Exhibit 99
Press Release | Source: First Acceptance Corporation Contact: Michael Bodayle (615) 844-2885 |
First Acceptance Corporation Reports Operating Results for the Quarter and Nine Months Ended March 31, 2009
NASHVILLE, TN, May 11, 2009/Businesswire-FirstCall/ — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the third quarter and nine months ended March 31, 2009 of its fiscal year ending June 30, 2009.
Operating Results
Revenues for the three months ended March 31, 2009 were $67.1 million, compared with $84.0 million in the same period last year. Income before income taxes for the three months ended March 31, 2009 was $4.0 million, compared with $1.3 million in the same period last year. Net income for the three months ended March 31, 2009 was $2.4 million, or $0.05 per share on a diluted basis, compared with net income of $0.8 million, or $0.02 per share on a diluted basis, for the three months ended March 31, 2008.
Revenues for the nine months ended March 31, 2009 were $203.8 million, compared with $253.5 million in the same period last year. Income before income taxes for the nine months ended March 31, 2009 was $6.4 million, compared with $4.3 million in the same period last year. Net income for the nine months ended March 31, 2009 was $3.2 million, or $0.07 per share on a diluted basis, compared with a net loss of $9.1 million, or $0.19 per share on a diluted basis, for the nine months ended March 31, 2008.
The results for the nine months ended March 31, 2009 included charges of $5.2 million associated with the settlement of litigation described below, the recognition of $2.5 million in net realized gains on investments that were sold in order to utilize expiring tax net operating loss carryforwards and $2.0 million of other-than-temporary impairment charges related to investments. The results for the nine months ended March 31, 2008 included an increase in the valuation allowance for our deferred tax asset of $11.6 million, or $0.24 per share on a diluted basis.
Premiums earned for the three months ended March 31, 2009 were $54.8 million, compared with $72.2 million for the three months ended March 31, 2008. Premiums earned for the nine months ended March 31, 2009 were $171.5 million, compared with $217.5 million for the nine months ended March 31, 2008. The decreases in premiums earned 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 increases taken in a number of states to improve underwriting profitability and the closure of stores also contributed toward the decreases in premiums earned. At March 31, 2009, the number of policies in force was 173,674, compared with 215,857 at March 31, 2008. At March 31, 2009, we operated 419 stores, compared with 432 stores at March 31, 2008.
Approximately 67% of the $17.4 million decline in premiums earned for the three months ended March 31, 2009 and approximately 68% of the $46.0 million decline in premiums earned for the nine months ended March 31, 2009 was in our Florida, Georgia, South Carolina and
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Texas markets. Our premiums earned in these states were adversely affected by the weak economic conditions, as well as a decline in used car sales, which have historically been a significant contributor to new policy growth in these markets.
Loss and Loss Adjustment Expense Ratio.The loss and loss adjustment expense ratio was 71.0% for the three months ended March 31, 2009, compared with 76.6% for the three months ended March 31, 2008. The loss and loss adjustment expense ratio was 70.1% for the nine months ended March 31, 2009, compared with 76.9% for the nine months ended March 31, 2008. We experienced favorable development of approximately $2.7 million and $6.9 million for the three and nine months ended March 31, 2009, respectively, for losses occurring prior to June 30, 2008. For the three and nine months ended March 31, 2008, we did not experience any significant development for losses occurring prior to June 30, 2008. In addition, we did not experience any significant weather-related losses during these periods.
Excluding the development noted above, the loss and loss adjustment expense ratio for the three and nine months ended March 31, 2009 was 75.9% and 74.1%, respectively. These improvements over the same periods last year were primarily the result of a revision in our estimate of the loss and loss adjustment expense ratio for calendar 2008 which improved from 76.5% at June 30, 2008 to 73.5% at March 31, 2009. We attribute this improvement to the impact of the rate increases taken in early calendar 2008 in Florida, Illinois, Indiana, Texas and South Carolina and the continued improvement in our underwriting and claim handling practices, as well as favorable severity trends most notably in our property damage and physical damage coverages.
Expense Ratio.Our expense ratio for the three months ended March 31, 2009 was 25.3%, compared with 21.0% for the same period in the prior year. Our expense ratio for the nine months ended March 31, 2009 was 23.9%, compared with 21.2% for the nine months ended March 31, 2008. These increases were primarily due to the declines in premiums earned discussed above.
Combined Ratio.The combined ratio decreased to 96.3% for the three months ended March 31, 2009 from 97.6% for the three months ended March 31, 2008. The combined ratio decreased to 94.0% for the nine months ended March 31, 2009 from 98.1% for the nine months ended March 31, 2008.
Litigation Settlement.As previously reported, we entered into a settlement agreement relating to the class action litigation brought against us in the State of Georgia, which was approved by the court in November 2008. In addition, during December 2008, we entered into a settlement agreement with the plaintiffs in similar litigation brought against us in the State of Alabama, which was approved by the court in February 2009. Eligible class members are entitled to certain premium credits or reimbursement certificates pursuant to the terms of the settlement agreements. Based upon our analysis of the premium credits available to class members, we have a remaining accrual of approximately $4.4 million as of March 31, 2009 for currently estimable costs associated with the utilization of available premium credits for Georgia and Alabama class members. We are currently in discussions with our insurance carriers regarding coverage for the costs and expenses incurred relating to the litigation settlements and are not able currently to estimate the amount, if any, that we may receive from our insurance carriers.
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About First Acceptance Corporation
First Acceptance Corporation provides non-standard private passenger automobile insurance, primarily through employee-agents. At March 31, 2009, we leased and operated 419 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 our Annual Report on Form 10-K 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
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues: | ||||||||||||||||
Premiums earned | $ | 54,845 | $ | 72,209 | $ | 171,506 | $ | 217,496 | ||||||||
Commission and fee income | 8,115 | 9,311 | 24,033 | 27,596 | ||||||||||||
Investment income | 2,410 | 2,687 | 7,741 | 8,573 | ||||||||||||
Net realized gains (losses) on fixed maturities, available-for-sale | 1,727 | (222 | ) | 486 | (181 | ) | ||||||||||
67,097 | 83,985 | 203,766 | 253,484 | |||||||||||||
Costs and expenses: | ||||||||||||||||
Losses and loss adjustment expenses | 38,929 | 55,319 | 120,214 | 167,336 | ||||||||||||
Insurance operating expenses | 22,021 | 24,496 | 64,977 | 73,662 | ||||||||||||
Other operating expenses | 276 | 487 | 982 | 1,751 | ||||||||||||
Litigation settlement | (67 | ) | 440 | 5,167 | 440 | |||||||||||
Stock-based compensation | 523 | 310 | 1,532 | 988 | ||||||||||||
Depreciation and amortization | 455 | 454 | 1,379 | 1,202 | ||||||||||||
Interest expense | 969 | 1,192 | 3,159 | 3,822 | ||||||||||||
63,106 | 82,698 | 197,410 | 249,201 | |||||||||||||
Income before income taxes | 3,991 | 1,287 | 6,356 | 4,283 | ||||||||||||
Provision for income taxes | 1,597 | 529 | 3,124 | 13,364 | ||||||||||||
Net income (loss) | $ | 2,394 | $ | 758 | $ | 3,232 | $ | (9,081 | ) | |||||||
Net income (loss) per share: | ||||||||||||||||
Basic and diluted | $ | 0.05 | $ | 0.02 | $ | 0.07 | $ | (0.19 | ) | |||||||
Number of shares used to calculate net income (loss) per share: | ||||||||||||||||
Basic | 47,673 | 47,640 | 47,662 | 47,624 | ||||||||||||
Diluted | 48,865 | 48,831 | 49,030 | 47,624 | ||||||||||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
March 31, | June 30, | |||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Fixed maturities, available-for-sale at fair value | $ | 140,590 | $ | 189,570 | ||||
Cash and cash equivalents | 74,512 | 38,646 | ||||||
Premiums and fees receivable, net | 55,053 | 63,377 | ||||||
Deferred tax asset, net | 15,206 | 17,593 | ||||||
Other assets | 13,398 | 15,053 | ||||||
Deferred acquisition costs | 4,461 | 4,549 | ||||||
Goodwill and identifiable intangible assets | 144,442 | 144,442 | ||||||
TOTAL ASSETS | $ | 447,662 | $ | 473,230 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Loss and loss adjustment expense reserves | $ | 92,747 | $ | 101,407 | ||||
Unearned premiums and fees | 68,766 | 77,237 | ||||||
Notes payable | — | 3,913 | ||||||
Debentures payable | 41,240 | 41,240 | ||||||
Other liabilities | 18,248 | 23,974 | ||||||
Total liabilities | 221,001 | 247,771 | ||||||
Total stockholders’ equity | 226,661 | 225,459 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 447,662 | $ | 473,230 | ||||
Book value per share | $ | 4.70 | $ | 4.69 | ||||
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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, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Premiums earned: | ||||||||||||||||
Georgia | $ | 12,273 | $ | 15,237 | $ | 38,045 | $ | 46,475 | ||||||||
Illinois | 6,736 | 8,016 | 20,923 | 24,116 | ||||||||||||
Florida | 6,382 | 10,762 | 20,194 | 33,943 | ||||||||||||
Texas | 6,459 | 8,781 | 19,593 | 25,524 | ||||||||||||
Alabama | 5,845 | 7,209 | 18,305 | 21,747 | ||||||||||||
South Carolina | 4,219 | 6,195 | 14,160 | 17,485 | ||||||||||||
Tennessee | 3,650 | 5,179 | 11,865 | 15,869 | ||||||||||||
Ohio | 3,182 | 3,846 | 9,815 | 11,660 | ||||||||||||
Pennsylvania | 2,883 | 2,606 | 8,455 | 7,267 | ||||||||||||
Indiana | 1,359 | 1,736 | 4,221 | 5,510 | ||||||||||||
Missouri | 939 | 1,435 | 3,023 | 4,287 | ||||||||||||
Mississippi | 918 | 1,207 | 2,907 | 3,613 | ||||||||||||
Total premiums earned | $ | 54,845 | $ | 72,209 | $ | 171,506 | $ | 217,496 | ||||||||
COMBINED RATIOS (INSURANCE COMPANIES)
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Loss and loss adjustment expense | 71.0 | % | 76.6 | % | 70.1 | % | 76.9 | % | ||||||||
Expense | 25.3 | % | 21.0 | % | 23.9 | % | 21.2 | % | ||||||||
Combined | 96.3 | % | 97.6 | % | 94.0 | % | 98.1 | % | ||||||||
POLICIES IN FORCE
Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Policies in force — beginning of period | 159,557 | 203,008 | 194,079 | 226,974 | ||||||||||||
Net increase (decrease) during period | 14,117 | 12,849 | (20,405 | ) | (11,117 | ) | ||||||||||
Policies in force — end of period | 173,674 | 215,857 | 173,674 | 215,857 | ||||||||||||
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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, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Retail locations — beginning of period | 424 | 440 | 431 | 462 | ||||||||||||
Opened | — | — | 1 | 2 | ||||||||||||
Closed | (5 | ) | (8 | ) | (13 | ) | (32 | ) | ||||||||
Retail locations — end of period | 419 | 432 | 419 | 432 | ||||||||||||
RETAIL LOCATIONS BY STATE
March 31, | December 31, | June 30, | ||||||||||||||||||||||
2009 | 2008 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||
Alabama | 25 | 25 | 25 | 25 | 25 | 25 | ||||||||||||||||||
Florida | 39 | 40 | 39 | 40 | 40 | 41 | ||||||||||||||||||
Georgia | 61 | 61 | 61 | 61 | 61 | 62 | ||||||||||||||||||
Illinois | 80 | 80 | 81 | 80 | 80 | 81 | ||||||||||||||||||
Indiana | 18 | 19 | 18 | 22 | 19 | 24 | ||||||||||||||||||
Mississippi | 8 | 8 | 8 | 8 | 8 | 8 | ||||||||||||||||||
Missouri | 12 | 15 | 12 | 16 | 14 | 15 | ||||||||||||||||||
Ohio | 27 | 29 | 28 | 29 | 29 | 30 | ||||||||||||||||||
Pennsylvania | 17 | 19 | 18 | 19 | 19 | 25 | ||||||||||||||||||
South Carolina | 27 | 28 | 27 | 28 | 28 | 28 | ||||||||||||||||||
Tennessee | 20 | 20 | 20 | 20 | 20 | 20 | ||||||||||||||||||
Texas | 85 | 88 | 87 | 92 | 88 | 103 | ||||||||||||||||||
Total | 419 | 432 | 424 | 440 | 431 | 462 | ||||||||||||||||||
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