##### Table of Contents



UNITED
STATES 
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-50360
 DIRECT GENERAL CORPORATION
  Tennessee
    
    62-1564496(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)1281 Murfreesboro Road, Nashville, TN
    
    37217(Address of principal executive offices)
    
    (Zip Code)
 
  þ o
  þ o




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPART II  OTHER INFORMATIONItem 1. Legal ProceedingsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 4. Submission of Matters to a Vote of Security HoldersItem 6. ExhibitsSIGNATURESEX-31.1  SECTION 302 CERTIFICATION OF THE CEOEX-31.2  SECTION 302 CERTIFICATION OF THE CFOEX-32.1  SECTION 906 CERTIFICATION OF THE CEOEX-32.2  SECTION 906 CERTIFICATION OF THE CFO    Table of Contents  
 PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 DIRECT GENERAL CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(In thousands  except per share amounts)RevenuesPremiums earned
    
    $
    104,737
    
    
    $
    93,297
    
    
    $
    206,650
    
    
    $
    176,304Finance income
    
    
    12,130
    
    
    
    12,702
    
    
    
    24,301
    
    
    
    25,463Commission and service fee income
    
    
    11,116
    
    
    
    11,980
    
    
    
    25,383
    
    
    
    25,475Net investment income
    
    
    3,546
    
    
    
    2,621
    
    
    
    6,875
    
    
    
    4,897Net realized (losses) gains on securities and other
    
    
    (286
    )
    
    
    (9
    )
    
    
    (255
    )
    
    
    60Total revenues
    
    
    131,243
    
    
    
    120,591
    
    
    
    262,954
    
    
    
    232,199ExpensesInsurance losses and loss adjustment expenses
    
    
    76,485
    
    
    
    68,262
    
    
    
    152,367
    
    
    
    129,087Selling, general and administrative costs
    
    
    34,322
    
    
    
    25,148
    
    
    
    67,106
    
    
    
    50,388Interest expense
    
    
    1,950
    
    
    
    1,539
    
    
    
    3,260
    
    
    
    2,891Total expenses
    
    
    112,757
    
    
    
    94,949
    
    
    
    222,733
    
    
    
    182,366Income before income taxes
    
    
    18,486
    
    
    
    25,642
    
    
    
    40,221
    
    
    
    49,833Income tax expense
    
    
    6,990
    
    
    
    9,624
    
    
    
    15,142
    
    
    
    18,797Net income
    
    $
    11,496
    
    
    $
    16,018
    
    
    $
    25,079
    
    
    $
    31,036Earnings per ShareBasic earnings per common share
    
    $
    0.53
    
    
    $
    0.72
    
    
    $
    1.14
    
    
    $
    1.42Diluted earnings per common share
    
    $
    0.53
    
    
    $
    0.70
    
    
    $
    1.14
    
    
    $
    1.37
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DIRECT GENERAL CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)June 30,
    
    December 31,2005
    
    2004(In thousands)AssetsInvestments:Debt securities available-for-sale at fair value (amortized cost
$357,253 and $334,770 at June 30, 2005 and December 31, 2004,
respectively)
    
    $
    356,706
    
    
    $
    334,816Short-term investments
    
    
    1,623
    
    
    
    1,663Total investments
    
    
    358,329
    
    
    
    336,479Cash and cash equivalents
    
    
    110,541
    
    
    
    70,988Finance receivables, net
    
    
    241,541
    
    
    
    214,180Reinsurance balances receivable
    
    
    32,102
    
    
    
    35,671Prepaid reinsurance premiums
    
    
    27,651
    
    
    
    29,544Deferred policy acquisition costs
    
    
    14,014
    
    
    
    12,666Income taxes recoverable
    
    
    3,551
    
    
    
    7,177Deferred income taxes
    
    
    22,393
    
    
    
    20,040Property and equipment
    
    
    16,686
    
    
    
    15,823Goodwill, net
    
    
    27,309
    
    
    
    22,188Other assets
    
    
    22,941
    
    
    
    22,696Total assets
    
    $
    877,058
    
    
    $
    787,452Liabilities and Shareholders EquityLoss and loss adjustment expense reserves
    
    $
    126,055
    
    
    $
    124,858Unearned premiums
    
    
    245,075
    
    
    
    223,303Reinsurance balances payable and funds held
    
    
    36,452
    
    
    
    33,996Accounts payable and accrued expenses
    
    
    15,801
    
    
    
    11,949Notes payable
    
    
    179,202
    
    
    
    135,626Capital lease obligations
    
    
    3,229
    
    
    
    3,772Other liabilities
    
    
    22,325
    
    
    
    8,867Total liabilities
    
    
    628,139
    
    
    
    542,371Shareholders equityCommon stock, no par; authorized shares  100,000.0; issued shares
 21,440.0 and 22,360.0 at June 30, 2005 and December 31, 2004,
respectively
    
    
    89,850
    
    
    
    109,163Retained earnings
    
    
    159,508
    
    
    
    136,178Accumulated other comprehensive (loss) income:Net unrealized (depreciation) appreciation on investment securities
    
    
    (356
    )
    
    
    30Net loss on cash flow hedge
    
    
    (83
    )
    
    
    (290
    )Total shareholders equity
    
    
    248,919
    
    
    
    245,081Total liabilities and shareholders equity
    
    $
    877,058
    
    
    $
    787,452
  3




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DIRECT GENERAL CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months Ended June 30,2005
    
    2004(In thousands)Operating activitiesNet income
    
    $
    25,079
    
    
    $
    31,036Adjustments to reconcile net income to net cash provided by operating activities:Net realized losses (gains) on securities and other
    
    
    255
    
    
    
    (60
    )Depreciation and amortization
    
    
    3,334
    
    
    
    2,675Deferred income taxes
    
    
    (2,256
    )
    
    
    (2,406
    )Changes in operating assets and liabilities:Finance receivables
    
    
    (27,361
    )
    
    
    (35,031
    )Reinsurance balances receivable
    
    
    3,569
    
    
    
    9,001Prepaid reinsurance premiums
    
    
    1,893
    
    
    
    11,495Deferred policy acquisition costs
    
    
    (1,348
    )
    
    
    (934
    )Income taxes recoverable/payable
    
    
    3,626
    
    
    
    (6,735
    )Loss and loss adjustment expense reserves
    
    
    1,197
    
    
    
    4,011Unearned premiums
    
    
    21,773
    
    
    
    35,386Reinsurance balances payable and funds held
    
    
    2,456
    
    
    
    (12,694
    )Accounts payable and accrued expenses
    
    
    3,852
    
    
    
    (315
    )Other
    
    
    4,691
    
    
    
    (4,486
    )Net cash provided by operating activities
    
    
    40,760
    
    
    
    30,943Investing activitiesProceeds from sales and maturities of debt securities available-for-sale
    
    
    51,409
    
    
    
    85,104Purchase of debt securities available-for-sale
    
    
    (74,532
    )
    
    
    (116,235
    )Payable for securities
    
    
    9,494
    
    
    
    1,569Net sales (purchases) of short-term investments
    
    
    40
    
    
    
    (716
    )Purchase of property and equipment, net
    
    
    (3,863
    )
    
    
    (3,297
    )Purchase of insurance agency assets
    
    
    (5,560
    )
    
    
    Purchase of life insurance company
    
    
    
    
    
    
    (7,330
    )Net cash used in investing activities
    
    
    (23,012
    )
    
    
    (40,905
    )Financing activitiesRepurchase of common stock
    
    
    (20,037
    )
    
    
    Issuance of common stock
    
    
    557
    
    
    
    16,804Net proceeds from borrowings
    
    
    43,800
    
    
    
    4,066Payment of principal on borrowings
    
    
    (766
    )
    
    
    (815
    )Payment of stock dividends
    
    
    (1,749
    )
    
    
    (1,754
    )Net cash provided by financing activities
    
    
    21,805
    
    
    
    18,301Net increase in cash and cash equivalents
    
    
    39,553
    
    
    
    8,339Cash and cash equivalents at beginning of period
    
    
    70,988
    
    
    
    87,342Cash and cash equivalents at end of period
    
    $
    110,541
    
    
    $
    95,681
  4




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DIRECT GENERAL CORPORATION AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Nature of Operations
  2. Basis of Presentation
  3. Acquisitions
  4. Common Stock Repurchase
  5. Notes Payable
  5




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6. Earnings Per Share
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(In thousands, except per share amounts)Numerator:Net income
    
    $
    11,496
    
    
    $
    16,018
    
    
    $
    25,079
    
    
    $
    31,036Denominator:Weighted average common shares outstanding
    
    
    21,634.5
    
    
    
    22,239.2
    
    
    
    21,951.6
    
    
    
    21,871.1Dilutive stock options
    
    
    48.4
    
    
    
    602.5
    
    
    
    75.4
    
    
    
    718.1Weighted average common shares
outstanding for purposes of computing
diluted earnings per common share
    
    
    21,682.9
    
    
    
    22,841.7
    
    
    
    22,027.0
    
    
    
    22,589.2Basic earnings per common share
    
    $
    0.53
    
    
    $
    0.72
    
    
    $
    1.14
    
    
    $
    1.42Diluted earnings per common share
    
    $
    0.53
    
    
    $
    0.70
    
    
    $
    1.14
    
    
    $
    1.37
 7. Stock Options
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(In thousands, except per share amounts)Net income, as reported
    
    $
    11,496
    
    
    $
    16,018
    
    
    $
    25,079
    
    
    $
    31,036Deduct: Total
stock-based employee
compensation expense
determined under the
fair value based
method, net of related
tax effects
    
    
    (213
    )
    
    
    (188
    )
    
    
    (431
    )
    
    
    (440
    )Net income, pro forma
    
    $
    11,283
    
    
    $
    15,830
    
    
    $
    24,648
    
    
    $
    30,596Income for purposes of
computing diluted
earnings per share
common, as reported
    
    $
    11,496
    
    
    $
    16,018
    
    
    $
    25,079
    
    
    $
    31,036Deduct: Total
stock-based employee
compensation expense
determined under the
fair value based
method, net of related
tax effects
    
    
    (213
    )
    
    
    (188
    )
    
    
    (431
    )
    
    
    (440
    )Income for purposes of
computing diluted
earnings per share
common, pro forma
    
    $
    11,283
    
    
    $
    15,830
    
    
    $
    24,648
    
    
    $
    30,596
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Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004(In thousands, except per share amounts)Earnings per shareBasic  as reported
    
    $
    0.53
    
    
    $
    0.72
    
    
    $
    1.14
    
    
    $
    1.42Basic  pro forma
    
    $
    0.52
    
    
    $
    0.71
    
    
    $
    1.12
    
    
    $
    1.40Diluted  as reported
    
    $
    0.53
    
    
    $
    0.70
    
    
    $
    1.14
    
    
    $
    1.37Diluted  pro forma
    
    $
    0.52
    
    
    $
    0.69
    
    
    $
    1.12
    
    
    $
    1.35
 8. Contingencies
  9. Subsequent Events
    10. Recent Accounting Pronouncements
  7




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 This Managements Discussion and Analysis of Financial Condition and Results of Operations
should be read in conjunction with the Companys discussion presented under the caption
Managements Discussion and Analysis of Financial Condition and Results of Operations that is
available in the Annual Report on Form 10-K for the year ended December 31, 2004 filed with the
Securities and Exchange Commission.
 Overview of Operating Results
    Summary of Key Measures of Financial Results
  (Unaudited)
    
    (Unaudited)Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,($ in millions)
    
    2005
    
    2004
    
    % Change
    
    2005
    
    2004
    
    % ChangeSelected Financial DataGross premiums written
    
    $
    98.4
    
    
    $
    101.8
    
    
    
    (3.3
    )
    
    $
    259.7
    
    
    $
    270.8
    
    
    
    (4.1
    )Ancillary income
    
    
    23.2
    
    
    
    24.7
    
    
    
    (6.1
    )
    
    
    49.7
    
    
    
    50.9
    
    
    
    (2.4
    )Net investment income
    
    
    3.6
    
    
    
    2.6
    
    
    
    38.5
    
    
    
    6.9
    
    
    
    4.9
    
    
    
    40.8Gross revenues
    
    $
    125.2
    
    
    $
    129.1
    
    
    
    (3.0
    )
    
    $
    316.3
    
    
    $
    326.6
    
    
    
    (3.2
    )Ceded premiums written
    
    
    (11.4
    )
    
    
    (16.0
    )
    
    
    (28.8
    )
    
    
    (29.4
    )
    
    
    (47.6
    )
    
    
    (38.2
    )Change in net unearned premiums
    
    
    17.7
    
    
    
    7.5
    
    
    
    136.0
    
    
    
    (23.6
    )
    
    
    (46.9
    )
    
    
    (49.7
    )Net realized (losses) gains on investments
    
    
    (0.3
    )
    
    
    
    
    
    NM
    
    
    (0.3
    )
    
    
    0.1
    
    
    NMTotal revenues
    
    $
    131.2
    
    
    $
    120.6
    
    
    
    8.8
    
    
    $
    263.0
    
    
    $
    232.2
    
    
    
    13.3Net income
    
    $
    11.5
    
    
    $
    16.0
    
    
    
    (28.2
    )
    
    $
    25.1
    
    
    $
    31.0
    
    
    
    (19.2
    )Key Financial RatiosLoss ratio  net
    
    
    73.0
    %
    
    
    73.2
    %
    
    
    
    
    
    
    73.7
    %
    
    
    73.2
    %Expense ratio  net
    
    
    12.4
    %
    
    
    2.2
    %
    
    
    
    
    
    
    10.0
    %
    
    
    1.3
    %Combined ratio  net
    
    
    85.4
    %
    
    
    75.4
    %
    
    
    
    
    
    
    83.7
    %
    
    
    74.5
    %Ancillary income to gross premiums earned
    
    
    19.4
    %
    
    
    20.5
    %
    
    
    
    
    
    
    20.9
    %
    
    
    21.6
    %Ancillary income to net operating expenses
    
    
    64.1
    %
    
    
    92.5
    %
    
    
    
    
    
    
    70.6
    %
    
    
    95.5
    %
 8




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Explanation of Key Measures
  Gross Premiums Written
 Net Premiums Written.
 Gross Revenues (a non-GAAP financial measure).
 Loss Ratio
 Expense Ratio
 Combined Ratio
 Ancillary Income Measures.
 Seasonality
 9




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Results of Operations
 Revenues
 Premiums
  (Unaudited)
    
    (Unaudited)Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,($ in millions)
    
    2005
    
    2004
    
    % Change
    
    2005
    
    2004
    
    % ChangeGross premiums writtenFlorida
    
    $
    46.6
    
    
    $
    52.2
    
    
    
    (10.7
    )
    
    $
    124.7
    
    
    $
    136.1
    
    
    
    (8.4
    )Tennessee
    
    
    12.5
    
    
    
    13.6
    
    
    
    (8.1
    )
    
    
    34.8
    
    
    
    37.0
    
    
    
    (5.9
    )Georgia
    
    
    5.5
    
    
    
    6.7
    
    
    
    (17.9
    )
    
    
    16.1
    
    
    
    19.0
    
    
    
    (15.3
    )Louisiana
    
    
    5.3
    
    
    
    6.1
    
    
    
    (13.1
    )
    
    
    17.1
    
    
    
    18.6
    
    
    
    (8.1
    )Texas
    
    
    14.5
    
    
    
    8.0
    
    
    
    81.3
    
    
    
    23.0
    
    
    
    15.0
    
    
    
    53.3Mississippi
    
    
    5.0
    
    
    
    5.0
    
    
    
    0.0
    
    
    
    15.0
    
    
    
    15.1
    
    
    
    (0.7
    )All other states
    
    
    9.0
    
    
    
    10.2
    
    
    
    (11.8
    )
    
    
    29.0
    
    
    
    30.0
    
    
    
    (3.3
    )Gross premiums written
    
    $
    98.4
    
    
    $
    101.8
    
    
    
    (3.3
    )
    
    $
    259.7
    
    
    $
    270.8
    
    
    
    (4.1
    )Ceded premiums written
    
    
    (11.4
    )
    
    
    (16.0
    )
    
    
    (28.8
    )
    
    
    (29.4
    )
    
    
    (47.6
    )
    
    
    (38.2
    )Net premiums written
    
    $
    87.0
    
    
    $
    85.8
    
    
    
    1.4
    
    
    $
    230.3
    
    
    $
    223.2
    
    
    
    3.2Gross premiums earned
    
    $
    119.7
    
    
    $
    120.4
    
    
    
    (0.6
    )
    
    $
    237.9
    
    
    $
    235.4
    
    
    
    1.1Ceded premiums earned
    
    
    (15.0
    )
    
    
    (27.1
    )
    
    
    (44.6
    )
    
    
    (31.2
    )
    
    
    (59.1
    )
    
    
    (47.2
    )Net premiums earned
    
    $
    104.7
    
    
    $
    93.3
    
    
    
    12.2
    
    
    $
    206.7
    
    
    $
    176.3
    
    
    
    17.2Net premiums written to gross premiums written
    
    
    88.4
    %
    
    
    84.3
    %
    
    
    
    
    
    
    88.7
    %
    
    
    82.4
    %Gross premiums earned to gross premiums written
    
    
    121.6
    %
    
    
    118.3
    %
    
    
    
    
    
    
    91.6
    %
    
    
    86.9
    %Net premiums earned to net premiums written
    
    
    120.3
    %
    
    
    108.7
    %
    
    
    
    
    
    
    89.8
    %
    
    
    79.0
    %
    10




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Ancillary Income
    Net Investment Income
  11




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##### Table of Contents



Realized Gains on Securities and Other
   Expenses
 Insurance Losses and Loss Adjustment Expenses
   Operating Expenses
  12




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Income Taxes
  Financial Condition
 Liquidity and Capital Resources
 Sources and Uses of Funds
    Financing and Capital
   Reinsurance
  13




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Investments
 Debt securities
    Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair($ in millions)
    
    Cost
    
    Gains
    
    Losses
    
    ValueU.S. Treasury securities and
obligations of U.S. government
corporations and agencies
    
    $
    56.3
    
    
    $
    0.3
    
    
    $
    0.7
    
    
    $
    55.9Obligations of states and
political subdivisions
    
    
    65.0
    
    
    
    1.0
    
    
    
    0.2
    
    
    
    65.8Corporate debt securitiesBanks and financial institutions
    
    
    89.6
    
    
    
    0.5
    
    
    
    0.9
    
    
    
    89.2Credit cards and auto loans
    
    
    67.6
    
    
    
    0.1
    
    
    
    0.9
    
    
    
    66.8Industrial
    
    
    44.9
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    44.9Telecommunications
    
    
    16.5
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    16.6Utilities and electric services
    
    
    17.4
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    17.5Corporate debt securities
    
    
    236.0
    
    
    
    1.5
    
    
    
    2.5
    
    
    
    235.0Total
    
    $
    357.3
    
    
    $
    2.8
    
    
    $
    3.4
    
    
    $
    356.7
 14




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##### Table of Contents



($ in millions)
    
    Amortized Cost
    
    Fair ValueYears to maturity:One or less
    
    $
    8.5
    
    
    $
    8.5After one through five
    
    
    159.1
    
    
    
    157.8After five through ten
    
    
    116.4
    
    
    
    117.3After ten
    
    
    73.3
    
    
    
    73.1Total
    
    $
    357.3
    
    
    $
    356.7
   ($ in millions)NAIC
    
    S&P
    
    AmortizedRating
    
    Rating
    
    Cost
    
    Fair Value
    
    
    %1
    
    AAA
    
    $
    130.1
    
    
    $
    129.5
    
    
    
    36.3
    %1
    
    AA
    
    
    33.4
    
    
    
    33.7
    
    
    
    9.5
    %1
    
    A
    
    
    104.6
    
    
    
    104.7
    
    
    
    29.4
    %2
    
    BBB
    
    
    32.6
    
    
    
    32.6
    
    
    
    9.1
    %3
    
    BB
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.2
    %1
    
    Agency
    
    
    55.8
    
    
    
    55.4
    
    
    
    15.5
    %$
    357.3
    
    
    $
    356.7
    
    
    
    100.0
    %
   -100 Basis Point
    
    
    
    
    
    +100 Basis Point($ in millions)
    
    Change
    
    Fair Value
    
    ChangeDebt securities, available-for-sale
    
    $
    373.5
    
    
    $
    356.7
    
    
    $
    339.9
 Short-term investments.
 Cash and cash equivalents
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##### Table of Contents



Forward-Looking Statements
  
    
    statements and assumptions relating to future growth, earnings, earnings per
share and other financial performance measures, as well as managements short-term and
long-term performance goals;
    
    statements relating to the anticipated effects on results of operations or
financial condition from recent and expected developments or events;
    
    statements relating to our business and growth strategies; and
    
    any other statements or assumptions that are not historical facts.
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
  16




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
      
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  Issuer Purchases of Equity Securities
 Total number of
    
    Approximate dollarshares purchased as
    
    value of shares thatTotal number of
    
    Average price
    
    part of publicly
    
    may yet be purchasedPeriod
    
    shares purchased
    
    paid per share
    
    announced program
    
    under the programApril 1 to April 30
    
    
    252,353
    
    
    $
    19.70
    
    
    
    252,353
    
    
    $
    5,045,832May 1 to May 31
    
    
    309,869
    
    
    $
    16.28
    
    
    
    309,869
    
    
    $
    0June 1 to June 30
    
    
    0
    
    
    $
    0.00
    
    
    
    0
    
    
    $
    0Total
    
    
    562,222
    
    
    $
    17.82
    
    
    
    562,222
    
    
    $
    0
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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders.
   
 Item 6. Exhibits.
 31.1
    
    Rule 13a-14(a) Certifications of CEO (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002).31.2
    
    Rule 13a-14(a) Certifications of CFO (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002).32.1
    
    Rule 1350 Certifications of CEO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).32.2
    
    Rule 1350 Certifications of CFO (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).
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##### Table of Contents



SIGNATURES
  DIRECT GENERAL CORPORATION,(Registrant)August 9, 2005
    
    By:
    
    /s/ William C. Adair, Jr.Date
    
    
    
    (Signature)Name:
    
    William C. Adair, Jr.Title:
    
    Chairman and Chief Executive OfficerAugust 9, 2005
    
    By:
    
    /s/ Barry D. ElkinsDate
    
    
    
    (Signature)Name:
    
    Barry D. ElkinsTitle:
    
    Senior Vice President and Chief Financial Officer
 19