8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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): May 10, 2007 (May 10, 2007)

FIRST ACCEPTANCE CORPORATION

(Exact Name of Registrant as Specified in Charter)

Delaware	1-6802	75-1328153
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer 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)

3813 Green Hills Village Drive
Nashville, Tennessee 37215

(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 May 10, 2007, First Acceptance Corporation issued a press release announcing its results of operations for the third quarter ended March 31, 2007 of its fiscal year ending June 30, 2007. The text of the release is set forth in Exhibit 99.

Item 7.01. Regulation FD Disclosure.

     On May 10, 2007, First Acceptance Corporation issued a press release announcing its results of operations for the third quarter ended March 31, 2007 of its fiscal year ending June 30, 2007. The text of the release is set forth in Exhibit 99.

Item 9.01. Financial Statements and Exhibits.

     (d) Exhibits

99 Press release dated May 10, 2007

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
	President and Chief Executive Officer

Date: May 10, 2007

INDEX TO EXHIBITS

Exhibit No.	Description
99	Press release dated May 10, 2007

EX-99.1

EXHIBIT 99

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

First Acceptance Corporation Reports Third Quarter Financial Results

NASHVILLE, TN, May 10, 2007 /Businesswire-FirstCall/ — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the third quarter ended March 31, 2007 of its fiscal year ending June 30, 2007.

     Revenues for the three months ended March 31, 2007 increased 31% to $92.0 million, from $70.1 million in the same period last year. Net income for the three months ended March 31, 2007 was $3.1 million, or $0.06 per share on a fully-diluted basis, compared with net income of $5.9 million, or $0.12 per share on a fully-diluted basis, for the same period of fiscal 2006.

     Revenues for the nine months ended March 31, 2007 increased 47% to $255.4 million, from $173.8 million in the same period last year. Net income for the nine months ended March 31, 2007 was $7.3 million, or $0.15 per share on a fully-diluted basis, compared with net income of $13.4 million, or $0.27 per share on a fully-diluted basis, for the same period of fiscal 2006. Net income for the three and nine-month periods ended March 31, 2007 was adversely impacted by an increase in the loss and loss adjustment expense ratio.

     Premiums earned increased by $24.1 million, or 44%, to $79.3 million for the three months ended March 31, 2007, from $55.1 million for the three months ended March 31, 2006. The increase was due primarily to the development of additional retail locations. Approximately 67% of the premium growth was in Florida and Texas, where the Company opened 81 locations in fiscal year 2006, and Chicago, where the Company acquired 72 locations in January 2006. The total number of insured policies in force at March 31, 2007 increased 32% over the same date in 2006 from 187,048 to 247,034. At March 31, 2007, the Company operated 468 retail locations (or “stores”) compared with 447 stores at March 31, 2006.

     For the nine months ended March 31, 2007, premiums earned increased by $76.4 million, or 54%, to $219.1 million, from $142.7 million for the nine months ended March 31, 2006. Approximately 75% of the premium growth was in Florida, Texas and Illinois.

     The loss and loss adjustment expense ratio was 75.9% for the three months ended March 31, 2007 compared with 69.6% for the same period last year. The increase in the ratio was the result of a change in the Company’s business mix resulting from premium growth in our emerging states of Florida and Texas where the Company anticipated higher loss ratios and adverse development related to prior accident quarters of approximately $2.3 million. The adverse development primarily related to losses occurring in the preceding accident quarter and was the result of an unanticipated increase in the frequency of Personal Injury Protection (“PIP”) losses in Florida and an unexpected increase in the paid severity of physical and property damage losses in certain states. Excluding this adverse development, the loss and loss adjustment expense ratio for the current quarter was 73.1%, which is an improvement over the re-estimated calendar 2006 accident year ratio of 74.3%, primarily as a result of recent premium rate actions.

     The loss and loss adjustment expense ratio was 76.5% for the nine months ended March 31, 2007 compared with 68.2% for the same period last year. In addition to the factors noted above, the Company had previously reported that the three months ended September 30, 2006

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included adverse development related to prior accident quarters of approximately $3.7 million. This adverse development related primarily to the estimation of the severity of losses in Florida and Texas, where the Company had significant growth during 2006 and Georgia where the Company reduced its physical damage premium rates effective January 2006. The Company increased premium rates in Florida (effective in December 2006), in South Carolina (effective in both January and March 2007), and in Georgia (effective in March 2007). The Company is currently in the process of reviewing its rates in Pennsylvania and Texas.

     The expense ratio decreased from 19.3% and 20.6% for the three and nine-month periods ended March 31, 2006, respectively, to 18.7% for the same periods this year. These decreases are primarily the result of the increase in premiums earned from new stores without a corresponding increase in their fixed operating costs (such as advertising, rent and base compensation of employee-agents). The combined ratio increased to 94.6% for the three months ended March 31, 2007 from 88.9% for the three months ended March 31, 2006, and to 95.2% for the nine months ended March 31, 2007 from 88.8% for the nine months ended March 31, 2006, primarily due the increase in the loss and loss adjustment expense ratio discussed above.

About First Acceptance Corporation

     First Acceptance Corporation provides non-standard private passenger automobile insurance, primarily through employee-agents. At March 31, 2007, the Company leased and operated 468 retail offices in 12 states. The Company’s 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 in the Company’s Annual Report on Form 10-K 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 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
Condensed Consolidated Statements of Income
($000s EXCEPT PER SHARE DATA)
(Unaudited)

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2007			2006		2007			2006
Revenues:
Premiums earned	$	79,282		$	55,147	$	219,126		$	142,717
Fee income		10,412			7,311		29,179			20,340
Transaction service fee		—			3,100		850			3,100
Gains on sales of foreclosed real estate		—			2,817		—			3,638
Investment income		2,292			1,646		6,336			3,961
(Losses) gains on sales of investments		(3	)		47		(85	)		51
	$	91,983		$	70,068	$	255,406		$	173,807
Costs and expenses:
Losses and loss adjustment expenses	$	60,202		$	38,374	$	167,508		$	97,303
Insurance operating expenses		25,244			21,046		71,082			52,774
Other operating expenses		560			742		2,186			1,964
Stock-based compensation		295			72		752			418
Depreciation and amortization		404			346		1,192			779
Interest expense		445			457		1,275			457
	$	87,150		$	61,037	$	243,995		$	153,695
Income before income taxes	$	4,833		$	9,031	$	11,411		$	20,112
Provision for income taxes		1,767			3,167		4,150			6,735
Net income	$	3,066		$	5,864	$	7,261		$	13,377
Net income per share:
Basic	$	0.06		$	0.12	$	0.15		$	0.28
Diluted	$	0.06		$	0.12	$	0.15		$	0.27
Number of shares used to calculate net income per share:
Basic		47,603			47,510		47,578			47,474
Diluted		49,691			49,570		49,666			49,541

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
($000s EXCEPT PER SHARE DATA)
(Unaudited)

	March 31,		June 30,
	2007		2006
ASSETS
Fixed maturities, available-for-sale, at market value	$	162,084	$	127,828
Cash and cash equivalents		29,522		31,534
Premiums and fees receivable		83,676		64,074
Reinsurance recoverables		688		1,344
Deferred tax asset		44,405		48,068
Other assets		12,087		12,171
Foreclosed real estate held for sale		234		87
Deferred acquisition costs		6,052		5,330
Goodwill and identifiable intangible assets		144,596		143,870
TOTAL		483,344	$	434,306
LIABILITIES AND STOCKHOLDERS’ EQUITY
Loss and loss adjustment expense reserves		77,019		62,822
Unearned premiums and fees		102,665		78,331
Notes payable and capitalized lease obligations		24,931		24,026
Other liabilities		12,937		15,704
Total liabilities		217,552		180,883
Total stockholders’ equity		265,792		253,423
TOTAL	$	483,344	$	434,306
Book value per share	$	5.58	$	5.33

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
($000s EXCEPT PER SHARE DATA)
(Unaudited)

GROSS PREMIUMS EARNED BY STATE

	Three Months Ended March 31,								Nine Months Ended March 31,
	2007		2006			Change			2007		2006			Change
						(in thousands)
Gross premiums earned:
Georgia	$	18,087	$	17,409		$	678		$	52,863	$	51,481		$	1,382
Florida		14,993		8,028			6,965			40,833		15,241			25,592
Illinois		8,410		2,196			6,214			22,681		2,574			20,107
Alabama		7,845		7,426			419			22,417		21,357			1,060
Texas		8,098		5,025			3,073			22,051		10,327			11,724
Tennessee		6,082		6,082			—			17,865		18,293			(428	)
Ohio		4,289		3,613			676			12,132		10,184			1,948
South Carolina		4,520		331			4,189			9,361		365			8,996
Indiana		2,110		1,689			421			6,040		4,217			1,823
Pennsylvania		1,961		612			1,349			4,717		1,055			3,662
Missouri		1,600		1,409			191			4,487		3,866			621
Mississippi		1,287		1,355			(68	)		3,679		3,833			(154	)
Total gross premiums earned		79,282		55,175			24,107			219,126		142,793			76,333
Premiums ceded		—		(28	)		28			—		(76	)		76
Total net premiums earned	$	79,282	$	55,147		$	24,135		$	219,126	$	142,717		$	76,409

GAAP COMBINED RATIOS (INSURANCE COMPANIES)

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
Loss and loss adjustment expense		75.9	%		69.6	%		76.5	%		68.2	%
Expense (1)		18.7	%		19.3	%		18.7	%		20.6	%
Combined		94.6	%		88.9	%		95.2	%		88.8	%

(1) Insurance operating expenses are reduced by fee income from insureds and the transaction service fee received from the Chicago agencies whose business we acquired.

POLICIES IN FORCE

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2007		2006		2007		2006
Policies in force — beginning of period		217,560		132,861		200,401		119,422
Net increase during period		29,474		54,187		46,633		67,626
Policies in force — end of period		247,034		187,048		247,034		187,048

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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 writing business. In prior years, we previously reported this information based upon the date that a location was leased. Information for all prior periods presented has been restated to conform to the current period’s method of presentation.

RETAIL LOCATIONS BY STATE

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2007			2006			2007			2006
Retail locations — beginning of period		467			351			460			248
Opened		5			28			18			132
Acquired		—			72			—			72
Closed		(4	)		(4	)		(10	)		(5	)
Retail locations — end of period		468			447			468			447

	March 31,				December 31,				June 30,
	2007		2006		2006		2005		2006		2005
Alabama		25		25		25		25		25		25
Florida		42		40		41		35		39		20
Georgia		63		63		63		63		63		62
Illinois		82		86		85		15		86		5
Indiana		27		25		26		26		26		21
Mississippi		8		8		8		8		8		8
Missouri		15		20		15		19		18		14
Ohio		30		30		30		30		30		29
Pennsylvania		25		20		26		18		25		7
South Carolina		28		12		26		4		21		—
Tennessee		20		20		20		20		20		20
Texas		103		98		102		88		99		37
Total		468		447		467		351		460		248

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