Donegal Group Inc. Agrees To Acquire Michigan Insurance Company
MARIETTA, Pa., July 16, 2010 (GLOBE NEWSWIRE) -- Donegal Group Inc. (Nasdaq:DGICA) (Nasdaq:DGICB) today announced the execution of an agreement pursuant to which it will acquire all of the outstanding stock of Michigan Insurance Company, a majority-owned stock subsidiary of West Bend Mutual Insurance Company. Michigan Insurance Company's headquarters are in Grand Rapids, Michigan. It writes various lines of property and casualty insurance exclusively in the State of Michigan. Michigan Insurance Company had direct written premiums of $106.6 million and net written premiums of $26.7 million for the year ended December 31, 2009.
Michigan Insurance Company currently participates in a quota share reinsurance agreement with West Bend, whereby West Bend assumes 75% of Michigan Insurance Company's business. Michigan Insurance Company will enter into a 50% quota share agreement with third-party reinsurers and a 25% quota share reinsurance agreement with Donegal Mutual Insurance Company to replace the current quota share reinsurance agreement with West Bend as of the closing date of the acquisition. Donegal Mutual Insurance Company will include its assumed business from Michigan Insurance Company in its pooling agreement with Atlantic States Insurance Company. Over time, Donegal Group Inc. and Donegal Mutual Insurance Company will have the ability to reduce the level of external quota share reinsurance and thereby provide additional premium growth for the Donegal Insurance Group. Based on Michigan Insurance Company's historical underwriting experience and profitability, Donegal Group Inc. believes the acquisition and reinsurance arrangements will be accretive to its earnings immediately upon completion of the acquisition.
The purchase price will be calculated based on the GAAP book value of Michigan Insurance Company as of the closing date of the transaction. Donegal Group Inc. estimates that the consideration payable to the shareholders of Michigan Insurance Company will be approximately $39 million.Donegal Group Inc. had approximately $936.0 million in total assets and approximately $385.4 million in stockholders' equity as of March 31, 2010. Donegal Group Inc.'s insurance subsidiaries and Donegal Mutual Insurance Company conduct property and casualty insurance business together as the Donegal Insurance Group in 18 Mid-Atlantic, Midwestern and Southern states. The Donegal Insurance Group has an A.M. Best rating of A.
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