EX-99 2 g25099exv99.htm EX-99 exv99
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, 2010
NASHVILLE, TN, November 4, 2010/Businesswire-FirstCall/ — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the first quarter ended September 30, 2010 of its fiscal year ending June 30, 2011.
Operating Results
     Revenues for the three months ended September 30, 2010 were $53.1 million, compared with $57.3 million for the same period in fiscal year 2010. Income before income taxes for the three months ended September 30, 2010 was $0.5 million, compared with $2.9 million in the same period in fiscal year 2010. Net income for the three months ended September 30, 2010 was $0.4 million, or $0.01 per share on a diluted basis, compared with $2.8 million, or $0.06 per share on a diluted basis, for the same period in fiscal year 2010.
     Premiums earned for the three months ended September 30, 2010 were $43.9 million, compared with $48.5 million for the same period in fiscal year 2010. The decline was primarily due to the continued 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. The closure of underperforming stores also contributed to the decrease in policies written and premiums earned. At September 30, 2010, the number of policies in force was 150,175, compared with 152,866 at September 30, 2009. At September 30, 2010, we operated 393 stores, compared with 415 stores at September 30, 2009.
     Loss and Loss Adjustment Expense Ratio. The loss and loss adjustment expense ratio was 73.0 percent for the three months ended September 30, 2010, compared with 68.4 percent for the three months ended September 30, 2009. For the three months ended September 30, 2010, we experienced favorable development related to prior periods of $2.1 million, compared with favorable development of $3.7 million for the three months ended September 30, 2009. The favorable development for the three months ended September 30, 2010 was primarily due to lower than anticipated severity of accidents, of which approximately $1.2 million related to losses occurring during the first six months of the 2010 calendar accident year and $0.9 million related to calendar accident years 2009 or prior.
     Excluding the favorable development related to prior periods, the loss and loss adjustment expense ratios for the three months ended September 30, 2010 and 2009 were 77.7 percent and 75.9 percent, respectively. This increase is due to higher loss adjustment expense resulting from (i) the increase in the percentage of claims related to liability-only coverage policies and (ii) increased investigative efforts with regards to Personal Injury Protection claims in Florida.

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     Expense Ratio. Our expense ratio for the three months ended September 30, 2010 was 25.5 percent, compared with 26.0 percent for the same period in fiscal year 2010. The year-over-year decrease in the expense ratio was due to the reduction in fixed costs and savings realized from the closure of underperforming stores.
     Combined Ratio. The combined ratio was 98.5 percent for the three months ended September 30, 2010, compared with 94.4 percent for the same period in fiscal year 2010.
About First Acceptance Corporation
     Our primary focus is the selling, servicing and underwriting of non-standard personal automobile insurance products underwritten by us as well as certain commissionable ancillary products, primarily through employee-agents. In certain states, our employee-agents also sell other complementary insurance products underwritten by us. At September 30, 2010, we leased and operated 393 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 for the fiscal year ended June 30, 2010 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,  
    2010     2009  
Revenues:
                
Premiums earned
   $ 43,934     $ 48,467  
Commission and fee income
     7,276       6,954  
Investment income
     2,137       1,913  
Net realized losses on investments, available-for-sale
     (224 )     (22 )
 
            
 
     53,123       57,312  
 
            
 
                
Costs and expenses:
                
Losses and loss adjustment expenses
     32,057       33,153  
Insurance operating expenses
     18,508       19,570  
Other operating expenses
     387       273  
Litigation settlement
     —       (381 )
Stock-based compensation
     192       383  
Depreciation and amortization
     476       464  
Interest expense
     991       989  
 
            
 
     52,611       54,451  
 
            
 
                
Income before income taxes
     512       2,861  
Provision for income taxes
     120       101  
 
            
Net income
   $ 392     $ 2,760  
 
            
 
                
Net income per share:
                
Basic and diluted
   $ 0.01     $ 0.06  
 
            
 
                
Number of shares used to calculate net income per share:
                
Basic
     48,037       47,877  
 
            
Diluted
     48,509       48,308  
 
            

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
                 
    September 30,     June 30,  
    2010     2010  
    (Unaudited)          
ASSETS
                
Investments, available-for-sale at fair value (amortized cost of $185,048 and $187,907, respectively)
   $ 197,511     $ 196,550  
Cash and cash equivalents
     28,871       26,184  
Premiums and fees receivable, net of allowance of $436 and $418
     44,665       41,276  
Other assets
     9,519       8,733  
Property and equipment, net
     3,155       3,524  
Deferred acquisition costs
     4,053       3,623  
Goodwill
     70,092       70,092  
Identifiable intangible assets
     6,360       6,360  
 
            
TOTAL ASSETS
   $ 364,226     $ 356,342  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Loss and loss adjustment expense reserves
   $ 71,191     $ 73,198  
Unearned premiums and fees
     55,011       52,563  
Debentures payable
     41,240       41,240  
Other liabilities
     15,190       12,151  
 
            
Total liabilities
     182,632       179,152  
 
            
 
                
Stockholders’ equity:
                
Preferred stock, $.01 par value, 10,000 shares authorized
     —       —  
Common stock, $.01 par value, 75,000 shares authorized; 48,509 shares issued and outstanding
     485       485  
Additional paid-in capital
     466,023       465,831  
Accumulated other comprehensive income
     12,463       8,643  
Accumulated deficit
     (297,377 )     (297,769 )
 
            
Total stockholders’ equity
     181,594       177,190  
 
            
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 364,226     $ 356,342  
 
            

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
GROSS PREMIUMS EARNED BY STATE
                 
    Three Months Ended  
    September 30,  
    2010     2009  
Premiums earned:
                
Georgia
   $ 9,591     $ 10,902  
Texas
     5,910       5,912  
Illinois
     5,806       6,331  
Florida
     4,818       5,261  
Alabama
     4,386       5,210  
Ohio
     3,224       2,952  
Tennessee
     2,714       3,104  
South Carolina
     2,500       3,138  
Pennsylvania
     2,416       2,819  
Indiana
     1,145       1,221  
Missouri
     738       827  
Mississippi
     686       790  
 
            
Total premiums earned
   $ 43,934     $ 48,467  
 
            
COMBINED RATIOS (INSURANCE OPERATIONS)
                 
    Three Months Ended
    September 30,
    2010   2009
Loss and loss adjustment expense
     73.0 %     68.4 %
Expense
     25.5 %     26.0 %
 
                
Combined
     98.5 %     94.4 %
 
                
POLICIES IN FORCE
                 
    Three Months Ended
    September 30,
    2010   2009
Policies in force — beginning of period
     154,655       158,222  
Net decrease during period
     (4,480 )     (5,356 )
 
                
Policies in force — end of period
     150,175       152,866  
 
                

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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,
    2010   2009
Retail locations — beginning of period
     394       418  
Opened
     —       —  
Closed
     (1 )     (3 )
 
                
Retail locations — end of period
     393       415  
 
                
RETAIL LOCATIONS BY STATE
                                 
    September 30,   June 30,
    2010   2009   2010   2009
Alabama
     25       25       25       25  
Florida
     31       36       31       39  
Georgia
     60       61       60       61  
Illinois
     74       78       74       78  
Indiana
     17       18       17       18  
Mississippi
     8       8       8       8  
Missouri
     12       12       12       12  
Ohio
     27       27       27       27  
Pennsylvania
     16       17       16       17  
South Carolina
     26       27       26       27  
Tennessee
     19       20       19       20  
Texas
     78       86       79       86  
 
                                
Total
     393       415       394       418  
 
                                

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