EX-99 2 g91902exv99.txt EX-99 PRESS RELEASE Exhibit 99 PRESS RELEASE Source: First Acceptance Corporation Contact: Chuck Hamilton (615) 844-2811 FIRST ACCEPTANCE CORPORATION REPORTS FIRST QUARTER FINANCIAL RESULTS NASHVILLE, TN, November 11, 2004 /PRNewswire-FirstCall/ -- First Acceptance Corporation (NYSE: FAC) today reported its financial results for the first quarter ended September 30, 2004 of its fiscal year ending June 30, 2005. ACTUAL RESULTS Net income for the three months ended September 30, 2004 was $3.9 million, or $0.08 per share on a fully-diluted basis, compared to $0.9 million, or $0.04 per share on a fully-diluted basis, for the same period of fiscal 2004. Total revenues grew from $1.5 million in the first quarter of fiscal 2004 to $30.9 million in the first quarter of fiscal 2005 as a result of the inclusion of USAuto's non-standard automobile insurance operations, which were acquired effective April 30, 2004. Total weighted average diluted shares increased from 21.2 million in the first quarter of fiscal 2004 to 48.0 million in the first quarter of fiscal 2005 as a result of the additional shares issues in the April 2004 rights offering and the USAuto acquisition. PRO FORMA RESULTS On a pro forma basis assuming that the acquisition of USAuto took place on July 1, 2003, for the three months ended September 30, 2003, total revenues were $24.5 million, net income was $3.1 million and, on a fully-diluted basis, net income per share was $0.07. On a pro forma basis, as compared to the same period last year, total revenues and net income for the three months ended September 30, 2004 both increased by 26% over the fiscal 2004 period. INSURANCE OPERATIONS - KEY RATIOS - The Company's loss ratio was 61.9% for the three months ended September 30, 2004, which improved from a 68.1% loss ratio for the same period last year on a pro forma basis. Similarly, the Company's combined ratio improved to 75.5% from 78.3% for the same periods. - OFFICE EXPANSION - During the three months ended September 30, 2004, the Company opened 16 new offices, compared to 13 offices opened during the three months ended June 30, 2004 and four new offices opened during the first quarter of fiscal 2004 by USAuto. As of October 31, 2004, the Company operated 165 retail offices in seven states. - PREMIUM GROWTH - Comparing the actual results for the three months ended September 30, 2004 to the pro forma results for the same period last year, net premiums earned increased by 79% to $21.7 million from $12.1 million. The increase was driven by (1) writing more of the Company's Georgia business through the Company's insurance company subsidiaries rather than through the Company's managing general agency operations; (2) increasing the percentage of reinsurance assumed on business written in Alabama from 15% to 50% effective February 2004; and (3) non-renewing the Company's 50% quota-share reinsurance effective September 1, 2004. In addition to these factors, the number of policies in force at September 30, 2004 increased 12% over the same date last year. REAL ESTATE OPERATIONS There were no sales of foreclosed real estate held for sale during the three months ended September 30, 2004. However, on July 7, 2004, the property and deed for 41 acres the Company owned in Arlington, Texas was taken by the City of Arlington upon foreclosure of a tax lien with no recourse to the Company. An accrual of $433,000 for potential liability for taxes was reversed during the three months ended September 30, 2004. The Company has six parcels of land remaining to be sold in the San Antonio area, totaling 310 acres, with a book value of $1.1 million at September 30, 2004. CASH AND INVESTED ASSETS During the three months ended September 30, 2004, the Company contributed $2.0 million to the statutory capital and surplus of its two insurance company subsidiaries, USAuto Insurance Company Inc. and Village Auto Insurance Company Inc., to support additional premium writings. At September 30, 2004, the Company held unrestricted cash and investments of $20.4 million that is available for general corporate purposes and to provide support for increased premium writings of the insurance operations. ABOUT FIRST ACCEPTANCE CORPORATION First Acceptance Corporation began its operations as Liberte Investors, Inc. in 1986. Its insurance subsidiary, USAuto, which began operations in 1995, provides non-standard private passenger automobile insurance, primarily through employee-agents in 165 retail offices in seven states. The Company's insurance company subsidiaries are licensed to do business in 22 states. As previously announced, the Company will hold a conference call on November 15, 2004 to present these financial results at 10:30 a.m., Eastern Standard Time. Investors may participate in the conference call by calling 800-468-9733 (U.S./Canada) or 706-634-8250 (International). This press release contains forward-looking statements. These statements, which have been included in reliance on the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, involve risks and uncertainties. Investors are hereby cautioned that these statements may be affected by the important factors, among others, set forth in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2004 and its 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 review any forward-looking statement, whether as a result of new information, future developments or otherwise. 2 FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME ($000S EXCEPT PER SHARE DATA) (UNAUDITED)
ACTUAL PRO FORMA (1) ------ ------------- THREE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 2004 2003 2003 ---- ---- ---- REVENUES: Premiums earned $ 21,685 $ -- $ 12,145 Commissions and fees 6,672 -- 7,788 Ceding commissions from reinsurer 1,937 -- 2,827 Gains on sales of foreclosed real estate -- 1,310 1,310 Investment income 609 239 383 Other -- -- 1 ------- ------- ---------- Total revenues 30,903 1,549 24,454 ------- ------- ---------- EXPENSES: Losses and loss adjustment expenses 13,430 -- 8,276 Insurance operating expenses 10,406 -- 9,863 Other operating expenses 369 560 369 Stock-based compensation 61 102 -- Depreciation and amortization 669 7 795 Interest expense 70 -- 70 ------- ------- ---------- Total expenses 25,005 669 19,373 ------- ------- ---------- Income before income taxes 5,898 880 5,081 Income tax expense 2,034 -- 1,982 ------- ------- ---------- Net income $ 3,864 $ 880 $ 3,099 ======= ======= ========== Basic net income per share $ 0.08 $ 0.04 $ 0.07 Diluted net income per share $ 0.08 $ 0.04 $ 0.07 Weighted average basic shares 46,659 20,589 46,218 Weighted average diluted shares 48,041 21,211 46,929
(1) Pro forma results give effect to the USAuto acquisition and related transactions as if they had been consummated on July 1, 2003. The pro forma results also give effect to the elimination of certain expenses that have been discontinued directly as a result of the acquisition, such as the compensation expense of terminated employees. 3 FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - BY BUSINESS SEGMENT ($000S EXCEPT PER SHARE DATA) (UNAUDITED)
ACTUAL PRO FORMA (1) ------ ------------- THREE MONTHS ENDED THREE MONTHS ENDED INSURANCE SEPTEMBER 30, SEPTEMBER 30, --------- ------------- ------------- 2004 2003 2003 ---- ---- ---- REVENUES: Premiums earned $ 21,685 $ -- $ 12,145 Commissions and fees 6,672 -- 7,788 Ceding commissions from reinsurer 1,937 -- 2,827 Investment income 355 -- 233 Other -- -- 1 -------- -------- ------- Total revenues 30,649 -- 22,994 -------- -------- ------- EXPENSES: Losses and loss adjustment expenses 13,430 -- 8,276 Operating expenses 10,406 -- 9,863 Depreciation and amortization 669 -- 795 -------- -------- ------- Total expenses 24,505 -- 18,934 -------- -------- ------- Income before income taxes $ 6,144 $ -- $ 4,060 ======== ======== =======
ACTUAL PRO FORMA (1) ------ ------------- THREE MONTHS ENDED THREE MONTHS ENDED REAL ESTATE AND CORPORATE (2) SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 2004 2003 2003 ---- ---- ---- REVENUES: Gains on sales of foreclosed real estate $ -- $ 1,310 $ 1,310 Investment income 254 239 150 --------- ------- ------- Total revenues 254 1,549 1,460 --------- ------- ------- EXPENSES: Operating expenses 369 560 369 Stock-based compensation 61 102 -- Depreciation -- 7 -- Interest expense 70 -- 70 --------- ------- ------- Total expenses 500 669 439 --------- ------- ------- (Loss) income before income taxes $ (246) $ 880 $ 1,021 ========= ======= =======
(1) Pro forma results give effect to the USAuto acquisition and related transactions as if they had been consummated on July 1, 2003. The pro forma results also give effect to the elimination of certain expenses that have been discontinued directly as a result of the acquisition, such as the compensation expense of terminated employees. (2) Includes activities related to acquiring an operating company and disposing of foreclosed real estate held for sale in addition to interest expense associated with all debt. 4 FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ($000S EXCEPT PER SHARE DATA) (UNAUDITED)
SEPTEMBER 30, JUNE 30, 2004 2004 ---- ---- ASSETS Fixed maturities, available-for-sale, at market value $ 43,303 $ 33,243 Investment in mutual fund, at market value 10,196 -- Cash and cash equivalents 24,654 38,352 Premiums and fees receivable 33,079 32,076 Reinsurance receivables 12,179 24,681 Deferred tax asset 43,291 45,493 Other assets 9,421 7,800 Foreclosed real estate held for sale 1,108 1,108 Goodwill and identifiable intangible assets 102,534 102,914 ------- ------- TOTAL $ 279,765 $ 285,667 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Total policy liabilities 67,401 63,867 Amounts due to reinsurers and insurance companies 1,841 13,750 Note payable to financial institution 3,750 4,000 Other liabilities 8,066 9,824 ----- ----- Total liabilities 81,058 91,441 Total stockholders' equity 198,707 194,226 ------- ------- TOTAL $ 279,765 $ 285,667 ========= ========= Book value per share $4.26 $4.17
5 FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES SUPPLEMENTAL DATA ($000S) (UNAUDITED)
GROSS PREMIUMS EARNED BY STATE ACTUAL PRO FORMA (1) ------ ------------- THREE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- State: 2004 2003 2003 ------ ---- ---- ---- Insurance company subsidiaries: Georgia $ 15,986 $ -- $ 12,341 Tennessee 6,401 -- 6,171 Ohio 2,017 -- 1,060 Mississippi 961 -- 948 Missouri 890 -- 702 Indiana 134 -- -- -------- --------- -------- Total insurance company subsidiaries $ 26,389 $ -- $ 21,222 ========= ========= ========= MGA subsidiaries: Alabama $ 6,309 $ -- $ 5,868 Georgia 919 -- 4,507 -------- --------- -------- Total MGA subsidiaries $ 7,228 $ -- $ 10,375 ========= ========= =========
NET PREMIUMS EARNED BY STATE ACTUAL PRO FORMA (1) ------ ------------- THREE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- State: 2004 2003 2003 ------ ---- ---- ---- Georgia $ 11,232 $-- $ 6,658 Tennessee 4,344 -- 3,128 Alabama 3,284 -- 971 Ohio 1,393 -- 541 Mississippi 683 -- 500 Missouri 616 -- 347 Indiana 133 -- -- -------- ----- -------- Total $ 21,685 $-- $ 12,145 ======== ===== ========
GAAP COMBINED RATIOS (INSURANCE COMPANIES) ACTUAL PRO FORMA (1) ------ ------------- THREE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 2004 2003 2003 ---- ---- ---- Loss and loss adjustment expense 61.9% -- 68.1% Expense (2) 13.6% -- 10.2% ----- ----- ----- 75.5% -- 78.3% ===== ===== =====
(1) Pro forma results give effect to the USAuto acquisition and related transactions as if they had been consummated on July 1, 2003. The pro forma results also give effect to the elimination of certain expenses that have been discontinued directly as a result of the acquisition, such as the compensation expense of terminated employees. (2) Insurance operating expenses are reduced by fee income from insureds and ceding commissions received from reinsurer as compensation for the costs incurred in servicing the business on their behalf. 6