior years of $10.5 million and $8.4 million for the three months ended March 31, 2025 and 2024, respectively. Our insurance subsidiaries made no significant changes in their reserving philosophy or claims management personnel, and they have made no significant offsetting changes in estimates that increased or decreased their loss and loss expense reserves in those years. The 2025 development represented 1.5% of the December 31, 2024 net carried reserves and resulted 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. The 2024 development represented 1.2% of the December 31, 2023 net carried reserves and resulted from lower-than-expected loss emergence or severity primarily in the commercial multi-peril, commercial automobile and homeowners lines of business. The majority of the 2024 development related to decreases in the liabilities for losses and loss expenses of prior years for Atlantic States and MICO.

Index

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, 2025.

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 on which they receive notice of a liability claim. Changes in the length of time between the loss occurrence date and the claim reporting date affect the actuaries’ ability to 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.

Index

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 that 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, 2025 and 2024 and changes in the allowance for expected credit losses for the three months ended March 31, 2025 and 2024.

	At and For the Three Months Ended March 31, 2025					At and For the Three Months Ended March 31, 2024
	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	$	705,714	$	1,388		$	679,497	$	1,326
Current period change for expected credit losses				(37	)				3
Balance at end of period	$	706,098	$	1,351		$	683,399	$	1,329

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, 2025 and 2024, and the changes in the allowance for expected credit losses for the three months ended March 31, 2025 and 2024.

	At and For the Three Months Ended March 31, 2025				At and For the Three Months Ended March 31, 2024
	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	$	420,742	$	391	$	441,431	$	1,394
Current period change for expected credit losses				43				(368	)
Balance at end of period	$	403,382	$	434	$	435,505	$	1,026

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.

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Item 2.

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

We recommend that you read the following information in conjunction with the historical financial information and the footnotes to that financial information we include in this Quarterly Report on Form 10-Q. We also recommend you read Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024.

Critical Accounting Policies and Estimates

We combine our financial statements with those of our insurance subsidiaries and present them on a consolidated basis in accordance with United States generally accepted accounting principles (“GAAP”).

Our insurance subsidiaries make estimates and assumptions that can have a significant effect on amounts and disclosures we report in our financial statements. The most significant estimates relate to the reserves of our insurance subsidiaries for property and casualty insurance unpaid losses and loss expenses. While we believe our estimates and the estimates of our insurance subsidiaries are appropriate, the ultimate amounts may differ from the estimates we provided. We regularly review our methods for making these estimates and we reflect any adjustment we consider necessary in our results of operations for the period in which we make an adjustment.

Liabilities for Losses and Loss Expenses

Liabilities for losses and loss expenses are estimates at a given point in time of the amounts an insurer expects to pay with respect to incurred policyholder claims based on facts and circumstances the insurer knows at that point in time. For example, legislative, judicial and regulatory actions may expand coverage definitions, retroactively mandate coverage or otherwise require our insurance subsidiaries to pay losses for damages that their policies explicitly excluded or did not intend to cover. At the time of establishing its estimates, an insurer recognizes that its ultimate liability for losses and loss expenses will exceed or be less than such estimates. Our insurance subsidiaries base their estimates of liabilities for losses and loss expenses on assumptions as to future loss trends, expected claims severity, judicial theories of liability and other factors. However, during the loss adjustment period, our insurance subsidiaries may learn additional facts regarding individual claims, and, consequently, it often becomes necessary for our insurance subsidiaries to refine and adjust their estimates for these liabilities. We reflect any adjustments to the liabilities for losses and loss expenses of our insurance subsidiaries in our consolidated results of operations in the period in which our insurance subsidiaries make adjustments to their estimates.

Our insurance subsidiaries maintain liabilities for the payment of losses and loss expenses with respect to both reported and unreported claims. Our insurance subsidiaries establish these liabilities for the purpose of covering the ultimate costs of settling all losses, including investigation and litigation costs. Our insurance subsidiaries base the amount of their liability for reported losses primarily upon a case-by-case evaluation of the type of risk involved, knowledge of the circumstances surrounding each claim and the insurance policy provisions relating to the type of loss the policyholder incurred. Our insurance subsidiaries determine the amount of their liability for unreported claims and loss expenses on the basis of historical information by line of insurance. Our insurance subsidiaries account for inflation in the reserving function through analysis of costs and trends and reviews of historical reserving results. Our insurance subsidiaries monitor their liabilities closely and recompute them periodically using new information on reported claims and a variety of statistical techniques. Our insurance subsidiaries do not discount their liabilities for losses and loss expenses.

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Reserve estimates can change over time because of unexpected changes in assumptions related to our insurance subsidiaries’ external environment and, to a lesser extent, assumptions related to our insurance subsidiaries’ internal operations. For example, our insurance subsidiaries have experienced an increase in claims severity and a lengthening of the claim settlement periods on bodily injury claims during the past several years. In addition, the COVID-19 pandemic and related government mandates and restrictions resulted in various changes from historical claims reporting and settlement trends during 2020 and resulted in significant increases in loss costs in subsequent years due to a number of factors, including supply chain disruption, higher new and used automobile values, increases in the cost of replacement automobile parts and rising labor rates. These trend changes caused significant disruption to historical loss patterns and give rise to greater uncertainty as to the pattern of future loss settlements. Related uncertainties regarding future trends include social inflation, availability and cost of replacement automobile parts and building materials, availability and cost of skilled labor, the rate of specialized plaintiff attorney involvement in claims, plaintiff attorney utilization of litigation financing and the cost of medical technologies and procedures. While we did not see a material impact in the first quarter of 2025, we are monitoring the impact of tariffs and other inflationary factors, which may result in increases in loss costs in the future. Assumptions related to our insurance subsidiaries’ external environment include the absence of significant changes in tort law and the legal environment that increase liability exposure, consistency in judicial interpretations of insurance coverage and policy provisions and the rate of loss cost inflation. Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business and consistency in reinsurance coverage and collectability of reinsured losses, among other items. To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes. Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at March 31, 2025. For every 1% change in our insurance subsidiaries’ loss and loss expense reserves, net of reinsurance recoverable, the effect on our pre-tax results of operations would be approximately $7.0 million.

The establishment of appropriate liabilities is an inherently uncertain process and we can provide no assurance that our insurance subsidiaries’ ultimate liability will not exceed our insurance subsidiaries’ loss and loss expense reserves and have an adverse effect on our results of operations and financial condition. Furthermore, we cannot predict the timing, frequency and extent of adjustments to our insurance subsidiaries’ estimated future liabilities, because the historical conditions and events that serve as a basis for our insurance subsidiaries’ estimates of ultimate claim costs may change. As is the case for substantially all property and casualty insurance companies, our insurance subsidiaries have found it necessary in the past to increase their estimated future liabilities for losses and loss expenses in certain periods and, in other periods, their estimated future liabilities for losses and loss expenses have exceeded their actual liabilities for losses and loss expenses. Changes in our insurance subsidiaries’ estimates of their liability for losses and loss expenses generally reflect actual payments and their evaluation of information received subsequent to the prior reporting period.

Excluding the impact of severe weather events and the COVID-19 pandemic, our insurance subsidiaries have noted stable amounts in the number of claims incurred and the number of claims outstanding at period ends relative to their premium base in recent years across most of their lines of business. However, the amount of the average claim outstanding has increased gradually over the past several years due to various factors such as increased property and automobile repair and replacement costs, rising medical loss costs and increased litigation trends and lengthening of repair completion times for property and automobile claims. We have also experienced a general slowing of settlement rates in litigated claims and lengthening of repair completion times for property and automobile claims. Our insurance subsidiaries could have to make further adjustments to their estimates in the future. However, on the basis of our insurance subsidiaries’ internal procedures, which analyze, among other things, their prior assumptions, their experience with similar cases and historical trends such as reserving patterns, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, economic conditions and public attitudes, we believe that our insurance subsidiaries have made adequate provision for their liability for losses and loss expenses.

Atlantic States’ participation in the underwriting pool with Donegal Mutual exposes Atlantic States to adverse loss development on the business that Donegal Mutual contributes to the underwriting pool. However, pooled business represents the predominant percentage of the net underwriting activity of both companies, and Donegal Mutual and Atlantic States share proportionately any adverse risk development relating to the pooled business. The business in the underwriting pool is homogeneous and each company has a pro-rata share of the entire underwriting pool. Since the predominant percentage of the business of Atlantic States and Donegal Mutual is pooled and the results shared by each company according to its participation level under the terms of the pooling agreement, the intent of the underwriting pool is to produce a more uniform and stable underwriting result from year to year for each company than either would experience individually and to spread the risk of loss between the companies.

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Our insurance subsidiaries’ liabilities for losses and loss expenses by major line of business at March 31, 2025 and December 31, 2024 consisted of the following:

	March 31, 2025		December 31, 2024
	(in thousands)
Commercial lines:
Automobile	$	172,468	$	180,757
Workers’ compensation		132,456		129,406
Commercial multi-peril		212,283		208,676
Other		39,389		39,336
Total commercial lines		556,596		558,175
Personal lines:
Automobile		110,817		116,693
Homeowners		25,760		26,591
Other		3,024		2,905
Total personal lines		139,601		146,189
Total commercial and personal lines		696,197		704,364
Plus reinsurance recoverable		396,427		416,621
Total liabilities for losses and loss expenses	$	1,092,624	$	1,120,985

We have evaluated the effect on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we consider in establishing the loss and loss expense reserves of our insurance subsidiaries. We established the range of reasonably likely changes based on a review of changes in accident-year development by line of business and applied those changes to our insurance subsidiaries’ loss and loss expense reserves as a whole. The range we selected does not necessarily indicate what could be the potential best or worst case or the most likely scenario. The following table sets forth the estimated effect on our insurance subsidiaries’ loss and loss expense reserves and our stockholders’ equity in the event of reasonably likely changes in the variables we considered in establishing the loss and loss expense reserves of our insurance subsidiaries:

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Percentage Change in Loss and Loss Expense Reserves Net of Reinsurance	Adjusted Loss and Loss Expense Reserves Net of Reinsurance at March 31, 2025	Percentage Change in Stockholders’ Equity at March 31, 2025(1)	Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2024	Percentage Change in Stockholders’ Equity at December 31, 2024(1)
(dollars in thousands)
(10.0)%	$626,577	9.4%	$633,928	10.2%
(7.5)	643,982	7.1	651,537	7.6
(5.0)	661,387	4.7	669,146	5.1
(2.5)	678,792	2.4	686,755	2.5
Base	696,197	—	704,364	—
2.5	713,602	(2.4)	721,973	(2.5)
5.0	731,007	(4.7)	739,582	(5.1)
7.5	748,412	(7.1)	757,191	(7.6)
10.0	765,817	(9.4)	774,800	(10.2)

(1)	Net of income tax effect.

Non-GAAP Information

We prepare our consolidated financial statements on the basis of GAAP. Our insurance subsidiaries also prepare financial statements based on statutory accounting principles state insurance regulators prescribe or permit (“SAP”). SAP financial measures are considered non-GAAP financial measures under applicable SEC rules because the SAP financial measures include or exclude certain items that the most comparable GAAP financial measures do not ordinarily include or exclude. Our calculation of non-GAAP financial measures may differ from similar measures other companies use, so investors should exercise caution when comparing our non-GAAP financial measures to the non-GAAP financial measures other companies use.

Because our insurance subsidiaries do not prepare GAAP financial statements, we evaluate the performance of our personal lines and commercial lines segments utilizing SAP financial measures that reflect the growth trends and underwriting results of our insurance subsidiaries. The SAP financial measures we utilize are net premiums written and statutory combined ratio.

Net Premiums Written

We define net premiums written as the amount of full-term premiums our insurance subsidiaries record for policies effective within a given period less premiums our insurance subsidiaries cede to reinsurers. Net premiums earned is the most comparable GAAP financial measure to net premiums written. Net premiums earned represent the sum of the amount of net premiums written and the change in net unearned premiums during a given period. Our insurance subsidiaries earn premiums and recognize them as revenue over the terms of their policies, which are one year or less in duration. Therefore, increases or decreases in net premiums earned generally reflect increases or decreases in net premiums written in the preceding 12-month period compared to the comparable period one year earlier.

The following table provides a reconciliation of our net premiums earned to our net premiums written for the three months ended March 31, 2025:

	Commercial Lines		Personal Lines			Total
(in thousands)
Net premiums earned	$	136,216	$	96,486		$	232,702
Change in net unearned premiums		24,402		(10,012	)		14,390
Net premiums written	$	160,618	$	86,474		$	247,092

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The following table provides a reconciliation of our net premiums earned to our net premiums written for the three months ended March 31, 2024:

	Commercial Lines		Personal Lines		Total
(in thousands)
Net premiums earned	$	132,092	$	95,657	$	227,749
Change in net unearned premiums		23,402		291		23,693
Net premiums written	$	155,494	$	95,948	$	251,442

Statutory Combined Ratio

The combined ratio is a standard measurement of underwriting profitability for an insurance company. The combined ratio does not reflect investment income, net investment gains or losses, federal income taxes or other non-operating income or expense. A combined ratio of less than 100% generally indicates underwriting profitability.

The statutory combined ratio is a non-GAAP financial measure that is based upon amounts determined under SAP. We calculate our statutory combined ratio as the sum of:

•

the statutory loss ratio, which is the ratio of calendar-year net incurred losses and loss expenses to net premiums earned;

•

the statutory expense ratio, which is the ratio of expenses incurred for net commissions, premium taxes and underwriting expenses to net premiums written; and

•

the statutory dividend ratio, which is the ratio of dividends to holders of workers’ compensation policies to net premiums earned.

The calculation of our statutory combined ratio differs from the calculation of our GAAP combined ratio. In calculating our GAAP combined ratio, we do not deduct installment payment fees from incurred expenses, and we base the expense ratio on net premiums earned instead of net premiums written. Differences between our GAAP loss ratio and our statutory loss ratio result from anticipating salvage and subrogation recoveries for our GAAP loss ratio but not for our statutory loss ratio.

Combined Ratios

The following table presents comparative details with respect to our GAAP and statutory combined ratios for the three months ended March 31, 2025 and 2024:

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	Three Months Ended March 31,
	2025			2024
GAAP Combined Ratios (Total Lines)
Loss ratio - core losses		54.2	%		58.7	%
Loss ratio - weather-related losses		3.7			4.7
Loss ratio - large fire losses		3.3			6.6
Loss ratio - net prior-year reserve development		(4.5	)		(3.7	)
Loss ratio		56.7			66.3
Expense ratio		34.6			35.7
Dividend ratio		0.3			0.4
Combined ratio		91.6	%		102.4	%

Statutory Combined Ratios
Commercial lines:
Automobile		91.4	%		99.6	%
Workers’ compensation		117.6			111.2
Commercial multi-peril		90.3			102.7
Other		80.8			82.2
Total commercial lines		94.7			101.6
Personal lines:
Automobile		85.0			99.8
Homeowners		83.8			102.9
Other		56.6			85.2
Total personal lines		83.6			100.3
Total commercial and personal lines		90.3			101.2

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Results of Operations - Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the first quarter of 2025 were $232.7 million, an increase of $5.0 million, or 2.2%, compared to $227.7 million for the first quarter of 2024, primarily reflecting solid premium retention and renewal premium increases.

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the first quarter of 2025 were $247.1 million, a decrease of $4.4 million, or 1.7%, from the $251.4 million of net premiums written for the first quarter of 2024. Commercial lines net premiums written increased $5.1 million, or 3.3%, for the first quarter of 2025 compared to the first quarter of 2024. Personal lines net premiums written decreased $9.5 million, or 9.9%, for the first quarter of 2025 compared to the first quarter of 2024. We attribute the increase in commercial lines net premiums written primarily to solid retention and a continuation of renewal premium increases in lines other than workers’ compensation, offset partially by lower new business writings. We attribute the decrease in personal lines net premiums written primarily to planned attrition due to lower new business writings and non-renewal actions, offset partially by a continuation of renewal premium rate increases and solid retention.

Investment Income. Our net investment income was $12.0 million for the first quarter of 2025, an increase of $1.0 million, or 9.2%, compared to $11.0 million for the first quarter of 2024. We attribute the increase primarily to an increase in the average investment yield and higher average invested assets relative to the first quarter of 2024.

Net Investment (Losses) Gains. Net investment losses for the first quarter of 2025 were $470,861, compared to net investment gains of $2.1 million for the first quarter of 2024. The net investment losses for the first quarter of 2025 resulted primarily from the net change in unrealized gains and losses within our equity securities portfolio at March 31, 2025. We did not recognize any impairment losses for individual securities in our investment portfolio during the first quarter of 2025 or 2024.

Losses and Loss Expenses. Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 56.7% for the first quarter of 2025, a decrease from our insurance subsidiaries’ loss ratio of 66.3% for the first quarter of 2024. We attribute this decrease primarily to decreased core losses and large fire losses, which we define as individual fire losses in excess of $50,000. The core loss ratio, which excludes weather-related losses, large fire losses and net favorable development of reserves for losses incurred in prior accident years, was 54.2% for the first quarter of 2025, compared to 58.7% for the first quarter of 2024. For the commercial lines segment, the core loss ratio of 58.3% for the first quarter of 2025 decreased modestly from 59.0% for the first quarter of 2024. For the personal lines segment, the core loss ratio of 48.7% for the first quarter of 2025 decreased significantly from 58.1% for the first quarter of 2024, due largely to the favorable impact of ongoing premium rate increases on net premiums earned for that segment. Weather-related losses were $8.6 million, or 3.7 percentage points of the loss ratio, for the first quarter of 2025, compared to $10.8 million, or 4.7 percentage points of the loss ratio, for the first quarter of 2024. The impact of weather-related loss activity to the loss ratio for the first quarter of 2025 was modestly lower than our previous five-year first-quarter average of 4.6 percentage points of the loss ratio. Large fire losses for the first quarter of 2025 were $7.7 million, or 3.3 percentage points of the loss ratio, compared to $15.0 million, or 6.6 percentage points of the loss ratio, for the first quarter of 2024. Our insurance subsidiaries’ commercial lines loss ratio was 59.7% for the first quarter of 2025, compared to 65.4% for the first quarter of 2024, primarily due to decreases in commercial multi-peril and commercial automobile loss ratios, offset by an increase in the workers’ compensation loss ratio. The personal lines loss ratio of our insurance subsidiaries decreased to 52.5% for the first quarter of 2025, compared to 67.6% for the first quarter of 2024. We attribute this decrease primarily to decreases in the homeowners and personal automobile loss ratios. Our insurance subsidiaries experienced favorable loss reserve development for the first quarter of 2025 of approximately $10.5 million that decreased the loss ratio by 4.5 percentage points, compared to $8.4 million that decreased the loss ratio for the first quarter of 2024 by 3.7 percentage points. Our insurance subsidiaries experienced favorable development primarily in the commercial automobile, commercial multi-peril and personal automobile lines of business, offset partially by modest unfavorable development in workers’ compensation for the first quarter of 2025.

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Underwriting Expenses. The expense ratio for an insurance company is the ratio of policy acquisition costs and other underwriting expenses to premiums earned. The expense ratio of our insurance subsidiaries was 34.6% for the first quarter of 2025, compared to 35.7% for the first quarter of 2024. The decrease in the expense ratio primarily reflected the favorable impact of ongoing expense management initiatives, offset partially by higher underwriting-based incentive costs for agents and employees. The impact from costs that Donegal Mutual Insurance Company allocated to our insurance subsidiaries related to its ongoing systems modernization project peaked at approximately 1.3 percentage points of the full year 2024 expense ratio, and we expect that impact to subside gradually over the next several years. Allocated costs related to that project represented approximately 1.2 percentage points of the expense ratio for the first quarter of 2025, and we expect the full year 2025 expense ratio impact will be approximately 1.0 percentage point.

Combined Ratio. The combined ratio represents the sum of the loss ratio, the expense ratio and the dividend ratio, which is the ratio of policyholder dividends incurred to premiums earned. Our insurance subsidiaries’ combined ratios were 91.6% and 102.4% for the first quarter of 2025 and 2024, respectively. We attribute the decrease in the combined ratio primarily to the decrease in the loss ratio for the first quarter of 2025 compared to the first quarter of 2024.

Income Tax Expense. We recorded income tax expense of $6.0 million for the first quarter of 2025, representing an effective tax rate of 19.1%. We recorded income tax expense of $1.3 million for the first quarter of 2024, representing an effective tax rate of 17.8%. The income tax tax expense for the first quarter of 2025 and 2024 represented estimates based on our projected annual taxable income and effective tax rates.

Net Income and Net Income Per Share. Our net income for the first quarter of 2025 was $25.2 million, or $.71 per share of Class A common stock on a diluted basis and $.65 per share of Class B common stock, compared to $6.0 million, or $.18 per share of Class A common stock on a diluted basis and $.16 per share of Class B common stock, for the first quarter of 2024. We had 30.4 million and 27.8 million Class A shares outstanding at March 31, 2025 and 2024, respectively. We had 5.6 million Class B shares outstanding at the end of both periods.

Liquidity and Capital Resources

Liquidity is a measure of an entity’s ability to secure enough cash to meet its contractual obligations and operating needs as they arise. Our major sources of funds from operations are the net cash flows we generate from our insurance subsidiaries’ underwriting results, investment income and maturing investments.

We have historically generated sufficient net positive cash flow to fund our commitments and add to our investment portfolio, thereby increasing future investment returns. The pooling agreement with Donegal Mutual historically has been cash-flow positive because of the profitability of the underwriting pool. Because we settle the pool monthly, our cash flows are substantially similar to the cash flows that would result from the underwriting of direct business. We maintain a high degree of liquidity in our investment portfolio in the form of marketable fixed maturities, equity securities and short-term investments. We structure our fixed-maturity investment portfolio following a “laddering” approach, so that projected cash flows from investment income and principal maturities are evenly distributed from a timing perspective. This laddering approach provides an additional measure of liquidity to meet our obligations and the obligations of our insurance subsidiaries should an unexpected variation occur in the future. Net cash flows provided by operating activities in the first three months of 2025 and 2024 were $25.7 million and $4.8 million, respectively.

At March 31, 2025, we had no outstanding borrowings under our line of credit with M&T and had the ability to borrow up to $20.0 million at interest rates equal to the then-current Term SOFR rate plus 2.11%. At March 31, 2025, Atlantic States had a $35.0 million outstanding advance with the FHLB of Pittsburgh that carries a fixed interest rate of 3.806% and is due in September 2026. We discuss in Note 7 – Borrowings our estimate of the timing of the amounts payable for the borrowings under our lines of credit based on their contractual maturities.

We estimate the timing of claim payments associated with the liabilities for losses and loss expenses of our insurance subsidiaries based on historical experience and expectations of future payment patterns. Amounts Atlantic States assumes pursuant to the pooling agreement with Donegal Mutual represent a substantial portion of our insurance subsidiaries’ gross liabilities for losses and loss expenses, and amounts Atlantic States cedes pursuant to the pooling agreement represent a substantial portion of our insurance subsidiaries’ reinsurance recoverable on unpaid losses and loss expenses. We include cash settlement of Atlantic States’ assumed liabilities from the pool in monthly settlements of pooled activity, as we net amounts ceded to and assumed from the pool. Although Donegal Mutual and we do not anticipate any changes in the pool participation levels in the foreseeable future, any such change would be prospective in nature and therefore would not impact the timing of expected payments by Atlantic States for its percentage share of pooled losses occurring in periods prior to the effective date of such change.

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On July 18, 2013, our board of directors authorized a share repurchase program pursuant to which we have the authority to purchase up to 500,000 shares of our Class A common stock at prices prevailing from time to time in the open market subject to the provisions of the SEC Rule 10b-18 and in privately negotiated transactions. We did not purchase any shares of our Class A common stock under this program during the three months ended March 31, 2025 or 2024. We have purchased a total of 57,658 shares of our Class A common stock under this program from its inception through March 31, 2025.

On April 17, 2025, our board of directors declared quarterly cash dividends of $.1825 per share of our Class A common stock and $.165 per share of our Class B common stock, payable on May 15, 2025 to our stockholders of record as of the close of business on May 1, 2025. There are no regulatory restrictions on our payment of dividends to our stockholders, although there are restrictions under applicable state laws on the payment of dividends from our insurance subsidiaries to us, which is a significant source of cash for payment of stockholder dividends by us. Our insurance subsidiaries are required by law to maintain minimum surplus on a statutory basis and are subject to regulations under which their payment of dividends from statutory surplus is restricted and may require prior approval of their domiciliary insurance regulatory authorities. Our insurance subsidiaries are also subject to risk based capital (“RBC”) requirements. The amount of statutory capital and surplus necessary for our insurance subsidiaries to satisfy regulatory requirements, including the RBC requirements, was not significant in relation to our insurance subsidiaries’ statutory capital and surplus at December 31, 2024. Our insurance subsidiaries did not pay any dividends to us during the first three months of 2025. Amounts remaining available for distribution to us as dividends from our insurance subsidiaries without prior approval of their domiciliary insurance regulatory authorities in 2025 are $40.7 million from Atlantic States, $7.8 million from MICO and $4.7 million from Peninsula, or a total of approximately $53.3 million.

At March 31, 2025, we had no material commitments for capital expenditures.

Equity Price Risk

Our portfolio of marketable equity securities, which we carry on our consolidated balance sheets at estimated fair value, has exposure to the risk of loss resulting from an adverse change in prices. We manage this risk by having our investment personnel perform an analysis of prospective investments and regular reviews of our portfolio of equity securities.

Credit Risk

Our portfolio of fixed-maturity securities and, to a lesser extent, our portfolio of short-term investments is subject to credit risk, which we define as the potential loss in market value resulting from adverse changes in the borrower’s ability to repay its debt. We manage this risk by having our investment personnel perform an analysis of prospective investments and regular reviews of our portfolio of fixed-maturity securities. We also limit the percentage and amount of our total investment portfolio that we invest in the securities of any one issuer.

Our insurance subsidiaries provide property and casualty insurance coverages through independent insurance agencies. We bill the majority of this business directly to the insured, although we bill a portion of our commercial business through licensed insurance agents to whom our insurance subsidiaries extend credit in the normal course of business.

Because the pooling agreement does not relieve Atlantic States of primary liability as the originating insurer, Atlantic States is subject to a concentration of credit risk arising from the business it cedes to Donegal Mutual. Our insurance subsidiaries maintain reinsurance agreements with Donegal Mutual and with a number of other major unaffiliated authorized reinsurers.

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Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Our market risk generally represents the risk of gain or loss that may result from the potential change in the fair value of the securities we hold in our investment portfolio as a result of fluctuations in prices and interest rates and, to a lesser extent, our debt obligations. We manage our interest rate risk by maintaining an appropriate relationship between the average duration of our investment portfolio and the approximate duration of our liabilities, i.e., policy claims of our insurance subsidiaries and our debt obligations.

There have been no material changes to our quantitative or qualitative market risk exposure from December 31, 2024 through March 31, 2025.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, at March 31, 2025, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information we are required to disclose in the reports that we file or submit under the Exchange Act, and our disclosure controls and procedures were also effective to ensure that information we disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to affect materially, our internal control over financial reporting.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

We base all statements contained in this Quarterly Report on Form 10-Q that are not historic facts on our current expectations. Such statements are forward-looking in nature (as defined in the Private Securities Litigation Reform Act of 1995) and necessarily involve risks and uncertainties. Forward-looking statements we make may be identified by our use of words such as “will,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “seek,” “estimate” and similar expressions. Our actual results could vary materially from our forward-looking statements. The factors that could cause our actual results to vary materially from the forward-looking statements we have previously made include, but are not limited to, adverse litigation and other trends that could increase our loss costs (including labor shortages and escalating medical, automobile and property repair costs, including due to tariffs), adverse and catastrophic weather events (including from changing climate conditions), our ability to maintain profitable operations (including our ability to underwrite risks effectively and charge adequate premium rates), the adequacy of the loss and loss expense reserves of our insurance subsidiaries, the availability and successful operation of the information technology systems our insurance subsidiaries utilize, the successful development of new information technology systems to allow our insurance subsidiaries to compete effectively, business and economic conditions in the areas in which we and our insurance subsidiaries operate, interest rates, competition from various insurance and other financial businesses, terrorism, the availability and cost of reinsurance, legal and judicial developments (including those related to COVID-19 business interruption coverage exclusions), changes in regulatory requirements, our ability to attract and retain independent insurance agents, changes in our A.M. Best rating and the other risks that we describe from time to time in our filings with the Securities and Exchange Commission. We disclaim any obligation to update such statements or to announce publicly the results of any revisions that we may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

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Part II. Other Information

Item 1.

Legal Proceedings.

None.

Item 1A.

Risk Factors.

Our business, results of operations and financial condition, and, therefore, the value of our Class A common stock and our Class B common stock, are subject to a number of risks. For a description of certain risks, we refer to “Risk Factors” in our 2024 Annual Report on Form 10-K that we filed with the SEC on March 10, 2025. There have been no material changes in the risk factors we disclosed in that Form 10-K Report during the three months ended March 31, 2025.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
Month #1 January 1-31, 2025	Class A – None Class B – None	Class A – None Class B – None	Class A – None Class B – None	(1)

Month #2 February 1-28, 2025	Class A – 51,901 Class B – None	Class A – $16.96 Class B – None	Class A – 51,901 Class B – None	(1)

Month #3 March 1-31, 2025	Class A – 130,109 Class B – None	Class A – $17.93 Class B – None	Class A – 130,109 Class B – None	(1)

Total	Class A – 182,010 Class B – None	Class A – $17.65 Class B – None	Class A – 182,010 Class B – None

(1)

Donegal Mutual purchased these shares pursuant to its announcement on April 29, 2022 that it will, at its discretion, purchase shares of our Class A common stock and Class B common stock at market prices prevailing from time to time in the open market subject to the provisions of SEC Rule 10b-18 and in privately negotiated transactions. Such announcement did not stipulate a maximum number of shares that may be purchased under this program.

Item 3.

Defaults upon Senior Securities.

None.

Item 4.

Mine Safety Disclosure.

Not Applicable.

Item 5.

Other Information.

None.

Index

Item 6.

Exhibits.

Exhibit No.	Description	Reference

Management Contracts and Compensatory Plans or Arrangements

10.1	Form of Employment Agreement dated as of October 1, 2020 among Donegal Mutual Insurance Company, Donegal Group Inc. and Our Executive Officers Other Than Kevin G. Burke and Jeffrey D. Miller	Filed herewith

Other Exhibits

31.1	Certification of Chief Executive Officer.	Filed herewith

31.2	Certification of Chief Financial Officer.	Filed herewith

32.1	Statement of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Title 18 of the United States Code.	Filed herewith

32.2	Statement of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Title 18 of the United States Code.	Filed herewith

Exhibit 101.INS	XBRL Instance Document	Filed herewith

Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith

Exhibit 101.PRE	XBRL Taxonomy Presentation Linkbase Document	Filed herewith

Exhibit 101.CAL	XBRL Taxonomy Calculation Linkbase Document	Filed herewith

Exhibit 101.LAB	XBRL Taxonomy Label Linkbase Document	Filed herewith

Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith

Exhibit 104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	Filed herewith

Index

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DONEGAL GROUP INC.

May 6, 2025	By:	/s/ Kevin G. Burke
		Kevin G. Burke, President and Chief Executive Officer

May 6, 2025	By:	/s/ Jeffrey D. Miller
		Jeffrey D. Miller, Executive Vice President and Chief Financial Officer