DONEGAL GROUP INC

Previous wording

Reserve estimates can change over time because of unexpected changes in assumptions related to our insurance subsidiaries’ external environment and, to a lesser extent, assumptions related to our insurance subsidiaries’ internal operations. For example, our insurance subsidiaries have experienced an increase in claims severity and a lengthening of the claim settlement periods on bodily injury claims during the past several years. In addition, the COVID-19 pandemic and related government mandates and restrictions resulted in various changes from historical claims reporting and settlement trends during 2020 and resulted in significant increases in loss costs in subsequent years due to a number of factors, including supply chain disruption, higher new and used automobile values, increases in the cost of replacement automobile parts and rising labor rates. These trend changes caused significant disruption to historical loss patterns and give rise to greater uncertainty as to the pattern of future loss settlements. Related uncertainties regarding future trends include social inflation, availability and cost of replacement automobile parts and building materials, availability and cost of skilled labor, the rate of specialized plaintiff attorney involvement in claims, increasing plaintiff attorney utilization of litigation financing and its impact on litigation strategies and the cost of medical technologies and procedures. Assumptions related to our insurance subsidiaries’ external environment include the absence of significant changes in tort law and the legal environment that increase liability exposure, consistency in judicial interpretations of insurance coverage and policy provisions and the rate of loss cost inflation. Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business and consistency in reinsurance coverage and collectability of reinsured losses, among other items. To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes. Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at June 30, 2025. At June 30, 2025, for every 1% change in our insurance subsidiaries’ loss and loss expense reserves, net of reinsurance recoverable, the effect on our pre-tax results of operations would be approximately $7.1 million.

Current wording

Reserve estimates can change over time because of unexpected changes in assumptions related to our insurance subsidiaries’ external environment and, to a lesser extent, assumptions related to our insurance subsidiaries’ internal operations. For example, our insurance subsidiaries have experienced an increase in claims severity and a lengthening of the claim settlement periods on bodily injury claims during the past several years. In addition, the COVID-19 pandemic and related government mandates and restrictions resulted in various changes from historical claims reporting and settlement trends during 2020 and resulted in significant increases in loss costs in subsequent years due to a number of factors, including supply chain disruption, higher new and used automobile values, increases in the cost of replacement automobile parts and rising labor rates. These trend changes caused significant disruption to historical loss patterns and give rise to greater uncertainty as to the pattern of future loss settlements. Related uncertainties regarding future trends include social inflation, availability and cost of replacement automobile parts and building materials, availability and cost of skilled labor, the rate of specialized plaintiff attorney involvement in claims, increasing plaintiff attorney utilization of litigation financing and its impact on litigation strategies and the cost of medical technologies and procedures. Assumptions related to our insurance subsidiaries’ external environment include the absence of significant changes in tort law and the legal environment that increase liability exposure, consistency in judicial interpretations of insurance coverage and policy provisions and the rate of loss cost inflation. Internal assumptions include consistency in the recording of premium and loss statistics, consistency in the recording of claims, payment and case reserving methodology, accurate measurement of the impact of rate changes and changes in policy provisions, consistency in the quality and characteristics of business written within a given line of business and consistency in reinsurance coverage and collectability of reinsured losses, among other items. To the extent our insurance subsidiaries determine that underlying factors impacting their assumptions have changed, our insurance subsidiaries make adjustments in their reserves that they consider appropriate for such changes. Accordingly, our insurance subsidiaries’ ultimate liability for unpaid losses and loss expenses will likely differ from the amount recorded at September 30, 2025. At September 30, 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 $7.2 million.

Previous wording

The following tables provide reconciliations of our net premiums earned to our net premiums written for the three and six months ended June 30, 2025 and 2024:

Current wording

The following tables provide reconciliations of our net premiums earned to our net premiums written for the three and nine months ended September 30, 2025 and 2024:

Previous wording

The following table presents comparative details with respect to our GAAP and statutory combined ratios for the three and six months ended June 30, 2025 and 2024:

Current wording

The following table presents comparative details with respect to our GAAP and statutory combined ratios for the three and nine months ended September 30, 2025 and 2024:

Previous wording

Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the second quarter of 2025 were $231.8 million, a decrease of $2.5 million, or 1.1%, compared to $234.3 million for the second quarter of 2024, primarily reflecting planned attrition and lower new business writings, offset partially by solid premium retention and renewal premium increases.

Current wording

Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the third quarter of 2025 were $229.8 million, a decrease of $8.2 million, or 3.4%, compared to $238.0 million for the third quarter of 2024, primarily reflecting planned attrition and lower new business writings, offset partially by solid premium retention and renewal premium increases.

Previous wording

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the second quarter of 2025 were $233.8 million, a decrease of $13.4 million, or 5.4%, from the $247.2 million of net premiums written for the second quarter of 2024. Commercial lines net premiums written increased $2.7 million, or 1.9%, for the second quarter of 2025 compared to the second quarter of 2024. Personal lines net premiums written decreased $16.0 million, or 15.3%, for the second quarter of 2025 compared to the second quarter of 2024. We attribute the increase in commercial lines net premiums written primarily to 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 lower new business writings and non-renewal actions, offset partially by a continuation of renewal premium rate increases and solid retention.

Current wording

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the third quarter of 2025 were $219.6 million, a decrease of $12.6 million, or 5.4%, from the $232.2 million of net premiums written for the third quarter of 2024. Commercial lines net premiums written increased $4.3 million, or 3.4%, for the third quarter of 2025 compared to the third quarter of 2024. Personal lines net premiums written decreased $16.9 million, or 15.9%, for the third quarter of 2025 compared to the third 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 lower new business writings and non-renewal actions, offset partially by renewal premium rate increases and solid retention.

Previous wording

Investment Income. Our net investment income was $12.5 million for the second quarter of 2025, an increase of $1.4 million, or 13.3%, compared to $11.1 million for the second quarter of 2024. We attribute the increase primarily to an increase in the average investment yield relative to the second quarter of 2024.

Current wording

Investment Income. Our net investment income was $13.9 million for the third quarter of 2025, an increase of $3.1 million, or 28.8%, compared to $10.8 million for the third quarter of 2024. We attribute the increase primarily to an increase in the average investment yield relative to the third quarter of 2024.

Previous wording

Net Investment Gains. Net investment gains for the second quarter of 2025 were $1.5 million, compared to $736,669 for the second quarter of 2024. The net investment gains for the second quarter of 2025 were primarily related to unrealized gains in the fair value of equity securities held at June 30, 2025 and realized gains on the sale of equity securities, offset partially by net realized investment losses on the sale of available-for-sale fixed-maturity securities. Net investment gains for the second quarter of 2024 were primarily related to unrealized gains in the fair value of equity securities held at June 30, 2024. We did not recognize any impairment losses for individual securities in our investment portfolio during the second quarter of 2025 or 2024.

Current wording

Net Investment Gains. Net investment gains for the third quarter of 2025 were $1.3 million, compared to $1.9 million for the third quarter of 2024. The net investment gains for the third quarter of 2025 were primarily related to unrealized gains in the fair value of equity securities held at September 30, 2025, offset partially by net realized investment losses on the strategic sales of available-for-sale fixed-maturity securities. The net investment gains for the third quarter of 2024 were primarily related to unrealized gains in the fair value of equity securities held at September 30, 2024. We did not recognize any impairment losses for individual securities in our investment portfolio during the third quarter of 2025 or 2024.

Previous wording

Losses and Loss Expenses. Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 65.1% for the second quarter of 2025, a decrease from our insurance subsidiaries’ loss ratio of 70.6% for the second quarter of 2024. The core loss ratio, which excludes weather-related losses, large fire losses and net development of reserves for losses incurred in prior accident years, was 50.1% for the second quarter of 2025, a decrease from the core loss ratio of 55.0% for the second quarter of 2024. For the commercial lines segment, the core loss ratio of 54.5% for the second quarter of 2025 decreased modestly from 54.8% for the second quarter of 2024. For the personal lines segment, the core loss ratio of 43.3% for the second quarter of 2025 decreased from 55.3% for the second quarter of 2024. We attribute this decrease primarily to the favorable impact of premium rate increases on net premiums earned for the personal lines segment. Weather-related losses were $25.8 million, or 11.1 percentage points of the loss ratio, for the second quarter of 2025, compared to $24.7 million, or 10.6 percentage points of the loss ratio, for the second quarter of 2024. The impact of weather-related loss activity to the loss ratio for the second quarter of 2025 was higher than our previous five-year average of 9.2 percentage points for second quarter weather-related losses. Large fire losses, which we define as individual fire losses in excess of $50,000, for the second quarter of 2025 were $12.1 million, or 5.2 percentage points of the loss ratio, compared to $12.5 million, or 5.3 percentage points of the loss ratio, for the second quarter of 2024. Our insurance subsidiaries’ commercial lines loss ratio was 65.8% for the second quarter of 2025, compared to 70.4% for the second quarter of 2024, primarily due to decreases in the commercial multi-peril loss and workers’ compensation loss ratios. The personal lines loss ratio of our insurance subsidiaries decreased to 64.1% for the second quarter of 2025, compared to 70.8% for the second quarter of 2024. We attribute this decrease primarily to a decrease in the personal automobile loss ratio. Our insurance subsidiaries experienced favorable loss reserve development for the second quarter of 2025 of $3.0 million that decreased the loss ratio by 1.3 percentage points, compared to $757,866 of favorable loss reserve development that decreased the loss ratio for the second quarter of 2024 by 0.3 percentage points. Our insurance subsidiaries experienced favorable development primarily in the personal automobile and homeowners lines of business for the second quarter of 2025, offset partially by unfavorable development in other commercial lines of business that we primarily attribute to higher-than-anticipated case reserve development.

Current wording

Losses and Loss Expenses. Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 62.1% for the third quarter of 2025, a slight increase from our insurance subsidiaries’ loss ratio of 61.5% for the third quarter of 2024. The core loss ratio, which excludes weather-related losses, large fire losses and net development of reserves for losses incurred in prior accident years, was 51.1% for the third quarter of 2025, an increase from the core loss ratio of 50.1% for the third quarter of 2024. For the commercial lines segment, the core loss ratio of 54.0% for the third quarter of 2025 increased from 48.5% for the third quarter of 2024. For the personal lines segment, the core loss ratio of 46.6% for the third quarter of 2025 decreased from 52.5% for the third quarter of 2024. We attribute the increase in the commercial lines core loss ratio primarily to an increase in the severity of casualty losses. We attribute the decrease in the personal lines core loss ratio primarily to the favorable impact of premium rate increases on net premiums earned for the personal lines segment. Weather-related losses were $14.3 million, or 6.2 percentage points of the loss ratio, for the third quarter of 2025, compared to $24.4 million, or 10.3 percentage points of the loss ratio, for the third quarter of 2024. The impact of weather-related loss activity to the loss ratio for the third quarter of 2025 was lower than our previous five-year average of third quarter weather-related losses and represented the lowest of any third quarter in the past 20 years. Large fire losses, which we define as individual fire losses in excess of $50,000, for the third quarter of 2025 were $10.0 million, or 4.4 percentage points of the loss ratio, compared to $8.8 million, or 3.7 percentage points of the loss ratio, for the third quarter of 2024. Our insurance subsidiaries’ commercial lines loss ratio was 59.6% for the third quarter of 2025, compared to 52.1% for the third quarter of 2024, primarily due to increases in the workers’ compensation and commercial multi-peril loss ratios. The personal lines loss ratio of our insurance subsidiaries decreased to 66.0% for the third quarter of 2025, compared to 74.2% for the third quarter of 2024. We attribute this decrease primarily to a decrease in the homeowners and personal automobile loss ratios. Our insurance subsidiaries experienced net unfavorable loss reserve development for the third quarter of 2025 of $1.0 million that increased the loss ratio by 0.4 percentage points, compared to $6.2 million of net favorable loss reserve development that decreased the loss ratio for the third quarter of 2024 by 2.6 percentage points. Our insurance subsidiaries experienced unfavorable development primarily in the personal automobile and other commercial lines of business for the third quarter of 2025 that we primarily attribute to higher-than-anticipated case reserve development, offset pa…

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Previous wording

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 32.2% for the second quarter of 2025, compared to 31.9% for the second quarter of 2024. The increase in the expense ratio primarily reflected higher underwriting-based incentive costs for agents and employees, partially offset by the favorable impact of ongoing expense management initiatives. The impact from allocated costs from Donegal Mutual to our insurance subsidiaries related to the ongoing systems modernization project peaked at approximately 1.3 percentage points of the expense ratio for the full year of 2024, and we expect that impact to subside gradually over the next several years. Allocated costs related to that project represented approximately 1.0 percentage point of the expense ratio for the second quarter of 2025, and we expect the full year 2025 expense ratio impact will also be approximately 1.0 percentage point.

Current wording

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 33.5% for the third quarter of 2025, compared to 34.5% for the third quarter of 2024. The decrease in the expense ratio primarily reflected the favorable impact of ongoing expense management initiatives and lower underwriting-based incentive costs for agents and employees. The impact of underwriting-based incentive costs for the third quarter of 2024 was somewhat elevated due to the substantial improvement in underwriting results for that period compared to the first half of 2024. The impact from allocated costs from Donegal Mutual to our insurance subsidiaries related to the ongoing systems modernization project peaked at approximately 1.3 percentage points of the expense ratio for the full year of 2024, 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 third quarter of 2025.

Previous wording

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 97.7% and 103.0% for the second quarter of 2025 and 2024, respectively. We attribute the decrease in the combined ratio primarily to a decrease in the loss ratio for the second quarter of 2025 compared to the second quarter of 2024.

Current wording

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 95.9% and 96.4% for the third quarter of 2025 and 2024, respectively. We attribute the decrease in the combined ratio primarily to a decrease in the expense ratio for the third quarter of 2025 compared to the third quarter of 2024.

Previous wording

Income Tax Expense. We recorded income tax expense of $3.6 million for the second quarter of 2025, representing an effective tax rate of 17.4%. We recorded income tax expense of $859,665 for the second quarter of 2024, representing an effective tax rate of 17.2%. The income tax expense for the second quarter of 2025 and 2024 represented estimates based on our projected annual taxable income and effective tax rates.

Current wording

Income Tax Expense. We recorded income tax expense of $5.0 million for the third quarter of 2025, representing an effective tax rate of 19.8%. We recorded income tax expense of $3.7 million for the third quarter of 2024, representing an effective tax rate of 17.9%. The income tax expense for the third quarter of 2025 and 2024 represented estimates based on our projected annual taxable income and effective tax rates.

Previous wording

Net Income and Net Income Per Share. Our net income for the second quarter of 2025 was $16.9 million, or $.46 per share of Class A common stock on a diluted basis and $.43 per share of Class B common stock, compared to $4.2 million, or $.13 per share of Class A common stock on a diluted basis and $.11 per share of Class B common stock, for the second quarter of 2024. We had 30.9 million and 27.9 million Class A shares outstanding at June 30, 2025 and 2024, respectively. We had 5.6 million Class B shares outstanding at the end of both periods.

Current wording

Net Income and Net Income Per Share. Our net income for the third quarter of 2025 was $20.1 million, or $.55 per share of Class A common stock on a diluted basis and $.51 per share of Class B common stock, compared to $16.8 million, or $.51 per share of Class A common stock on a diluted basis and $.46 per share of Class B common stock, for the third quarter of 2024. We had 31.0 million and 28.2 million Class A shares outstanding at September 30, 2025 and 2024, respectively. We had 5.6 million Class B shares outstanding at the end of both periods.

Previous wording

Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the first half of 2025 were $464.5 million, an increase of $2.4 million, or 0.5%, compared to $462.1 million for the first half of 2024, primarily reflecting solid premium retention and renewal premium increases, offset partially by lower new business writings.

Current wording

Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the first nine months of 2025 were $694.3 million, a decrease of $5.7 million, or 0.8%, compared to $700.0 million for the first nine months of 2024, primarily reflecting lower new business writings and non-renewal actions, offset partially by solid premium retention and renewal premium increases.

Previous wording

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the first half of 2025 were $480.9 million, a decrease of $17.7 million, or 3.6%, from the $498.6 million of net premiums written for the first half of 2024. Commercial lines net premiums written increased $7.8 million, or 2.6%, for the first half of 2025 compared to the first half of 2024. Personal lines net premiums written decreased $25.5 million, or 12.7%, for the first half of 2025 compared to the first half 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 lower new business writings and non-renewal actions, offset partially by a continuation of renewal premium rate increases and solid retention.

Current wording

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the first nine months of 2025 were $700.5 million, a decrease of $30.3 million, or 4.1%, from the $730.8 million of net premiums written for the first nine months of 2024. Commercial lines net premiums written increased $12.1 million, or 2.8%, for the first nine months of 2025 compared to the first nine months of 2024. Personal lines net premiums written decreased $42.4 million, or 13.8%, for the first nine months of 2025 compared to the first nine months 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 lower new business writings and non-renewal actions, offset partially by renewal premium rate increases and solid retention.

Previous wording

Investment Income. Our net investment income was $24.5 million for the first half of 2025, an increase of $2.5 million, or 11.3%, compared to $22.0 million for the first half of 2024. We attribute the increase primarily to an increase in the average investment yield relative to the first half of 2024.

Current wording

Investment Income. Our net investment income was $38.5 million for the first nine months of 2025, an increase of $5.6 million, or 17.0%, compared to $32.9 million for the first nine months of 2024. We attribute the increase primarily to an increase in the average investment yield relative to the first nine months of 2024.

Previous wording

Net Investment Gains. Net investment gains for the first half of 2025 were $1.1 million, compared to $2.9 million for the first half of 2024. The net investment gains for the first half of 2025 primarily related to unrealized gains in the fair value of equity securities held at June 30, 2025 and realized gains on the sale of equity securities, offset partially by net realized investment losses on the sale of available-for-sale fixed-maturity securities. The net investment gains for the first half of 2024 primarily related to unrealized gains in the fair value of our equity securities portfolio at June 30, 2024. We did not recognize any impairment losses for individual securities in our investment portfolio during the first half of 2025 or 2024.

Current wording

Net Investment Gains. Net investment gains for the first nine months of 2025 were $2.3 million, compared to $4.7 million for the first nine months of 2024. The net investment gains for the first nine months of 2025 primarily related to unrealized gains in the fair value of equity securities held at September 30, 2025, offset partially by net realized investment losses on the sale of available-for-sale fixed-maturity securities. The net investment gains for the first nine months of 2024 primarily related to unrealized gains in the fair value of our equity securities portfolio at September 30, 2024. We did not recognize any impairment losses for individual securities in our investment portfolio during the first nine months of 2025 or 2024.

Previous wording

Losses and Loss Expenses. Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 60.9% for the first half of 2025, a decrease from our insurance subsidiaries’ loss ratio of 68.4% for the first half of 2024. The core loss ratio, which excludes weather-related losses, large fire losses and net development of reserves for losses incurred in prior accident years, was 52.1% for the first half of 2025, compared to 56.8% for the first half of 2024. For the commercial lines segment, the core loss ratio of 56.4% for the first half of 2025 decreased modestly from 56.9% for the first half of 2024. For the personal lines segment, the core loss ratio of 46.0% for the first half of 2025 decreased from 56.6% for the first half of 2024. Weather-related losses were $34.4 million, or 7.4 percentage points of the loss ratio, for the first half of 2025, compared to $35.5 million, or 7.7 percentage points of the loss ratio, for the first half of 2024. Large fire losses for the first half of 2025 were $19.8 million, or 4.3 percentage points of the loss ratio, compared to $27.4 million, or 5.9 percentage points of the loss ratio, for the first half of 2024. Our insurance subsidiaries’ commercial lines loss ratio was 62.9% for the first half of 2025, compared to 67.9% for the first half of 2024, primarily due to decreases in the commercial multi-peril and workers’ compensation loss ratios. The personal lines loss ratio of our insurance subsidiaries decreased to 58.2% for the first half of 2025, compared to 69.1% for the first half of 2024. We attribute this decrease primarily to a decrease in the personal automobile loss ratio. Our insurance subsidiaries experienced favorable loss reserve development for the first half of 2025 of approximately $13.5 million that decreased the loss ratio by 2.9 percentage points, compared to $9.2 million that decreased the loss ratio for the first half of 2024 by 2.0 percentage points. Our insurance subsidiaries experienced favorable development primarily in the commercial automobile, commercial multi-peril and personal automobile lines of business for the first half of 2025, offset partially by unfavorable development in other commercial lines of business that we attribute to higher-than-anticipated case reserve development.

Current wording

Losses and Loss Expenses. Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 61.3% for the first nine months of 2025, a decrease from our insurance subsidiaries’ loss ratio of 66.1% for the first nine months of 2024. The core loss ratio, which excludes weather-related losses, large fire losses and net development of reserves for losses incurred in prior accident years, was 51.8% for the first nine months of 2025, compared to 54.5% for the first nine months of 2024. For the commercial lines segment, the core loss ratio of 55.6% for the first nine months of 2025 increased modestly from 54.1% for the first nine months of 2024. For the personal lines segment, the core loss ratio of 46.2% for the first nine months of 2025 decreased from 55.2% for the first nine months of 2024. We attribute the decrease in the personal lines core loss ratio primarily to the favorable impact of premium rate increases on net premiums earned for the personal lines segment. Weather-related losses were $48.7 million, or 7.0 percentage points of the loss ratio, for the first nine months of 2025, compared to $60.0 million, or 8.6 percentage points of the loss ratio, for the first nine months of 2024. Large fire losses for the first nine months of 2025 were $29.8 million, or 4.3 percentage points of the loss ratio, compared to $36.2 million, or 5.2 percentage points of the loss ratio, for the first nine months of 2024. Our insurance subsidiaries’ commercial lines loss ratio was 61.7% for the first nine months of 2025, compared to 62.6% for the first nine months of 2024, primarily due to a decrease in the commercial multi-peril loss ratio. The personal lines loss ratio of our insurance subsidiaries decreased to 60.7% for the first nine months of 2025, compared to 70.8% for the first nine months of 2024. We attribute this decrease primarily to decreases in the personal automobile and homeowners loss ratios. Our insurance subsidiaries experienced net favorable loss reserve development for the first nine months of 2025 of approximately $12.5 million that decreased the loss ratio by 1.8 percentage points, compared to $15.4 million that decreased the loss ratio for the first nine months of 2024 by 2.2 percentage points. Our insurance subsidiaries experienced favorable development primarily in the commercial multi-peril, commercial automobile, personal automobile, and homeowners lines of business for the first nine months of 2025, offset partially by unfavorable development in other commercial lines of business that we attribute to higher-than-anticipated case reserve development.

Previous wording

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 33.4% for the first half of 2025, compared to 33.8% for the first half of 2024. The decrease in the expense ratio primarily reflected impacts of expense management initiatives, offset partially by higher underwriting-based incentive costs for agents and employees. The impact from allocated costs from Donegal Mutual to our insurance subsidiaries related to the ongoing systems modernization project peaked at approximately 1.3 percentage points of the expense ratio for the full year of 2024 and we expect the full year 2025 expense ratio impact will be approximately 1.0 percentage point.

Current wording

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 33.4% for the first nine months of 2025, compared to 34.0% for the first nine months of 2024. The decrease in the expense ratio primarily reflected impacts of expense management initiatives, offset partially by higher underwriting-based incentive costs for agents and employees. The impact from allocated costs from Donegal Mutual to our insurance subsidiaries related to the ongoing systems modernization project peaked at approximately 1.3 percentage points of the expense ratio for the full year of 2024, and we expect the full year 2025 expense ratio impact will be approximately 1.2 percentage points.

Previous wording

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 94.6% and 102.7% for the first half of 2025 and 2024, respectively. We attribute the decrease in the combined ratio primarily to a decrease in the loss ratio for the first half of 2025 compared to the first half of 2024.

Current wording

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 95.1% and 100.6% for the first nine months of 2025 and 2024, respectively. We attribute the decrease in the combined ratio primarily to a decrease in the loss ratio for the first nine months of 2025 compared to the first nine months of 2024.

Previous wording

Income Tax Expense. We recorded income tax expense of $9.5 million for the first half of 2025, representing an effective tax rate of 18.4%. We recorded income tax expense of $2.2 million for the first half of 2024, representing an effective tax rate of 17.6%. The income tax expense for the first half of 2025 and 2024 represented estimates based on our projected annual taxable income and effective tax rates.

Current wording

Income Tax Expense. We recorded income tax expense of $14.5 million for the first nine months of 2025, representing an effective tax rate of 18.9%. We recorded income tax expense of $5.8 million for the first nine months of 2024, representing an effective tax rate of 17.8%. The income tax expense for the first nine months of 2025 and 2024 represented estimates based on our projected annual taxable income and effective tax rates.

Previous wording

Net Income and Net Income Per Share. Our net income for the first half of 2025 was $42.1 million, or $1.17 per share of Class A common stock on a diluted basis and $1.08 per share of Class B common stock, compared to $10.1 million, or $.31 per share of Class A common stock on a diluted basis and $.28 per share of Class B common stock, for the first half of 2024. We had 30.9 million and 27.9 million Class A shares outstanding at June 30, 2025 and 2024, respectively. We had 5.6 million Class B shares outstanding at the end of both periods.

Current wording

Net Income and Net Income Per Share. Our net income for the first nine months of 2025 was $62.2 million, or $1.72 per share of Class A common stock on a diluted basis and $1.58 per share of Class B common stock, compared to $26.9 million, or $.81 per share of Class A common stock on a diluted basis and $.74 per share of Class B common stock, for the first nine months of 2024. We had 31.0 million and 28.2 million Class A shares outstanding at September 30, 2025 and 2024, respectively. We had 5.6 million Class B shares outstanding at the end of both periods.

Previous wording

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 impact of the pooling agreement between Donegal Mutual and Atlantic States has historically been cash-flow positive because of the consistent underwriting 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 six months of 2025 and 2024 were $37.9 million and $26.5 million, respectively.

Current wording

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 impact of the pooling agreement between Donegal Mutual and Atlantic States has historically been cash-flow positive because of the consistent underwriting 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 nine months of 2025 and 2024 were $60.2 million and $39.2 million, respectively.

Previous wording

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 applicable rules 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 six months ended June 30, 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 June 30, 2025.

Current wording

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 applicable rules 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 nine months ended September 30, 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 September 30, 2025.

Previous wording

On July 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 August 15, 2025 to our stockholders of record as of the close of business on August 1, 2025. There are no 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 six 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.

Current wording

On October 16, 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 November 17, 2025 to our stockholders of record as of the close of business on November 3, 2025. There are no 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 paid $10.0 million in dividends to us during the first nine 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 $30.7 million from Atlantic States, $7.8 million from MICO and $4.7 million from Peninsula, or a total of approximately $43.3 million.