A.M. Best Affirms FSR for Donegal Insurance Pool and Peninsula Insurance Group

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and assigned an issuer credit rating (ICR) of “a” to the Donegal Insurance Pool (Pool) (Marietta, Pennsylvania) and its members.

At the same time, A.M. Best has affirmed the financial strength rating of A (Excellent) and assigned an ICR of “a” to the Peninsula Insurance Group (Peninsula) (Salisbury, Maryland) and its members. An ICR of “bbb” has also been assigned to Donegal Group Inc. (Donegal) (Pa.). All ratings have a stable outlook.

The rating of the Pool reflects its excellent capitalization, improved operating performance and management’s conservative operating philosophy, which is evident in its diversified investment portfolio and prudent catastrophe exposure management program. In addition, the rating recognizes Donegal’s disciplined underwriting culture, multi-faceted growth strategy that incorporates organic growth as well as growth by acquisitions, and the continuing development and implementation of technological advancements.

These positive factors are partially offset by Donegal’s geographic concentration in the Mid-Atlantic region. This risk exposes the group’s earnings and surplus to volatility associated with significant localized weather patterns, regulatory and judicial changes, as well as market dislocations.

Peninsula maintains favorable risk-adjusted capitalization, improved underwriting performance and the financial flexibility derived from its parent, Donegal. Its strengths are supported by long-term independent agency relationships and local market expertise.

Furthermore, management has taken positive steps to improve its business profile through increased efficiencies in its underwriting and claims handling functions, as well as Peninsula’s planned geographic expansion into Pennsylvania.

A.M. Best anticipates continuance of Donegal’s favorable operating trends in 2005, barring the occurrence of greater than normal catastrophe losses.

The financial strength rating of A (Excellent) has been affirmed, and an ICR of “a” has been assigned to the Donegal Insurance Pool and its following members:

· Atlantic States Insurance Company
· Donegal Mutual Insurance Company
· Southern Insurance Company of Virginia
· Le Mars Insurance Company

The financial strength rating of A (Excellent) has been affirmed, and an ICR of “a” has been assigned to the Peninsula Insurance Group and its following members:

· Peninsula Insurance Company
· Peninsula Indemnity Company

An ICR of “bbb” has been assigned to Donegal Group Inc.