AM Best Affirms Credit Ratings of Donegal Insurance Group Members and Donegal Group Inc.
May 02 2024 - 1:16PM
Business Wire
AM Best has affirmed the Financial Strength Rating (FSR)
of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term
ICR) of “a” (Excellent) of the members of Donegal Insurance Group
(Donegal Group). Concurrently, AM Best has affirmed the Long-Term
ICR of “bbb” (Good) 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 ratings reflect Donegal Group’s balance sheet strength,
which AM Best assesses as very strong, as well as its adequate
operating performance, neutral business profile and appropriate
enterprise risk management (ERM).
Donegal Group’s balance sheet strength assessment reflects its
risk-adjusted capitalization at the strongest level, as measured by
Best’s Capital Adequacy Ratio (BCAR), stabilized loss reserving
trends, conservative investment portfolio, a comprehensive
reinsurance program and sound liquidity position. These factors are
offset partially by elevated underwriting leverage and a modest
stockholders’ dividend obligation.
Although the individual members within Donegal Group play a
specific role in the organization’s overall business plan, and
their operating performances 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.
Donegal Group’s adequate operating performance assessment
reflects volatile net underwriting results in recent years, largely
driven by severe weather-related losses, inflationary pressures and
supply chain disruptions, namely in 2021, 2022 and to a smaller
degree in 2023 with a widespread impact across the industry.
Overall, the group’s five-year combined ratio average slightly lags
the property/casualty insurance industry’s composite average but is
in line with its 10-year combined ratio on an average basis.
Management has instituted a series of profitability initiatives in
recent years to improve the group’s underwriting performance,
including significant rate actions, the transfer of unprofitable
accounts and investing in new technology.
Donegal Group’s neutral business profile assessment reflects its
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.
Donegal Group’s appropriate ERM is demonstrated through a formal
risk management process, which provides assurances that the
organization’s key compliance, financial and operational risks are
addressed in meeting organizational objectives. Additionally,
Donegal Group purchases various excess of loss and per risk
reinsurance treaties from high quality reinsurers to protect
surplus, reduce volatility and increase capacity.
The FSR of A (Excellent) and the Long Term ICRs of “a”
(Excellent) have been affirmed, with stable outlooks for the
following members of Donegal Insurance Group:
- Atlantic States Insurance Company
- Donegal Mutual 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
This press release relates to Credit Ratings that have been
published on AM 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 AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Guide to Best's Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of Best’s
Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
Copyright © 2024 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Adib Nassery Senior Financial Analyst +1 908 882 2198
adib.nassery@ambest.com
Brian O’Larte Director +1 908 882 2212
brian.o'larte@ambest.com
Christopher Sharkey Associate Director, Public Relations +1
908 882 2310 christopher.sharkey@ambest.com
Al Slavin Senior Public Relations Specialist +1 908 882
2318 al.slavin@ambest.com
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