EXHIBIT 99
PRESS RELEASE Source: First Acceptance Corporation
Contact: Steve Harrison (615) 844-2900
FIRST ACCEPTANCE CORPORATION REPORTS FIRST QUARTER FINANCIAL RESULTS
NASHVILLE, TN, November 8, 2005 /PRNewswire-FirstCall/ -- First Acceptance
Corporation (NYSE: FAC) today reported its financial results for the first
quarter ended September 30, 2005 of its fiscal year ending June 30, 2006.
Net income for the three months ended September 30, 2005 was $3.7
million, or $0.08 per share on a fully-diluted basis, compared to $3.9 million,
or $0.08 per share on a fully-diluted basis, for the same period of fiscal 2005.
Total weighted average diluted shares increased from 48.0 million to 49.5
million over the same period as a result of the effect of the issuance of
750,000 contingent shares in connection with the USAuto acquisition and the
increase in the dilutive effect of stock options, primarily as a result of the
increase in the Company's average stock price.
There were no gains on sales of foreclosed real estate in either the
three months ended September 30, 2005 or 2004.
INSURANCE OPERATIONS
o KEY RATIOS - The Company's loss ratio for the three months ended
September 30, 2005 was 66.6%, compared with 61.9% for the same period
last year and 68.8% for the quarter ended June 30, 2005. The Company's
expense ratio for the three months ended September 30, 2005 was 20.6%,
compared with 13.6% for the same period last year and 22.0% for the
quarter ended June 30, 2005. As a result, the Company's combined ratio
for the three months ended September 30, 2005 was 87.2%, compared with
75.5% for the same period last year and 90.8% for the quarter ended
June 30, 2005. Expected losses from Hurricane Katrina during the
current quarter amounted to approximately $300,000 and resulted in a
0.7% point increase in the loss ratio. The expense ratio for the three
months ended September 30, 2005 increased primarily as a result of
costs incurred in adding and developing new retail locations.
o OFFICE EXPANSION - During the three months ended September 30, 2005,
the Company added 39 additional offices, compared to 16 offices added
during the three months ended September 30, 2004 and 84 offices added
during the three months ended June 30, 2005. The total number of stores
increased from 154 as of September 30, 2004 and 309 as of June 30, 2005
to 348 as of September 30, 2005. The Company now leases offices in 12
states, including offices in South Carolina where the Company commenced
operations in October 2005.
o PREMIUM GROWTH - Total gross premiums earned (before the effects of
reinsurance) increased 27% to $42.8 million for the three months ended
September 30, 2005 from $33.6 million for the same period last year.
The number of insured policies in force serviced by the Company at
September 30, 2005 increased 35% over the number of policies in force
at
September 30, 2004. Net premiums earned increased 97% over this same
period as a result of the aforementioned increase in gross premiums
earned, the non-renewal of our 50% quota share reinsurance on September
1, 2004 and the increase in the assumed reinsurance percentage for
business written in Alabama from 50% to 100% on February 1, 2005.
REAL ESTATE OPERATIONS
There was no real estate sales activity during the most recent quarter.
However, on October 31, 2005, the Company sold a parcel of foreclosed real
estate for net proceeds of $872,000 that resulted in a gain of $796,000. After
giving effect to this sale, the Company has five parcels of land remaining to be
sold in the San Antonio area, which have a book value of $885,000.
CASH AND INVESTED ASSETS
During the three months ended September 30, 2005, the Company
contributed $750,000 to the statutory capital and surplus of its two insurance
company subsidiaries, USAuto Insurance Company Inc. and Village Auto Insurance
Company Inc., to support additional premium writings. At September 30, 2005, the
Company held unrestricted cash and investments of $11.2 million that is
available for general corporate purposes and to provide support for increased
premium writings of the insurance operations.
ABOUT FIRST ACCEPTANCE CORPORATION
First Acceptance Corporation began its operations as Liberte Investors,
Inc. in 1986. Its insurance subsidiary, USAuto, which began operations in 1995,
provides non-standard private passenger automobile insurance, primarily through
employee-agents. As of November 1, 2005, the Company leased 356 retail offices
in 12 states. The Company's insurance company subsidiaries are licensed to do
business in 24 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 review 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
($000S EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------
2005 2004
------- -------
REVENUES:
Premiums earned $42,754 $21,685
Commissions and fees 6,405 6,672
Ceding commissions from reinsurer -- 1,937
Investment income 1,099 609
------- -------
Total revenues 50,258 30,903
------- -------
EXPENSES:
Losses and loss adjustment expenses 28,491 13,430
Insurance operating expenses 15,223 10,406
Other operating expenses 613 369
Stock-based compensation 84 61
Depreciation and amortization 214 669
Interest expense -- 70
------- -------
Total expenses 44,625 25,005
------- -------
Income before income taxes 5,633 5,898
Income tax expense 1,920 2,034
------- -------
Net income $ 3,713 $ 3,864
======= =======
Basic net income per share $ 0.08 $ 0.08
Diluted net income per share $ 0.08 $ 0.08
Weighted average basic shares 47,455 46,659
Weighted average diluted shares 49,465 48,041
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - BY BUSINESS SEGMENT
($000S EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
INSURANCE OPERATIONS SEPTEMBER 30,
--------------------
2005 2004
------- -------
REVENUES:
Premiums earned $42,754 $21,685
Commissions and fees 6,405 6,672
Ceding commissions from reinsurer -- 1,937
Investment income 887 355
------- -------
Total revenues 50,046 30,649
------- -------
EXPENSES:
Losses and loss adjustment expenses 28,491 13,430
Operating expenses 15,223 10,406
Depreciation and amortization 214 669
------- -------
Total expenses 43,928 24,505
------- -------
Income before income taxes $ 6,118 $ 6,144
======= =======
THREE MONTHS ENDED
REAL ESTATE AND CORPORATE(1) SEPTEMBER 30,
--------------------
2005 2004
------- -------
REVENUES:
Investment income $ 212 $ 254
------- -------
Total revenues 212 254
------- -------
EXPENSES:
Operating expenses 613 369
Stock-based compensation 84 61
Interest expense -- 70
------- -------
Total expenses 697 500
------- -------
Loss before income taxes $ (485) $ (246)
======= =======
- ---------------------
(1) Includes activities related to disposing of foreclosed real
estate held for sale, interest expense associated with debt,
and general corporate overhead.
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000S EXCEPT PER SHARE DATA)
(UNAUDITED)
SEPTEMBER 30, JUNE 30,
2005 2005
------------ --------
ASSETS
Fixed maturities, available-for-sale, at market value $ 86,234 $ 74,840
Investment in mutual fund, at market value 11,139 10,920
Cash and cash equivalents 21,192 24,762
Premiums and fees receivable 45,851 42,908
Reinsurance recoverables 3,456 4,490
Deferred tax asset 46,820 48,106
Other assets 11,576 11,031
Foreclosed real estate held for sale 961 961
Goodwill and identifiable intangible assets 112,668 112,704
-------- --------
TOTAL $339,897 $330,722
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total policy liabilities 97,788 90,649
Other liabilities 10,807 11,744
-------- --------
Total liabilities 108,595 102,393
Total stockholders' equity 231,302 228,329
-------- --------
TOTAL $339,897 $330,722
======== ========
Book value per share $ 4.87 $ 4.81
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL DATA
($000S EXCEPT PER SHARE DATA)
(UNAUDITED)
GROSS PREMIUMS EARNED BY STATE
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
2005 2004
-------- --------
Gross premiums earned:
Georgia $ 17,316 $ 16,905
Alabama 6,930 6,309
Tennessee 6,331 6,401
Ohio 3,300 2,017
Florida 2,589 --
Texas 2,459 --
Missouri 1,234 890
Mississippi 1,211 961
Indiana 1,161 134
Pennsylvania 125 --
Illinois 122 --
-------- --------
Total gross premiums earned 42,778 33,617
Premiums ceded (24) (8,340)
Premiums not assumed -- (3,592)
-------- --------
Total net premiums earned $ 42,754 $ 21,685
======== ========
GAAP COMBINED RATIOS (INSURANCE COMPANIES)
THREE MONTHS ENDED
SEPTEMBER 30,
------------------
2005 2004
---- ----
Loss and loss adjustment expense 66.6% 61.9%
Expense(1) 20.6% 13.6%
---- ----
87.2% 75.5%
==== ====
(1) Insurance operating expenses are reduced by fee income from
insureds and ceding commissions received from our quota-share
reinsurer as compensation for the costs incurred in servicing the
business on their behalf.
POLICIES IN FORCE
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------
2005 2004
------- ------
Policies in force - beginning of period 119,422 91,385
Net increase during period 6,377 1,500
------- ------
Policies in force - end of period 125,799 92,885
======= ======
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL DATA (CONTINUED)
(UNAUDITED)
NUMBER OF RETAIL LOCATIONS
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------
2005 2004
---- ----
Retail locations - beginning of period 309 138
Opened 40 17
Closed (1) (1)
---- ----
Retail locations - end of period 348 154
==== ====
RETAIL LOCATIONS BY STATE
CHANGE IN LOCATIONS DURING
THE THREE MONTHS ENDED
AS OF SEPTEMBER 30, AS OF JUNE 30, SEPTEMBER 30,
------------------- ----------------- ----------------------
2005 2004 2005 2004 2005 2004
---- ---- ---- ---- ---- ----
Alabama 25 23 25 21 -- 2
Florida 36 1 24 -- 12 1
Georgia 63 57 63 55 -- 2
Illinois 15 -- 12 -- 3 --
Indiana 25 8 22 4 3 4
Mississippi 8 8 9 6 (1) 2
Missouri 21 11 18 11 3 --
Ohio 30 28 30 25 -- 3
Pennsylvania 17 -- 14 -- 3 --
Tennessee 20 18 20 16 -- 2
Texas 88 -- 72 -- 16 --
--- --- --- --- --- --
Total 348 154 309 138 39 16
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