Donegal DGICA

Donegal Group Inc. is an insurance holding company whose insurance subsidiaries and affiliates offer property and casualty insurance in 21 states across the northeastern southern midwestern and southwestern United States. Donegal Group Inc. has no significant business operations and is separate and distinct from its insurance subsidiaries. As used in this Form 10-K Report the terms we us and our refer to Donegal Group Inc. and its insurance subsidiaries. Our Class A common stock and our Class B common stock trade on the NASDAQ Global Select Market under the symbols DGICA and DGICB respectively. Donegal Mutual Insurance Company organized us as an insurance holding company on August 26 1986. At December 31 2025 Donegal Mutual held approximately 44 percent of our outstanding Class A common stock and approximately 85 percent of our outstanding Class B common stock providing approximately 70 percent of the combined voting power of our shares.

Donegal Group Inc. generates revenue through insurance premiums collected by its subsidiaries from commercial and personal lines policies. The commercial lines products consist primarily of commercial automobile commercial multi peril and workers' compensation insurance. The personal lines products consist primarily of homeowners and private passenger automobile insurance. The company's revenue comes from policyholders in smaller to mid sized regional communities. The annual net premiums earned of our insurance subsidiaries increased from 301.5 million dollars in 2006 to 921.2 million dollars in 2025 representing a compound annual growth rate of 6.1 percent. In 2025 total net premiums written amounted to 904.8 million dollars with commercial lines contributing 564.0 million dollars and personal lines contributing 340.8 million dollars.

Donegal Group Inc. operates through three segments: the investment function commercial lines of insurance and personal lines of insurance. We set forth financial information about these segments in Note 18 of the Notes to Consolidated Financial Statements.

• The investment function manages the investment portfolios of the insurance subsidiaries focusing on generating after-tax income while minimizing equity market volatility and credit risk through investments in high quality securities. The investment strategy emphasizes investments in diversified highly rated and marketable fixed maturity instruments. The fixed maturity portfolios consist of both taxable and tax exempt securities with a small percentage allocated to equity securities. At December 31 2025 96.4 percent of all debt securities held had an investment grade rating. The portfolio includes United States Treasury and agency securities obligations of states and political subdivisions corporate securities and mortgage backed securities. Investment income is derived from interest dividends and capital gains on these holdings with an average yield of 3.6 percent for 2025.
• The commercial lines segment provides commercial automobile commercial multi peril and workers' compensation insurance policies to businesses. Commercial automobile policies provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured. Commercial multi peril policies provide protection to businesses against many perils usually combining liability and physical damage coverages. Workers' compensation policies are purchased by employers to provide benefits to employees for injuries sustained during employment with coverage determined by state workers' compensation laws. The commercial lines underwriting department evaluates and selects risks to achieve underwriting profit through disciplined underwriting guidelines appropriate pricing based on exposure and risk characteristics and utilization of predictive models and underwriting judgment. In 2025 commercial lines net premiums written totaled 564.0 million dollars comprising automobile 197.9 million dollars workers' compensation 92.5 million dollars multi peril 221.3 million dollars and other 52.3 million dollars.
• The personal lines segment provides homeowners and private passenger automobile insurance policies to individuals. Homeowners policies provide coverage for damage to residences and their contents from a broad range of perils including fire lightning windstorm and theft. These policies also cover liability of the insured arising from injury to other persons or their property while on the insured property under other specified conditions. Private passenger automobile policies provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured. The personal lines underwriting department evaluates and selects risks to achieve underwriting profit through similar disciplined processes. In 2025 personal lines net premiums written totaled 340.8 million dollars comprising automobile 208.1 million dollars homeowners 123.0 million dollars and other 9.8 million dollars. Due to inflationary pressures on loss costs the company managed personal lines exposure growth in 2024 and 2025 by implementing premium rate increases while selectively writing new business.

Donegal Group Inc. operates in the highly competitive property and casualty insurance market where many competitors are larger with greater financial resources. The company competes effectively through local market knowledge and economies of scale from centralized administrative data processing investment and other services. Its competitive advantages include strong underwriting discipline claims servicing and policyholder service capabilities. Donegal Group Inc. believes it has a substantial opportunity as a well capitalized regional insurance holding company with a solid business strategy to grow profitably and compete effectively with larger national property and casualty insurers. The downstream holding company structure with Donegal Mutual holding approximately 70 percent of the combined voting power has proven effective over 39 years contributing to revenue growth and financial strength. Donegal Group Inc. and its subsidiaries maintain an A. M. Best rating of Excellent indicating strong ability to meet ongoing insurance obligations. The company focuses on maintaining a profitable book of business to provide stability across its product portfolio and enhance brand value to independent agents.

Donegal Group Inc.'s insurance subsidiaries serve individuals and businesses in smaller to mid sized regional communities across 21 states including Arizona Colorado Delaware Georgia Illinois Indiana Iowa Maryland Michigan Nebraska New Mexico North Carolina Ohio Pennsylvania South Carolina South Dakota Tennessee Texas Utah Virginia and Wisconsin. Products are distributed through approximately 2000 independent insurance agencies. The company seeks to be among the top three insurers within each agency for its lines of business by providing consistent competitive and stable market offerings. Donegal Group Inc. offers a competitive compensation program to independent agents that includes base commissions growth incentive plans and a profit sharing plan. The company encourages independent agents to focus on account selling or serving all of a particular insured's property and casualty insurance needs which generally results in more favorable loss experience. Agency relationships are managed through regular evaluation of profitability and performance with underperforming agents subject to improvement plans or termination where permitted by law. The multi year systems modernization project has enhanced the ability to conduct business with agents and develop new products. Technology investments include agency interface systems automated policy management claims processing and billing administration systems to improve service communications and efficiency.