A.M. Best Comments on Acquisition of Direct General Group

Business Wire, Dec 6, 2006

OLDWICK, N.J. -- A.M. Best Co. has commented on the proposed transaction regarding Direct General Group's (Direct General) announcement that its parent company, Direct General Corporation (Nashville, TN) [NYSE: DRCT] has reached a definitive agreement to be acquired by Elara Holdings Inc. (Delaware), an affiliate of Fremont Partners (Fremont) and Texas Pacific Group (TPG).

The proposed transaction is being funded primarily by equity capital, and to a lesser extent, term debt and trust preferred securities. The transaction is expected to be completed during the first half of 2007, pending government and regulatory approvals as well as other customary closing conditions. Consummation of the transaction is conditioned upon Elara closing on the committed debt financing.

As a result of the proposed acquisition, A.M. Best anticipates that the financial strength ratings (FSR) and issuer credit ratings (ICR) of Direct General's four property/casualty members will remain unchanged. The members include Direct General Insurance Group (Nashville, TN); Direct General Insurance Company (Aiken, SC) and its wholly-owned separately rated subsidiary, Direct General Insurance Company of Mississippi (Jackson, MS); Direct Insurance Company (Nashville, TN); and Direct General Insurance Company of Louisiana (Baton Rouge, LA). A.M. Best expects that Direct General's risk-adjusted capital, financial leverage, operating performance and reserve adequacy measures will remain within acceptable ranges to support its current ratings. However, it is expected that A.M. Best will revise the rating outlooks to stable from positive, which contemplates the impact of business plans and dividend projections provided by management.

Consistent with the announcement, A.M Best views the transaction as an opportunity for Direct General to enhance the operating performance of its core business. Also, through the cross-selling of complementary financial products, greater diversification is anticipated, which should position Direct General to become a broader financial services enterprise.

The FSRs of B (Fair) and the ICRs of "bb " are unchanged for the following members of Direct General Group:

* Direct General Insurance Group

* Direct General Insurance Company

* Direct General Insurance Company of Mississippi

* Direct Insurance Company

The FSR of B (Fair) and the ICR of "bb" are unchanged for Direct General Insurance Company of Louisiana.

The ICR of "b" is unchanged for Direct General Corporation.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.> For current Best's Ratings, independent data and analysis on more than 3,000 individual property/casualty companies and A.M. Best groups, please visit www.ambest.com/pc.> A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.