A.M. Best Affirms Credit Ratings of Members of Donegal Insurance Group and Donegal Group Inc.

A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of the members of the Donegal Insurance Group (Donegal Group). Concurrently, A.M. Best has affirmed the Long-Term ICR of “bbb” of the publicly traded holding company, Donegal Group Inc. (Delaware) [NASDAQ: DGICA and DGICB]. The outlook of these Credit Ratings (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 their excellent risk-adjusted capitalization, sound overall liquidity, moderate five-year operating earnings and solid 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 member supports the corporate business strategy and benefits 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 partially offset by the organization’s overall less than favorable operating performance in the most recent five-year period (2011 through 2015) compared to the previous five-year period (2006 through 2010) and a slightly higher expense structure. Operating performance over the most recent five-year period has been adversely impacted by more frequent and severe weather events. However, A.M. Best continues to look favorably upon the actions being taken by management to improve operating performance through rate increases, stronger underwriting standards and use of enterprise risk management. These initiatives and reduced weather activity have contributed to improved underwriting results and operating earnings in recent years.

The affirmation of the Long-Term ICR of Donegal Group Inc. recognizes the overall financial strength of its property/casualty insurance operation, its moderate amount of financial leverage and the subordination of its creditors to the insurance companies’ policyholders.

The FSR of A (Excellent) and the Long Term 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
• Michigan Insurance Company
• The Peninsula Insurance Company
• Peninsula Indemnity Company
• Sheboygan Falls Insurance Company
• Southern Insurance Company of Virginia
• Southern Mutual Insurance Company

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

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A.M. BestKenneth Tappen, [phone], ext. 5248Senior Financial [e-mail] Attanasio, [phone], ext. 5432Senior [e-mail] Sharkey, [phone], ext. 5159Manager, Public [e-mail] Peavy, [phone], ext. 5644Director, Public [e-mail]