1023031--3/15/2006--DIRECT_GENERAL

related topics

{loss, insurance, financial}

{capital, credit, financial}

{financial, litigation, operation}

{condition, economic, financial}

{acquisition, growth, future}

{debt, indebtedness, cash}

{system, service, information}

{personnel, key, retain}

{stock, price, operating}

{cost, operation, labor}

{competitive, industry, competition}

{operation, natural, condition}

{loan, real, estate}

{cost, contract, operation}

{cost, regulation, environmental}

{regulation, change, law}

Because we write a substantial number of insurance policies in Florida and Tennessee, our business may be adversely affected by conditions in these states. Severe weather conditions and other catastrophes may result in an increase in the number and amount of claims filed against us. Our business is highly competitive, which may make it difficult for us to market our core products effectively and profitably. Our results may fluctuate as a result of cyclical changes in the personal automobile insurance industry. Current ratings of our insurance subsidiaries or any failure of our insurance subsidiaries to maintain current financial strength ratings could materially and adversely affect our business and our ability to obtain financing or reinsurance at favorable rates. Our principal shareholder has the ability to control our operations, including the election of our directors. As a holding company, we are dependent on the results of operations of our operating subsidiaries and the regulatory and contractual capacity of our operating subsidiaries to pay dividends to us. We are subject to comprehensive regulation that may restrict our ability to earn profits. The outcome of recent litigation and insurance regulatory investigations may adversely impact our business. Regulation may become more extensive in the future, which may adversely affect our business. Our insurance, premium finance and consumer products subsidiaries are subject to capital requirements, and our failure to meet these standards could subject us to regulatory actions. New pricing, claim, coverage and financing issues and class action litigation are continually emerging in the automobile insurance industry, and these new issues could adversely impact our revenues or our methods of doing business. Our assumed reinsurance arrangements may be deemed to be the unauthorized business of insurance. Our largely fixed cost structure would work to our disadvantage if our sales volume were to decline significantly. Our inability to refinance our current lines of credit or obtain additional financing could have an adverse effect on our premium finance revenue. Our losses and loss adjustment expenses may exceed our reserves, which would adversely impact our results of operations and financial condition. We are party to litigation, which, if decided adversely to us, could affect our business, results of operations or financial condition. If we lose key personnel or are unable to recruit qualified personnel, our ability to implement our business strategies could be delayed or hindered. Our investment portfolio may suffer reduced returns or losses, which could reduce our profitability. We may not be successful in reducing our risk and increasing our underwriting capacity through reinsurance arrangements, which could adversely affect our business, financial condition and results of operations. Because we have reduced our use of reinsurance, we will retain more risk, which could result in losses. We rely on our information technology and telecommunication systems, and the failure of these systems could materially and adversely affect our business. We may have difficulties in managing our expansion into new markets, and we may not be successful in identifying agency acquisition candidates or integrating their operations. Our plans to introduce new insurance and ancillary products may prove unsuccessful or subject us to greater liability than anticipated.

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1023031--3/15/2006--DIRECT_GENERAL_CORP