Donegal Group Inc. has announced the execution of an agreement pursuant to which it will acquire all of the outstanding stock of Michigan Insurance Co., a majority-owned stock subsidiary of West Bend Mutual Insurance Co. Michigan Insurance Co. writes various lines of property and casualty insurance exclusively in the state of Michigan. It had direct written premiums of $106.6 million and net written premiums of $26.7 million for the year 2009.
Michigan Insurance Co. currently participates in a quota share reinsurance agreement with West Bend, where West Bend assumes 75 percent of Michigan Insurance Co.’s business. Michigan Insurance Co. will enter into a 50 percent quota share agreement with third-party reinsurers, and a 25 percent quota share reinsurance agreement with Donegal Mutual Insurance Co. to replace the current quota share reinsurance agreement with West Bend as of the closing date of the acquisition.
Donegal Mutual Insurance Co. will include its assumed business from Michigan Insurance Co. in its pooling agreement with Atlantic States Insurance Co. Over time, Donegal Group Inc. and Donegal Mutual Insurance Co. will have the ability to reduce the level of external quota share reinsurance and thereby provide additional premium growth for the Donegal Insurance Group.
The acquisition is subject to a number of conditions, including the approval of the Insurance Department of the State of Michigan. Donegal Group Inc. expects to complete the transaction in the fourth quarter of 2010.