EX-99 3 g10453exv99.htm EX-99 PRESS RELEASE DATED NOVEMBER 9, 2007 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, 2007
NASHVILLE, TN, November 9, 2007 /Businesswire-FirstCall/ — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the first quarter ended September 30, 2007 of its fiscal year ending June 30, 2008.
Operating Results
     Revenues for the three months ended September 30, 2007 were $87.2 million compared with $79.1 million for the same period of fiscal 2007. Net income for the three months ended September 30, 2007 was $1.9 million, or $0.04 per share on a diluted basis, compared with net income of $1.5 million, or $0.03 per share on a diluted basis, for the same period in fiscal 2007.
     Premiums earned increased by $6.9 million, or 10%, to $74.8 million for the three months ended September 30, 2007, from $67.9 million for the three months ended September 30, 2006. The increase was primarily due to (1) the premium growth experienced in South Carolina and Texas, where we opened 87 locations in fiscal year 2006, and Chicago, where we acquired 72 locations in January 2006 and (2) an increase in our average premium per policy as a result of recent rate increases. Premiums earned in Georgia and Tennessee were down $1.5 million, or 7%, over the prior year due to softening economic conditions. At September 30, 2007, we operated 458 retail locations (or “stores”) compared with 466 stores at September 30, 2006. Our total number of insured policies in force at September 30, 2007 decreased 2% to 212,511 from 217,308 at September 30, 2006 primarily due to the factors noted above regarding Georgia and Tennessee.
     Loss and Loss Adjustment Expense Ratio. The loss and loss adjustment expense ratio was 77.1% for the three months ended September 30, 2007 and 77.2% for the three months ended September 30, 2006. For the three months ended September 30, 2007, we did not experience any significant adverse development for prior accident periods. The three months ended September 30, 2006 included approximately $3.7 million (5.5% of the ratio) of adverse development related primarily to the estimation of the severity of losses in Florida and Texas, where we had significant growth during 2006, and Georgia, where we reduced our physical damage premium rates effective January 2006.
     Effective October 1, 2007, we began using new rates for Bodily Injury, Medical Payments, and Uninsured Motorists Coverage in Florida, in conjunction with the change in coverage resulting from the expiration of Personal Injury Protection (“PIP”). The state of Florida has reinstated PIP effective January 1, 2008, at which time we anticipate using new higher rates for most of our coverages.
     Expense Ratio. Our expense ratio for the three months ended September 30, 2007 was 19.6%, an increase from 19.2% for the same period in fiscal 2007. This increase was primarily due to the positive impact on the prior year expense ratio from the transaction service fee of $0.6 million, or 0.8%, received during 2006 in connection with servicing the run-off business acquired in our Chicago agency acquisition.

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     Our combined ratio of 96.7% for the three months ended September 30, 2007 increased slightly from 96.4% for the three months ended September 30, 2006 primarily as a result of the higher expense ratio.
About First Acceptance Corporation
     First Acceptance Corporation provides non-standard private passenger automobile insurance, primarily through employee-agents. At September 30, 2007, we leased and operated 458 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 the Company’s 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
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
                 
    Three Months Ended  
    September 30,  
    2007     2006  
Revenues:
                
Premiums earned
   $ 74,803     $ 67,877  
Fee income
     9,298       8,756  
Investment income
     3,027       1,947  
Other
     30       522  
 
            
 
     87,158       79,102  
 
            
Costs and expenses:
                
Losses and loss adjustment expenses
     57,671       52,420  
Insurance operating expenses
     23,986       22,329  
Other operating expenses
     505       1,108  
Stock-based compensation
     324       104  
Depreciation and amortization
     368       393  
Interest expense
     1,341       412  
 
            
 
     84,195       76,766  
 
            
Income before income taxes
     2,963       2,336  
Provision for income taxes
     1,071       843  
 
            
Net income
   $ 1,892     $ 1,493  
 
            
Net income per share:
                
Basic and diluted
   $ 0.04     $ 0.03  
 
            
Number of shares used to calculate net income per share:
                
Basic
     47,615       47,545  
 
            
Diluted
     49,536       49,663  
 
            

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(Unaudited)
                 
    September 30,     June 30,  
    2007     2007  
ASSETS
                
Fixed maturities, available-for-sale, at market value
   $ 182,225     $      176,555  
Cash and cash equivalents
     45,842       34,161  
Premiums and fees receivable, net
     70,538       71,771  
Receivable for securities
     —       19,973  
Deferred tax asset
     30,012       30,936  
Other assets
     15,171       15,838  
Deferred acquisition costs
     5,401       5,166  
Goodwill and identifiable intangible assets
     144,480       144,492  
 
            
TOTAL
   $ 493,669     $ 498,892  
 
            
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Loss and loss adjustment expense reserves
     93,922       91,446  
Unearned premiums and fees
     85,576       88,831  
Notes payable and capitalized lease obligations
     17,048       23,490  
Debentures payable
     41,240       41,240  
Other liabilities
     12,331       14,401  
 
            
Total liabilities
     250,117       259,408  
Total stockholders’ equity
     243,552       239,484  
 
            
TOTAL
   $ 493,669     $ 498,892  
 
            
Book value per share
   $ 5.12     $ 5.03  
 
            

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
PREMIUMS EARNED BY STATE
                                 
    Three Months Ended                
    September 30,                
    2007     2006     Change          
    (in thousands)                  
Premiums earned:
                        
Georgia
   $ 16,103     $ 17,190     $ (1,087 )  
Florida
     12,361       12,229       132  
Texas
     8,526       7,117       1,409  
Illinois
     8,169       6,637       1,532  
Alabama
     7,504       7,289       215  
South Carolina
     5,640       1,822       3,818  
Tennessee
     5,522       5,947       (425 )  
Ohio
     4,000       3,862       138  
Pennsylvania
     2,301       1,186       1,115  
Indiana
     1,968       1,937       31  
Missouri
     1,470       1,430       40  
Mississippi
     1,239       1,231       8  
 
                  
Total premiums earned
   $ 74,803     $ 67,877     $ 6,926  
 
                  
COMBINED RATIOS (INSURANCE COMPANIES)
                 
    Three Months Ended  
    September 30,  
    2007     2006  
Loss and loss adjustment expense
     77.1 %     77.2 %
Expense(1)
    19.6 %     19.2 %
 
            
Combined
    96.7 %     96.4 %
 
            
  (1)   Insurance operating expenses are reduced by fee income from insureds and, through December 31, 2006, the transaction service fee received from the Chicago agencies whose business we acquired.
POLICIES IN FORCE
                         
    Three Months Ended          
    September 30,          
    2007     2006          
Policies in force — beginning of period
     226,974       200,401  
Net (decrease) increase during period
     (14,463 )     16,907  
 
            
Policies in force — end of period
     212,511       217,308  
 
            

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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.
                 
    Three Months Ended          
    September 30,          
    2007     2006          
Retail locations — beginning of period
     462        460  
Opened
     1       9  
Closed
     (5 )     (3 )
 
            
Retail locations — end of period
     458       466  
 
            
RETAIL LOCATIONS BY STATE
                                 
    September 30,     June 30,  
    2007     2006     2007     2006  
Alabama
     25       25       25       25  
Florida
     41       40       41       39  
Georgia
     62       63       62       63  
Illinois
     81       85       81       86  
Indiana
     23       26       24       26  
Mississippi
     8       8       8       8  
Missouri
     16       17       15       18  
Ohio
     30       30       30       30  
Pennsylvania
     24       25       25       25  
South Carolina
     28       26       28       21  
Tennessee
     20       21       20       20  
Texas
     100       100       103       99  
 
                        
Total
     458       466       462       460  
 
                        

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