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 12, 2015
FIRST ACCEPTANCE CORPORATION
(Exact Name of Registrant as Specified in Charter)
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Delaware |
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001-12117 |
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75-1328153 |
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(State or Other Jurisdiction |
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(Commission |
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(I.R.S. Employer |
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3813 Green Hills Village Drive Nashville, Tennessee |
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37215 |
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(Address of Principal Executive Offices) |
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(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):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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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 May 12, 2015, First Acceptance Corporation issued a press release announcing its results of operations for the quarter ended March 31, 2015. 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
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Exhibit No. |
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Description |
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99 |
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Press release dated May 12, 2015 |
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.
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FIRST ACCEPTANCE CORPORATION |
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By: |
/s/ Brent J. Gay |
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Brent J. Gay |
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Chief Financial Officer |
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Date: May 12, 2015 |
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INDEX TO EXHIBITS
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Exhibit No. |
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Description |
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99 |
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Press release dated May 12, 2015 |
Exhibit 99
First Acceptance Corporation Reports Operating Results for the Quarter Ended March 31, 2015
NASHVILLE, TN, May 12, 2015 – First Acceptance Corporation (NYSE: FAC) today reported its financial results for the quarter ended March 31, 2015.
Operating Results
Income before income taxes for three months ended March 31, 2015 was $0.8 million, compared with income before income taxes of $0.5 million for the three months ended March 31, 2014. Net income was $0.5 million for both the three months ended March 31, 2015 and 2014. Basic and diluted net income per share were $0.01 for both the three months ended March 31, 2015 and 2014.
Joe Borbely, the Company’s President and CEO commented “I am extremely proud of the strong sales results produced by our retail, internet and call center channels during the first quarter. With the February-March tax refund season historically setting the tone for the balance of the year, achieving a 14.2% increase in policies in force has Acceptance positioned for a strong 2015. While we remain challenged by an increased loss ratio, we will continue our focus on pricing initiatives and product design to maintain profitability. On the other hand, through leveraging our predominately fixed cost sales platforms, we were pleased with our 22.8% expense ratio.”
Revenues. Revenues for the three months ended March 31, 2015 increased 20% to $75.1 million from $62.5 million in the same period in the prior year.
Premiums earned increased by $10.9 million, or 21%, to $62.6 million for the three months ended March 31, 2015, from $51.7 million for the three months ended March 31, 2014. This improvement was primarily due to an increase in policies in force from 168,607 at March 31, 2014 to 192,613 at March 31, 2015, in addition to a higher percentage of full coverage policies sold and our recent pricing actions.
Loss Ratio. The loss ratio was 76.5% for the three months ended March 31, 2015, compared with 71.1% for the three months ended March 31, 2014. We experienced favorable development related to prior periods of $1.1 million for the three months ended March 31, 2015, compared with favorable development of $2.9 million for the three months ended March 31, 2014. The favorable development for the three months ended March 31, 2015 was primarily related to bodily injury and uninsured motorist bodily injury claims occurring in accident year 2014.
Excluding the development related to prior periods for the three months ended March 31, 2015 and 2014, the loss ratios were 78.4% and 76.8%, respectively. The year-over-year increase in the loss ratio was primarily due to higher than expected claim frequency and severity across multiple coverages.
Expense Ratio. The expense ratio was 22.8% for the three months ended March 31, 2015, compared with 29.6% for the three months ended March 31, 2014. 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 decreased to 99.3% for the three months ended March 31, 2015 from 100.7% for the three months ended March 31, 2014.
Pending Acquisition
On April 27, the Company announced that it has entered into an agreement to acquire certain assets of Titan Insurance Services, Inc. and Titan Auto Insurance of New Mexico, Inc. These agencies sell private passenger non-standard automobile insurance from 83 retail stores, principally in California, but also in Texas, Arizona, Florida, Nevada and New Mexico.
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 13 states and are licensed as an insurer in 12 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 or driving record and/or vehicle type. In most instances, these individuals are seeking to obtain the minimum amount of automobile insurance required by law.
At May 12, 2015, we leased and operated 355 retail locations and a call center 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
1
coverage for renters underwritten by us. In addition, select retail locations in highly competitive markets in Illinois and Texas offer 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 mobile platform. On a limited basis, we also sell our products through selected 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, 2014 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.
2
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(unaudited)
(in thousands, except per share data)
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Three Months Ended |
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March 31, |
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2015 |
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2014 |
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Revenues: |
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Premiums earned |
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$ |
62,615 |
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$ |
51,748 |
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Commission and fee income |
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11,348 |
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9,175 |
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Investment income |
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1,145 |
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1,537 |
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Net realized (losses) gains on investments, available-for-sale |
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(3 |
) |
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82 |
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75,105 |
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62,542 |
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Costs and expenses: |
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Losses and loss adjustment expenses |
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47,934 |
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36,817 |
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Insurance operating expenses |
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25,194 |
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24,029 |
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Other operating expenses |
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323 |
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233 |
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Stock-based compensation |
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19 |
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46 |
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Depreciation and amortization |
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407 |
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443 |
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Interest expense |
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424 |
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427 |
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74,301 |
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61,995 |
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Income before income taxes |
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804 |
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547 |
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Provision for income taxes |
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318 |
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36 |
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Net income |
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$ |
486 |
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$ |
511 |
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Net income per share: |
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Basic |
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$ |
0.01 |
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$ |
0.01 |
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Diluted |
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$ |
0.01 |
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$ |
0.01 |
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Number of shares used to calculate net income per share: |
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Basic |
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41,016 |
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40,970 |
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Diluted |
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41,304 |
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41,283 |
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3
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
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March 31, |
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December 31, |
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2015 |
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2014 |
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(Unaudited) |
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ASSETS |
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Investments, available-for-sale at fair value (amortized cost of $122,244 and $119,119, respectively) |
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$ |
129,234 |
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$ |
125,085 |
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Cash and cash equivalents |
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110,312 |
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102,429 |
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Premiums and fees receivable, net of allowance of $405 and $392 |
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74,835 |
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56,344 |
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Deferred tax assets, net |
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15,978 |
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16,521 |
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Other investments |
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10,696 |
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10,530 |
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Other assets |
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6,247 |
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6,104 |
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Property and equipment, net |
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2,997 |
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3,173 |
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Deferred acquisition costs |
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4,797 |
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3,459 |
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Identifiable intangible assets |
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4,800 |
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4,800 |
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TOTAL ASSETS |
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$ |
359,896 |
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$ |
328,445 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Loss and loss adjustment expense reserves |
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$ |
104,361 |
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$ |
96,613 |
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Unearned premiums and fees |
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90,511 |
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67,942 |
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Debentures payable |
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40,222 |
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40,211 |
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Other liabilities |
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16,691 |
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16,715 |
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Total liabilities |
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251,785 |
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221,481 |
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Stockholders’ equity: |
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Preferred stock, $.01 par value, 10,000 shares authorized |
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— |
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— |
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Common stock, $.01 par value, 75,000 shares authorized; 41,016 issued and outstanding |
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410 |
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410 |
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Additional paid-in capital |
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457,261 |
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457,242 |
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Accumulated other comprehensive income, net of tax of $1,269 and $923, respectively |
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5,732 |
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5,090 |
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Accumulated deficit |
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(355,292 |
) |
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(355,778 |
) |
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Total stockholders’ equity |
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108,111 |
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106,964 |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
359,896 |
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$ |
328,445 |
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4
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
PREMIUMS EARNED BY STATE
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Three Months Ended |
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March 31, |
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2015 |
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2014 |
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Gross premiums earned: |
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Georgia |
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$ |
11,745 |
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$ |
9,581 |
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Florida |
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9,843 |
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7,963 |
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Texas |
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8,363 |
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6,468 |
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Ohio |
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6,365 |
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5,253 |
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Illinois |
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5,956 |
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4,729 |
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Alabama |
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5,846 |
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5,149 |
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South Carolina |
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4,622 |
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4,008 |
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Tennessee |
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3,619 |
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3,186 |
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Pennsylvania |
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2,260 |
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2,146 |
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Indiana |
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1,846 |
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1,431 |
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Missouri |
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1,402 |
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1,138 |
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Mississippi |
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815 |
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750 |
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Virginia |
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16 |
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— |
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Total gross premiums earned |
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62,698 |
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51,802 |
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Premiums ceded to reinsurer |
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(83 |
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(54 |
) |
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Total net premiums earned |
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$ |
62,615 |
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$ |
51,748 |
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COMBINED RATIOS (INSURANCE OPERATIONS)
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Three Months Ended |
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March 31, |
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2015 |
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2014 |
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Loss |
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76.5 |
% |
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71.1 |
% |
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Expense |
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22.8 |
% |
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29.6 |
% |
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Combined |
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99.3 |
% |
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100.7 |
% |
POLICIES IN FORCE
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Three Months Ended |
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March 31, |
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2015 |
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2014 |
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Policies in force – beginning of period |
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163,712 |
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143,077 |
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Net change during period |
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28,901 |
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25,530 |
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Policies in force – end of period |
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192,613 |
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168,607 |
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5
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.
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Three Months Ended |
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March 31, |
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2015 |
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2014 |
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Retail locations – beginning of period |
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356 |
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360 |
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Opened |
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— |
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— |
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Closed |
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(1 |
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(5 |
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Retail locations – end of period |
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355 |
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355 |
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RETAIL LOCATIONS BY STATE
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March 31, |
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December 31, |
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2015 |
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2014 |
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2014 |
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2013 |
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Alabama |
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24 |
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24 |
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24 |
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24 |
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Florida |
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31 |
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30 |
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31 |
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30 |
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Georgia |
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60 |
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60 |
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60 |
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|
60 |
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Illinois |
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60 |
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61 |
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60 |
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|
61 |
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Indiana |
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17 |
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|
|
17 |
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17 |
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|
|
17 |
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Mississippi |
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|
7 |
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|
7 |
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|
|
7 |
|
|
|
7 |
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Missouri |
|
|
9 |
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|
|
11 |
|
|
|
10 |
|
|
|
11 |
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Ohio |
|
|
27 |
|
|
|
27 |
|
|
|
27 |
|
|
|
27 |
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Pennsylvania |
|
|
15 |
|
|
|
16 |
|
|
|
15 |
|
|
|
16 |
|
|
South Carolina |
|
|
25 |
|
|
|
25 |
|
|
|
25 |
|
|
|
25 |
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|
Tennessee |
|
|
22 |
|
|
|
19 |
|
|
|
22 |
|
|
|
19 |
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Texas |
|
|
58 |
|
|
|
58 |
|
|
|
58 |
|
|
|
63 |
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Total |
|
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355 |
|
|
|
355 |
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|
|
356 |
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|
|
360 |
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SOURCE: First Acceptance Corporation
INVESTOR RELATIONS CONTACT:
Michael J. Bodayle
615.844.2885
6