Donegal Group Inc. Acquires Michigan Insurance Co.

Donegal Group Inc. announced that it had completed the acquisition of Michigan Insurance Co., which was formerly a majority-owned subsidiary of West Bend Mutual Insurance Co. The final purchase price will be calculated based on the GAAP book value of Michigan Insurance Co. as of Nov. 30, 2010. Donegal Group Inc. estimates that the final purchase price will be approximately $40 million.

Michigan Insurance Co. writes various lines of property and casualty insurance and had direct written premiums of $106.6 million and net written premiums of $26.7 million for the year ended Dec. 31, 2009. Effective on Dec. 1, 2010, Michigan Insurance Co. entered into a 50 percent quota share agreement with third-party reinsurers and a 25 percent quota share reinsurance agreement with Donegal Mutual Insurance Company to replace the 75% quota share reinsurance agreement Michigan Insurance Company maintained with West Bend through November 30, 2010. Donegal Mutual Insurance Company will include its assumed business from Michigan Insurance Company in its pooling agreement with Atlantic States Insurance Co. Over time, Donegal Group Inc. will have the ability to reduce the level of third-party quota share reinsurance and thereby provide additional premium growth. Based on Michigan Insurance Co.’s historical underwriting experience and profitability, Donegal Group Inc. believes the acquisition and reinsurance arrangements will be accretive to earnings in 2011.

Donald H. Nikolaus, president and CEOof Donegal Group Inc. said the acquisition will help the company expand its Midwest operations into Michigan.

Donegal Group Inc. is an insurance holding company whose insurance subsidiaries offer personal and commercial property and casualty lines of insurance in four Mid-Atlantic states.

Topics Mergers & Acquisitions Reinsurance Michigan