UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant ☒                                      Filed by a Party other than the Registrant ☐

Check the appropriate box:

Donegal Group Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS

WE WILL HOLD ON APRIL 16, 202015, 2021

To the Stockholders of

DONEGAL GROUP INC.:

We encourage you to read the accompanying proxy statement and our 2020 Annual Report to stockholders (our “2020 Annual Report”). The theme of our 2020 Annual Report is “pulling together and moving forward.” As we outline in our annual letter to stockholders, Donegal’s management, employees and network of professional independent agents are pulling together like never before and moving forward to execute our strategic plan and fulfill our mission to be “there when it matters most” for our policyholders.

The events of 2020 have confirmed our core belief that exceptional service and accessibility to our agents and customers drives positive business results. Our ability to maintain our highly responsive service levels was a key underlying force that contributed to our solid commercial premium growth during the year. We were pleased that a continuation of improved underwriting results and investment income during 2020 led to a 9.3 percent increase in book value per share to $17.13 at December 31, 2020, compared to $15.67 at December 31, 2019. In addition, our dividend yield continues to rank highly among our public insurance company peers.

We are focused on several primary strategies, including achieving sustained excellent financial performance, strategically modernizing our operations and processes to transform our business, capitalizing on opportunities to grow profitably and delivering a superior experience to our agents and customers.

Due to the ongoing health risks associated with large public gatherings, we will hold our 20202021 annual meeting of stockholders (our “2020“2021 Annual Meeting”) as a “virtual meeting” on Thursday, April 15, 2021 at 10:00 a.m., local time,Eastern time. Stockholders will not be able to attend the meeting in person. You will be able to attend our 2021 Annual Meeting, vote and submit questions during our 2021 Annual Meeting via live webcast only at www.virtualshareholdermeeting.com/DGICA2021. In order to participate, vote and submit questions in our 2021 Annual Meeting, you will need to have your 16-digit control number that is included on Thursday, April 16, 2020, at the Heritage Hotel Lancaster, 500 Centerville Road, Lancaster, Pennsylvania 17601. proxy card we include with this notice of our 2021 Annual Meeting and our proxy statement relating to our 2021 Annual Meeting. Guests may participate in the webcast but will not have the ability to vote or ask questions during our 2021 Annual Meeting.

At our 20202021 Annual Meeting, our stockholders will vote on the following items of stockholder business:

Our advance noticeby-laws require that our stockholders submit to us, not later than 90 days prior to the first anniversary of the date on which we first mailed our proxy statement to stockholders for our most recent year’s annual meeting of stockholders, the information specified in thoseby-laws regarding any nomination by a stockholder of a candidate for election as a director or any proposal by a stockholder of any other item of stockholder business a stockholder wishes our stockholders to consider at our next forthcoming annual meeting of stockholders. That date was December 18, 2019 with respect to our 2020 Annual Meeting and is December 16, 2020 with respect to our 2021 Annual Meeting and is December 15, 2021 with respect to our 2022 annual meeting of stockholders. No stockholder made another nomination or other proposal for consideration by our stockholders at our 20202021 Annual Meeting.

Our board of directors has established the close of business on March 2, 20201, 2021 as the record date for the determination of the holders of our Class A common stock and for the determination of the holders of our Class B common stock entitled to notice of, and to vote at, our 20202021 Annual Meeting.

By order of our board of directors,

Kevin G. Burke,

President and Chief Executive Officer

March 15, 2021

Important Notice Regarding the Availability of Our Proxy Materials for

Our April 16, 202015, 2021 Annual Meeting

This mailing includes our notice of our 20202021 Annual Meeting, our proxy statement with respect to our 20202021 Annual Meeting and our 20192020 Annual Report. You may also view each of these documents on the Internet atwww.proxyvote.com. No information on our website other than our notice of our 20202021 Annual Meeting, this proxy statement with respect to our 20202021 Annual Meeting and our 20192020 Annual Report constitutes a part of our proxy solicitation materials for our 20202021 Annual Meeting or part of our 20192020 Annual Report.

DONEGAL GROUP INC.

PROXY STATEMENT

Introduction

This proxy statement contains information relating to our 20202021 Annual Meeting. WeDue to the ongoing health risks associated with large public gatherings, we will hold our 20202021 Annual Meeting as a “virtual meeting” on Thursday, April 15, 2021 at 10:00 a.m., local time,Eastern time. You will be able to attend our 2021 Annual Meeting, vote and submit questions during our 2021 Annual Meeting via live webcast only at www.virtualshareholdermeeting.com/DGICA2021. In order to participate, vote and submit questions in our 2021 Annual Meeting, you will need to have your 16-digit control number that is included on Thursday, April 16, 2020, at the Heritage Hotel Lancaster, 500 Centerville Road, Lancaster, Pennsylvania 17601.proxy card we include with this notice of our 2021 Annual Meeting and our proxy statement relating to our 2021 Annual Meeting. Guests may participate in the webcast but will not have the ability to vote or ask questions during our 2021 Annual Meeting.

On March 16, 2020,15, 2021, we commenced the mailing to our stockholders of record at the close of business on March 2, 20201, 2021 of:

We ask our stockholders to return their completed proxy cards promptly whether or not they plan to attend our 2020 Annual Meeting in person unless a stockholder prefers to vote in person, by telephone or via the Internet.Internet at www.proxyvote.com.

We will pay the costs of preparing and mailing our proxy materials for our 20202021 Annual Meeting to our stockholders and making those materials available for our stockholders to view on the Internet. We will, upon request, reimburse brokers, nominees, fiduciaries, custodians and other record holders for their reasonable expenses in forwarding our proxy solicitation materials for our 20202021 Annual Meeting to the beneficial owners of our Class A common stock and to the beneficial owners of our Class B common stock for whom such persons serve as record holders. We may also solicit proxies from some stockholders in person, by mail, bye-mail or by telephone through our directors, officers and regular employees whom we do not employ specifically for proxy solicitation purposes and none of whom will receive any additional compensation for performing such services.

(i)

Summary of Our 20192020 Performance

For 2019,2020, our total revenues increased 5.3%decreased 4.3% compared to 2018.2019, with the decrease largely related to lower net investment gains in 2020 compared to 2019. We had net income of $52.8 million and net income per diluted Class A share of $1.83 for 2020, compared to $47.2 million and net income per diluted Class A share of $1.67 for 2019, compared to a net loss in 2018.2019. The following table depicts our total revenues, net income (loss), net income (loss) per diluted Class A share and net income (loss) per Class B share for the three years ended December 31, 2020, 2019 2018 and 2017.2018. For further information, we refer you to the financial statements we include in our 20192020 Annual Report.

(i)

CONTENTS

(iii)

(iv)

OUR 20202021 ANNUAL MEETING

In accordance with this proxy statement, our board of directors solicits proxies from our stockholders for use in connection with our 20202021 Annual Meeting and any adjournment or postponement of our 20202021 Annual Meeting. We will hold our 20202021 Annual Meeting as a “virtual meeting” on Thursday, April 15, 2021 at 10:00 a.m., local time, on Thursday, April 16, 2020Eastern time. You will be able to attend our 2021 Annual Meeting, vote and submit questions during our 2021 Annual Meeting via live webcast only at the Heritage Hotel Lancaster, 500 Centerville Road, Lancaster, Pennsylvania 17601.www.virtualshareholdermeeting.com/DGICA2021.

What is the agenda for our 20202021 Annual Meeting?

At our 20202021 Annual Meeting, our stockholders will consider and act upon the three items of stockholder business we propose as follows:

We refer you to detailed descriptions of each of these proposals we include within this proxy statement.

What is the effect of our advance noticeby-laws?

Our advance noticeby-laws require that a stockholder provide us with a specified period of prior notice of that stockholder’s intention to nominate any candidate for election as a Class AB director at our 20202021 Annual Meeting or to propose any other item of stockholder business for stockholder consideration at our 20202021 Annual Meeting.

Our advance noticeby-laws establish a date by which a stockholder must submit a stockholder proposal to us with respect to our next forthcoming annual meeting of stockholders. That date in general is 90 days prior to the first anniversary of the mailing date of our proxy solicitation material for our prior year’s annual meeting of stockholders. After that date, a stockholder may no longer propose any candidate for election as a director at our next forthcoming annual meeting of stockholders and may no longer propose any other item of stockholder business for consideration and a vote by our stockholders at our next forthcoming annual meeting of stockholders. For our 20202021 Annual Meeting, that date was December 18, 2019.16, 2020. For our 20212022 annual meeting of stockholders, that

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date is December 16, 2020.15, 2021. The purpose of our advance noticeby-laws is to ensure that we can include in our annual proxy statements, for the information of all of our stockholders, all of the actions we or others propose to present for consideration by our stockholders at our annual meetings of stockholders.

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of stockholder business we will conduct at our 20202021 Annual Meeting and the procedural manner in which we will conduct the business of our 20202021 Annual Meeting. If Mr. Burke is unavailable for any reason, our board of directors will designate a replacement as presiding officer of our 20202021 Annual Meeting.

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Computershare, our independent stock transfer agent, has prepared and certified a list of all holders of our Class A common stock and all holders of our Class B common stock outstanding as of the close of business on March 2, 2020,1, 2021, the record date for our 20202021 Annual Meeting. If your name appears on that certified list of stockholders, you are a stockholder of record entitled to vote in person or by proxy at our 20202021 Annual Meeting. For example, you are a stockholder of record if you received this proxy statement and the related materials for our 20202021 Annual Meeting directly from us through our mailing agent and not indirectly from another person who is the record holder of the shares you own beneficially, such as a bank, a brokerage firm or other fiduciary or representative.

Ourby-laws, in compliance with the DGCL, provide a stockholder of record an opportunity, subject to that stockholder of record’s prior compliance with certain conditions we describe in this proxy statement, during the ten calendar days preceding the date of our 20202021 Annual Meeting, to examine, at our principal executive offices in Marietta, Pennsylvania, an alphabetical list of the holders of record for our 20202021 Annual Meeting of our Class A common stock and an alphabetical list of the holders of record for our 20202021 Annual Meeting of our Class B common stock. We will grant the request of a stockholder of record to make such an examination if:

If a stockholder of record does not make such a written request to inspect our list of stockholders within theten-day period we describe above or if we make a determination, in our discretion, that the stockholder of record’s request for inspection of our list of stockholders within suchten-day period is not proper or not legally relevant to one of the three items of stockholder business we will conduct at our 20202021 Annual Meeting, we will not permit that stockholder of record to examine the list of the record holders of our Class A common stock and the record holders of our Class B common stock.

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Which of the items of stockholder business we will conduct at our 20202021 Annual Meeting do we consider routine and which do we considernon-routine?

We will transact three items of stockholder business at our 20202021 Annual Meeting. We consider these items routine ornon-routine as we indicate in the table below:

Under applicable rules, a record owner who is not also the beneficial owner, such as a broker, has the authority to vote on routine matters, but may not vote onnon-routine matters. If you do not give specific voting instructions to the institution that holds your shares with respect to anon-routine matter, the institution will inform the inspectors of election that it does not have authority to vote on thatnon-routine matter with respect to your shares. This lack of authority is known as a brokernon-vote.

What percentage of the aggregate voting power of our outstanding shares of Class A common stock and our outstanding shares of Class B common stock is necessary to approve the items of stockholder business that will come before our 20202021 Annual Meeting?

Election of Four Class AB Directors

The four persons our board of directors has nominated for election as Class AB directors are the only nominees eligible for election as Class AB directors at our 20202021 Annual Meeting and any adjournment or postponement of our 20202021 Annual Meeting. Our certificate of incorporation and ourby-laws do not authorize cumulative voting in the election of our directors. As the DGCL permits and ourby-laws provide, we utilize a plurality of the votes cast standard, and not a majority of the

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authority. We will count the shares for which you have withheld authority to vote for the election of Class AB directors as present at our 20202021 Annual Meeting for the purpose of determining whether a quorum is present at our 20202021 Annual Meeting. Because Donegal Mutual will vote all of its shares for the election of the four nominees for Class AB directors we name in this proxy statement and Donegal Mutual-owned shares constitute approximately 71% of votes entitled to be cast at our 20202021 Annual Meeting, our stockholders will elect those Class AB nominees (Kevin G. Burke, Jack L. Hess, David C. King(Dennis J. Bixenman, Kevin M. Kraft, Sr., Jon M. Mahan and Annette B. Szady)Richard D. Wampler, II) at our 20202021 Annual Meeting to serve as Class AB directors for a term of three years and until the election of their respective successors and their respective successors take office.

Approval on aNon-binding Advisory Basis, of the Compensation of Our Named Executive Officers2021 Employee Stock Purchase Plan

Approval of our 2021 employee stock purchase plan requires the affirmative vote of a majority of the voting power of our outstanding shares of Class A common stock and our outstanding shares of Class B common stock, voting together as a single class, present, including by proxy, and eligible to vote on the proposal at our 2021 Annual Meeting. Because Donegal Mutual will vote all of its DGI shares to approve on anon-binding advisory basis,our 2021 employee stock purchase plan and the compensationDonegal Mutual-owned shares constitute approximately 71% of the votes entitled to be cast at our named executive officers2021 Annual Meeting, our stockholders will approve our 2021 employee stock purchase plan.

Ratification of the Appointment by Our Audit Committee of KPMG LLP to Serve as Our Independent Registered Public Accounting Firm for 2021

Ratification of the appointment by our audit committee of KPMG LLP to serve as our independent registered public accounting firm for our fiscal year ending December 31, 2021 requires the affirmative vote of the holders of a majority of the voting power of our outstanding shares of Class A common stock and our outstanding shares of Class B common stock, voting together as a single class, present, in person orincluding by proxy, and entitled to vote on the proposal at our 2020 Annual Meeting. Because Donegal Mutual will vote all of its DGI shares to approve our proposal to approve, on anon-binding advisory basis, the compensation of our named executive officers and the Donegal Mutual-owned shares constitute approximately 71% of the votes entitled to be cast at our 2020 Annual Meeting, our stockholders will approve our proposal to approve, on anon-binding advisory basis, the compensation of our named executive officers.

Ratification of the Appointment by Our Audit Committee of KPMG LLP to Serve as Our Independent Registered Public Accounting Firm for 2020

Ratification of the appointment by our audit committee of KPMG LLP to serve as our independent registered public accounting firm for our fiscal year ending December 31, 2020 requires the affirmative vote of the holders of a majority of the voting power of our outstanding shares of Class A common stock and our outstanding shares of Class B common stock, voting together as a single class, present in person or by proxy and entitled to vote on the proposal at our 20202021 Annual Meeting. Because Donegal Mutual will vote all of its shares for ratification of the appointment by our audit committee of KPMG LLP to serve as our independent registered public accounting firm for 20202021 and

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What are the voting rights of our stockholders?

At the close of business on March 2, 2020,1, 2021, we had outstanding:

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At the close of business on March 2, 2020,1, 2021, Donegal Mutual owned of record and beneficially 9,851,02510,267,692 shares, or approximately 42.3%41.6%, of our outstanding Class A common stock, and 4,654,339 shares, or 83.5%, of our outstanding Class B common stock. Donegal Mutual therefore has the right to cast votes that constitute approximately 71% of the combined voting power at our 20202021 Annual Meeting on each matter we submit to a vote of our stockholders at our 20202021 Annual Meeting.

Donegal Mutual has advised us that it will vote all of its shares of our Class A common stock and all of its shares of our Class B common stock at our 20202021 Annual Meeting as follows:

As a result, based on the information Donegal Mutual furnished to us as to how Donegal Mutual will vote its shares at our 20202021 Annual Meeting and because Donegal Mutual-owned shares constitute 71% of votes entitled to be cast at our 20202021 Annual Meeting, we anticipate our stockholders will, at our 20202021 Annual Meeting:

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You may vote by using one of the following four methods:

Vote in personduring our 2021 Annual Meeting webcast – attend our 20202021 Annual Meeting live webcast at www.virtualshareholdermeeting.com/DGICA2021 and cast a vote by following the instructions provided in person.the webcast portal. Have your proxy card available when you access the webcast. Providing access virtually is especially important in light of the ongoing social distancing requirements necessitated by the COVID-19 pandemic.

Vote by telephone – use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week.week by dialing 1-800-690-6903. Have your proxy card available when you call. When requested, enter the control numbers your proxy card lists and then follow the prompts for voting your shares at our 2020 Annual Meeting. The telephone number is1-800-690-6903.

Vote by mail – mark, sign and date the proxy card we have mailed to you and return it in the postage-prepaid envelope we mailed to you along with this proxy statement and our other proxy solicitation materials for our 2020 Annual Meeting.

Vote via the Internet – use the Internet to vote your proxy 24 hours a day, 7 days a week.week at www.proxyvote.com. Have your proxy card available when you access the website. When requested, enter

Vote by mail – mark, sign and date the control number your proxy card listswe have mailed to you and then create a ballotreturn it in the postage-prepaid envelope we mailed to you along with this proxy statement and submit your marked ballotour other proxy solicitation materials for voting your shares at our 20202021 Annual Meeting over the Internet. The website address for voting via the Internet is www.proxyvote.com.Meeting.

The deadline for stockholders of record to vote at our 20202021 Annual Meeting by telephone or via the Internet is 11:59 p.m., local time, on April 15, 202014, 2021 for shares held directly and 11:59 p.m., local time, on April 13, 202012, 2021 for shares held in the 401(k) Plan of Donegal Mutual. The deadline for our receipt of proxies submitted by mail or by express delivery services for voting at our 20202021 Annual Meeting is 3:00 p.m., local time, on April 15, 2020.14, 2021. If you vote by proxy, the proxies our board of directors has appointed will vote your shares as you direct on any proxy card you return by mail, by telephone or via the Internet.

If a broker, bank or other fiduciary or representative is the holder of record of your shares, see “How do you vote the DGI shares you own beneficially that are registered in the name of another person?” below.

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Your broker, however, does have the discretion to vote your shares on routine matters at our 20202021 Annual Meeting. The stockholder ratification of the appointment by our audit committee of KPMG LLP to serve as our independent registered public accounting firm for our fiscal year ending December 31, 20202021 is a routine matter as to which your broker may exercise discretionary voting power.

If you are a “beneficial owner” of our Class A common stock or our Class B common stock and desire to attend our 20202021 Annual Meeting and vote the shares you beneficially own atduring our 20202021 Annual Meeting in person,live webcast, you must obtain a proxy from your holder of record that you may vote as if you were the holder of record and not direct your holder of record how to vote. Your holder of record is generally the bank, broker or other fiduciary or representative who holds your shares in its name on your behalf.

How does our board of directors recommend our stockholders vote at our 20202021 Annual Meeting?

Our board of directors unanimously recommends that each of our stockholders complete such stockholder’s proxy and vote as follows:

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However, if you attend our 20202021 Annual Meeting in person and do not submit a ballot at our 2020 Annual Meeting, our proxies will vote the proxy you most recently submitted to them in accordance with the instructions you provided on that most recently submitted proxy.live webcast.

OUR BUSINESS STRATEGIES

Our business strategies seek to enhance stockholder value by pursuing prudent revenue growth as well as improving operating efficiencies in order to sustain and improve the long-term, cost-effectiveness and operating profits of our businesses. Our board of directors and management regularly evaluate our business strategies and concentrate on improving our long-term, sustainable earnings. We focus on:

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CERTAIN BENEFICIAL OWNERS OF OUR CLASS A COMMON STOCK

AND OUR CLASS B COMMON STOCK

Beneficial Owners of 5% or More of Our Class A Common Stock or Our Class B Common Stock

The table below lists each person whom we believe beneficially owned 5% or more of the outstanding shares of our Class A common stock (NASDAQ symbol DGICA) or 5% or more of the outstanding shares of our Class B common stock (NASDAQ symbol DGICB), in each case, as of the close of business on March 2, 2020.1, 2021.

The Beneficial Ownership of Our Stock by Our Directors and Executive Officers

The following table shows the amount and the percentage of the outstanding shares of our Class A common stock and the amount and the percentage of the outstanding shares of our Class B common stock that each of our directors each of our nominees for director, each of ourand named executive officers and all of our directors and executive officers our nominees for director and our directors as a group owned beneficially at the close of business on March 2, 2020.1, 2021. The total shares shown for each person includes shares the person owned jointly, in whole or in part, with the person’s spouse, or owned individually by the person’s spouse and shares purchasable upon the exercise of stock options that were exercisable as of March 2, 20201, 2021 or that become exercisable within 60 days after March 2, 2020.1, 2021. The ownership of each director nominee for director and named executive officer is less than 1% unless the table below indicates otherwise.

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Donegal Mutual’s Controlling Interest in Our Relationship with Donegal Mutual

Since the establishment of Atlantic States as our wholly owned property and casualty insurance company and our downstream insurance holding company system in 1986, Donegal Mutual and Atlantic States have been parties to a proportional reinsurance agreement, or pooling agreement, that became effective October 1, 1986. Under the pooling agreement, Donegal Mutual and Atlantic States pool substantially all of their respective premiums, losses and loss expenses. The underwriting pool includes the business Donegal Mutual assumes from Southern Mutual Insurance Company and several of our insurance subsidiaries. The underwriting pool does not include the business Donegal Mutual conducts in four Southwestern states. The underwriting pool homogenizes the risk characteristics of business Donegal Mutual and Atlantic States place into the underwriting pool. Atlantic States receives an allocation of 80% from the underwriting pool and Donegal Mutual receives an allocation of 20%. We do not anticipate any change in the allocation of the underwriting pool between Donegal Mutual and Atlantic States in the future. The business Atlantic States derives from the underwriting pool represents a significant percentage of our total consolidated revenues.

Donegal Mutual and our insurance subsidiaries conduct business together as the Donegal Insurance Group, while each entity retains its separate legal and corporate existence. As the Donegal Insurance Group, Donegal Mutual and our insurance subsidiaries share a combined business plan to enhance market penetration and underwriting profitability. As such, Donegal Mutual and our insurance subsidiaries share the same business philosophies, the same management, the same employees and the same facilities and offer the same types of insurance products.

The products Donegal Mutual and our insurance subsidiaries offer are generally complementary, which permits the Donegal Insurance Group to offer a broad range of products in 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 Donegal Mutual and our insurance subsidiaries offer generally relate to specific risk profiles within similar classes of business, such as preferred tier products versus standard tier products. Donegal Mutual and we do not allocate all of the standard risk gradients to one company. As a result, the underwriting results of the business the individual companies write directly will vary.

Our insurance subsidiaries paid a total of $4.0 million in dividends to us during 2019. These dividends are one of the sources of the funds we utilized to pay quarterly cash dividends to our stockholders. We paid $16.1 million in dividends to our stockholders in 2019, of which Donegal Mutual received $8.1 million based on its ownership of shares of our Class A common stock and shares of our Class B common stock on the respective record dates for the dividends we paid during 2019.

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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 Donegal Mutual and our insurance subsidiaries offer generally relate to specific risk profiles within similar classes of business, such as preferred tier products versus standard tier products. Donegal Mutual and we do not allocate all of the standard risk gradients to one company. As a result, the underwriting results of the business the individual companies write directly will vary.

As a result of reviews that occurred in February 20202021 and March 2020,2021, both our board of directors and Donegal Mutual’s board of directors reaffirmed their respective belief that the DonegalMutual-DGI structure and the inter-company relationships between Donegal Mutual and DGI and its insurance subsidiaries we describe in this proxy statement continue to be appropriate for the respective businesses and operations of Donegal Mutual and of DGI and our insurance subsidiaries. Our board of directors reaffirmed in March 20202021 that preservation of the relationship between Donegal Mutual and us and our status as a public company of which Donegal Mutual owns approximately 71% of the combined voting power of our Class A common stock and our Class B common stock is in the collective best interests of the constituencies that we and Donegal Mutual serve, including:

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We referInter-Company Transactions

Since the establishment of Atlantic States as our stockholderswholly owned property and casualty insurance company and our downstream insurance holding company system in 1986, Donegal Mutual and Atlantic States have been parties to a proportional reinsurance agreement, or pooling agreement. Under the pooling agreement, Donegal Mutual and Atlantic States contribute substantially all of their direct written business to the pool and receive an allocated percentage of the pooled underwriting results, excluding certain reinsurance Donegal Mutual assumes from our insurance subsidiaries. In

addition, Donegal Mutual has a 100% quota-share reinsurance agreement with Southern Mutual Insurance Company, or Southern Mutual, and Donegal Mutual places its assumed business from Southern Mutual into the underwriting pool. 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. The intent of the pooling agreement is to produce more uniform and stable underwriting results from year to year for each pool participant than they would experience individually and to spread the risk of loss between the participants based on each participant’s relative amount of surplus and relative access to capital. Each participant in the pool has at its disposal the capacity of the entire pool, rather than being limited to policy exposures of a size commensurate with its own capital and surplus. The business Atlantic States derives from the underwriting pool represents a significant percentage of our total consolidated revenues. The underwriting pool did not include the business Donegal Mutual conducts in four Southwestern states for policies effective through December 31, 2020.

In addition to the pooling agreement, our insurance subsidiaries, in the ordinary course of their businesses, have various reinsurance agreements with Donegal Mutual that are renewed annually. The coordinating committee reviews these reinsurance agreements annually so as to achieve relative parity between Donegal Mutual and our insurance subsidiaries between the reinsurance premiums Donegal Mutual charges our insurance subsidiaries for the reinsurance and the losses Donegal Mutual incurs under the reinsurance it provides to our Form10-K Report for our fiscal year ended December 31, 2019 for further information about our business strategiesinsurance subsidiaries over a period of several years. We believe the reinsurance arrangements between Donegal Mutual and our relationship with Donegal Mutual.

Our Strategyinsurance subsidiaries are no less favorable to Maximize Stockholder Value

A fundamental goalour insurance subsidiaries than the terms and conditions of reinsurance available to our board of directors and management is to maximize stockholder value overinsurance subsidiaries from independent reinsurers. These reinsurance agreements include the long-term. We conduct our operations with this fundamental goal in mind. Our business strategies seek to maximize stockholder value by improving operating efficiencies as well as pursuing internal and external growth in order to enhance the long-term, cost-effectiveness and operating profits of our businesses. Our board of directors and management regularly evaluate our business strategies and concentrate on improving our long-term, sustainable earnings. We focus on:following reinsurance agreements:

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Donegal Mutual provides facilities, management and other services to us and our insurance subsidiaries. In addition, Donegal Mutual purchases and maintains the information technology systems that support the business of Donegal Mutual and our insurance subsidiaries. Donegal Mutual allocates certain related expenses to Atlantic States in accordance with the relative participation of Donegal Mutual and Atlantic States in the pooling agreement. Our insurance subsidiaries other than Atlantic States reimburse Donegal Mutual for direct costs of services Donegal Mutual provides on their behalf and a proportionate share of certain costs Donegal Mutual allocates to them based on historic results, minimizing our exposure to catastrophe-prone areas, analyzingtheir percentage of the cost and availability of external reinsurance as well as the levels at which we purchase external reinsurance for the member companiestotal net premiums written of the Donegal Insurance Group and evaluating claims historyother metrics. Donegal Mutual allocates costs related to its development and maintenance of information technology systems over the estimated useful life of those systems (generally five years) and charges a proportionate share of

those costs to our insurance companies based on their percentage of the total net premiums written of the Donegal Insurance Group. Donegal Mutual’s charges for these services totaled $153.9 million in 2020, compared to $134.1 million in 2019.

Donegal Mutual is currently in the midst of a regular basismulti-year effort to analyzemodernize certain of its key technology infrastructure and application systems. In 2020, Donegal Mutual placed the adequacyfirst release of new systems into service and allocated $2.8 million of related costs to our underwriting guidelinesinsurance subsidiaries. Donegal Mutual will allocate to our insurance subsidiaries their proportionate share of the remaining $19.2 million of its costs for the first release over the next five years.

We refer you to Note 3 of the Notes to our Consolidated Financial Statements we include in our 2020 Annual Report for further information about the inter-company transactions between Donegal Mutual and product pricing;our insurance subsidiaries.

The Coordinating Committee

Donegal Mutual and we maintain a coordinating committee that consists of two members of our board of directors, neither of whom is a member of Donegal Mutual’s board of directors, and two members of Donegal Mutual’s board of directors, neither of whom is a member of our board of directors. The purpose of the coordinating committee is to maintain a process for anon-going ongoing evaluation of the fairness of the terms of all transactions between Donegal Mutual and its policyholders, on the one hand, and our insurance subsidiaries, us and our stockholders, on the other hand.

Any change to an agreement between Donegal Mutual, on the one hand, and us or any of our insurance subsidiaries, on the other hand, or any new agreement between Donegal Mutual, on the one hand, and us or any of our insurance subsidiaries, on the other hand, is also subject to the applicable provisions of the Pennsylvania Insurance Company Law of 1921, as amended, and the PHCA, as well as the laws of the other states of domicile of our insurance subsidiaries.

The coordinating committee will only approve a new agreement between Donegal Mutual and us or Donegal Mutual and one or more of our insurance subsidiaries or a change in an existing agreement between Donegal Mutual and us or Donegal Mutual and one or more of our insurance subsidiaries if:

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premiums. The intent of any changes is to achieve relative parity between Donegal Mutual, on the one hand, and us or one or more of our insurance subsidiaries, on the other hand, over a period of several years. These agreements areon-going in nature and will continue in effect throughout 20202021 in the ordinary course of our business and the business of our insurance subsidiaries and in the ordinary course of the business of Donegal Mutual.

Robert S. Bolinger and Richard D. Wampler, II were our members of the coordinating committee during 2019. Mr. Bolinger, age 83, served as one of our directors since 1986. Mr. Bolinger retired in 2001 as chief executive officer of Susquehanna Bancshares, Inc., a position he held from 1982 to 2001. Mr. Bolinger beneficially owns 57,110 shares of our Class A common stock and owns 1,450 shares of our Class B common stock. Certain biographical information about Mr. Wampler appears later in this proxy statement under the caption “Election of Directors.”

Michael W. Brubaker and John E. Hiestand were Donegal Mutual’s members of the coordinating committee during 2019. The Donegal Mutual board of directors appointed Cyril J. Greenya to succeed Mr. Hiestand as one of Donegal Mutual’s members of the coordinating committee following Mr. Hiestand’s retirement from the Donegal Mutual board of directors inOn February 2020. Certain biographical information about Messrs. Brubaker, Greenya and Hiestand is as follows:

Mr. Brubaker, age 62, has been a director of Donegal Mutual since 2016. Mr. Brubaker has served as chief executive officer of Blackford Ventures, LLC, a private equity and real estate investment firm in Lancaster, Pennsylvania, since 2015. From 2006 through 2014, Mr. Brubaker served as a Pennsylvania State Senator. Mr. Brubaker beneficially owns 12,565 shares of our Class A common stock and does not own beneficially any shares of our Class B common stock. As director

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The Risk Management Committee

The Donegal Insurance Group maintains a risk management committee that consists of 1516 officers of Donegal Mutual, eight12 of whom are also officers of DGI. The purpose of the risk management committee is to assess and monitor the major strategic, operational, regulatory, informational and external risks that affect the business the Donegal Insurance Group transacts and the internal and external resources of the Donegal Insurance Group for assessing and controlling such risks. The Donegal Insurance Group’s risk management committee meets quarterly, and annually evaluates its performance of its responsibilities. The risk management committee submits reports to our board of directors no less frequently than quarterly.

The responsibilities of the risk management committee on behalf of the Donegal Insurance Group include:

Our financial reporting, risk management and internal audit areas serve as our primary monitoring and testing functions for our overall policies and procedures for theday-to-day oversight of our risk management systems and controls. This oversight includes identifying, evaluating and addressing risks that may exist at the enterprise, strategic, financial, operational, compliance and reporting levels.

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CORPORATE GOVERNANCE

Our board of directors maintains corporate governance guidelines to assist the committees of our board of directors in the discharge of their respective responsibilities. Each committee of our board of directors has a written charter that sets forth the purposes, goals and responsibilities of the committee as well as the qualifications for committee membership, procedures for the appointment and replacement of committee members, committee structure and operations and committee reporting to our board of directors. Each of the committees of our board of directors, in its discretion, and at our

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Pursuant to the PHCA, the committees of our board of directors must annually discharge each of the following responsibilities:

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The Audit Committee

Members: Messrs. Bolinger, Hess, Huber, Mahan and Wampler (Chairman). Each member of the audit committee satisfies the independence requirements of the SEC and the PHCA and is in compliance with applicable provisions of the PHCA and the Sarbanes-Oxley Act of 2002. Each of Messrs. Hess, Huber and Wampler is a certified public accountant and each constitutes a designated financial expert member of our audit committee.

The responsibilities of the audit committee include:

The Nominating Committee

Members: Messrs. Bolinger,Hess, Kraft, Mahan (Chairman) and Wampler.

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The Compensation Committee

Members: Messrs. Hess (Chairman), Kraft, Moore and Wampler. The compensation committee and the compensation committee of Donegal Mutual meet jointly from time to time. The members of the Donegal Mutual compensation committee, as of the date of this proxy statement, are Messrs. Berlucchi (Chairman), Michael K. Callahan, Hess and Kraft. Following these joint meetings, our compensation committee meets and makes compensation determinations with respect to the compensation of our named executive officers and our other officers and senior employees.

The responsibilities of our compensation committee include:

See “Executive Compensation Discussion and Analysis” for further information.

The Coordinating Committee

We refer you to “The Relationship of Donegal Mutual and DGI – The Coordinating Committee” for information as to the responsibilities of the coordinating committee and the identity of its members.

The Special Committee

Members: Messrs. Bolinger, Huber, King, Mahan (Chairman), Moore and Wampler. The special committee operates under a charter our board of directors established, and, from time to time, reviews stockholder proposals and evaluates other matters from the perspective of our stockholders other than Donegal Mutual. None of the members of the special committee serves as a director of Donegal Mutual. The special committee did not meet during 2019.2020.

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The charter of the special committee provides for the following principal responsibilities of the special committee:

Compensation Committee Interlocks and Insider Participation

No member of our compensation committee is a former or current officer of Donegal Mutual or us, nor does any member of our compensation committee have any other interlocking relationships, as current SEC rules and regulations define such terms.

Related Person Transactions

We have a written related person transaction policy that governs our audit committee’s review and approval or ratification of transactions between us, on the one hand, and a related person, on the other hand. The definition of “related person” under applicable SEC regulations includes our directors, our executive officers, holders of 5% or more of the outstanding shares of our Class A common stock, holders of 5% or more of the outstanding shares of our Class B common stock and each of the immediate family members of each of those persons. SEC rules and regulations require that we disclose specified information reporting related person transactions that involve in excess of $120,000 in our annual proxy statements and certain other filings we submit to the SEC.

Our policy applies, in our case, to all transactions with related parties with the exception of those transactions between Donegal Mutual and us or one or more of the insurance subsidiaries because those transactions require the prior approval of our coordinating committee. See “The Relationship of Donegal Mutual and DGI—DGI - The Coordinating Committee” elsewhere in this proxy statement.

Our board of directors has determined that certain types of transactions do not create or involve a direct or indirect material interest on the part of the related person and therefore do not require review or approval under our related person transaction policy. These types of transactions include

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Our related person transaction policy establishes procedures for our audit committee’s prior review of proposed transactions between us and a related person because we recognize that related person transactions can suggest a heightened risk of a potential conflict of interest and could create the appearance of potential impropriety. Our policy requires that the audit committee review all proposed related person transactions and determine whether or not to approve the related person transaction. The audit committee must first approve a related person transaction before we can agree to the related person transaction. In addition, if the related person transaction continues in effect for more than one year, our audit committee must annually approve the continuation of that transaction.

Our Code of Business Conduct and Ethics; Our Internal Audit Department; Hedging

We follow our code of business conduct and ethics in conducting business with third parties because we believe it is important that we conduct our business with integrity and with the trust of the people with whom we do business. Our code of business conduct and ethics provides guidance to our directors, employees, including our named executive officers, and the independent agents who represent Donegal Mutual and our insurance subsidiaries as they deal with the legal and ethical issues that arise in our business dealings with others. You may view our code of business conduct and ethics on our website atwww.donegalgroup.com. If we make any substantive amendments to our code of business conduct and ethics or grant any waiver from a provision of our code of business conduct and ethics to any of our named executive officers or directors, we will promptly disclose the nature of the amendment or waiver on our website.

We also maintain an internal audit department that evaluates our business and financial processes, our management of risk and the efficacy of our financial controls. Our chief risk officer oversees our internal audit department and reports no less frequently than quarterly to the audit committee of our board of directors.

We have not adopted any practice or policy regarding the ability of our employees, officers and directors, and any of their designees, to purchase financial instruments, or otherwise engage in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our Class A common stock or our Class B common stock.

Our Response to the COVID-19 Pandemic

Along with our management, our board of directors quickly identified the unprecedented nature of the COVID-19 pandemic and its potential to impact the global economic environment, the industry in which we operate and the way that we conduct our business. In response to the quickly changing and high-impact nature of the COVID-19 pandemic, our board of directors has been actively monitoring and overseeing our management’s response to this crisis, which included transitioning of

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approximately 90% of our employees to a remote working environment, a comprehensive review of our operations and personnel safety guidelines for essential employees working in our offices, strengthening our liquidity resources at the outset of the pandemic, proactive communications with our employees and independent agents to ensure continuity of our operations and customer service levels and deferral of payment due dates and other accommodations for our customers. Our management and the board of directors will continue to oversee our response and risk assessment relating to the COVID-19 pandemic and the changing nature of the business impacts in a manner that they believe is in the best interests of our stockholders, employees, independent agents and other stakeholders.

No Material Proceedings

As of March 9, 2020,2021, there are no material proceedings to which any of our directors, executive officers, affiliates, owners of more than five percent of our Class A common stock and Class B common stock, or any associate of any of the foregoing (i) is a party adverse to us or any of our insurance subsidiaries or (ii) has a material interest adverse to us or any of our insurance subsidiaries.

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EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

This Executive Compensation Discussion and Analysis provides information with respect to our 2020 compensation program for the following named executive officers:

In addition to our named executive officers, our board of directors has named several of our other senior officers as “executive officers” under Section 16 of the Exchange Act due to their responsibility for our principal business functions.

20192020 Performance Review

We adopted a three-year strategic plan in 2019 that set forth several primary strategies:

We believe we made significant progress executing those primary strategies during 2020.

The following table depicts our total revenues and our results of operations for the years ended December 31, 20192020 and 2018,2019, and the prices of our Class A common stock and our Class B common stock at December 31, 2019,2020, compared to the same data at December 31, 2018.2019. For further information, we refer you to the financial statements we include in our 20192020 Annual Report.

Stock Option Grants

On December 19, 2019, we granted stock options to a number of employees of Donegal Mutual and our affiliates, including our named executive officers, and we also granted stock options to our directors and the directors of Donegal Mutual and our affiliates. We granted each of our directors, other than Mr. Burke and Mrs. Gilmartin, an option to purchase 4,500 shares of our Class A common stock exercisable for five years that vests in three equal annual cumulative installments commencing on July 1, 2020. Each stock option is exercisable at a price of $14.98 per share, which price represented the closing price of our Class A common stock on the day before the date of grant.

The following table sets forth the stock options we granted to the following named executive officers in 2019:

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Our Compensation Process

In assessing the performance of our named executive officers in light of the objectives our board of directors establishes, our compensation committee reviews specific achievements associated with each named executive officer’s attainment of those objectives, the degree of difficulty in achieving those objectives and the extent to which significant unforeseen obstacles or unfavorable circumstances adversely affected their performance. As part of its oversight of the compensation of our named executive officers, the compensation committee recommended no increases in the base salaries of our named executive officers for 2019,2020 that averaged 6.2%, which our compensation committee considered reasonable based on publicly available information from our peer group and based on the fact that our named executive officers received no increases in their base salaries for 2019 due to our financial performance for 2018.

During 2019, our compensation committee engaged compensation consultants from Willis Towers Watson to assist them in assessing the competitiveness of our compensation program for key executive positions as compared with the eight insurance companies we informally consider our peer group. The names of those insurance companies are: Cincinnati Financial Corporation, EMC Insurance Group Inc., The Hanover Insurance Group, Inc., Horace Mann Educators Corporation, RLI Corp., Selective Insurance Group, Inc., State Auto Financial Corporation and United Fire Group, Inc.

Summary of the 20192020 Compensation of Our Named Executive Officers

The compensation of our named executive officers in 2019for 2020 consisted of three principal elements:

We paid incentive bonuses of $1,245,000approximately $1,811,000 to our named executive officers in respect of 2019,2020, compared to no bonuses$1,245,000 in respect of 2018.2019. We attribute the increase primarily to the fact that our underwriting results for 20192020 were substantially more favorable than our underwriting results for 2018.2019.

On December 17, 2020, we granted stock options to a number of employees of Donegal Mutual and our affiliates, including our named executive officers, and we also granted stock options to our directors and the directors of Donegal Mutual and our affiliates. We granted each of our directors, other than Mr. Burke, an option to purchase 4,500 shares of our Class A common stock exercisable for five years that vests in three equal annual cumulative installments commencing on July 1, 2021. Each stock option is exercisable at a price of $14.43 per share, which price represented the closing price of our Class A common stock on the day before the date of grant.

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The following table sets forth the stock options we granted to the following named executive officers in 2020:

Our named executive officers also participate in our 401(k) plan to which we make contributions on a formula basis. Our named executive officers also receive the health and other insurance benefits we make available to all of our full-time employees.

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20192020 Total Direct Compensation of Our Named Executive Officers

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We believe our 20192020 compensation for our officers, including our named executive officers, is fair and reasonable. We implemented our compensation programs to balance risk and reward in our overall business strategy. Our compensation programs tie a significant percentage of the total compensation of our officers, including our named executive officers, directly to our objective of attaining an underwriting profit each year. Accordingly, we base our annual incentive compensation awards on our underwriting results. As a result, our named executive officers evaluate carefully the risks we underwrite because a reduction in our underwriting profitability would adversely affect the annual incentive bonus compensation of our named executive officers. Finally, our incentive compensation programs for our named executive officers do not guarantee compensation to our named executive officers.

We believe that the elements of our compensation programs as we describe them in this proxy statement establish that we have the appropriate mix of risk versus benefit to align effectively the interests of our named executive officers with the interests of our stockholders, and that our incentive compensation programs do contribute to the enhancement of the long-term value of an investment in our common stock and do not create incentives or disincentives that may materially affect risk taking or are reasonably likely to have a material adverse effect on us. For example, our named executive officers did not receive any incentive bonuses in respect of 2018 when we had an underwriting loss, and our named executive officers will only realize a gain from the stock options we granted to them as compensation in 20192020 if the price of our Class A common stock increases above the exercise price of the options subsequently to the vesting date of the options.

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Director Compensation

Our objectives for our director compensation are to attract qualified individuals to serve on our board of directors and to align the interests of our directors with the interests of our stockholders. Our board of directors determines the form and amount of director compensation after its review of recommendations by the compensation committee of our board of directors. Our compensation committee reviews our director compensation program annually to confirm that the compensation of the members of our board of directors remains competitive and comparable to the compensation practices of our peer group and to make recommendations to our board of directors that our compensation committee believes are appropriate.

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Under our equity incentive plan for directors, each of our directors and each director of Donegal Mutual who is not also one of our directors receives an annual restricted stock award of 500 shares of our Class A common stock. We grant the award to each director as of the first business day of each year, provided the director served as a member of our board of directors or as a member of the board of directors of Donegal Mutual during any portion of the preceding year. Donegal Mutual reimburses us for the cost of the restricted stock awards we grant to those directors of Donegal Mutual who do not also serve as members of our board of directors.

Each of our directors and each of the directors of Donegal Mutual is also eligible to receivenon-qualified options to purchase shares of our Class A common stock in an amount our board of directors determines on the date of grant. On December 19, 2019,17, 2020, we granted each of our directors, and each director of Donegal Mutual who was not also a member of our board of directors, anon-qualified stock option to purchase 4,500 shares of our Class A common stock at an exercise price of $14.98$14.43 per share. Each option is exercisable until December 19, 202417, 2025 and vests in three equal annual cumulative installments commencing on July 1, 2020. We did not issue a stock option to Ms. Gilmartin because she had previously notified us that she would not seek reelection as a Class A director at our 2020 Annual Meeting.2021.

The following table sets forth a summary of the compensation we paid to ournon-officer directors during 2019.2020.

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The following table summarizes the outstanding equity awards our directors held at December 31, 2019,2020, excluding the awards our president and chief executive officer, Mr. Burke, held. We report those awards elsewhere in this proxy statement.

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