8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 9, 2009 (November 9, 2009)

FIRST ACCEPTANCE CORPORATION

(Exact Name of Registrant as Specified in Charter)

Delaware	001-12117	75-1328153
(State or Other Jurisdiction	(Commission File Number)	(I.R.S. Employer
of Incorporation)		Identification No.)

3322 West End Ave, Suite 1000
Nashville, Tennessee	37203
(Address of Principal Executive Offices)	(Zip Code)

(615) 844-2800

  (Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.      

     On November 9, 2009, First Acceptance Corporation issued a press release announcing its results of operations for the first quarter ended September 30, 2009 of its fiscal year ending June 30, 2010. The text of the release is set forth in Exhibit 99.

Item 7.01. Regulation FD Disclosure.      

     On November 9, 2009, First Acceptance Corporation issued a press release announcing its results of operations for the first quarter ended September 30, 2009 of its fiscal year ending June 30, 2010. The text of the release is set forth in Exhibit 99.

     Item 9.01. Financial Statements and Exhibits.      

     (d) Exhibits

     99 Press release dated November 9, 2009

SIGNATURE

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

FIRST ACCEPTANCE CORPORATION
By:	/s/ Stephen J. Harrison
	Stephen J. Harrison
	Chief Executive Officer

Date: November 9, 2009

INDEX TO EXHIBITS

Exhibit No.		Description
	99	Press release dated November 9, 2009

EX-99

Exhibit 99

Press Release	Source: First Acceptance Corporation
	Contact: Michael Bodayle (615) 844-2885

First Acceptance Corporation Reports Operating Results for the Quarter Ended September 30, 2009

NASHVILLE, TN, November 9, 2009/Businesswire-FirstCall/ — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the first quarter ended September 30, 2009 of its fiscal year ending June 30, 2010.

Operating Results

     Revenues for the three months ended September 30, 2009 were $57.3 million, compared with $71.6 million for the same period in fiscal year 2009. Income before income taxes for the three months ended September 30, 2009 was $2.9 million, compared with $3.8 million in the same period in fiscal year 2009. Net income for the three months ended September 30, 2009 was $2.8 million, or $0.06 per share on a diluted basis, compared with $1.8 million, or $0.04 per share on a diluted basis, for the same period in fiscal year 2009.

     Premiums earned for the three months ended September 30, 2009 were $48.5 million, compared with $61.8 million for the same period in fiscal year 2009. This decline was primarily due to the weak economic conditions, which have caused both a decline in the number of policies written, as well as an increase in the percentage of our customers purchasing liability only coverage. Rate actions taken in a number of states to improve underwriting profitability and the closure of underperforming stores also contributed toward the decreases in policies written and premiums earned. At September 30, 2009, the number of policies in force was 152,866, compared with 170,555 at September 30, 2008. At September 30, 2009, we operated 415 stores, compared with 429 stores at September 30, 2008.

     Loss and Loss Adjustment Expense Ratio. The loss and loss adjustment expense ratio was 68.4 percent for the three months ended September 30, 2009, compared with 70.7 percent for the same period in fiscal year 2009. For the three months ended September 30, 2009 and 2008, we experienced favorable development on losses related to prior periods of approximately $3.7 million and $4.3 million, respectively.

     The favorable development for the three months ended September 30, 2009 was due to lower than anticipated severity and frequency of accidents. Excluding favorable development, the loss and loss adjustment expense ratios for the three months ended September 30, 2009 and 2008 were 75.9 percent and 77.7 percent, respectively. The year-over-year improvement reflects among other things, favorable severity trends in property and physical damage coverages, rate actions taken in a number of states to improve underwriting profitability, improvement in our underwriting and claim handling practices, and the shift in business mix toward renewal policies, which have lower loss ratios than new policies.

     Expense Ratio. Our expense ratio for the three months ended September 30, 2009 was 26.0 percent, compared with 21.4 percent for the same period in fiscal year 2009. The year-over-year increase in the expense ratio was due to the drop in premiums earned, which resulted in a higher percentage of fixed expenses (e.g., rent, base salary).

     Combined Ratio. The combined ratio increased to 94.4 percent for the three months ended September 30, 2009 from 92.1 percent for the same period in fiscal year 2009.

     Litigation Settlement. As previously reported, we entered into settlement agreements related to litigation brought against us in Georgia and Alabama with respect to certain sales practices. Pursuant to the terms of the settlement agreements, eligible class members are entitled to certain premium credits or reimbursement certificates. At December 31, 2008, we accrued $5.2 million associated with the estimated utilization of available premium credits for class members. During the three months ended September 30, 2009, eligible class members utilized $1.0 million of available premium credits and $0.4 million were forfeited, resulting in a remaining settlement accrual of $1.6 million at September 30, 2009.

     Provision for Income Taxes. The provision for income taxes for the three months ended September 30, 2009 was $0.1 million, compared with $1.9 million for the same period in fiscal year 2009. The provision for income taxes for the three months ended September 30, 2009 related to current state income taxes for certain subsidiaries with taxable income. At September 30, 2009 and June 30, 2009, we established a full valuation allowance against all net deferred tax assets. In assessing our ability to support the realizability of our deferred tax assets, we have considered both positive and negative evidence. We have placed greater weight on historical results than on our outlook for future profitability. The deferred tax valuation allowance may be adjusted in future periods if we consider that it is more likely than not that some portion or all of the deferred tax assets will be realized. In the event the deferred tax valuation allowance is adjusted, we would record an income tax benefit for the amount of the adjustment.

About First Acceptance Corporation

     First Acceptance Corporation provides non-standard private passenger automobile insurance, primarily through employee-agents. At September 30, 2009, we leased and operated 415 retail offices in 12 states. Our insurance company subsidiaries are licensed to do business in 25 states. Additional information about First Acceptance Corporation can be found online at www.firstacceptancecorp.com.

     This press release contains forward-looking statements. These statements, which have been included in reliance on the “safe harbor” provisions of the federal securities laws, involve risks and uncertainties. Investors are hereby cautioned that these statements may be affected by important factors, including, among others, the factors set forth under the caption “Risk Factors” in Item 1A. of our Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission. Actual operations and results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share data)

	Three Months Ended
	September 30,
	2009			2008
Revenues:
Premiums earned	$	48,467		$	61,838
Commission and fee income		6,954			8,243
Investment income		1,913			2,723
Net realized losses on fixed maturities, available-for-sale		(22	)		(1,215	)
		57,312			71,589
Costs and expenses:
Losses and loss adjustment expenses		33,153			43,732
Insurance operating expenses		19,570			21,446
Other operating expenses		273			392
Litigation settlement		(381	)		145
Stock-based compensation		383			495
Depreciation and amortization		464			469
Interest expense		989			1,157
		54,451			67,836
Income before income taxes		2,861			3,753
Provision for income taxes		101			1,912
Net income	$	2,760		$	1,841
Net income per share:
Basic and diluted	$	0.06		$	0.04
Number of shares used to calculate net income per share:
Basic		47,877			47,655
Diluted		48,853			49,244

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)

	September 30,			June 30,
	2009			2009
	(Unaudited)
ASSETS
Fixed maturities, available-for-sale at fair value (amortized cost of $178,003 and $140,849, respectively)	$	181,640		$	140,311
Cash and cash equivalents		37,271			77,201
Premiums and fees receivable, net of allowance of $458 and $419		45,633			45,309
Other assets		9,845			11,866
Property and equipment, net		3,604			3,921
Deferred acquisition costs		4,197			3,896
Goodwill		70,092			70,092
Identifiable intangible assets		6,360			6,360
TOTAL ASSETS	$	358,642		$	358,956
LIABILITIES AND STOCKHOLDERS’ EQUITY
Loss and loss adjustment expense reserves	$	81,736		$	83,973
Unearned premiums and fees		56,608			57,350
Debentures payable		41,240			41,240
Other liabilities		11,884			16,537
Total liabilities		191,468			199,100
Stockholders’ equity:
Preferred stock, $.01 par value, 10,000 shares authorized		—			—
Common stock, $.01 par value, 75,000 shares authorized; 48,308 and 48,312 shares issued and outstanding, respectively		483			483
Additional paid-in capital		465,103			464,720
Accumulated other comprehensive income (loss)		3,637			(538	)
Accumulated deficit		(302,049	)		(304,809	)
Total stockholders’ equity		167,174			159,856
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	358,642		$	358,956

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)

GROSS PREMIUMS EARNED BY STATE

	Three Months Ended
	September 30,
	2009		2008
Premiums earned:
Georgia	$	10,902	$	13,427
Illinois		6,331		7,361
Texas		5,912		7,002
Florida		5,261		7,616
Alabama		5,210		6,572
South Carolina		3,138		5,450
Tennessee		3,104		4,415
Ohio		2,952		3,451
Pennsylvania		2,819		2,787
Indiana		1,221		1,563
Missouri		827		1,128
Mississippi		790		1,066
Total premiums earned	$	48,467	$	61,838

COMBINED RATIOS (INSURANCE COMPANIES)

	Three Months Ended
	September 30,
	2009			2008
Loss and loss adjustment expense		68.4	%		70.7	%
Expense		26.0	%		21.4	%
Combined		94.4	%		92.1	%

POLICIES IN FORCE

	Three Months Ended
	September 30,
	2009			2008
Policies in force — beginning of period		158,222			194,079
Net decrease during period		(5,356	)		(23,524	)
Policies in force — end of period		152,866			170,555

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data (continued)
(Unaudited)

NUMBER OF RETAIL LOCATIONS

     Retail location counts are based upon the date that a location commenced or ceased writing business.

	Three Months Ended
	September 30,
	2009			2008
Retail locations — beginning of period		418			431
Opened		—			1
Closed		(3	)		(3	)
Retail locations — end of period		415			429

RETAIL LOCATIONS BY STATE

	June 30,				September 30,
	2009		2008		2009		2008
Alabama		25		25		25		25
Florida		39		40		36		39
Georgia		61		61		61		61
Illinois		78		80		78		81
Indiana		18		19		18		19
Mississippi		8		8		8		8
Missouri		12		14		12		13
Ohio		27		29		27		29
Pennsylvania		17		19		17		18
South Carolina		27		28		27		28
Tennessee		20		20		20		20
Texas		86		88		86		88
Total		418		431		415		429

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