EX-10.25




 EXHIBIT 10.25 

DONEGAL MUTUAL INSURANCE COMPANY 

DONEGAL GROUP INC. 
 2021
ANNUAL EXECUTIVE INCENTIVE PLAN 
 Purpose 
 The
2021 Annual Executive Incentive Plan (the “Plan”) provides for the payment of performance-based bonuses to Plan participants based upon the Donegal Insurance Group’s achievement of performance objectives for individual performance
measures according to the weighting assigned to each performance measure. 
 The performance objectives correlate to incentive levels that represent
percentages of a participant’s 2021 base salary (as defined in this Plan). The potential bonuses available for Plan participants with respect to the performance measures will be based on the incentive levels, performance objectives and
weighting percentages as outlined in Appendix 1. 
 Scope 

The performance measures and objectives, unless otherwise specified, relate to the statutory financial results of the Donegal Insurance Group, which includes
the following legal entities for the purposes of this Plan: 
 Donegal Mutual Insurance Company 

Atlantic States Insurance Company 
 Michigan Insurance Company

 Mountain States Commercial Insurance Company 
 Mountain
States Indemnity Company 
 Peninsula Indemnity Company 

Peninsula Insurance Company 
 Southern Insurance Company of
Virginia 
 Southern Mutual Insurance Company 
 Performance
Measures 
 Commercial Lines Premium Growth – annual growth in commercial lines direct premiums written compared to the previous calendar year
total. 
 Personal Lines Premium Growth – annual growth in personal lines direct premiums written compared to the previous calendar year total. 

Adjusted Statutory Combined Ratio – reported statutory combined ratio excluding any catastrophe adjustment, all executive incentive plan bonus accruals
and a stock option expense adjustment (see definitions below). 

  
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 Operating Return on Equity – Donegal Group Inc.’s consolidated GAAP net income divided by average
GAAP stockholders’ equity excluding accumulated other comprehensive income or loss (average of current year-end and prior year-end values). 

Bonus Formula 
 Each participant in this Plan shall be
eligible to receive a bonus that represents the sum of the performance bonuses such participant earns for each respective performance measure. Each performance bonus shall be calculated by multiplying the participant’s 2021 base salary, as
defined in this Plan, by the bonus percentage that correlates to the incentive level achieved and multiplying that result by the weighting percentage assigned to the respective performance measure. The calculation methodology is illustrated below:

  

	 	•	 	 Base Salary x Incentive Level Bonus % x Weighting % = Performance Bonus 



 

	 	•	 	 Sum of Performance Bonuses = Total Bonus Earned 



Key Definitions 
 Base Salary – total wages as
reported on a participant’s W-2 for 2021, excluding any taxable fringe benefits, short or long-term disability pay, gains from exercise of stock options and prior-year bonus. 

Statutory Combined Ratio – sum of the net loss and loss expense ratio (net losses and loss expenses incurred divided by net premiums earned), the expense
ratio (underwriting expenses less installment fee income divided by net premiums written) and the dividend ratio (policyholder dividends incurred divided by net premiums earned). 

Catastrophe Adjustment – an adjustment will be provided to the statutory combined ratio for the purpose of this Plan to limit the net effect of up to two
catastrophe events. For purposes of this provision, a catastrophe event is defined as an event for which the Property Claims Services unit of Insurance Services Office issues a catastrophe serial number and for which the net effect to the Donegal
Insurance Group exceeds $5 million when aggregating losses incurred, loss expenses incurred and reinstatement premiums. The statutory combined ratio for the purposes of this Plan will be charged with: 

 

	 	•	 	 The first $5 million of the net effect of a catastrophe 



 

	 	•	 	 One-half of the amount between $5 million and $10 million



  

	 	•	 	 None of the net effect above $10 million 



In the event that more than two catastrophe events, as defined above, occur within the calendar year, the statutory combined ratio for the purposes of this
Plan will be charged with all of the net effect of the third and subsequent catastrophe events. 

  
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 Stock Option Expense Adjustment – an adjustment will be provided to statutory combined ratio for the
purpose of this Plan to remove the effect of stock option compensation expense included in the statutory financial statements. 
 Additional Provisions

  

	1.	 Participants must be employed by Donegal Mutual Insurance Company on or before October 1, 2021 to be
eligible to participate in this Plan. Participants must be employed by the Donegal Mutual Insurance Company on December 31, 2021 in order to receive a bonus payment under this Plan. 



 

	2.	 No bonus is payable under this Plan unless the employees and managers of Donegal Mutual Insurance Company
qualify for bonuses under their respective incentive plans. 


  

	3.	 Any bonuses earned under this Plan shall be paid prior to March 15, 2022. 



 

	4.	 Approved participants in this Plan are listed in Appendix 1. Any changes to the participants in this Plan and
the incentive levels for such participants must be approved by the Joint Compensation Committee of the Boards of Directors of Donegal Mutual Insurance Company and Donegal Group Inc. (“the Joint Compensation Committee”).



  

	5.	 This Plan provides for a discretionary pool calculated in similar fashion to the bonuses for Plan participants
using a “base salary” equivalent of $1,000,000. The discretionary pool may be allocated among participants in this Plan or other officers, managers or employees in the sole discretion of the Joint Compensation Committee. The President
shall provide a recommendation to the Joint Compensation Committee with respect to high performers who should be considered for allocations from the discretionary pool. 



 

	6.	 Payment of bonuses under this Plan may be capped by the Joint Compensation Committee in their sole discretion.




  
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 Appendix 1 

The participants and incentive levels for the 2021 Annual Executive Incentive Plan are as follows: 

 

																													
	 	  	Incentive Levels - Bonus% of Salary	 
	 Participants
	  	 Threshold
	 	  	 Level 1
	 	  	 Level 2
	 	  	 Target
	 	  	 Level 3
	 	  	 Level 4
	 	  	 Maximum
	 
	 Kevin G. Burke
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 
	 Jeffrey D. Miller
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 
	 Kristi S. Altshuler
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 
	 William A. Folmar
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 
	 Jeffery T. Hay
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 
	 Christina M. Hoffman
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 
	 Richard G. Kelley
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 
	 Robert R. Long, Jr.
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 
	 Sanjay Pandey
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 
	 V. Anthony Viozzi
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 
	 Daniel J. Wagner
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 
	 Discretionary Pool
	  	 	40	 	  	 	50	 	  	 	60	 	  	 	70	 	  	 	80	 	  	 	90	 	  	 	100	 

 Note: Francis J. Haefner, Jr., Jeffrey A. Jacobsen, and Regional Senior Officers are not included as participants in this
Plan due to their participation in individual incentive plans that are tailored to performance objectives within their specific areas of responsibility. 

  
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 Performance measures, performance objectives and weighting percentages for 2021 are as follows: 

 

																																	
	 	  	 	 	 	Performance Objectives	 
	 Performance
Measure
	  	 Weighting
	 	 	 Threshold
	 	 	 Level 1
	 	 	 Level 2
	 	 	 Target
	 	 	 Level 3
	 	 	 Level 4
	 	 	 Maximum
	 
	 Commercial Lines Premium Growth
	  	 	25.0	% 	 	 	3.0	% 	 	 	4.0	% 	 	 	5.0	% 	 	 	6.0	% 	 	 	7.0	% 	 	 	8.0	% 	 	 	9.0	% 
	 Personal Lines Premium Growth
	  	 	15.0	% 	 	 	-3.0	% 	 	 	-2.0	% 	 	 	-1.0	% 	 	 	0.0	% 	 	 	1.0	% 	 	 	2.0	% 	 	 	3.0	% 
	 Adjusted Statutory Combined Ratio
	  	 	40.0	% 	 	 	100.0	% 	 	 	99.0	% 	 	 	98.0	% 	 	 	97.0	% 	 	 	96.0	% 	 	 	95.0	% 	 	 	94.0	% 
	 Operating Return on Equity
	  	 	20.0	% 	 	 	7.5	% 	 	 	8.0	% 	 	 	8.5	% 	 	 	9.0	% 	 	 	9.5	% 	 	 	10.0	% 	 	 	10.5	% 


  
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