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 7, 2011
FIRST ACCEPTANCE CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware | 001-12117 | 75-1328153 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
3813 Green Hills Village Drive Nashville, Tennessee |
37215 | |||
(Address of Principal Executive Offices) | (Zip Code) |
(615) 844-2800
(Registrants Telephone Number, Including Area Code)
(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):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | 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 7, 2011, First Acceptance Corporation issued a press release announcing its results of operations for the first quarter ended September 30, 2011 of its fiscal year ending June 30, 2012. The text of the release is set forth in Exhibit 99.
Item 7.01. Regulation FD Disclosure.
On November 7, 2011, First Acceptance Corporation issued a press release announcing its results of operations for the first quarter ended September 30, 2011 of its fiscal year ending June 30, 2012. 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 7, 2011 |
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/ John R. Barnett | |||||
John R. Barnett | ||||||
Senior Vice President of Finance | ||||||
Date: November 7, 2011 |
INDEX TO EXHIBITS
Exhibit No. |
Description | |
99 | Press release dated November 7, 2011 |
Exhibit 99
First Acceptance Corporation Reports Operating Results for the Quarter Ended September 30, 2011
NASHVILLE, TN, November 7, 2011 First Acceptance Corporation (NYSE: FAC) today reported its financial results for the first quarter ended September 30, 2011 of its fiscal year ending June 30, 2012.
Operating Results
Revenues for the three months ended September 30, 2011 were $50.0 million, compared with $53.1 million for the same period in fiscal year 2011. Loss before income taxes for the three months ended September 30, 2011 was $3.6 million, compared with income before income taxes of $0.5 million for the same period in fiscal year 2011. Net loss for the three months ended September 30, 2011 was $3.7 million, or $0.08 per share on a diluted basis, compared with net income of $0.4 million, or $0.01 per share on a diluted basis, for the same period in fiscal year 2011.
Premiums earned for the three months ended September 30, 2011 were $40.5 million, compared with $43.9 million for the same period in fiscal year 2011. The decreases in premiums earned were primarily due to a decline in the number of policies in force (PIF) from 150,175 at September 30, 2010 to 140,930 at September 30, 2011, which was impacted by the closure of underperforming stores. At September 30, 2011, we operated 383 stores, compared with 393 stores at September 30, 2010. Premiums earned were also negatively impacted by an increase in the percentage of PIF with liability-only coverage. Although the number of PIF sold through our open stores decreased from 143,738 at September 30, 2010 to 137,026 at September 30, 2011, for those policies quoted, we have experienced a higher close ratio for the three months ended September 30, 2011 compared with the same period in fiscal year 2011.
Loss and Loss Adjustment Expense Ratio. The loss and loss adjustment expense ratio was 82.1 percent for the three months ended September 30, 2011, compared with 73.0 percent for the three months ended September 30, 2010. We experienced unfavorable development related to prior fiscal years of $1.1 million for the three months ended September 30, 2011, compared with favorable development of $2.1 million for the three months ended September 30, 2010. The unfavorable development for the three months ended September 30, 2011 was primarily due to higher than expected loss adjustment expense related to bodily injury and no-fault claims that occurred in fiscal years 2009 and 2010.
Excluding the development related to prior periods, the loss and loss adjustment expense ratios for the three months ended September 30, 2011 and 2010 were 79.5 percent and 77.7 percent, respectively. The year-over-year increase in the loss and loss adjustment expense ratio was primarily due to higher loss and loss adjustment expense driven by an increase in bodily injury frequency, as well as, higher losses for comprehensive coverage.
We have substantially completed the process of implementing a new multivariate pricing program in all states in which we operate. We believe this new pricing program provides us with greater pricing segmentation and improves our pricing relative to the risk we are insuring. Currently, approximately 43 percent of our PIF have been underwritten using this new pricing program, which has now been implemented in eleven of the twelve states in which we operate. We plan to implement the new pricing program in the single remaining state in which we operate by December 2011.
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Expense Ratio. The expense ratio was 27.5 percent for the three months ended September 30, 2011, compared with 25.5 percent for the three months ended September 30, 2010. The year-over-year increase in the expense ratio was due to the decrease in premiums earned.
Combined Ratio. The combined ratio was 109.6 percent for the three months ended September 30, 2011, compared with 98.5 percent for the same period in fiscal year 2011.
2011 Annual Meeting of Stockholders
Our 2011 annual meeting of stockholders will be held on Tuesday, November 15, 2011, in Nashville, Tennessee. Further details can be found online at www.sec.gov which contains our Notice of 2011 Annual Meeting of Stockholders and Proxy Statement electronic filing.
About First Acceptance Corporation
We are a retailer, servicer and underwriter of non-standard personal automobile insurance based in Nashville, Tennessee. We currently write non-standard personal automobile insurance in 12 states and are licensed as an insurer in 13 additional states. Non-standard personal automobile insurance is made available to individuals who are categorized as non-standard because of their inability or unwillingness to obtain standard insurance coverage due to various factors, including payment history, payment preference, failure in the past to maintain continuous insurance coverage, driving record and/or vehicle type, and in most instances who are required by law to buy a minimum amount of automobile insurance. At September 30, 2011, we leased and operated 383 retail locations, staffed with employee-agents. Our employee-agents primarily sell non-standard personal automobile insurance products underwritten by us, as well as certain commissionable ancillary products and other insurance products. In select markets, we also sell our products through 13 retail locations operated by independent agents. 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 Item 1A. of our Annual Report on Form 10-K for the fiscal year ended June 30, 2011 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. Except as required by law, 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
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months
Ended September 30, |
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2011 | 2010 | |||||||
Revenues: |
||||||||
Premiums earned |
$ | 40,505 | $ | 43,934 | ||||
Commission and fee income |
7,500 | 7,276 | ||||||
Investment income |
2,021 | 2,137 | ||||||
Net realized losses on investments, available for sale |
(57 | ) | (224 | ) | ||||
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49,969 | 53,123 | |||||||
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Costs and expenses: |
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Losses and loss adjustment expenses |
33,248 | 32,057 | ||||||
Insurance operating expenses |
18,625 | 18,508 | ||||||
Other operating expenses |
244 | 387 | ||||||
Stock-based compensation |
91 | 192 | ||||||
Depreciation and amortization |
344 | 476 | ||||||
Interest expense |
990 | 991 | ||||||
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53,542 | 52,611 | |||||||
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Income (loss) before income taxes |
(3,573 | ) | 512 | |||||
Provision for income taxes |
115 | 120 | ||||||
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Net income (loss) |
$ | (3,688 | ) | $ | 392 | |||
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Net income (loss) per share: |
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Basic and diluted |
$ | (0.08 | ) | $ | 0.01 | |||
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Number of shares used to calculate net income (loss) per share: |
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Basic |
48,227 | 48,037 | ||||||
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Diluted |
48,227 | 48,509 | ||||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
September 30, | June 30, | |||||||
2011 | 2011 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Investments, available-for-sale at fair value (amortized cost of $171,649 and $177,300, respectively) |
$ | 181,989 | $ | 186,815 | ||||
Cash and cash equivalents |
28,055 | 29,305 | ||||||
Premiums and fees receivable, net of allowance of $418 and $406 |
42,834 | 40,447 | ||||||
Other assets |
8,012 | 7,999 | ||||||
Property and equipment, net |
2,847 | 2,533 | ||||||
Deferred acquisition costs |
3,705 | 3,305 | ||||||
Goodwill |
21,090 | 21,090 | ||||||
Identifiable intangible assets |
4,800 | 4,800 | ||||||
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TOTAL ASSETS |
$ | 293,332 | $ | 296,294 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Loss and loss adjustment expense reserves |
$ | 68,934 | $ | 68,424 | ||||
Unearned premiums and fees |
52,413 | 50,772 | ||||||
Debentures payable |
41,240 | 41,240 | ||||||
Other liabilities |
12,026 | 13,630 | ||||||
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Total liabilities |
174,613 | 174,066 | ||||||
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Stockholders equity: |
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Preferred stock, $.01 par value, 10,000 shares authorized |
| | ||||||
Common stock, $.01 par value, 75,000 shares authorized; 47,998 and 48,458 shares issued and outstanding, respectively |
480 | 485 | ||||||
Additional paid-in capital |
466,136 | 466,777 | ||||||
Accumulated other comprehensive income |
10,340 | 9,515 | ||||||
Accumulated deficit |
(358,237 | ) | (354,549 | ) | ||||
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Total stockholders equity |
118,719 | 122,228 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
$ | 293,332 | $ | 296,294 | ||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
PREMIUMS EARNED BY STATE
Three Months Ended | ||||||||
September 30, | ||||||||
2011 | 2010 | |||||||
Gross premiums earned: |
||||||||
Georgia |
$ | 8,711 | $ | 9,596 | ||||
Texas |
5,219 | 5,910 | ||||||
Illinois |
5,268 | 5,809 | ||||||
Florida |
4,810 | 4,826 | ||||||
Alabama |
3,986 | 4,388 | ||||||
Ohio |
3,367 | 3,227 | ||||||
Tennessee |
2,524 | 2,716 | ||||||
South Carolina |
2,389 | 2,500 | ||||||
Pennsylvania |
2,020 | 2,422 | ||||||
Indiana |
1,049 | 1,146 | ||||||
Missouri |
614 | 739 | ||||||
Mississippi |
593 | 687 | ||||||
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Total gross premiums earned |
40,550 | 43,966 | ||||||
Premiums ceded |
(45 | ) | (32 | ) | ||||
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Total net premiums earned |
$ | 40,505 | $ | 43,934 | ||||
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COMBINED RATIOS (INSURANCE OPERATIONS)
Three Months Ended | ||||||||
September 30, | ||||||||
2011 | 2010 | |||||||
Loss and loss adjustment expense |
82.1 | % | 73.0 | % | ||||
Expense |
27.5 | % | 25.5 | % | ||||
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Combined |
109.6 | % | 98.5 | % | ||||
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POLICIES IN FORCE
Three Months Ended | ||||||||
September 30, | ||||||||
2011 | 2010 | |||||||
Policies in force beginning of period |
144,410 | 154,655 | ||||||
Net decrease during period |
(3,480 | ) | (4,480 | ) | ||||
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Policies in force end of period |
140,930 | 150,175 | ||||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data (continued)
(Unaudited)
POLICIES IN FORCE (continued)
The following tables present total PIF for the insurance operations segregated by policies that were sold through our open and closed retail locations as well as our independent agents. For our retail locations, PIF are further segregated by (i) new and renewal and (ii) liability-only or full coverage. New policies are defined as those policies issued to both first-time customers and customers who have reinstated a lapsed or cancelled policy. Renewal policies are those policies which renewed after completing their full uninterrupted policy term. Liability-only policies are defined as those policies including only bodily injury (or no-fault) and property damage coverages, which are the required coverages in most states. For comparative purposes, the PIF data with respect to closed retail locations for each of the periods presented below includes all retail locations closed at September 30, 2011.
September 30, | ||||||||
2011 | 2010 | |||||||
Retail locations: |
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Open retail locations: |
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New |
61,138 | 65,651 | ||||||
Renewal |
75,888 | 78,087 | ||||||
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137,026 | 143,738 | |||||||
Closed retail locations: |
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New |
119 | 1,094 | ||||||
Renewal |
1,971 | 3,344 | ||||||
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2,090 | 4,438 | |||||||
Independent agents |
1,814 | 1,999 | ||||||
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Total policies in force |
140,930 | 150,175 | ||||||
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September 30, | ||||||||
2011 | 2010 | |||||||
Retail locations: |
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Open retail locations: |
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Liability-only |
83,365 | 87,688 | ||||||
Full coverage |
53,661 | 56,050 | ||||||
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137,026 | 143,738 | |||||||
Closed retail locations: |
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Liability-only |
1,224 | 2,784 | ||||||
Full coverage |
866 | 1,654 | ||||||
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2,090 | 4,438 | |||||||
Independent agents |
1,814 | 1,999 | ||||||
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Total policies in force |
140,930 | 150,175 | ||||||
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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, | ||||||||
2011 | 2010 | |||||||
Retail locations beginning of period |
385 | 394 | ||||||
Opened |
| | ||||||
Closed |
(2 | ) | (1 | ) | ||||
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Retail locations end of period |
383 | 393 | ||||||
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RETAIL LOCATIONS BY STATE
September 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Alabama |
24 | 25 | 24 | 25 | ||||||||||||
Florida |
31 | 31 | 31 | 31 | ||||||||||||
Georgia |
60 | 60 | 60 | 60 | ||||||||||||
Illinois |
67 | 74 | 68 | 74 | ||||||||||||
Indiana |
17 | 17 | 17 | 17 | ||||||||||||
Mississippi |
8 | 8 | 8 | 8 | ||||||||||||
Missouri |
12 | 12 | 12 | 12 | ||||||||||||
Ohio |
27 | 27 | 27 | 27 | ||||||||||||
Pennsylvania |
16 | 16 | 16 | 16 | ||||||||||||
South Carolina |
26 | 26 | 26 | 26 | ||||||||||||
Tennessee |
20 | 19 | 20 | 19 | ||||||||||||
Texas |
75 | 78 | 76 | 79 | ||||||||||||
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Total |
383 | 393 | 385 | 394 | ||||||||||||
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SOURCE: First Acceptance Corporation
INVESTOR RELATIONS CONTACT:
Michael J. Bodayle
615.844.2885
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