<PAGE>
                                                                   Exhibit 10.10






                  PRIVATE PASSENGER AUTOMOBILE EXCESS CESSIONS
                              REINSURANCE CONTRACT

                                    issued to

                            THE DIRECT GENERAL GROUP
                         NASHVILLE, TENNESSEE, INCLUDING

                            DIRECT INSURANCE COMPANY

                        DIRECT GENERAL INSURANCE COMPANY

                  DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA

                                       and

                 DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI

   AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF

                            THE DIRECT GENERAL GROUP

<PAGE>

                  PRIVATE PASSENGER AUTOMOBILE EXCESS CESSIONS
                              REINSURANCE CONTRACT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

ARTICLE                                                                     PAGE
-------                                                                     ----
<S>        <C>                                                              <C>
           Preamble.........................................................  2

   1       Business Reinsured...............................................  2

   2       Cover............................................................  3

   3       Commencement and Termination.....................................  4

   4       Territory........................................................  4

   5       Exclusions.......................................................  5

   6       Premium..........................................................  7

   7       Definitions......................................................  7

   8       Extra Contractual Obligations....................................  8

   9       Net Retained Lines...............................................  9

  10       Notice of Loss and Loss Settlements..............................  9

  11       Offset........................................................... 10

  12       Currency......................................................... 11

  13       Loss and Unearned Premium Reserve Funding........................ 11

  14       Taxes............................................................ 13

  15       Federal Excise Tax............................................... 13

  16       Inspection....................................................... 14

  17       Delay, Omission or Error......................................... 14

  18       Insolvency....................................................... 14

  19       Arbitration...................................................... 15

  20       Service of Suit.................................................. 16

  21       Intermediary..................................................... 17

  22       Mode of Execution................................................ 17

  23       Company Signature................................................ 18


ATTACHMENTS:

           Nuclear Incident Exclusion Clause - Liability -
             Reinsurance - U.S.A............................................ 19
</TABLE>

                                     1 of 23

<PAGE>

                  PRIVATE PASSENGER AUTOMOBILE EXCESS CESSIONS
                              REINSURANCE CONTRACT

                                (the "Contract")

                                    issued to

                            THE DIRECT GENERAL GROUP
                         NASHVILLE, TENNESSEE, INCLUDING

                            DIRECT INSURANCE COMPANY

                        DIRECT GENERAL INSURANCE COMPANY

                  DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA

                                       and

                 DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI

   AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF

                            THE DIRECT GENERAL GROUP

                          (collectively the "Company")

                                       by

                 THE SUBSCRIBING REINSURER(S) IDENTIFIED IN THE
                     INTERESTS AND LIABILITIES AGREEMENT(S)
                  ATTACHED TO AND FORMING PART OF THIS CONTRACT

                                (the "Reinsurer")

                                    ARTICLE 1

BUSINESS REINSURED

This Contract is to indemnify the Company in respect of the net excess liability
as a result of any loss or losses which are ascribed to an Underwriting Year
hereunder on Policies, endorsements and/or other evidences of liability covering
Private Passenger Automobile Liability Business written or renewed by or on
behalf of the Company, subject to the terms and conditions herein contained.

                                     2 of 23

<PAGE>

                                    ARTICLE 2

COVER

A.      In respect of cessions to this Contract, the Reinsurer shall be liable
        in respect of each and every loss, each and every Policy, each and every
        coverage, for the Ultimate Net Loss (including Extra Contractual
        Obligations) in excess of the applicable compulsory and/or financial
        responsibility primary automobile liability limits which are further
        subject to the following minimum limits:

<TABLE>

<S>                                              <C>
        Automobile Bodily Injury Liability       $10,000 per person/$20,000 per occurrence
        Property Damage Liability                $5,000 per occurrence
        Uninsured/Underinsured Motorists
          Bodily Injury Liability                $10,000 per person/$20,000 per occurrence

        Uninsured/Underinsured Motorists
          Property Damage Liability              $5,000 per occurrence
          Personal Injury Protection             Statutory Coverages
          Medical Payments                       $10,000 per person

</TABLE>

B.      The Reinsurer's limit of liability shall be the difference between the
        applicable compulsory and/or financial responsibility or minimum primary
        automobile liability limits as referenced above and the actual Policy
        limits as respects each and every loss, each and every Policy, each and
        every coverage, subject to maximum Policy limits as follows:

<TABLE>

<S>                                              <C>
        Automobile Bodily Injury Liability       $100,000 per person/$300,000 per occurrence
        Property Damage Liability                $100,000 per occurrence
        Uninsured/Underinsured Motorists
          Bodily Injury Liability                $100,000 per person/$300,000 per occurrence

        Uninsured/Underinsured Motorists
          Property Damage Liability              $100,000 per occurrence
          Personal Injury Protection             Statutory Coverages
          Medical Payments                       $10,000 per person

</TABLE>

C.       The Company shall be permitted to carry underlying quota share
         reinsurance on business covered by this Contract, recoveries from which
         shall be disregarded for purposes of determining Ultimate Net Loss
         hereunder.

                                     3 of 23

<PAGE>

                                    ARTICLE 3

COMMENCEMENT AND TERMINATION

A.      This Contract shall become effective at 12:01 a.m., Central Standard
        Time, January 1, 2002, and shall remain in full force and effect until
        terminated as provided in the following paragraph.

B.      Either the Company or the Reinsurer shall have the right to terminate
        this Contract as of 12:01 a.m., Central Standard Time, any January 1, by
        giving 90 days' prior notice in writing via either certified or
        registered mail, return receipt requested.

C.      In the event of termination of this Contract, the Reinsurer shall
        continue to cover all Policies coming within the scope of this Contract,
        including those written or renewed during the period of notice, until
        the natural expiration or anniversary of such Policies, whichever occurs
        first, but in no event longer than 12 months plus odd time, not to
        exceed 15 months, from the date of termination.

D.      Notwithstanding the foregoing, in the event the Company is required by
        statute, regulation or by order of any court or regulatory authority to
        (i) continue a Policy or Policies subject hereto in force, (ii) renew
        the coverage under a Policy or Policies through the issuance of a
        renewal Policy or Policies, or (iii) accept new insurance business,
        after termination the Reinsurer agrees to extend reinsurance coverage
        hereunder with respect to such Policy or Policies until the Company may
        legally cancel, nonrenew or otherwise eliminate its liability under such
        Policy or Policies.

E.      Upon termination, the Company, at its option, may elect to terminate the
        Reinsurer's liability for all losses occurring subsequent to
        termination.

F.      The Reinsurer shall return to the Company a portfolio representing the
        unearned premium reserve under this Contract appropriate to the mode of
        termination.

                                    ARTICLE 4

TERRITORY

This Contract shall cover wherever the Company's original Policies cover but is
limited to losses occurring on Policies issued to insureds located in the United
States of America and its territories and possessions.

                                     4 of 23

<PAGE>

                                    ARTICLE 5

EXCLUSIONS

A.      This Contract shall not apply to and specifically excludes the following
        perils, risks and classes of business:

        1.      As regards interests which at time of Loss or damage are on
                shore, no liability shall attach hereto in respect of any Loss
                or damage which is occasioned by war, invasion, hostilities,
                acts of foreign enemies, civil war, rebellion, insurrection,
                military or usurped power, or marital law or confiscation by
                order of any government or public authority. This War Exclusion
                Clause shall not, however, apply to interests which at time of
                loss or damage are within the territorial limits of the United
                States of America (comprising the fifty States of the Union, the
                District of Columbia, and including bridges between the U.S.A.
                and Mexico provided they are under United States ownership),
                Canada, St. Pierre and Miquelon, provided such interests are
                insured under Policies, endorsements or binders containing a
                standard war or hostilities or warlike operations exclusion
                clause.

        2.      Loss or liability excluded by the Nuclear Incident Exclusion
                Clauses - Liability - Reinsurance - U.S.A. attached to this
                Contract.

        3.      Pools, Associations and Syndicates, except losses from Assigned
                Risk Plans or similar plans are not excluded. It is further
                agreed that business ceded to the North Carolina Reinsurance
                Facility is excluded hereunder.

        4.      Reinsurance except for Agency and Intra Group Company
                Reinsurance.

        5.      Mortgage Impairment Insurance or other similar covers, however
                styled.

        6.      All liability of the Company arising by contract, operation of
                law, or otherwise, from its participation or membership, whether
                voluntary or involuntary, in any insolvency fund. "Insolvency
                fund" includes any guaranty fund (other than recoupment fees),
                insolvency fund, plan, pool, association, fund or other
                arrangement, however denominated, established or governed, which
                provides for any assessment of or payment or assumption by the
                Company of part or all of any claim, debt, charge, fee or other
                obligation of an insurer, or its successors or assigns, which
                has been declared by any competent authority to be insolvent, or
                which is otherwise deemed unable to meet any claim, debt,
                charge, fee or other obligation in whole or in part.

        7.      Products Liability, Professional Malpractice Liability,
                Directors' & Officers' Liability, Securities and Exchange
                Commission Liability, Workers' Compensation and Employers'
                Liability.


                                     5 of 23

<PAGE>

        8.      Loss arising out of the ownership, maintenance or use of any
                vehicle, the principal use of which is:

                (a)     As a public or livery conveyance;

                (b)     Emergency vehicles;

                (c)     Drive yourself motor vehicles available for leasing
                        periods of less than six months;

                (d)     Automobiles used in speed contests and races;

                (e)     Motorcycles.

        9.      Commercial Automobile Physical Damage and Liability business.

        10.     Private Passenger Automobile Physical Damage business.

        11.     Accidental Death, Towing and Rental Reimbursement, and Life
                Insurance when written as such.

        12.     Coverages written in conjunction with Motor Club memberships,
                Accident Hospital Indemnity, Vehicle Protection Plans or Travel
                Protection Plans.

        13.     Losses arising from seepage and pollution, provided, however,
                that this exclusion will not apply, if and when a court
                invalidates the Company's pollution liability exclusion
                notwithstanding that such liability was intended to be excluded
                from coverage.

B.      In the event the Company becomes bound on an excluded risk without its
        knowledge, either as a result of an existing insured extending its
        operations or through an inadvertent error by an agent, the exclusions
        hereunder, other than exclusions 1, 2, 4, 6 and 13, shall be suspended
        with respect to such insured risk until 30 days after an underwriting
        supervisor of the Company acquires knowledge thereof and until the
        Company can legally cancel or terminate its coverage of such risk.

C.      Business which is beyond the terms, conditions or limitations of this
        Contract may be submitted to the Reinsurer for special acceptance
        hereunder and such business, if accepted by the Reinsurer, shall be
        subject to all of the terms, conditions and limitations of this Contract
        except as modified by the special acceptance.

                                     6 of 23

<PAGE>

                                    ARTICLE 6

PREMIUM

A.      The Company shall pay to the Reinsurer 72.5% of the Subject Net Premium
        Written with respect to business cessions made under this Contract
        within 30 days after the end of each calendar month.

B.      As respects financed premiums, which includes premiums financed by the
        Company, the Company shall cede full Policy term premiums. As respects
        installment premiums; i.e., premiums which are collected under an
        installment payment plan, the Company shall cede the premiums as they
        are earned.

C.      Within 30 days following the end of each month, the Company shall
        prepare and submit to the Reinsurer a bordereau report summarizing all
        cessions hereunder during the month.

D.      Within 60 days following the end of each Underwriting Year, the Company
        shall furnish the Reinsurer with any other information which the
        Reinsurer may require for their Annual Convention Statement which may be
        reasonably available to the Company.

                                    ARTICLE 7

DEFINITIONS

A.      The term "Private Passenger Automobile Liability Business" as used in
        this Contract shall mean all insurances and reinsurances written by the
        Company and classified as private passenger automobile liability.

B.      The term "Ultimate Net Loss" as used in this Contract shall mean the
        actual loss (including 100%, up to the Policy limit, of any Extra
        Contractual Obligations as defined in the Extra Contractual Obligations
        Article) paid by the Company or for which the Company becomes liable to
        pay (such loss to include interest accrued prior to judgment when such
        interest is made part of the judgment, but to exclude all other interest
        and expenses which shall be handled in accordance with the Notice of
        Loss and Loss Settlements Article), but salvages and all recoveries,
        including recoveries under all reinsurances which inure to the benefit
        of this Contract (whether recovered or not), shall be first deducted
        from such loss to arrive at the amount of liability attaching hereunder.

        As respects any Claim-Specific Declaratory Judgment Expenses, Ultimate
        Net Loss shall also include as loss, declaratory judgment expenses where
        there is no loss other than declaratory judgment expenses arising out of
        any claim hereunder. All other claim-specific declaratory judgment
        expense shall be handled in accordance with the Notice of Loss and Loss
        Settlements Article.

                                     7 of 23

<PAGE>

        All salvages, recoveries or payments recovered or received subsequent to
        loss settlements hereunder shall be applied as if recovered or received
        prior to the aforesaid settlement, and all necessary adjustments shall
        be made by the parties hereto.

        For purposes of this definition, the phrase "becomes liable to pay"
        shall mean the existence of a judgment which the Company does not intend
        to appeal, or a release has been obtained by the Company, or the Company
        has accepted a proof of loss.

        Nothing in this clause shall be construed to mean that losses are not
        recoverable hereunder until the Company's Ultimate Net Loss has been
        ascertained.

C.      The term "Subject Net Premium Written" as used in this Contract shall
        mean the gross premium written applying to the limits of liability in
        excess of minimum primary automobile liability limits as described in
        the Cover Article on business the subject of this Contract, less returns
        and cancellations and less written premium income paid for reinsurances
        which would inure to the benefit of this Contract. Subject net written
        premium income shall not include premium finance income, billing fees
        and Policy fees, collected by the Company in connection with business
        covered hereunder, regardless of whether these fees are taxed as premium
        by the jurisdiction in question.

D.      The term "Policy" as used in this Contract shall mean any binder,
        policy, or contract of insurance issued, accepted or held covered
        provisionally or otherwise, by or on behalf of the Company.

E.      The term "Underwriting Year" as used in this Contract shall mean those
        Policies with inception, renewal or anniversary dates during each 12
        month period commencing with each January 1, and all premium
        attributable to, and all loss arising out of such Policies from such
        inception, renewal or anniversary dates until expiration, cancellation,
        or next anniversary, whichever occurs first, shall be ascribed to the
        Underwriting Year.

                                    ARTICLE 8

EXTRA CONTRACTUAL OBLIGATIONS

A.      This Contract shall protect the Company, subject to a cession being made
        hereon, and subject to the Reinsurer's limit of liability based on
        cessions permitted under this Contract appearing in the Cover Article of
        this Contract, where the loss includes any extra contractual obligations
        as provided for in the definition of Ultimate Net Loss. "Extra
        Contractual Obligations" are defined as those liabilities not covered
        under any other provision of this Contract and which arise from handling
        of any claim on business covered hereunder, such liabilities arising
        because of, but not limited to, the following: failure by the Company to
        settle within the Policy limit, or by reason of alleged or actual
        negligence, fraud or bad faith in rejecting an offer of settlement or in
        the preparation of the defense or in the trial of any action against its
        insured or in the preparation or prosecution of an appeal consequent
        upon such action.



                                     8 of 23

<PAGE>

B.      The date on which any Extra Contractual Obligation is incurred by the
        Company shall be deemed, in all circumstances, to be the date of the
        original loss.

C.      Notwithstanding anything stated herein, the Contract shall not apply to
        any Extra Contractual Obligation incurred by the Company as a result of
        any final legal adjudication of fraudulent and/or criminal act by any
        officer or director of the Company acting individually, or collectively,
        or in collusion with any individual or corporation, or any other
        organization, or party involved in the presentation, or defense of
        settlement of any claim covered hereunder.

                                    ARTICLE 9

NET RETAINED LINES

A.      This Contract applies only to that portion of any Policy which the
        Company retains net for its own account (prior to deduction of any
        underlying reinsurance specifically permitted in this Contract), and in
        calculating the amount of any loss hereunder and also in computing the
        amount or amounts in excess of which this Contract attaches, only loss
        or losses in respect of that portion of any Policy which the Company
        retains net for its own account shall be included.

B.      The amount of the Reinsurer's liability hereunder in respect of any loss
        or losses shall not be increased by reason of the inability of the
        Company to collect from any other reinsurer(s), whether specific or
        general, any amounts which may have become due from such reinsurer(s),
        whether such inability arises from the insolvency of such other
        reinsurer(s) or otherwise.

C.      Nothing herein shall in any manner create any obligations or establish
        any rights against the Reinsurer in favor of any third party or any
        persons not parties to this Contract.

                                   ARTICLE 10

NOTICE OF LOSS AND LOSS SETTLEMENTS

A.      The Company shall advise the Reinsurer promptly of all claims which in
        the opinion of the Company may involve the Reinsurer and of all
        subsequent developments on these claims which may materially affect the
        position of the Reinsurer.

B.      The Reinsurer agrees to abide by the loss settlements of the Company,
        provided that retroactive extension of Policy terms or coverages made
        voluntarily by the Company and not in response to court decisions
        (whether such court decision is against the Company or other companies
        affording the same or similar coverages) shall not be covered under this
        Contract.

                                     9 of 23

<PAGE>

C.      When so requested the Company shall afford the Reinsurer an opportunity
        to be associated with the Company, at the expense of the Reinsurer, in
        the defense of any claim or suit or proceeding involving this
        reinsurance and the Company shall cooperate in every respect in the
        defense of such claim, suit or proceeding.

D.      The Reinsurer shall pay its share of loss settlements immediately upon
        receipt of proof of loss from the Company.

E.      All investigation, adjustment, legal expense, (including interest other
        than interest accrued prior to judgment which is made part of the
        judgment), and Claim-Specific Declaratory Judgment Expenses, incurred by
        the Company (except office expenses and salaries of officials and
        employees not classified as loss adjusters) shall be divided between the
        Company and the Reinsurer in proportion to their respective shares of
        the Ultimate Net Loss. Such expenses shall be in addition to the limits
        stated in the Cover Article. However, if a verdict, judgment or award is
        reversed or reduced, the Company and the Reinsurer shall share expenses
        incurred in securing such reversal or reduction or recovery in the
        proportion that each benefits from the reversal. Expenses incurred up to
        the time of the original loss, verdict, judgment or award shall be
        shared in proportion to what would have been each party's share.

F.      The term "Claim-Specific Declaratory Judgment Expenses," as used in this
        Contract shall mean all expenses incurred by the Company in connection
        with declaratory judgment actions brought to determine the Company's
        defense and/or indemnification obligations that are allocable to
        specific Policies and claims subject to this Contract. Declaratory
        judgment expenses shall be deemed to have been incurred by the Company
        on the date of the original loss (if any) giving rise to the declaratory
        judgment action. Declaratory judgment expenses incurred by the Company
        in an action that results in a loss to the Company shall be combined
        with loss expense and shall be apportioned between the Company and the
        Reinsurer in proportion to their respective interests as finally
        determined.

                                   ARTICLE 11

OFFSET

The Company and the Reinsurer shall have the right to offset any balance or
balances (whether on account of premiums or losses) due from one party to the
other under the terms of this Contract. However, in the event of the insolvency
of any party hereto, offsets shall be allowed in accordance with the statutes
and/or regulations of the state having jurisdiction over the insolvency.

                                    10 of 23

<PAGE>

                                   ARTICLE 12

CURRENCY

The currency to be used for all purposes of this Contract shall be United States
of America currency.

                                   ARTICLE 13

LOSS AND UNEARNED PREMIUM RESERVE FUNDING

A.      This Article applies only to a reinsurer who does not qualify for full
        credit with any insurance regulatory authority having jurisdiction over
        the Company's reserves.

B.      The Company agrees, in respect of its Policies or bonds falling within
        the scope of this Contract, that when it files with its insurance
        regulatory authority, or sets up on its books liabilities as required by
        law, it will forward to the Reinsurer a statement showing the proportion
        of such liabilities applicable to the Reinsurer. The "Reinsurer's
        Obligations" shall be defined as follows:

        1.      unearned premium (if applicable);

        2.      known outstanding losses that have been reported to the
                Reinsurer and Loss Adjustment Expense relating thereto;

        3.      losses and Loss Adjustment Expense paid by the Company but not
                recovered from the Reinsurer;

        4.      losses incurred but not reported and Loss Adjustment Expense
                relating thereto, where the Company has submitted the
                calculation for said amount to the Reinsurer and the Reinsurer's
                agreement is not unreasonably withheld.

C.      The Reinsurer's Obligations shall be funded by funds withheld, cash
        advances, trust agreement or a Letter of Credit (LOC). The Reinsurer
        shall have the option of determining the method of funding provided it
        is acceptable to the insurance regulatory authorities having
        jurisdiction over the Company's reserves.

D.      When funding by an LOC, the Reinsurer agrees to apply for and secure
        timely delivery to the Company of a clean, irrevocable and unconditional
        LOC issued by a bank and containing provisions acceptable to the
        insurance regulatory authorities having jurisdiction over the Company's
        reserves in an amount equal to the Reinsurer's Obligations. Such LOC
        shall be issued for a period of not less than one year, and shall be
        automatically extended for one year from its date of expiration or any
        future expiration date unless 30 days (or such other time period as may
        be required by insurance regulatory authorities), prior to any
        expiration date the issuing bank shall notify the Company by certified
        or


                                    11 of 23

<PAGE>

        registered mail that the issuing bank elects not to consider the LOC
        extended for any additional period.

E.      The Reinsurer and Company agree that any funding provided by the
        Reinsurer pursuant to the provisions of this Contract may be drawn upon
        at any time, notwithstanding any other provision of this Contract, and
        be utilized by the Company or any successor, by operation of law, of the
        Company including, without limitation, any liquidator, rehabilitator,
        receiver or conservator of the Company, for the following purposes,
        unless otherwise provided for in a separate trust agreement:

        1.      to reimburse the Company for the Reinsurer's Obligations, the
                payment of which is due under the terms of this Contract and
                that has not been otherwise paid;

        2.      to make refund of any sum that is in excess of the actual amount
                required to pay the Reinsurer's Obligations under this Contract
                (or in excess of 102% of Reinsurer's Obligations, if funding is
                provided by a trust agreement);

        3.      to fund an account with the Company for the Reinsurer's
                Obligations. Such cash deposit shall be held in an interest
                bearing account separate from the Company's other assets, and
                interest thereon not in excess of the prime rate shall accrue to
                the benefit of the Reinsurer. Any taxes payable on accrued
                interest shall be paid out of the assets in the account that are
                in excess of the Reinsurer's Obligations (or in excess of 102%
                of Reinsurer's Obligations, if funding is provided by a trust
                agreement). If the assets are inadequate to pay taxes, any taxes
                due shall be paid by the Reinsurer;

        4.      to pay the Reinsurer's share of any other amounts the Company
                claims are due under this Contract.

F.      If the amount drawn by the Company is in excess of the actual amount
        required for 1. or 3., or in the case of 4., the actual amount
        determined to be due, the Company shall promptly return to the Reinsurer
        the excess amount so drawn. All of the foregoing shall be applied
        without diminution because of insolvency on the part of the Company or
        the Reinsurer.

G.      The issuing bank shall have no responsibility whatsoever in connection
        with the propriety of withdrawals made by the Company or the disposition
        of funds withdrawn, except to ensure that withdrawals are made only upon
        the order of properly authorized representatives of the Company.

H.      Fifty days prior to the end of each calendar quarter, the Company shall
        prepare a specific statement of the Reinsurer's Obligations for the sole
        purpose of amending the LOC or other method of funding, in the following
        manner:

        1.      If the statement shows that the Reinsurer's Obligations exceed
                the balance of the LOC as of the statement date, the Reinsurer
                shall, within 30 days after receipt of the statement, secure
                delivery to the Company of an amendment to the LOC increasing
                the amount of credit by the amount of such difference. Should
                another method of

                                    12 of 23

<PAGE>

                funding be used, the Reinsurer shall, within the time period
                outlined above, increase such funding by the amount of such
                difference.

        2.      If, however, the statement shows that the Reinsurer's
                Obligations are less than the balance of the LOC (or less than
                102% of Reinsurer's Obligations if funding is provided by a
                trust agreement), as of the statement date, the Company shall,
                within 30 days after receipt of written request from the
                Reinsurer, release such excess credit by agreeing to secure an
                amendment to the LOC reducing the amount of credit available by
                the amount of such excess credit. Should another method of
                funding be used, the Company shall, within the time period
                outlined above, decrease such funding by the amount of such
                excess.

                                   ARTICLE 14

TAXES

In consideration of the terms under which this Contract is issued, the Company
undertakes not to claim any deduction of the premium hereon when making tax
returns, other than income or profits tax returns, to any state or territory of
the United States of America or to the District of Columbia.

                                   ARTICLE 15

FEDERAL EXCISE TAX

A.      The Company will be liable for taxes (except Federal Excise Tax) on
        premiums reported to the Reinsurer hereunder.

B.      Federal Excise Tax applies only to those Reinsurer, excepting
        Underwriters at Lloyd's, London and other Reinsurer exempt from the
        Federal Excise Tax, who are domiciled outside the United States of
        America.

C.      The Reinsurer has agreed to allow for the purpose of paying the Federal
        Excise Tax 1% of the premium payable hereon to the extent such premium
        is subject to Federal Excise Tax.

D.      In the event of any return of premium becoming due hereunder, the
        Reinsurer will deduct 1% from the amount of the return, and the Company
        or its agent should take steps to recover the Tax from the U.S.
        Government.


                                    13 of 23

<PAGE>

                                   ARTICLE 16

INSPECTION

The Company shall place at the disposal of the Reinsurer at all reasonable times
and with reasonable notice to the Company, and the Reinsurer shall have the
right to inspect, through their authorized representatives, all books, records
and papers of the Company in connection with any reinsurance hereunder or claims
in connection herewith.

                                   ARTICLE 17

DELAY, OMISSION OR ERROR

Any inadvertent delay, omission or error shall not be held to relieve either
party hereto from any liability which would attach to it hereunder if such
delay, omission or error had not been made, providing such delay, omission or
error is rectified upon discovery.

                                   ARTICLE 18

INSOLVENCY

A.      All references to the insolvency of the Company herein are also
        applicable to the insolvency of each and every insurance carrier
        collectively referred to as the "Company."

B.      In the event of the insolvency of the Company, reinsurance under this
        Contract shall be payable by the Reinsurer on the basis of the liability
        of the Company under Policy or Policies reinsured without diminution
        because of the insolvency of the Company, to the Company or to its
        liquidator, receiver, or statutory successor except as provided by
        Section 4118(a) of the New York Insurance Law or except when the
        Agreement specifically provides another payee of such reinsurance in the
        event of the insolvency of the Company or when the Reinsurer with the
        consent of the direct insured or insureds has assumed such Policy
        obligations of the Company as direct obligations of the Reinsurer to the
        payees under such Policies and in substitution for the obligations of
        the Company to such payees.

C.      It is agreed, however, that the liquidator or receiver or statutory
        successor of the insolvent Company shall give written notice to the
        Reinsurer of the pendency of a claim against the insolvent Company on
        the Policy or Policies reinsured within a reasonable time after such
        claim is filed in the insolvency proceeding and that during the pendency
        of such claim, the Reinsurer may investigate such claim and interpose,
        at their own expense, in the proceeding when such claim is to be
        adjudicated, any defense or defenses which it may deem available to the
        Company or its liquidator or receiver or statutory successor. The
        expense thus incurred by the Reinsurer shall be chargeable, subject to
        court approval, against the insolvent Company as part of the expense of
        liquidation to the extent of a


                                    14 of 23

<PAGE>

        proportionate share of the benefit which may accrue to the Company
        solely as a result of the defense undertaken by the Reinsurer.

D.      When two or more reinsurers are involved in the same claim and a
        majority in interest elect to interpose defense to such claim, the
        expense shall be apportioned in accordance with the terms of this
        Contract as though such expense had been incurred by the insolvent
        Company.

E.      Should the Company go into liquidation or should a receiver be
        appointed, the Reinsurer shall be entitled to deduct from any sums which
        may be due or may become due to the Company under this reinsurance
        agreement any sums which are due to the Reinsurer by the Company under
        this reinsurance agreement and which are payable at a fixed or stated
        date as well as any other sums due the Reinsurer which are permitted to
        be offset under applicable law.

                                   ARTICLE 19

ARBITRATION

A.      As a condition precedent to any right of action hereunder, any
        irreconcilable dispute between the parties to this Contract will be
        submitted for decision to a board of arbitration composed of two
        arbitrators and an umpire meeting at a site in Nashville, Tennessee.

B.      Arbitration shall be initiated by the delivery of a written notice of
        demand for arbitration by one party to the other within a reasonable
        time after the dispute has arisen.

C.      The members of the board of arbitration shall be active or retired
        disinterested officials of insurance or reinsurance companies, or
        Underwriters at Lloyd's, London, not under the control or management of
        either party to this Contract. Each party shall appoint its arbitrator
        and the two arbitrators shall choose an umpire before instituting the
        hearing. If the respondent fails to appoint its arbitrator within four
        weeks after being requested to do so by the claimant, the latter shall
        also appoint the second arbitrator. If the two arbitrators fail to agree
        upon the appointment of an umpire within four weeks after their
        nominations, each of them shall name three, of whom the other shall
        decline two, and the decision shall be made by drawing lots.

D.      The claimant shall submit its initial brief within 45 days from
        appointment of the umpire. The respondent shall submit its brief within
        45 days thereafter and the claimant may submit a reply brief within 30
        days after filing of the respondent's brief.

E.      The board shall make its decision with regard to the custom and usage of
        the insurance and reinsurance business. The board shall issue its
        decision in writing based upon a hearing in which evidence may be
        introduced without following strict rules of evidence but in which
        cross-examination and rebuttal shall be allowed. The board shall make
        its decision within 60 days following the termination of the hearings
        unless the parties consent to an extension.

                                    15 of 23

<PAGE>

        The majority decision of the board shall be final and binding upon all
        parties to the proceeding. Judgment may be entered upon the award of the
        board in any court having jurisdiction.

F.      Each party shall bear the expense of its own arbitrator and shall
        jointly and equally bear with the other party the expense of the umpire
        and of the arbitration.

                                   ARTICLE 20

SERVICE OF SUIT

A.      This Article applies if the reinsurer is not domiciled in the United
        States of America and/or is not authorized in any State, Territory or
        District of the United States where authorization is required by
        insurance regulatory authorities.

B.      It is agreed that in the event of the failure of the Reinsurer hereon to
        pay any amount claimed to be due hereunder, the Reinsurer hereon, at the
        request of the Company, will submit to the jurisdiction of a court of
        competent jurisdiction within the United States. Nothing in this Clause
        constitutes or should be understood to constitute a waiver of the
        Reinsurer's right to commence an action in any court of competent
        jurisdiction in the United States, to remove an action to a United
        States district court or to seek a transfer of a case to another court
        as permitted by the laws of the United States or of any state in the
        United States.

C.      It is further agreed that service of process in such suit may be made
        upon Messrs. Mendes & Mount, 750 Seventh Avenue, New York, New York
        10019-6829 and that in any suit instituted against the Reinsurer upon
        this Contract, the Reinsurer will abide by the final decision of such
        court or of any appellate court in the event of an appeal.

D.      The above-named are authorized and directed to accept service of process
        on behalf of the Reinsurer in any such action, suit or proceeding
        instituted by or on behalf of the Company or any beneficiary hereunder
        arising suit and/or upon the request of the Company to give a written
        undertaking to the Company that they will enter a general appearance
        upon the Reinsurer's behalf in the event such a suit shall be
        instituted.

E.      Further, pursuant to any statute of any state, territory or district of
        the United States which makes provision therefor, the Reinsurer hereon
        hereby designates the superintendent, commissioner or director of
        insurance or other officer specified for that purpose in the statute or
        his successor or successors in office as its true and lawful attorney
        upon whom may be served any lawful process in any out of this Contract,
        and hereby designates the above-named as the person to whom the said
        officer is authorized to mail such process or a true copy thereof.


                                    16 of 23

<PAGE>

                                   ARTICLE 21

INTERMEDIARY

Guy Carpenter & Company, Inc., is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All communications
(including notices, statements, premiums, return premiums, commissions, taxes,
losses, loss adjustment expense, salvages, and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer through Guy
Carpenter & Company, Inc., 3600 Minnesota Drive, Suite 400, Edina, Minnesota
55435. Payments by the Company to the Intermediary shall be deemed payment to
the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed
payment to the Company only to the extent that such payments are actually
received by the Company.

                                   ARTICLE 22

MODE OF EXECUTION

A.      This Contract may be executed by:

        1.      An original written ink signature of paper documents.

        2.      An exchange of facsimile copies showing the original written ink
                signature of paper documents.

        3.      Electronic signature technology employing computer software and
                a digital signature or digitizer pen pad to capture a person's
                handwritten signature in such a manner that the signature is
                unique to the person signing, is under the sole control of the
                person signing, is capable of verification to authenticate the
                signature and is linked to the document signed in such a manner
                that if the data is changed, such signature is invalidated.

B.      The use of any one or a combination of these methods of execution shall
        constitute a legally binding and valid signing of this Contract. This
        Contract may be executed in one or more counterparts, each of which,
        when duly executed, shall be deemed an original.

                                    17 of 23

<PAGE>

IN WITNESS WHEREOF, the Company has caused this Contract to be executed by its
duly authorized representative(s) this 27th day of September, in the year of
2002.

                            THE DIRECT GENERAL GROUP
                         NASHVILLE, TENNESSEE, INCLUDING

                            DIRECT INSURANCE COMPANY

                        DIRECT GENERAL INSURANCE COMPANY

                  DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA

                                       and

                 DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI

   AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF

                            THE DIRECT GENERAL GROUP

/s/ J. Todd Hagely
------------------------------------
J. Todd Hagely
Vice President - Finance & Treasurer
Direct Insurance Company
Direct General Insurance Company
Direct General Insurance Company of Louisiana
Direct General Insurance Company of Mississippi


                                    18 of 23

<PAGE>

NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.

(1)     This reinsurance does not cover any loss or liability accruing to the
        Reassured as a member of, or subscriber to, any association of insurers
        or reinsurers formed for the purpose of covering nuclear energy risks or
        as a direct or indirect reinsurer of any such member, subscriber or
        association.

(2)     Without in any way restricting the operation of paragraph (1) of this
        Clause it is understood and agreed that for all purposes of this
        reinsurance all the original policies of the Reassured (new, renewal and
        replacement) of the classes specified in Clause II of this paragraph (2)
        from the time specified in Clause III in this paragraph (2) shall be
        deemed to include the following provision (specified as the Limited
        Exclusion Provision):

        LIMITED EXCLUSION PROVISION.*

        I.      It is agreed that the policy does not apply under any liability
                coverage, to

                           injury, sickness, disease, death or destruction

                           bodily injury or property damage

                with respect to which an insured under the policy is also an
                insured under a nuclear energy liability policy issued by
                Nuclear Energy Liability Insurance Association, Mutual Atomic
                Energy Liability Underwriters or Nuclear Insurance Association
                of Canada, or would be an insured under any such policy but for
                its termination upon exhaustion of its limit of liability.

        II.     Family Automobile Policies (liability only), Special Automobile
                Policies (private passenger automobiles, liability only),
                Farmers Comprehensive Personal Liability Policies (liability
                only), Comprehensive Personal Liability Policies (liability
                only) or policies of a similar nature; and the liability portion
                of combination forms related to the four classes of policies
                stated above, such as the Comprehensive Dwelling Policy and the
                applicable types of Homeowners Policies.

        III.    The inception dates and thereafter of all original policies as
                described in II above, whether new, renewal or replacement,
                being policies which either

                (a)     become effective on or after 1st May, 1960, or

                (b)     become effective before that date and contain the
                        Limited Exclusion Provision set out above;

                provided this paragraph (2) shall not be applicable to Family
                Automobile Policies, Special Automobile Policies, or policies or
                combination policies of a similar nature, issued by the
                Reassured on New York risks, until 90 days following approval of
                the

                                    19 of 23

<PAGE>

                Limited Exclusion Provision by the Governmental Authority having
                jurisdiction thereof.

(3)     Except for those classes of policies specified in Clause II of paragraph
        (2) and without in any way restricting the operation of paragraph (1) of
        this Clause, it is understood and agreed that for all purposes of this
        reinsurance the original liability policies of the Reassured (new,
        renewal and replacement) affording the following coverages:

                Owners, Landlords and Tenants Liability, Contractual Liability,
                Elevator Liability, Owners or Contractors (including railroad)
                Protective Liability, Manufacturers and Contractors Liability,
                Product Liability, Professional and Malpractice Liability,
                Storekeepers Liability, Garage Liability, Automobile Liability
                (including Massachusetts Motor Vehicle or Garage Liability)

        shall be deemed to include, with respect to such coverages, from the
        time specified in Clause V of this paragraph (3), the following
        provision (specified as the Broad Exclusion Provision):

        BROAD EXCLUSION PROVISION.*

        It is agreed that the policy does not apply:

        I.      Under any Liability Coverage, to

                injury, sickness, disease, death or destruction

                bodily injury or property damage

                (a)     with respect to which an insured under the policy is
                        also an insured under a nuclear energy liability policy
                        issued by Nuclear Energy Liability Insurance
                        Association, Mutual Atomic Energy Liability Underwriters
                        or Nuclear Insurance Association of Canada, or would be
                        an insured under any such policy but for its termination
                        upon exhaustion of its limit of liability; or

                (b)     resulting from the hazardous properties of nuclear
                        material and with respect to which (1) any person or
                        organization is required to maintain financial
                        protection pursuant to the Atomic Energy Act of 1954, or
                        any law amendatory thereof, or (2) the insured is, or
                        had this policy not been issued would be, entitled to
                        indemnity from the United States of America, or any
                        agency thereof, under any agreement entered into by the
                        United States of America, or any agency thereof, with
                        any person or organization.

        II.     Under any Medical Payments Coverage, or under any Supplementary
                Payments Provision relating to

                      immediate medical or surgical relief

                                    20 of 23

<PAGE>

                        first aid,

                to expenses incurred with respect to

                        bodily injury, sickness, disease or death

                        bodily injury

                resulting from the hazardous properties of nuclear material and
                arising out of the operation of a nuclear facility by any person
                or organization.

        III.    Under any Liability Coverage, to

                        injury, sickness, disease, death or destruction

                        bodily injury or property damage

                resulting from the hazardous properties of nuclear material, if

                (a)     the nuclear material (1) is at any nuclear facility
                        owned by, or operated by or on behalf of, an insured or
                        (2) has been discharged or dispersed therefrom;

                (b)     the nuclear material is contained in spent fuel or waste
                        at any time possessed, handled, used, processed, stored,
                        transported or disposed of by or on behalf of an
                        insured; or

                (c)     the

                                injury, sickness, disease, death or destruction

                                bodily injury or property damage

                        arises out of the furnishing by an insured of services,
                        materials, parts or equipment in connection with the
                        planning, construction, maintenance, operation or use of
                        any nuclear facility, but if such facility is located
                        within the United States of America, its territories or
                        possessions or Canada, this exclusion (c) applies only
                        to

                                injury to or destruction of property at such
                                nuclear facility.

                                property damage to such nuclear facility and any
                                property thereat.

        IV.     As used in this endorsement:

                "HAZARDOUS PROPERTIES" include radioactive, toxic or explosive
                properties; "NUCLEAR MATERIAL" means source material, special
                nuclear material or byproduct material; "SOURCE MATERIAL",
                "SPECIAL NUCLEAR MATERIAL", and "BYPRODUCT MATERIAL" have the

                                    21 of 23

<PAGE>

                meanings given them in the Atomic Energy Act of 1954 or in any
                law amendatory thereof; "SPENT FUEL" means any fuel element or
                fuel component, solid or liquid, which has been used or exposed
                to radiation in a nuclear reactor; "WASTE" means any waste
                material (1) containing byproduct material other than the
                tailings or wastes produced by the extraction or concentration
                of uranium or thorium from any ore processed primarily for its
                source material content and (2) resulting from the operation by
                any person or organization of any nuclear facility included
                under the first two paragraphs of the definition of nuclear
                facility; "NUCLEAR FACILITY" means

                (a)     any nuclear reactor,

                (b)     any equipment or device designed or used for (1)
                        separating the isotopes of uranium or plutonium, (2)
                        processing or utilizing spent fuel, or (3) handling,
                        processing or packaging waste,

                (c)     any equipment or device used for the processing,
                        fabricating or alloying of special nuclear material if
                        at any time the total amount of such material in the
                        custody of the insured at the premises where such
                        equipment or device is located consists of or contains
                        more than 25 grams of plutonium or uranium 233 or any
                        combination thereof, or more than 250 grams of uranium
                        235,

                (d)     any structure, basin, excavation, premises or place
                        prepared or used for the storage or disposal of waste,

                and includes the site on which any of the foregoing is located,
                all operations conducted on such site and all premises used for
                such operations; "nuclear reactor" means any apparatus designed
                or used to sustain nuclear fission in a self-supporting chain
                reaction or to contain a critical mass of fissionable material;

                With respect to injury to or destruction of property, the word
                "injury" or "destruction" includes all forms of radioactive
                contamination of property; "property damage" includes all forms
                of radioactive contamination of property.

        V.      The inception dates and thereafter of all original policies
                affording coverages specified in this paragraph (3), whether
                new, renewal or replacement, being policies which become
                effective on or after 1st May, 1960, provided this paragraph (3)
                shall not be applicable to

                (i)     Garage and Automobile Policies issued by the Reassured
                        on New York risks, or

                (ii)    statutory liability insurance required under Chapter 90,
                        General Laws of Massachusetts,

                until 90 days following approval of the Broad Exclusion
                Provision by the Governmental Authority having jurisdiction
                thereof.

                                    22 of 23

<PAGE>

(4)     Without in any way restricting the operation of paragraph (1) of this
        Clause, it is understood and agreed that paragraphs (2) and (3) above
        are not applicable to original liability policies of the Reassured in
        Canada and that with respect to such policies this Clause shall be
        deemed to include the Nuclear Energy Liability Exclusion Provisions
        adopted by the Canadian Underwriters' Association or the Independent
        Insurance Conference of Canada.

--------------------------------------------------------------------------------
*NOTE. THE WORDS PRINTED IN ITALICS IN THE LIMITED EXCLUSION PROVISION AND IN
THE BROAD EXCLUSION PROVISION SHALL APPLY ONLY IN RELATION TO ORIGINAL LIABILITY
POLICIES WHICH INCLUDE A LIMITED EXCLUSION PROVISION OR A BROAD EXCLUSION
PROVISION CONTAINING THOSE WORDS.

--------------------------------------------------------------------------------












--------------------------------------------------------------------------------
NOTES:  Wherever used herein the terms:

        "Reassured" shall be understood to mean "Company", "Reinsured",
                    "Reassured" or whatever other term is used in the attached
                    reinsurance document to designate the reinsured company or
                    companies.

        "Agreement" shall be understood to mean "Agreement", "Contract",
                    "Policy" or whatever other term is used to designate the
                    attached reinsurance document.

        "Reinsurers" shall be understood to mean "Reinsurers", "Underwriters" or
                     whatever other term is used in the attached reinsurance
                     document to designate the reinsurer or reinsurers.


                                    23 of 23

<PAGE>
                       INTERESTS AND LIABILITIES AGREEMENT
                                (the "Agreement")

                                     of the

                           QBE REINSURANCE CORPORATION
                          (the "Subscribing Reinsurer")

                                 as respects the

                  PRIVATE PASSENGER AUTOMOBILE EXCESS CESSIONS
                              REINSURANCE CONTRACT
                                (the "Contract")

                            issued to and executed by

                            THE DIRECT GENERAL GROUP
                         NASHVILLE, TENNESSEE, INCLUDING

                            DIRECT INSURANCE COMPANY

                        DIRECT GENERAL INSURANCE COMPANY

                  DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA

                                       and

                 DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI

   AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF

                            THE DIRECT GENERAL GROUP
                          (collectively the "Company")


The Subscribing Reinsurer agrees that its share in the interests and liabilities
of the "Reinsurers" as set forth in the Contract attached hereto shall be for
40.00%.

The share of the Subscribing Reinsurer in the interests and liabilities of the
Reinsurers in respect of said Contract shall be separate and apart from the
shares of such other subscribing reinsurers, if any, in respect of said
Contract. The interests and liabilities of the Subscribing Reinsurer shall not
be joint with those of such other subscribing reinsurers, and in no event shall
the Subscribing Reinsurer participate in the interests and liabilities of such
other subscribing reinsurers.

This Agreement shall be effective at 12:01 a.m., Central Standard Time, January
1, 2002, subject to the termination provisions of the Commencement and
Termination Article of the Contract.


                                     1 of 2
<PAGE>

IN WITNESS WHEREOF, the Subscribing Reinsurer has caused this Agreement to be
executed by its duly authorized representative as follows:

on this 30th day of September, in the year of 2002.


                           QBE REINSURANCE CORPORATION


                             /s/ Dennis R. Johnson
--------------------------------------------------------------------------------
                                 Vice President











Market Reference Number:





                            THE DIRECT GENERAL GROUP
                         NASHVILLE, TENNESSEE, INCLUDING

                            DIRECT INSURANCE COMPANY

                        DIRECT GENERAL INSURANCE COMPANY

                  DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA

                                       AND

                 DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI

   AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF

                            THE DIRECT GENERAL GROUP

                  PRIVATE PASSENGER AUTOMOBILE EXCESS CESSIONS
                              REINSURANCE CONTRACT





                                     2 of 2
<PAGE>

                       INTERESTS AND LIABILITIES AGREEMENT
                                (the "Agreement")

                                     of the

                            SCOR REINSURANCE COMPANY
                          (the "Subscribing Reinsurer")

                                 as respects the

                  PRIVATE PASSENGER AUTOMOBILE EXCESS CESSIONS
                              REINSURANCE CONTRACT
                                (the "Contract")

                            issued to and executed by

                            THE DIRECT GENERAL GROUP
                         NASHVILLE, TENNESSEE, INCLUDING

                            DIRECT INSURANCE COMPANY

                        DIRECT GENERAL INSURANCE COMPANY

                  DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA

                                       AND

                 DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI

   AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF

                            THE DIRECT GENERAL GROUP

                          (collectively the "Company")

The Subscribing Reinsurer agrees that its share in the interests and liabilities
of the "Reinsurers" as set forth in the Contract attached hereto shall be for
60.00%.

The share of the Subscribing Reinsurer in the interests and liabilities of the
Reinsurers in respect of said Contract shall be separate and apart from the
shares of such other subscribing reinsurers, if any, in respect of said
Contract. The interests and liabilities of the Subscribing Reinsurer shall not
be joint with those of such other subscribing reinsurers, and in no event shall
the Subscribing Reinsurer participate in the interests and liabilities of such
other subscribing reinsurers.

This Agreement shall be effective at 12:01 a.m., Central Standard Time, January
1, 2002, subject to the termination provisions of the Commencement and
Termination Article of the Contract.


                                     1 of 2
<PAGE>

IN WITNESS WHEREOF, the Subscribing Reinsurer has caused this Agreement to be
executed by its duly authorized representative as follows:

on this 27th day of September, in the year of 2002.



                            SCOR REINSURANCE COMPANY

                             /s/ Marushka Stefanova
--------------------------------------------------------------------------------
                               ASSISTANT SECRETARY




Market Reference Number: TOO9078





                            THE DIRECT GENERAL GROUP
                         NASHVILLE, TENNESSEE, INCLUDING

                            DIRECT INSURANCE COMPANY

                        DIRECT GENERAL INSURANCE COMPANY

                  DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA

                                       AND

                 DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI

   AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF

                            THE DIRECT GENERAL GROUP

                  PRIVATE PASSENGER AUTOMOBILE EXCESS CESSIONS
                              REINSURANCE CONTRACT





                                     2 of 2
<PAGE>



                                 ADDENDUM NO. 1

                                     to the

                  PRIVATE PASSENGER AUTOMOBILE EXCESS CESSIONS
                              REINSURANCE CONTRACT
                                (the "contract")

                                    issued to

                            THE DIRECT GENERAL GROUP
                        Nashville, Tennessee, including
                            DIRECT INSURANCE COMPANY
                        DIRECT GENERAL INSURANCE COMPANY
                 DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA
                                      and
                DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI
   and/or any other companies that are now or may hereafter become members of
                            THE DIRECT GENERAL GROUP
                         (collectively, the "company")



Effective January 1, 2002, this Contract shall be amended as follows:

1. Paragraph E of the Insolvency Article shall be deleted from this Contract.

2. The following Article shall be added to and made part of this Contract:

                                   ARTICLE 23

        ENTIRE CONTRACT

        This Contract embodies the entire agreement and understanding between
        the Company and the Reinsurer relating to the subject matter hereof
        during the term of this Contract. Unless otherwise specifically provided
        herein, this Contract may be amended, modified or waived only by an
        instrument in writing signed by the Company and each subscribing
        reinsurer that is affected by such amendment, modification or waiver.

Effective January 1, 2003, with respect to Policies allocated to Underwriting
Years commencing on or after that date, paragraph A of the Premium Article shall
read as follows and not as heretofore:



                                     1 of 2
<PAGE>

        A.      The Company shall pay to the Reinsurer 73.5% of the Subject Net
                Premium Written with respect to business cessions made under
                this Contract within 30 days after the end of each calendar
                month.

All other terms and conditions of this Contract shall remain unchanged.

IN WITNESS WHEREOF, the Company has caused this Addendum to be executed by its
duly authorized representative(s) this 28th day of March, 2003.

                            THE DIRECT GENERAL GROUP
                         NASHVILLE, TENNESSEE, INCLUDING
                            DIRECT INSURANCE COMPANY
                        DIRECT GENERAL INSURANCE COMPANY
                  DIRECT GENERAL INSURANCE COMPANY OF LOUISIANA
                                       AND
                 DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI
   AND/OR ANY OTHER COMPANIES THAT ARE NOW OR MAY HEREAFTER BECOME MEMBERS OF
                            THE DIRECT GENERAL GROUP



                               /s/ J. Todd Hagely
--------------------------------------------------------------------------------





                                     2 of 2