AM Best

SEPTEMBER 14, 2007 12:00 AM (EDT)

A.M. Best Assigns Ratings to Direct National Insurance Company and Affirms Ratings of Direct General Group's Members

Maurice Thomas
(908) 439-2200, ext. 5794

Jeffrey Mango, CPA
(908) 439-2200, ext. 5204
Public Relations
Jim Peavy
(908) 439-2200, ext. 5644

Rachelle Morrow
(908) 439-2200, ext. 5378


OLDWICK, N.J. - SEPTEMBER 14, 2007 12:00 AM (EDT)
A.M. Best Co. has assigned a financial strength rating (FSR) of B (Fair) and an issuer credit rating (ICR) of "bb" to Direct National Insurance Company (Direct National) (Little Rock, AK). In addition, A.M. Best has affirmed the FSR of B (Fair) and ICRs of "bb+" of Direct General Group's (DGG) property/casualty companies. These rating actions apply to Direct General Insurance Group, Direct Insurance Company (both of Nashville, TN), Direct General Insurance Company (Aiken, SC) and its wholly-owned separately rated subsidiary, Direct General Insurance Company of Mississippi (Jackson, MS).

A.M. Best has also affirmed the FSR of B (Fair) and assigned an ICR of "bb" to Direct General Insurance Company of Louisiana (Baton Rouge, LA). Additionally, A.M. Best has withdrawn the ICR of "b" of the group's formerly publicly-traded holding company, Direct General Corporation (DGC) (Nashville, TN). The outlook for all ratings is stable.

Direct National's assigned ratings reflect its limited business profile and the inherent risk associated with the company's growing book of business. These negative rating factors are partially offset by Direct National's moderate underwriting leverage and future operating performance based on business plans provided by its management to A.M. Best.

The affirmation of the ratings of some of the property/casualty entities of DGG are reflective of their historically elevated underwriting leverage, volatile reserve development trends in prior years and anticipated dividend requirements to DGC. These negative rating factors are partially offset by improved underwriting results in recent years, elimination of quota share reinsurance and a conservative investment profile.

Concurrently, A.M. Best has affirmed the FSR of B (Fair) and the ICRs of "bb+" of Direct Life Insurance Company (Griffin, GA) and Direct General Life Insurance Company (Aiken, SC). The outlook for these ratings is stable.

The ratings of the Direct General life insurance companies reflect their monoline product offering, their dependence on the DGG property/casualty agent force to sell life insurance, the high lapse rates recorded and the dividend service required to DGC. Partially offsetting these negative rating factors are the adequate level of capitalization and positive trends in premium growth and operating earnings.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.

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