<PAGE>

                                                                    Exhibit 10.8

GUY CARPENTER

                    TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
                        QUOTA SHARE 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

Effective: January 1, 2003                                      DOC: May 6, 2003
8958-00-0016-00

<PAGE>

GUY CARPENTER

                    TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
                        QUOTA SHARE REINSURANCE CONTRACT

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ARTICLE                                                                                                           PAGE
-------                                                                                                           ----
<S>              <C>                                                                                              <C>
   1             Business Reinsured............................................................................     2
   2             Cover.........................................................................................     2
   3             Loss Limit....................................................................................     4
   4             Loss Corridor.................................................................................     4
   5             Commencement and Termination..................................................................     4
   6             Exclusions....................................................................................     6
   7             Reinsurance Premium...........................................................................     8
   8             Premium Cap...................................................................................     8
   9             Provisional Ceding Commission.................................................................     8
  10             Adjustment of Ceding Commission...............................................................     9
  11             Accounts and Remittances......................................................................    10
  12             Definitions...................................................................................    12
  13             Original Conditions...........................................................................    14
  14             Special Provisions............................................................................    14
  15             No Third Party Rights.........................................................................    14
  16             Loss and Loss Adjustment Expense..............................................................    14
  17             Special Commutation...........................................................................    15
  18             Offset........................................................................................    16
  19             Currency......................................................................................    16
  20             Loss Reserve Funding.........................................................................     16
  21             Taxes........................................................................................     19
  22             Federal Excise Tax...........................................................................     19
  23             Inspection...................................................................................     19
  24             Delay, Omission or Error.....................................................................     19
  25             Insolvency...................................................................................     20
  26             Arbitration..................................................................................     20
  27             Service of Suit..............................................................................     21
  28             Entire Contract..............................................................................     22
  29             Severability.................................................................................     22
  30             Intermediary.................................................................................     23
  31             Mode of Execution............................................................................     23
                 Company Signature............................................................................     23

ATTACHMENTS

                 Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance
                 -U.S.A.......................................................................................     25
                 Nuclear Incident Exclusion Clause - Liability - Reinsurance - U.S.A..........................     27
</TABLE>

Effective: January 1, 2003                                      DOC: May 6, 2003
8958-00-0016-00

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<PAGE>

GUY CARPENTER

                    TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
                        QUOTA SHARE 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 share with the Reinsurer the interests and liabilities of
the Company's Loss on its Net Retained Liability under all policies,
endorsements, and/or other evidences of liability for Private Passenger
Automobile Physical Damage and Liability business written or renewed by the
Company or on its behalf by State National Specialty Insurance Company, Fort
Worth, Texas, in the States of Arkansas, Florida, Georgia, Kentucky, Louisiana,
Mississippi, North Carolina, South Carolina, and Tennessee during the Contract
Year (hereinafter referred to as "Policy(ies)"), subject to the terms and
conditions herein contained.

                                    ARTICLE 2

COVER

A.       Subject to the limits hereof, the Company will cede, and the Reinsurer
         will accept as reinsurance, the percentage share set forth below (the
         "Quota Share Percentage") of the

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         Company's Loss arising from its Net Retained Liability for all business
         reinsured hereunder:

         1.       As respects Direct General Insurance Company, 60%;

         2.       As respects Direct Insurance Company, 25%;

         3.       As respects Direct General Insurance Company of Mississippi,
                  45%;

         4.       As respects Direct General Insurance Company of Louisiana,
                  20%.

         The Company shall have the option to adjust the Quota Share Percentage
         as respects each individually named reinsured company hereunder,
         effective on the first day of any calendar quarter, by giving the
         Reinsurer notice on or before the first day of such calendar quarter.
         The Company shall have the option to adjust the Quota Share Percentage,
         as respects each individually named reinsured company, to any
         percentage from 15% through 70%, however, the total cession shall not
         be less than 27.5%, nor shall it exceed 57.5%, for all reinsured
         companies combined, as respects Policies with new or renewal Policy
         periods effective during any one Contract Year.

B.       In the event the Company's Loss Ratio exceeds the attachment point of
         the Loss Corridor, as respects Policies issued or renewed during any
         one Contract Year, the Reinsurer may elect to require the Company to
         recalculate the Quota Share Percentage(s) for such Policies based upon
         the following parameters, as applicable:

         1.       The Loss Ratio will be calculated as though the cession were
                  made evenly throughout the Contract Year;

         2.       The ceded premium from the State of Florida shall not exceed
                  55% of the overall cession;

         3.       The ceded premium from new business shall not exceed 60% of
                  the overall cession, and the ceded premium from renewal
                  business shall not be less than 40% of the overall cession.

C.       Notwithstanding the above, Loss subject to this Contract and classified
         by the Company as "Property Loss" will be limited to $2,000,000 per
         Loss Occurrence.

D.       The Company is permitted to carry an Excess Cessions reinsurance
         contract, as well as Excess Catastrophe reinsurance, both of which
         inure to the benefit of this Contract,

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                                    ARTICLE 3

LOSS LIMIT

A.       For purposes of determining the liability of the Reinsurer, the limits
         of liability of the Company for Loss with respect to any one Policy
         shall be deemed not to exceed the greater of the minimum statutory
         limits in the applicable state in which the Company is licensed, or the
         following:

         1.       Automobile Bodily Injury Liability, $ 10,000 per
                  person/$20,000 per occurrence;

         2.       Property Damage Liability, $5,000 per occurrence;

         3.       Uninsured/Underinsured Motorists Bodily Injury Liability,
                  $10,000 per person/$20,000 per occurrence;

         4.       Uninsured/Underinsured Motorists Property Damage Liability,
                  $5,000 per occurrence;

         5.       Personal Injury Protection, Statutory Coverages;

         6.       Medical Payments, $ 10,000 per person.

B.       Further, the Company's Automobile Physical Damage limits shall not
         exceed $75,000 each vehicle, or so deemed.

                                    ARTICLE 4

LOSS CORRIDOR

As respects Policies with effective or renewal dates during each Contract Year,
the Company shall retain, under this Contract, 100% of Losses Incurred above a
Loss Ratio of 81.5%, The Company will remain liable for such Losses Incurred
unless Losses Incurred exceeds a Loss Ratio of 87.5%, at which point the
Reinsurer's liability will resume (based on its pro rata share) for any Losses
Incurred in excess of an 87.5% Loss Ratio. Said additional retention is called
the "Loss Corridor." The Loss Corridor is not subject to any effect from a
deficit carryforward from prior Contract Years.

                                    ARTICLE 5

COMMENCEMENT AND TERMINATION

A.       This Contract shall become effective at 12:01 a.m., Central Standard
         Time, January 1, 2003, and shall remain in full force and effect until
         terminated as provided in the following paragraph.

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B.       1.       This Contract may be terminated by either party at 12:01 a.m.,
                  Central Standard Time, on January 1, 2004, or any January 1
                  thereafter by giving to the other party not less than 90 days'
                  notice by certified or registered mail, return receipt
                  requested.

         2.       Either party to this Contract shall also have the right to
                  terminate this Contract immediately by giving written notice
                  to the other party by certified or registered mail in the
                  event the other party:

                  a.       Has its financial condition impaired by a reduction
                           of consolidated statutory policyholders surplus to a
                           level below $40,000,000. Such determination is made
                           based upon the consolidated statutory policyholders
                           surplus at the end of each calendar quarter.

                  b.       Becomes insolvent, files a petition in bankruptcy,
                           goes into liquidation, enters voluntary supervision,
                           enters rehabilitation or has a receiver appointed.
                           The party shall immediately notify the other party of
                           any regulatory involvement.

         3.       The Reinsurer shall also have the right to terminate this
                  Contract immediately by giving written notice to the Company
                  by certified or registered mail in the event either of the
                  following occurs:

                  a.       The Company's risk-based capital ratio is reduced
                           below 250% on a consolidated basis, or any of the
                           individual reinsured companies' risk-based capital
                           ratio is reduced below 200%, such calculations to be
                           provided to the Reinsurer by the Company at the end
                           of each calendar quarter.

                  b.       The Company files for rate changes which effect
                           greater than a 3.5% weighted average rate reduction
                           as respects premiums ceded under the current Contract
                           Year without obtaining the Reinsurer's approval in
                           advance at the quarterly actuarial meeting.

         4.       It is understood and agreed that should the Company enter any
                  arrangement either by way of shareholding or management or
                  otherwise, under which effective legal or presumptive control
                  of 50% or more is assumed by any individual or organization
                  other than that which pertained at the time this Contract
                  became effective, the Company shall forthwith notify the
                  Reinsurer.

                  Acting upon such actual notice, or upon constructive notice
                  thereof by any other means, the Company shall have the right
                  to terminate this Contract by giving the Reinsurer not less
                  than 90 days' notice from the closing date of the arrangement,
                  by registered letter stating therein the date of termination.

         In the event this Contract is terminated in accordance with the
         provisions of paragraph B of this Article, the Reinsurer will remain
         liable for 12 months run-off, plus six months of odd time, for all
         Policies in force on the date of termination, unless the Company elects
         to

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         terminate coverage on a cut-off basis with return of unearned premium,
         such election to be made by the Company in writing within 30 days of
         the date of termination.

C.       The Reinsurer shall also have the right to terminate this Contract by
         giving the Company written notice by certified or registered mail in
         the event the Company is more than 30 days delinquent with its monthly
         reports and remittances due under this Contract. Following receipt of
         such notice, the Company shall have 15 working days to bring its
         account current. If the Company fails to bring its account current
         within 15 working days, this Contract shall be terminated effective on
         the date through which the most recent monthly report and remittance
         provided subject premium, and the Reinsurer shall have no liability
         hereunder for Losses occurring after the effective date of termination.

                                    ARTICLE 6

         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.       Business excluded by the following attached Nuclear Incident
                  Exclusion Clauses:

                  a.       Nuclear Incident Exclusion Clause - Physical Damage -
                           Reinsurance - U.S.A.

                  b.       Nuclear Incident Exclusion Clause - Liability -
                           Reinsurance - U.S.A.

         3.       Pools, Associations, Syndicates and Guaranty Funds, 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, and Private Passenger Automobile business assumed
                  under "fronting" facilities with State National Specialty
                  Insurance Company.

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         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, 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.

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

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

         12.      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.

         13.      Extra contractual obligations and excess Policy limits awards.

         14.      Automobile Dealers Open Lot Coverage, Garage and Garagekeepers
                  Legal Liability and Vendors Single Interest Coverages.

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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, 12 and 14, 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.

                                    ARTICLE 7

REINSURANCE PREMIUM

Company shall cede to the Reinsurer its Quota Share Percentage of the Gross Net
Written Premium.

                                    ARTICLE 8

PREMIUM CAP

A.       As respects the Contract Year beginning January 1, 2003, the Company's
         Gross Net Written Premium for Policies subject to this Contract shall
         not exceed a Premium Cap of $400,000,000.

B.       If the Premium Cap is exceeded, or is projected by the Company to be
         exceeded, during the Contract Year, the Reinsurer shall have the right
         to waive the Premium Cap, or by giving notice within 30 days of the
         date upon which notice is given to the Reinsurer that the Premium Cap
         is exceeded or projected to be exceeded, invoke its rights to reduce
         the Quota Share Percentage under this Contract, as respects the
         business for which the Premium Cap is exceeded, to the proportion that
         the Quota Share Percentage of the Premium Cap bears to the total Gross
         Net Written Premium under this Contract, Failure to invoke such option
         within 30 days will constitute waiver of the Premium Cap.

                                    ARTICLE 9

PROVISIONAL CEDING COMMISSION

A.       The Reinsurer shall allow the Company a provisional ceding commission
         of 22.7% of the ceded Gross Net Written Premium remitted to the
         Reinsurer as per subparagraph 2 of

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         paragraph A of the Accounts and Remittances Article. Return commission
         shall be allowed on return premiums at the same rate.

B.       It is expressly agreed that the ceding commission includes provision
         for all acquisition costs, administrative fees, and for all other
         expenses (other than the flat 6.0% charge and up to an additional 2.5%
         charge for outside legal expense relating to Loss Adjustment Expense)
         of whatever nature.

                                   ARTICLE 10

ADJUSTMENT OF CEDING COMMISSION

A.       As respects Policies written or renewed during each Contract Year, the
         provisional commission allowed the Company shall be adjusted
         periodically in accordance with the provisions set forth herein. The
         adjusted commission rate shall be calculated as follows:

         1.       If the Adjusted Loss Ratio is 81.5% or greater, the commission
                  rate for the Contract Year shall be 14.2%;

         2.       If the Adjusted Loss Ratio is less than 81.5%, but not less
                  than 65.0%, the adjusted commission rate for the Contract Year
                  shall be 14.2%, plus 100% of the difference in percentage
                  points between 81.5% and the actual Adjusted Loss Ratio;

         3.       If the Adjusted Loss Ratio is 65% or less, the adjusted
                  commission rate for the Contract Year shall be 30.7%.

B.       The first adjustment of the provisional ceding commission will take
         place 12 months after the close of the Contract Year. The Company will
         provide the Reinsurer with a detailed report showing its adjustment
         calculation and indicating any amounts due. In the event funds are due
         the Reinsurer, the Company will remit said funds with the report. In
         the event funds are due the Company, the Reinsurer will remit said
         funds to the Company when the Company agrees to commute the Contract
         Year and accept a final commission adjustment calculation and
         remittance.

C.       Adjustments will continue to be made each January 1st thereafter until
         all Losses and Loss Adjustment Expense for the Contract Year have been
         closed, at which time a final adjustment will be made.

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                                   ARTICLE 11

ACCOUNTS AND REMITTANCES

A.       Within 30 days following the end of each month, the Company shall
         render a net account to the Reinsurer, segregated by Contract Year.
         Such account shall contain the following information, summarized by
         line of business:

         1.       Ceded Gross Net Earned Premium during the month; less,

         2.       The provisional ceding commission rate (applied to ceded Gross
                  Net Earned Premium remitted), and the allowance for Loss
                  Adjustment Expense, as provided for in this Contract; less,

         3.       Ceded Loss and outside legal expense paid on Losses under
                  Policies written or renewed during the Contract Year (net of
                  the Company's Cumulative Retention under the Loss Corridor for
                  the Contract Year, if any); plus,

         4.       The Reinsurer's share of subrogation, salvage, or other
                  recoveries on Losses under Policies written or renewed during
                  Contract Year.

         Any balances (as calculated in subparagraphs 1 through 4) due to the
         Reinsurer shall be paid by the Company within 30 days following the end
         of the month. Any balances due to the Company shall be paid by the
         Reinsurer as soon as is reasonably practicable after receiving the
         monthly report, but not to exceed 30 days following receipt of the
         monthly report.

B.       The Company's "Cumulative Retention under the Loss Corridor" for the
         Contract Year shall mean at any time the amount, if any, by which the
         inception-to-date accumulated paid Losses Incurred exceed 81.5% of
         inception-to-date ceded Gross Net Earned Premium from Policies with
         effective or renewal dates during the Contract Year, subject to a
         maximum of 6% of the inception-to-date accumulated ceded Gross Net
         Earned Premium from such Policies.

C.       Notwithstanding the above, in the event that the Reinsurer has its
         "Best's" rating lowered below "A-", the Company may withhold from
         payment amounts due the Reinsurer hereunder, provided it establishes a
         Security Fund (the "Fund") for the payment and/or settlement of amounts
         due to and from the Reinsurer under this Contract. The Company shall be
         permitted to withdraw from the fund any such payable amounts.

         In that event, in lieu of the provisions of paragraph A above, the
         Company shall remit to the Reinsurer only the Reinsurer's Margin,
         calculated as 4.3% of the reinsurance premium due, and the remaining
         reinsurance premium, net of ceding commission, shall be deposited in
         the Fund.

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         Thereafter, in lieu of the provisions of paragraph A above, the
         Company's monthly report shall contain the following information:

         1.       Ceded Gross Net Earned Premium during the month; less

         2.       The provisional ceding commission rate (applied to Gross Net
                  Earned Premium remitted) as provided for in this Contract;
                  less,

         3.       The Reinsurer's Margin of 4.3% of (1) above; less

         4.       Ceded Loss and Loss Adjustment Expense paid on Losses ascribed
                  to the Contract Year (net of the Company's cumulative
                  retention under the Loss Corridor for the Contract Year, if
                  any); plus,

         5.       The Reinsurer's share of subrogation, salvage, or other
                  recoveries on Losses ascribed to the Contract Year.

         If the net balance is positive, the Company shall deposit that amount
         in the Fund. The Company shall hold any amounts due the Reinsurer until
         such time that the Reinsurer's liability for Losses ascribed to the
         Contract Year has been commuted, or all Losses have been closed or
         settled for the Contract Year.

         If said balance is negative, the Company shall withdraw such amount
         from the Fund. To the extent the Fund balance is less than the amount
         due, the Reinsurer shall remit the amount due promptly upon receipt and
         verification of the Company's report.

         In the event the "Best's" rating of the Reinsurer is raised to a level
         of "A-" or better, the provisions of paragraph A above shall apply to
         this Contract, in lieu of the provisions of this paragraph, and the
         Company shall immediately pay to the Reinsurer the current balance of
         the Fund and the Fund shall be terminated and all securities therein
         released to the Company.

D.       Each monthly account will also bear a notation advising of the Gross
         Net Written Premium, outstanding Loss and Loss Adjustment Expense
         reserve, summarized by line of business, and the unearned premium
         reserve at the end of the period, summarized by line of business,
         segregated by Contract Year, Should Loss and Loss Adjustment Expense
         attributable to an ISO catastrophe(s) be involved, the account should
         bear a notation showing the ISO number(s) and the paid and outstanding
         amounts applicable.

E.       Within 60 days following the end of each annual accounting period, the
         Company shall furnish to the Reinsurer any other information which the
         Reinsurer may require for its Annual Convention Statement which may be
         reasonably available to the Company.

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                                   ARTICLE 12

DEFINITIONS

A.       "Loss" shall mean amounts paid or payable by Company for indemnity
         under the Policies reinsured under this Contract.

B.       "Net Retained Liability" shall mean the Company's gross liability for
         Loss and Loss Adjustment Expense under the Policies, after application
         of any reinsurance which inures to the benefit of this Contract.

C.       "Private Passenger Automobile Physical Damage and Liability Business"
         shall mean that business classified as private passenger automobile
         insurance, including liability, physical damage, uninsured/underinsured
         motorists and personal injury protection.

D.       "Gross Net Written Premium" shall mean the gross written premium income
         on subject business, without any reduction due to bad debts, less
         returns and cancellations and less written premium income paid for
         reinsurances, recoveries under which would inure to the benefit of this
         Contract, subject to the provisions of paragraph B of the Special
         Provisions Article. Gross 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.

E.       "Gross Net Earned Premium" shall mean the earned portion of the ceded
         Gross Net Written Premium.

F.       "Loss Ratio" shall mean: (a) the Losses Incurred arising from Policies
         with effective or renewal dates during the Contract Year; divided by,
         (b) the Gross Net Earned Premium from Policies with effective or
         renewal dates during the Contract Year.

G.       "Adjusted Loss Ratio" shall mean the Loss Ratio after application of
         the Loss Corridor and IBNR.

H.       "Losses Incurred" shall mean paid ceded Loss and Loss Adjustment
         Expense, plus ceded outstanding reserves under this Contract.

I,       "IBNR" shall mean the amount added to Losses Incurred for purposes of
         determining the Adjusted Loss Ratio for the adjustment of the ceding
         commission for each Contract Year. As respects each Contract Year, the
         IBNR factor for the first computation of adjusted commission for said
         Contract Year will be 6% of ceded Automobile Liability Gross Net Earned
         Premium (excluding property damage) under this Contract. For the second
         computation, the IBNR factor will be reduced to 3% of said premium.
         IBNR will be eliminated for subsequent computations of adjusted
         commission for said Contract Year.

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J.       "Contract Year" shall mean the 12-month period beginning 12:01 a.m.,
         Central Standard Time, January 1, 2003, and each subsequent 12-month
         period that this Contract remains in force shall be a separate Contract
         Year. In the event of termination, the final Contract Year shall be
         from the beginning of the current Contract Year through the date of
         termination.

K.       The term "Loss Occurrence" shall mean the sum of all individual losses
         directly occasioned by any one disaster, accident or loss or series of
         disasters, accidents or losses arising out of one event which occurs
         within the area of one state of the United States or province of Canada
         and states or provinces contiguous thereto and to one another. However,
         the duration and extent of any one "Loss Occurrence" shall be limited
         to all individual losses sustained by the Company occurring during any
         period of 168 consecutive hours arising out of and directly occasioned
         by the same event, except that the term "Loss Occurrence" shall be
         further defined as follows:

         1.       As regards windstorms, hail, tornado, hurricane, cyclone,
                  including ensuing collapse and water damage, all individual
                  losses sustained by the Company occurring during any period of
                  72 consecutive hours arising out of and directly occasioned by
                  the same event. However, the event need not be limited to one
                  state or province or states or provinces contiguous thereto.

         2.       As regards riot, riot attending a strike, civil commotion,
                  vandalism and malicious mischief, all individual losses
                  sustained by the Company occurring during any period of 72
                  consecutive hours within the area of one municipality or
                  county and the municipalities or counties contiguous thereto
                  arising out of and directly occasioned by the same event. The
                  maximum duration of 72 consecutive hours may be extended in
                  respect of individual losses which occur beyond such 72
                  consecutive hours during the continued occupation of an
                  insured's premises by strikers, provided such occupation
                  commenced during the aforementioned period.

         3.       As regards earthquake (the epicenter of which need not
                  necessarily be within the territorial confines referred to in
                  the opening paragraph of this Article) and fire following
                  directly occasioned by the earthquake, only those individual
                  fire losses which commence during the period of 168
                  consecutive hours may be included in the Company's "Loss
                  Occurrence."

         4.       As regards "freeze," only individual losses directly
                  occasioned by collapse, breakage of glass and water damage
                  (caused by bursting of frozen pipes and tanks) may be included
                  in the Company's "Loss Occurrence."

         For all "Loss Occurrences" the Company may choose the date and time
         when any such period of consecutive hours commences, provided that it
         is not earlier than the date and time of the occurrence of the first
         recorded individual loss sustained by the Company arising out of that
         disaster, accident or loss and provided that only one such period of
         168 consecutive hours shall apply with respect to one event, except for
         those "Loss Occurrences" referred to in subparagraphs 1 and 2 above
         where only one such period of 72

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         consecutive hours shall apply with respect to one event, regardless of
         the duration of the event.

         No individual losses occasioned by an event that would be covered by 72
         hours clauses may be included in any "Loss Occurrence" claimed under
         the 168 hours provision.

                                   ARTICLE 13

ORIGINAL CONDITIONS

All insurances falling under this Contract shall be subject to the same terms,
rates, conditions and waivers, and to the same modifications, alterations and
cancellations as the respective Policies of the Company (except that in the
event of the insolvency of the Company the provisions of the Insolvency Article
of this Contract shall apply).

                                   ARTICLE 14

SPECIAL PROVISIONS

A.       The Company shall provide the Reinsurer with quarterly Loss Ratio
         estimates.

B.       Deductions for inuring reinsurance purchases shall not exceed the
         lesser of the actual cost of the inuring insurance or 2% of Gross Net
         Written Premium (prior to deduction for inuring reinsurance purchases).

C.       The Company shall not cede business written in any state not set forth
         in the Business Reinsured Article.

                                   ARTICLE 15

NO THIRD PARTY RIGHTS

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

                                   ARTICLE 16

LOSS AND LOSS ADJUSTMENT EXPENSE

A.       Subject to the terms and conditions of this Contract, any Loss
         settlement made by the Company within the terms and conditions of the
         Policy shall be unconditionally binding upon the Reinsurer in
         proportion to its participation, and the Reinsurer shall benefit
         proportionally in all salvages and recoveries.

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B.       As an allowance for Loss Adjustment Expense (including Declaratory
         Judgment Expenses), the Reinsurer shall be liable for an amount equal
         to 6% of the ceded Gross Net Earned Premium hereunder. The Reinsurer
         shall also reimburse the Company for a pro rata share of any outside
         legal expenses incurred, but the Reinsurer's liability for such
         expenses under this Contract shall not exceed 2.5% of ceded Gross Net
         Earned Premium hereunder for Policies issued or renewed during each
         Contract Year. Further, the Reinsurer's liability for Loss Adjustment
         Expense and outside legal expenses incurred shall not exceed 8.5% of
         ceded Gross Net Earned Premium hereunder for Policies issued or renewed
         during each Contract Year.

C.       "Declaratory Judgment Expenses" 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.

                                   ARTICLE 17

SPECIAL COMMUTATION

A.       If the Company experiences a 33 l/3% or greater decrease in its
         Consolidated Statutory Policyholders' Surplus from the amount reported
         in its Statutory Annual Statement as of December 31, 2002 (the
         "Triggering Event"), the Reinsurer shall have the sole option to
         commute this Contract and to commute all outstanding liabilities (the
         "Special Commutation") at any time by giving the Company 15 days' prior
         written notice.

B.       Where applicable, the Company shall notify the Reinsurer no later than
         five business days from the date of the Triggering Event. When the
         Reinsurer is on notice of the Triggering Event, the Reinsurer shall
         notify the Company within a reasonable time thereafter whether or not
         it will exercise its right of Special Commutation. Failure by the
         Company to so notify the Reinsurer or failure by the Reinsurer to
         invoke Special Commutation after the Triggering Event shall not limit
         the right of the Reinsurer to invoke Special Commutation in the future;
         such Special Commutation, however, would take effect on the date of
         Reinsurer invocation, and not be retroactive back to the date of the
         Triggering Event.

C.       Upon the Reinsurer's Notice of Special Commutation, this Contract shall
         be automatically commuted in its entirety as of the date of the
         Triggering Event ("Commutation Effective Date"). In consideration for
         the full release and settlement by the Company of all current and
         future liabilities of the Company hereunder, the Reinsurer shall remit
         to the Company an amount ("the Settlement Amount") equal to the ceded
         unearned premium reserve as of the Commutation Effective Date plus, at
         the Reinsurer's option, either (A) the sum of the Company's ceded
         reserves for the Reinsurer's proportional share of Loss and Loss
         Adjustment Expense (including Loss and Loss Adjustment Expense incurred
         but not

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         reported) under this Contract as reflected in the latest report
         received by the Reinsurer, prior to date of notice of Special
         Commutation or (B) the amount the Company and the Reinsurer agree is
         the present value of the Reinsurer's proportional share of such Losses.

D.       In the event the parties cannot agree on the Settlement Amount, then
         within 10 business days of the Reinsurer's notice of its election of
         Special Commutation, the parties shall mutually appoint an independent
         nationally recognized actuary (F.S.A./F.C.A.S. or A.S.A./A.C.A.S.) (the
         "Independent Actuary") who shall investigate and determine the
         Settlement Amount. If the Reinsurer and the Company cannot reach an
         agreement on the individual to be selected as the Independent Actuary
         within 10 business days after the Reinsurer's notice to elect Special
         Commutation, then the Reinsurer and the Company shall each furnish the
         name of an acceptable actuary and the Independent Actuary shall be
         selected by drawing lots. The determination of the Commutation
         Settlement by the Independent Actuary shall be made within 20 business
         days of its appointment and such determination shall be final and
         binding between the parties. The costs of the Independent Actuary shall
         be shared on an equal basis by the Reinsurer and the Company.

                                   ARTICLE 18

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 or any other contract heretofore or
hereafter entered into between the Company and the Reinsurer which is classified
by the Company as part of the Company's Private Passenger Automobile program.
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.

                                   ARTICLE 19

CURRENCY

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

                                   ARTICLE 20

LOSS 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.

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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 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;

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         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 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.

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                                   ARTICLE 21

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 22

FEDERAL EXCISE TAX

(This Article applies only to those reinsurers, domiciled outside the United
States of America, who are not exempt from the Federal Excise Tax.)

A.       The Reinsurer has agreed to allow for the purpose of paying the Federal
         Excise Tax the percentage specified by United States law of the premium
         payable hereon to the extent such premium is subject to Federal Excise
         Tax.

B.       In the event of any return of premium becoming due hereunder, the
         Reinsurer shall deduct the percentage specified by United States law
         from the amount of the return and the Company or its agent should take
         steps to recover the Tax from the United States Government.

                                   ARTICLE 23

INSPECTION

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

                                   ARTICLE 24

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.

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                                   ARTICLE 25

INSOLVENCY

A.       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
         Contract 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.

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

C.       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.

D.       In the event of the insolvency of any company or companies included in
         the designation of "Company," this clause will apply only to the
         insolvent company or companies.

                                   ARTICLE 26

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.

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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. 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 27

SERVICE OF SUIT

A.       This Article applies only to those reinsurers not domiciled in the
         United States of America, and/or not authorized in any state, territory
         and/or district of the United States of America where authorization is
         required by insurance regulatory authorities.

B.       In the event of the failure of a Reinsurer to pay any amount claimed to
         be due under this Contract, the Reinsurer, at the request of the
         Company, shall submit to the jurisdiction of any court of competent
         jurisdiction within the United States of America and shall comply with
         all requirements necessary to give such court jurisdiction; and all
         matters arising hereunder shall be determined in accordance with the
         law and practice of such court. Nothing in this clause constitutes or
         should be understood to constitute a waiver of the Reinsurer's rights
         to commence an action in any court of competent jurisdiction in the
         United States of America, 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 of America or of any state
         in the United States of America.

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C.       Service of process in such suit may be made upon Messrs. Mendes and
         Mount, 750 Seventh Avenue, New York, New York 10019-6829 (hereinafter,
         "agent for service of process"), and in any suit instituted against the
         Reinsurer upon this Contract, the Reinsurer shall abide by the final
         decision of such court or of any appellate court in the event of an
         appeal.

         The above named are authorized and directed to accept service of
         process on behalf of the Reinsurer in any such suit and/or upon the
         request of the Company to give a written undertaking to the Company
         that the agent for service of process shall enter a general appearance
         on behalf of the Reinsurer in the event such a suit shall be
         instituted.

         Further, pursuant to any statute of any state, territory or district of
         the United States of America that makes provision therefor, the
         Reinsurer 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
         action, suit or proceeding instituted by or on behalf of the Company or
         any beneficiary hereunder arising out of this Contract and hereby
         designates the agent for service of process as the firm to whom the
         said officer is authorized to mail such process or a true copy thereof.

                                   ARTICLE 28

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.

                                   ARTICLE 29

SEVERABILITY

If any law or regulation of the Federal, state or local government of the United
States of America or the rulings of officials having supervision over insurance
companies should render the undertaking of this Contract illegal within the
jurisdiction of such authority, the Company may upon written notice to the
Reinsurer suspend, abrogate or amend this Contract insofar as it relates to such
jurisdiction, to the extent necessary to comply with such law, regulation or
ruling. Such suspension, abrogation or amendment of a portion of this Contract
will in no way affect any other portion thereof.

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                                   ARTICLE 30

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 31

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.

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IN WITNESS WHEREOF, THE COMPANY HAS CAUSED THIS CONTRACT TO BE EXECUTED BY ITS
DULY AUTHORIZED REPRESENTATIVE(S) THIS 10TH DAY OF JULY, 2003.

                            THE DIRECT GENERAL GROUP
                            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, VICE PRESIDENT-FINANCE & TREASURER

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              NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE -
                              REINSURANCE - U.S.A.

1.       This Reinsurance does not cover any loss or liability accruing to the
         Reassured, directly or indirectly, and whether as Insurer or Reinsurer,
         from any Pool of Insurers or Reinsurers formed for the purpose of
         covering Atomic or Nuclear Energy risks.

2.       Without in any way restricting the operation of paragraph (1) of this
         clause, this Reinsurance does not cover any loss or liability accruing
         to the Reassured, directly or indirectly and whether as Insurer or
         Reinsurer, from any insurance against Physical Damage (including
         business interruption or consequential loss arising out of such
         Physical Damage) to:

         I.       Nuclear reactor power plants including all auxiliary property
                  on the site, or

         II.      Any other nuclear reactor installation, including laboratories
                  handling radioactive materials in connection with reactor
                  installations, and "critical facilities" as such, or

         III.     Installations for fabricating complete fuel elements or for
                  processing substantial quantities of "special nuclear
                  material", and for reprocessing, salvaging, chemically
                  separating, storing or disposing of "spent" nuclear fuel or
                  waste materials, or

         IV.      Installations other than those listed in paragraph (2) III
                  above using substantial quantities of radioactive isotopes or
                  other products of nuclear fission.

3.       Without in any way restricting the operations of paragraphs (1) and (2)
         hereof, this Reinsurance does not cover any loss or liability by
         radioactive contamination accruing to the Reassured, directly or
         indirectly, and whether as Insurer or Reinsurer, from any insurance on
         property which is on the same site as a nuclear reactor power plant or
         other nuclear installation and which normally would be insured
         therewith except that this paragraph (3) shall not operate

         (a)      where Reassured does not have knowledge of such nuclear
                  reactor power plant or nuclear installation, or

         (b)      where said insurance contains a provision excluding coverage
                  for damage to property caused by or resulting from radioactive
                  contamination, however caused. However on and after 1st
                  January 1960 this sub-paragraph (b) shall only apply provided
                  the said radioactive contamination exclusion provision has
                  been approved by the Governmental Authority having
                  jurisdiction thereof.

4.       Without in any way restricting the operations of paragraphs (1), (2)
         and (3) hereof, this Reinsurance does not cover any loss or liability
         by radioactive contamination accruing to the Reassured, directly or
         indirectly, and whether as Insurer or Reinsurer, when such radioactive
         contamination is a named hazard specifically insured against.

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5.       It is understood and agreed that this clause shall not extend to risks
         using radioactive isotopes in any form where the nuclear exposure is
         not considered by the Reassured to be the primary hazard.

6.       The term "special nuclear material" shall have the meaning given it in
         the Atomic Energy Act of 1954 or by any law amendatory thereof.

7.       Reassured to be sole judge of what constitutes:

         (a)      substantial quantities, and

         (b)      the extent of installation, plant or site.

Note: Without in any way restricting the operation of paragraph (1) hereof, it
is understood and agreed that

         (a)      all policies issued by the Reassured on or before 31st
                  December 1957 shall be free from the application of the other
                  provisions of this Clause until expiry date or 31st December
                  1960 whichever first occurs whereupon all the provisions of
                  this Clause shall apply.

         (b)      with respect to any risk located in Canada policies issued by
                  the Reassured on or before 31st December 1958 shall be free
                  from the application of the other provisions of this Clause
                  until expiry date or 31st December 1960 whichever first occurs
                  whereupon all the provisions of this Clause shall apply.

12/12/57
NMA 1119

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.

Effective: January 1, 2003                                      DOC: May 6, 2003
8958-00-0016-00

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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

Effective: January 1, 2003                                      DOC: May 6, 2003
8958-00-0016-00

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                  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

Effective: January 1, 2003                                      DOC: May 6, 2003
8958-00-0016-00

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                           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.

Effective: January 1, 2003                                      DOC: May 6, 2003
8958-00-0016-00

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         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
                  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

Effective: January 1, 2003                                       DOC: May 6,2003
8958-00-0016-00

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                  (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.

(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.

21/9/67
NMA 1590 (amended).

Effective: January 1, 2003                                      DOC: May 6, 2003
8958-00-0016-00

                                    31 of 31

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                       INTERESTS AND LIABILITIES AGREEMENT
                                (the "Agreement")

                                     of the

                           DORINCO REINSURANCE COMPANY
                          (the "Subscribing Reinsurer")

                                 as respects the

                    TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
                        QUOTA SHARE 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 "Reinsurer" as set forth in the Contract attached hereto shall be for
25.00%.

The share of the Subscribing Reinsurer in the interests and liabilities of the
Reinsurer 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 for the period commencing at 12:01 a.m.,
Central Standard Time, January 1,2003, subject to the termination provisions of
the Commencement and Termination Article of the Contract.

Effective: January 1, 2003                                      DOC: May 6, 2003
8958-00-0016-00

                                     1 of 2

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

on this 14TH day of JULY, in the year of 2003.

                           DORINCO REINSURANCE COMPANY

                              /s/ David E. Chamberlain
                              ------------------------
                                 VICE PRESIDENT
                              OUR REF: TA 33587 - 2003

Market Reference Number:

                            THE DIRECT GENERAL GROUP
                            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

                    TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
                        QUOTA SHARE REINSURANCE CONTRACT

Effective: January 1, 2003                                      DOC: May 6, 2003
8958-00-0016-00

                                     2 of 2

<PAGE>



GUY CARPENTER

                       INTERESTS AND LIABILITIES AGREEMENT
                                (the "Agreement")

                                     of the

                            SCOR REINSURANCE COMPANY
                          (the "Subscribing Reinsurer")

                                 as respects the

                    TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
                        QUOTA SHARE 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 "Reinsurer" as set forth in the Contract attached hereto shall be for
20.00%.

The share of the Subscribing Reinsurer in the interests and liabilities of the
Reinsurer 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 for the period commencing at 12:01 a.m.,
Central Standard Time, January 1, 2003, subject to the termination provisions of
the Commencement and Termination Article of the Contract.

Effective: JANUARY 1, 2003                                      DOC: May 6, 2003
8958-00-0016-00

                                     1 of 2

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GUY CARPENTER

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

on this 15TH day of JULY, in the year of 2003.

                            SCOR REINSURANCE COMPANY

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

Market Reference Number:

                            THE DIRECT GENERAL GROUP
                            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

                    TRADITIONAL PRIVATE PASSENGER AUTOMOBILE
                        QUOTA SHARE REINSURANCE CONTRACT

Effective: January 1, 2003                                      DOC: May 6, 2003
8958-00-0016-00

                                     2 of 2