Donegal Group Notes Q3 Storm Impact

October 13, 2004

Pennsylvania-based Donegal Group Inc. reported that it expects cumulative property losses from severe weather during the third quarter to total approximately $3.2 million, before taxes, which will reduce net income by approximately $2.1 million, or $.15 per share on a diluted basis, for the quarter ended Sept. 30, 2004. The company expects net income of between $.40 and $.44 per share on a diluted basis for the third quarter.

The storm losses occurred primarily in the Mid-Atlantic and Southeastern regions of the company’s operations and were non-coastal in nature. The estimate of losses includes approximately $60,000 in net losses from Hurricane Charley, $360,000 from Hurricane Frances, $1.3 million from Hurricane Ivan, $800,000 from Hurricane Jeanne and $650,000 from a July tornado.

“The unprecedented number of storms in such a short period resulted in a substantial cumulative effect from events that individually were not as significant,” stated Donald Nikolaus, president and CEO of the Donegal Companies. “However, even in this unusual situation, our approach to limiting catastrophic losses through underwriting discipline, reinsurance, geographic spread and careful risk selection helped contain the financial impact on the company.”

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