Exhibit 99
Press Release | Source: First Acceptance Corporation | |
Contact: Michael Bodayle (615) 844-2885 |
First Acceptance Corporation Reports Operating Results for the Second Quarter and Six Months Ended December 31, 2009
NASHVILLE, TN, February 8, 2010/Businesswire-FirstCall/ — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the second quarter and six months ended December 31, 2009 of its fiscal year ending June 30, 2010.
Operating Results
Revenues for the three months ended December 31, 2009 were $53.8 million, compared with $65.1 million for the same period in fiscal year 2009. Income before income taxes for the three months ended December 31, 2009 was $1.6 million, compared with a loss before income taxes of $1.4 million in the same period in fiscal year 2009. Net income for the three months ended December 31, 2009 was $1.5 million, or $0.03 per share on a diluted basis, compared with a net loss of $1.0 million, or $0.02 per share on a diluted basis, for the same period in fiscal year 2009.
Revenues for the six months ended December 31, 2009 were $111.1 million, compared with $136.7 million for the same period in fiscal year 2009. Income before income taxes for the six months ended December 31, 2009 was $4.4 million, compared with $2.4 million in the same period in fiscal year 2009. Net income for the six months ended December 31, 2009 was $4.2 million, or $0.09 per share on a diluted basis, compared with $0.8 million, or $0.02 per share on a diluted basis, for the same period in fiscal year 2009.
Premiums earned for the three months ended December 31, 2009 were $45.2 million, compared with $54.8 million for the same period in fiscal year 2009. Premiums earned for the six months ended December 31, 2009 were $93.7 million, compared with $116.7 million for the same period in fiscal year 2009. These declines were primarily due to the weak economic conditions, which have caused both a decline in the number of policies written, as well as an increase in the percentage of our customers purchasing liability only coverage. Rate actions taken in a number of states to improve underwriting profitability and the closure of underperforming stores also contributed to the decrease in policies written and premiums earned. At December 31, 2009, the number of policies in force was 147,090, compared with 159,557 at December 31, 2008. At December 31, 2009, we operated 409 stores, compared with 424 stores at December 31, 2008.
Loss and Loss Adjustment Expense Ratio.The loss and loss adjustment expense ratio was 66.1 percent for the three months ended December 31, 2009, compared with 68.5 percent for the three months ended December 31, 2008. The loss and loss adjustment expense ratio was 67.3 percent for the six months ended December 31, 2009, compared with 69.7 percent for the six months ended December 31, 2008. For the three months ended December 31, 2009, we experienced favorable development on losses related to prior periods of approximately $2.4 million, compared with unfavorable development of $0.1 million for the three months ended
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December 31, 2008. For the six months ended December 31, 2009, we experienced favorable development of approximately $6.1 million, compared with $4.2 million for the six months ended December 31, 2008.
Excluding development, the loss and loss adjustment expense ratios for the three months ended December 31, 2009 and 2008 were 71.4 percent and 68.3 percent, respectively. Excluding favorable development, the loss and loss adjustment expense ratios for the six months ended December 31, 2009 and 2008 were 73.8 percent and 73.3 percent, respectively. The favorable development for the six months ended December 31, 2009 and 2008 was due to lower than anticipated severity and frequency of accidents.
Expense Ratio.Our expense ratio for the three months ended December 31, 2009 was 28.2 percent, compared with 25.2 percent for the same period in fiscal year 2009. Our expense ratio increased from 23.2 percent for the six months ended December 31, 2008 to 27.1 percent for the same period in the current fiscal year. The year-over-year increase in the expense ratio was due to the decrease in premiums earned, which resulted in a higher percentage of fixed expenses in our retail operations (such as rent and base salary).
Combined Ratio.The combined ratio was 94.3 percent for the three months ended December 31, 2009, compared with 93.7 percent for the same period in fiscal year 2009. The combined ratio was 94.4 percent for the six months ended December 31, 2009, compared with 92.9 percent for the same period in fiscal year 2009.
Litigation Settlement.As previously reported, we entered into settlement agreements related to litigation brought against us in Georgia and Alabama with respect to certain sales practices. Pursuant to the terms of the settlement agreements, eligible class members are entitled to certain premium credits or reimbursement certificates. At December 31, 2008, we accrued $5.2 million for premium credits available to class members who were actively insured by the Company. Subsequently, $3.3 million of premium credits have been utilized and $1.1 million have been forfeited, resulting in an estimated premium credit liability of $0.8 million at December 31, 2009.
Provision for Income Taxes.The provision for income taxes for the three months ended December 31, 2009 was $0.1 million, compared with a benefit of $0.4 million for the same period in fiscal year 2009. For the six months ended December 31, 2009, the provision for income taxes was $0.2 million, compared with $1.5 million for the same period in fiscal year 2009. The provision for income taxes for the three and six months ended December 31, 2009 related to current state income taxes for certain subsidiaries with taxable income. At December 31, 2009 and June 30, 2009, we established a full valuation allowance against all net deferred tax assets. In assessing our ability to support the realizability of our deferred tax assets, we considered both positive and negative evidence. We placed greater weight on historical results than on our outlook for future profitability. The deferred tax valuation allowance may be adjusted in future periods if we consider that it is more likely than not that some portion or all of the deferred tax assets will be realized. In the event the deferred tax valuation allowance is adjusted, we would record an income tax benefit for the adjustment.
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About First Acceptance Corporation
First Acceptance Corporation provides non-standard private passenger automobile insurance, primarily through employee-agents. At December 31, 2009, we leased and operated 409 retail offices in 12 states. Our insurance company subsidiaries are licensed to do business in 25 states. Additional information about First Acceptance Corporation can be found online at www.firstacceptancecorp.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 fiscal year ended June 30, 2009 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. 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 (Unaudited)
(in thousands, except per share data)
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums earned | $ | 45,199 | $ | 54,823 | $ | 93,666 | $ | 116,661 | ||||||||
Commission and fee income | 6,966 | 7,675 | 13,920 | 15,918 | ||||||||||||
Investment income | 2,033 | 2,608 | 3,946 | 5,331 | ||||||||||||
Net realized losses on fixed maturities, available-for-sale | (423 | ) | (26 | ) | (445 | ) | (1,241 | ) | ||||||||
53,775 | 65,080 | 111,087 | 136,669 | |||||||||||||
Costs and expenses: | ||||||||||||||||
Losses and loss adjustment expenses | 29,871 | 37,553 | 63,024 | 81,285 | ||||||||||||
Insurance operating expenses | 19,711 | 21,510 | 39,281 | 42,956 | ||||||||||||
Other operating expenses | 750 | 314 | 1,023 | 706 | ||||||||||||
Litigation settlement | 102 | 5,089 | (279 | ) | 5,234 | |||||||||||
Stock-based compensation | 272 | 514 | 655 | 1,009 | ||||||||||||
Depreciation and amortization | 500 | 455 | 964 | 924 | ||||||||||||
Interest expense | 992 | 1,033 | 1,981 | 2,190 | ||||||||||||
52,198 | 66,468 | 106,649 | 134,304 | |||||||||||||
Income (loss) before income taxes | 1,577 | (1,388 | ) | 4,438 | 2,365 | |||||||||||
Provision (benefit) for income taxes | 102 | (385 | ) | 203 | 1,527 | |||||||||||
Net income (loss) | $ | 1,475 | $ | (1,003 | ) | $ | 4,235 | $ | 838 | |||||||
Net income (loss) per share: | ||||||||||||||||
Basic and diluted | $ | 0.03 | $ | (0.02 | ) | $ | 0.09 | $ | 0.02 | |||||||
Number of shares used to calculate net income (loss) per share: | ||||||||||||||||
Basic | 47,960 | 47,658 | 47,919 | 47,656 | ||||||||||||
Diluted | 48,551 | 47,658 | 48,720 | 49,088 | ||||||||||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
Consolidated Balance Sheets
(in thousands, except per share data)
December 31, | June 30, | |||||||
2009 | 2009 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Fixed maturities, available-for-sale at fair value (amortized cost of $183,318 and $140,849, respectively) | $ | 186,328 | $ | 140,311 | ||||
Cash and cash equivalents | 29,227 | 77,201 | ||||||
Premiums and fees receivable, net of allowance of $531 and $419 | 39,212 | 45,309 | ||||||
Other assets | 9,543 | 11,866 | ||||||
Property and equipment, net | 3,546 | 3,921 | ||||||
Deferred acquisition costs | 3,641 | 3,896 | ||||||
Goodwill | 70,092 | 70,092 | ||||||
Identifiable intangible assets | 6,360 | 6,360 | ||||||
TOTAL ASSETS | $ | 347,949 | $ | 358,956 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Loss and loss adjustment expense reserves | $ | 77,546 | $ | 83,973 | ||||
Unearned premiums and fees | 50,160 | 57,350 | ||||||
Debentures payable | 41,240 | 41,240 | ||||||
Other liabilities | 10,676 | 16,537 | ||||||
Total liabilities | 179,622 | 199,100 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $.01 par value, 10,000 shares authorized | — | — | ||||||
Common stock, $.01 par value, 75,000 shares authorized; 48,490 and 48,312 shares issued and outstanding, respectively | 485 | 483 | ||||||
Additional paid-in capital | 465,406 | 464,720 | ||||||
Accumulated other comprehensive income (loss) | 3,010 | (538 | ) | |||||
Accumulated deficit | (300,574 | ) | (304,809 | ) | ||||
Total stockholders’ equity | 168,327 | 159,856 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 347,949 | $ | 358,956 | ||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
Supplemental Data
(Unaudited)
GROSS PREMIUMS EARNED BY STATE
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Premiums earned: | ||||||||||||||||
Georgia | $ | 9,960 | $ | 12,344 | $ | 20,861 | $ | 25,772 | ||||||||
Illinois | 6,075 | 6,826 | 12,406 | 14,188 | ||||||||||||
Texas | 5,714 | 6,133 | 11,626 | 13,134 | ||||||||||||
Florida | 4,933 | 6,196 | 10,194 | 13,812 | ||||||||||||
Alabama | 4,709 | 5,888 | 9,918 | 12,460 | ||||||||||||
Ohio | 2,909 | 3,182 | 5,862 | 6,633 | ||||||||||||
Tennessee | 2,855 | 3,800 | 5,958 | 8,215 | ||||||||||||
South Carolina | 2,727 | 4,491 | 5,866 | 9,941 | ||||||||||||
Pennsylvania | 2,610 | 2,786 | 5,429 | 5,572 | ||||||||||||
Indiana | 1,211 | 1,298 | 2,433 | 2,861 | ||||||||||||
Missouri | 782 | 956 | 1,609 | 2,085 | ||||||||||||
Mississippi | 714 | 923 | 1,504 | 1,988 | ||||||||||||
Total premiums earned | $ | 45,199 | $ | 54,823 | $ | 93,666 | $ | 116,661 | ||||||||
COMBINED RATIOS (INSURANCE OPERATIONS)
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Loss and loss adjustment expense | 66.1 | % | 68.5 | % | 67.3 | % | 69.7 | % | ||||||||
Expense | 28.2 | % | 25.2 | % | 27.1 | % | 23.2 | % | ||||||||
Combined | 94.3 | % | 93.7 | % | 94.4 | % | 92.9 | % | ||||||||
POLICIES IN FORCE
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Policies in force — beginning of period | 152,866 | 170,555 | 158,222 | 194,079 | ||||||||||||
Net decrease during period | (5,776 | ) | (10,998 | ) | (11,132 | ) | (34,522 | ) | ||||||||
Policies in force — end of period | 147,090 | 159,557 | 147,090 | 159,557 | ||||||||||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data (continued)
(Unaudited)
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 | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Retail locations — beginning of period | 415 | 429 | 418 | 431 | ||||||||||||
Opened | — | — | — | 1 | ||||||||||||
Closed | (6 | ) | (5 | ) | (9 | ) | (8 | ) | ||||||||
Retail locations — end of period | 409 | 424 | 409 | 424 | ||||||||||||
RETAIL LOCATIONS BY STATE
December 31, | September 30, | June 30, | ||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Alabama | 25 | 25 | 25 | 25 | 25 | 25 | ||||||||||||||||||
Florida | 34 | 39 | 36 | 39 | 39 | 40 | ||||||||||||||||||
Georgia | 61 | 61 | 61 | 61 | 61 | 61 | ||||||||||||||||||
Illinois | 76 | 81 | 78 | 81 | 78 | 80 | ||||||||||||||||||
Indiana | 18 | 18 | 18 | 19 | 18 | 19 | ||||||||||||||||||
Mississippi | 8 | 8 | 8 | 8 | 8 | 8 | ||||||||||||||||||
Missouri | 12 | 12 | 12 | 13 | 12 | 14 | ||||||||||||||||||
Ohio | 27 | 28 | 27 | 29 | 27 | 29 | ||||||||||||||||||
Pennsylvania | 17 | 18 | 17 | 18 | 17 | 19 | ||||||||||||||||||
South Carolina | 27 | 27 | 27 | 28 | 27 | 28 | ||||||||||||||||||
Tennessee | 19 | 20 | 20 | 20 | 20 | 20 | ||||||||||||||||||
Texas | 85 | 87 | 86 | 88 | 86 | 88 | ||||||||||||||||||
Total | 409 | 424 | 415 | 429 | 418 | 431 | ||||||||||||||||||
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