Exhibit 99
Press Release | Source: First Acceptance Corporation Contact: Steve Harrison (615) 844-2885 |
First Acceptance Corporation Reports Fourth Quarter and Fiscal Year 2006 Financial Results
NASHVILLE, TN, September 13, 2006 /Businesswire-FirstCall/ — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the fourth quarter and fiscal year ended June 30, 2006.
Net income for the three months ended June 30, 2006 was $14.7 million, or $0.30 per share on a fully-diluted basis, compared with net income of $13.2 million, or $0.27 per share on a fully-diluted basis, for the same period of fiscal 2005. The 2006 and 2005 periods include income tax benefits of $10.5 million and $10.6 million ($0.21 per share on a fully-diluted basis for both periods), respectively, from decreases in the valuation allowance for the Company’s deferred tax asset. Such decreases were the result of taxable income for both years exceeding the estimates used by management in establishing the valuation allowances, in addition to revisions in management’s estimates of future taxable income based on the results for the most recent fiscal years. Total revenues for the three months ended June 30, 2006 increased 51% to $75.2 million, from $49.8 million in the same period last year. Income before taxes for the three months ended June 30, 2006 was $6.9 million versus $4.0 million for the same period of fiscal 2005.
Net income for the year ended June 30, 2006 was $28.1 million, or $0.57 per share on a fully-diluted basis, compared with $26.2 million, or $0.53 per share on a fully-diluted basis, for the same period of fiscal 2005. The 2006 and 2005 periods include income tax benefits of $10.5 million and $10.6 million ($0.21 and $0.22 per share on a fully-diluted basis), respectively, from decreases in the valuation allowance for the Company’s deferred tax asset. Total revenues for the year ended June 30, 2006 increased 49% to $249.0 million, from $166.8 million in the same period last year. Income before income taxes for the year ended June 30, 2006 was $27.0 million versus $24.0 million for the same period of fiscal 2005.
Net income for the year ended June 30, 2006 included pre-tax gains on sales of foreclosed real estate held for sale of $3.6 million as compared with $0.08 million for the year ended June 30, 2005. There were no sales of foreclosed real estate held for sale during the three months ended June 30, 2006 or 2005. Remaining real estate held for sale consists of two tracts of land in San Antonio, Texas with a book value of $87,000.
Insurance Operations
• | Key ratios— The Company’s loss ratio for the three months ended June 30, 2006 was 68.0%, compared with 68.8% for the same period last year and 69.6% for the quarter ended March 31, 2006. The Company’s expense ratio for the three months ended June 30, 2006 was 21.1%, compared with 22.0% for the same period last year and 19.3% for the quarter ended March 31, 2006. As a result, the Company’s combined ratio for the three months ended June 30, 2006 was 89.1%, compared with 90.8% for the same period last year and 88.9% for the quarter ended March 31, 2006. |
• | Office Expansion— During the three months ended June 30, 2006, the Company opened 17 additional offices, compared with 25 offices added to operations during the three months ended June 30, 2005 and 28 offices added to operations during the three months ended March 31, 2006. The Company also closed four offices during the three months ended June 30, 2006. The total number of stores in operation increased from 248 as of June 30, 2005 and 447 as of March 31, 2006 to 460 as of June 30, 2006. |
• | Premium growth— Total gross premiums earned increased 53% to $64.0 million for the three months ended June 30, 2006 from $41.9 million for the same period last year. The number of insured policies in force serviced by the Company at June 30, 2006 increased 68% over the number of policies in force at June 30, 2005. |
Appointment of Edward Pierce As Executive Vice President
The Company also announced that Edward Pierce has been named Executive Vice President. The Company anticipates that Mr. Pierce will be named as the Chief Financial Officer of the Company in the future. In connection with Mr. Pierce’s employment, the Company has agreed to sell Mr. Pierce 50,000 shares of the Company’s common stock at a purchase price equal to the closing price on September 13, 2006.
From May 2001 through February 2006, Mr. Pierce, 49, served as Executive Vice President and Chief Financial Officer and as a director of BindView Development Corporation, a network security software development company. BindView was acquired by Symantec Corp. in January 2006. From November 1994 through January 2001, Mr. Pierce held various financial management positions, including Executive Vice President and Chief Financial Officer, with Metamor Worldwide Corporation, a global information technology services company. Metamor was acquired by PSINet Inc. in June 2000.
2006 Annual Meeting of Stockholders
The 2006 annual meeting of stockholders of First Acceptance Corporation will be held on Thursday, November 9, 2006 in Dallas, Texas. Further details will be provided in our forthcoming Proxy Statement.
About First Acceptance Corporation
First Acceptance Corporation provides non-standard private passenger automobile insurance, primarily through employee-agents. As of September 1, 2006, the Company leased and operated 458 retail offices in 12 states. The Company’s insurance company subsidiaries are licensed to do business in 25 states.
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 in the Company’s Annual Report on Form 10-K and its 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
Condensed Consolidated Statements of Income
($000s EXCEPT PER SHARE DATA)
(Unaudited)
Condensed Consolidated Statements of Income
($000s EXCEPT PER SHARE DATA)
(Unaudited)
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums earned | $ | 64,037 | $ | 41,613 | $ | 206,754 | $ | 132,347 | ||||||||
Commissions and fees | 8,434 | 7,868 | 28,774 | 27,151 | ||||||||||||
Transaction service fee | 1,050 | — | 4,150 | — | ||||||||||||
Ceding commissions from reinsurer(1) | — | (628 | ) | — | 2,975 | |||||||||||
Gains on sales of foreclosed real estate | — | — | 3,638 | 755 | ||||||||||||
Investment income | 1,801 | 898 | 5,762 | 3,353 | ||||||||||||
Other gains (losses) | (127 | ) | 22 | (76 | ) | 214 | ||||||||||
Total revenues | 75,195 | 49,773 | 249,002 | 166,795 | ||||||||||||
Expenses: | ||||||||||||||||
Losses and loss adjustment expenses | 43,542 | 28,616 | 140,845 | 87,493 | ||||||||||||
Insurance operating expenses | 22,999 | 15,806 | 75,773 | 49,921 | ||||||||||||
Other operating expenses | 530 | 792 | 2,494 | 2,775 | ||||||||||||
Stock-based compensation | 82 | 95 | 500 | 332 | ||||||||||||
Depreciation and amortization | 684 | 322 | 1,463 | 1,920 | ||||||||||||
Interest expense | 441 | 144 | 898 | 351 | ||||||||||||
Total expenses | 68,278 | 45,775 | 221,973 | 142,792 | ||||||||||||
Income before income taxes | 6,917 | 3,998 | 27,029 | 24,003 | ||||||||||||
Income tax benefit(2) | (7,774 | ) | (9,203 | ) | (1,039 | ) | (2,153 | ) | ||||||||
Net income | $ | 14,691 | $ | 13,201 | $ | 28,068 | $ | 26,156 | ||||||||
Basic net income per share | $ | 0.31 | $ | 0.28 | $ | 0.59 | $ | 0.56 | ||||||||
Diluted net income per share | $ | 0.30 | $ | 0.27 | $ | 0.57 | $ | 0.53 | ||||||||
Weighted average basic shares | 47,525 | 47,444 | 47,487 | 47,055 | ||||||||||||
Weighted average diluted shares | 49,605 | 49,378 | 49,576 | 48,989 |
(1) | The reduction in ceding commissions from reinsurer for the three months ended June 30, 2005 was the result of a re-estimation based upon loss experience. |
(2) | The three month periods and years ended June 30, 2006 and 2005 include decreases in the valuation allowance for the deferred tax asset of $10,540 and $10,594, respectively. |
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations — By Business Segment
($000s EXCEPT PER SHARE DATA)
(Unaudited)
Consolidated Statements of Operations — By Business Segment
($000s EXCEPT PER SHARE DATA)
(Unaudited)
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
INSURANCE OPERATIONS | 2006 | 2005 | 2006 | 2005 | ||||||||||||
Revenues: | ||||||||||||||||
Premiums earned | $ | 64,037 | $ | 41,613 | $ | 206,754 | $ | 132,347 | ||||||||
Commissions and fees | 8,434 | 7,868 | 28,774 | 27,151 | ||||||||||||
Transaction service fee | 1,050 | — | 4,150 | — | ||||||||||||
Ceding commissions from reinsurer(2) | — | (628 | ) | — | 2,975 | |||||||||||
Investment income | 1,693 | 756 | 4,955 | 2,287 | ||||||||||||
Other gains (losses) | (127 | ) | 22 | (76 | ) | 214 | ||||||||||
Total revenues | 75,087 | 49,631 | 244,557 | 164,974 | ||||||||||||
Expenses: | ||||||||||||||||
Losses and loss adjustment expenses | 43,542 | 28,616 | 140,845 | 87,493 | ||||||||||||
Operating expenses | 22,999 | 15,806 | 75,773 | 49,921 | ||||||||||||
Depreciation and amortization | 684 | 322 | 1,463 | 1,920 | ||||||||||||
Total expenses | 67,225 | 44,744 | 218,081 | 139,334 | ||||||||||||
Income before income taxes | $ | 7,862 | $ | 4,887 | $ | 26,746 | $ | 25,640 | ||||||||
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
REAL ESTATE AND CORPORATE(1) | 2006 | 2005 | 2006 | 2005 | ||||||||||||
Revenues: | ||||||||||||||||
Gains on sales of foreclosed real estate | $ | — | $ | — | $ | 3,638 | $ | 755 | ||||||||
Investment income | 108 | 142 | 807 | 1,066 | ||||||||||||
Total revenues | 108 | 142 | 4,445 | 1,821 | ||||||||||||
Expenses: | ||||||||||||||||
Operating expenses | 530 | 792 | 2,494 | 2,775 | ||||||||||||
Stock-based compensation | 82 | 95 | 500 | 332 | ||||||||||||
Interest expense | 441 | 144 | 898 | 351 | ||||||||||||
Total expenses | 1,053 | 1,031 | 3,892 | 3,458 | ||||||||||||
(Loss) income before income taxes | $ | (945 | ) | $ | (889 | ) | $ | 553 | $ | (1,637 | ) | |||||
(1) | Includes activities related to disposing of foreclosed real estate held for sale, interest expense associated with debt, and general corporate overhead. |
(2) | The reduction in ceding commissions from reinsurer for the three months ended June 30, 2005 was the result of a re-estimation based upon loss experience. |
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
($000s EXCEPT PER SHARE DATA)
(Unaudited)
Condensed Consolidated Balance Sheets
($000s EXCEPT PER SHARE DATA)
(Unaudited)
June 30, | ||||||||
2006 | 2005 | |||||||
ASSETS | ||||||||
Fixed maturities, available-for-sale, at market value | $ | 127,828 | $ | 74,840 | ||||
Investment in mutual fund, at market value | — | 10,920 | ||||||
Cash and cash equivalents | 31,534 | 24,762 | ||||||
Premiums and fees receivable | 64,074 | 42,908 | ||||||
Reinsurance recoverables | 1,344 | 4,490 | ||||||
Deferred tax asset | 48,068 | 48,106 | ||||||
Other assets | 17,501 | 11,031 | ||||||
Foreclosed real estate held for sale | 87 | 961 | ||||||
Goodwill and identifiable intangible assets | 143,870 | 112,704 | ||||||
TOTAL | $ | 434,306 | $ | 330,722 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Total policy liabilities | 138,939 | 90,649 | ||||||
Notes payable and capitalized lease obligation | 24,026 | — | ||||||
Other liabilities | 17,918 | 11,744 | ||||||
Total liabilities | 180,883 | 102,393 | ||||||
Total stockholders’ equity | 253,423 | 228,329 | ||||||
TOTAL | $ | 434,306 | $ | 330,722 | ||||
Book value per share | $ | 5.33 | $ | 4.81 |
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
($000s EXCEPT PER SHARE DATA)
(Unaudited)
Supplemental Data
($000s EXCEPT PER SHARE DATA)
(Unaudited)
GROSS PREMIUMS EARNED BY STATE
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Gross premiums earned: | ||||||||||||||||
Georgia | $ | 17,467 | $ | 17,829 | $ | 68,948 | $ | 69,806 | ||||||||
Florida | 11,086 | 994 | 26,327 | 1,181 | ||||||||||||
Alabama | 7,595 | 7,126 | 28,952 | 26,610 | ||||||||||||
Texas | 6,252 | 2,408 | 16,579 | 4,569 | ||||||||||||
Tennessee | 6,094 | 6,710 | 24,387 | 26,205 | ||||||||||||
Illinois | 5,106 | 65 | 7,680 | 112 | ||||||||||||
Ohio | 3,862 | 3,339 | 14,046 | 10,703 | ||||||||||||
Indiana | 1,946 | 941 | 6,163 | 2,032 | ||||||||||||
Missouri | 1,466 | 1,239 | 5,332 | 4,193 | ||||||||||||
Mississippi | 1,354 | 1,247 | 5,187 | 4,431 | ||||||||||||
Pennsylvania | 941 | 24 | 1,996 | 24 | ||||||||||||
South Carolina | 873 | — | 1,238 | — | ||||||||||||
Total gross premiums earned | 64,042 | 41,922 | 206,835 | 149,866 | ||||||||||||
Premiums ceded | (5 | ) | (309 | ) | (81 | ) | (8,732 | ) | ||||||||
Premiums not assumed | — | — | — | (8,787 | ) | |||||||||||
Total net premiums earned | $ | 64,037 | $ | 41,613 | $ | 206,754 | $ | 132,347 | ||||||||
GAAP COMBINED RATIOS (INSURANCE COMPANIES)
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Loss and loss adjustment expense | 68.0 | % | 68.8 | % | 68.1 | % | 66.1 | % | ||||||||
Expense (1) | 21.1 | % | 22.0 | % | 20.7 | % | 17.7 | % | ||||||||
Combined ratio | 89.1 | % | 90.8 | % | 88.8 | % | 83.8 | % | ||||||||
(1) | Insurance operating expenses are reduced by fee income from insureds, ceding commissions received from our quota-share reinsurer and the transaction service fee received from the Chicago agencies whose business we acquired. |
POLICIES IN FORCE
Three Months Ended | Year Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Policies in force — beginning of period | 187,048 | 122,363 | 119,422 | 91,385 | ||||||||||||
Acquired | — | 6,473 | — | 6,473 | ||||||||||||
Net increase during period | 13,353 | (9,414 | ) | 80,979 | 21,564 | |||||||||||
Policies in force — end of period | 200,401 | 119,422 | 200,401 | 119,422 | ||||||||||||
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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 writing business. Through December 31, 2005, we had previously reported this information based upon the date that a location was leased and first incurred operating expenses. Count information for all prior periods presented has been restated to conform to the current period’s method of presentation. Under the prior basis of presentation, we would have reported a total of 468 locations leased at June 30, 2006.
Three Months Ended | Years Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Retail locations — beginning of period | 447 | 208 | 248 | 133 | ||||||||||||
Opened | 17 | 25 | 149 | 101 | ||||||||||||
Acquired | — | 15 | 72 | 15 | ||||||||||||
Closed | (4 | ) | — | (9 | ) | (1 | ) | |||||||||
Retail locations — end of period | 460 | 248 | 460 | 248 | ||||||||||||
RETAIL LOCATIONS BY STATE
Change in Locations | ||||||||||||||||||||||||
During the Three Months | ||||||||||||||||||||||||
Retail Locations as of | Retail Locations as of | Ended | ||||||||||||||||||||||
June 30, | March 31, | June 30, | ||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||
Alabama | 25 | 25 | 25 | 24 | — | 1 | ||||||||||||||||||
Florida | 39 | 20 | 40 | 14 | (1 | ) | 6 | |||||||||||||||||
Georgia | 63 | 62 | 63 | 62 | — | — | ||||||||||||||||||
Illinois | 86 | 5 | 86 | 3 | — | 2 | ||||||||||||||||||
Indiana | 26 | 21 | 25 | 21 | 1 | — | ||||||||||||||||||
Mississippi | 8 | 8 | 8 | 8 | — | — | ||||||||||||||||||
Missouri | 18 | 14 | 20 | 14 | (2 | ) | — | |||||||||||||||||
Ohio | 30 | 29 | 30 | 28 | — | 1 | ||||||||||||||||||
Pennsylvania | 25 | 7 | 20 | — | 5 | 7 | ||||||||||||||||||
South Carolina | 21 | — | 12 | — | 9 | — | ||||||||||||||||||
Tennessee | 20 | 20 | 20 | 20 | — | — | ||||||||||||||||||
Texas | 99 | 37 | 98 | 14 | 1 | 23 | ||||||||||||||||||
Total | 460 | 248 | 447 | 208 | 13 | 40 | ||||||||||||||||||
Change in Locations | ||||||||||||||||||||||||
Retail Locations as of | Retail Locations as of | During the Years Ended | ||||||||||||||||||||||
June 30, | June 30, | June 30, | ||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2006 | 2005 | |||||||||||||||||||
Alabama | 25 | 25 | 25 | 21 | — | 4 | ||||||||||||||||||
Florida | 39 | 20 | 20 | — | 19 | 20 | ||||||||||||||||||
Georgia | 63 | 62 | 62 | 54 | 1 | 8 | ||||||||||||||||||
Illinois | 86 | 5 | 5 | — | 81 | 5 | ||||||||||||||||||
Indiana | 26 | 21 | 21 | 4 | 5 | 17 | ||||||||||||||||||
Mississippi | 8 | 8 | 8 | 5 | — | 3 | ||||||||||||||||||
Missouri | 18 | 14 | 14 | 10 | 4 | 4 | ||||||||||||||||||
Ohio | 30 | 29 | 29 | 23 | 1 | 6 | ||||||||||||||||||
Pennsylvania | 25 | 7 | 7 | — | 18 | 7 | ||||||||||||||||||
South Carolina | 21 | — | — | — | 21 | — | ||||||||||||||||||
Tennessee | 20 | 20 | 20 | 16 | — | 4 | ||||||||||||||||||
Texas | 99 | 37 | 37 | — | 62 | 37 | ||||||||||||||||||
Total | 460 | 248 | 248 | 133 | 212 | 115 | ||||||||||||||||||
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