A.M. Best Affirms Ratings of Members of Donegal Insurance Group, Michigan Insurance Company and Donegal Group Inc. Business Wire OLDWICK, N.J. -- September 17, 2013 A.M. Best Co. has affirmed the financial strength ratings (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of the members of the Donegal Insurance Group (Marietta, PA) (Donegal Group) , as well as Michigan Insurance Company (MICO) (Grand Rapids, MI). In addition, A.M. Best has affirmed the ICR of “bbb” of the publicly traded holding company, Donegal Group Inc. (Delaware) [NASDAQ: DGICA and DGICB]. The outlook for all ratings is stable. (See below for a detailed listing of the member companies.) The affirmation of the ratings of the Donegal Group members is based on supportive risk-adjusted capitalization, sound balance sheet liquidity, generally positive earnings and good business profile, which includes geographic and product line diversification, effective use of technology in the independent agency distribution channel and a history of successful expansion through strategic acquisitions and affiliations. Although the individual members within the Donegal Group play a specific role in the organization’s overall business plan and their operating performances may vary, each contributes favorably to the group’s risk-adjusted capitalization. In addition, each of the members support the corporate business strategy and benefit from shared senior management, intercompany reinsurance and the added financial flexibility of Donegal Group Inc. to raise capital through debt or equity offerings during favorable investment markets. These positive rating factors are offset in part by the organization’s overall less favorable operating performance over the last five years, below average interest rates and a slightly higher expense structure. Operating performance in recent years has been adversely impacted by more frequent and severe weather events and lower investment yields. However, earnings improved in 2012 and through the first six months of 2013, and A.M. Best looks favorably upon the actions being taken by management to improve operating performance through rate increases, stronger underwriting standards and use of enterprise risk management. The ratings of MICO are mainly reflective of its sound capitalization, historically favorable operating performance and the benefits it derives from its ultimate parent, Donegal Mutual Insurance Company. These attributes are partially offset by MICO’s concentration of risk in Michigan, above average gross leverage and dependence on reinsurance to lower its net retained risks to a more manageable level, compounded by a weakened economy. The ICR of Donegal Group Inc. recognizes the overall financial strength of the property/casualty insurance operation, its moderate amount of financial leverage and the subordination of its creditors to the insurance companies’ policyholders. The ratings would be further stabilized by stronger earnings, which could lead to capital appreciation. However, the organization’s outlook may be revised to negative and/or the ratings downgraded if capitalization significantly weakens or a positive trend towards sustained underwriting profitability does not develop. The FSR of A (Excellent) and ICRs of “a” have been affirmed for the following members of Donegal Insurance Group: *Atlantic States Insurance Company *Donegal Mutual Insurance Company *Le Mars Insurance Company *The Peninsula Insurance Company *Peninsula Indemnity Company *Sheboygan Falls Insurance Company *Southern Insurance Company of Virginia *Southern Mutual Insurance Company The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED. Contact: A.M. Best Co. Charles M. Huber, 908-439-2200, ext. 5122 Managing Senior Financial Analyst firstname.lastname@example.org or Joseph Burtone, 908-439-2200, ext. 5125 Assistant Vice President email@example.com or Rachelle Morrow, 908-439-2200, ext. 5378 Senior Manager, Public Relations firstname.lastname@example.org or Jim Peavy, 908-439-2200, ext. 5644 Assistant Vice President, Public Relations email@example.com
A.M. Best Affirms Ratings of Members of Donegal Insurance Group, Michigan Insurance Company and Donegal Group Inc.
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