A.M. Best Co. has commented that the financial strength ratings of A (Excellent) and issuer credit ratings (ICR) of “a” of Donegal Insurance Group (group) and its members as well as Peninsula Insurance Group and its members, are unchanged following the announcement by Donegal Group Inc. (Donegal) [NASDAQ: DGICA and DGICB] that it has agreed to acquire all of the outstanding stock of Michigan Insurance Company (MIC) (headquartered in Grand Rapids, MI), a majority-owned stock subsidiary of West Bend Mutual Insurance Company. Concurrently, A.M. Best has commented that the ICR of “bbb” of Donegal also is unchanged. The outlook for all ratings is stable.
This commentary follows the recent announcement that Donegal has entered into a definitive agreement to acquire all of the outstanding stock of MIC. The acquisition is subject to a number of customary closing conditions, including the approval of the Insurance Department of the State of Michigan and is anticipated to close in the fourth quarter of 2010.
The purchase price will be calculated based on the GAAP book value of MIC as of the closing date of the transaction. Donegal estimates that the consideration payable to the shareholders of MIC will be approximately $39.0 million. As of March 31, 2010, Donegal had approximately $936.0 million in total assets and approximately $385.4 million in stockholders’ equity.
The acquisition will expand Donegal’s Midwestern operations into Michigan and enhance the group’s geographic diversification and growth opportunities. MIC also will benefit from Donegal’s technology and operational support to further enhance its policyholder and agency relationships. A.M. Best anticipates that Donegal's strong capitalization will provide ample support to fully integrate MIC's operations without materially impacting the group's overall results or financial strength.The FSR of A (Excellent) and ICRs of “a” are unchanged for the Donegal Insurance Group and its following members: