Peninsula Insurance

Acquisition By Donegal Group

PENINSULA INSURANCE GROUP TO BE ACQUIRED BY DONEGAL GROUP INC.

We are pleased to announce the plans of the Donegal Group, located in Marietta, Pennsylvania. [ Donegal Group Web Site ] to acquire the Peninsula Insurance Group.

The following is the text of the joint press release issued on October 30, 2003:

PENINSULA INSURANCE GROUP TO BE ACQUIRED BY DONEGAL GROUP INC.

For Immediate Release

SALISBURY, Maryland and MARIETTA, Pennsylvania, October 30, 2003 - Peninsula Insurance Group and Donegal Group Inc. announced today that Donegal Group has signed a definitive agreement to acquire all of the outstanding capital stock of the Peninsula Insurance Group from Folksamerica Reinsurance Company. The acquisition is subject to approval by the Insurance Commissioner of the State of Maryland and is expected to be completed by the end of 2003 or early 2004.

Peninsula operates as a multiple line carrier, primarily in Maryland, Delaware and Virginia through approximately 350 independent agencies. Personal lines coverages represent a majority of premiums written, with the balance coming from mercantile and service businesses. Peninsula's largest line of business is private passenger automobile liability and physical damage; other principal lines include commercial auto, commercial multi-peril and homeowners. On a GAAP basis as of September 30, 2003, Peninsula had total assets of $61.4 million, and consolidated GAAP stockholders' equity of $21.8 million. For the year ended December 31, 2002 and the nine months ended September 30, 2003 on a GAAP basis, Peninsula had earned premiums of $29.7 million and $24.4 million, respectively.

Following the acquisition, Peninsula will continue as a Maryland domiciled property and casualty insurance company with its headquarters based in Salisbury, Maryland under the management of Eric Crouchley, President and Chief Executive Officer, and his management team.

Donald H. Nikolaus, President and Chief Executive Officer of Donegal Group stated "We believe the Peninsula acquisition will enhance Donegal's market position in the Middle Atlantic states while enabling both Donegal and Peninsula to expand their business and to leverage certain expenses over a greater premium base and consolidate various reinsurance costs in the future. We are looking forward to working with the Peninsula management team in carrying out its well focused business strategies while enabling Donegal Group to expand its profitable growth."

Eric Crouchley, President and Chief Executive Officer of Peninsula Insurance Group, commented, "We at the Peninsula Companies are excited about the prospects of being part of the Donegal Group. Their conservative underwriting philosophies, solid reputation among agents and policyholders, along with their commitment to the independent agency system and the mid-Atlantic region, will fit nicely with our existing operation. In addition, our product lines and agency force will be a strong complement to Donegal's presence in the marketplace. The synergies of our combining forces, along with the economies of scale, will certainly be beneficial to both groups."

Donegal Group Inc. is a regional property-casualty insurance holding company currently rated A (Excellent) by the A. M. Best Company and doing business in 14 Mid-Atlantic and Southern states through its current insurance subsidiaries, Atlantic States Insurance Company and Southern Insurance Company of Virginia.

All statements contained in this release that are not historic facts are based on current expectations. Such statements are forward-looking (as defined in the Private Securities Litigation Reform Act of 1995) in nature and involve a number of risks and uncertainties. Actual results could vary materially. Among the factors that could cause actual results to vary materially include: the ability of the Company to maintain profitable operations, the adequacy of the Company's reserves for losses and loss adjustment expenses, business and economic conditions in the Company's primary operating areas, competition from various insurance and non-insurance businesses, terrorism, legal and judicial developments, changes in regulatory requirements and other risks that are described from time to time in the periodic reports the Company files with the Securities and Exchange Commission. Undue reliance should not be placed on any such forward-looking statements.