Exhibit 99
First Acceptance Corporation Reports Operating Results for the Three Month Period Ended March 31, 2014
NASHVILLE, TN, May 6, 2014 — First Acceptance Corporation (NYSE: FAC) today reported its financial results for the three month period ended March 31, 2014.
Operating Results
Revenues for the three months ended March 31, 2014 were $62.5 million, compared with $59.3 million for the same period in the prior year. Income before income taxes for the three months ended March 31, 2014 was $0.5 million, compared with income before income taxes of $2.1 million for the same period in the prior year. Net income for the three months ended March 31, 2014 was $0.5 million, or $0.01 per share on a basic and diluted basis, compared with net income of $2.0 million, or $0.05 per share on a basic and diluted basis, for the same period in the prior year.
Premiums earned for the three months ended March 31, 2014 were $51.7 million, compared with $49.4 million for the same period in the prior year. This improvement was primarily due to a higher percentage of full coverage policies sold and recent pricing actions.
Loss and Loss Adjustment Expense Ratio.The loss and loss adjustment expense ratio was 71.1 percent for the three months ended March 31, 2014, compared with 67.8 percent for the three months ended March 31, 2013. We experienced favorable development related to prior periods of $2.9 million and $2.4 million for the three months ended March 31, 2014 and 2013, respectively. The favorable development for the three months ended March 31, 2014 was primarily related to the lower than expected bodily injury claims related to accident year 2013, partially offset by unfavorable loss and loss adjustment expense development on Florida personal injury protection claims.
Excluding the development related to prior periods, the loss and loss adjustment expense ratio for the three months ended March 31, 2014 and 2013 were 76.8 percent and 72.7 percent, respectively. The year-over-year increase in the loss ratio was primarily due to the impact of an increase in weather-related claims frequency in the collision and property damage coverages.
Expense Ratio.The expense ratio was 29.6 percent for the three months ended March 31, 2014, compared with 29.0 percent for the three months ended March 31, 2013. The year-over-year increase in the expense ratio was primarily due to planned increases in sales headcount and advertising costs.
Combined Ratio. The combined ratio was 100.7 percent for the three months ended March 31, 2014, compared with 96.8 percent for the same period in the prior year.
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About First Acceptance Corporation
We are principally a retailer, servicer and underwriter of non-standard personal automobile insurance based in Nashville, Tennessee. We currently write non-standard personal automobile insurance in 12 states and are licensed as an insurer in 13 additional states. Non-standard personal automobile insurance is made available to individuals because of their inability or unwillingness to obtain standard insurance coverage due to various factors, including payment history, payment preference, failure in the past to maintain continuous insurance coverage, driving record and/or vehicle type, and in most instances who are required by law to buy a minimum amount of automobile insurance.
At March 31, 2014, we leased and operated 355 retail locations, staffed with employee-agents. Our employee-agents primarily sell non-standard personal automobile insurance products underwritten by us, as well as certain commissionable ancillary products. In most states, our employee-agents also sell a complementary insurance product providing personal property and liability coverage for renters underwritten by us. In addition, select retail locations in highly competitive markets in Illinois and Texas offer non-standard personal automobile insurance serviced and underwritten by other third-party insurance carriers. In addition to our retail locations, we are able to complete the entire sales process over the phone via our call center or through the internet via our consumer-based website or mobile platform. We also sell our products through 10 retail locations operated by independent agents. Additional information about First Acceptance Corporation can be found online at www.acceptanceinsurance.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 year ended December 31, 2013 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. Except as required by law, 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 Income
(in thousands, except per share data)
(Unaudited)
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Revenues: | ||||||||
Premiums earned | $ | 51,748 | $ | 49,403 | ||||
Commission and fee income | 9,175 | 8,597 | ||||||
Investment income | 1,537 | 1,276 | ||||||
Net realized gains on investments, available-for-sale (includes $82 and $13, respectively, of accumulated other comprehensive income reclassifications for unrealized gains) | 82 | 13 | ||||||
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62,542 | 59,289 | |||||||
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Costs and expenses: | ||||||||
Losses and loss adjustment expenses | 36,817 | 33,505 | ||||||
Insurance operating expenses | 24,029 | 22,340 | ||||||
Other operating expenses | 233 | 229 | ||||||
Stock-based compensation | 46 | 84 | ||||||
Depreciation and amortization | 443 | 571 | ||||||
Interest expense | 427 | 443 | ||||||
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61,995 | 57,172 | |||||||
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Income before income taxes | 547 | 2,117 | ||||||
Provision for income taxes (includes $29 and $5, respectively, of income tax expense from reclassification items) | 36 | 93 | ||||||
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Net income | $ | 511 | $ | 2,024 | ||||
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Net income per share: | ||||||||
Basic | $ | 0.01 | $ | 0.05 | ||||
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Diluted | $ | 0.01 | $ | 0.05 | ||||
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Number of shares used to calculate net income per share: | ||||||||
Basic | 40,970 | 40,910 | ||||||
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Diluted | 41,283 | 40,939 | ||||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
March 31, 2014 | December 31, 2013 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Investments, available-for-sale at fair value (amortized cost of $128,185 and $126,873, respectively) | $ | 133,213 | $ | 130,248 | ||||
Cash and cash equivalents | 77,132 | 72,033 | ||||||
Premiums and fees receivable, net of allowance of $310 and $311 | 62,862 | 46,228 | ||||||
Limited partnership interests | 7,867 | 7,513 | ||||||
Other assets | 6,145 | 6,471 | ||||||
Property and equipment, net | 3,419 | 3,512 | ||||||
Deferred acquisition costs | 3,654 | 2,902 | ||||||
Identifiable intangible assets | 4,800 | 4,800 | ||||||
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TOTAL ASSETS | $ | 299,092 | $ | 273,707 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Loss and loss adjustment expense reserves | $ | 85,951 | $ | 84,286 | ||||
Unearned premiums and fees | 75,998 | 55,983 | ||||||
Debentures payable | 40,311 | 40,301 | ||||||
Other liabilities | 17,696 | 16,205 | ||||||
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Total liabilities | 219,956 | 196,775 | ||||||
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Stockholders’ equity: | ||||||||
Preferred stock, $.01 par value, 10,000 shares authorized | — | — | ||||||
Common stock, $.01 par value, 75,000 shares authorized; 40,981 and 40,983 shares issued and outstanding, respectively | 410 | 410 | ||||||
Additional paid-in capital | 457,033 | 456,993 | ||||||
Accumulated other comprehensive income | 5,028 | 3,375 | ||||||
Accumulated deficit | (383,335 | ) | (383,846 | ) | ||||
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Total stockholders’ equity | 79,136 | 76,932 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 299,092 | $ | 273,707 | ||||
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
PREMIUMS EARNED BY STATE
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Gross premiums earned: | ||||||||
Georgia | $ | 9,581 | $ | 9,651 | ||||
Florida | 7,963 | 7,621 | ||||||
Texas | 6,468 | 5,822 | ||||||
Alabama | 5,253 | 5,048 | ||||||
Ohio | 5,149 | 4,360 | ||||||
Illinois | 4,729 | 5,317 | ||||||
South Carolina | 4,008 | 3,659 | ||||||
Tennessee | 3,186 | 3,040 | ||||||
Pennsylvania | 2,146 | 2,144 | ||||||
Indiana | 1,431 | 1,245 | ||||||
Missouri | 1,138 | 887 | ||||||
Mississippi | 750 | 657 | ||||||
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Total gross premiums earned | 51,802 | 49,451 | ||||||
Premiums ceded | (54 | ) | (48 | ) | ||||
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Total net premiums earned | $ | 51,748 | $ | 49,403 | ||||
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COMBINED RATIOS (INSURANCE OPERATIONS)
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Loss | 71.1 | % | 67.8 | % | ||||
Expense | 29.6 | % | 29.0 | % | ||||
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Combined | 100.7 | % | 96.8 | % | ||||
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POLICIES IN FORCE
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Policies in force – beginning of period | 154,183 | 147,500 | ||||||
Net increase during period | 27,894 | 26,956 | ||||||
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Policies in force – end of period | 182,077 | 174,456 | ||||||
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NUMBER OF RETAIL LOCATIONS
Retail location counts are based upon the date that a location commenced or ceased writing business.
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Retail locations – beginning of period | 360 | 369 | ||||||
Opened | — | — | ||||||
Closed | (5 | ) | (2 | ) | ||||
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Retail locations – end of period | 355 | 367 | ||||||
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RETAIL LOCATIONS BY STATE
March 31, | December 31, | |||||||||||||||
2014 | 2013 | 2013 | 2012 | |||||||||||||
Alabama | 24 | 24 | 24 | 24 | ||||||||||||
Florida | 30 | 30 | 30 | 30 | ||||||||||||
Georgia | 60 | 60 | 60 | 60 | ||||||||||||
Illinois | 61 | 62 | 61 | 63 | ||||||||||||
Indiana | 17 | 17 | 17 | 17 | ||||||||||||
Mississippi | 7 | 7 | 7 | 7 | ||||||||||||
Missouri | 11 | 11 | 11 | 11 | ||||||||||||
Ohio | 27 | 27 | 27 | 27 | ||||||||||||
Pennsylvania | 16 | 16 | 16 | 16 | ||||||||||||
South Carolina | 25 | 26 | 25 | 26 | ||||||||||||
Tennessee | 19 | 19 | 19 | 19 | ||||||||||||
Texas | 58 | 68 | 63 | 69 | ||||||||||||
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Total | 355 | 367 | 360 | 369 | ||||||||||||
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SOURCE: First Acceptance Corporation
INVESTOR RELATIONS CONTACT:
Michael J. Bodayle
615.844.2885
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