Donegal Mutual Insurance Company and the Mountain States Insurance Group Announce Strategic Affiliation
December 16 2016 - 11:04AM
Donegal Mutual Insurance Company ("Donegal Mutual") and Mountain
States Mutual Casualty Company ("Mountain States") announced today
that they have signed an agreement whereby, subject to applicable
regulatory approvals and the approval of the policyholders of
Mountain States, Mountain States will merge with and into Donegal
Mutual. Donegal Mutual will be the surviving company in the
merger, and Mountain States' insurance subsidiaries, Mountain
States Indemnity Company and Mountain States Commercial Insurance
Company, will become insurance subsidiaries of Donegal
Mutual. Mountain States and its insurance subsidiaries
currently conduct business together as the Mountain States
Insurance Group in the states of Colorado, New Mexico, Texas and
Utah.
Upon consummation of the merger, Donegal Mutual will enter into
quota share reinsurance, services and technology license agreements
with Mountain States' insurance subsidiaries with the intent of
making those subsidiaries eligible for A.M. Best Company's
assignment of Donegal Mutual's group rating of A (Excellent) to
those subsidiaries and reducing operating costs of those
subsidiaries through economies of scale. Donegal Mutual and
those insurance subsidiaries will market their products together as
the Mountain States Insurance Group in the Southwestern region of
the United States as they seek profitable growth in the region.
William F. Davis, President of Mountain States, stated that the
merger and the related transactions will enable the Mountain States
Insurance Group to enhance its competitive position within its
property and casualty insurance markets. Donegal Mutual will
bring management assistance, as well as significant operational and
technology resources, to provide the Mountain States Insurance
Group enhanced opportunities to improve its underwriting
profitability and grow its business. Mr. Davis further noted
that the merger, which the board of directors of Mountain States
Mutual has unanimously approved, will provide significant benefits
and opportunities for the policyholders, agents and employees of
the Mountain States Insurance Group. The executive officers
of Mountain States will become officers of Donegal Mutual and will
retain their current responsibilities in the current Albuquerque,
New Mexico headquarters of the Mountain States Insurance Group.
The proposed affiliation affords Donegal Mutual an opportunity
to expand its business into the Southwestern region, where it
currently has no operations. Donald H. Nikolaus, President of
Donegal Mutual, remarked, "We look forward to our affiliation with
Mountain States, which has longstanding excellent relationships
with its independent agents throughout its marketing region.
We will bring our 127-year history of financial strength and
profitable growth to the Mountain States Insurance Group as we work
with its management team and provide strategic resources to enable
the Mountain States Insurance Group to deliver enhanced products
and services to its agents and policyholders."
Mountain States was formed in 1937 and writes commercial lines
of insurance in Colorado, New Mexico, Texas and Utah. The
Mountain States Insurance Group had net premiums written of $42.3
million in 2015.
Donegal Mutual, which was incorporated in 1889, is a mutual
insurance company located in Marietta, Pennsylvania. Donegal
Mutual underwrites a broad line of personal and commercial
insurance coverages. Donegal Mutual owns approximately 73% of
the voting control of Donegal Group Inc., an insurance holding
company. Donegal Mutual and the insurance subsidiaries of
Donegal Group Inc. conduct property and casualty insurance business
together as the Donegal Insurance Group in 21 Mid-Atlantic,
Midwestern, New England and Southern states and had net premiums
written of $738.7 million in 2015. The Class A common stock
and the Class B common stock of Donegal Group Inc. are traded on
the NASDAQ Global Select Market (NASDAQ:DGICA) (NASDAQ:DGICB).
For an indefinite period of time following the consummation of
the affiliation, Donegal Mutual will exclude the business of the
Mountain States Insurance Group from its pooling agreement with
Atlantic States Insurance Company.
Donegal Mutual and Donegal Group Inc. have completed numerous
acquisitions of property and casualty insurance companies since
1986 and expect to continue to acquire other insurance companies
over time to expand their business.
Jeffrey D. Miller, Executive Vice President & Chief Financial Officer
Donegal Mutual Insurance Company
Phone: (717) 426-3529 ext. 7357
Fax: (717) 426-7009
E-mail: jeffmiller@donegalgroup.com
William F. Davis, President & Chief Executive Officer
Mountain States Insurance Group
Phone: (505) 764-1414
Fax: (505) 764-3600
E-mail: wdavis@msig-nm.com
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