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 10, 2008 (November 10, 2008)

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 10, 2008, First Acceptance Corporation issued a press release announcing its results of operations for the first quarter ended September 30, 2008 of its fiscal year ending June 30, 2009. The text of the release is set forth in Exhibit 99.

Item 7.01. Regulation FD Disclosure.

     On November 10, 2008, First Acceptance Corporation issued a press release announcing its results of operations for the first quarter ended September 30, 2008 of its fiscal year ending June 30, 2009. 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 10, 2008

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 10, 2008

INDEX TO EXHIBITS

Exhibit No.	Description
99	Press release dated November 10, 2008

EX-99

Exhibit 99

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

First Acceptance Corporation Reports Operating Results for the First Quarter Ended September 30, 2008

NASHVILLE, TN, November 10, 2008/Businesswire-FirstCall/ — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the first quarter ended September 30, 2008 of its fiscal year ending June 30, 2009.

Operating Results

     Revenues for the three months ended September 30, 2008 were $71.6 million, compared with $87.2 million in the same period last year. Net income for the three months ended September 30, 2008 was $1.8 million, or $0.04 per share on a diluted basis, compared with net income of $1.9 million, or $0.04 per share on a diluted basis, for the three months ended September 30, 2007. Income before income taxes for the three months ended September 30, 2008 was $3.8 million, which reflects other-than-temporary impairment charges of $1.3 million relating to our investment portfolio.

     Premiums earned for the three months ended September 30, 2008 were $61.8 million, compared with $74.8 million for the three months ended September 30, 2007. The 17% decrease in premiums earned was primarily due to declines in policies written resulting from the weak economic conditions, rate increases taken in a number of states to improve underwriting profitability and the closure of 48 poor performing stores since January 2007. At September 30, 2008, the number of policies in force was 170,555, compared with 212,511 at September 30, 2007. At September 30, 2008, we operated 429 stores, compared with 458 stores at September 30, 2007.

     Approximately 78% of the $13.0 million decline in premiums earned for the three months ended September 30, 2008 was in our Florida, Georgia, Texas and Tennessee markets. These states collectively accounted for 52% of premiums earned during the three months ended September 30, 2008, down from 57% for the same period in the prior year. In addition to the weak economic conditions, the decline in our Florida market was due to a January 1, 2008 rate increase to improve our underwriting profitability.

     Loss and Loss Adjustment Expense Ratio. The loss and loss adjustment expense ratio was 70.7% for the three months ended September 30, 2008, compared with 77.1% for the three months ended September 30, 2007. For the three months ended September 30, 2008, we experienced favorable development of approximately $1.4 million for losses occurring prior to calendar year 2008. For the three months ended September 30, 2007, we did not experience any significant development for prior accident periods. In addition, we did not experience any significant weather-related losses during the three months ended September 30, 2008.

     Excluding the favorable development noted above, the loss and loss adjustment expense ratio for the three months ended September 30, 2008 was 73.0%. The improvement over the same period last year was the result of rate increases taken in early 2008 in our Florida, Illinois, Indiana, Texas and South Carolina markets and the continued improvement in our underwriting and claim handling practices.

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     Expense Ratio. Our expense ratio for the three months ended September 30, 2008 was 21.4%, compared with 19.6% for the three months ended September 30, 2007. This increase was primarily due to the decline in premiums earned discussed above.

     Combined Ratio. The combined ratio decreased to 92.1% for the three months ended September 30, 2008 from 96.7% for the three months ended September 30, 2007.

     Litigation Settlement. As previously reported, we have entered into a settlement agreement relating to the class action litigation pending against us in the State of Georgia, which is subject to approval by the court, and have agreed upon preliminary settlement terms with the plaintiffs in similar litigation pending against us in the State of Alabama. A court hearing to approve the Georgia litigation has been scheduled for November 2008. During the quarter ended June 30, 2008, we had accrued $6.7 million for the costs of certain components of the settlements. At this time, we are still unable to fully estimate the total costs associated with these settlements, and during the quarter ended September 30, 2008, no additional costs of the settlements have been accrued. We are also still in discussions with our insurance carriers regarding coverage for the costs and expenses incurred relating to the litigation settlements and are not able currently to estimate the amount, if any, that we may receive from our insurance carriers.

About First Acceptance Corporation

     First Acceptance Corporation provides non-standard private passenger automobile insurance, primarily through employee-agents. At September 30, 2008, we leased and operated 429 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 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
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

	Three Months Ended
	September 30,
	2008			2007
Revenues:
Premiums earned	$	61,838		$	74,803
Commission and fee income		8,243			9,298
Investment income		2,723			3,027
Other		(1,215	)		30
		71,589			87,158
Costs and expenses:
Losses and loss adjustment expenses		43,732			57,671
Insurance operating expenses		21,446			23,986
Other operating expenses		392			505
Litigation settlement		145			—
Stock-based compensation		495			324
Depreciation and amortization		469			368
Interest expense		1,157			1,341
		67,836			84,195
Income before income taxes		3,753			2,963
Provision for income taxes		1,912			1,071
Net income	$	1,841		$	1,892
Net income per share:
Basic and diluted	$	0.04		$	0.04
Number of shares used to calculate net income per share:
Basic		47,655			47,615
Diluted		49,244			49,536

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

	September 30,		June 30,
	2008		2008
	(Unaudited)
ASSETS
Fixed maturities, available-for-sale at fair value	$	189,040	$	189,570
Cash and cash equivalents		29,101		38,646
Premiums and fees receivable, net		57,662		63,377
Deferred tax asset, net		15,892		17,593
Other assets		15,530		15,053
Deferred acquisition costs		4,690		4,549
Goodwill and identifiable intangible assets		144,442		144,442
TOTAL ASSETS	$	456,357	$	473,230
LIABILITIES AND STOCKHOLDERS’ EQUITY
Loss and loss adjustment expense reserves	$	98,631	$	101,407
Unearned premiums and fees		70,274		77,237
Notes payable and capitalized lease obligations		2,633		4,124
Debentures payable		41,240		41,240
Other liabilities		19,246		23,763
Total liabilities		232,024		247,771
Total stockholders’ equity		224,333		225,459
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	456,357	$	473,230
Book value per share	$	4.67	$	5.03

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)

GROSS PREMIUMS EARNED BY STATE

	Three Months Ended
	September 30,
	2008		2007		Change
	(in thousands)
Premiums earned:
Georgia	$	13,427	$	16,103	$	(2,676	)
Florida		7,616		12,361		(4,745	)
Illinois		7,361		8,169		(808	)
Texas		7,002		8,526		(1,524	)
Alabama		6,572		7,504		(932	)
South Carolina		5,450		5,640		(190	)
Tennessee		4,415		5,522		(1,107	)
Ohio		3,451		4,000		(549	)
Pennsylvania		2,787		2,301		486
Indiana		1,563		1,968		(405	)
Missouri		1,128		1,470		(342	)
Mississippi		1,066		1,239		(173	)
Total premiums earned	$	61,838	$	74,803	$	(12,965	)

COMBINED RATIOS (INSURANCE COMPANIES)

	Three Months Ended
	September 30,
	2008			2007
Loss and loss adjustment expense		70.7	%		77.1	%
Expense (1)		21.4	%		19.6	%
Combined		92.1	%		96.7	%

(1) Insurance operating expenses are reduced by fee income from insureds and, through December 31, 2007, the transaction service fee received from the Chicago agencies whose business we acquired.

POLICIES IN FORCE

	Three Months Ended
	September 30,
	2008			2007
Policies in force — beginning of period		194,079			226,974
Net decrease during period		(23,524	)		(14,463	)
Policies in force — end of period		170,555			212,511

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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,
	2008			2007
Retail locations — beginning of period		431			462
Opened		1			1
Closed		(3	)		(5	)
Retail locations — end of period		429			458

RETAIL LOCATIONS BY STATE

	September 30,				June 30,
	2008		2007		2008		2007
Alabama		25		25		25		25
Florida		39		41		40		41
Georgia		61		62		61		62
Illinois		81		81		80		81
Indiana		19		23		19		24
Mississippi		8		8		8		8
Missouri		13		16		14		15
Ohio		29		30		29		30
Pennsylvania		18		24		19		25
South Carolina		28		28		28		28
Tennessee		20		20		20		20
Texas		88		100		88		103
Total		429		458		431		462

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