OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a” of the members of the Donegal Insurance Group (Donegal Group) (Marietta, PA). In addition, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of “a” for the newly added Donegal Group member, Michigan Insurance Company (MICO) (Grand Rapids, MI). Concurrently, 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, including MICO, play a specific role in the organization’s overall business plan and their operating performances may vary, each contribute 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 and a slightly higher expense structure. Operating performance in recent years 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.
The affirmation of the 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.
While the ratings of Donegal Group's members are stable, future positive rating actions may result should a trend toward sustained underwriting profitability develop. However, negative rating actions could result should the group's underwriting and operating performance fall markedly short of A.M. Best's expectations or if there is a significant weakening of its overall risk-adjusted capitalization.
The FSR of A (Excellent) and the 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
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.
Key insurance criteria reports utilized:
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance Companies
• The Treatment of Terrorism Risk in the Rating Evaluation
• Insurance Holding Company and Debt Ratings
• Analyzing Insurance Holding Company Liquidity
• Catastrophe Analysis in A.M. Best Ratings
• Equity Credit for Hybrid Securities
• Understanding BCAR for Property/Casualty Insurers
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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