2008-08-21 19:52:02 -

www.ambest.com - A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of the Donegal Insurance Group (Group) (Marietta, PA) and its members. Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICRs of "a" of Peninsula Insurance Group (Peninsula) (Salisbury, MD) and its members. A.M. Best also

has affirmed the ICR of "bbb" of Donegal Group Inc. (Donegal) (Pennsylvania) (NASDAQ: DGICA and DGICB). The outlook for all ratings is stable. (See below for a detailed list of the companies and ratings.)

The Group's ratings are reflective of its excellent risk-adjusted capitalization, solid operating performance, conservative business strategies and well-established regional presence. Additionally, the affirmations acknowledge management's adherence to underwriting discipline and rate adequacy despite the challenges of soft market conditions. Following a regional strategy approach, the Group's sustained operating performance benefits from an innovative management team, brand name recognition and improved technology as demonstrated by its new automated claims handling and processing system. The ratings also recognize a diversified investment portfolio and prudent catastrophe risk management.

Offsetting factors include the Group's geographic concentration in the Mid-Atlantic region. As a result, earnings are exposed to volatility from weather-related events as well as changes in the regulatory, legal and competitive market environment.

Peninsula's rating affirmations reflect its conservative underwriting leverage and solid operating performance derived from management's underwriting and pricing philosophy. Peninsula's operating performance is derived from solid underwriting results attributed to management's underwriting discipline, pricing adequacy and strong agency relationships complemented by steady investment income.

The FSR of A (Excellent) and ICRs of "a" have been affirmed for the Donegal Insurance Group and its following members:

-- Atlantic States Insurance Company

-- Donegal Mutual Insurance Company

-- Southern Insurance Company of Virginia

-- Le Mars Insurance Company

-- Sheboygan Falls Mutual Insurance Company

The FSR of A (Excellent) and ICRs of "a" have been affirmed for the Peninsula Insurance Group and its following members:

-- The Peninsula Insurance Company

-- Peninsula Indemnity Company

The ICR of "bbb" has been affirmed for Donegal Group Inc.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

A.M. Best Co.
Analysts
Maurice Thomas, 908-439-2200, ext. 5794
maurice.thomas@ambest.com
or
Jeffrey Mango, CPA, 908-439-2200, ext. 5402
jeffrey.mango@ambest.com
or
Public Relations
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com