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): March 4, 2014
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 |
| |
| (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 March 4, 2014, First Acceptance Corporation issued a press release announcing its results of operations for the quarter and year ended December 31, 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 March 4, 2014 | |
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/ Brent J. Gay | |
|
| ||
| Brent J. Gay | ||
| Chief Financial Officer | ||
Date: March 4, 2014
INDEX TO EXHIBITS
| Exhibit No. |
Description | |
| 99 | Press release dated March 4, 2014 | |
Exhibit 99
First Acceptance Corporation Reports Operating Results for the Quarter and Year Ended December 31, 2013
NASHVILLE, TN, March 4, 2014 – First Acceptance Corporation (NYSE: FAC) today reported its financial results for the quarter and year ended December 31, 2013.
Operating Results
Revenues for the three months ended December 31, 2013 were $59.2 million, compared with $55.1 million for the three months ended December 31, 2012. Income before income taxes for the three months ended December 31, 2013 was $3.4 million, compared with income before income taxes of $0.2 million for the three months ended December 31, 2012. Income before income taxes for the three months ended December 31, 2013 included favorable development of $2.6 million for losses occurring in prior accident quarters, while the income before income taxes for the three months ended December 31, 2012 included a favorable development of $1.8 million. Net income for the three months ended December 31, 2013 was $3.2 million, or $0.07 per share on a diluted basis, compared with net income of $0.1 million, or $0.00 per share on a diluted basis, for the three months ended December 31, 2012.
Revenues for the year ended December 31, 2013 were $240.5 million, compared with $228.1 million for the year ended December 31, 2012. Income before income taxes for the year ended December 31, 2013 was $9.8 million, compared with loss before income taxes of $9.0 million for the year ended December 31, 2012. Income before income taxes for the year ended December 31, 2013 included favorable development of $3.0 million for losses occurring in prior fiscal years, while the loss before income taxes for the year ended December 31, 2012 included the recognition of a net realized gain on investments of $3.2 million, or $0.08 per share on a diluted basis, and unfavorable development of $4.0 million for losses occurring in prior fiscal years. Net income for the year ended December 31, 2013 was $9.2 million, or $0.22 per share on a diluted basis, compared with net loss of $9.0 million, or $0.22 per share on a diluted basis, for the year ended December 31, 2012.
Premiums earned for the three months ended December 31, 2013 were $48.7 million, compared with $46.1 million for the three months ended December 31, 2012. Premiums earned for the year ended December 31, 2013 were $199.7 million, compared with $185.6 million for the year ended December 31, 2012. This improvement was primarily due to our recent pricing actions.
Loss Ratio. The loss ratio was 70.0 percent for the three months ended December 31, 2013, compared with 73.4 percent for the three months ended December 31, 2012. The loss ratio was 71.5 percent for the year ended December 31, 2013, compared with 79.8 percent for the year ended December 31, 2012.
We experienced favorable development related to prior accident quarters of $2.6 million for the three months ended December 31, 2013, compared with favorable development of $1.8 million for the three months ended December 31, 2012. We experienced favorable development related to prior fiscal years of $3.0 million for the year ended December 31, 2013, compared with unfavorable development of $4.0 million for the year ended December 31, 2012.
The favorable loss development for the year ending December 31, 2013 was primarily related to bodily injury claims occurring in accident years 2010 through 2012, partially offset by unfavorable loss and loss adjustment expense development on Florida personal injury protection claims. The unfavorable development for the year ended December 31, 2012 was primarily due to higher than expected severity with Florida personal injury protection claims and with Georgia bodily injury claims in older accident periods, and unfavorable loss adjustment expense development that was primarily related to higher than expected legal expenses for bodily injury claims for accident years 2010 and prior.
Excluding the development related to prior fiscal years, the loss ratios for the years ended December 31, 2013 and 2012 were 73.0 percent and 77.7 percent, respectively. The year-over-year decrease in the loss ratio was primarily due to the impact of pricing actions taken throughout 2012.
Expense Ratio. The expense ratio was 24.0 percent for the three months ended December 31, 2013, compared with 26.4 percent for the three months ended December 31, 2012. The expense ratio was 23.9 percent for the year ended December 31, 2013, compared with 26.7 percent for the year ended December 31, 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 94.0 percent for the three months ended December 31, 2013, compared with 99.8 percent for the three months ended December 31, 2012. The combined ratio was 95.4 percent for the year ended December 31, 2013, compared with 106.5 percent for year ended December 31, 2012.
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About First Acceptance Corporation
We are principally 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 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 March 4, 2014, we leased and operated 356 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 insurance product providing personal property and liability coverage for renters underwritten by us. In addition, during the year ended December 31, 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. In addition to our retail locations, we are able to complete the entire sales process over the phone via our call center or through the internet via our consumer-based website or recently-launched mobile platform. We also sell our products through 10 retail locations operated by independent agents. Additional information about First Acceptance Corporation can be found online at 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, 2013 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)
| Three Months Ended December 31, |
Year Ended December 31, |
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| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| (Unaudited) | ||||||||||||||||
| Revenues: |
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| Premiums earned |
$ | 48,712 | $ | 46,080 | $ | 199,700 | $ | 185,644 | ||||||||
| Commission and fee income |
8,734 | 7,534 | 35,125 | 32,574 | ||||||||||||
| Investment income |
1,699 | 1,443 | 5,716 | 6,599 | ||||||||||||
| Net realized gains (losses) on investments, available-for-sale (includes $7, $22, $(29) and $3,242, respectively, of accumulated other comprehensive income reclassification for unrealized gains (losses)) |
7 | 22 | (29 | ) | 3,242 | |||||||||||
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| 59,152 | 55,079 | 240,512 | 228,059 | |||||||||||||
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| Costs and expenses: |
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| Losses and loss adjustment expenses |
34,115 | 33,805 | 142,839 | 148,223 | ||||||||||||
| Insurance operating expenses |
20,428 | 19,716 | 82,822 | 82,127 | ||||||||||||
| Other operating expenses |
300 | 240 | 987 | 922 | ||||||||||||
| Stock-based compensation |
49 | 97 | 243 | 604 | ||||||||||||
| Depreciation and amortization |
460 | 597 | 2,053 | 2,203 | ||||||||||||
| Interest expense |
437 | 449 | 1,738 | 3,025 | ||||||||||||
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| 55,789 | 54,904 | 230,682 | 237,104 | |||||||||||||
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| Income (loss) before income taxes |
3,363 | 175 | 9,830 | (9,045 | ) | |||||||||||
| Provision (benefit) for income taxes (includes $2, $8, $(10) and $1,135, respectively, of income tax expense from reclassifications items) |
205 | 79 | 650 | (5 | ) | |||||||||||
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| Net income (loss) |
$ | 3,158 | $ | 96 | $ | 9,180 | $ | (9,040 | ) | |||||||
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| Net income (loss) per share: |
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| Basic and diluted |
$ | 0.07 | $ | 0.00 | $ | 0.22 | $ | (0.22 | ) | |||||||
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| Number of shares used to calculate net income (loss) per share: |
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| Basic |
40,946 | 40,877 | 40,930 | 40,861 | ||||||||||||
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| Diluted |
41,161 | 40,938 | 41,092 | 40,861 | ||||||||||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
| December 31, | ||||||||
| 2013 | 2012 | |||||||
| ASSETS |
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| Investments, available-for-sale at fair value (amortized cost of $126,873 and $130,342, respectively) |
$ | 130,248 | $ | 139,046 | ||||
| Cash and cash equivalents |
72,033 | 59,104 | ||||||
| Premiums and fees receivable, net of allowance of $311 and $306 |
46,228 | 45,286 | ||||||
| Limited partnership interests |
7,513 | — | ||||||
| Other assets |
6,471 | 6,190 | ||||||
| Property and equipment, net |
3,512 | 4,656 | ||||||
| Deferred acquisition costs |
2,902 | 3,221 | ||||||
| Identifiable intangible assets |
4,800 | 4,800 | ||||||
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| TOTAL ASSETS |
$ | 273,707 | $ | 262,303 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Loss and loss adjustment expense reserves |
$ | 84,286 | $ | 79,260 | ||||
| Unearned premiums and fees |
55,983 | 55,092 | ||||||
| Debentures payable |
40,301 | 40,261 | ||||||
| Other liabilities |
16,205 | 14,897 | ||||||
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| Total liabilities |
196,775 | 189,510 | ||||||
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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; 40,983 and 40,962 shares issued and outstanding, respectively |
410 | 410 | ||||||
| Additional paid-in capital |
456,993 | 456,705 | ||||||
| Accumulated other comprehensive income |
3,375 | 8,704 | ||||||
| Accumulated deficit |
(383,846 | ) | (393,026 | ) | ||||
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| Total stockholders’ equity |
76,932 | 72,793 | ||||||
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| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 273,707 | $ | 262,303 | ||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
PREMIUMS EARNED BY STATE
| Three Months Ended December 31, |
Year Ended December 31, |
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| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Premiums earned: |
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| Georgia |
$ | 9,098 | $ | 9,373 | $ | 37,957 | $ | 38,500 | ||||||||
| Florida |
7,356 | 6,962 | 30,517 | 26,744 | ||||||||||||
| Texas |
5,986 | 5,432 | 24,051 | 22,481 | ||||||||||||
| Alabama |
5,161 | 4,211 | 20,978 | 17,157 | ||||||||||||
| Illinois |
4,635 | 5,379 | 20,200 | 21,896 | ||||||||||||
| Ohio |
4,662 | 4,046 | 18,225 | 15,788 | ||||||||||||
| South Carolina |
3,767 | 3,231 | 15,301 | 12,637 | ||||||||||||
| Tennessee |
3,018 | 2,848 | 12,334 | 11,819 | ||||||||||||
| Pennsylvania |
2,114 | 2,070 | 8,624 | 8,301 | ||||||||||||
| Indiana |
1,325 | 1,164 | 5,218 | 4,703 | ||||||||||||
| Missouri |
956 | 777 | 3,778 | 3,172 | ||||||||||||
| Mississippi |
689 | 634 | 2,718 | 2,638 | ||||||||||||
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| Total gross premiums earned |
48,767 | 46,127 | 199,901 | 185,836 | ||||||||||||
| Premiums ceded to reinsurer |
(55 | ) | (47 | ) | (201 | ) | (192 | ) | ||||||||
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| Total net premiums earned |
$ | 48,712 | $ | 46,080 | $ | 199,700 | $ | 185,644 | ||||||||
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COMBINED RATIOS (INSURANCE OPERATIONS)
| Three Months Ended December 31, |
Year Ended December 31, |
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| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Loss |
70.0 | % | 73.4 | % | 71.5 | % | 79.8 | % | ||||||||
| Expense |
24.0 | % | 26.4 | % | 23.9 | % | 26.7 | % | ||||||||
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| Combined |
94.0 | % | 99.8 | % | 95.4 | % | 106.5 | % | ||||||||
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POLICIES IN FORCE
| Three Months Ended December 31, |
Year Ended December 31, |
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| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Policies in force – beginning of period |
157,199 | 148,799 | 147,500 | 141,862 | ||||||||||||
| Net change during period |
(3,016 | ) | (1,299 | ) | 6,683 | 5,638 | ||||||||||
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| Policies in force – end of period |
154,183 | 147,500 | 154,183 | 147,500 | ||||||||||||
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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 December 31, |
Year Ended December 31, |
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| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Retail locations – beginning of period |
363 | 369 | 369 | 382 | ||||||||||||
| Opened |
— | — | — | — | ||||||||||||
| Closed |
(3 | ) | — | (9 | ) | (13 | ) | |||||||||
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| Retail locations – end of period |
360 | 369 | 360 | 369 | ||||||||||||
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RETAIL LOCATIONS BY STATE
| December 31, | September 30, | |||||||||||||||||||
| 2013 | 2012 | 2011 | 2013 | 2012 | ||||||||||||||||
| Alabama |
24 | 24 | 24 | 24 | 24 | |||||||||||||||
| Florida |
30 | 30 | 30 | 30 | 30 | |||||||||||||||
| Georgia |
60 | 60 | 60 | 60 | 60 | |||||||||||||||
| Illinois |
61 | 63 | 67 | 62 | 63 | |||||||||||||||
| Indiana |
17 | 17 | 17 | 17 | 17 | |||||||||||||||
| Mississippi |
7 | 7 | 8 | 7 | 7 | |||||||||||||||
| Missouri |
11 | 11 | 12 | 11 | 11 | |||||||||||||||
| Ohio |
27 | 27 | 27 | 27 | 27 | |||||||||||||||
| Pennsylvania |
16 | 16 | 16 | 16 | 16 | |||||||||||||||
| South Carolina |
25 | 26 | 26 | 26 | 26 | |||||||||||||||
| Tennessee |
19 | 19 | 20 | 19 | 19 | |||||||||||||||
| Texas |
63 | 69 | 75 | 64 | 69 | |||||||||||||||
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| Total |
360 | 369 | 382 | 363 | 369 | |||||||||||||||
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SOURCE: First Acceptance Corporation
INVESTOR RELATIONS CONTACT:
Michael J. Bodayle
615.844.2885
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