Direct General Corp. NASD: DRCT

A class action lawsuit was filed in the United States District Court for the Middle District of Tennessee on behalf of all securities purchasers of Direct General Corp. (NASDAQ: DRCT) ("Direct General" or the "Company") between August 11, 2003, and January 26, 2005 inclusive (the "Class Period").

The complaint charges Direct General, William Adair, Jr., Barry Elkins, Brian Moore, Jacqueline Adair, and Tammy Adair with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the defendants concealed the negative effect that a chance in the law related to personal injury protection coverage in Florida had on its business; (2) that the Company maintained inadequate loss reserves and failed to adjust for loss reserves with respect to a change in the law related to personal injury protection coverage in Florida. Beginning with policies issued on or after October 1, 2003, Florida mandated that the maximum personal injury protection coverage deductible be reduced from $2,000 per occurrence to $1,000 and that the limit be increased to $10,000 in excess of the deductible as opposed to $10,000 less the deductible; (3) that as result of this, the Company had to further increase its reserves by approximately $2.2 million; and (4) as a consequence of the foregoing, the Company's income was materially overstated at all relevant times.

On January 26, 2005, Direct General announced that it had completed its analysis of loss reserves as of December 31, 2004, and had determined that it was necessary to strengthen its loss reserves for an estimated 2.1 point increase in the expected ultimate loss ratio for the 2004 accident year and to further increase its reserves for prior accident years by approximately $2.2 million. The news shocked the market. Shares of fell $8.88 per share, or 31.17 percent, on January 27, 2005, to close at $19.61 per share.

If you acquired the securities of the defendants during the Class Period you may, no later than the Lead Plaintiff Deadline shown above, request that the Court appoint you as lead plaintiff through counsel of your choice. You may also choose to remain an absent class member. A lead plaintiff must meet certain requirements.