2011-02-07 22:14:14 -
NASHVILLE, TN, February 7, 2011 -- First Acceptance Corporation (NYSE: FAC)
today reported its financial results for the second quarter and six months ended
December 31, 2010 of its fiscal year ending June 30, 2011.
Operating Results
Revenues for the three months ended December 31, 2010 were $51.7 million,
compared with $53.8 million for the same period in fiscal year 2010. Loss before
income taxes for the three months ended December 31, 2010 was $2.0 million,
compared with income before income taxes of $1.6 million in the same period in
fiscal year 2010. Net loss for the three months ended December 31, 2010 was $2.1
million, or $0.04 per share on a diluted basis, compared with net income of $1.5
million, or $0.03 per share on a diluted basis, for
the same period in fiscal
year 2010.
Revenues for the six months ended December 31, 2010 were $104.8 million,
compared with $111.1 million for the same period in fiscal year 2010. Loss
before income taxes for the six months ended December 31, 2010 was $1.5 million,
compared with income before income taxes of $4.4 million in the same period in
fiscal year 2010. Net loss for the six months ended December 31, 2010 was $1.7
million, or $0.04 per share on a diluted basis, compared with net income of $4.2
million, or $0.09 per share on a diluted basis, for the same period in fiscal
year 2010.
Premiums earned for the three months ended December 31, 2010 were $42.5 million,
compared with $45.2 million for the same period in fiscal year 2010. Premiums
earned for the six months ended December 31, 2010 were $86.5 million, compared
with $93.7 million for the same period in fiscal year 2010. The declines in
premiums earned were primarily due to a decline in the number of policies in
force ("PIF") from 147,090 at December 31, 2009 to 144,582 at December
31, 2010, which was impacted by the closure of underperforming stores. At
December 31, 2010, we operated 393 stores, compared with 409 stores at December
31, 2009. Premiums earned were also negatively impacted by an increase in the
percentage of PIF with liability-only coverage, as well as a decline in newly-
issued PIF at December 31, 2010 compared with the same date in the prior year.
The number of PIF sold through our open stores increased from 139,453 at
December 31, 2009 to 140,547 at December 31, 2010.
Loss and Loss Adjustment Expense Ratio. The loss and loss adjustment expense
ratio was 78.4 percent for the three months ended December 31, 2010, compared
with 66.1 percent for the three months ended December 31, 2009. The loss and
loss adjustment expense ratio was 75.6 percent for the six months ended December
31, 2010 compared with 67.3 percent for the six months ended December 31, 2009.
We experienced unfavorable development related to prior periods of $3.1 million
for the three months ended December 31, 2010, compared with favorable
development of $2.4 million for the three months ended December 31, 2009. For
the six months ended December 31, 2010, we experienced unfavorable development
related to prior periods of $1.0 million, compared with favorable development of
$6.1 million for the six months ended December 31, 2009. The unfavorable
development for the three and six months ended December 31, 2010 was primarily
due to higher than anticipated paid severity on accidents occurring during the
first six months of calendar year 2010. The higher than anticipated paid
severity was primarily related to no-fault (or Personal Injury Protection)
losses in Florida and Bodily Injury losses in Florida and Georgia.
Excluding the development related to prior periods, the loss and loss adjustment
expense ratios for the three months ended December 31, 2010 and 2009 were 71.1
percent and 71.4 percent, respectively. Excluding the development related to
prior periods, the loss and loss adjustment expense ratios for the six months
ended December 31, 2010 and 2009 were 74.5 percent and 73.8 percent,
respectively. The increase for the six months ended December 31, 2010 compared
with the same period in the prior year was due to higher loss adjustment expense
resulting from (i) the increase in the percentage of claims related to
liability-only coverage policies and (ii) increased investigative efforts with
regards to no-fault claims in Florida.
We are in the process of implementing a new multivariate pricing program in all
states in which we conduct business. We believe that this new pricing program
will provide us with greater pricing segmentation and improve our pricing
relative to the risk we are insuring. In connection with this new pricing
program and specific to the states mentioned above, we filed new rates in
Florida, which became effective in November 2010, and in Georgia, which are
currently awaiting regulatory approval.
Expense Ratio. The expense ratio decreased from 28.2 percent for the three
months ended December 31, 2009 to 26.6 percent for the same period in the
current fiscal year. The expense ratio decreased from 27.1 percent for the six
months ended December 31, 2009 to 26.1 percent for the same period in the
current fiscal year. The year-over-year decreases in the expense ratio were
primarily due to the reduction in fixed costs and savings realized from the
closure of underperforming stores.
Combined Ratio. The combined ratio was 105.0 percent for the three
months ended December 31, 2010, compared with 94.3 percent for the same period
in fiscal year 2010. The combined ratio was 101.7 percent for the six months
ended December 31, 2010, compared with 94.4 percent for the same period in
fiscal year 2010.
About First Acceptance Corporation
Our primary focus is the selling, servicing and underwriting of non-standard
personal 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 December 31, 2010, we leased and operated 393 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, 2010 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.
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
December 31, December 31,
__________________________ __________________________
2010 2009 2010 2009
__________ __________ __________ __________
Revenues:
Premiums $ 42,520 $ 45,199 $ 86,454 $
earned 93,666
Commission 7,065 14,341
and fee 6,966 13,920
income
Investment 2,124 4,261
income 2,033 3,946
Net realized
losses on
investments,
available-
for-sale (32) (423) (256) (445)
__________ __________ __________ __________
51,677 104,800
53,775 111,087
__________ __________ __________ __________
Costs and
expenses:
Losses and 33,338 65,395
loss 29,871 63,024
adjustment
expenses
Insurance 18,393 36,901
operating 19,711 39,281
expenses
Other
678
operating 291 750 1,023
expenses
Litigation
settlement (5) 102 (5) (279)
Stock-based
365
compensation 173 272 655
Depreciation
941
and 465 500 964
amortization
Interest
1,982
expense 991 992 1,981
__________ __________ __________ __________
53,646 106,257
52,198 106,649
__________ __________ __________ __________
Income (loss)
before income (1,969) 1,577 (1,457) 4,438
taxes
Provision for
241
income taxes 121 102 203
__________ __________ __________ __________
Net income $ (2,090) $ $
$
(loss) 1,475 (1,698) 4,235
========== ========== ========== ==========
Net income
(loss) per
share:
Basic and $ $ $ $
diluted (0.04) 0.03 (0.04)
0.09
========== ========== ========== ==========
Number of
shares used
to calculate
net income
(loss) per
share:
Basic 48,138 48,087
47,960 47,919
========== ========== ========== ==========
Diluted 48,138 48,087
48,387 48,348
========== ========== ========== ==========
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
December 31, June 30,
2010 2010
_______________ _______________
(Unaudited)
ASSETS
Investments, available-
for-sale at fair value
(amortized cost of
$181,097 and
$187,907, respectively) $ 190,022 $
196,550
Cash and cash 29,078
26,184
equivalents
Premiums and fees 39,469
41,276
receivable, net of
allowance of $369 and
$418
Other assets 8,938
8,733
Property and equipment, 2,860
3,524
net
Deferred acquisition 3,641
3,623
costs
Goodwill 70,092
70,092
Identifiable intangible 6,360
6,360
assets
__________ __________
TOTAL ASSETS $ 350,460
$ 356,342
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Loss and loss adjustment
expense reserves $ 70,295
$ 73,198
Unearned premiums and
fees 49,566
52,563
Debentures payable 41,240
41,240
Other liabilities 13,189
12,151
__________ __________
Total liabilities 174,290
179,152
Stockholders' equity:
Preferred stock, $.01 -
-
par value, 10,000 shares
authorized
Common stock, $.01 par
value, 75,000 shares
authorized; 48,532 and
48,509 shares issued and
outstanding,
respectively 485
485
Additional paid-in 466,227
465,831
capital
Accumulated other 8,925
8,643
comprehensive income
Accumulated deficit (299,467) (297,769)
__________ __________
Total stockholders' 176,170
177,190
equity
__________ __________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 350,460
$ 356,342
========== ==========
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
PREMIUMS EARNED BY STATE
Three Months Ended Six Months Ended
December 31, December 31,
_________________________ _________________________
2010 2009 2010 2009
__________ __________ __________ __________
Premiums
earned:
$
Georgia $ 9,343 $ 9,960 18,934
$ 20,861
Illinois 5,774 6,075 11,580
12,406
Texas 5,708 5,714 11,617
11,626
Florida 4,628 4,933 9,446
10,194
Alabama 4,126 4,709 8,513 9,918
Ohio 3,265 2,909 6,490 5,862
Tennessee 2,582 2,855 5,295 5,958
South Carolina 2,351 2,727 4,851 5,866
Pennsylvania 2,302 2,610 4,719 5,429
Indiana 1,121 1,211 2,265 2,433
Missouri 684 782 1,422 1,609
Mississippi 636 714 1,322 1,504
__________ __________ __________ __________
Total premiums $
earned $ 42,520 $ 45,199 86,454 $
93,666
========== ========== ========== ==========
COMBINED RATIOS (INSURANCE OPERATIONS)
Three Months Ended Six Months Ended
December 31, December 31,
_________________________ _________________________
2010 2009 2010 2009
__________ __________ __________ __________
Loss and loss adjustment 78.4% 66.1% 75.6% 67.3%
expense
Expense 26.6% 28.2% 26.1% 27.1%
__________ __________ __________ __________
Combined 105.0% 94.3% 101.7% 94.4%
========== ========== ========== ==========
POLICIES IN FORCE
Three Months Ended Six Months Ended
December 31, December 31,
_________________________ _________________________
2010 2009 2010 2009
Policies in 150,175 152,866 154,655
158,222
force -
beginning of
period
Net (5,776)
(11,132)
decrease (5,593) (10,073)
during period
__________ __________ __________ __________
Policies in 144,582 147,090 144,582
147,090
force - end of
period
========== ========== ========== ==========
The following tables present total policies in force ("PIF") for the insurance
operations segregated by policies that were sold through our open and closed
retail locations as well as our independent agents. For our retail locations,
PIF are further segregated by (i) newly-issued policies and renewal policies and
(ii) liability-only or full coverage. Renewal policies are defined as those
policies which renewed after completing their full uninterrupted policy term.
Newly-issued policies are defined as those policies issued to first-time
customers and customers who have reinstated a lapsed or cancelled policy.
Liability-only policies are defined as those policies including only bodily
injury (or no-fault) and property damage coverages, which are the required
coverages in most states. For comparative purposes, the PIF data with respect to
closed retail locations for each of the periods presented below includes all
retail locations closed as of December 31, 2010.
December 31,
_________________________
2010 2009
__________ __________
Retail locations:
Open retail locations:
New 63,020 63,775
Renewal 77,527 75,678
__________ __________
140,547 139,453
Closed retail locations:
New 197 2,201
Renewal 1,985 3,143
__________ __________
2,182 5,344
Independent agents 1,853 2,293
__________ __________
Total policies in force 144,582 147,090
========== ==========
December 31,
_________________________
2010 2009
__________ __________
Retail locations:
Open retail locations:
Liability-only 85,577 82,730
Full coverage 54,970 56,723
__________ __________
140,547 139,453
Closed retail locations:
Liability-only 1,255 3,263
Full coverage 927 2,081
__________ __________
2,182 5,344
Independent agents 1,853 2,293
__________ __________
Total policies in force 144,582 147,090
========== ==========
NUMBER OF RETAIL LOCATIONS
Retail location counts are based upon the date that a location
commenced or ceased writing business.
Three Months Ended Six Months Ended
December 31, December 31,
_________________________ _________________________
2010 2009 2010 2009
__________ __________ __________ __________
Retail 393
394 418
locations - 415
beginning
of period
Opened 1 -
1
-
Closed (1) (6) (2)
(9)
__________ __________ __________ __________
Retail 393
393 409
locations - 409
end of
period
========== ========== ========== ==========
RETAIL LOCATIONS BY STATE
December 31, September 30,
June 30,
_________________________ _________________________
_________________________
2010 2009 2010 2009 2010
2009
__________ __________ __________ __________ __________
__________
Alabama 25
25 25 25
25 25
Florida
31 34 31 36 31
39
Georgia
60 61 60 61 60
61
Illinois
73 76 74 78 74
78
Indiana
17 18 17 18 17
18
Mississippi
8 8 8 8 8
8
Missouri
12 12 12 12
12 12
Ohio
27 27 27 27 27
27
Pennsylvania
16 17 16 17 16
17
South
Carolina 26 27 26 27 26
27
Tennessee
20 19 19 20
19 20
Texas
78 85 78 86 79
86
__________ __________ __________ __________ __________
__________
Total 393 409 393
415 394 418
========== ========== ========== ========== ==========
==========
SOURCE: First Acceptance Corporation
INVESTOR RELATIONS CONTACT:
Michael J. Bodayle
615.844.2885
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(i) the releases contained herein are protected by copyright and
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(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: First Acceptance Corporation via Thomson Reuters ONE
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