January 24, 2008: Donegal Insurance Group, unwrapped.

Donegal Insurance Group is a mini-conglomerate of companies that the Donegal Insurance Group has assembled to do business in stable (some may reason "boring") markets. It also owns Province Bank, with three branches in and around Lancaster, PA.

At present, Donegal owns the following entities:

Le Mars Insurance Company located in LeMars, Iowa which does business in Iowa, Nebraska, Oklahoma and South Dakota.

The Pennsylvania Insurance Group which includes the Pennsylvania Insurance Company and the Pennsylvania Indemnity Company located in Salisbury, Maryland serving Maryland, Delaware, Virginia and New Hampshire.

Southern Insurance Company of America located in Duluth, Georgia doing business providing personal and commercial insurance coverages in Georgia, Tennessee, Alabama, Louisiana, and Arkansas.

Southern Insurance Company of Virginia located in Glen Allen, Virginia doing business in Virginia, South Carolina and North Carolina.

Atlantic States Insurance Company, located in the headquarters city of The Donegal Group, Marietta, PA with a branch in Greenville, OH doing business in Ohio, Maryland, Virginia, Delaware, New York, Georgia, Tennessee and Pennsylvania.

The Donegal Group (DGICA) has a market cap of $421 million. The company holds approximately 45% of outstanding shares with institutional holdings keeping all but 5% out of individual investor hands. The Insurance company is rated "A" per A.M. Best. The PE is approximately 11, the Price to Book about 1.28 and the Price to Cash Flow 15.07 according to the company's latest figures. The return on equity is about 13.65%. The five year annual growth rate is 12.25%. Trading at $17.69 per share with a 2.04% dividend and a volume of around 33,000 shares per day, this stock presents an interesting situation.

I have followed this security for quite some time. Some would call it a "channel stock" as it trades in a fairly narrow band. Others would simply call it dead money.I believe that the conservative business and investment approach this company has consistently taken over decades, and the fact that is has weathered the present stock market and economic turbulence very smartly bodes well for the future. It may even catch the eye of a larger financial company on the search a quality acquisition.

This is a company Ron Paul may find too conservative. But in today's market, DGICA is worth a glance - or more. Their website is www.donegalgroup.com

DISCLOSURE: THE AUTHOR DOES NOT HOLD A CURRENT POSITION IN DGICA.