AM Best Revises Outlooks to Stable for Members of Donegal Insurance Group and Donegal Group Inc.

AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of members of Donegal Insurance Group (Donegal Group). Concurrently, AM Best has revised the outlook to stable from negative and affirmed the Long-Term ICR of “bbb” of the publicly traded holding company, Donegal Group Inc. (Delaware) [NASDAQ: DGICA and DGICB]. (See below for a detailed listing of the member companies.)

The Credit Ratings (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).

The revised outlooks to stable largely reflect Donegal Group’s improved operating performance in the most recent years (2019 and 2020), primarily driven by a number of initiatives implemented to help improve its underwriting performance, including significant rate actions, the transfer of unprofitable accounts and investing in new technology. Furthermore, the stable outlooks consider the improved loss reserving trends and the favorable impact on its risk-adjusted capitalization. Management attributes the favorable reserve development to reserve strengthening during 2019 and 2020 that far exceeded exposure growth.

Donegal Group’s capital assessment reflects its Best’s Capital Adequacy Ratio (BCAR), which AM Best categorizes as strongest, sound liquidity position, conservative investment portfolio, and a comprehensive reinsurance program, which are offset partially by increasing underwriting leverage, and constrained surplus growth over the most recent five-year period due to stockholder’s dividend payments.

Although the individual members within Donegal Group play a specific role in the organization’s overall business plan, and their operating performances may 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.