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): May 11, 2009 (May 11, 2009)

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))

TABLE OF CONTENTS

EX-99

Item 2.02. Results of Operations and Financial Condition.

     On May 11, 2009, First Acceptance Corporation issued a press release announcing its results of operations for the third quarter and nine months ended March 31, 2009 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 May 11, 2009, First Acceptance Corporation issued a press release announcing its results of operations for the third quarter and nine months ended March 31, 2009 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 May 11, 2009

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: May 11, 2009

INDEX TO EXHIBITS

Exhibit No.	Description
99	Press release dated May 11, 2009

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 and Nine Months Ended March 31, 2009

NASHVILLE, TN, May 11, 2009/Businesswire-FirstCall/ — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the third quarter and nine months ended March 31, 2009 of its fiscal year ending June 30, 2009.

Operating Results

     Revenues for the three months ended March 31, 2009 were $67.1 million, compared with $84.0 million in the same period last year. Income before income taxes for the three months ended March 31, 2009 was $4.0 million, compared with $1.3 million in the same period last year. Net income for the three months ended March 31, 2009 was $2.4 million, or $0.05 per share on a diluted basis, compared with net income of $0.8 million, or $0.02 per share on a diluted basis, for the three months ended March 31, 2008.

     Revenues for the nine months ended March 31, 2009 were $203.8 million, compared with $253.5 million in the same period last year. Income before income taxes for the nine months ended March 31, 2009 was $6.4 million, compared with $4.3 million in the same period last year. Net income for the nine months ended March 31, 2009 was $3.2 million, or $0.07 per share on a diluted basis, compared with a net loss of $9.1 million, or $0.19 per share on a diluted basis, for the nine months ended March 31, 2008.

     The results for the nine months ended March 31, 2009 included charges of $5.2 million associated with the settlement of litigation described below, the recognition of $2.5 million in net realized gains on investments that were sold in order to utilize expiring tax net operating loss carryforwards and $2.0 million of other-than-temporary impairment charges related to investments. The results for the nine months ended March 31, 2008 included an increase in the valuation allowance for our deferred tax asset of $11.6 million, or $0.24 per share on a diluted basis.

     Premiums earned for the three months ended March 31, 2009 were $54.8 million, compared with $72.2 million for the three months ended March 31, 2008. Premiums earned for the nine months ended March 31, 2009 were $171.5 million, compared with $217.5 million for the nine months ended March 31, 2008. The decreases in premiums earned were primarily due to the 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. Rate increases taken in a number of states to improve underwriting profitability and the closure of stores also contributed toward the decreases in premiums earned. At March 31, 2009, the number of policies in force was 173,674, compared with 215,857 at March 31, 2008. At March 31, 2009, we operated 419 stores, compared with 432 stores at March 31, 2008.

     Approximately 67% of the $17.4 million decline in premiums earned for the three months ended March 31, 2009 and approximately 68% of the $46.0 million decline in premiums earned for the nine months ended March 31, 2009 was in our Florida, Georgia, South Carolina and

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Texas markets. Our premiums earned in these states were adversely affected by the weak economic conditions, as well as a decline in used car sales, which have historically been a significant contributor to new policy growth in these markets.

     Loss and Loss Adjustment Expense Ratio. The loss and loss adjustment expense ratio was 71.0% for the three months ended March 31, 2009, compared with 76.6% for the three months ended March 31, 2008. The loss and loss adjustment expense ratio was 70.1% for the nine months ended March 31, 2009, compared with 76.9% for the nine months ended March 31, 2008. We experienced favorable development of approximately $2.7 million and $6.9 million for the three and nine months ended March 31, 2009, respectively, for losses occurring prior to June 30, 2008. For the three and nine months ended March 31, 2008, we did not experience any significant development for losses occurring prior to June 30, 2008. In addition, we did not experience any significant weather-related losses during these periods.

     Excluding the development noted above, the loss and loss adjustment expense ratio for the three and nine months ended March 31, 2009 was 75.9% and 74.1%, respectively. These improvements over the same periods last year were primarily the result of a revision in our estimate of the loss and loss adjustment expense ratio for calendar 2008 which improved from 76.5% at June 30, 2008 to 73.5% at March 31, 2009. We attribute this improvement to the impact of the rate increases taken in early calendar 2008 in Florida, Illinois, Indiana, Texas and South Carolina and the continued improvement in our underwriting and claim handling practices, as well as favorable severity trends most notably in our property damage and physical damage coverages.

     Expense Ratio. Our expense ratio for the three months ended March 31, 2009 was 25.3%, compared with 21.0% for the same period in the prior year. Our expense ratio for the nine months ended March 31, 2009 was 23.9%, compared with 21.2% for the nine months ended March 31, 2008. These increases were primarily due to the declines in premiums earned discussed above.

     Combined Ratio. The combined ratio decreased to 96.3% for the three months ended March 31, 2009 from 97.6% for the three months ended March 31, 2008. The combined ratio decreased to 94.0% for the nine months ended March 31, 2009 from 98.1% for the nine months ended March 31, 2008.

     Litigation Settlement. As previously reported, we entered into a settlement agreement relating to the class action litigation brought against us in the State of Georgia, which was approved by the court in November 2008. In addition, during December 2008, we entered into a settlement agreement with the plaintiffs in similar litigation brought against us in the State of Alabama, which was approved by the court in February 2009. Eligible class members are entitled to certain premium credits or reimbursement certificates pursuant to the terms of the settlement agreements. Based upon our analysis of the premium credits available to class members, we have a remaining accrual of approximately $4.4 million as of March 31, 2009 for currently estimable costs associated with the utilization of available premium credits for Georgia and Alabama class members. We are currently 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.

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About First Acceptance Corporation

     First Acceptance Corporation provides non-standard private passenger automobile insurance, primarily through employee-agents. At March 31, 2009, we leased and operated 419 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						Nine Months Ended
	March 31,						March 31,
	2009			2008			2009		2008
Revenues:
Premiums earned	$	54,845		$	72,209		$	171,506	$	217,496
Commission and fee income		8,115			9,311			24,033		27,596
Investment income		2,410			2,687			7,741		8,573
Net realized gains (losses) on fixed maturities, available-for-sale		1,727			(222	)		486		(181	)
		67,097			83,985			203,766		253,484
Costs and expenses:
Losses and loss adjustment expenses		38,929			55,319			120,214		167,336
Insurance operating expenses		22,021			24,496			64,977		73,662
Other operating expenses		276			487			982		1,751
Litigation settlement		(67	)		440			5,167		440
Stock-based compensation		523			310			1,532		988
Depreciation and amortization		455			454			1,379		1,202
Interest expense		969			1,192			3,159		3,822
		63,106			82,698			197,410		249,201
Income before income taxes		3,991			1,287			6,356		4,283
Provision for income taxes		1,597			529			3,124		13,364
Net income (loss)	$	2,394		$	758		$	3,232	$	(9,081	)
Net income (loss) per share:
Basic and diluted	$	0.05		$	0.02		$	0.07	$	(0.19	)
Number of shares used to calculate net income (loss) per share:
Basic		47,673			47,640			47,662		47,624
Diluted		48,865			48,831			49,030		47,624

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

	March 31,		June 30,
	2009		2008
	(Unaudited)
ASSETS
Fixed maturities, available-for-sale at fair value	$	140,590	$	189,570
Cash and cash equivalents		74,512		38,646
Premiums and fees receivable, net		55,053		63,377
Deferred tax asset, net		15,206		17,593
Other assets		13,398		15,053
Deferred acquisition costs		4,461		4,549
Goodwill and identifiable intangible assets		144,442		144,442
TOTAL ASSETS	$	447,662	$	473,230
LIABILITIES AND STOCKHOLDERS’ EQUITY
Loss and loss adjustment expense reserves	$	92,747	$	101,407
Unearned premiums and fees		68,766		77,237
Notes payable		—		3,913
Debentures payable		41,240		41,240
Other liabilities		18,248		23,974
Total liabilities		221,001		247,771
Total stockholders’ equity		226,661		225,459
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	447,662	$	473,230
Book value per share	$	4.70	$	4.69

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)

GROSS PREMIUMS EARNED BY STATE

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2009		2008		2009		2008
Premiums earned:
Georgia	$	12,273	$	15,237	$	38,045	$	46,475
Illinois		6,736		8,016		20,923		24,116
Florida		6,382		10,762		20,194		33,943
Texas		6,459		8,781		19,593		25,524
Alabama		5,845		7,209		18,305		21,747
South Carolina		4,219		6,195		14,160		17,485
Tennessee		3,650		5,179		11,865		15,869
Ohio		3,182		3,846		9,815		11,660
Pennsylvania		2,883		2,606		8,455		7,267
Indiana		1,359		1,736		4,221		5,510
Missouri		939		1,435		3,023		4,287
Mississippi		918		1,207		2,907		3,613
Total premiums earned	$	54,845	$	72,209	$	171,506	$	217,496

COMBINED RATIOS (INSURANCE COMPANIES)

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2009			2008			2009			2008
Loss and loss adjustment expense		71.0	%		76.6	%		70.1	%		76.9	%
Expense		25.3	%		21.0	%		23.9	%		21.2	%
Combined		96.3	%		97.6	%		94.0	%		98.1	%

POLICIES IN FORCE

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2009		2008		2009			2008
Policies in force — beginning of period		159,557		203,008		194,079			226,974
Net increase (decrease) during period		14,117		12,849		(20,405	)		(11,117	)
Policies in force — end of period		173,674		215,857		173,674			215,857

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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						Nine Months Ended
	March 31,						March 31,
	2009			2008			2009			2008
Retail locations — beginning of period		424			440			431			462
Opened		—			—			1			2
Closed		(5	)		(8	)		(13	)		(32	)
Retail locations — end of period		419			432			419			432

RETAIL LOCATIONS BY STATE

	March 31,				December 31,				June 30,
	2009		2008		2008		2007		2008		2007
Alabama		25		25		25		25		25		25
Florida		39		40		39		40		40		41
Georgia		61		61		61		61		61		62
Illinois		80		80		81		80		80		81
Indiana		18		19		18		22		19		24
Mississippi		8		8		8		8		8		8
Missouri		12		15		12		16		14		15
Ohio		27		29		28		29		29		30
Pennsylvania		17		19		18		19		19		25
South Carolina		27		28		27		28		28		28
Tennessee		20		20		20		20		20		20
Texas		85		88		87		92		88		103
Total		419		432		424		440		431		462

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