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): February 24, 2005

Affirmative Insurance Holdings, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

Delaware	000-50795	75-2770432
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
4450 Sojourn Drive, Suite 500, Addison, Texas		75001
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 972-728-6300

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:

[  ]  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 February 24, 2005, Affirmative Insurance Holdings, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2004. A copy of the Company’s press release is attached as Exhibit 99.1 to this Current Report. The Company held a conference call relating to its financial results for the fourth quarter and year ended December 31, 2004 on February 24, 2005. A transcript of the Company’s earnings call is attached as Exhibit 99.2 to this Current Report.

Due to technical difficulties with the call service, investors were unable to ask questions regarding the contents of the earnings conference call held earlier today. As a result, the Company has scheduled a follow-up call on Monday, February  28, 2005 to provide an opportunity for participants to ask questions regarding the contents of the earnings call held earlier today. A copy of the Company's press release issued on February  24, 2005 announcing this follow-up call is attached as Exhibit  99.3 to this Current Report.

Item 7.01. Regulation FD Disclosure.

On February 24, 2005, the Company issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2004. A copy of the Company’s press release is attached as Exhibit 99.1 to this Current Report. The Company held a conference call relating to its financial results for the fourth quarter and year ended December 31, 2004 on February 24, 2005. A transcript of the Company’s earnings call is attached as Exhibit 99.2 to this Current Report.

Due to technical difficulties with the call service, investors were unable to ask questions regarding the contents of the earnings conference call held earlier today. As a result, the Company has scheduled a follow-up call on Monday, February 28, 2005 to provide an opportunity for participants to ask questions regarding the contents of the earnings call held earlier today. A copy of the Company’s press release issued on February 24, 2005 announcing this follow-up call is attached as Exhibit 99.3 to this Current Report.

Item 9.01. Financial Statements and Exhibits.

c) Exhibits

99.1 Press release dated February 24, 2005

99.2 Transcript of Fourth Quarter 2004 Earnings Call held on February 24, 2005

99.3 Press release dated February 24, 2005

The information furnished in this report, including the exhibits, shall not be deemed to be incorporated by reference into any of Affirmative’s filings with the SEC under the Securities Act of 1933, except as shall be expressly set forth by specific reference in any such filing, and shall not be deemed to be “filed” with the SEC under the Securities Exchange Act of 1934.

SIGNATURES

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.

	Affirmative Insurance Holdings, Inc.
February 24, 2005	By:	Timothy A. Bienek
		Name: Timothy A. Bienek
		Title: Executive Vice President and Chief Financial Officer

Exhibit Index

Exhibit No.	Description
99.1	Press release dated February 24, 2005
99.2	Transcript of Fourth Quarter 2004 Earnings Call held on February 24, 2005
99.3	Press release dated February 24, 2005

EX-99.1

EXHIBIT  99.1

News Release

Contact: Stewart Yee

Investor Relations
Affirmative Insurance Holdings, Inc.
(972) 728-2117

AFFIRMATIVE INSURANCE HOLDINGS, INC. ANNOUNCES FOURTH QUARTER AND FULL YEAR RESULTS FOR 2004

Period produces continuing strong net income, and revenue growth, contributing to excellent full
year results

ADDISON, Texas (February 24, 2005) – Affirmative Insurance Holdings, Inc. (Nasdaq: AFFM), a producer and provider of personal non-standard automobile insurance, today announced financial results for the quarter and year ended December 31, 2004.

Highlights for the Company’s fourth quarter and full year included:

• Earnings per share for the fourth quarter of 2004 were $0.33 per diluted share and $1.72 per diluted share for the full year;

• Total revenues for the fourth quarter of 2004 were $76.7 million, an increase of 19.7% as compared to pro forma total revenue for the same period of 2003. For the full year 2004, total revenues were $288.7 million, an increase of 19.0% from the prior year pro forma results;

• Net income for the fourth quarter of 2004 was $5.7 million, even with pro forma net income for the same period of 2003. The fourth quarter of 2003 was favorably impacted by one time adjustments to revenue deferrals. Without these one time adjustments, net income for the fourth quarter of 2004 would have increased 15.9% as compared to the same period of 2003. For the full year net income was $24.4 million, an increase of 32.3% from the prior year pro forma results;

• In the quarter the Company raised $30.0 million in an offering of trust preferred securities and contributed the net proceeds to its insurance subsidiaries. At December 31, 2004 the statutory surplus of the insurance companies was $139.3 million, up from $36.7 million at December 31 2003, and the Company significantly reduced its purchase of reinsurance for 2005; and,

• Affirmative completed the acquisition of the assets of 24 retail stores and a franchise operation with 42 locations in Florida at the end of December 2004.

“We are pleased to announce solid financial results in the face of softening market conditions,” said Thomas E. Mangold, president and chief executive officer of Affirmative Insurance Holdings, Inc. “We continue to focus on our plan of increasing total controlled premium by leveraging and developing our multiple distribution channel strategy, as well as making strategic acquisitions to drive additional growth and earnings. We accomplished this in 2004 while improving margins in both of our operating segments.”

Mangold also commented that as a result of increasing the surplus in the insurance companies following the initial public offering and the issuance of trust preferred securities, Affirmative plans to increase its retention of business to capture a larger share of its favorable underwriting results. In 2005, the Company expects to retain approximately 90.0% of its total controlled premiums, as compared to 52.8% for the full year 2004. The Company was able to achieve a 15.3% return on equity for the full year 2004 and ended the year with 13.1% debt to total capitalization.

Fourth Quarter Financial Results
Fourth quarter net income was $5.7 million or $0.33 per diluted share, even with the pro forma net income of $5.7 million or $0.56 per diluted share for the same period in 2003. Without the previously mentioned one time adjustments in the fourth quarter of 2003, net income for the fourth quarter of 2004 would have increased 15.9% as compared to the same period of 2003. Weighted average diluted shares for the fourth quarter were 17.1 million compared to 10.1 million for the year-ago period, as a result of the Company’s initial public offering in July of 2004.

Revenues for the three months ended December 31, 2004 were $76.7 million, an increase of $12.6 million or 19.7% compared to pro forma revenues for the three months ended December 31, 2003. The increase was primarily due to Affirmative’s increased retention of gross premiums written as a result of the increased surplus in our insurance companies and increases in commission and fee income in the Company’s Agency Segment.

Fourth quarter revenues from agency operations increased 4.0% to $40.7 million with a pre-tax margin of 11.5%, compared to revenues of $39.1 million with a pre-tax margin of 20.0% for the fourth quarter of 2003. Revenues from insurance company operations for the fourth quarter of 2004 were $61.3 million, an increase of 22.9% as compared to fourth quarter 2003 pro forma revenues of $49.8 million. Combined ratio for the fourth quarter of 2004 was 92.5% compared to 96.8% for the fourth quarter of 2003.

Full Year Financial Results
For the twelve months ended December 31, 2004 net income was $24.4 million or $1.72 per diluted share, compared to pro forma net income of $18.5 million or $1.83 per diluted share for the twelve months ended December 31, 2003. As a result of the Company’s initial public offering in July of 2004, weighted average diluted shares for 2004 were 14.2 million compared to 10.1 million for 2003. Growth in net income during 2004 was driven by greater retention of premiums and improved production and operating margins as compared to 2003.

Consolidated revenues for the fiscal year ended December 31, 2004 were $288.7 million compared to 2003 pro forma revenues of $242.7 million for the fiscal year ended December 31, 2003, an increase of 19.0%. The increase was primarily due to Affirmative’s increased retention of gross premiums written as a result of the increased surplus in our insurance companies and increases in commission and fee income in the Company’s Agency Segment.

For the full year 2004, agency operations revenue increased 13.1% to $165.8 million with a pre-tax margin of 15.8% compared to full year 2003 revenue of $146.5 million with a pre-tax margin of 14.3%. For the full year, revenues from insurance company operations were $225.1 million, up 16.7% from pro forma revenues of $193.0 million for full year 2003. Combined ratio for the full year 2004 was 93.6% compared to 95.2% for 2003.

Recent Events
As previously announced, Affirmative completed the acquisition of the assets of 24 retail stores and a franchise operation with 42 locations in Florida at the end of December 2004. In addition, in January 2005 Affirmative closed two separate transactions and acquired the assets of 12 retail stores, 11 of which are in the Houston DMA. These acquisitions were purchased with cash on hand.

Guidance and Supplemental Information
Affirmative maintains a positive outlook for 2005 and has increased its earlier guidance for full year earnings to be in the range of $1.90 to $2.10 per diluted share from previous guidance of $1.85 to $2.05 per diluted share.

To provide a more complete understanding of Affirmative’s financial results, the Company has posted supplemental financial data on the investor relations portion of the Company’s website, www.affirmativeholdings.com. The data pertains to fourth quarter and full year financial results for 2003 and 2004. The supplemental financial data also contains a reconciliation of 2003 pro forma financial results contained in this release to 2003 GAAP financial results.

Conference call
Affirmative will hold a conference today, Thursday, February 24^th, at 11:00 a.m. Eastern Time, 10:00 a.m. Central Time. Following a brief presentation, participants will have the opportunity to ask questions. To participate in the call, dial 1-888-396-2356 (international dial 1-617-847-8709), ten minutes before the conference call begins and dial pass code 26111696.

There will also be a real-time audio webcast of the conference call by CCBN. To listen to the live call, select the webcast icon from the investor relations section of Affirmative’s website http://www.affirmativeholdings.com at least 15 minutes before the start of the call to register, download, and install any necessary audio software. Individuals accessing the audio webcast will be “listen only” and will not have the ability to take part in the Q&A session.

A digital replay will be available one hour after the conclusion of the call. Interested individuals can access the webcast replay at http://www.affirmativeholdings.com, by clicking on the webcast link. The webcast replay will be available for 30 days after the call. Phone replay will be available through March 3^rd and may be accessed by dialing 1-888-286-8010 (international dial 1-617-801-6888), then enter pass code 34228496.

About Affirmative Insurance Holdings, Inc.
Headquartered in Addison, Texas, Affirmative Insurance Holdings, Inc., is a producer and provider of personal non-standard automobile insurance policies to individual consumers in highly targeted geographic markets. Affirmative currently offers products and services in 11 states, including Texas, Illinois, California and Florida.

Forward-Looking Statements Disclosure
Certain information in this news release and other statements or materials are not historical facts but are forward-looking statements relating to such matters as: assumed future results of the Company’s business; financial condition; liquidity; results of operations; plans; and objectives. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary remarks regarding important factors which, among others, could cause the Company’s actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, results of the Company’s business, and the other matters referred to above include, but are not limited to: general volatility of the non-standard personal automobile and reinsurance markets; the market price of our common stock; changes in business strategy; severe weather conditions; availability, terms and deployment of capital; the degree and nature of competitor product and pricing activity; changes in the non-standard personal automobile insurance industry, interest rates or the general economy; identification and integration of potential acquisitions; claims experience; availability of qualified personnel; and the loss of one or more members of the Company’s management team.

Affirmative Insurance Holdings, Inc.
Consolidated Statements of Operations — Unaudited
(dollars in thousands, except per share data)

	Three months ended December 31,
	Actual		Actual		Pro Forma
	2004		2003		2003
Revenues
Net premiums earned	$	53,065	$	—	$	43,602
Commissions and fees		22,706		28,700		19,929
Net investment income		938		41		41
Realized gains (losses)		1		—		—
Other		—		—		538
Total revenues		76,710		28,741		64,110
Expenses
Losses and loss adjustment expenses		33,644		—		29,501
Policy acquisition and operating expenses		33,120		18,315		25,155
Interest expense		62		212		212
Total expenses		66,826		18,527		54,868
Net income before income taxes, minority interest and equity interest in unconsolidated subsidiaries		9,884		10,214		9,242
Income tax expense		3,651		3,653		3,314
Minority interest, net of income taxes		223		58		58
Equity interest in unconsolidated subsidiaries, net of income taxes		317		174		174
Net income	$	5,693	$	6,329	$	5,696
Net income per common share — Basic	$	0.34	$	0.63	$	0.56
Net income per common share — Diluted	$	0.33	$	0.62	$	0.56
Weighted average shares — Basic		16,836,663		10,101,230		10,101,230
Weighted average shares — Diluted		17,130,371		10,138,266		10,138,266

Affirmative Insurance Holdings, Inc.
Consolidated Statements of Operations — Unaudited
(dollars in thousands, except per share data)

	Twelve months ended December 31,
	Actual			Actual		Pro Forma
	2004			2003		2003
Revenues
Net premiums earned	$	194,341		$	—	$	167,411
Commissions and fees		92,014			103,344		71,709
Net investment income		2,327			189		189
Realized gains (losses)		(8	)		451		451
Other		—			—		2,890
Total revenues		288,674			103,984		242,650
Expenses
Losses and loss adjustment expenses		128,969			—		114,426
Policy acquisition and operating expenses		117,648			72,330		97,478
Interest expense		588			821		821
Total expenses		247,205			73,151		212,725
Net income before income taxes, minority interest and equity interest in unconsolidated subsidiaries		41,469			30,833		29,925
Income tax expense		15,319			11,025		10,707
Minority interest, net of income taxes		804			403		403
Equity interest in unconsolidated subsidiaries, net of income taxes		913			348		348
Net income	$	24,433		$	19,057	$	18,467
Net income per common share — Basic	$	1.74		$	1.89	$	1.83
Net income per common share — Diluted	$	1.72		$	1.88	$	1.83
Weighted average shares — Basic		14,018,530			10,082,794		10,082,794
Weighted average shares — Diluted		14,213,682			10,112,585		10,112,585

Affirmative Insurance Holdings, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)

	December 31,		December 31,
	2004		2003
Assets
Fixed maturities — available for sale	$	157,666	$	6,610
Short-term investments		1,995		—
Other invested assets		—		928
		159,661		7,538
Cash and cash equivalents		24,096		15,358
Fiduciary and restricted cash		16,267		9,467
Premiums and fees receivable		117,978		75,596
Commissions receivable		11,890		7,043
Receivable from reinsurers		84,332		94,526
Deferred acquisition costs		19,118		14,371
Other assets		106,855		91,309
Total assets	$	540,197	$	315,208
Liabilities and Stockholders’ Equity
Liabilities
Reserves for losses and loss adjustment expenses		99,746		58,507
Unearned premium		90,695		71,226
Amounts due reinsurers		55,728		19,633
Deferred revenue		24,478		15,451
Other liabilities		64,244		37,014
Total liabilities		334,891		201,831
Stockholders’ equity
Common stock		168		116
Warrants		—		157
Additional paid-in capital		151,752		84,074
Accumulated other comprehensive income (loss)		251		(9	)
Retained earnings		53,135		29,039
Total stockholders’ equity		205,306		113,377
Total liabilities and stockholders’ equity	$	540,197	$	315,208

EX-99.2

Exhibit 99.2

Event ID: 1006572
Event Name: Q4 2004 Affirmative Insurance Holdings Inc. Earnings Conference Call
Event Date: 2005-02-24T16:00:00 UTC

******************************************************

Notes:
Converted From Text Transcript
Event ID 1006572
Q4 2004 Affirmative Insurance Holdings Inc. Earnings Conference Call February 24, 2005
C: David Snyder; Affirmative Insurance Holdings Inc.; Vice President and General Counsel
C: Tom Mangold; Affirmative Insurance Holdings Inc.; President and CEO
C: Tim Bienek; Affirmative Insurance Holdings Inc.; Executive Vice President and CFO
C: Sean McPadden; Affirmative Insurance Holdings Inc.; Executive Vice President

******************************************************

C: David Snyder; Affirmative Insurance Holdings Inc.; Vice President and General Counsel
C: Tom Mangold; Affirmative Insurance Holdings Inc.; President and CEO
C: Tim Bienek; Affirmative Insurance Holdings Inc.; Executive Vice President and CFO
C: Sean McPadden; Affirmative Insurance Holdings Inc.; Executive Vice President
P: Operator;;
P: Unidentified Speaker;;

+++ presentation
Operator: Good morning, ladies and gentlemen, and welcome to the Affirmative Insurance Holdings Inc. fourth quarter 2004 earnings conference call. My name is Bill, and I’ll be your call coordinator for today. All participants are in a listen-only mode. Following formal remarks by management, there will be a question-and-answer session. At the end of the call, I will review instructions for accessing replays of this conference call. I will now introduce David Snyder, Vice President and General Counsel. Please proceed, sir.

David Snyder: Good morning and welcome to the Affirmative Insurance Holdings 2004 fourth quarter earnings conference call. My name is David Snyder, Vice President and General Counsel of Affirmative. With me on the call today is Tom Mangold, President and Chief Executive Officer; Tim Bienek, Executive Vice President and Chief Financial Officer; and Sean McPadden, Executive Vice President.

We are pleased you have joined us for our earnings call. Today’s presentation will provide us with an opportunity to discuss results for our fourth quarter 2004 and give you a chance to ask questions after our formal remarks are concluded. Some housekeeping before we began — this conference call is being recorded, and all participants on the audio bridge are in a listen-only mode. Let me remind everyone that as a result of this conference call, Affirmative’s management may make forward-looking statements

regarding assumed future results of the Company’s business, financial condition, and results of operations. These statements may refer to a future period or include such terms as “anticipate, estimate, expect, may, and should.” In connection with Safe Harbor provisions, the company cautions you that the forward-looking statements are subject to these risks, uncertainties, and assumptions, and actual results could differ materially from those that are indicated in our forward-looking statements. For a discussion of those factors, please refer to Affirmative’s periodic reports and documents filed with the Securities and Exchange Commission. The company is filing with the SEC a form 8-K, which will contain a news release announcing the 2004 fourth quarter results. If you have not received a copy of this news release, you may find it on the investor relations portion of our website www.affirmativeholdings.com or on the Web in the SEC’s database. With that, I’d like to introduce our President and Chief Executive Officer, Tom Mangold. Tom?

Tom Mangold: Thank you David and good morning everyone. Welcome to our fourth quarter conference call. First, I’d like to thank all of you for your continuing support of Affirmative. Before I start my review, I want to mention we were pleased with our reception at the recent NYSSA insurance conference in New York. It was nice seeing several of you there. Coming up next month is our participation at the Raymond James conference in Orlando and the Piper Jaffray conference in New York. We look forward to having the opportunity to meet some of you there as well and at additional conferences throughout 2005.

2004 was a breakout year for Affirmative. We assumed a separate and stand-alone identity, raised significant capital from our initial public offering and issuance of trust preferred securities and continued to build on our foundation to position us for solid growth and profitability into the future. The fourth quarter of 2004 delivered another good period of earnings in what is seasonally our weakest quarter, with strong year-on-year revenue growth. Although on a comparative basis, earnings were equal with the same quarter of 2003, I’d like to point out that the fourth quarter 2003 contained some one-time adjustments that Tim will provide more details on later. Absent these adjustments, net income was actually up 16.7% for the quarter. We continued to have favorable loss ratio development in the fourth quarter of 2004. We recognized profit-sharing commission of $4.9 million in the quarter, bringing the year-to-date total to $12.4 million. As we have told you in the past, we only recognize profit-sharing commissions on prior treaty years. As such, we have not recognized any profit-sharing commission in 2004 reported results from the 2004 treaty year contracts. We continue to see strong and stable underwriting margins, even with signs of increasing market competition. In terms of revenue growth, the fourth quarter revenues grew 19.7% over the same period last year, primarily due to increases in retained gross written premium, prior insurance companies, and increased fees and commissions in our agency segments.

Our total controlled premium grew 4.3% and fell slightly below our expectations for the quarter. The good news was our multiple distribution channel strategy benefited us in the quarter. Total controlled premiums from unaffiliated underwriting agencies increased 13% in the quarter, offsetting a slower one percent increase in our underwriting agencies

in that quarter. We made a strategic decision to decrease our advertising spend in the fourth quarter of 2004, which acted as a drag on our growth in our retail distribution channel. We were in the process of revamping our creative and media strategies and chose to delay the expenditure of advertising dollars until the second week of January 2005. Thus far, although it is very early, growth in total controlled premium for our retail distribution channel is now trending up.

During 2004, we were also successful in growing our networks of independent agents to approximately 2,500 at year-end compared to the 1,800 we had for 2003. Expanding our independent agent distribution channel remains a focus for our company as competition increases. In 2004, we entered into a relationship with a new unaffiliated underwriting agency in California, and we are actively pursuing adding additional unaffiliated underwriting relationships to expand this distribution channel in 2005 and beyond. Based on some of your comments on our last conference call, we have included in our supplemental information total controlled premium by state for years 2003 and 2004. As you can see when you review the information, no single state dominates the course of production. Our largest state, Texas represents 28.3% of our total controlled premium. We are achieving excellent underwriting margins in each of our states. We realize there has been a lot of focus on Florida results in the last month or so. Florida represents about 8.9% of our total controlled premium, and our underwriting margins in Florida are in line with — in fact, slightly better than our overall results).

In the fourth quarter, we announced the issuance of trust preferred securities, and we contributed $29 million of the net proceeds to the surplus from our insurance companies. At December 31st 2004, the surplus from our insurance companies stood at $139.3 million. We did not renew our January reinsurance treaties and plan on retaining approximately 90% of our total controlled premium in 2005, up from approximately 53% in 2004. We also made a year-end strategic acquisition in Florida. In addition, in January of this year, we closed two separate transactions and acquired the assets of 12 retail stores, 11 of which are in our Houston DMA. These acquisitions were purchased with cash on-hand. As a result of these acquisitions, we are now conducting retail operations in six states through 181 company-owned stores and 42 franchise stores, producing approximately $200 million in non-standard automobile insurance premiums annually on behalf of our underwriting agencies, unaffiliated underwriting agencies, and other unaffiliated insurance companies. With the acquisition in Florida, we also obtained a new model for growth; franchising. We believe franchising will give us the ability to more quickly expand and extend our brand and leverage expenses such as advertising over a larger base. In the coming quarters, I will be updating you on our franchise model as we begin to roll it out in selected geographies.

2004 was a banner year for Affirmative. We grew total controlled premiums just over five percent and total revenues 19 percent, producing a 32 percent growth in net income. We achieved a return on equity of 15.3 percent, with only modest levels of debt at year-end. And in 2005, we will continue to execute on our growth initiatives but will also continue to focus on improving our operating efficiencies. During the last half of 2005, we will begin to roll out a new common operating platform, which we expect to provide

long-term operating efficiencies. We also expect to improve operating efficiencies as we integrate our recent acquisition.

We have a positive outlook and have increased our guidance for 2005 from $1.85 to $2.05 to $1.90 to $2.10 per diluted share on recent events and acquisitions. With that, I will now turn it over to Tim who will go over the financial highlights for the quarter. Tim?

Tim Bienek: Thanks Tom. Before I discuss the highlights of the financial results for the quarter I want to briefly cover the logistics on where to find our supplemental financial information. As we mentioned in our press release, we have posted supplemental financial data on our Web site, www.affirmativeholdings.com. This data pertains to all four quarters of 2004 and 2003. We’ve also posted quarterly pro forma financial results for all four quarters of 2003, which should be helpful in comparing our financial results for 2004 to the prior year.

Net income for the fourth quarter of 2004 was $5.7 million, flat with the pro forma net income for the same period of 2003. As was mentioned in our earnings release, we had one-time items that occurred in the fourth quarter of 2004 that makes it more challenging to make the year-over-year comparison. Absent these one-time adjustments, net income for the fourth quarter of 2004 would have increased 15.9% as compared to the same period in the prior year. To provide additional detail — in the fourth quarter of 2003, we had a release of revenue deferrals which had a favorable impact of $786,000 after-tax on the consolidated earnings. This release was the result of accounting recognition for deferrals following the December 31st 2003 reinsurance transaction, where Affirmative assumed the in-force non-standard automobile business that was previously ceded to Vesta.

Consolidated revenues for the fourth quarter of 2004 were $76.7 million, an increase of 19.7% of our pro forma revenues for the fourth quarter of 2003. The increase in revenues was primarily attributable to increased retention of total controlled premiums in the quarter by our insurance companies. In the fourth quarter 2004, we retained 65% of total controlled premiums compared to 47.9% on a pro forma basis in the fourth quarter of 2003.

Net income from the agency segment was $2.7 million in the fourth quarter of 2004, a $2.2 million decrease from the fourth quarter of 2003. As was previously mentioned, the fourth quarter 2003 results were favorably impacted by the $786,000 after-tax release of revenue deferrals, which was all in the agency segment.

Agency segment revenues for the fourth quarter were $40.7 million, an increase of four percent as compared to the prior year. The agency segment expenses in the fourth quarter were $36 million, an increase of 15% compared to the fourth quarter of 2003. The increase in expenses in excess of the growth in revenues was primarily attributable to legal expenses, franchise tax expenses, and an increase in an accrual for commission in one of our underwriting agencies.

Net income in the insurance segment was $3.5 million for the quarter, as compared to $1 million in pro forma net income for the fourth quarter of 2003. Revenues were $61.3 million in the fourth quarter, an increase of 22.9% compared to pro forma revenues for the same period of the prior year. The combined ratio in the fourth quarter was 92.5% compared to pro forma combined ratio of 96.8% for the fourth quarter of 2003. The combined ratio in the fourth quarter of 2004 was favorably impacted by 1.5 points, by the release of loss reserves related to an assumed aggregate of excess of loss reinsurance contract.

The uptick in the loss from equity interest in unconsolidated subsidiaries in our fourth quarter was the result of our decision to write down the remainder of our investment in Harbor Insurance Managers. In the fourth quarter of 2004, our after-tax loss for equity interest and unconsolidated subs was $317,000. That compared sequentially to a loss of $173,000 in the third quarter of 2004.

As Tom mentioned, the statutory surplus in our insurance companies increased to $139.3 million at the end of the fourth quarter of 2004, up from $105.9 million at the end of the prior quarter, and this was the result of the contribution of $29 million of the proceeds from our issuance of trust preferred securities in the quarter, along with some additional net income.

As was mentioned in the earnings release, and also in Tom’s remarks, we expect to increase our retention of total controlled premiums to approximately 90% in 2005, up from 52.8% for the full year of 2004.

As of December 31st 2004, our net reinsurance receivable from Vesta was $10.3 million, which is up from $4.6 million as of September 30th 2004. The increase in the net reinsurance receivable is the result of increased premium receivables on business ceded to us by Vesta. The trust account has been established by Vesta to collateralize this obligation, and has $8.9 million of securities in the trust. We have recently notified Vesta that we need to increase the collateral trust an additional $1.4 million.

As of December 31st 2004, our book value per share was $12.19, and our tangible book value per share was $7.10. As Tom mentioned, and also we mentioned in the press release for 2005, we’ve moved our range of earnings guidance up by a nickel, and we’ve moved that up to $1.90 per share, to $2.10 per diluted share. This earnings guidance was based on fully diluted shares of 17.1 million, and it doesn’t include any assumptions for any additional acquisitions. With that, that concludes our formal remarks, and we would like to open up the call for questions.

Operator: Thank you very much, sir. Ladies and gentlemen, if you have a question, please key star one now on your touchtone telephone. If your question has been answered, or you wish to withdraw your question at anytime, please key star two. Questions will be taken in the order they are received. Please key star one now to begin. And we will wait

one moment to compile a list of questions. Again ladies and gentlemen, that’s star one for a question. And at this time, sir, you have no questions.

Tom Mangold: Well, let’s wait a minute, I’m sure somebody will come up with a question.

Operator: OK, again, ladies and gentlemen, if you have a question please key star one now.

Mangold: All right then, we must have done a nice job on providing information, so we look forward to your continued support and next year.

Operator: Thank you very much, ladies and gentlemen, for your participation in today’s conference call. I will now give over the replay instructions. A webcast replay of this call can be accessed approximately one hour from now. You may access the replay from the link on Affirmative Investor Relations Website at www.affirmativeholdings.com. Affirmative holdings is all one word. The replay will be available for 30 days. You may also access a phone replay by dialing 1-888-286-8010 or 1-617-801-6888 and entering the pass code 34228396. The phone replay will be available through March 3rd. Written instructions on how to access these replays will be found at the end of Affirmative’s fourth quarter earnings release. Thank you very much for your participation and you may now disconnect. Have a good day.

EX-99.3

EXHIBIT 99.3

News Release

Contact:  Stewart Yee
Investor Relations
Affirmative Insurance Holdings, Inc.
(972) 728-2117

AFFIRMATIVE INSURANCE HOLDINGS, INC. ANNOUNCES CONFERENCE CALL Q&A
ON MONDAY, FEBRUARY 28 AS FOLLOW-UP TO Q4 EARNINGS CALL

ADDISON, Texas (February 24, 2005) - Affirmative Insurance Holdings, Inc. (Nasdaq: AFFM), a producer and provider of personal non-standard automobile insurance, today announced that it will hold a follow-up conference call on Monday, February 28^th, at 11:00 a.m. Eastern Time, 10:00 a.m. Central Time. Due to technical difficulties with the call service, investors were unable to ask questions at the Company’s conference call held earlier today.

Conference call
Affirmative will hold a conference call on Monday, February 28^th, at 11:00 a.m. Eastern Time, 10:00 a.m. Central Time. The call will serve as an opportunity for participants to ask questions regarding the contents of the earnings conference call held earlier today. To participate in the call, dial 1-800-591-6944 (international dial 1-617-614-4910), ten minutes before the conference call begins and dial pass code 69893809.

There will also be a real-time audio webcast of the conference call by CCBN. To listen to the live call, select the webcast icon from the investor relations section of Affirmative’s website http://www.affirmativeholdings.com at least 15 minutes before the start of the call to register, download, and install any necessary audio software. Individuals accessing the audio webcast will be “listen only” and will not have the ability to take part in the Q&A session.

A digital replay will be available one hour after the conclusion of the call. Interested individuals can access the webcast replay at http://www.affirmativeholdings.com, by clicking on the webcast link. The webcast replay will be available for 30 days after the call. Phone replay will be available through Monday, March 7^th and may be accessed by dialing 1-888-286-8010 (international dial 1-617-801-6888), then enter pass code 77632341.

About Affirmative Insurance Holdings, Inc.
Headquartered in Addison, Texas, Affirmative Insurance Holdings, Inc., is a producer and provider of personal non-standard automobile insurance policies to individual consumers in highly targeted geographic markets. Affirmative currently offers products and services in 11 states, including Texas, Illinois, California and Florida.

Forward-Looking Statements Disclosure
Certain information in this news release and other statements or materials are not historical facts but are forward-looking statements relating to such matters as: assumed future results of the Company’s business; financial condition; liquidity; results of operations; plans; and objectives. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary remarks regarding important factors which, among others, could cause the Company’s actual results and experience to differ

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materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, results of the Company’s business, and the other matters referred to above include, but are not limited to: general volatility of the non-standard personal automobile and reinsurance markets; the market price of our common stock; changes in business strategy; severe weather conditions; availability, terms and deployment of capital; the degree and nature of competitor product and pricing activity; changes in the non-standard personal automobile insurance industry, interest rates or the general economy; identification and integration of potential acquisitions; claims experience; availability of qualified personnel; and the loss of one or more members of the Company’s management team.

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