What Donegal Group Inc. told the SEC could break it.

Donegal Group's earnings and capital depend on its investment portfolio (U.S. government/agency, state and municipal, corporate and mortgage-backed securities plus equities), and its exposure to market risk from changes in interest rates is concentrated in that portfolio; rising or volatile interest rates, declines in debt/equity fair values, or credit deterioration — which it generally does not hedge — would reduce investment income and the carrying value of its portfolio, pressuring results and statutory surplus.

“Our exposure to market risk for a change in interest rates is concentrated in our investment portfolio.”

Donegal Group is controlled by its affiliate Donegal Mutual, which holds greater-than-majority voting control and can determine the company's management and policies and control the outcome of any corporate transaction (mergers, acquisitions, asset sales) regardless of how other stockholders vote; Donegal Mutual's interest in maintaining that control may adversely affect the price of the Class A and Class B common stock (because of the absence of any potential takeover premium) and may be inconsistent with the interests of other stockholders.

“The interests of Donegal Mutual in maintaining this greater-than-majority voting control of us may have an adverse effect on the price of our Class A common stock and the price of our Class B common stock because of the absence of any potential “takeover” premium and may, therefore, be inconsistent with the interests of our stockholders other than Donegal Mutual.”

Donegal Group depends on dividends from its regulated insurance subsidiaries, which are subject to state insurance regulation: the maximum ordinary dividends those subsidiaries can pay to the parent in 2026 without prior regulatory approval is approximately $66.4 million, and the NAIC and state regulators periodically consider modifying dividend rules; together with risk-based-capital (RBC) requirements and the need to maintain surplus to support ratings, these constraints could limit cash available to the holding company and its financial flexibility.

“The maximum amount of ordinary dividends that our insurance subsidiaries can pay to us in 2026 without prior regulatory approval is approximately $66.4 million.”

As a property and casualty insurer (commercial and personal lines, including auto, multi-peril and homeowners), Donegal Group is exposed to catastrophe and weather-related losses, and changing climate conditions could increase the frequency and severity of weather events affecting its insured exposures; while it can adjust underwriting standards, pricing and policy terms (subject to regulatory approval), changing climate conditions could also lead to new or revised regulations that impact its insurance subsidiaries' ability to manage exposures in affected areas — pressuring loss ratios and growth.

“Changing climate conditions could lead to new or revised regulations with which our insurance subsidiaries would have to comply. Such regulations could impact the ability of our insurance subsidiaries to manage their exposures in areas impacted by increased weather a”