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): August 6, 2013

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

(Registrant’s 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 August 6, 2013, First Acceptance Corporation issued a press release announcing its results of operations for the three and six month periods ended June 30, 2013. The text of the release is set forth in Exhibit 99 attached to this Current Report on Form 8-K and is incorporated herein by reference.

The information in this Current Report on Form 8-K is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99	Press release dated August 6, 2013

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/ Michael J. Bodayle
	Michael J. Bodayle
	Acting Chief Financial Officer

Date: August 6, 2013

INDEX TO EXHIBITS

Exhibit No.	Description
99	Press release dated August 6, 2013

EX-99

Exhibit 99

First Acceptance Corporation Reports Operating Results for the Three and Six Month Periods Ended June 30, 2013

NASHVILLE, TN, August 6, 2013 — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the three and six month periods ended June 30, 2013.

Operating Results

Revenues for the three months ended June 30, 2013 were $62.5 million, compared with $57.9 million for the same period in the prior year. Income before income taxes for the three months ended June 30, 2013 was $2.3 million, compared with loss before income taxes of $4.5 million for the same period in the prior year. Net income for the three months ended June 30, 2013 was $2.1 million, or $0.05 per share on a basic and diluted basis, compared with net loss of $4.2 million, or $0.10 per share on a basic and diluted basis, for the same period in the prior year.

Revenues for the six months ended June 30, 2013 were $121.8 million, compared with $113.4 million for the same period in the prior year. Income before income taxes for the six months ended June 30, 2013 was $4.4 million, compared with loss before income taxes of $12.6 million for the same period in the prior year. Net income for the six months ended June 30, 2013 was $4.1 million, or $0.10 per share on a basic and diluted basis, compared with net loss of $12.4 million, or $0.30 per share on a basic and diluted basis, for the same period in the prior year.

Premiums earned for the three months ended June 30, 2013 were $52.1 million, compared with $47.7 million for the same period in the prior year. Premiums earned for the six months ended June 30, 2013 were $101.5 million, compared with $93.1 million for the same period in the prior year. This improvement was primarily due to the continued sales, marketing, customer interaction and product initiatives, in addition to our recent pricing actions.

Loss and Loss Adjustment Expense Ratio. The loss and loss adjustment expense ratio was 75.0 percent for the three months ended June 30, 2013, compared with 83.3 percent for the three months ended June 30, 2012. The loss and loss adjustment expense ratio was 71.5 percent for the six months ended June 30, 2013, compared with 84.4 percent for the six months ended June 30, 2012. We experienced favorable development related to prior periods of $1.4 million for the three months ended June 30, 2013, compared with unfavorable development of $0.8 million for the three months ended June 30, 2012. For the six months ended June 30, 2013, we experienced favorable development related to prior periods of $2.5 million, compared with unfavorable development of $4.0 million for the six months ended June 30, 2012. The favorable development for the three and six month periods ended June 30, 2013 was primarily due to lower than expected development related to property damage liability and no-fault claims that occurred in calendar year 2012, as well as lower than expected development related to bodily injury claims that occurred in calendar years 2011 and 2012.

Excluding the development related to prior periods, the loss and loss adjustment expense ratios for the three months ended June 30, 2013 and 2012 were 77.8 percent and 81.5 percent, respectively. Excluding the development related to prior periods, the loss and loss adjustment expense ratios for the six months ended June 30, 2013 and 2012 were 74.0 percent and 80.1 percent, respectively. The year-over-year decrease in the loss and loss adjustment expense ratio was primarily due to the impact of pricing actions taken throughout 2012.

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Expense Ratio. The expense ratio was 20.6 percent for the three months ended June 30, 2013, compared with 25.8 percent for the three months ended June 30, 2012. The expense ratio was 24.1 percent for the six months ended June 30, 2013, compared with 28.8 percent for the six months ended June 30, 2012. The year-over-year decrease in the expense ratio was primarily due to the increase in premiums earned which resulted in a lower percentage of fixed expenses in our retail operations (such as rent and base salary).

Combined Ratio. The combined ratio was 95.6 percent for the three months ended June 30, 2013, compared with 109.1 percent for the same period in the prior year. For the six months ended June 30, 2013, the combined ratio was 95.6 percent, compared with 113.2 percent for the same period in the prior year.

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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 June 30, 2013, we leased and operated 366 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. In most states, our employee-agents also sell a complementary tenant homeowner insurance product underwritten by us. In addition, during the six months ended June 30, 2013, select retail locations in highly competitive markets in Illinois and Texas began offering non-standard personal automobile insurance serviced and underwritten by other third-party insurance carriers. We are able to complete the entire sales process over the phone or through our consumer-based website. In addition to our retail, call center and website, 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.acceptanceinsurance.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 year ended December 31, 2012 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 and Comprehensive Income (Loss)

(Unaudited)

(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenues:
Premiums earned	$	52,118		$	47,701		$	101,521		$	93,120
Commission and fee income		9,162			8,501			17,759			16,753
Investment income		1,268			1,762			2,544			3,532
Net realized gains (losses) on investments, available-for-sale (includes $(55), $(19), $(42) and $7, respectively, of accumulated other comprehensive income reclassification for unrealized gains (losses))		(55	)		(19	)		(42	)		7
		62,493			57,945			121,782			113,412
Costs and expenses:
Losses and loss adjustment expenses		39,087			39,726			72,592			78,590
Insurance operating expenses		19,909			20,798			42,249			43,560
Other operating expenses		223			224			452			490
Stock-based compensation		56			115			140			410
Depreciation and amortization		537			573			1,108			1,002
Interest expense		427			979			870			1,958
		60,239			62,415			117,411			126,010
Net income (loss) before income taxes		2,254			(4,470	)		4,371			(12,598	)
Provision (benefit) for income taxes (includes $(19), $(7), $(15) and $2, respectively, of income tax expense from reclassifications items)		188			(262	)		281			(183	)
Net income (loss)	$	2,066		$	(4,208	)	$	4,090		$	(12,415	)
Net income (loss) per share:
Basic	$	0.05		$	(0.10	)	$	0.10		$	(0.30	)
Diluted	$	0.05		$	(0.10	)	$	0.10		$	(0.30	)
Number of shares used to calculate net income (loss) per share:
Basic		40,921			40,852			40,915			40,847
Diluted		40,948			40,852			40,942			40,847

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except per share data)

	June 30, 2013			December 31, 2012
	(Unaudited)
ASSETS
Investments, available-for-sale at fair value (amortized cost of $128,065 and $130,342, respectively)	$	132,762		$	139,046
Cash and cash equivalents		74,382			59,104
Premiums and fees receivable, net of allowance of $434 and $306		47,437			45,286
Other assets		7,556			6,190
Property and equipment, net		4,177			4,656
Deferred acquisition costs		3,136			3,221
Identifiable intangible assets		4,800			4,800
TOTAL ASSETS	$	274,250		$	262,303
LIABILITIES AND STOCKHOLDERS’ EQUITY
Loss and loss adjustment expense reserves	$	85,998		$	79,260
Unearned premiums and fees		59,480			55,092
Debentures payable		40,281			40,261
Other liabilities		15,474			14,897
Total liabilities		201,233			189,510
Stockholders’ equity:
Preferred stock, $.01 par value, 10,000 shares authorized		—			—
Common stock, $.01 par value, 75,000 shares authorized; 40,967 and 40,962 shares issued and outstanding, respectively		410			410
Additional paid-in capital		456,866			456,705
Accumulated other comprehensive income		4,677			8,704
Accumulated deficit		(388,936	)		(393,026	)
Total stockholders’ equity		73,017			72,793
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	274,250		$	262,303

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES

Supplemental Data

(Unaudited)

PREMIUMS EARNED BY STATE

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Gross premiums earned:
Georgia	$	9,887		$	9,904		$	19,538		$	19,433
Florida		8,092			6,847			15,713			12,919
Texas		6,168			5,851			11,990			11,528
Alabama		5,523			4,442			10,571			8,670
Illinois		5,327			5,586			10,644			11,124
Ohio		4,684			3,999			9,044			7,802
South Carolina		4,036			3,222			7,694			6,234
Tennessee		3,182			3,058			6,222			6,010
Pennsylvania		2,228			2,100			4,372			4,147
Indiana		1,355			1,203			2,599			2,379
Missouri		982			834			1,870			1,622
Mississippi		703			702			1,361			1,348
Total gross premiums earned		52,167			47,748			101,618			93,216
Premiums ceded to reinsurer		(49	)		(47	)		(97	)		(96	)
Total net premiums earned	$	52,118		$	47,701		$	101,521		$	93,120

COMBINED RATIOS (INSURANCE OPERATIONS)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Loss and loss adjustment expense		75.0	%		83.3	%		71.5	%		84.4	%
Expense		20.6	%		25.8	%		24.1	%		28.8	%
Combined		95.6	%		109.1	%		95.6	%		113.2	%

POLICIES IN FORCE

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013		2012
Policies in force – beginning of period		174,456			170,254			147,176		141,862
Net change during period		(13,411	)		(12,459	)		13,869		15,933
Policies in force – end of period		161,045			157,795			161,045		157,795

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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 retail locations, independent agents, call center and website, and include those sold on behalf of third party carriers. 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.

	June 30,
	2013		2012
Retail locations:
New		77,615		75,819
Renewal		78,117		78,908
		155,732		154,727
Independent agents		1,778		2,117
Call center and website		3,535		951
Total policies in force		161,045		157,795

	June 30,
	2013		2012
Retail locations:
Liability-only		89,871		90,766
Full coverage		65,861		63,961
		155,732		154,727
Independent agents		1,778		2,117
Call center and website		3,535		951
Total policies in force		161,045		157,795

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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 June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Retail locations – beginning of period		367			378			369			382
Opened		—			—			—			—
Closed		(1	)		(9	)		(3	)		(13	)
Retail locations – end of period		366			369			366			369

RETAIL LOCATIONS BY STATE

	June 30,				March 31,				December 31,
	2013		2012		2013		2012		2012		2011
Alabama		24		24		24		24		24		24
Florida		30		30		30		30		30		30
Georgia		60		60		60		60		60		60
Illinois		62		63		62		66		63		67
Indiana		17		17		17		17		17		17
Mississippi		7		7		7		8		7		8
Missouri		11		11		11		12		11		12
Ohio		27		27		27		27		27		27
Pennsylvania		16		16		16		16		16		16
South Carolina		26		26		26		26		26		26
Tennessee		19		19		19		19		19		20
Texas		67		69		68		73		69		75
Total		366		369		367		378		369		382

SOURCE: First Acceptance Corporation

INVESTOR RELATIONS CONTACT:

Michael J. Bodayle

615.844.2885

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