Donegal Completes Acquisition of Pioneer

January 4, 2001

Donegal Group Inc. has completed the acquisition of Pioneer Insurance Co., which is headquartered in Greenville, New York, from Donegal Mutual Insurance Company effective January 1, 2001. The purchase price will be equal to Pioneer’s adjusted statutory equity at December 31, 2000, which is estimated to be $4.5 million.

The purchase will be treated as a pooling of interest for financial reporting purposes. Pioneer, which writes property and casualty business in New York and Connecticut, will have direct premiums written of approximately $2.5 million in 2000. Donegal Group Inc. is a regional property/casualty insurance holding company doing business in 15 Mid-Atlantic and Southern states through its six insurance subsidiaries: Atlantic States Insurance Company, Southern Heritage Insurance Company, Southern Insurance Company of Virginia, Delaware Atlantic Insurance Company, Pioneer Insurance Company, Greenville, Ohio and Pioneer Insurance Company, Greenville, New York.

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