DONEGAL GROUP INC

Previous wording

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.

Current wording

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.

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, 2026 and 2025:

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, 2026 and 2025:

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, 2026 and 2025:

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, 2026 and 2025:

Previous wording

Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the second quarter of 2026 were $222.6 million, a decrease of $9.2 million, or 4.0%, compared to $231.8 million for the second quarter of 2025, primarily reflecting lower retention and renewal premium increases, offset partially by modestly higher new business writings in the preceding twelve-month period.

Current wording

Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the third quarter of 2026 were $222.9 million, a decrease of $6.9 million, or 3.0%, compared to $229.8 million for the third quarter of 2025, primarily reflecting lower retention and renewal premium increases, offset partially by incremental growth in new business writings.

Previous wording

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the second quarter of 2026 were $226.4 million, a decrease of $7.4 million, or 3.2%, from the $233.8 million of net premiums written for the second quarter of 2025. Commercial lines net premiums written increased $1.2 million, or 0.8%, for the second quarter of 2026 compared to the second quarter of 2025. Personal lines net premiums written decreased $8.6 million, or 9.7%, for the second quarter of 2026 compared to the second quarter of 2025. We attribute the increase in commercial lines net premiums written primarily to new business writings, offset partially by a lower level of renewal premium increases and retention. We attribute the decrease in personal lines net premiums written primarily to attrition, offset partially by modest renewal premium rate increases and incremental growth in new business writings. We believe that the decrease in personal lines net premiums written will gradually taper over the course of 2026 as actions we have taken to slow and eventually reverse the decline take effect.

Current wording

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the third quarter of 2026 were $209.7 million, a decrease of $9.9 million, or 4.5%, from the $219.6 million of net premiums written for the third quarter of 2025. Commercial lines net premiums written decreased $4.9 million, or 3.7%, for the third quarter of 2026 compared to the third quarter of 2025. Personal lines net premiums written decreased $5.0 million, or 5.6%, for the third quarter of 2026 compared to the third quarter of 2025. We attribute the decrease in commercial lines net premiums written primarily to modestly higher attrition and a lower level of renewal premium increases, offset partially by incremental growth in new business writings. We attribute the decrease in personal lines net premiums written primarily to a lower level of renewal premium increases, offset partially by incremental growth in new business writings that included the impact of our insurance subsidiaries’ introduction during the third quarter of 2026 of a 12-month automobile policy term option for new business policies.

Previous wording

Investment Income. Our net investment income was $14.5 million for the second quarter of 2026, an increase of $2.0 million, or 15.6%, compared to $12.5 million for the second quarter of 2025. We attribute the increase primarily to an increase in the average investment yield and higher average invested assets relative to the second quarter of 2025.

Current wording

Investment Income. Our net investment income was $14.7 million for the third quarter of 2026, an increase of $0.8 million, or 5.4%, compared to $13.9 million for the third quarter of 2025. We attribute the increase primarily to an increase in the average investment yield relative to the third quarter of 2025.

Previous wording

Net Investment Gains. Net investment gains for the second quarter of 2026 and 2025 were $3.3 million and $1.5 million, respectively. The net investment gains for the second quarter of 2026 and 2025 were primarily related to unrealized gains in the fair value of equity securities held at June 30, 2026 and 2025, offset partially by net realized investment losses on the sale of available-for-sale fixed-maturity securities. We did not recognize any impairment losses for individual securities in our investment portfolio during the second quarter of 2026 or 2025.

Current wording

Net Investment (Losses) Gains. Net investment losses for the third quarter of 2026 were $0.7 million, Net investment gains for the third quarter of 2025 were $1.3 million. The net investment losses for the third quarter of 2026 were primarily related to net realized investment losses on the strategic sales of available-for-sale fixed-maturity securities, offset partially by net unrealized gains in the fair value of equity securities held at September 30, 2026. Net investment gains of $1.3 million for the third quarter of 2025 were primarily related to net 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.

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 59.5% for the second quarter of 2026, a decrease from our insurance subsidiaries’ loss ratio of 65.1% for the second quarter of 2025. 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 51.0% for the second quarter of 2026, an increase from the core loss ratio of 50.1% for the second quarter of 2025. For the commercial lines segment, the core loss ratio of 54.0% for the second quarter of 2026 remained relatively consistent with 54.5% for the second quarter of 2025. For the personal lines segment, the core loss ratio of 45.8% for the second quarter of 2026 increased modestly from 43.3% for the second quarter of 2025. We attribute the decrease in the commercial lines core loss ratio primarily to ongoing premium rate increases in all lines except workers' compensation. We attribute the increase in the personal lines core loss ratio primarily to lower premium rate increases, as rate adequacy has largely been achieved for the personal lines segment. Weather-related losses were $11.9 million, or 5.3 percentage points of the loss ratio, for the second quarter of 2026, compared to $25.8 million, or 11.1 percentage points of the loss ratio, for the second quarter of 2025. The impact of weather-related loss activity to the loss ratio for the second quarter of 2026 was much lower than our previous five-year average of $20.3 million, or 9.4 percentage points of the loss ratio, 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 2026 were $15.0 million, or 6.7 percentage points of the loss ratio, compared to $12.1 million, or 5.2 percentage points of the loss ratio, for the second quarter of 2025. We attribute the increase to higher commercial property fire losses that were partially offset by a decrease in homeowners fire losses compared to the prior-year quarter. Our insurance subsidiaries’ commercial lines loss ratio was 63.2% for the second quarter of 2026, compared to 65.8% for the second quarter of 2025, primarily due to decreases in the commercial automobile, workers' compensation and other commercial lines of business loss ratios, offset partially by an increase in the commercial multi-peril line of business loss ratio. The personal lines loss ratio of our insurance subsidiaries decreased to 53.2% for the second quarter of 2026, compared to 64.1% for the second quarter of 2025. We attribute this decrease primarily to the decrease in the homeowners line of business loss ratio. Our insurance subsidiaries experienced net favorable loss reserve development of $7.8 million for the second quarter of 2026 that decreased the loss ratio by 3.5 percentage points, compared to $3.0 million of net favorable loss reser…

Excerpt shortened here; the source contains the full paragraph.

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 61.5% for the third quarter of 2026, a decrease from our insurance subsidiaries’ loss ratio of 62.1% for the third quarter of 2025. 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 third quarter of 2026, a modest increase from the core loss ratio of 51.1% for the third quarter of 2025. For the commercial lines segment, the core loss ratio of 57.2% for the third quarter of 2026 increased from 54.0% for the third quarter of 2025. For the personal lines segment, the core loss ratio of 42.2% for the third quarter of 2026 decreased from 46.6% for the third quarter of 2025. We attribute the increase in the commercial lines core loss ratio primarily to higher workers’ compensation and casualty loss severity. We attribute the decrease in the personal lines core loss ratio to the homeowners line of business. Weather-related losses were $19.1 million, or 8.6 percentage points of the loss ratio, for the third quarter of 2026, compared to $14.3 million, or 6.2 percentage points of the loss ratio, for the third quarter of 2025. The impact of weather-related loss activity to the loss ratio for the third quarter of 2026 was lower than our previous five-year average of $20.4 million, or 9.3 percentage points of the loss ratio, for third quarter weather-related losses. Large fire losses, which we define as individual fire losses in excess of $50,000, for the third quarter of 2026 were $5.8 million, or 2.6 percentage points of the loss ratio, compared to $10.0 million, or 4.4 percentage points of the loss ratio, for the third quarter of 2025. We experienced decreases in both commercial property and homeowners fire losses compared to the prior-year quarter. Our insurance subsidiaries’ commercial lines loss ratio was 62.3% for the third quarter of 2026, compared to 59.6% for the third quarter of 2025, primarily due to increases in the workers’ compensation, commercial multi-peril and other commercial lines of business loss ratios, offset partially by a decrease in the commercial automobile line of business loss ratio. The personal lines loss ratio of our insurance subsidiaries decreased to 60.1% for the third quarter of 2026, compared to 66.0% for the third quarter of 2025. We attribute this decrease primarily to decreases in the homeowners and personal automobile lines of business loss ratios. Our insurance subsidiaries experienced net favorable loss reserve development of $3.5 million for the third quarter of 2026 that decreased the loss ratio by 1.5 percentage points, compared to $1.0 million of net unfavorable loss reserve development that increased the loss ratio for the third quarter of 2025 by 0.4 percentage points. Our insurance subsidiaries experienced favorable development primarily in the w…

Excerpt shortened here; the source contains the full paragraph.

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 35.8% for the second quarter of 2026, compared to 32.2% for the second quarter of 2025. The increase in the expense ratio primarily reflected the impacts of higher underwriting-based incentive costs for agents and employees as well as higher technology-related expenses and a lower base of net premiums earned compared to the prior-year quarter.

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 34.8% for the third quarter of 2026, compared to 33.5% for the third quarter of 2025. The increase in the expense ratio primarily reflected the impact of a lower base of net premiums earned compared to the prior-year quarter.

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 95.6% and 97.7% for the second quarter of 2026 and 2025, respectively. We attribute the decrease in the combined ratio primarily to a decrease in the loss ratio, partially offset by an increase in the expense ratio for the second quarter of 2026 compared to the second quarter of 2025.

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 96.5% and 95.9% for the third quarter of 2026 and 2025, respectively. We attribute the increase in the combined ratio primarily to an increase in the expense ratio, offset partially by a decrease in the loss ratio, for the third quarter of 2026 compared to the third quarter of 2025.

Previous wording

Income Tax Expense. We recorded income tax expense of $5.2 million for the second quarter of 2026, representing an effective tax rate of 19.0%. We recorded income tax expense of $3.6 million for the second quarter of 2025, representing an effective tax rate of 17.4%. The income tax expense for the second quarter of 2026 and 2025 represented estimates based on our projected annual taxable income and effective tax rates.

Current wording

Income Tax Expense. We recorded income tax expense of $3.9 million for the third quarter of 2026, representing an effective tax rate of 17.6%. We recorded income tax expense of $5.0 million for the third quarter of 2025, representing an effective tax rate of 19.8%. The income tax expense for the third quarter of 2026 and 2025 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 2026 was $22.3 million, or $.60 per share of Class A common stock on a diluted basis and $.55 per share of Class B common stock, compared to $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, for the second quarter of 2025. We had 31.5 million and 30.9 million Class A shares outstanding at June 30, 2026 and 2025, 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 2026 was $18.2 million, or $.49 per share of Class A common stock on a diluted basis and $.45 per share of Class B common stock, compared to $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, for the third quarter of 2025. We had 31.8 million and 31.0 million Class A shares outstanding at September 30, 2026 and 2025, respectively. We had5.6 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 2026 were $443.9 million, a decrease of $20.5 million, or 4.4%, compared to $464.5 million for the first half of 2025, primarily reflecting lower retention and renewal premium increases, offset partially by modestly higher new business writings in the preceding twelve-month period.

Current wording

Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the first nine months of 2026 were $666.8 million, a decrease of $27.5 million, or 4.0%, compared to $694.3 million for the first nine months of 2025, primarily reflecting lower retention and renewal premium increases, offset partially by incremental growth in new business writings.

Previous wording

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the first half of 2026 were $465.7 million, a decrease of $15.2 million, or 3.2%, from the $480.9 million of net premiums written for the first half of 2025. Commercial lines net premiums written increased $4.7 million, or 1.5%, for the first half of 2026 compared to the first half of 2025. Personal lines net premiums written decreased $19.9 million, or 11.3%, for the first half of 2026 compared to the first half of 2025. We attribute the increase in commercial lines net premiums written primarily to new business writings, offset partially by a lower level of renewal premium increases and retention. We attribute the decrease in personal lines net premiums written primarily to attrition, offset partially by modest renewal premium rate increases and incremental growth in new business writings.

Current wording

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the first nine months of 2026 were $675.4 million, a decrease of $25.1 million, or 3.6%, from the $700.5 million of net premiums written for the first nine months of 2025. Commercial lines net premiums written remained relatively consistent for the first nine months of 2026 compared to the first nine months of 2025. Personal lines net premiums written decreased $24.9 million, or 9.4%, for the first nine months of 2026 compared to the first nine months of 2025. We attribute the decrease in personal lines net premiums written primarily to a lower level of renewal premium increases, offset partially by incremental growth in new business writings that included the impact of our insurance subsidiaries’ introduction during the third quarter of 2026 of a 12-month automobile policy term option for new business policies.

Previous wording

Investment Income. Our net investment income was $28.8 million for the first half of 2026, an increase of $4.3 million, or 17.3%, compared to $24.5 million for the first half of 2025. We attribute the increase primarily to an increase in the average investment yield and higher average invested assets relative to the first half of 2025.

Current wording

Investment Income. Our net investment income was $43.5 million for the first nine months of 2026, an increase of $5.0 million, or 13.0%, compared to $38.5 million for the first nine months of 2025. We attribute the increase primarily to an increase in the average investment yield and higher average invested assets relative to the first nine months of 2025.

Previous wording

Net Investment Gains. Net investment gains for the first half of 2026 were $2.8 million, compared to $1.1 million for the first half of 2025. The net investment gains for the first half of 2026 and 2025 primarily related to unrealized gains in the fair value of equity securities, offset partially by net realized investment losses on the sale of available-for-sale fixed-maturity securities. We did not recognize any impairment losses for individual securities in our investment portfolio during the first half of 2026 or 2025.

Current wording

Net Investment Gains. Net investment gains for the first nine months of 2026 were $2.1 million, compared to $2.3 million for the first nine months of 2025. The net investment gains for the first nine months of 2026 and 2025 primarily related to unrealized gains in the fair value of equity securities, offset partially by net realized investment losses on the strategic sales of available-for-sale fixed-maturity securities. We did not recognize any impairment losses for individual securities in our investment portfolio during the first nine months of 2026 or 2025.

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 61.8% for the first half of 2026, an increase from our insurance subsidiaries’ loss ratio of 60.9% for the first half of 2025. 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 52.3% for the first half of 2026, compared to 52.1% for the first half of 2025. For the commercial lines segment, the core loss ratio of 55.8% for the first half of 2026 remained relatively consistent with 56.4% for the first half of 2025. For the personal lines segment, the core loss ratio of 46.2% for the first half of 2026 remained relatively consistent with 46.0% for the first half of 2025. Weather-related losses were $29.1 million, or 6.5 percentage points of the loss ratio, for the first half of 2026, compared to $34.4 million, or 7.4 percentage points of the loss ratio, for the first half of 2025. Large fire losses for the first half of 2026 were $27.2 million, or 6.1 percentage points of the loss ratio, compared to $19.8 million, or 4.3 percentage points of the loss ratio, for the first half of 2025. Our insurance subsidiaries’ commercial lines loss ratio was 65.9% for the first half of 2026, compared to 62.9% for the first half of 2025, primarily due to increases in the commercial multi-peril loss ratio, offset partially by a decrease in the commercial automobile and workers’ compensation loss ratios. The personal lines loss ratio of our insurance subsidiaries decreased to 54.8% for the first half of 2026, compared to 58.2% for the first half of 2025. We attribute this decrease primarily to a decrease in the homeowners and personal automobile loss ratios. Our insurance subsidiaries experienced favorable loss reserve development for the first half of 2026 of approximately $13.6 million that decreased the loss ratio by 3.1 percentage points, compared to $13.5 million that decreased the loss ratio for the first half of 2025 by 2.9 percentage points. Our insurance subsidiaries experienced favorable development primarily in the personal automobile, commercial automobile, workers' compensation and homeowners lines of business for the first half of 2026, offset partially by unfavorable development in the commercial multi-peril and other commercial lines of business that we attribute to higher-than-anticipated case reserve development.

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 61.7% for the first nine months of 2026, a slight increase from our insurance subsidiaries’ loss ratio of 61.3% for the first nine months of 2025. 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 nine months of 2026, compared to 51.8% for the first nine months of 2025. For the commercial lines segment, the core loss ratio of 56.2% for the first nine months of 2026 increased from 55.6% for the first nine months of 2025. For the personal lines segment, the core loss ratio of 44.9% for the first nine months of 2026 decreased from 46.2% for the first nine months of 2025. Weather-related losses were $48.2 million, or 7.2 percentage points of the loss ratio, for the first nine months of 2026, compared to $48.7 million, or 7.0 percentage points of the loss ratio, for the first nine months of 2025. Large fire losses for the first nine months of 2026 were $33.0 million, or 5.0 percentage points of the loss ratio, compared to $29.8 million, or 4.3 percentage points of the loss ratio, for the first nine months of 2025. Our insurance subsidiaries’ commercial lines loss ratio was 64.7% for the first nine months of 2026, compared to 61.7% for the first nine months of 2025, primarily due to increases in the commercial multi-peril and workers’ compensation loss ratios, offset partially by a decrease in the commercial automobile loss ratio. The personal lines loss ratio of our insurance subsidiaries decreased to 56.7% for the first nine months of 2026, compared to 60.7% for the first nine months of 2025. 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 nine months of 2026 of approximately $17.0 million that decreased the loss ratio by 2.6 percentage points, compared to $12.5 million that decreased the loss ratio for the first nine months of 2025 by 1.8 percentage points. Our insurance subsidiaries experienced favorable development primarily in the commercial automobile, personal automobile, workers’ compensation and homeowners lines of business for the first nine months of 2026, offset partially by unfavorable development in the commercial multi-peril and other commercial lines of business that we attribute to higher-than-anticipated case reserve development.

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 35.6% for the first half of 2026, compared to 33.4% for the first half of 2025. The increase in the expense ratio primarily reflected the impacts of higher underwriting-based incentive costs for agents and employees as well as higher technology-related expenses and a lower base of net premiums earned compared to the first half of 2025.

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 35.3% for the first nine months of 2026, compared to 33.4% for the first nine months of 2025. The increase in the expense ratio primarily reflected the impact of a lower base of net premiums earned compared to the first nine months 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 94.6% for the first half of 2026 and 2025, respectively. We attribute the increase in the combined ratio primarily to increases in the loss and expense ratios for the first half of 2026 compared to the first half of 2025.

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 97.3% and 95.1% for the first nine months of 2026 and 2025, respectively. We attribute the increase in the combined ratio primarily to an increase in the expense ratio for the first nine months of 2026 compared to the first nine months of 2025.

Previous wording

Income Tax Expense. We recorded income tax expense of $7.9 million for the first half of 2026, representing an effective tax rate of 18.8%. We recorded income tax expense of $9.5 million for the first half of 2025, representing an effective tax rate of 18.4%. The income tax expense for the first half of 2026 and 2025 represented estimates based on our projected annual taxable income and effective tax rates.

Current wording

Income Tax Expense. We recorded income tax expense of $11.7 million for the first nine months of 2026, representing an effective tax rate of 18.4%. We recorded income tax expense of $14.5 million for the first nine months of 2025, representing an effective tax rate of 18.9%. The income tax expense for the first nine months of 2026 and 2025 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 2026 was $33.8 million, or $0.91 per share of Class A common stock on a diluted basis and $0.84 per share of Class B common stock, compared to $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, for the first half of 2025. We had 31.5 million and 30.9 million Class A shares outstanding at June 30, 2026 and 2025, 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 2026 was $52.0 million, or $1.40 per share of Class A common stock on a diluted basis and $1.29 per share of Class B common stock, compared to $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, for the first nine months of 2025. We had 31.8 million and 31.0 million Class A shares outstanding at September 30, 2026 and 2025, 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 2026 and 2025 were $26.1 million and $37.9 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 2026 and 2025 were $41.0 million and $60.2 million, respectively.

Previous wording

At June 30, 2026, 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 an interest rate equal to the then-current Term SOFR rate plus 2.11%. At June 30, 2026, 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.

Current wording

At September 30, 2026, 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 an interest rate equal to the then-current Term SOFR rate plus 2.11%. At September 30, 2026, Atlantic States had a $35.0 million outstanding advance with the FHLB of Pittsburgh that carries a variable interest rate of the current SOFR plus 0.293% and is due in September 2028. We discuss in Note 7 – Borrowings our estimate of the timing of the amounts payable for the borrowings based on their contractual maturities.

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 Securities and Exchange Commission 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, 2026 or 2025. We have purchased a total of 57,658 shares of our Class A common stock under this program from its inception through June 30, 2026.

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 Securities and Exchange Commission 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, 2026 or 2025. We have purchased a total of 57,658 shares of our Class A common stock under this program from its inception through September 30, 2026.

Previous wording

On July 16, 2026, our board of directors declared quarterly cash dividends of $0.1925 per share of our Class A common stock and $0.175 per share of our Class B common stock, payable on August 14, 2026 to our stockholders of record as of the close of business on July 31, 2026. 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, 2025. Our insurance subsidiaries did not pay any dividends to us during the first six months of 2026. Amounts remaining available for distribution to us as dividends from our insurance subsidiaries without prior approval of their domiciliary insurance regulatory authorities in 2026 are approximately $50.8 million from Atlantic States, $10.2 million from MICO and $5.4 million from Peninsula, or a total of approximately $66.4 million.

Current wording

On October 15, 2026, our board of directors declared quarterly cash dividends of $0.1925 per share of our Class A common stock and $0.175 per share of our Class B common stock, payable on November 16, 2026 to our stockholders of record as of the close of business on November 2, 2026. 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, 2025. Our insurance subsidiaries paid $10.0 million in dividends to us during the first nine months of 2026. Amounts remaining available for distribution to us as dividends from our insurance subsidiaries without prior approval of their domiciliary insurance regulatory authorities in 2026 are approximately $40.8 million from Atlantic States, $10.2 million from MICO and $5.4 million from Peninsula, or a total of approximately $56.4 million.

Previous wording

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.

Current wording

Our portfolio of fixed maturities 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 maturities. We also limit the percentage and amount of our total investment portfolio that we invest in the securities of any one issuer. During the third quarter of 2026, market interest rates increased significantly, which had an adverse impact on the market value of our fixed maturities. We held fixed maturities with unrealized losses of $141.7 million at September 30, 2026, compared to $65.7 million at December 31, 2025. Based upon our analysis of general market conditions and underlying factors impacting these fixed maturities, we have determined that no additional allowance for expected credit loss is required beyond the allowance for expected credit loss we recorded at September 30, 2026.

Previous wording

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.

Current wording

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.