10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                 .

Commission file number 0-15341

Donegal Group Inc.

(Exact name of registrant as specified in its charter)

Delaware	23-2424711
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1195 River Road, P.O. Box 302, Marietta, PA 17547

(Address of principal executive offices) (Zip code)

(717) 426-1931

(Registrant’s telephone number, including area code)

Not applicable

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

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

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

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

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

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

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 25,668,501 shares of Class A Common Stock, par value $0.01 per share, and 5,576,775 shares of Class B Common Stock, par value $0.01 per share, outstanding on July 31, 2021.

DONEGAL GROUP INC.

INDEX TO FORM 10-Q REPORT

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults upon Senior Securities	35
Item 4.	Removed and Reserved	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
Signatures		37

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

Donegal Group Inc. and Subsidiaries

Consolidated Balance Sheets

	June 30, 2021			December 31, 2020
		(Unaudited)
Assets
Investments
Fixed maturities
Held to maturity, at amortized cost	$	643,847,647		$	586,609,439
Available for sale, at fair value		522,580,264			555,136,017
Equity securities, at fair value		72,757,031			58,556,173
Short-term investments, at cost, which approximates fair value		22,767,372			20,900,155
Total investments		1,261,952,314			1,221,201,784
Cash		88,004,738			103,094,236
Accrued investment income		8,175,750			7,936,879
Premiums receivable		189,383,783			169,596,332
Reinsurance receivable		422,198,101			408,908,850
Deferred policy acquisition costs		69,687,624			59,156,958
Deferred tax asset, net		5,134,455			5,683,113
Prepaid reinsurance premiums		186,451,557			169,418,333
Property and equipment, net		3,350,691			4,390,377
Accounts receivable - securities		79,402			67,676
Federal income taxes recoverable		4,018,210			3,089,369
Goodwill		5,625,354			5,625,354
Other intangible assets		958,010			958,010
Other		1,380,569			1,393,053
Total assets	$	2,246,400,558		$	2,160,520,324
Liabilities and Stockholders’ Equity
Liabilities
Losses and loss expenses	$	998,658,015		$	962,007,437
Unearned premiums		599,949,617			537,189,598
Accrued expenses		11,465,644			29,115,198
Reinsurance balances payable		4,030,947			3,233,523
Borrowings under lines of credit		35,000,000			85,000,000
Cash dividends declared to stockholders		—			4,436,301
Subordinated debentures		5,000,000			5,000,000
Accounts payable - securities		11,295,765			—
Due to affiliate		22,196,384			10,293,495
Other		8,647,393			6,470,652
Total liabilities		1,696,243,765			1,642,746,204
Stockholders’ Equity
Preferred stock, $.01 par value, authorized 2,000,000 shares; none issued		—			—
Class A common stock, $.01 par value, authorized 50,000,000 shares, issued 28,619,866 and 27,651,774 shares and outstanding 25,617,278 and 24,649,186 shares		286,199			276,518
Class B common stock, $.01 par value, authorized 10,000,000 shares, issued 5,649,240 shares and outstanding 5,576,775 shares		56,492			56,492
Additional paid-in capital		302,510,624			289,149,567
Accumulated other comprehensive income		8,473,471			11,130,612
Retained earnings		280,056,364			258,387,288
Treasury stock, at cost		(41,226,357	)		(41,226,357	)
Total stockholders’ equity		550,156,793			517,774,120
Total liabilities and stockholders’ equity	$	2,246,400,558		$	2,160,520,324

See accompanying notes to consolidated financial statements.

1

Donegal Group Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended June 30,
	2021		2020
Revenues:
Net premiums earned	$	192,488,665	$	184,373,768
Investment income, net of investment expenses		7,652,180		7,172,144
Net investment gains (includes $479,211 and $14,493 accumulated other comprehensive income reclassifications)		4,241,031		6,485,896
Lease income		108,038		109,205
Installment payment fees		656,029		758,759
Total revenues		205,145,943		198,899,772
Expenses:
Net losses and loss expenses		113,956,652		105,349,019
Amortization of deferred policy acquisition costs		33,103,000		29,634,000
Other underwriting expenses		36,229,677		33,567,266
Policyholder dividends		1,629,499		1,683,658
Interest		217,290		428,092
Other expenses, net		313,000		249,688
Total expenses		185,449,118		170,911,723
Income before income tax expense		19,696,825		27,988,049
Income tax expense (includes $100,634 and $3,044 income tax expense from reclassification items)		3,532,789		5,309,271
Net income	$	16,164,036	$	22,678,778
Earnings per common share:
Class A common stock - basic	$	0.53	$	0.80
Class A common stock - diluted	$	0.53	$	0.79
Class B common stock - basic and diluted	$	0.48	$	0.72

Donegal Group Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended June 30,
	2021			2020
Net income	$	16,164,036		$	22,678,778
Other comprehensive income, net of tax
Unrealized gain on securities:
Unrealized holding gain during the period, net of income tax expense of $511,306 and $1,774,279		1,928,551			6,674,664
Reclassification adjustment for gains included in net income, net of income tax expense of $100,634 and $3,044		(378,577	)		(11,449	)
Other comprehensive income		1,549,974			6,663,215
Comprehensive income	$	17,714,010		$	29,341,993

See accompanying notes to consolidated financial statements.

2

Donegal Group Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Six Months Ended June 30,
	2021		2020
Revenues:
Net premiums earned	$	379,740,265	$	371,626,546
Investment income, net of investment expenses		15,162,758		14,548,428
Net investment gains (losses) (includes $450,025 and $436,328 accumulated other comprehensive income reclassifications)		6,710,085		(4,208,947	)
Lease income		215,805		218,472
Installment payment fees		1,286,928		1,626,479
Total revenues		403,115,841		383,810,978
Expenses:
Net losses and loss expenses		233,176,399		222,595,545
Amortization of deferred policy acquisition costs		63,282,000		59,571,000
Other underwriting expenses		70,011,727		66,164,895
Policyholder dividends		2,923,520		3,525,658
Interest		529,616		652,422
Other expenses, net		745,069		810,238
Total expenses		370,668,331		353,319,758
Income before income tax expense		32,447,510		30,491,220
Income tax expense (includes $94,505 and $91,629 income tax expense from reclassification items)		5,753,626		4,081,321
Net income	$	26,693,884	$	26,409,899
Earnings per common share:
Class A common stock - basic	$	0.89	$	0.93
Class A common stock - diluted	$	0.88	$	0.92
Class B common stock - basic and diluted	$	0.80	$	0.84

Donegal Group Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Six Months Ended June 30,
	2021			2020
Net income	$	26,693,884		$	26,409,899
Other comprehensive (loss) income, net of tax
Unrealized (loss) gain on securities:
Unrealized holding (loss) gain during the period, net of income tax (benefit) expense of ($614,319) and $2,713,454		(2,301,621	)		10,207,754
Reclassification adjustment for gains included in net income, net of income tax expense of $94,505 and $91,629		(355,520	)		(344,699	)
Other comprehensive (loss) income		(2,657,141	)		9,863,055
Comprehensive income	$	24,036,743		$	36,272,954

See accompanying notes to consolidated financial statements.

3

Donegal Group Inc. and Subsidiaries

Consolidated Statement of Stockholders’ Equity

(Unaudited)

Six Months Ended June 30, 2021

	Class A Shares		Class B Shares		Class A Amount		Class B Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income			Retained Earnings			Treasury Stock			Total Stockholders’ Equity
Balance, December 31, 2020		27,651,774		5,649,240	$	276,518	$	56,492	$	289,149,567	$	11,130,612		$	258,387,288		$	(41,226,357	)	$	517,774,120
Issuance of common stock (stock compensation plans)		33,336		—		334		—		419,454		—			—			—			419,788
Share-based compensation		346,124		—		3,461		—		4,719,388		—			—			—			4,722,849
Net income		—		—		—		—		—		—			10,529,848			—			10,529,848
Cash dividends declared		—		—		—		—		—		—			(5,000	)		—			(5,000	)
Grant of stock options		—		—		—		—		109,184		—			(109,184	)		—			—
Other comprehensive loss		—		—		—		—		—		(4,207,115	)		—			—			(4,207,115	)
Balance, March 31, 2021		28,031,234		5,649,240	$	280,313	$	56,492	$	294,397,593	$	6,923,497		$	268,802,952		$	(41,226,357	)	$	529,234,490
Issuance of common stock (stock compensation plans)		49,613		—		496		—		730,005		—			—			—			730,501
Share-based compensation		539,019		—		5,390		—		7,313,031		—			—			—			7,318,421
Net income		—		—		—		—		—		—			16,164,036			—			16,164,036
Cash dividends declared		—		—		—		—		—		—			(4,840,629	)		—			(4,840,629	)
Grant of stock options		—		—		—		—		69,995		—			(69,995	)		—			—
Other comprehensive income		—		—		—		—		—		1,549,974			—			—			1,549,974
Balance, June 30, 2021		28,619,866		5,649,240	$	286,199	$	56,492	$	302,510,624	$	8,473,471		$	280,056,364		$	(41,226,357	)	$	550,156,793

See accompanying notes to consolidated financial statements.

4

Donegal Group Inc. and Subsidiaries

Consolidated Statement of Stockholders’ Equity

(Unaudited)

Six Months Ended June 30, 2020

	Class A Shares		Class B Shares		Class A Amount		Class B Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings			Treasury Stock			Total Stockholders’ Equity
Balance, December 31, 2019		26,203,935		5,649,240	$	262,040	$	56,492	$	268,151,601	$	504,170	$	223,267,573		$	(41,226,357	)	$	451,015,519
Issuance of common stock (stock compensation plans)		28,924		—		289		—		376,539		—		—			—			376,828
Share-based compensation		67,087		—		671		—		1,242,315		—		—			—			1,242,986
Net income		—		—		—		—		—		—		3,731,121			—			3,731,121
Cash dividends declared		—		—		—		—		—		—		(5,363	)		—			(5,363	)
Grant of stock options		—		—		—		—		118,525		—		(118,525	)		—			—
Other comprehensive income		—		—		—		—		—		3,199,840		—			—			3,199,840
Balance, March 31, 2020		26,299,946		5,649,240	$	263,000	$	56,492	$	269,888,980	$	3,704,010	$	226,874,806		$	(41,226,357	)	$	459,560,931
Issuance of common stock (stock compensation plans)		52,964		—		530		—		720,018		—		—			—			720,548
Share-based compensation		160,869		—		1,608		—		2,490,136		—		—			—			2,491,744
Net income		—		—		—		—		—		—		22,678,778			—			22,678,778
Cash dividends declared		—		—		—		—		—		—		(4,255,882	)		—			(4,255,882	)
Grant of stock options		—		—		—		—		76,354		—		(76,354	)		—			—
Other comprehensive income		—		—		—		—		—		6,663,215		—			—			6,663,215
Balance, June 30, 2020		26,513,779		5,649,240	$	265,138	$	56,492	$	273,175,488	$	10,367,225	$	245,221,348		$	(41,226,357	)	$	487,859,334

See accompanying notes to consolidated financial statements.

5

Donegal Group Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

		Six Months Ended June 30,
		2021			2020
Cash Flows from Operating Activities:
Net income	$	26,693,884		$	26,409,899
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash items		3,083,025			3,502,046
Net investment (gains) losses		(6,710,085	)		4,208,947
Changes in assets and liabilities:
Losses and loss expenses		36,650,578			32,149,773
Unearned premiums		62,760,019			52,796,454
Premiums receivable		(19,787,451	)		(21,717,231	)
Deferred acquisition costs		(10,530,666	)		(2,865,674	)
Deferred income taxes		1,266,870			(837,202	)
Reinsurance receivable		(13,289,251	)		(12,319,334	)
Prepaid reinsurance premiums		(17,033,224	)		(32,483,228	)
Accrued investment income		(238,871	)		(597,823	)
Due to affiliate		11,902,889			(2,053,312	)
Reinsurance balances payable		797,424			144,398
Current income taxes		(928,841	)		4,893,520
Accrued expenses		(17,649,554	)		(5,005,473	)
Other, net		2,189,225			1,809,764
Net adjustments		32,482,087			21,625,625
Net cash provided by operating activities		59,175,971			48,035,524
Cash Flows from Investing Activities:
Purchases of fixed maturities, held to maturity		(80,315,578	)		(55,313,641	)
Purchases of fixed maturities, available for sale		(73,023,551	)		(81,210,780	)
Purchases of equity securities, available for sale		(25,332,194	)		(5,071,801	)
Maturity of fixed maturities:
Held to maturity		23,650,172			18,812,367
Available for sale		111,197,663			70,379,590
Sales of fixed maturities, available for sale		—			15,251,996
Sales of equity securities, available for sale		17,391,396			3,202,672
Net sales of property and equipment		935,029			32,107
Net purchases of short-term investments		(1,867,217	)		(37,311,903	)
Net cash used in investing activities		(27,364,280	)		(71,229,393	)
Cash Flows from Financing Activities:
Cash dividends paid		(9,281,930	)		(8,336,479	)
Issuance of common stock		12,380,741			3,988,784
Borrowing under lines of credit		—			50,000,000
Payments on lines of credit		(50,000,000	)		—
Net cash (used in) provided by financing activities		(46,901,189	)		45,652,305
Net (decrease) increase in cash		(15,089,498	)		22,458,436
Cash at beginning of period		103,094,236			49,318,930
Cash at end of period	$	88,004,738		$	71,777,366
Cash paid during period - Interest	$	659,222		$	664,342
Net cash paid during period - Taxes	$	5,400,000		$	—

See accompanying notes to consolidated financial statements.

6

DONEGAL GROUP INC. AND SUBSIDIARIES

(Unaudited)

Notes to Consolidated Financial Statements

1 - Organization

Donegal Mutual Insurance Company (“Donegal Mutual”) organized us as an insurance holding company on August 26, 1986. Our insurance subsidiaries, Atlantic States Insurance Company (“Atlantic States”), Southern Insurance Company of Virginia (“Southern”), the Peninsula Insurance Group (“Peninsula”), which consists of Peninsula Indemnity Company and The Peninsula Insurance Company, and Michigan Insurance Company (“MICO”), and our affiliates write personal and commercial lines of property and casualty coverages exclusively through independent insurance agents in certain Mid-Atlantic, Midwestern, New England, Southern and Southwestern states.

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

At June 30, 2021, Donegal Mutual held approximately 41% of our outstanding Class A common stock and approximately 84% of our outstanding Class B common stock. This ownership provides Donegal Mutual with approximately 70% of the total voting power of our common stock. Our insurance subsidiaries and Donegal Mutual have interrelated operations due to a pooling agreement and other intercompany agreements and transactions. While each company maintains its separate corporate existence, our insurance subsidiaries and Donegal Mutual conduct business together as the Donegal Insurance Group. As such, Donegal Mutual and our insurance subsidiaries share the same business philosophy, the same management, the same employees and the same facilities and offer the same types of insurance products.

Atlantic States, our largest subsidiary, participates in a proportional reinsurance agreement, or pooling agreement, with Donegal Mutual. Under the pooling agreement, Donegal Mutual and Atlantic States contribute substantially all of their respective premiums, losses and loss expenses to the underwriting pool, and the underwriting pool, acting through Donegal Mutual, then allocates 80% of the pooled business to Atlantic States. Thus, Donegal Mutual and Atlantic States share the underwriting results of the pooled business in proportion to their respective participation in the underwriting pool.

In addition, Donegal Mutual has a 100% quota-share reinsurance agreement with Southern Mutual Insurance Company, or Southern Mutual. Donegal Mutual places its assumed business from Southern Mutual into the underwriting pool.

Donegal Mutual completed the merger of Mountain States Mutual Casualty Company, or Mountain States, with and into Donegal Mutual effective May 25, 2017. Donegal Mutual was the surviving company in the merger, and Mountain States’ insurance subsidiaries, Mountain States Indemnity Company and Mountain States Commercial Insurance Company (collectively, the “Mountain States insurance subsidiaries”), became insurance subsidiaries of Donegal Mutual upon completion of the merger. Upon completion of the merger, Donegal Mutual assumed all of the policy obligations of Mountain States and began to market its products together with the Mountain States insurance subsidiaries as the Mountain States Insurance Group in four Southwestern states. Donegal Mutual also entered into a 100% quota-share reinsurance agreement with the Mountain States insurance subsidiaries on the merger date. Beginning with policies effective in 2021, Donegal Mutual began to place the business of the Mountain States Insurance Group into the underwriting pool. As a result, our consolidated financial results through December 31, 2020 excluded the results of the Mountain States Insurance Group operations in those Southwestern states.

The same executive management and underwriting personnel administer products, classes of business underwritten, pricing practices and underwriting standards of Donegal Mutual and our insurance subsidiaries. In addition, as the Donegal Insurance Group, Donegal Mutual and our insurance subsidiaries share a combined business plan to achieve market penetration and underwriting profitability objectives. The products our insurance subsidiaries and Donegal Mutual market are generally complementary, thereby allowing the Donegal Insurance Group to offer a broader range of products to a given market and to

7

expand the Donegal Insurance Group’s ability to service an entire personal lines or commercial lines account. Distinctions within the products of Donegal Mutual and our insurance subsidiaries generally relate to specific risk profiles targeted within similar classes of business, such as preferred tier versus standard tier products, but we do not allocate all of the standard risk gradients to one company. Therefore, the underwriting profitability of the business the individual companies write directly will vary. However, the underwriting pool homogenizes the risk characteristics of all business that Donegal Mutual and Atlantic States write directly. The business Atlantic States derives from the underwriting pool represents a significant percentage of our total consolidated revenues.​​​​​​​

2 - Basis of Presentation

Our financial information for the interim periods included in this Form 10-Q Report is unaudited; however, our financial information we include in this Form 10-Q Report reflects all adjustments, consisting only of normal recurring adjustments that, in the opinion of our management, are necessary for a fair presentation of our financial position, results of operations and cash flows for those interim periods. Our results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results of operations we expect for the year ending December 31, 2021.

We recommend you read the interim financial statements we include in this Form 10-Q Report in conjunction with the financial statements and the notes to our financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

3 - Earnings Per Share

We have two classes of common stock, which we refer to as our Class A common stock and our Class B common stock. Our certificate of incorporation provides that whenever our board of directors declares a dividend on our Class B common stock, our board of directors shall simultaneously declare a dividend on our Class A common stock that is payable to the holders of our Class A common stock at the same time and as of the same record date at a rate that is at least 10% greater than the rate at which our board of directors declared a dividend on our Class B common stock. Accordingly, we use the two-class method to compute our earnings per common share. The two-class method is an earnings allocation formula that determines earnings per share separately for each class of common stock based on dividends we have declared and an allocation of our remaining undistributed earnings using a participation percentage that reflects the dividend rights of each class. The table below presents for the periods indicated a reconciliation of the numerators and denominators we used to compute basic and diluted net income per share for our Class A common stock and our Class B common stock:​​​​​​​

8

	Three Months Ended June 30,
	2021				2020
	Class A		Class B		Class A		Class B
	(in thousands, except per share data)
Basic earnings per share:
Numerator:
Allocation of net income	$	13,482	$	2,682	$	18,665	$	4,014
Denominator:
Weighted-average shares outstanding		25,342		5,577		23,451		5,577
Basic earnings per share	$	0.53	$	0.48	$	0.80	$	0.72
Diluted earnings per share:
Numerator:
Allocation of net income	$	13,482	$	2,682	$	18,665	$	4,014
Denominator:
Number of shares used in basic computation		25,342		5,577		23,451		5,577
Weighted-average shares effect of dilutive securities:
Director and employee stock options		252		—		199		—
Number of shares used in diluted computation		25,594		5,577		23,650		5,577
Diluted earnings per share	$	0.53	$	0.48	$	0.79	$	0.72

	Six Months Ended June 30,
	2021				2020
	Class A		Class B		Class A		Class B
	(in thousands, except per share data)
Basic earnings per share:
Numerator:
Allocation of net income	$	22,223	$	4,471	$	21,721	$	4,689
Denominator:
Weighted-average shares outstanding		25,057		5,577		23,356		5,577
Basic earnings per share	$	0.89	$	0.80	$	0.93	$	0.84
Diluted earnings per share:
Numerator:
Allocation of net income	$	22,223	$	4,471	$	21,721	$	4,689
Denominator:
Number of shares used in basic computation		25,057		5,577		23,356		5,577
Weighted-average shares effect of dilutive securities:
Director and employee stock options		190		—		193		—
Number of shares used in diluted computation		25,247		5,577		23,549		5,577
Diluted earnings per share	$	0.88	$	0.80	$	0.92	$	0.84

9

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Number of options to purchase Class A shares excluded		4,952,276		6,183,992		4,952,276		6,183,992

4 -  Reinsurance

Atlantic States and Donegal Mutual have participated in a pooling agreement since 1986 under which they pool their direct premiums written, and Atlantic States and Donegal Mutual then share the underwriting results of the pool in accordance with the terms of the pooling agreement. Atlantic States has an 80% share of the results of the pool, and Donegal Mutual has a 20% share of the results of the pool. Donegal Mutual began placing the business of the Mountain States Insurance Group into the pool beginning with policies effective in 2021.

Our insurance subsidiaries and Donegal Mutual have a combined third-party reinsurance program. The coverage and parameters of the program are common to all of our insurance subsidiaries and Donegal Mutual. Our insurance subsidiaries and Donegal Mutual use several different reinsurers. They require their reinsurers to maintain an A.M. Best rating of A- (Excellent) or better or, with respect to foreign reinsurers, have a financial condition that, in the opinion of our management, is equivalent to a company with at least an A- rating from A.M. Best. The following information describes the external reinsurance our insurance subsidiaries have in place for 2021:

• excess of loss reinsurance, under which the losses of Donegal Mutual and our insurance subsidiaries are automatically reinsured, through a series of contracts, over a set retention of $2.0 million; and

• catastrophe reinsurance, under which Donegal Mutual and our insurance subsidiaries recover, through a series of reinsurance agreements, 100% of an accumulation of many losses resulting from a single event, including natural disasters, over a set retention of $15.0 million up to aggregate losses of $185.0 million per occurrence.

In addition to the pooling agreement and third-party reinsurance, our insurance subsidiaries have a catastrophe reinsurance agreement with Donegal Mutual, under which each of our insurance subsidiaries recovers 100% of an accumulation of multiple losses resulting from a single event, including natural disasters, over a set retention of $2.0 million up to aggregate losses of $13.0 million per occurrence. The agreement also provides additional coverage for an accumulation of losses from a single event including a combination of our insurance subsidiaries over a combined retention of $5.0 million.

Our insurance subsidiaries and Donegal Mutual also purchase facultative reinsurance to cover certain exposures, including property exposures that exceeded the limits provided by their respective treaty reinsurance.

5 -  Investments

The amortized cost and estimated fair values of our fixed maturities at June 30, 2021 were as follows:

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	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	89,716	$	2,839	$	649	$	91,906
Obligations of states and political subdivisions		346,517		20,073		788		365,802
Corporate securities		188,162		15,061		267		202,956
Mortgage-backed securities		19,453		1,005		—		20,458
Totals	$	643,848	$	38,978	$	1,704	$	681,122

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	22,508	$	257	$	439	$	22,326
Obligations of states and political subdivisions		59,378		2,366		31		61,713
Corporate securities		201,634		9,644		202		211,076
Mortgage-backed securities		222,814		5,068		417		227,465
Totals	$	506,334	$	17,335	$	1,089	$	522,580

At June 30, 2021, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $267.8 million and an amortized cost of $254.2 million. Our holdings at June 30, 2021 also included special revenue bonds with an aggregate fair value of $159.7 million and an amortized cost of $151.7 million. With respect to both categories of those bonds at June 30, 2021, we held no securities of any issuer that comprised more than 10% of our holdings of either bond category. Education bonds and water and sewer utility bonds represented 46% and 35%, respectively, of our total investments in special revenue bonds based on the carrying values of these investments at June 30, 2021. Many of the issuers of the special revenue bonds we held at June 30, 2021 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held at June 30, 2021 are similar to general obligation bonds.

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The amortized cost and estimated fair values of our fixed maturities at December 31, 2020 were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	77,435	$	3,984	$	223	$	81,196
Obligations of states and political subdivisions		312,319		23,212		143		335,388
Corporate securities		173,270		18,172		206		191,236
Mortgage-backed securities		23,585		1,236		—		24,821
Totals	$	586,609	$	46,604	$	572	$	632,641

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	47,512	$	424	$	121	$	47,815
Obligations of states and political subdivisions		66,287		2,690		12		68,965
Corporate securities		202,396		10,496		184		212,708
Mortgage-backed securities		218,763		6,902		17		225,648
Totals	$	534,958	$	20,512	$	334	$	555,136

​​​​​​​

At December 31, 2020, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $263.6 million and an amortized cost of $247.5 million. Our holdings also included special revenue bonds with an aggregate fair value of $140.8 million and an amortized cost of $131.1 million. With respect to both categories of bonds, we held no securities of any issuer that comprised more than 10% of that category at December 31, 2020. Education bonds and water and sewer utility bonds represented 44% and 39%, respectively, of our total investments in special revenue bonds based on their carrying values at December 31, 2020. Many of the issuers of the special revenue bonds we held at December 31, 2020 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held are similar to general obligation bonds.

We made reclassifications from available for sale to held to maturity of certain fixed maturities at fair value on November 30, 2013. We segregated within accumulated other comprehensive income the net unrealized losses of $15.1 million arising prior to the November 30, 2013 reclassifications. We are amortizing this balance over the remaining life of the related securities as an adjustment to yield in a manner consistent with the accretion of discount on the same fixed maturities. We recorded amortization of $556,553 and $833,690 in other comprehensive (loss) income during the six months ended June 30, 2021 and 2020, respectively. At June 30, 2021 and December 31, 2020, net unrealized losses of $5.5 million and $6.1 million, respectively, remained within accumulated other comprehensive income.

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We show below the amortized cost and estimated fair value of our fixed maturities at June 30, 2021 by contractual maturity. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Estimated Fair Value
	(in thousands)
Held to maturity
Due in one year or less	$	38,641	$	39,762
Due after one year through five years		83,282		88,929
Due after five years through ten years		224,135		237,348
Due after ten years		278,337		294,625
Mortgage-backed securities		19,453		20,458
Total held to maturity	$	643,848	$	681,122
Available for sale
Due in one year or less	$	26,146	$	26,621
Due after one year through five years		131,837		138,624
Due after five years through ten years		96,413		99,711
Due after ten years		29,124		30,159
Mortgage-backed securities		222,814		227,465
Total available for sale	$	506,334	$	522,580

The cost and estimated fair values of our equity securities at June 30, 2021 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	50,864	$	22,007	$	114	$	72,757

The cost and estimated fair values of our equity securities at December 31, 2020 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	42,410	$	17,103	$	957	$	58,556

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Gross investment gains and losses before applicable income taxes for the three months and six months ended June 30, 2021 and 2020 were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in thousands)				(in thousands)
Gross investment gains:
Fixed maturities	$	479	$	229	$	524	$	652
Equity securities		3,762		6,474		6,728		3,355
		4,241		6,703		7,252		4,007
Gross investment losses:
Fixed maturities		—		217		74		218
Equity securities		—		—		468		7,998
		—		217		542		8,216
Net investment gains (losses)	$	4,241	$	6,486	$	6,710	$	(4,209	)

We recognized $6.1 million of gains and $114,339 of losses on equity securities we held at June 30, 2021 in net investment gains for the six months ended June 30, 2021. We recognized $3.4 million of gains and $4.9 million of losses on equity securities we held at June 30, 2020 in net investment losses for the six months ended June 30, 2020.

We held fixed maturities with unrealized losses representing declines that we considered temporary at June 30, 2021 as follows:

	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	38,202	$	1,088	$	—	$	—
Obligations of states and political subdivisions		45,446		819		—		—
Corporate securities		38,846		344		3,375		125
Mortgage-backed securities		55,930		415		487		2
Totals	$	178,424	$	2,666	$	3,862	$	127

We held fixed maturities with unrealized losses representing declines that we considered temporary at December 31, 2020 as follows:

	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	29,144	$	345	$	—	$	—
Obligations of states and political subdivisions		9,362		154		—		—
Corporate securities		26,143		115		8,230		276
Mortgage-backed securities		3,091		15		236		1
Totals	$	67,740	$	629	$	8,466	$	277

We make estimates concerning the valuation of our investments and the recognition of other-than-temporary declines in the value of our investments. For equity securities, we measure investments at fair value, and we recognize changes in fair value in

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our results of operations. With respect to a debt security that is in an unrealized loss position, we first assess if we intend to sell the debt security. If we determine we intend to sell the debt security, we recognize the impairment loss in our results of operations. If we do not intend to sell the debt security, we determine whether it is more likely than not that we will be required to sell the debt security prior to recovery. If we determine it is more likely than not that we will be required to sell the debt security prior to recovery, we recognize the impairment loss in our results of operations. If we determine it is more likely than not that we will not be required to sell the debt security prior to recovery, we then evaluate whether a credit loss has occurred with respect to that security. We determine whether a credit loss has occurred by comparing the amortized cost of the debt security to the present value of the cash flows we expect to collect. If we expect a cash flow shortfall, we consider that a credit loss has occurred. If we determine that a credit loss has occurred, we consider the impairment to be other than temporary. We then recognize the amount of the impairment loss related to the credit loss in our results of operations, and we recognize the remaining portion of the impairment loss in our other comprehensive income, net of applicable taxes. In addition, we may write down securities in an unrealized loss position based on a number of other factors, including when the fair value of an investment is significantly below its cost, when the financial condition of the issuer of a security has deteriorated, the occurrence of industry, issuer or geographic events that have negatively impacted the value of a security and rating agency downgrades. We held 89 debt securities that were in an unrealized loss position at June 30, 2021. Based upon our analysis of general market conditions and underlying factors impacting these debt securities, we considered these declines in value to be temporary.

We amortize premiums and discounts on debt securities over the life of the security as an adjustment to yield using the effective interest method. We compute realized investment gains and losses using the specific identification method.

We amortize premiums and discounts on mortgage-backed debt securities using anticipated prepayments.

6 - Segment Information

We evaluate the performance of our personal lines and commercial lines segments based upon the underwriting results of our insurance subsidiaries using statutory accounting principles (“SAP”) that various state insurance departments prescribe or permit. Our management uses SAP to measure the performance of our insurance subsidiaries instead of United States generally accepted accounting principles (“GAAP”). SAP financial measures are considered non-GAAP financial measures under applicable SEC rules because they include or exclude certain items that the most comparable GAAP financial measures do not ordinarily include or exclude.

Financial data by segment for the three and six months ended June 30, 2021 and 2020 is as follows:​​​​​​​​​​​​​​

15

	Three Months Ended June 30,
	2021		2020
	(in thousands)
Revenues:
Premiums earned:
Commercial lines	$	115,300	$	101,870
Personal lines		77,189		82,504
GAAP premiums earned		192,489		184,374
Net investment income		7,652		7,172
Investment gains		4,241		6,486
Other		764		868
Total revenues	$	205,146	$	198,900
Income before income tax expense:
Underwriting income:
Commercial lines	$	1,767	$	4,472
Personal lines		547		8,290
SAP underwriting income		2,314		12,762
GAAP adjustments		5,256		1,378
GAAP underwriting income		7,570		14,140
Net investment income		7,652		7,172
Investment gains		4,241		6,486
Other		234		190
Income before income tax expense	$	19,697	$	27,988

	Six Months Ended June 30,
	2021			2020
	(in thousands)
Revenues:
Premiums earned:
Commercial lines	$	224,525		$	203,645
Personal lines		155,215			167,982
GAAP premiums earned		379,740			371,627
Net investment income		15,163			14,548
Investment gains (losses)		6,710			(4,209	)
Other		1,503			1,845
Total revenues	$	403,116		$	383,811
Income before income tax expense:
Underwriting (loss) income:
Commercial lines	$	(6,475	)	$	3,906
Personal lines		5,584			13,101
SAP underwriting (loss) income		(891	)		17,007
GAAP adjustments		11,238			2,762
GAAP underwriting income		10,347			19,769
Net investment income		15,163			14,548
Investment gains (losses)		6,710			(4,209	)
Other		228			383
Income before income tax expense	$	32,448		$	30,491

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7 - Borrowings

Lines of Credit

In August 2020, we entered into a credit agreement with Manufacturers and Traders Trust Company (“M&T”) that related to a $20.0 million unsecured demand line of credit. The line of credit has no expiration date, no annual fees and no covenants. At June 30, 2021, we had no outstanding borrowings from M&T and had the ability to borrow up to $20.0 million at interest rates equal to the then-current LIBOR rate plus 2.00%.

Atlantic States is a member of the FHLB of Pittsburgh. Through its membership, Atlantic States has the ability to issue debt to the FHLB of Pittsburgh in exchange for cash advances. Atlantic States has a fixed-rate cash advance of $35.0 million that was outstanding at June 30, 2021. The cash advance carries a fixed interest rate of 1.74% and is due in August 2024. In March 2020, Atlantic States issued $50.0 million of debt to the FHLB of Pittsburgh in exchange for a cash advance in the same amount that carried a fixed interest rate of 0.83%. Atlantic States obtained this contingent liquidity funding in light of uncertainty surrounding the economic impact of the COVID-19 pandemic. Atlantic States repaid this advance when it became due in March 2021. The table below presents the amount of FHLB of Pittsburgh stock Atlantic States purchased, collateral pledged and assets related to Atlantic States’ membership in the FHLB of Pittsburgh at June 30, 2021.

FHLB of Pittsburgh stock purchased and owned	$	1,575,600
Collateral pledged, at par (carrying value $45,226,104)		44,343,661
Borrowing capacity currently available		8,847,792

Subordinated Debentures

Donegal Mutual holds a $5.0 million surplus note that MICO issued to increase MICO’s statutory surplus. The surplus note carries an interest rate of 5.00%, and any repayment of principal or payment of interest on the surplus note requires prior approval of the Michigan Department of Insurance and Financial Services.

8 - Share–Based Compensation

We measure all share-based payments to employees, including grants of stock options, and use a fair-value-based method for the recording of related compensation expense in our results of operations. In determining the expense we record for stock options granted to directors and employees of our subsidiaries and affiliates, we estimate the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The significant assumptions we utilize in applying the Black-Scholes option pricing model are the risk-free interest rate, the expected term, the dividend yield and the expected volatility.

We charged compensation expense related to our stock compensation plans against income before income taxes of $304,373 and $314,237 for the three months ended June 30, 2021 and 2020, respectively, with a corresponding income tax benefit of $63,918 and $65,990, respectively. We charged compensation expense related to our stock compensation plans against income before income taxes of $597,168 and $644,541 for the six months ended June 30, 2021 and 2020, respectively, with a corresponding income tax benefit of $125,405 and $135,354, respectively. At June 30, 2021, we had $1.0 million of unrecognized compensation expense related to nonvested share-based compensation granted under our stock compensation plans that we expect to recognize over a weighted average period of approximately 1.6 years.

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We received cash from option exercises under all stock compensation plans during the three months ended June 30, 2021 and 2020 of $7.0 million and $2.2 million, respectively. We received cash from option exercises under all stock compensation plans during the six months ended June 30, 2021 and 2020 of $11.4 million and $3.1 million, respectively. We realized actual tax benefits for the tax deductions related to those option exercises of $271,979 and $54,221 for the three months ended June 30, 2021 and 2020, respectively. We realized actual tax benefits for the tax deductions related to those option exercises of $421,135 and $68,878 for the six months ended June 30, 2021 and 2020, respectively.

9 - Fair Value Measurements

We account for financial assets using a framework that establishes a hierarchy that ranks the quality and reliability of the inputs, or assumptions, we use in the determination of fair value, and we classify financial assets and liabilities carried at fair value in one of the following three categories:

Level 1 – quoted prices in active markets for identical assets and liabilities;

Level 2 – directly or indirectly observable inputs other than Level 1 quoted prices; and

Level 3 – unobservable inputs not corroborated by market data.

For investments that have quoted market prices in active markets, we use the quoted market price as fair value and include these investments in Level 1 of the fair value hierarchy. We classify publicly-traded equity securities as Level 1. When quoted market prices in active markets are not available, we base fair values on quoted market prices of comparable instruments or price estimates we obtain from independent pricing services and include these investments in Level 2 of the fair value hierarchy. We classify our fixed maturity investments as Level 2. Our fixed maturity investments consist of U.S. Treasury securities and obligations of U.S. government corporations and agencies, obligations of states and political subdivisions, corporate securities and mortgage-backed securities.

We present our investments in available-for-sale fixed maturity and equity securities at estimated fair value. The estimated fair value of a security may differ from the amount that could be realized if we sold the security in a forced transaction. In addition, the valuation of fixed maturity investments is more subjective when markets are less liquid, increasing the potential that the estimated fair value does not reflect the price at which an actual transaction would occur. We utilize nationally recognized independent pricing services to estimate fair values or obtain market quotations for substantially all of our fixed maturity and equity investments. These pricing services utilize market quotations for fixed maturity and equity securities that have quoted prices in active markets. For fixed maturity securities that generally do not trade on a daily basis, the pricing services prepare estimates of fair value measurements based predominantly on observable market inputs. The pricing services do not use broker quotes in determining the fair values of our investments. Our investment personnel review the estimates of fair value the pricing services provide to verify that the estimates we obtain from the pricing services are representative of fair values based upon our investment personnel’s general knowledge of the market, their research findings related to unusual fluctuations in value and their comparison of such values to execution prices for similar securities. Our investment personnel regularly monitor the market, current trading ranges for similar securities and the pricing of specific investments. Our investment personnel review all pricing estimates that we receive from the pricing services against their expectations with respect to pricing based on fair market curves, security ratings, interest rates, security types and recent trading activity. Our investment personnel periodically review documentation with respect to the pricing services’ pricing methodology that they obtain to determine if the primary pricing sources, market inputs and pricing frequency for various security types are reasonable. At June 30, 2021, we received two estimates per security from the pricing services, and we priced substantially all of our Level 1 and Level 2 investments using those prices. In our review of the estimates the pricing services provided at June 30, 2021, we did not identify any material discrepancies, and we did not make any adjustments to the estimates the pricing services provided.

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

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The carrying values we report in our balance sheet for premium receivables and reinsurance receivables and payables for premiums and paid losses and loss expenses approximate their fair values. The carrying amounts we report in our balance sheets for our subordinated debentures and borrowings under lines of credit approximate their fair values. We classify these items as Level 3.

We evaluate our assets and liabilities to determine the appropriate level at which to classify them for each reporting period.

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at June 30, 2021:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	22,326	$	—	$	22,326	$	—
Obligations of states and political subdivisions		61,713		—		61,713		—
Corporate securities		211,076		—		211,076		—
Mortgage-backed securities		227,465		—		227,465		—
Equity securities		72,757		70,467		2,290		—
Total investments in the fair value hierarchy	$	595,337	$	70,467	$	524,870	$	—

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at December 31, 2020:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	47,815	$	—	$	47,815	$	—
Obligations of states and political subdivisions		68,965		—		68,965		—
Corporate securities		212,708		—		212,708		—
Mortgage-backed securities		225,648		—		225,648		—
Equity securities		58,556		54,152		4,404		—
Totals	$	613,692	$	54,152	$	559,540	$	—

10 - Income Taxes

At June 30, 2021 and December 31, 2020, respectively, we had no material unrecognized tax benefits or accrued interest and penalties. Tax years 2016 through 2020 remained open for examination at June 30, 2021. We provide a valuation allowance when we believe it is more likely than not that we will not realize some portion of our tax assets. We established a valuation allowance of $7.9 million for our net state operating loss carryforward. We have determined that we are not required to establish a valuation allowance for our other deferred tax assets of $27.6 million and $26.7 million at June 30, 2021 and December 31, 2020, respectively, because it is more likely than not that we will realize these deferred tax assets through reversals of existing temporary differences, future taxable income and the implementation of tax planning strategies.

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On March 27, 2020, the Coronavirus Aid, Relief and Security Act (the “CARES Act”) was signed into law. The CARES Act amended net operating loss provisions in effect prior to its enactment. The CARES Act allows for the carryback of losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021 to each of the five taxable years preceding the taxable year of such loss. As a result, we filed amended tax returns to carry back net operating losses from taxable year 2018 to past tax years. We recorded a tax benefit of $1.6 million in the first quarter of 2020 in anticipation of a refund of taxes we paid in prior years as a result of the carryback.

11 - Liabilities for Losses and Loss Expenses

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

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

	Six Months Ended June 30,
	2021			2020
	(in thousands)
Balance at January 1	$	962,007		$	869,674
Less reinsurance recoverable		(404,818	)		(362,768	)
Net balance at January 1		557,189			506,906
Incurred related to:
Current year		254,740			233,460
Prior years		(21,564	)		(10,864	)
Total incurred		233,176			222,596
Paid related to:
Current year		98,966			97,473
Prior years		111,300			106,716
Total paid		210,266			204,189
Net balance at end of period		580,099			525,313
Plus reinsurance recoverable		418,559			376,511
Balance at end of period	$	998,658		$	901,824

Our insurance subsidiaries recognized a decrease in their liabilities for losses and loss expenses of prior years of $21.6 million and $10.9 million for the six months ended June 30, 2021 and 2020, respectively. Our insurance subsidiaries made no significant changes in their reserving philosophy or claims management personnel, and they have made no significant offsetting changes in estimates that increased or decreased their loss and loss expense reserves in those years. The 2021 development represented 3.9% of the December 31, 2020 net carried reserves and resulted primarily from lower-than-expected loss emergence or severity in nearly all lines of business. The majority of the 2021 development related to decreases in the liabilities for losses and loss expenses of prior years for Atlantic States and MICO. The 2020 development represented 2.1% of the December 31, 2019 net carried reserves and resulted primarily from lower-than-expected severity in nearly all lines of business,

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with the exception of modest higher-than-expected severity in commercial automobile. The majority of the 2020 development related to decreases in the liabilities for losses and loss expenses of prior years for Atlantic States and MICO.

Short-duration contracts are contracts for which our insurance subsidiaries receive premiums that they recognize as revenue over the period of the contract in proportion to the amount of insurance protection our insurance subsidiaries provide. Our insurance subsidiaries consider the policies they issue to be short-duration contracts. We consider the material lines of business of our insurance subsidiaries to be personal automobile, homeowners, commercial automobile, commercial multi-peril and workers’ compensation.

Our insurance subsidiaries determine incurred but not reported (“IBNR”) reserves by subtracting the cumulative loss and loss expense amounts our insurance subsidiaries have paid and the case reserves our insurance subsidiaries have established at the balance sheet date from their actuaries’ estimate of the ultimate cost of losses and loss expenses. Accordingly, the IBNR reserves of our insurance subsidiaries include their actuaries’ projections of the cost of unreported claims as well as their actuaries’ projected development of case reserves on known claims and reopened claims. Our insurance subsidiaries’ methodology for estimating IBNR reserves has been in place for many years, and their actuaries made no significant changes to that methodology during the six months ended June 30, 2021.

The actuaries for our insurance subsidiaries generally prepare an initial estimate for ultimate losses and loss expenses for the current accident year by multiplying earned premium by an expected loss ratio for each line of business our insurance subsidiaries write. Expected loss ratios represent the actuaries’ expectation of losses at the time our insurance subsidiaries price and write their policies and before the emergence of any actual claims experience. The actuaries determine an expected loss ratio by analyzing historical experience and adjusting for loss cost trends, loss frequency and severity trends, premium rate level changes, reported and paid loss emergence patterns and other known or observed factors.

The actuaries use a variety of actuarial methods to estimate the ultimate cost of losses and loss expenses. These methods include paid loss development, incurred loss development and the Bornhuetter-Ferguson method. The actuaries base their selection of a point estimate on a judgmental weighting of the estimates each of these methods produce.

The actuaries consider loss frequency and severity trends when they develop expected loss ratios and point estimates. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Factors that affect loss frequency include changes in weather patterns and economic activity. Factors that affect loss severity include changes in policy limits, reinsurance retentions, inflation rates and judicial interpretations.

Our insurance subsidiaries create a claim file when they receive notice of an actual demand for payment, an event that may lead to a demand for payment or when they otherwise determine that a demand for payment could potentially lead to a future demand for payment on another coverage under the same policy or another policy they have issued. In recent years, our insurance subsidiaries have noted an increase in the period of time between the occurrence of a casualty loss event and the date at which they receive notice of a liability claim. Changes in the length of time between the loss occurrence date and the claim reporting date affect the actuaries’ ability to predict loss frequency accurately and the amount of IBNR reserves our insurance subsidiaries require.

Our insurance subsidiaries generally create a claim file for a policy at the claimant level by type of coverage and generally recognize one count for each claim event. In certain lines of business where it is common for multiple parties to claim damages arising from a single claim event, our insurance subsidiaries recognize one count for each claimant involved in the event. Atlantic States recognizes one count for each claim event, or claimant involved in a multiple-party claim event, related to losses Atlantic States assumes through its participation in its pooling agreement with Donegal Mutual. Our insurance subsidiaries accumulate the claim counts and report them by line of business.

12 - Impact of New Accounting Standards

In September 2016, the FASB issued guidance that amends previous guidance on the impairment of financial instruments by adding an impairment model that requires an entity to recognize expected credit losses as an allowance rather than impairments as credit losses are incurred. The intent of this guidance is to reduce complexity and result in a more timely

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recognition of expected credit losses. In November 2019, the FASB issued guidance that delays the effective date for “smaller reporting companies,” as defined in Item 10(f)(1) of Regulation S-K, to annual and interim reporting periods beginning after December 15, 2022 from December 15, 2019. We are a smaller reporting company and are in the process of evaluating the impact of the adoption of this guidance on our financial position, results of operations and cash flows.

In December 2019, the FASB issued guidance that simplifies accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The guidance was effective January 1, 2021, using the retrospective method or modified retrospective method for certain changes and the prospective method for all other changes, and permits early adoption. Our adoption of this guidance on January 1, 2021 did not have a significant impact on our financial position, results of operations or cash flows.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We recommend that you read the following information in conjunction with the historical financial information and the footnotes to that financial information we include in this Quarterly Report on Form 10-Q. We also recommend you read Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020.

Critical Accounting Policies and Estimates

We combine our financial statements with those of our insurance subsidiaries and present our financial statements on a consolidated basis in accordance with GAAP.

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

Liabilities for Losses and Loss Expenses

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

Our insurance subsidiaries maintain liabilities for the payment of losses and loss expenses with respect to both reported and unreported claims. Our insurance subsidiaries establish these liabilities for the purpose of covering the ultimate costs of settling all losses, including investigation and litigation costs. Our insurance subsidiaries base the amount of their liability for reported losses primarily upon a case-by-case evaluation of the type of risk involved, knowledge of the circumstances surrounding each claim and the insurance policy provisions relating to the type of loss the policyholder incurred. Our insurance subsidiaries determine the amount of their liability for unreported claims and loss expenses on the basis of historical

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information by line of insurance. Our insurance subsidiaries account for inflation in the reserving function through analysis of costs and trends and reviews of historical reserving results. Our insurance subsidiaries monitor their liabilities closely and recompute them periodically using new information on reported claims and a variety of statistical techniques. Our insurance subsidiaries do not discount their liabilities for losses and loss expenses.

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Reserve estimates can change over time because of unexpected changes in assumptions related to our insurance subsidiaries’ external environment and, to a lesser extent, assumptions related to our insurance subsidiaries’ internal operations. For example, our insurance subsidiaries have experienced an increase in claims severity and a lengthening of the claim settlement periods on bodily injury claims during the past several years. These trend changes give rise to greater uncertainty as to the pattern of future loss settlements on bodily injury claims. 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. Related uncertainties regarding future trends include social inflation, supply chain disruption, the rate of plaintiff attorney involvement in claims 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 liabilities for losses and loss expenses will likely differ from the amount recorded at June 30, 2021. 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 $5.8 million.

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

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

Atlantic States’ participation in the pool with Donegal Mutual exposes Atlantic States to adverse loss development on the business of Donegal Mutual that the pool includes. However, pooled business represents the predominant percentage of the net underwriting activity of both companies, and Donegal Mutual and Atlantic States share proportionately any adverse risk development relating to the pooled business. The business in the pool is homogeneous and each company has a pro-rata share of the entire pool. Since the predominant percentage of the business of Atlantic States and Donegal Mutual is pooled and the results shared by each company according to its participation level under the terms of the pooling agreement, the intent of the

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underwriting pool is to produce a more uniform and stable underwriting result from year to year for each company than either would experience individually and to spread the risk of loss between the companies.

Donegal Mutual and our insurance subsidiaries operate together as the Donegal Insurance Group and share a combined business plan designed to achieve market penetration and underwriting profitability objectives. The products our insurance subsidiaries and Donegal Mutual offer are generally complementary, thereby allowing Donegal Insurance Group to offer a broader range of products to a given market and to expand Donegal Insurance Group’s ability to service an entire personal lines or commercial lines account. Distinctions within the products of Donegal Mutual and our insurance subsidiaries generally relate to specific risk profiles targeted within similar classes of business, such as preferred tier products compared to standard tier products, but we do not allocate all of the standard risk gradients to one company. Therefore, the underwriting profitability of the business the individual companies write directly will vary. However, because the pool homogenizes the risk characteristics of the predominant percentage of the business Donegal Mutual and Atlantic States write directly and each company shares the underwriting results according to each company’s participation percentage, each company realizes its percentage share of the underwriting results of the pool.

Our insurance subsidiaries’ liabilities for losses and loss expenses by major line of business at June 30, 2021 and December 31, 2020 consisted of the following:

		June 30, 2021		December 31,    2020
		(in thousands)
Commercial lines:
Automobile	$	159,162	$	151,813
Workers’ compensation		116,346		118,037
Commercial multi-peril		139,497		126,299
Other		16,476		13,212
Total commercial lines		431,481		409,361
Personal lines:
Automobile		118,165		120,861
Homeowners		23,169		20,976
Other		7,284		5,991
Total personal lines		148,618		147,828
Total commercial and personal lines		580,099		557,189
Plus reinsurance recoverable		418,559		404,818
Total liabilities for losses and loss expenses	$	998,658	$	962,007

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

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Percentage Change in Loss and Loss Expense Reserves Net of Reinsurance	Adjusted Loss and Loss Expense Reserves Net of Reinsurance at June 30, 2021	Percentage Change in Stockholders’ Equity at June 30, 2021(1)	Adjusted Loss and Loss Expense Reserves Net of Reinsurance at December 31, 2020	Percentage Change in Stockholders’ Equity at December 31, 2020(1)
(dollars in thousands)
(10.0)%	$522,089	8.3%	$501,470	8.5%
(7.5)	536,592	6.2	515,400	6.4
(5.0)	551,094	4.2	529,330	4.3
(2.5)	565,597	2.1	543,259	2.1
Base	580,099	—	557,189	—
2.5	594,601	(2.1)	571,119	(2.1)
5.0	609,104	(4.2)	585,048	(4.3)
7.5	623,606	(6.2)	598,978	(6.4)
10.0	638,109	(8.3)	612,908	(8.5)

(1) Net of income tax effect.

Non-GAAP Information

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

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

Net Premiums Written

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

The following table provides a reconciliation of our net premiums earned to our net premiums written for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
		(in thousands)
Net premiums earned		$192,489		$184,374		$379,740		$371,627
Change in net unearned premiums		17,116		9,329		45,727		20,313
Net premiums written		$209,605		$193,703		$425,467		$391,940

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Statutory Combined Ratio

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

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

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

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

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

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

Combined Ratios

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The following table presents comparative details with respect to our GAAP and statutory combined ratios for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
GAAP Combined Ratios (Total Lines)
Loss ratio (non-weather)		53.1	%		47.0	%		56.5	%		53.0	%
Loss ratio (weather-related)		6.1			10.1			4.9			6.9
Expense ratio		36.0			34.3			35.1			33.8
Dividend ratio		0.9			0.9			0.8			1.0
Combined ratio		96.1	%		92.3	%		97.3	%		94.7	%
Statutory Combined Ratios
Commercial lines:
Automobile		105.5	%		104.4	%		103.9	%		110.8	%
Workers’ compensation		84.0			80.9			89.3			85.5
Commercial multi-peril		94.5			95.8			100.8			92.4
Other		77.2			80.6			68.8			72.4
Total commercial lines		94.3			93.5			96.6			94.7
Personal lines:
Automobile		91.1			76.1			92.2			88.4
Homeowners		110.1			109.5			102.4			100.1
Other		74.5			78.6			75.7			72.6
Total personal lines		96.9			88.1			94.7			91.5
Total commercial and personal lines		95.4			91.0			95.9			93.3

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Results of Operations - Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the second quarter of 2021 were $192.5 million, an increase of $8.1 million, or 4.4 %, compared to $184.4 million for the second quarter of 2020, primarily reflecting the inclusion of the business of the Mountain States Insurance Group in the underwriting pool beginning with policies effective in 2021, as well as new business growth and renewal premium increases.

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the three months ended June 30, 2021 were $209.6 million, an increase of $15.9 million, or 8.2%, from the $193.7 million of net premiums written for the second quarter of 2020. Commercial lines net premiums written increased $21.4 million, or 19.9%, for the second quarter of 2021 compared to the second quarter of 2020. We attribute the increase in commercial lines net premiums written primarily to the inclusion of the business of the Mountain States Insurance Group in the underwriting pool beginning with policies effective in 2021, as well as new business growth and renewal premium increases. Personal lines net premiums written decreased $5.5 million, or 6.4%, for the second quarter of 2021 compared to the second quarter of 2020. We attribute the decrease in personal lines net premiums written primarily to net attrition as a result of measures our insurance subsidiaries have implemented to improve underwriting profitability, partially offset by the impact of premium rate increases our insurance subsidiaries have implemented.

Investment Income. Our net investment income was $7.7 million for the second quarter of 2021, compared to $7.2 for the second quarter of 2020. We attribute the increase primarily to an increase in average invested assets.

Net Investment Gains. Net investment gains for the second quarter of 2021 were $4.2 million, compared to $6.5 million for the second quarter of 2020. The net investment gains for the second quarters of 2021 and 2020 resulted primarily from unrealized gains within our equity securities portfolio at June 30, 2021 and 2020, respectively. We did not recognize any impairment losses in our investment portfolio during the second quarter of 2021 or 2020.

Losses and Loss Expenses. Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 59.2% for the second quarter of 2021, an increase from our insurance subsidiaries’ loss ratio of 57.1% for the second quarter of 2020. We attribute this increase primarily to increased frequency of personal automobile claims compared to the second quarter of 2020 when lower driving activity resulted from COVID-19 related shutdowns and elevated fire losses that primarily impacted the loss ratios for our homeowners and commercial multi-peril lines of business. Weather-related losses of $11.7 million for the second quarter of 2021, or 6.1 percentage points of the loss ratio, decreased from $18.7 million for the second quarter of 2020, or 10.1 percentage points of the loss ratio. Weather-related loss activity for the second quarter of 2021 was lower than our previous five-year average of $17.0 million for second quarter weather-related losses. On a statutory basis, our insurance subsidiaries’ commercial lines loss ratio was 56.4% for the second quarter of 2021, compared to 58.5% for the second quarter of 2020, primarily due to a decrease in the commercial multi-peril and workers’ compensation loss ratios. The personal lines statutory loss ratio of our insurance subsidiaries increased to 63.9% for the second quarter of 2021, compared to 55.3% for the second quarter of 2020. We attribute this increase primarily to an increase in the personal automobile loss ratio. Our insurance subsidiaries experienced favorable loss reserve development of approximately $13.4 million and $6.6 million during the second quarters of 2021 and 2020, respectively.

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 36.0% for the second quarter of 2021, compared to 34.3% for the second quarter of 2020. The increase in the expense ratio primarily reflected an increase in technology systems-related expenses and higher growth and underwriting-based incentive costs for our agents during the second quarter of 2021 compared to the second quarter of 2020. The expense ratio increase also reflected a reallocation from loss expenses to underwriting expenses that resulted from the implementation of a new software system during the second quarter of 2021 that enhanced our expense allocation methodology.

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 96.1% and

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92.3% for the three months ended June 30, 2021 and 2020, respectively. We attribute the increase in the combined ratio primarily to an increase in the loss ratio for the second quarter of 2021 compared to the second quarter of 2020.

Interest Expense. Our interest expense for the second quarter of 2021 was $217,290, compared to $428,092 for the second quarter of 2020. We attribute the decrease to lower average borrowings under our lines of credit during the second quarter of 2021 compared to the second quarter of 2020.

Income Taxes. We recorded income tax expense of $3.5 million for the second quarter of 2021, representing an effective tax rate of 17.9%. We recorded income tax expense of $5.3 million for the second quarter of 2020, representing an effective tax rate of 19.0%. The income tax expense and effective tax rates for the second quarters of 2021 and 2020 represented estimates based on our projected annual taxable income.

Net Income and Income Per Share. Our net income for the second quarter of 2021 was $16.2 million, or $.53 per share of Class A common stock on a diluted basis and $.48 per share of Class B common stock, compared to $22.7 million, or $.79 per share of Class A common stock on a diluted basis and $.72 per share of Class B common stock, for the second quarter of 2020. We had 25.6 million and 23.5 million Class A shares outstanding at June 30, 2021 and 2020, respectively. We had 5.6 million Class B shares outstanding at the end of both periods.

Results of Operations - Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Net Premiums Earned. Our insurance subsidiaries’ net premiums earned for the first half of 2021 were $379.7 million, an increase of $8.1 million, or 2.2%, compared to $371.6 million for the first half of 2020, primarily reflecting the inclusion of the business of the Mountain States Insurance Group in the underwriting pool beginning with policies effective in 2021, as well as new business growth and renewal premium increases.

Net Premiums Written. Our insurance subsidiaries’ net premiums written for the six months ended June 30, 2021 were $425.5 million, an increase of $33.6 million, or 8.6%, from the $391.9 million of net premiums written for the first half of 2020. Commercial lines net premiums written increased $44.2 million, or 19.3%, for the first half of 2021 compared to the first half of 2020. We attribute the increase in commercial lines net premiums written primarily to the inclusion of the business of the Mountain States Insurance Group in the underwriting pool beginning with policies effective in 2021, as well as new business growth and renewal premium increases. Personal lines net premiums written decreased $10.6 million, or 6.5%, for the first half of 2021 compared to the first half of 2020. We attribute the decrease in personal lines net premiums written primarily to net attrition as a result of measures our insurance subsidiaries have implemented to improve underwriting profitability, partially offset by the impact of premium rate increases our insurance subsidiaries have implemented.

Investment Income. Our net investment income was $15.2 million for the first half of 2021, compared to $14.5 million for the first half of 2020. We attribute the increase primarily to an increase in average invested assets.

Net Investment Gains (Losses). Net investment gains for the first half of 2021 were $6.7 million, compared to net investment losses of $4.2 million for the first half of 2020. The net investment gains for the first half of 2021 resulted primarily from unrealized gains within our equity securities portfolio at June 30, 2021. The net investment losses for the first half of 2020 resulted primarily from realized losses on sales of equity securities and unrealized losses within our equity securities portfolio due to a decline in equity markets at June 30, 2020. We did not recognize any impairment losses in our investment portfolio during the first half of 2021 or 2020.

Losses and Loss Expenses. Our insurance subsidiaries’ loss ratio, which is the ratio of incurred losses and loss expenses to premiums earned, was 61.4% for the first half of 2021, an increase from our insurance subsidiaries’ loss ratio of 59.9% for the first half of 2020. We attribute this increase primarily to elevated fire losses that primarily impacted the loss ratio for our commercial multi-peril line of business. Weather-related losses of $18.6 million for the first half of 2021, or 4.9 percentage points of the loss ratio, decreased from $25.6 million for the first half of 2020, or 6.9 percentage points of the loss ratio. On a statutory basis, our insurance subsidiaries’ commercial lines loss ratio was 61.2% for the first half of 2021, compared to 60.6%

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for the first half of 2020, primarily due to an increase in the commercial multi-peril loss ratio. The personal lines statutory loss ratio of our insurance subsidiaries increased to 62.4% for the first half of 2021, compared to 59.3% for the first half of 2020. We attribute this increase primarily to an increase in the personal automobile and homeowners’ loss ratios. Our insurance subsidiaries experienced favorable loss reserve development of approximately $21.6 million and $10.9 million during the first half of 2021 and 2020, respectively.

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 35.1% for the first half of 2021, compared to 33.8% for the first half of 2020. The increase in the expense ratio primarily reflected an increase in technology systems-related expenses, higher agency growth incentive and underwriting-based incentive costs for our agents during the first half of 2021 compared to the first half of 2020.

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 94.7% for the first half of 2021 and 2020, respectively. We attribute the increase in the combined ratio primarily to an increase in the loss ratio for the first half of 2021 compared to the first half of 2020.

Interest Expense. Our interest expense for the first half of 2021 was $529,616, compared to $652,422 for the first half of 2020. We attribute the decrease to lower average borrowings under our lines of credit during the first half of 2021 compared to the first half of 2020.

Income Taxes. We recorded income tax expense of $5.8 million for the first half of 2021, representing an effective tax rate of 17.7%. We recorded income tax expense of $4.1 million for the first half of 2020, representing an effective tax rate of 13.4%. The income tax expense and effective tax rate for the first half of 2021 represented an estimate based on our projected annual taxable income. Income tax expense for the first half of 2020 included a $1.6 million income tax benefit related to the anticipated carryback of 2018 net operating losses to past tax years with higher statutory income tax rates than are currently in effect, as allowed under the Coronavirus Aid, Relief and Economic Security Act that was enacted in March 2020.

Net Income and Income Per Share. Our net income for the first half of 2021 was $26.7 million, or $.88 per share of Class A common stock on a diluted basis and $.80 per share of Class B common stock, compared to $26.4 million, or $.92 per share of Class A common stock on a diluted basis and $.84 per share of Class B common stock, for the first half of 2020. We had 25.6 million and 23.5 million Class A shares outstanding at June 30, 2021 and 2020, respectively. We had 5.6 million Class B shares outstanding at the end of both periods.

Liquidity and Capital Resources

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

Our operations have historically generated sufficient net positive cash flow to fund our commitments and add to our investment portfolio, thereby increasing future investment returns and enhancing our liquidity. 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 pool. Donegal Mutual and Atlantic States settle their respective obligations to each other under the pool monthly, thereby resulting in cash flows substantially similar to the cash flows that would result from each company writing the business directly. We have not experienced any unusual variations in the timing of claim payments associated with the loss reserves of our insurance subsidiaries. We maintain significant liquidity in our investment portfolio in the form of readily 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, thereby providing an additional measure of liquidity to meet our obligations

31

should an unexpected variation occur in the future. Our operating activities provided net cash flows in the first six months of 2021 and 2020 of $59.2 million and $48.0 million, respectively.

At June 30, 2021, we had no outstanding borrowings under our line of credit with M&T and had the ability to borrow up to $20.0 million at interest rates equal to the then-current LIBOR rate plus 2.00%. At June 30, 2021, Atlantic States had $35.0 million in outstanding advances with the FHLB of Pittsburgh that carry a fixed interest rate of 1.74%.

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

We discuss in Note 7 – Borrowings our estimate of the timing of the amounts payable for the borrowings under our lines of credit based on their contractual maturities.

We discuss in Note 7 – Borrowings our estimate of the timing of the amounts payable for the subordinated debentures based on their contractual maturity. The subordinated debentures carry an interest rate of 5.00%, and any repayment of principal or payment of interest on the subordinated debentures requires prior approval of the Michigan Department of Insurance and Financial Services. Our annual interest cost associated with the subordinated debentures is $250,000.

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 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, 2021 or 2020. We have purchased a total of 57,658 shares of our Class A common stock under this program from its inception through June 30, 2021.

On July 15, 2021, our board of directors declared quarterly cash dividends of 16.0 cents per share of our Class A common stock and 14.25 cents per share of our Class B common stock, payable on August 16, 2021 to our stockholders of record as of the close of business on August 2, 2021. We are not subject to any restrictions on our payment of dividends to our stockholders, although there are state law restrictions on the payment of dividends by our insurance subsidiaries to us. Dividends from our insurance subsidiaries are our principal source of cash for payment of dividends to our stockholders. Our insurance subsidiaries are subject to regulations that restrict the payment of dividends from statutory surplus and may require prior approval of their domiciliary insurance regulatory authorities. Our insurance subsidiaries are also subject to risk based capital (“RBC”) requirements that limit their ability to pay dividends to us. Our insurance subsidiaries’ statutory capital and surplus at December 31, 2020 exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the RBC requirements, by a significant margin. Our insurance subsidiaries paid $5.0 million in dividends to us during the first six months of 2021. Amounts remaining available for distribution to us as dividends from our insurance subsidiaries without prior approval of their domiciliary insurance regulatory authorities in 2021 are $28.0 million from Atlantic States, $300,000 from Southern, $5.9 million from Peninsula and $12.2 million from MICO, or a total of approximately $46.4 million.

At June 30, 2021, we had no material commitments for capital expenditures.

Equity Price Risk

32

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

Credit Risk

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

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

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

Item 3.   Quantitative and Qualitative Disclosures About Market Risk.

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

There have been no material changes to our quantitative or qualitative market risk exposure from December 31, 2020 through June 30, 2021.

Item 4.   Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, at June 30, 2021, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information we are required to disclose in the reports that we file or submit under the Exchange Act, and our disclosure controls and procedures were also effective to ensure that information we disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

33

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

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

We base all statements contained in this Quarterly Report on Form 10-Q that are not historic facts on our current expectations. Such statements are forward-looking in nature (as defined in the Private Securities Litigation Reform Act of 1995) and necessarily involve risks and uncertainties. Forward-looking statements we make may be identified by our use of words such as “will,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “seeks,” “estimates” and similar expressions. Our actual results could vary materially from our forward-looking statements. The factors that could cause our actual results to vary materially from the forward-looking statements we have previously made include, but are not limited to, prolonged economic challenges resulting from the COVID-19 pandemic, the availability and cost of labor and materials, adverse and catastrophic weather events, our ability to maintain profitable operations, the adequacy of the loss and loss expense reserves of our insurance subsidiaries, the availability and successful operation of the information technology systems our insurance subsidiaries utilize, the successful development of new information technology systems to allow our insurance subsidiaries to compete effectively, business and economic conditions in the areas in which we and our insurance subsidiaries operate, interest rates, competition from various insurance and other financial businesses, terrorism, the availability and cost of reinsurance, legal and judicial developments including those related to COVID-19 business interruption coverage exclusions, adverse litigation and other industry trends that could increase our loss costs, changes in regulatory requirements, changes in our A.M. Best rating, our ability to integrate and manage successfully the companies we may acquire from time to time and the other risks that we describe from time to time in our filings with the SEC. We disclaim any obligation to update such statements or to announce publicly the results of any revisions that we may make to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Part II. Other Information

Item 1.   Legal Proceedings.

None.

Item 1A.   Risk Factors.

Our business, results of operations and financial condition, and, therefore, the value of our Class A common stock and our Class B common stock, are subject to a number of risks. For a description of certain risks, we refer to “Risk Factors” in our 2020 Annual Report on Form 10-K that we filed with the SEC on March 5, 2021. There have been no material changes in the risk factors we disclosed in that Form 10-K Report during the six months ended June 30, 2021.

34

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
Month #1 April 1-30, 2021	Class A – None Class B – None	Class A – None Class B – None	Class A – None Class B – None
Month #2 May 1-31, 2021	Class A – None Class B – None	Class A – None Class B – None	Class A – None Class B – None
Month #3 June 1-30, 2021	Class A – 200,000 Class B – None	Class A – $15.22 Class B – None	Class A – 200,000 Class B – None	(1)
Total	Class A – 200,000 Class B – None	Class A – $15.22 Class B – None	Class A – 200,000 Class B – None

(1) Donegal Mutual purchased these shares pursuant to its announcement on August 17, 2004 that it will, at its discretion, purchase shares of our Class A common stock and Class B common stock at market prices prevailing from time to time in the open market subject to the provisions of SEC Rule 10b-18 and in privately negotiated transactions. Such announcement did not stipulate a maximum number of shares that may be purchased under this program.

Item 3.   Defaults upon Senior Securities.

None.

Item 4.   Mine Safety Disclosure.

Not Applicable.

Item 5.   Other Information.

None.

35

Item 6.   Exhibits.

Exhibit No.	Description
Exhibit 31.1	Certification of Chief Executive Officer
Exhibit 31.2	Certification of Chief Financial Officer
Exhibit 32.1	Statement of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Title 18 of the United States Code
Exhibit 32.2	Statement of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Title 18 of the United States Code
Exhibit 101.INS	XBRL Instance Document
Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document
Exhibit 101.PRE	XBRL Taxonomy Presentation Linkbase Document
Exhibit 101.CAL	XBRL Taxonomy Calculation Linkbase Document
Exhibit 101.LAB	XBRL Taxonomy Label Linkbase Document
Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

36

Signatures

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

	DONEGAL GROUP INC.
August 6, 2021	By:	/s/ Kevin G. Burke
		Kevin G. Burke, President and Chief Executive Officer
August 6, 2021	By:	/s/ Jeffrey D. Miller
		Jeffrey D. Miller, Executive Vice President
		and Chief Financial Officer

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Kevin G. Burke, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2021 of Donegal Group Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2021	/s/ Kevin G. Burke
	Kevin G. Burke, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Jeffrey D. Miller, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2021 of Donegal Group Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2021	/s/ Jeffrey D. Miller
	Jeffrey D. Miller, Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Statement of President

Pursuant to Section 1350 of Title 18 of the United States Code

Pursuant to Section 1350 of Title 18 of the United States Code, I, Kevin G. Burke, the President and Chief Executive Officer of Donegal Group Inc. (the “Company”), hereby certify that, to the best of my knowledge:

1. The Company’s Form 10-Q Quarterly Report for the period ended June 30, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2021	/s/ Kevin G. Burke
	Kevin G. Burke, President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Statement of Chief Financial Officer

Pursuant to Section 1350 of Title 18 of the United States Code

Pursuant to Section 1350 of Title 18 of the United States Code, I, Jeffrey D. Miller, the Executive Vice President and Chief Financial Officer of Donegal Group Inc. (the “Company”), hereby certify that, to the best of my knowledge:

1. The Company’s Form 10-Q Quarterly Report for the period ended June 30, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2021	/s/ Jeffrey D. Miller
	Jeffrey D. Miller, Executive Vice President and Chief Financial Officer

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2021	Jul. 31, 2021
Document Information [Line Items]
Document Type	10-Q
Entity Interactive Data Current	Yes
Amendment Flag	false
Document Period End Date	Jun. 30, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Document Quarterly Report	true
Document Transition Report	false
Entity Registrant Name	DONEGAL GROUP INC
Entity Central Index Key	0000800457
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Address, State or Province	PA
Entity Address, Address Line One	1195 River Road, P.O. Box 302
Entity Address, City or Town	Marietta
Entity Address, Postal Zip Code	17547
Entity File Number	0-15341
Entity Tax Identification Number	23-2424711
City Area Code	717
Local Phone Number	426-1931
Entity Incorporation, State or Country Code	DE
Class A Common Stock [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		25,668,501
Title of 12(b) Security	Common Stock
Trading Symbol	DGICA
Security Exchange Name	NASDAQ
Class B Common Stock [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		5,576,775
Title of 12(b) Security	Common Stock
Trading Symbol	DGICB
Security Exchange Name	NASDAQ

XML

Consolidated Balance Sheets - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Fixed maturities
Held to maturity, at amortized cost	$ 643,847,647	$ 586,609,439
Available for sale, at fair value	522,580,264	555,136,017
Equity securities, at fair value	72,757,031	58,556,173
Short-term investments, at cost, which approximates fair value	22,767,372	20,900,155
Total investments	1,261,952,314	1,221,201,784
Cash	88,004,738	103,094,236
Accrued investment income	8,175,750	7,936,879
Premiums receivable	189,383,783	169,596,332
Reinsurance receivable	422,198,101	408,908,850
Deferred policy acquisition costs	69,687,624	59,156,958
Deferred tax asset, net	5,134,455	5,683,113
Prepaid reinsurance premiums	186,451,557	169,418,333
Property and equipment, net	3,350,691	4,390,377
Accounts receivable - securities	79,402	67,676
Federal income taxes recoverable	4,018,210	3,089,369
Goodwill	5,625,354	5,625,354
Other intangible assets	958,010	958,010
Other	1,380,569	1,393,053
Total assets	2,246,400,558	2,160,520,324
Liabilities
Losses and loss expenses	998,658,015	962,007,437
Unearned premiums	599,949,617	537,189,598
Accrued expenses	11,465,644	29,115,198
Reinsurance balances payable	4,030,947	3,233,523
Borrowings under lines of credit	35,000,000	85,000,000
Cash dividends declared to stockholders	0	4,436,301
Subordinated debentures	5,000,000	5,000,000
Accounts payable - securities	11,295,765	0
Due to affiliate	22,196,384	10,293,495
Other	8,647,393	6,470,652
Total liabilities	1,696,243,765	1,642,746,204
Stockholders' Equity
Preferred stock
Additional paid-in capital	302,510,624	289,149,567
Accumulated other comprehensive income	8,473,471	11,130,612
Retained earnings	280,056,364	258,387,288
Treasury stock, at cost	(41,226,357)	(41,226,357)
Total stockholders' equity	550,156,793	517,774,120
Total liabilities and stockholders' equity	2,246,400,558	2,160,520,324
Class A Common Stock [Member]
Stockholders' Equity
Common stock value	286,199	276,518
Total stockholders' equity	286,199	276,518
Class B Common Stock [Member]
Stockholders' Equity
Common stock value	56,492	56,492
Total stockholders' equity	$ 56,492	$ 56,492

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2021	Dec. 31, 2020
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Class A Common Stock [Member]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	28,619,866	27,651,774
Common stock, shares outstanding	25,617,278	24,649,186
Class B Common Stock [Member]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	5,649,240	5,649,240
Common stock, shares outstanding	5,576,775	5,576,775

XML

Consolidated Statements of Income - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenues:
Net premiums earned	$ 192,488,665	$ 184,373,768	$ 379,740,265	$ 371,626,546
Investment income, net of investment expenses	7,652,180	7,172,144	15,162,758	14,548,428
Net investment gains (losses)	4,241,031	6,485,896	6,710,085	(4,208,947)
Lease income	108,038	109,205	215,805	218,472
Installment payment fees	656,029	758,759	1,286,928	1,626,479
Total revenues	205,145,943	198,899,772	403,115,841	383,810,978
Expenses:
Net losses and loss expenses	113,956,652	105,349,019	233,176,399	222,595,545
Amortization of deferred policy acquisition costs	33,103,000	29,634,000	63,282,000	59,571,000
Other underwriting expenses	36,229,677	33,567,266	70,011,727	66,164,895
Policyholder dividends	1,629,499	1,683,658	2,923,520	3,525,658
Interest	217,290	428,092	529,616	652,422
Other expenses, net	313,000	249,688	745,069	810,238
Total expenses	185,449,118	170,911,723	370,668,331	353,319,758
Income before income tax expense	19,696,825	27,988,049	32,447,510	30,491,220
Income tax expense	3,532,789	5,309,271	5,753,626	4,081,321
Net income	$ 16,164,036	$ 22,678,778	$ 26,693,884	$ 26,409,899
Class A Common Stock [Member]
Earnings per common share:
common stock - basic	$ 0.53	$ 0.80	$ 0.89	$ 0.93
common stock - diluted	0.53	0.79	0.88	0.92
Class B Common Stock [Member]
Earnings per common share:
common stock - basic	0.48	0.72	0.80	0.84
common stock - diluted	0.48	0.72	0.80	0.84
common stock - basic and diluted	$ 0.48	$ 0.72	$ 0.80	$ 0.84

XML

Consolidated Statements of Income (Parenthetical) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Net investment (losses) gains	$ 4,241,031	$ 6,485,896	$ 6,710,085	$ (4,208,947)
Income tax expense (benefit)	3,532,789	5,309,271	5,753,626	4,081,321
Reclassification out of Accumulated Other Comprehensive Income [Member]
Net investment (losses) gains	479,211	14,493	450,025	436,328
Income tax expense (benefit)	$ 100,634	$ 3,044	$ 94,505	$ 91,629

XML

Consolidated Statements of Comprehensive Income - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Statement of Comprehensive Income [Abstract]
Net income	$ 16,164,036	$ 22,678,778	$ 26,693,884	$ 26,409,899
Unrealized gain on securities:
Unrealized holding gain during the period, net of income tax expense	1,928,551	6,674,664	(2,301,621)	10,207,754
Reclassification adjustment for gains included in net income, net of income tax expense	(378,577)	(11,449)	(355,520)	(344,699)
Other comprehensive income	1,549,974	6,663,215	(2,657,141)	9,863,055
Comprehensive income	$ 17,714,010	$ 29,341,993	$ 24,036,743	$ 36,272,954

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Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Statement of Comprehensive Income [Abstract]
Unrealized holding (loss) gain during the period, net of income tax (benefit) expense	$ 511,306	$ 1,774,279	$ 614,319	$ 2,713,454
Income tax expense (benefit) on reclassification adjustment for losses (gains)	$ 100,634	$ 3,044	$ 94,505	$ 91,629

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Consolidated Statements of Stockholders' Equity - USD ($)	Total	Additional Paid-In Capital [Member]	Accumulated Other Comprehensive Income [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Class A Common Stock [Member]	Class B Common Stock [Member]
Beginning balance at Dec. 31, 2019	$ 451,015,519	$ 268,151,601	$ 504,170	$ 223,267,573	$ (41,226,357)	$ 262,040	$ 56,492
Beginning balance, shares at Dec. 31, 2019						26,203,935	5,649,240
Issuance of common stock (stock compensation plans)	376,828	376,539				$ 289
Issuance of common stock (stock compensation plans), shares						28,924
Share-based compensation	1,242,986	1,242,315				$ 671
Share-based compensation, Shares						67,087
Net income	3,731,121			3,731,121
Cash dividends declared	(5,363)			(5,363)
Grant of stock options		118,525		(118,525)
Other comprehensive (loss) income	3,199,840		3,199,840
Ending balance at Mar. 31, 2020	459,560,931	269,888,980	3,704,010	226,874,806	(41,226,357)	$ 263,000	$ 56,492
Ending balance, shares at Mar. 31, 2020						26,299,946	5,649,240
Beginning balance at Dec. 31, 2019	451,015,519	268,151,601	504,170	223,267,573	(41,226,357)	$ 262,040	$ 56,492
Beginning balance, shares at Dec. 31, 2019						26,203,935	5,649,240
Net income	26,409,899
Other comprehensive (loss) income	9,863,055
Ending balance at Jun. 30, 2020	487,859,334	273,175,488	10,367,225	245,221,348	(41,226,357)	$ 265,138	$ 56,492
Ending balance, shares at Jun. 30, 2020						26,513,779	5,649,240
Beginning balance at Mar. 31, 2020	459,560,931	269,888,980	3,704,010	226,874,806	(41,226,357)	$ 263,000	$ 56,492
Beginning balance, shares at Mar. 31, 2020						26,299,946	5,649,240
Issuance of common stock (stock compensation plans)	720,548	720,018				$ 530
Issuance of common stock (stock compensation plans), shares						52,964
Share-based compensation	2,491,744	2,490,136				$ 1,608
Share-based compensation, Shares						160,869
Net income	22,678,778			22,678,778
Cash dividends declared	(4,255,882)			(4,255,882)
Grant of stock options		76,354		(76,354)
Other comprehensive (loss) income	6,663,215		6,663,215
Ending balance at Jun. 30, 2020	487,859,334	273,175,488	10,367,225	245,221,348	(41,226,357)	$ 265,138	$ 56,492
Ending balance, shares at Jun. 30, 2020						26,513,779	5,649,240
Beginning balance at Dec. 31, 2020	517,774,120	289,149,567	11,130,612	258,387,288	(41,226,357)	$ 276,518	$ 56,492
Beginning balance, shares at Dec. 31, 2020						27,651,774	5,649,240
Issuance of common stock (stock compensation plans)	419,788	419,454				$ 334
Issuance of common stock (stock compensation plans), shares						33,336
Share-based compensation	4,722,849	4,719,388				$ 3,461
Share-based compensation, Shares						346,124
Net income	10,529,848			10,529,848
Cash dividends declared	(5,000)			(5,000)
Grant of stock options		109,184		(109,184)
Other comprehensive (loss) income	(4,207,115)		(4,207,115)
Ending balance at Mar. 31, 2021	529,234,490	294,397,593	6,923,497	268,802,952	(41,226,357)	$ 280,313	$ 56,492
Ending balance, shares at Mar. 31, 2021						28,031,234	5,649,240
Beginning balance at Dec. 31, 2020	517,774,120	289,149,567	11,130,612	258,387,288	(41,226,357)	$ 276,518	$ 56,492
Beginning balance, shares at Dec. 31, 2020						27,651,774	5,649,240
Net income	26,693,884
Other comprehensive (loss) income	(2,657,141)
Ending balance at Jun. 30, 2021	550,156,793	302,510,624	8,473,471	280,056,364	(41,226,357)	$ 286,199	$ 56,492
Ending balance, shares at Jun. 30, 2021						28,619,866	5,649,240
Beginning balance at Mar. 31, 2021	529,234,490	294,397,593	6,923,497	268,802,952	(41,226,357)	$ 280,313	$ 56,492
Beginning balance, shares at Mar. 31, 2021						28,031,234	5,649,240
Issuance of common stock (stock compensation plans)	730,501	730,005				$ 496
Issuance of common stock (stock compensation plans), shares						49,613
Share-based compensation	7,318,421	7,313,031				$ 5,390
Share-based compensation, Shares						539,019
Net income	16,164,036			16,164,036
Cash dividends declared	(4,840,629)			(4,840,629)
Grant of stock options		69,995		(69,995)
Other comprehensive (loss) income	1,549,974		1,549,974
Ending balance at Jun. 30, 2021	$ 550,156,793	$ 302,510,624	$ 8,473,471	$ 280,056,364	$ (41,226,357)	$ 286,199	$ 56,492
Ending balance, shares at Jun. 30, 2021						28,619,866	5,649,240

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Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash Flows from Operating Activities:
Net income	$ 26,693,884	$ 26,409,899
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash items	3,083,025	3,502,046
Net investment (gains) losses	(6,710,085)	4,208,947
Changes in assets and liabilities:
Losses and loss expenses	36,650,578	32,149,773
Unearned premiums	62,760,019	52,796,454
Premiums receivable	(19,787,451)	(21,717,231)
Deferred acquisition costs	(10,530,666)	(2,865,674)
Deferred income taxes	1,266,870	(837,202)
Reinsurance receivable	(13,289,251)	(12,319,334)
Prepaid reinsurance premiums	(17,033,224)	(32,483,228)
Accrued investment income	(238,871)	(597,823)
Due to affiliate	11,902,889	(2,053,312)
Reinsurance balances payable	797,424	144,398
Current income taxes	(928,841)	4,893,520
Accrued expenses	(17,649,554)	(5,005,473)
Other, net	2,189,225	1,809,764
Net adjustments	32,482,087	21,625,625
Net cash provided by operating activities	59,175,971	48,035,524
Cash Flows from Investing Activities:
Purchases of fixed maturities, held to maturity	(80,315,578)	(55,313,641)
Purchases of fixed maturities, available for sale	(73,023,551)	(81,210,780)
Purchases of equity securities, available for sale	(25,332,194)	(5,071,801)
Maturity of fixed maturities:
Held to maturity	23,650,172	18,812,367
Available for sale	111,197,663	70,379,590
Sales of fixed maturities, available for sale		15,251,996
Sales of equity securities, available for sale	17,391,396	3,202,672
Net sales of property and equipment	935,029	32,107
Net purchases of short-term investments	(1,867,217)	(37,311,903)
Net cash used in investing activities	(27,364,280)	(71,229,393)
Cash Flows from Financing Activities:
Cash dividends paid	(9,281,930)	(8,336,479)
Issuance of common stock	12,380,741	3,988,784
Borrowing under lines of credit		50,000,000
Payments on lines of credit	(50,000,000)
Net cash (used in) provided by financing activities	(46,901,189)	45,652,305
Net (decrease) increase in cash	(15,089,498)	22,458,436
Cash at beginning of period	103,094,236	49,318,930
Cash at end of period	88,004,738	71,777,366
Cash paid during period - Interest	659,222	$ 664,342
Net cash paid during period - Taxes	$ 5,400,000

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Organization

6 Months Ended

Jun. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

1 - Organization

Donegal Mutual Insurance Company (“Donegal Mutual”) organized us as an insurance holding company on August 26, 1986. Our insurance subsidiaries, Atlantic States Insurance Company (“Atlantic States”), Southern Insurance Company of Virginia (“Southern”), the Peninsula Insurance Group (“Peninsula”), which consists of Peninsula Indemnity Company and The Peninsula Insurance Company, and Michigan Insurance Company (“MICO”), and our affiliates write personal and commercial lines of property and casualty coverages exclusively through independent insurance agents in certain Mid-Atlantic, Midwestern, New England, Southern and Southwestern states.

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

At June 30, 2021, Donegal Mutual held approximately 41% of our outstanding Class A common stock and approximately 84% of our outstanding Class B common stock. This ownership provides Donegal Mutual with approximately 70% of the total voting power of our common stock. Our insurance subsidiaries and Donegal Mutual have interrelated operations due to a pooling agreement and other intercompany agreements and transactions. While each company maintains its separate corporate existence, our insurance subsidiaries and Donegal Mutual conduct business together as the Donegal Insurance Group. As such, Donegal Mutual and our insurance subsidiaries share the same business philosophy, the same management, the same employees and the same facilities and offer the same types of insurance products.

Atlantic States, our largest subsidiary, participates in a proportional reinsurance agreement, or pooling agreement, with Donegal Mutual. Under the pooling agreement, Donegal Mutual and Atlantic States contribute substantially all of their respective premiums, losses and loss expenses to the underwriting pool, and the underwriting pool, acting through Donegal Mutual, then allocates 80% of the pooled business to Atlantic States. Thus, Donegal Mutual and Atlantic States share the underwriting results of the pooled business in proportion to their respective participation in the underwriting pool.

In addition, Donegal Mutual has a 100% quota-share reinsurance agreement with Southern Mutual Insurance Company, or Southern Mutual. Donegal Mutual places its assumed business from Southern Mutual into the underwriting pool.

Donegal Mutual completed the merger of Mountain States Mutual Casualty Company, or Mountain States, with and into Donegal Mutual effective May 25, 2017. Donegal Mutual was the surviving company in the merger, and Mountain States’ insurance subsidiaries, Mountain States Indemnity Company and Mountain States Commercial Insurance Company (collectively, the “Mountain States insurance subsidiaries”), became insurance subsidiaries of Donegal Mutual upon completion of the merger. Upon completion of the merger, Donegal Mutual assumed all of the policy obligations of Mountain States and began to market its products together with the Mountain States insurance subsidiaries as the Mountain States Insurance Group in four Southwestern states. Donegal Mutual also entered into a 100% quota-share reinsurance agreement with the Mountain States insurance subsidiaries on the merger date. Beginning with policies effective in 2021, Donegal Mutual began to place the business of the Mountain States Insurance Group into the underwriting pool. As a result, our consolidated financial results through December 31, 2020 excluded the results of the Mountain States Insurance Group operations in those Southwestern states.

The same executive management and underwriting personnel administer products, classes of business underwritten, pricing practices and underwriting standards of Donegal Mutual and our insurance subsidiaries. In addition, as the Donegal Insurance Group, Donegal Mutual and our insurance subsidiaries share a combined business plan to achieve market penetration and underwriting profitability objectives. The products our insurance subsidiaries and Donegal Mutual market are generally complementary, thereby allowing the Donegal Insurance Group to offer a broader range of products to a given market and to

expand the Donegal Insurance Group’s ability to service an entire personal lines or commercial lines account. Distinctions within the products of Donegal Mutual and our insurance subsidiaries generally relate to specific risk profiles targeted within similar classes of business, such as preferred tier versus standard tier products, but we do not allocate all of the standard risk gradients to one company. Therefore, the underwriting profitability of the business the individual companies write directly will vary. However, the underwriting pool homogenizes the risk characteristics of all business that Donegal Mutual and Atlantic States write directly. The business Atlantic States derives from the underwriting pool represents a significant percentage of our total consolidated revenues.​​​​​​​

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Basis of Presentation

6 Months Ended

Jun. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

2 - Basis of Presentation

Our financial information for the interim periods included in this Form 10-Q Report is unaudited; however, our financial information we include in this Form 10-Q Report reflects all adjustments, consisting only of normal recurring adjustments that, in the opinion of our management, are necessary for a fair presentation of our financial position, results of operations and cash flows for those interim periods. Our results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results of operations we expect for the year ending December 31, 2021.

We recommend you read the interim financial statements we include in this Form 10-Q Report in conjunction with the financial statements and the notes to our financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

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Earnings Per Share

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Earnings Per Share

3 - Earnings Per Share

We have two classes of common stock, which we refer to as our Class A common stock and our Class B common stock. Our certificate of incorporation provides that whenever our board of directors declares a dividend on our Class B common stock, our board of directors shall simultaneously declare a dividend on our Class A common stock that is payable to the holders of our Class A common stock at the same time and as of the same record date at a rate that is at least 10% greater than the rate at which our board of directors declared a dividend on our Class B common stock. Accordingly, we use the two-class method to compute our earnings per common share. The two-class method is an earnings allocation formula that determines earnings per share separately for each class of common stock based on dividends we have declared and an allocation of our remaining undistributed earnings using a participation percentage that reflects the dividend rights of each class. The table below presents for the periods indicated a reconciliation of the numerators and denominators we used to compute basic and diluted net income per share for our Class A common stock and our Class B common stock:​​​​​​​

	Three Months Ended June 30,
	2021				2020
	Class A		Class B		Class A		Class B
	(in thousands, except per share data)
Basic earnings per share:
Numerator:
Allocation of net income	$	13,482	$	2,682	$	18,665	$	4,014
Denominator:
Weighted-average shares outstanding		25,342		5,577		23,451		5,577
Basic earnings per share	$	0.53	$	0.48	$	0.80	$	0.72
Diluted earnings per share:
Numerator:
Allocation of net income	$	13,482	$	2,682	$	18,665	$	4,014
Denominator:
Number of shares used in basic computation		25,342		5,577		23,451		5,577
Weighted-average shares effect of dilutive securities:
Director and employee stock options		252		—		199		—
Number of shares used in diluted computation		25,594		5,577		23,650		5,577
Diluted earnings per share	$	0.53	$	0.48	$	0.79	$	0.72

	Six Months Ended June 30,
	2021				2020
	Class A		Class B		Class A		Class B
	(in thousands, except per share data)
Basic earnings per share:
Numerator:
Allocation of net income	$	22,223	$	4,471	$	21,721	$	4,689
Denominator:
Weighted-average shares outstanding		25,057		5,577		23,356		5,577
Basic earnings per share	$	0.89	$	0.80	$	0.93	$	0.84
Diluted earnings per share:
Numerator:
Allocation of net income	$	22,223	$	4,471	$	21,721	$	4,689
Denominator:
Number of shares used in basic computation		25,057		5,577		23,356		5,577
Weighted-average shares effect of dilutive securities:
Director and employee stock options		190		—		193		—
Number of shares used in diluted computation		25,247		5,577		23,549		5,577
Diluted earnings per share	$	0.88	$	0.80	$	0.92	$	0.84

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Number of options to purchase Class A shares excluded		4,952,276		6,183,992		4,952,276		6,183,992

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Reinsurance

6 Months Ended

Jun. 30, 2021

Insurance [Abstract]

Reinsurance

4 -  Reinsurance

Atlantic States and Donegal Mutual have participated in a pooling agreement since 1986 under which they pool their direct premiums written, and Atlantic States and Donegal Mutual then share the underwriting results of the pool in accordance with the terms of the pooling agreement. Atlantic States has an 80% share of the results of the pool, and Donegal Mutual has a 20% share of the results of the pool. Donegal Mutual began placing the business of the Mountain States Insurance Group into the pool beginning with policies effective in 2021.

Our insurance subsidiaries and Donegal Mutual have a combined third-party reinsurance program. The coverage and parameters of the program are common to all of our insurance subsidiaries and Donegal Mutual. Our insurance subsidiaries and Donegal Mutual use several different reinsurers. They require their reinsurers to maintain an A.M. Best rating of A- (Excellent) or better or, with respect to foreign reinsurers, have a financial condition that, in the opinion of our management, is equivalent to a company with at least an A- rating from A.M. Best. The following information describes the external reinsurance our insurance subsidiaries have in place for 2021:

• excess of loss reinsurance, under which the losses of Donegal Mutual and our insurance subsidiaries are automatically reinsured, through a series of contracts, over a set retention of $2.0 million; and

• catastrophe reinsurance, under which Donegal Mutual and our insurance subsidiaries recover, through a series of reinsurance agreements, 100% of an accumulation of many losses resulting from a single event, including natural disasters, over a set retention of $15.0 million up to aggregate losses of $185.0 million per occurrence.

In addition to the pooling agreement and third-party reinsurance, our insurance subsidiaries have a catastrophe reinsurance agreement with Donegal Mutual, under which each of our insurance subsidiaries recovers 100% of an accumulation of multiple losses resulting from a single event, including natural disasters, over a set retention of $2.0 million up to aggregate losses of $13.0 million per occurrence. The agreement also provides additional coverage for an accumulation of losses from a single event including a combination of our insurance subsidiaries over a combined retention of $5.0 million.

Our insurance subsidiaries and Donegal Mutual also purchase facultative reinsurance to cover certain exposures, including property exposures that exceeded the limits provided by their respective treaty reinsurance.

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Investments

6 Months Ended

Jun. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Investments

5 -  Investments

The amortized cost and estimated fair values of our fixed maturities at June 30, 2021 were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	89,716	$	2,839	$	649	$	91,906
Obligations of states and political subdivisions		346,517		20,073		788		365,802
Corporate securities		188,162		15,061		267		202,956
Mortgage-backed securities		19,453		1,005		—		20,458
Totals	$	643,848	$	38,978	$	1,704	$	681,122

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	22,508	$	257	$	439	$	22,326
Obligations of states and political subdivisions		59,378		2,366		31		61,713
Corporate securities		201,634		9,644		202		211,076
Mortgage-backed securities		222,814		5,068		417		227,465
Totals	$	506,334	$	17,335	$	1,089	$	522,580

At June 30, 2021, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $267.8 million and an amortized cost of $254.2 million. Our holdings at June 30, 2021 also included special revenue bonds with an aggregate fair value of $159.7 million and an amortized cost of $151.7 million. With respect to both categories of those bonds at June 30, 2021, we held no securities of any issuer that comprised more than 10% of our holdings of either bond category. Education bonds and water and sewer utility bonds represented 46% and 35%, respectively, of our total investments in special revenue bonds based on the carrying values of these investments at June 30, 2021. Many of the issuers of the special revenue bonds we held at June 30, 2021 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held at June 30, 2021 are similar to general obligation bonds.

The amortized cost and estimated fair values of our fixed maturities at December 31, 2020 were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	77,435	$	3,984	$	223	$	81,196
Obligations of states and political subdivisions		312,319		23,212		143		335,388
Corporate securities		173,270		18,172		206		191,236
Mortgage-backed securities		23,585		1,236		—		24,821
Totals	$	586,609	$	46,604	$	572	$	632,641

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	47,512	$	424	$	121	$	47,815
Obligations of states and political subdivisions		66,287		2,690		12		68,965
Corporate securities		202,396		10,496		184		212,708
Mortgage-backed securities		218,763		6,902		17		225,648
Totals	$	534,958	$	20,512	$	334	$	555,136

​​​​​​​

At December 31, 2020, our holdings of obligations of states and political subdivisions included general obligation bonds with an aggregate fair value of $263.6 million and an amortized cost of $247.5 million. Our holdings also included special revenue bonds with an aggregate fair value of $140.8 million and an amortized cost of $131.1 million. With respect to both categories of bonds, we held no securities of any issuer that comprised more than 10% of that category at December 31, 2020. Education bonds and water and sewer utility bonds represented 44% and 39%, respectively, of our total investments in special revenue bonds based on their carrying values at December 31, 2020. Many of the issuers of the special revenue bonds we held at December 31, 2020 have the authority to impose ad valorem taxes. In that respect, many of the special revenue bonds we held are similar to general obligation bonds.

We made reclassifications from available for sale to held to maturity of certain fixed maturities at fair value on November 30, 2013. We segregated within accumulated other comprehensive income the net unrealized losses of $15.1 million arising prior to the November 30, 2013 reclassifications. We are amortizing this balance over the remaining life of the related securities as an adjustment to yield in a manner consistent with the accretion of discount on the same fixed maturities. We recorded amortization of $556,553 and $833,690 in other comprehensive (loss) income during the six months ended June 30, 2021 and 2020, respectively. At June 30, 2021 and December 31, 2020, net unrealized losses of $5.5 million and $6.1 million, respectively, remained within accumulated other comprehensive income.

We show below the amortized cost and estimated fair value of our fixed maturities at June 30, 2021 by contractual maturity. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Estimated Fair Value
	(in thousands)
Held to maturity
Due in one year or less	$	38,641	$	39,762
Due after one year through five years		83,282		88,929
Due after five years through ten years		224,135		237,348
Due after ten years		278,337		294,625
Mortgage-backed securities		19,453		20,458
Total held to maturity	$	643,848	$	681,122
Available for sale
Due in one year or less	$	26,146	$	26,621
Due after one year through five years		131,837		138,624
Due after five years through ten years		96,413		99,711
Due after ten years		29,124		30,159
Mortgage-backed securities		222,814		227,465
Total available for sale	$	506,334	$	522,580

The cost and estimated fair values of our equity securities at June 30, 2021 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	50,864	$	22,007	$	114	$	72,757

The cost and estimated fair values of our equity securities at December 31, 2020 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	42,410	$	17,103	$	957	$	58,556

Gross investment gains and losses before applicable income taxes for the three months and six months ended June 30, 2021 and 2020 were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in thousands)				(in thousands)
Gross investment gains:
Fixed maturities	$	479	$	229	$	524	$	652
Equity securities		3,762		6,474		6,728		3,355
		4,241		6,703		7,252		4,007
Gross investment losses:
Fixed maturities		—		217		74		218
Equity securities		—		—		468		7,998
		—		217		542		8,216
Net investment gains (losses)	$	4,241	$	6,486	$	6,710	$	(4,209	)

We recognized $6.1 million of gains and $114,339 of losses on equity securities we held at June 30, 2021 in net investment gains for the six months ended June 30, 2021. We recognized $3.4 million of gains and $4.9 million of losses on equity securities we held at June 30, 2020 in net investment losses for the six months ended June 30, 2020.

We held fixed maturities with unrealized losses representing declines that we considered temporary at June 30, 2021 as follows:

	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	38,202	$	1,088	$	—	$	—
Obligations of states and political subdivisions		45,446		819		—		—
Corporate securities		38,846		344		3,375		125
Mortgage-backed securities		55,930		415		487		2
Totals	$	178,424	$	2,666	$	3,862	$	127

We held fixed maturities with unrealized losses representing declines that we considered temporary at December 31, 2020 as follows:

	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	29,144	$	345	$	—	$	—
Obligations of states and political subdivisions		9,362		154		—		—
Corporate securities		26,143		115		8,230		276
Mortgage-backed securities		3,091		15		236		1
Totals	$	67,740	$	629	$	8,466	$	277

We make estimates concerning the valuation of our investments and the recognition of other-than-temporary declines in the value of our investments. For equity securities, we measure investments at fair value, and we recognize changes in fair value in

our results of operations. With respect to a debt security that is in an unrealized loss position, we first assess if we intend to sell the debt security. If we determine we intend to sell the debt security, we recognize the impairment loss in our results of operations. If we do not intend to sell the debt security, we determine whether it is more likely than not that we will be required to sell the debt security prior to recovery. If we determine it is more likely than not that we will be required to sell the debt security prior to recovery, we recognize the impairment loss in our results of operations. If we determine it is more likely than not that we will not be required to sell the debt security prior to recovery, we then evaluate whether a credit loss has occurred with respect to that security. We determine whether a credit loss has occurred by comparing the amortized cost of the debt security to the present value of the cash flows we expect to collect. If we expect a cash flow shortfall, we consider that a credit loss has occurred. If we determine that a credit loss has occurred, we consider the impairment to be other than temporary. We then recognize the amount of the impairment loss related to the credit loss in our results of operations, and we recognize the remaining portion of the impairment loss in our other comprehensive income, net of applicable taxes. In addition, we may write down securities in an unrealized loss position based on a number of other factors, including when the fair value of an investment is significantly below its cost, when the financial condition of the issuer of a security has deteriorated, the occurrence of industry, issuer or geographic events that have negatively impacted the value of a security and rating agency downgrades. We held 89 debt securities that were in an unrealized loss position at June 30, 2021. Based upon our analysis of general market conditions and underlying factors impacting these debt securities, we considered these declines in value to be temporary.

We amortize premiums and discounts on debt securities over the life of the security as an adjustment to yield using the effective interest method. We compute realized investment gains and losses using the specific identification method.

We amortize premiums and discounts on mortgage-backed debt securities using anticipated prepayments.

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Segment Information

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Segment Information

6 - Segment Information

We evaluate the performance of our personal lines and commercial lines segments based upon the underwriting results of our insurance subsidiaries using statutory accounting principles (“SAP”) that various state insurance departments prescribe or permit. Our management uses SAP to measure the performance of our insurance subsidiaries instead of United States generally accepted accounting principles (“GAAP”). SAP financial measures are considered non-GAAP financial measures under applicable SEC rules because they include or exclude certain items that the most comparable GAAP financial measures do not ordinarily include or exclude.

Financial data by segment for the three and six months ended June 30, 2021 and 2020 is as follows:​​​​​​​​​​​​​​

	Three Months Ended June 30,
	2021		2020
	(in thousands)
Revenues:
Premiums earned:
Commercial lines	$	115,300	$	101,870
Personal lines		77,189		82,504
GAAP premiums earned		192,489		184,374
Net investment income		7,652		7,172
Investment gains		4,241		6,486
Other		764		868
Total revenues	$	205,146	$	198,900
Income before income tax expense:
Underwriting income:
Commercial lines	$	1,767	$	4,472
Personal lines		547		8,290
SAP underwriting income		2,314		12,762
GAAP adjustments		5,256		1,378
GAAP underwriting income		7,570		14,140
Net investment income		7,652		7,172
Investment gains		4,241		6,486
Other		234		190
Income before income tax expense	$	19,697	$	27,988

	Six Months Ended June 30,
	2021			2020
	(in thousands)
Revenues:
Premiums earned:
Commercial lines	$	224,525		$	203,645
Personal lines		155,215			167,982
GAAP premiums earned		379,740			371,627
Net investment income		15,163			14,548
Investment gains (losses)		6,710			(4,209	)
Other		1,503			1,845
Total revenues	$	403,116		$	383,811
Income before income tax expense:
Underwriting (loss) income:
Commercial lines	$	(6,475	)	$	3,906
Personal lines		5,584			13,101
SAP underwriting (loss) income		(891	)		17,007
GAAP adjustments		11,238			2,762
GAAP underwriting income		10,347			19,769
Net investment income		15,163			14,548
Investment gains (losses)		6,710			(4,209	)
Other		228			383
Income before income tax expense	$	32,448		$	30,491

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Borrowings

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Borrowings

7 - Borrowings

Lines of Credit

In August 2020, we entered into a credit agreement with Manufacturers and Traders Trust Company (“M&T”) that related to a $20.0 million unsecured demand line of credit. The line of credit has no expiration date, no annual fees and no covenants. At June 30, 2021, we had no outstanding borrowings from M&T and had the ability to borrow up to $20.0 million at interest rates equal to the then-current LIBOR rate plus 2.00%.

Atlantic States is a member of the FHLB of Pittsburgh. Through its membership, Atlantic States has the ability to issue debt to the FHLB of Pittsburgh in exchange for cash advances. Atlantic States has a fixed-rate cash advance of $35.0 million that was outstanding at June 30, 2021. The cash advance carries a fixed interest rate of 1.74% and is due in August 2024. In March 2020, Atlantic States issued $50.0 million of debt to the FHLB of Pittsburgh in exchange for a cash advance in the same amount that carried a fixed interest rate of 0.83%. Atlantic States obtained this contingent liquidity funding in light of uncertainty surrounding the economic impact of the COVID-19 pandemic. Atlantic States repaid this advance when it became due in March 2021. The table below presents the amount of FHLB of Pittsburgh stock Atlantic States purchased, collateral pledged and assets related to Atlantic States’ membership in the FHLB of Pittsburgh at June 30, 2021.

FHLB of Pittsburgh stock purchased and owned	$	1,575,600
Collateral pledged, at par (carrying value $45,226,104)		44,343,661
Borrowing capacity currently available		8,847,792

Subordinated Debentures

Donegal Mutual holds a $5.0 million surplus note that MICO issued to increase MICO’s statutory surplus. The surplus note carries an interest rate of 5.00%, and any repayment of principal or payment of interest on the surplus note requires prior approval of the Michigan Department of Insurance and Financial Services.

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Share-Based Compensation

6 Months Ended

Jun. 30, 2021

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

8 - Share–Based Compensation

We measure all share-based payments to employees, including grants of stock options, and use a fair-value-based method for the recording of related compensation expense in our results of operations. In determining the expense we record for stock options granted to directors and employees of our subsidiaries and affiliates, we estimate the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The significant assumptions we utilize in applying the Black-Scholes option pricing model are the risk-free interest rate, the expected term, the dividend yield and the expected volatility.

We charged compensation expense related to our stock compensation plans against income before income taxes of $304,373 and $314,237 for the three months ended June 30, 2021 and 2020, respectively, with a corresponding income tax benefit of $63,918 and $65,990, respectively. We charged compensation expense related to our stock compensation plans against income before income taxes of $597,168 and $644,541 for the six months ended June 30, 2021 and 2020, respectively, with a corresponding income tax benefit of $125,405 and $135,354, respectively. At June 30, 2021, we had $1.0 million of unrecognized compensation expense related to nonvested share-based compensation granted under our stock compensation plans that we expect to recognize over a weighted average period of approximately 1.6 years.

We received cash from option exercises under all stock compensation plans during the three months ended June 30, 2021 and 2020 of $7.0 million and $2.2 million, respectively. We received cash from option exercises under all stock compensation plans during the six months ended June 30, 2021 and 2020 of $11.4 million and $3.1 million, respectively. We realized actual tax benefits for the tax deductions related to those option exercises of $271,979 and $54,221 for the three months ended June 30, 2021 and 2020, respectively. We realized actual tax benefits for the tax deductions related to those option exercises of $421,135 and $68,878 for the six months ended June 30, 2021 and 2020, respectively.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

9 - Fair Value Measurements

We account for financial assets using a framework that establishes a hierarchy that ranks the quality and reliability of the inputs, or assumptions, we use in the determination of fair value, and we classify financial assets and liabilities carried at fair value in one of the following three categories:

Level 1 – quoted prices in active markets for identical assets and liabilities;

Level 2 – directly or indirectly observable inputs other than Level 1 quoted prices; and

Level 3 – unobservable inputs not corroborated by market data.

For investments that have quoted market prices in active markets, we use the quoted market price as fair value and include these investments in Level 1 of the fair value hierarchy. We classify publicly-traded equity securities as Level 1. When quoted market prices in active markets are not available, we base fair values on quoted market prices of comparable instruments or price estimates we obtain from independent pricing services and include these investments in Level 2 of the fair value hierarchy. We classify our fixed maturity investments as Level 2. Our fixed maturity investments consist of U.S. Treasury securities and obligations of U.S. government corporations and agencies, obligations of states and political subdivisions, corporate securities and mortgage-backed securities.

We present our investments in available-for-sale fixed maturity and equity securities at estimated fair value. The estimated fair value of a security may differ from the amount that could be realized if we sold the security in a forced transaction. In addition, the valuation of fixed maturity investments is more subjective when markets are less liquid, increasing the potential that the estimated fair value does not reflect the price at which an actual transaction would occur. We utilize nationally recognized independent pricing services to estimate fair values or obtain market quotations for substantially all of our fixed maturity and equity investments. These pricing services utilize market quotations for fixed maturity and equity securities that have quoted prices in active markets. For fixed maturity securities that generally do not trade on a daily basis, the pricing services prepare estimates of fair value measurements based predominantly on observable market inputs. The pricing services do not use broker quotes in determining the fair values of our investments. Our investment personnel review the estimates of fair value the pricing services provide to verify that the estimates we obtain from the pricing services are representative of fair values based upon our investment personnel’s general knowledge of the market, their research findings related to unusual fluctuations in value and their comparison of such values to execution prices for similar securities. Our investment personnel regularly monitor the market, current trading ranges for similar securities and the pricing of specific investments. Our investment personnel review all pricing estimates that we receive from the pricing services against their expectations with respect to pricing based on fair market curves, security ratings, interest rates, security types and recent trading activity. Our investment personnel periodically review documentation with respect to the pricing services’ pricing methodology that they obtain to determine if the primary pricing sources, market inputs and pricing frequency for various security types are reasonable. At June 30, 2021, we received two estimates per security from the pricing services, and we priced substantially all of our Level 1 and Level 2 investments using those prices. In our review of the estimates the pricing services provided at June 30, 2021, we did not identify any material discrepancies, and we did not make any adjustments to the estimates the pricing services provided.

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

The carrying values we report in our balance sheet for premium receivables and reinsurance receivables and payables for premiums and paid losses and loss expenses approximate their fair values. The carrying amounts we report in our balance sheets for our subordinated debentures and borrowings under lines of credit approximate their fair values. We classify these items as Level 3.

We evaluate our assets and liabilities to determine the appropriate level at which to classify them for each reporting period.

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at June 30, 2021:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	22,326	$	—	$	22,326	$	—
Obligations of states and political subdivisions		61,713		—		61,713		—
Corporate securities		211,076		—		211,076		—
Mortgage-backed securities		227,465		—		227,465		—
Equity securities		72,757		70,467		2,290		—
Total investments in the fair value hierarchy	$	595,337	$	70,467	$	524,870	$	—

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at December 31, 2020:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	47,815	$	—	$	47,815	$	—
Obligations of states and political subdivisions		68,965		—		68,965		—
Corporate securities		212,708		—		212,708		—
Mortgage-backed securities		225,648		—		225,648		—
Equity securities		58,556		54,152		4,404		—
Totals	$	613,692	$	54,152	$	559,540	$	—

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Income Taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

10 - Income Taxes

At June 30, 2021 and December 31, 2020, respectively, we had no material unrecognized tax benefits or accrued interest and penalties. Tax years 2016 through 2020 remained open for examination at June 30, 2021. We provide a valuation allowance when we believe it is more likely than not that we will not realize some portion of our tax assets. We established a valuation allowance of $7.9 million for our net state operating loss carryforward. We have determined that we are not required to establish a valuation allowance for our other deferred tax assets of $27.6 million and $26.7 million at June 30, 2021 and December 31, 2020, respectively, because it is more likely than not that we will realize these deferred tax assets through reversals of existing temporary differences, future taxable income and the implementation of tax planning strategies.

On March 27, 2020, the Coronavirus Aid, Relief and Security Act (the “CARES Act”) was signed into law. The CARES Act amended net operating loss provisions in effect prior to its enactment. The CARES Act allows for the carryback of losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021 to each of the five taxable years preceding the taxable year of such loss. As a result, we filed amended tax returns to carry back net operating losses from taxable year 2018 to past tax years. We recorded a tax benefit of $1.6 million in the first quarter of 2020 in anticipation of a refund of taxes we paid in prior years as a result of the carryback.

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Liabilities for Losses and Loss Expenses

6 Months Ended

Jun. 30, 2021

Text Block [Abstract]

Liabilities for Losses and Loss Expenses

11 - Liabilities for Losses and Loss Expenses

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

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

	Six Months Ended June 30,
	2021			2020
	(in thousands)
Balance at January 1	$	962,007		$	869,674
Less reinsurance recoverable		(404,818	)		(362,768	)
Net balance at January 1		557,189			506,906
Incurred related to:
Current year		254,740			233,460
Prior years		(21,564	)		(10,864	)
Total incurred		233,176			222,596
Paid related to:
Current year		98,966			97,473
Prior years		111,300			106,716
Total paid		210,266			204,189
Net balance at end of period		580,099			525,313
Plus reinsurance recoverable		418,559			376,511
Balance at end of period	$	998,658		$	901,824

Our insurance subsidiaries recognized a decrease in their liabilities for losses and loss expenses of prior years of $21.6 million and $10.9 million for the six months ended June 30, 2021 and 2020, respectively. Our insurance subsidiaries made no significant changes in their reserving philosophy or claims management personnel, and they have made no significant offsetting changes in estimates that increased or decreased their loss and loss expense reserves in those years. The 2021 development represented 3.9% of the December 31, 2020 net carried reserves and resulted primarily from lower-than-expected loss emergence or severity in nearly all lines of business. The majority of the 2021 development related to decreases in the liabilities for losses and loss expenses of prior years for Atlantic States and MICO. The 2020 development represented 2.1% of the December 31, 2019 net carried reserves and resulted primarily from lower-than-expected severity in nearly all lines of business,

with the exception of modest higher-than-expected severity in commercial automobile. The majority of the 2020 development related to decreases in the liabilities for losses and loss expenses of prior years for Atlantic States and MICO.

Short-duration contracts are contracts for which our insurance subsidiaries receive premiums that they recognize as revenue over the period of the contract in proportion to the amount of insurance protection our insurance subsidiaries provide. Our insurance subsidiaries consider the policies they issue to be short-duration contracts. We consider the material lines of business of our insurance subsidiaries to be personal automobile, homeowners, commercial automobile, commercial multi-peril and workers’ compensation.

Our insurance subsidiaries determine incurred but not reported (“IBNR”) reserves by subtracting the cumulative loss and loss expense amounts our insurance subsidiaries have paid and the case reserves our insurance subsidiaries have established at the balance sheet date from their actuaries’ estimate of the ultimate cost of losses and loss expenses. Accordingly, the IBNR reserves of our insurance subsidiaries include their actuaries’ projections of the cost of unreported claims as well as their actuaries’ projected development of case reserves on known claims and reopened claims. Our insurance subsidiaries’ methodology for estimating IBNR reserves has been in place for many years, and their actuaries made no significant changes to that methodology during the six months ended June 30, 2021.

The actuaries for our insurance subsidiaries generally prepare an initial estimate for ultimate losses and loss expenses for the current accident year by multiplying earned premium by an expected loss ratio for each line of business our insurance subsidiaries write. Expected loss ratios represent the actuaries’ expectation of losses at the time our insurance subsidiaries price and write their policies and before the emergence of any actual claims experience. The actuaries determine an expected loss ratio by analyzing historical experience and adjusting for loss cost trends, loss frequency and severity trends, premium rate level changes, reported and paid loss emergence patterns and other known or observed factors.

The actuaries use a variety of actuarial methods to estimate the ultimate cost of losses and loss expenses. These methods include paid loss development, incurred loss development and the Bornhuetter-Ferguson method. The actuaries base their selection of a point estimate on a judgmental weighting of the estimates each of these methods produce.

The actuaries consider loss frequency and severity trends when they develop expected loss ratios and point estimates. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Factors that affect loss frequency include changes in weather patterns and economic activity. Factors that affect loss severity include changes in policy limits, reinsurance retentions, inflation rates and judicial interpretations.

Our insurance subsidiaries create a claim file when they receive notice of an actual demand for payment, an event that may lead to a demand for payment or when they otherwise determine that a demand for payment could potentially lead to a future demand for payment on another coverage under the same policy or another policy they have issued. In recent years, our insurance subsidiaries have noted an increase in the period of time between the occurrence of a casualty loss event and the date at which they receive notice of a liability claim. Changes in the length of time between the loss occurrence date and the claim reporting date affect the actuaries’ ability to predict loss frequency accurately and the amount of IBNR reserves our insurance subsidiaries require.

Our insurance subsidiaries generally create a claim file for a policy at the claimant level by type of coverage and generally recognize one count for each claim event. In certain lines of business where it is common for multiple parties to claim damages arising from a single claim event, our insurance subsidiaries recognize one count for each claimant involved in the event. Atlantic States recognizes one count for each claim event, or claimant involved in a multiple-party claim event, related to losses Atlantic States assumes through its participation in its pooling agreement with Donegal Mutual. Our insurance subsidiaries accumulate the claim counts and report them by line of business.

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Impact of New Accounting Standards

6 Months Ended

Jun. 30, 2021

Accounting Changes and Error Corrections [Abstract]

Impact of New Accounting Standards

12 - Impact of New Accounting Standards

In September 2016, the FASB issued guidance that amends previous guidance on the impairment of financial instruments by adding an impairment model that requires an entity to recognize expected credit losses as an allowance rather than impairments as credit losses are incurred. The intent of this guidance is to reduce complexity and result in a more timely

recognition of expected credit losses. In November 2019, the FASB issued guidance that delays the effective date for “smaller reporting companies,” as defined in Item 10(f)(1) of Regulation S-K, to annual and interim reporting periods beginning after December 15, 2022 from December 15, 2019. We are a smaller reporting company and are in the process of evaluating the impact of the adoption of this guidance on our financial position, results of operations and cash flows.

In December 2019, the FASB issued guidance that simplifies accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The guidance was effective January 1, 2021, using the retrospective method or modified retrospective method for certain changes and the prospective method for all other changes, and permits early adoption. Our adoption of this guidance on January 1, 2021 did not have a significant impact on our financial position, results of operations or cash flows.

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Summary of Reconciliation of Numerators and Denominators Used in Basic and Diluted Per Share Computations

The table below presents for the periods indicated a reconciliation of the numerators and denominators we used to compute basic and diluted net income per share for our Class A common stock and our Class B common stock:

	Three Months Ended June 30,
	2021				2020
	Class A		Class B		Class A		Class B
	(in thousands, except per share data)
Basic earnings per share:
Numerator:
Allocation of net income	$	13,482	$	2,682	$	18,665	$	4,014
Denominator:
Weighted-average shares outstanding		25,342		5,577		23,451		5,577
Basic earnings per share	$	0.53	$	0.48	$	0.80	$	0.72
Diluted earnings per share:
Numerator:
Allocation of net income	$	13,482	$	2,682	$	18,665	$	4,014
Denominator:
Number of shares used in basic computation		25,342		5,577		23,451		5,577
Weighted-average shares effect of dilutive securities:
Director and employee stock options		252		—		199		—
Number of shares used in diluted computation		25,594		5,577		23,650		5,577
Diluted earnings per share	$	0.53	$	0.48	$	0.79	$	0.72

	Six Months Ended June 30,
	2021				2020
	Class A		Class B		Class A		Class B
	(in thousands, except per share data)
Basic earnings per share:
Numerator:
Allocation of net income	$	22,223	$	4,471	$	21,721	$	4,689
Denominator:
Weighted-average shares outstanding		25,057		5,577		23,356		5,577
Basic earnings per share	$	0.89	$	0.80	$	0.93	$	0.84
Diluted earnings per share:
Numerator:
Allocation of net income	$	22,223	$	4,471	$	21,721	$	4,689
Denominator:
Number of shares used in basic computation		25,057		5,577		23,356		5,577
Weighted-average shares effect of dilutive securities:
Director and employee stock options		190		—		193		—
Number of shares used in diluted computation		25,247		5,577		23,549		5,577
Diluted earnings per share	$	0.88	$	0.80	$	0.92	$	0.84

Summary of Antidilutive Securities Excluded From Computation Of Earnings Per Share

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Number of options to purchase Class A shares excluded		4,952,276		6,183,992		4,952,276		6,183,992

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Investments (Tables)

6 Months Ended

Jun. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Summary of Amortized Cost and Estimated Fair Values of Fixed Maturities

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	89,716	$	2,839	$	649	$	91,906
Obligations of states and political subdivisions		346,517		20,073		788		365,802
Corporate securities		188,162		15,061		267		202,956
Mortgage-backed securities		19,453		1,005		—		20,458
Totals	$	643,848	$	38,978	$	1,704	$	681,122

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	22,508	$	257	$	439	$	22,326
Obligations of states and political subdivisions		59,378		2,366		31		61,713
Corporate securities		201,634		9,644		202		211,076
Mortgage-backed securities		222,814		5,068		417		227,465
Totals	$	506,334	$	17,335	$	1,089	$	522,580

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Held to Maturity
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	77,435	$	3,984	$	223	$	81,196
Obligations of states and political subdivisions		312,319		23,212		143		335,388
Corporate securities		173,270		18,172		206		191,236
Mortgage-backed securities		23,585		1,236		—		24,821
Totals	$	586,609	$	46,604	$	572	$	632,641

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Available for Sale
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	47,512	$	424	$	121	$	47,815
Obligations of states and political subdivisions		66,287		2,690		12		68,965
Corporate securities		202,396		10,496		184		212,708
Mortgage-backed securities		218,763		6,902		17		225,648
Totals	$	534,958	$	20,512	$	334	$	555,136

Summary of Amortized Cost and Estimated Fair Value of Fixed Maturities by Contractual Maturity

	Amortized Cost		Estimated Fair Value
	(in thousands)
Held to maturity
Due in one year or less	$	38,641	$	39,762
Due after one year through five years		83,282		88,929
Due after five years through ten years		224,135		237,348
Due after ten years		278,337		294,625
Mortgage-backed securities		19,453		20,458
Total held to maturity	$	643,848	$	681,122
Available for sale
Due in one year or less	$	26,146	$	26,621
Due after one year through five years		131,837		138,624
Due after five years through ten years		96,413		99,711
Due after ten years		29,124		30,159
Mortgage-backed securities		222,814		227,465
Total available for sale	$	506,334	$	522,580

Summary of Cost and Estimated Fair Values of Equity Securities

The cost and estimated fair values of our equity securities at June 30, 2021 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	50,864	$	22,007	$	114	$	72,757

The cost and estimated fair values of our equity securities at December 31, 2020 were as follows:

	Cost		Gross Gains		Gross Losses		Estimated Fair Value
	(in thousands)
Equity securities	$	42,410	$	17,103	$	957	$	58,556

Summary of Gross Investment Gains and Losses before Applicable Income Taxes

Gross investment gains and losses before applicable income taxes for the three months and six months ended June 30, 2021 and 2020 were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in thousands)				(in thousands)
Gross investment gains:
Fixed maturities	$	479	$	229	$	524	$	652
Equity securities		3,762		6,474		6,728		3,355
		4,241		6,703		7,252		4,007
Gross investment losses:
Fixed maturities		—		217		74		218
Equity securities		—		—		468		7,998
		—		217		542		8,216
Net investment gains (losses)	$	4,241	$	6,486	$	6,710	$	(4,209	)

Summary of Fixed Maturities with Unrealized Losses

We held fixed maturities with unrealized losses representing declines that we considered temporary at June 30, 2021 as follows:

	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	38,202	$	1,088	$	—	$	—
Obligations of states and political subdivisions		45,446		819		—		—
Corporate securities		38,846		344		3,375		125
Mortgage-backed securities		55,930		415		487		2
Totals	$	178,424	$	2,666	$	3,862	$	127

We held fixed maturities with unrealized losses representing declines that we considered temporary at December 31, 2020 as follows:

	Less Than 12 Months				More Than 12 Months
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	29,144	$	345	$	—	$	—
Obligations of states and political subdivisions		9,362		154		—		—
Corporate securities		26,143		115		8,230		276
Mortgage-backed securities		3,091		15		236		1
Totals	$	67,740	$	629	$	8,466	$	277

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Summary of Financial Data by Segment

Financial data by segment for the three and six months ended June 30, 2021 and 2020 is as follows:​​​​​​​

	Three Months Ended June 30,
	2021		2020
	(in thousands)
Revenues:
Premiums earned:
Commercial lines	$	115,300	$	101,870
Personal lines		77,189		82,504
GAAP premiums earned		192,489		184,374
Net investment income		7,652		7,172
Investment gains		4,241		6,486
Other		764		868
Total revenues	$	205,146	$	198,900
Income before income tax expense:
Underwriting income:
Commercial lines	$	1,767	$	4,472
Personal lines		547		8,290
SAP underwriting income		2,314		12,762
GAAP adjustments		5,256		1,378
GAAP underwriting income		7,570		14,140
Net investment income		7,652		7,172
Investment gains		4,241		6,486
Other		234		190
Income before income tax expense	$	19,697	$	27,988

	Six Months Ended June 30,
	2021			2020
	(in thousands)
Revenues:
Premiums earned:
Commercial lines	$	224,525		$	203,645
Personal lines		155,215			167,982
GAAP premiums earned		379,740			371,627
Net investment income		15,163			14,548
Investment gains (losses)		6,710			(4,209	)
Other		1,503			1,845
Total revenues	$	403,116		$	383,811
Income before income tax expense:
Underwriting (loss) income:
Commercial lines	$	(6,475	)	$	3,906
Personal lines		5,584			13,101
SAP underwriting (loss) income		(891	)		17,007
GAAP adjustments		11,238			2,762
GAAP underwriting income		10,347			19,769
Net investment income		15,163			14,548
Investment gains (losses)		6,710			(4,209	)
Other		228			383
Income before income tax expense	$	32,448		$	30,491

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Borrowings (Tables)

6 Months Ended

Jun. 30, 2021

FHLB of Pittsburgh [Member]

Amount of FHLB of Indianapolis/Pittsburgh Stock Purchased, Collateral Pledged and Assets Related to MICO's/Atlantic States Agreement

FHLB of Pittsburgh stock purchased and owned	$	1,575,600
Collateral pledged, at par (carrying value $45,226,104)		44,343,661
Borrowing capacity currently available		8,847,792

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements for Investments in Available-for-Sale Fixed Maturity and Equity Securities

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at June 30, 2021:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	22,326	$	—	$	22,326	$	—
Obligations of states and political subdivisions		61,713		—		61,713		—
Corporate securities		211,076		—		211,076		—
Mortgage-backed securities		227,465		—		227,465		—
Equity securities		72,757		70,467		2,290		—
Total investments in the fair value hierarchy	$	595,337	$	70,467	$	524,870	$	—

The following table presents our fair value measurements for our investments in available-for-sale fixed maturity and equity securities at December 31, 2020:

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in thousands)
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	47,815	$	—	$	47,815	$	—
Obligations of states and political subdivisions		68,965		—		68,965		—
Corporate securities		212,708		—		212,708		—
Mortgage-backed securities		225,648		—		225,648		—
Equity securities		58,556		54,152		4,404		—
Totals	$	613,692	$	54,152	$	559,540	$	—

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Liabilities for Losses and Loss Expenses (Tables)

6 Months Ended

Jun. 30, 2021

Text Block [Abstract]

Summary of Insurance Subsidiaries' Liabilities for Losses and Loss Expenses

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

	Six Months Ended June 30,
	2021			2020
	(in thousands)
Balance at January 1	$	962,007		$	869,674
Less reinsurance recoverable		(404,818	)		(362,768	)
Net balance at January 1		557,189			506,906
Incurred related to:
Current year		254,740			233,460
Prior years		(21,564	)		(10,864	)
Total incurred		233,176			222,596
Paid related to:
Current year		98,966			97,473
Prior years		111,300			106,716
Total paid		210,266			204,189
Net balance at end of period		580,099			525,313
Plus reinsurance recoverable		418,559			376,511
Balance at end of period	$	998,658		$	901,824

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Organization - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2021 Segment
Business Acquisition [Line Items]
Operations commenced date	Aug. 26, 1986
Number of operating segments	3
Atlantic States [Member]
Business Acquisition [Line Items]
Voting power percentage of outstanding common stock	70.00%
Percentage of share in results of pooled business subsidiary	80.00%
Donegal Mutual [Member]
Business Acquisition [Line Items]
Premiums and losses related to certain products	100.00%
Class A Common Stock [Member]
Business Acquisition [Line Items]
Stock ownership percentage held by major shareholder	41.00%
Class B Common Stock [Member]
Business Acquisition [Line Items]
Stock ownership percentage held by major shareholder	84.00%

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Earnings Per Share - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2021
Earnings Per Share [Abstract]
Minimum percentage of class A common stock declared dividend excess over class B dividend	10.00%

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Earnings Per Share - Summary of Reconciliation of Numerators and Denominators Used in Basic and Diluted Per Share Computations (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Class A Common Stock [Member]
Numerator:
Allocation of net income (loss)	$ 13,482	$ 18,665	$ 22,223	$ 21,721
Denominator:
Weighted-average shares outstanding	25,342	23,451	25,057	23,356
Basic earnings (loss) per share	$ 0.53	$ 0.80	$ 0.89	$ 0.93
Numerator:
Allocation of net income (loss)	$ 13,482	$ 18,665	$ 22,223	$ 21,721
Denominator:
Number of shares used in basic computation	25,342	23,451	25,057	23,356
Weighted-average shares effect of dilutive securities
Director and employee stock options	252	199	190	193
Number of shares used in diluted computation	25,594	23,650	25,247	23,549
Diluted earnings (loss) per share	$ 0.53	$ 0.79	$ 0.88	$ 0.92
Class B Common Stock [Member]
Numerator:
Allocation of net income (loss)	$ 2,682	$ 4,014	$ 4,471	$ 4,689
Denominator:
Weighted-average shares outstanding	5,577	5,577	5,577	5,577
Basic earnings (loss) per share	$ 0.48	$ 0.72	$ 0.80	$ 0.84
Numerator:
Allocation of net income (loss)	$ 2,682	$ 4,014	$ 4,471	$ 4,689
Denominator:
Number of shares used in basic computation	5,577	5,577	5,577	5,577
Weighted-average shares effect of dilutive securities
Number of shares used in diluted computation	5,577	5,577	5,577	5,577
Diluted earnings (loss) per share	$ 0.48	$ 0.72	$ 0.80	$ 0.84

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Earnings Per Share - Summary of Antidilutive Securities Excluded From Computation Of Earnings Per Share (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of options to purchase Class A shares excluded	4,952,276	6,183,992	4,952,276	6,183,992

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Reinsurance - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2021 USD ($)
Ceded Credit Risk [Line Items]
Loss reinsurance, set retention amount for property losses	$ 2,000,000.0
Third Party Reinsurance [Member]
Ceded Credit Risk [Line Items]
Percentage of accumulation of losses	100.00%
Catastrophe reinsurance, set retention amount	$ 15,000,000.0
Maximum amount of loss coverage under reinsurance agreement of property catastrophe	$ 185,000,000.0
Atlantic States [Member]
Ceded Credit Risk [Line Items]
Percentage of share in results of pooled business subsidiary	80.00%
Donegal Mutual [Member]
Ceded Credit Risk [Line Items]
Percentage of share in results of pooled business owned by third party	20.00%
Percentage of accumulation of losses	100.00%
Catastrophe reinsurance, set retention amount	$ 2,000,000.0
Maximum amount of loss coverage under reinsurance agreement of property catastrophe	13,000,000.0
Additional coverage amount	$ 5,000,000.0

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Investments - Summary of Amortized Cost and Estimated Fair Values of Fixed Maturities (Detail) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Schedule of Equity Method Investments [Line Items]
Total held to maturity, Amortized Cost	$ 643,847,647	$ 586,609,439
Held to Maturity, Gross Unrealized Gains	38,978,000	46,604,000
Held to Maturity, Gross Unrealized Losses	1,704,000	572,000
Total held to maturity, Estimated Fair Value	681,122,000	632,641,000
Available for Sale, Amortized Cost	506,334,000	534,958,000
Available for Sale, Gross Unrealized Gains	17,335,000	20,512,000
Available for Sale, Gross Unrealized Losses	1,089,000	334,000
Available for Sale, Estimated Fair Value	522,580,000	555,136,000
U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies [Member]
Schedule of Equity Method Investments [Line Items]
Total held to maturity, Amortized Cost	89,716,000	77,435,000
Held to Maturity, Gross Unrealized Gains	2,839,000	3,984,000
Held to Maturity, Gross Unrealized Losses	649,000	223,000
Total held to maturity, Estimated Fair Value	91,906,000	81,196,000
Available for Sale, Amortized Cost	22,508,000	47,512,000
Available for Sale, Gross Unrealized Gains	257,000	424,000
Available for Sale, Gross Unrealized Losses	439,000	121,000
Available for Sale, Estimated Fair Value	22,326,000	47,815,000
Obligations of States and Political Subdivisions [Member]
Schedule of Equity Method Investments [Line Items]
Total held to maturity, Amortized Cost	346,517,000	312,319,000
Held to Maturity, Gross Unrealized Gains	20,073,000	23,212,000
Held to Maturity, Gross Unrealized Losses	788,000	143,000
Total held to maturity, Estimated Fair Value	365,802,000	335,388,000
Available for Sale, Amortized Cost	59,378,000	66,287,000
Available for Sale, Gross Unrealized Gains	2,366,000	2,690,000
Available for Sale, Gross Unrealized Losses	31,000	12,000
Available for Sale, Estimated Fair Value	61,713,000	68,965,000
Corporate Securities [Member]
Schedule of Equity Method Investments [Line Items]
Total held to maturity, Amortized Cost	188,162,000	173,270,000
Held to Maturity, Gross Unrealized Gains	15,061,000	18,172,000
Held to Maturity, Gross Unrealized Losses	267,000	206,000
Total held to maturity, Estimated Fair Value	202,956,000	191,236,000
Available for Sale, Amortized Cost	201,634,000	202,396,000
Available for Sale, Gross Unrealized Gains	9,644,000	10,496,000
Available for Sale, Gross Unrealized Losses	202,000	184,000
Available for Sale, Estimated Fair Value	211,076,000	212,708,000
Mortgage-Backed Securities [Member]
Schedule of Equity Method Investments [Line Items]
Total held to maturity, Amortized Cost	19,453,000	23,585,000
Held to Maturity, Gross Unrealized Gains	1,005,000	1,236,000
Held to Maturity, Gross Unrealized Losses	0	0
Total held to maturity, Estimated Fair Value	20,458,000	24,821,000
Available for Sale, Amortized Cost	222,814,000	218,763,000
Available for Sale, Gross Unrealized Gains	5,068,000	6,902,000
Available for Sale, Gross Unrealized Losses	417,000	17,000
Available for Sale, Estimated Fair Value	$ 227,465,000	$ 225,648,000

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Investments - Additional Information (Detail)		6 Months Ended		12 Months Ended
	Nov. 30, 2013 USD ($)	Jun. 30, 2021 USD ($) Securities	Jun. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Schedule of Investments [Line Items]
Net unrealized losses arising prior to reclassification date	$ 15,100,000
Amortization of unrealized losses recorded in accumulated other comprehensive income (loss)		$ 556,553	$ 833,690
Accumulated other comprehensive loss		8,473,471		$ 11,130,612
Gain on equity securities		6,100,000	4,900,000
Loss on equity securities		114,339	$ 3,400,000
Obligations of States and Political Subdivisions [Member]
Schedule of Investments [Line Items]
Aggregate fair value of bond held		267,800,000		263,600,000
Amortized cost of bond held		254,200,000		247,500,000
Special Revenue Bonds [Member]
Schedule of Investments [Line Items]
Aggregate fair value of bond held		159,700,000		140,800,000
Amortized cost of bond held		$ 151,700,000		$ 131,100,000
Education Bonds [Member]
Schedule of Investments [Line Items]
Percentage of investments in special revenue bonds		46.00%		44.00%
Water and Sewer Utility Bonds [Member]
Schedule of Investments [Line Items]
Percentage of investments in special revenue bonds		35.00%		39.00%
Fixed Maturities [Member]
Schedule of Investments [Line Items]
Number of fixed maturity securities classified as available for sale | Securities		89
Accumulated Net Unrealized Investment Losses [Member]
Schedule of Investments [Line Items]
Accumulated other comprehensive loss		$ 5,500,000		$ 6,100,000
Minimum [Member]
Schedule of Investments [Line Items]
Percentage of which the company held security of any issuer		10.00%		10.00%

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Investments - Summary of Amortized Cost and Estimated Fair Value of Fixed Maturities by Contractual Maturity (Detail) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Held to maturity
Due in one year or less, Amortized Cost	$ 38,641,000
Due after one year through five years, Amortized Cost	83,282,000
Due after five years through ten years, Amortized Cost	224,135,000
Due after ten years, Amortized Cost	278,337,000
Mortgage-backed securities, Amortized Cost	19,453,000
Total held to maturity, Amortized Cost	643,847,647	$ 586,609,439
Available for sale
Due in one year or less, Amortized Cost	26,146,000
Due after one year through five years, Amortized Cost	131,837,000
Due after five years through ten years, Amortized Cost	96,413,000
Due after ten years, Amortized Cost	29,124,000
Mortgage-backed securities, Amortized Cost	222,814,000
Total available for sale, Amortized Cost	506,334,000
Held to maturity
Due in one year or less, Estimated Fair Value	39,762,000
Due after one year through five years, Estimated Fair Value	88,929,000
Due after five years through ten years, Estimated Fair Value	237,348,000
Due after ten years, Estimated Fair Value	294,625,000
Mortgage-backed securities, Estimated Fair Value	20,458,000
Total held to maturity, Estimated Fair Value	681,122,000	632,641,000
Available for sale
Due in one year or less, Estimated Fair Value	26,621,000
Due after one year through five years, Estimated Fair Value	138,624,000
Due after five years through ten years, Estimated Fair Value	99,711,000
Due after ten years, Estimated Fair Value	30,159,000
Mortgage-backed securities, Estimated Fair Value	227,465,000
Total available for sale, Estimated Fair Value	$ 522,580,264	$ 555,136,017

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Investments - Summary of Cost and Estimated Fair Value of Equity Securities (Detail) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Investments, Debt and Equity Securities [Abstract]
Cost	$ 50,864,000	$ 42,410,000
Gross Gains	22,007,000	17,103,000
Gross Losses	114,000	957,000
Estimated Fair Value	$ 72,757,031	$ 58,556,173

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Investments - Summary of Gross Investment Gains and Losses before Applicable Income Taxes (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Gain (Loss) on Securities [Line Items]
Gross investment gains	$ 4,241,000	$ 6,703,000	$ 7,252,000	$ 4,007,000
Gross investment losses	0	217,000	542,000	8,216,000
Net investment gains (losses)	4,241,031	6,485,896	6,710,085	(4,208,947)
Fixed Maturities [Member]
Gain (Loss) on Securities [Line Items]
Gross investment gains	479,000	229,000	524,000	652,000
Gross investment losses	0	217,000	74,000	218,000
Equity Securities [Member]
Gain (Loss) on Securities [Line Items]
Gross investment gains	3,762,000	6,474,000	6,728,000	3,355,000
Gross investment losses	$ 0	$ 0	$ 468,000	$ 7,998,000

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Investments - Summary of Fixed Maturities with Unrealized Losses (Detail) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Debt Securities, Available-for-sale [Line Items]
Less Than 12 Months, Fair Value	$ 178,424	$ 67,740
Less Than 12 Months, Unrealized Losses	2,666	629
More Than 12 Months, Fair Value	3,862	8,466
More Than 12 Months, Unrealized Losses	127	277
U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies [Member]
Debt Securities, Available-for-sale [Line Items]
Less Than 12 Months, Fair Value	38,202	29,144
Less Than 12 Months, Unrealized Losses	1,088	345
Obligations of States and Political Subdivisions [Member]
Debt Securities, Available-for-sale [Line Items]
Less Than 12 Months, Fair Value	45,446	9,362
Less Than 12 Months, Unrealized Losses	819	154
More Than 12 Months, Fair Value	0
More Than 12 Months, Unrealized Losses	0
Corporate Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Less Than 12 Months, Fair Value	38,846	26,143
Less Than 12 Months, Unrealized Losses	344	115
More Than 12 Months, Fair Value	3,375	8,230
More Than 12 Months, Unrealized Losses	125	276
Mortgage-Backed Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Less Than 12 Months, Fair Value	55,930	3,091
Less Than 12 Months, Unrealized Losses	415	15
More Than 12 Months, Fair Value	487	236
More Than 12 Months, Unrealized Losses	$ 2	$ 1

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Segment Information - Summary of Financial Data by Segment (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Premiums earned:
Premiums earned	$ 192,488,665	$ 184,373,768	$ 379,740,265	$ 371,626,546
Net investment income	7,652,180	7,172,144	15,162,758	14,548,428
Investment gains (losses)	4,241,031	6,485,896	6,710,085	(4,208,947)
Total revenues	205,145,943	198,899,772	403,115,841	383,810,978
Underwriting (loss) income:
Net investment income	7,652,180	7,172,144	15,162,758	14,548,428
Net investment gains (losses)	4,241,031	6,485,896	6,710,085	(4,208,947)
Income before income tax expense	19,696,825	27,988,049	32,447,510	30,491,220
Operating Segments [Member]
Premiums earned:
Premiums earned	192,489,000	184,374,000	379,740,000	371,627,000
Net investment income	7,652,000	7,172,000	15,163,000	14,548,000
Investment gains (losses)	4,241,000	6,486,000	6,710,000	(4,209,000)
Other	764,000	868,000	1,503,000	1,845,000
Total revenues	205,146,000	198,900,000	403,116,000	383,811,000
Underwriting (loss) income:
SAP underwriting (loss) income	2,314,000	12,762,000	(891,000)	17,007,000
GAAP adjustments	5,256,000	1,378,000	11,238,000	2,762,000
GAAP underwriting income	7,570,000	14,140,000	10,347,000	19,769,000
Net investment income	7,652,000	7,172,000	15,163,000	14,548,000
Net investment gains (losses)	4,241,000	6,486,000	6,710,000	(4,209,000)
Other	234,000	190,000	228,000	383,000
Income before income tax expense	19,697,000	27,988,000	32,448,000	30,491,000
Commercial Lines [Member] | Operating Segments [Member]
Premiums earned:
Premiums earned	115,300,000	101,870,000	224,525,000	203,645,000
Underwriting (loss) income:
SAP underwriting (loss) income	1,767,000	4,472,000	(6,475,000)	3,906,000
Personal Lines [Member] | Operating Segments [Member]
Premiums earned:
Premiums earned	77,189,000	82,504,000	155,215,000	167,982,000
Underwriting (loss) income:
SAP underwriting (loss) income	$ 547,000	$ 8,290,000	$ 5,584,000	$ 13,101,000

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Borrowings - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2021	Aug. 01, 2020
Line of Credit Facility [Line Items]
Line of credit expiration month and year	2020-08
Line of credit, interest rate description	interest rates equal to the then-current LIBOR rate plus 2.00%
Manufacturers and Traders Trust Company [Member]
Line of Credit Facility [Line Items]
Line of credit facility remaining borrowing capacity	$ 20,000,000.0
FHLB of Pittsburgh [Member] | Atlantic States [Member]
Line of Credit Facility [Line Items]
Right to request for extension of credit agreement with Manufacturers and Traders Trust Company	8,847,792
Federal home loan bank, fixed rate advances	$ 35,000,000.0
Revolving Credit Facility [Member] | Manufacturers and Traders Trust Company [Member]
Line of Credit Facility [Line Items]
Right to request for extension of credit agreement with Manufacturers and Traders Trust Company		$ 20,000,000.0
Debt instrument stated interest rate	2.00%
Lines of Credit [Member] | FHLB of Pittsburgh [Member] | Atlantic States [Member]
Line of Credit Facility [Line Items]
Interest rate on advances	1.74%
Subordinated Debentures [Member]
Line of Credit Facility [Line Items]
Debt instrument stated interest rate	5.00%
Subordinated Debentures [Member] | West Bend Mutual Insurance Company [Member]
Line of Credit Facility [Line Items]
Surplus note	$ 5,000,000.0
Subordinated Debentures [Member] | Lines of Credit [Member] | FHLB of Pittsburgh [Member] | March 2021 Due [Member]
Line of Credit Facility [Line Items]
Outstanding advances	$ 50,000,000.0
Interest rate on advances	0.83%

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Borrowings - Amount of FHLB of Indianapolis/Pittsburgh Stock Purchased, Collateral Pledged and Assets Related to MICO's/Atlantic States Agreement (Detail) - Atlantic States [Member] - FHLB of Pittsburgh [Member]	Jun. 30, 2021 USD ($)
Amount of FHLB of Indianapolis/Pittsburgh stock purchased, collateral pledged and assets related to MICO's/Atlantic States Agreement
FHLB stock purchased and owned	$ 1,575,600
Collateral pledged, at par	44,343,661
Borrowing capacity currently available	$ 8,847,792

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Borrowings - Amount of FHLB of Indianapolis/Pittsburgh Stock Purchased, Collateral Pledged and Assets Related to MICO's/Atlantic States Agreement (Parenthetical) (Detail)	Jun. 30, 2021 USD ($)
FHLB of Pittsburgh [Member] | Atlantic States [Member]
Line of Credit Facility [Line Items]
Collateral Pledged at carrying value	$ 45,226,104

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Share-Based Compensation - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Compensation expense in stock compensation plans	$ 304,373	$ 314,237	$ 597,168	$ 644,541
Income tax benefit of stock compensation plans	63,918	65,990	125,405	135,354
Unrecognized compensation expense related to nonvested share-based compensation granted under the plan	1,000,000.0		$ 1,000,000.0
Weighted average period of unrecognized compensation expense			1 year 7 months 6 days
Cash from option exercises	7,000,000.0	2,200,000	$ 11,400,000	3,100,000
Tax benefit for tax deductions related to option exercises	$ 271,979	$ 54,221	$ 421,135	$ 68,878

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Fair Value Measurements - Fair Value Measurements for Investments in Available-for-Sale Fixed Maturity and Equity Securities (Detail) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	$ 522,580	$ 555,136
U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	22,326	47,815
Obligations of States and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	61,713	68,965
Corporate Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	211,076	212,708
Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	227,465	225,648
Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	595,337	613,692
Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member] | U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	22,326	47,815
Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member] | Obligations of States and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	61,713	68,965
Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member] | Corporate Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	211,076	212,708
Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member] | Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	227,465	225,648
Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member] | Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	72,757	58,556
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	70,467	54,152
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member] | Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	70,467	54,152
Significant Other Observable Inputs (Level 2) [Member] | Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	524,870	559,540
Significant Other Observable Inputs (Level 2) [Member] | Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member] | U.S. Treasury Securities and Obligations of U.S. Government Corporations and Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	22,326	47,815
Significant Other Observable Inputs (Level 2) [Member] | Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member] | Obligations of States and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	61,713	68,965
Significant Other Observable Inputs (Level 2) [Member] | Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member] | Corporate Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	211,076	212,708
Significant Other Observable Inputs (Level 2) [Member] | Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member] | Mortgage-Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	227,465	225,648
Significant Other Observable Inputs (Level 2) [Member] | Assets and Liabilities on Recurring Basis [Member] | Total Investments in the Fair Value Hierarchy [Member] | Equity Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	$ 2,290	$ 4,404

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Income Taxes - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020	Mar. 31, 2020
Operating Loss Carryforwards [Line Items]
Other deferred tax assets, net	$ 27,600,000	$ 26,700,000
Income taxes receivable	4,018,210	$ 3,089,369	$ 1,600,000
Parent Company [Member]
Operating Loss Carryforwards [Line Items]
Valuation allowance related to the portion of operating loss carryforwards	$ 7,900,000
Earliest Tax Year [Member]
Operating Loss Carryforwards [Line Items]
Tax years open for examination	2016
Latest Tax Year [Member]
Operating Loss Carryforwards [Line Items]
Tax years open for examination	2020

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Liabilities for Losses and Loss Expenses - Summary of Insurance Subsidiaries' Liabilities for Losses and Loss Expenses (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Liability for Claims and Claims Adjustment Expense [Abstract]
Balance at January 1	$ 962,007,437	$ 869,674,000
Less reinsurance recoverable	(404,818,000)	(362,768,000)
Net balance at January 1	557,189,000	506,906,000
Incurred related to:
Current year	254,740,000	233,460,000
Prior years	(21,564,000)	(10,864,000)
Total incurred	233,176,000	222,596,000
Paid related to:
Current year	98,966,000	97,473,000
Prior years	111,300,000	106,716,000
Total paid	210,266,000	204,189,000
Net balance at end of period	580,099,000	525,313,000
Plus reinsurance recoverable	418,559,000	376,511,000
Balance at end of period	$ 998,658,015	$ 901,824,000

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Liabilities for Losses and Loss Expenses - Additional Information (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Increase (Decrease) in liability for losses and loss expenses of prior years	$ (21,564)	$ (10,864)
Percentage of 2010 development	3.90%	2.10%