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): May 5, 2006

AFFIRMATIVE INSURANCE HOLDINGS, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware
(State or other jurisdiction
of incorporation) 000-50795
(Commission File Number) 75-2770432
(I.R.S. Employer
Identification Number)

4450 Sojourn Drive, Suite 500
Addison, Texas
(Address of principal
executive offices)  
75001
(Zip code) 

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

Not Applicable
(Former name or former address, if changed since last report)

     Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

TABLE OF CONTENTS

	Item 2.02 Results of Operations and Financial Condition.
	Item 5.02 Appointment of Principal Officers
	Item 7.01. Regulation FD Disclosure.
	Item 9.01. Financial Statements and Exhibits.
SIGNATURE
Press Release of Final Results
Press Release of Earnings Release

Item 2.02 Results of Operations and Financial Condition.

On May 10, 2006, we issued a press release announcing our results of operations for the quarter ended March 31, 2006 and board approval of a share repurchase program for up to $15 million of our common stock over the next 12 months. The press release is attached hereto as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference into this Item 2.02.

Item 5.02 Appointment of Principal Officers

(c) On May 9, 2006, the Board of Directors appointed V. Van Vaughan, 45, as our Senior Vice President, Chief Accounting Officer and Treasurer, effective May 13, 2006. Mr. Vaughan has been our Controller since July 2005. From August 2003 to July 2005, Mr. Vaughan served as Vice President and Controller of HCC Insurance Holdings, Inc., a NYSE-listed specialty insurance company. From April 2001 to August 2003 Mr. Vaughan was the Controller and Director of Financial Reporting of Highlands Insurance Group, a property and casualty insurer.

Item 7.01. Regulation FD Disclosure.

On May 10, 2006, we issued a press release announcing our results of operations for the quarter ended March 31, 2006 and board approval of a share repurchase program for up to $15 million of our common stock over the next 12 months. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K.

On May 5, 2006, we issued a press release announcing our earnings release date and conference call for the quarter ended March 31, 2006. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K.

The information furnished pursuant to this Item 7.01, including the exhibits, shall not be deemed to be incorporated by reference into any of our 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.

Item 9.01. Financial Statements and Exhibits.

(d)     Exhibits.

Number	Exhibit
99.1*	Press release, dated May 10, 2006 announcing our results of operations for the quarter ended March 31, 2006 and board approval of a share repurchase program.
99.2*	Press release, dated May 5, 2006 announcing our earnings release date and conference call for the quarter ended March 31, 2006.

*Filed herewith.

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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.

AFFIRMATIVE INSURANCE HOLDINGS, INC.
By:	/s/ MARK E. PAPE
	Mark E. Pape
	Executive Vice President and Chief Financial Officer

Date: May 10, 2006

Number	Exhibit
99.1*	Press release, dated May 10, 2006 announcing our results of operations for the quarter ended March 31, 2006 and board approval of a share repurchase program.
99.2*	Press release, dated May 5, 2006 announcing our earnings release date and conference call for the quarter ended March 31, 2006.

* Filed herewith

EX-99.1

Exhibit 99.1

News Release

Contact:	Mark Pape
	Chief Financial Officer
	Affirmative Insurance Holdings, Inc.
	(972) 728-6481

AFFIRMATIVE INSURANCE ANNOUNCES 2006 FIRST QUARTER RESULTS AND SHARE REPURCHASE PROGRAM

ADDISON, Texas (May 10, 2006) — Affirmative Insurance Holdings, Inc. (Nasdaq: AFFM), a producer and provider of personal non-standard automobile insurance, today announced financial results for the quarter ended March 31, 2006.

Key Financial Results for the Quarter Ended March 31, 2006

	Three months ended March 31,
	2006		2005		% Change
			Restated
	(dollars in millions, except per share data)
Gross premiums written	$	88.7	$	105.1		-15.6	%
Net premiums written	$	87.1	$	104.1		-16.4	%
Net premiums earned	$	73.0	$	67.9		7.5	%
Total revenues	$	92.2	$	90.2		2.3	%
Net income	$	6.2	$	7.8		-19.8	%
Net income per common share — diluted	$	0.40	$	0.45		-11.1	%

First Quarter Financial Results
In the first quarter of 2006, we had net income of $6.2 million or $0.40 per diluted share, as compared to the net income of $7.8 million or $0.45 income per diluted share for the same period in 2005. Weighted average diluted shares outstanding for the first quarter were 15.5 million compared to 17.1 million for the year-ago period, largely as a result of our acquisition of 2.0 million shares of treasury stock in June 2005.

Net premiums earned for the three months ended March 31, 2006 were $73.0 million, an increase of $5.1 million or 7.5% compared to net premiums earned of $67.9 million for the three months ended March 31, 2005. The increase was primarily due to our increased retention of gross premiums written in previous periods. We increased the surplus in our insurance companies with proceeds from our IPO in July 2004 and our issuance of trust preferred securities in December 2004 to enable us to increase our gross premiums written. In the first quarter of 2006, our gross premiums written were down 15.6% as compared to the first quarter of 2005

Net premiums written decreased 16.4% to $87.1 million due to the decline in our gross premiums written.

For the quarter ended March 31, 2006, our loss and loss adjustment expense ratio was 65.2% as compared to 65.6% in the first quarter of the prior year. This improvement reflects decreases in our overall loss and loss adjustment

expense ratios for both our owned and non-owned programs due to favorable claims development in the current period relative to the loss ratios estimated in previous periods.

For the quarter ended March 31, 2006, our expense ratio was 22.1% as compared to 17.6% in the prior year. This increase in our expense ratio reflects the effect of the widely used industry calculation method that offsets our operating expenses (selling, general and administrative expenses and depreciation and amortization) with our other revenues (commission income and fees) in the dividend, with the divisor consisting of only net premiums earned. The revenue from commission income and fees included in our consolidated financial statements decreased to $17.5 million in the first quarter of 2006 from $21.0 million in the comparable period in 2005 as a result of the elimination entries related to our increased retention of business produced.

Our combined ratio (the sum of the loss and loss adjustment expense ratio and the expense ratio) for the first quarter of 2006 was 87.4% as compared to 83.2% for the comparable quarter in 2005.

Share Repurchase Program
On May 9, 2006, the board of directors approved a share repurchase program for up to $15 million of our common stock over the next 12 months. From time to time, repurchases may be made on the open market or through privately negotiated transactions at the discretion of management based on management’s assessment of market conditions and other relevant factors. We expect to fund the purchases initially through internally available funds.

“This repurchase program clearly expresses the Board’s confidence in the long term value of our Company,” said Kevin Callahan, chairman and interim chief executive officer, “Furthermore, it provides another means for the Company to effectively deploy its capital to enhance shareholder value.”

Restatement
We have restated our previously issued financial statements to correct consolidating elimination entries made in prior periods that were not in conformity with generally accepted accounting principles, and to correct the allocation of commission income and fees among the first three quarters of 2005. The erroneous elimination entries had no effect on reported net income, earnings per share, cash, invested assets or stockholders’ equity, but did have the effect of materially understating gross revenues and expenses and misstating certain assets and liabilities. The restatement of misallocation of commission income and fees among the first three quarters of 2005 reduced commission and fee income for the first quarter of 2005 by $345,000 ($223,000 after incomes taxes) that is now included in the third quarter of 2005. The previously issued unaudited interim consolidated financial statements for the quarter ended March 31, 2005 have been restated. All financial information in this announcement gives effect to the restatement.

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

	Three months ended March 31,
	2006			2005			% Change
				Restated
Revenues
Net premiums earned	$	73,038		$	67,936			7.5	%
Commission income and fees		17,499			20,995			-16.7	%
Net investment income		2,060			1,257			63.9	%
Realized gains (losses)		(367	)		3		NM
Total revenues		92,230			90,191			2.3	%
Expenses
Losses and loss adjustment expenses		47,652			44,567			6.9	%
Selling, general and administrative expenses		32,601			31,926			2.1	%
Depreciation and amortization		1,060			1,029			3.0	%
Interest expense		1,085			579			87.4	%
Total expenses		82,398			78,101			5.5	%
Net income before income taxes, minority interest and equity interest in unconsolidated subsidiaries		9,832			12,090			-18.7	%
Income tax expense		3,520			4,284			-17.8	%
Minority interest, net of income taxes		81			33			145.5	%
Net income (loss)	$	6,231		$	7,773			-19.8	%
Net income (loss) per common share — Basic	$	0.40		$	0.46			-13.0	%
Net income (loss) per common share — Diluted	$	0.40		$	0.45			-11.1	%
Weighted average shares outstanding — Basic		15,432,557			16,845,934			-8.4	%
Weighted average shares outstanding — Diluted		15,463,132			17,119,853			-9.7	%
Operational Information
Gross premiums written	$	88,749		$	105,102			-15.6	%
Net premiums written	$	87,058		$	104,110			-16.4	%
Percentage retained		98.1	%		99.1	%
Loss Ratio		65.2	%		65.6	%
Expense Ratio		22.1	%		17.6	%
Combined Ratio		87.4	%		83.2	%

Affirmative Insurance Holdings, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except share and per share data)

	March 31,			December 31,
Assets	2006			2005
Fixed maturities — available for sale	$	229,418		$	210,273
Short-term investments		—			477
Total invested assets		229,418			210,750
Cash and cash equivalents		26,570			48,037
Fiduciary and restricted cash		35,227			29,689
Premiums and fees receivable		98,401			81,680
Commissions receivable		4,945			2,144
Receivable from reinsurers		24,345			28,137
Deferred acquisition costs		28,069			24,453
Deferred tax asset, net		15,264			14,866
Goodwill and other intangible assets, net		83,805			80,616
Other assets		20,365			23,753
Total assets	$	566,409		$	544,125
Liabilities and Stockholders’ Equity
Liabilities
Reserves for losses and loss adjustment expenses		127,911			126,940
Unearned premium		111,441			97,344
Amounts due reinsurers		12,262			8,715
Deferred revenue		28,152			27,101
Notes payable		56,702			56,702
Other liabilities		24,107			27,361
Total liabilities		360,575			344,163
Stockholders’ equity
Common stock		175			175
Additional paid-in capital		159,067			158,904
Treasury stock, at cost		(28,746	)		(28,746	)
Accumulated other comprehensive income (loss)		(742	)		(529	)
Retained earnings		76,080			70,158
Total stockholders’ equity		205,834			199,962
Total liabilities and stockholders’ equity	$	566,409		$	544,125
Notes payable as % of capitalization		21.6	%		22.1	%
Actual shares outstanding		15,432,557			15,432,557
Book value per share	$	13.34		$	12.96
Tangible book value per share	$	7.91		$	7.73

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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 future results of our 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, we provide the following cautionary remarks regarding important factors that, among others, could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in our forward-looking statements. The risks and uncertainties that may affect the operations, performance, results of our 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; and availability of qualified personnel.

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. We currently offer products and services in 12 states, including Texas, Illinois, California and Florida.

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EX-99.2

Exhibit 99.2

News Release

Contact:	Mark Pape
	Chief Financial Officer
	Affirmative Insurance Holdings, Inc.
	(972) 728-6481

AFFIRMATIVE INSURANCE HOLDINGS ANNOUNCES EARNINGS RELEASE DATE AND CONFERENCE CALL FOR FIRST
QUARTER 2006 FINANCIAL RESULTS

ADDISON, Texas (May 5, 2006) — Affirmative Insurance Holdings, Inc. (Nasdaq: AFFM ) announced today that it would release financial results for the quarter ended March 31, 2006 on Wednesday, May 10^th, 2006, before the market opens.

We will conduct a conference call the same day, Wednesday, May 10^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 1-866-713-8567 and use pass code 67556596. The international dial-in number is 617-597-5326.

A real-time audio webcast of the conference call can be accessed by visiting our Web site at http://www.affirmativeholdings.com . Click on the “investor relations” link where an audio link is provided. Individuals accessing the audio webcast will be “listen only” and will not have the ability to take part in the Q&A session.

A replay of the call will be made available approximately 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 from the date of the call. A phone replay will be available through May 17, 2006 and may be accessed by dialing 1-888-286-8010 (international dial 1-617-801-6888), pass code 75643964.

ABOUT AFFIRMATIVE INSURANCE HOLDINGS
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. We currently offer products and services in 12 states, including Texas, Illinois, California and Florida.

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