Exhibit 99
Press Release | Source: First Acceptance Corporation | |
Contact: Michael Bodayle (615) 844-2885 |
First Acceptance Corporation Reports Operating Results for the Third Quarter and Nine Months Ended March 31, 2010
NASHVILLE, TN, May 10, 2010/Businesswire-FirstCall/ — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the third quarter and nine months ended March 31, 2010 of its fiscal year ending June 30, 2010.
Operating Results
Revenues for the three months ended March 31, 2010 were $56.1 million, compared with $67.1 million for the same period in fiscal year 2009. Income before income taxes for the three months ended March 31, 2010 was $2.2 million, compared with $4.0 million in the same period in fiscal year 2009. Net income for the three months ended March 31, 2010 was $2.1 million, or $0.04 per share on a diluted basis, compared with $2.4 million, or $0.05 per share on a diluted basis, for the same period in fiscal year 2009.
Revenues for the nine months ended March 31, 2010 were $167.2 million, compared with $203.8 million for the same period in fiscal year 2009. Income before income taxes for the nine months ended March 31, 2010 was $6.6 million, compared with $6.4 million in the same period in fiscal year 2009. Net income for the nine months ended March 31, 2010 was $6.3 million, or $0.13 per share on a diluted basis, compared with $3.2 million, or $0.07 per share on a diluted basis, for the same period in fiscal year 2009.
Premiums earned for the three months ended March 31, 2010 were $46.7 million, compared with $54.8 million for the same period in fiscal year 2009. Premiums earned for the nine months ended March 31, 2010 were $140.3 million, compared with $171.5 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. The closure of underperforming stores also contributed to the decrease in policies written and premiums earned. At March 31, 2010, the number of policies in force was 169,603, compared with 173,674 at March 31, 2009. At March 31, 2010, we operated 405 stores, compared with 419 stores at March 31, 2009.
Loss and Loss Adjustment Expense Ratio.The loss and loss adjustment expense ratio was 68.4 percent for the three months ended March 31, 2010, compared with 71.0 percent for the three months ended March 31, 2009. The loss and loss adjustment expense ratio was 67.6 percent for the nine months ended March 31, 2010, compared with 70.1 percent for the nine months ended March 31, 2009. For the three months ended March 31, 2010, we experienced favorable development related to prior periods of $4.1 million, compared with $2.7 million for the three months ended March 31, 2009. For the nine months ended March 31, 2010, we experienced favorable development related to prior periods of $10.2 million, compared with $6.9 million for the nine months ended March 31, 2009.
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Excluding favorable development related to prior periods, the loss and loss adjustment expense ratios for the three months ended March 31, 2010 and 2009 were 77.2 percent and 75.9 percent, respectively, and the loss and loss adjustment expense ratios for the nine months ended March 31, 2010 and 2009 were 74.9 percent and 74.1 percent, respectively. The favorable development for the nine months ended March 31, 2010 and 2009 was due to lower than anticipated severity and frequency of accidents in addition to improvement in our claim handling practices.
Expense Ratio.Our expense ratio for the three months ended March 31, 2010 was 27.1 percent, compared with 25.3 percent for the same period in fiscal year 2009. Our expense ratio increased from 23.9 percent for the nine months ended March 31, 2009 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 95.5 percent for the three months ended March 31, 2010, compared with 96.3 percent for the same period in fiscal year 2009. The combined ratio was 94.7 percent for the nine months ended March 31, 2010, compared with 94.0 percent for the same period in fiscal year 2009.
Provision for Income Taxes.The provision for income taxes for the three months ended March 31, 2010 was $0.1 million, compared with $1.6 million for the same period in fiscal year 2009. For the nine months ended March 31, 2010, the provision for income taxes was $0.3 million, compared with $3.1 million for the same period in fiscal year 2009. The provision for income taxes for the three and nine months ended March 31, 2010 related to current state income taxes for certain subsidiaries with taxable income. At March 31, 2010 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
We primarily sell non-standard private passenger automobile insurance products underwritten by us as well as certain commissionable ancillary products, primarily through employee-agents. In certain states, our employee-agents also sell other complementary insurance products underwritten by us. At March 31, 2010, we leased and operated 405 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 | Nine Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums earned | $ | 46,651 | $ | 54,845 | $ | 140,317 | $ | 171,506 | ||||||||
Commission and fee income | 7,471 | 8,115 | 21,391 | 24,033 | ||||||||||||
Investment income | 2,008 | 2,410 | 5,954 | 7,741 | ||||||||||||
Net realized gains (losses) on fixed maturities, available-for-sale | (14 | ) | 1,727 | (459 | ) | 486 | ||||||||||
56,116 | 67,097 | 167,203 | 203,766 | |||||||||||||
Costs and expenses: | ||||||||||||||||
Losses and loss adjustment expenses | 31,902 | 38,929 | 94,926 | 120,214 | ||||||||||||
Insurance operating expenses | 20,125 | 22,021 | 59,406 | 64,977 | ||||||||||||
Other operating expenses | 280 | 276 | 1,303 | 982 | ||||||||||||
Litigation settlement | (35 | ) | (67 | ) | (314 | ) | 5,167 | |||||||||
Stock-based compensation | 198 | 523 | 853 | 1,532 | ||||||||||||
Depreciation and amortization | 483 | 455 | 1,447 | 1,379 | ||||||||||||
Interest expense | 970 | 969 | 2,951 | 3,159 | ||||||||||||
53,923 | 63,106 | 160,572 | 197,410 | |||||||||||||
Income before income taxes | 2,193 | 3,991 | 6,631 | 6,356 | ||||||||||||
Provision for income taxes | 124 | 1,597 | 327 | 3,124 | ||||||||||||
Net income | $ | 2,069 | $ | 2,394 | $ | 6,304 | $ | 3,232 | ||||||||
Net income per share: | ||||||||||||||||
Basic and diluted | $ | 0.04 | $ | 0.05 | $ | 0.13 | $ | 0.07 | ||||||||
Number of shares used to calculate net income per share: | ||||||||||||||||
Basic | 47,994 | 47,673 | 47,943 | 47,662 | ||||||||||||
Diluted | 48,637 | 48,865 | 48,699 | 49,030 | ||||||||||||
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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)
March 31, | June 30, | |||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Fixed maturities, available-for-sale at fair value (amortized cost of $183,013 and $140,849, respectively) | $ | 188,145 | $ | 140,311 | ||||
Cash and cash equivalents | 32,531 | 77,201 | ||||||
Premiums and fees receivable, net of allowance of $376 and $419 | 49,777 | 45,309 | ||||||
Other assets | 8,905 | 11,866 | ||||||
Property and equipment, net | 3,662 | 3,921 | ||||||
Deferred acquisition costs | 4,255 | 3,896 | ||||||
Goodwill | 70,092 | 70,092 | ||||||
Identifiable intangible assets | 6,360 | 6,360 | ||||||
TOTAL ASSETS | $ | 363,727 | $ | 358,956 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Loss and loss adjustment expense reserves | $ | 76,183 | $ | 83,973 | ||||
Unearned premiums and fees | 62,499 | 57,350 | ||||||
Debentures payable | 41,240 | 41,240 | ||||||
Other liabilities | 11,092 | 16,537 | ||||||
Total liabilities | 191,014 | 199,100 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $.01 par value, 10,000 shares authorized | — | — | ||||||
Common stock, $.01 par value, 75,000 shares authorized; 48,489 and 48,312 shares issued and outstanding, respectively | 485 | 483 | ||||||
Additional paid-in capital | 465,601 | 464,720 | ||||||
Accumulated other comprehensive income (loss) | 5,132 | (538 | ) | |||||
Accumulated deficit | (298,505 | ) | (304,809 | ) | ||||
Total stockholders’ equity | 172,713 | 159,856 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 363,727 | $ | 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 | Nine Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Premiums earned: | ||||||||||||||||
Georgia | $ | 9,918 | $ | 12,273 | $ | 30,780 | $ | 38,045 | ||||||||
Texas | 6,233 | 6,459 | 17,858 | 19,593 | ||||||||||||
Illinois | 6,076 | 6,736 | 18,482 | 20,923 | ||||||||||||
Florida | 5,307 | 6,382 | 15,502 | 20,194 | ||||||||||||
Alabama | 4,727 | 5,845 | 14,645 | 18,305 | ||||||||||||
Ohio | 3,223 | 3,182 | 9,085 | 9,815 | ||||||||||||
Tennessee | 2,925 | 3,650 | 8,883 | 11,865 | ||||||||||||
South Carolina | 2,847 | 4,219 | 8,712 | 14,160 | ||||||||||||
Pennsylvania | 2,569 | 2,883 | 7,998 | 8,455 | ||||||||||||
Indiana | 1,266 | 1,359 | 3,699 | 4,221 | ||||||||||||
Missouri | 834 | 939 | 2,443 | 3,023 | ||||||||||||
Mississippi | 726 | 918 | 2,230 | 2,907 | ||||||||||||
Total premiums earned | $ | 46,651 | $ | 54,845 | $ | 140,317 | $ | 171,506 | ||||||||
COMBINED RATIOS (INSURANCE OPERATIONS)
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Loss and loss adjustment expense | 68.4 | % | 71.0 | % | 67.6 | % | 70.1 | % | ||||||||
Expense | 27.1 | % | 25.3 | % | 27.1 | % | 23.9 | % | ||||||||
Combined | 95.5 | % | 96.3 | % | 94.7 | % | 94.0 | % | ||||||||
POLICIES IN FORCE
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Policies in force — beginning of period | 147,090 | 159,557 | 158,222 | 194,079 | ||||||||||||
Net increase (decrease) during period | 22,513 | 14,117 | 11,381 | (20,405 | ) | |||||||||||
Policies in force — end of period | 169,603 | 173,674 | 169,603 | 173,674 | ||||||||||||
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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 | Nine Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Retail locations — beginning of period | 409 | 424 | 418 | 431 | ||||||||||||
Opened | — | — | — | 1 | ||||||||||||
Closed | (4 | ) | (5 | ) | (13 | ) | (13 | ) | ||||||||
Retail locations — end of period | 405 | 419 | 405 | 419 | ||||||||||||
RETAIL LOCATIONS BY STATE
March 31, | December 31, | June 30, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Alabama | 25 | 25 | 25 | 25 | 25 | 25 | ||||||||||||||||||
Florida | 34 | 39 | 34 | 39 | 39 | 40 | ||||||||||||||||||
Georgia | 61 | 61 | 61 | 61 | 61 | 61 | ||||||||||||||||||
Illinois | 75 | 80 | 76 | 81 | 78 | 80 | ||||||||||||||||||
Indiana | 18 | 18 | 18 | 18 | 18 | 19 | ||||||||||||||||||
Mississippi | 8 | 8 | 8 | 8 | 8 | 8 | ||||||||||||||||||
Missouri | 12 | 12 | 12 | 12 | 12 | 14 | ||||||||||||||||||
Ohio | 27 | 27 | 27 | 28 | 27 | 29 | ||||||||||||||||||
Pennsylvania | 17 | 17 | 17 | 18 | 17 | 19 | ||||||||||||||||||
South Carolina | 26 | 27 | 27 | 27 | 27 | 28 | ||||||||||||||||||
Tennessee | 19 | 20 | 19 | 20 | 20 | 20 | ||||||||||||||||||
Texas | 83 | 85 | 85 | 87 | 86 | 88 | ||||||||||||||||||
Total | 405 | 419 | 409 | 424 | 418 | 431 | ||||||||||||||||||
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