First Acceptance Corporation Reports Operating Results for the Quarter and Year Ended December 31, 2012
2013-02-26 22:06:29 -
NASHVILLE, TN, February 26, 2013 -- First Acceptance Corporation (NYSE: FAC)
today reported its financial results for the quarter and year ended December
31, 2012.
Operating Results
Revenues for the three months ended December 31, 2012 were $55.1 million,
compared with $49.1 million for the three months ended December 31, 2011. Income
before income taxes for the three months ended December 31, 2012 was $0.2
million, compared with loss before income taxes of $25.7 million for the three
months ended December 31, 2011. Income before income taxes for the three months
ended December 31, 2012 included favorable development of $1.8 million for
losses occurring in prior fiscal years, while the loss before income taxes for
the three months ended December 31, 2011 included a goodwill impairment charge
of $21.1 million, or $0.45 per share on a diluted basis, and unfavorable
development of $4.6 million for losses occurring in prior periods. Net income
for the three months ended December 31, 2012 was $0.1 million, or $0.00 per
share on a diluted basis, compared with net loss of $25.8 million, or $0.55 per
share on a diluted basis, for the three months ended December 31, 2011.
Revenues for the year ended December 31, 2012 were $228.1 million, compared with
$205.0 million for the year ended December 31, 2011. Loss before income taxes
for the year ended December 31, 2012 was $9.0 million, compared with loss before
income taxes of $84.4 million for the year ended December 31, 2011. The loss
before income taxes for the year ended December 31, 2012 included the
recognition of a net realized gain on investments of $3.2 million, or $0.08 per
share on a diluted basis, and unfavorable development of $4.0 million for losses
occurring in prior fiscal years, while the loss before income taxes for the same
period in the prior year included goodwill and intangible assets impairment
charges of $73.5 million, or $0.99 per share on a diluted basis, unfavorable
development of $3.1 million for losses occurring in prior fiscal years, charges
of $1.7 million incurred in connection with the separation of certain executive
officers during March 2011 (comprised of $1.3 million in accrued severance and
benefits and a $0.4 million non-cash charge related to the vesting of certain
stock awards) and $0.4 million of other-than-temporary impairment charges on
investments. Net loss for the year ended December 31, 2012 was $9.0 million, or
$0.22 per share on a diluted basis, compared with net loss of $84.5 million, or
$1.76 per share on a diluted basis, for year ended December 31, 2011.
Premiums earned for the three months ended December 31, 2012 were $46.1 million,
compared with $40.1 million for the three months ended December 31, 2011.
Premiums earned for the year ended December 31, 2012 were $185.6 million,
compared with $167.2 million for the year ended December 31, 2011. This
improvement was primarily due to an increase in the number of policies in force
("PIF") from 141,862 at December 31, 2011 to 145,938 at December 31, 2012, which
we attribute to the continued sales, marketing, customer interactions and
product initiatives. Such factors led to a higher close ratio resulting in an
increase in new policies sold on a year-over-year basis.
Loss and Loss Adjustment Expense Ratio. The loss and loss adjustment expense
ratio was 73.4 percent for the three months ended December 31, 2012, compared
with 81.0 percent for the three months ended December 31, 2011. The loss and
loss adjustment expense ratio was 79.8 percent for the year ended December
31, 2012, compared with 77.5 percent for the year ended December 31, 2011. We
experienced favorable development of $1.8 million related to the three months
ended December 31, 2012, compared with unfavorable development of $4.6 million
for the three months ended December 31, 2011. We experienced unfavorable
development related to prior fiscal years of $4.0 million for the year ended
December 31, 2012, compared with unfavorable development of $3.1 million for the
year ended December 31, 2011. The unfavorable development for the year ended
December 31, 2012 was primarily related to the strengthening of loss and loss
adjustment expense reserves. Loss development was primarily related to higher
than expected severity for Florida personal injury protection claims and
for Georgia bodily injury claims in older accident years. Loss adjustment
expense development was primarily related to higher than expected legal expenses
for bodily injury claims for accident years 2010 and prior. The unfavorable
development for the year ended December 31, 2011 included amounts related to the
settlement of claims for extra-contractual damages.
Excluding the development related to prior fiscal years, the loss and loss
adjustment expense ratios for the years ended December 31, 2012 and 2011 were
77.7 percent and 75.6 percent, respectively. The year-over-year increase in the
loss and loss adjustment expense ratio was primarily due to higher loss driven
by an increase in frequency experienced during the second quarter of 2012 and
higher expected severity for bodily injury claims.
In December 2011, we completed the process of implementing new scored pricing
programs. We believe these new scored pricing programs provide us with greater
pricing segmentation and improve our pricing relative to the risk we are
insuring. Approximately 74 percent of our current PIF have been underwritten
using these new scored pricing programs.
We perform state-by-state reviews of all insurance pricing programs on a
quarterly basis and alter rates as we believe necessary. In response to the
increases in our loss ratio during recent quarters, we implemented rate
increases on most of our non-scored pricing programs during the first quarter
and for our scored pricing programs in most states during the second and third
quarters. The full benefit of these rate actions will not be fully realized
until all customers renew their policies under the new rates, typically six
months from the date of rate change implementation.
Expense Ratio. The expense ratio was 26.4 percent for the three months ended
December 31, 2012, compared with 30.5 percent for the three months ended
December 31, 2011. The expense ratio was 26.7 percent for the year ended
December 31, 2012, compared with 29.4 percent for the year ended December
31, 2011. Excluding the severance and related benefits charges noted above, the
expense ratio for the year ended December 31, 2011 was 28.6 percent.
Combined Ratio. The combined ratio was 99.8 percent for the three months ended
December 31, 2012, compared with 111.5 percent for the three months ended
December 31, 2012. The combined ratio was 106.5 percent for the year ended
December 31, 2012, compared with 106.9 percent for year ended December
31, 2011. Excluding the severance and related benefits charges noted above, the
combined ratio for the year ended December 31, 2011 was 106.1 percent.
About First Acceptance Corporation
We are 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 who are categorized as "non-standard" 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 February 26, 2013, we leased and operated 368 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 and other insurance products. In select
markets, we are testing the sale of automobile insurance underwritten by third
party carriers. We are able to complete the entire sales process over the phone
or through our consumer-based website. In addition to our retail, website and
call center sales, we also sell our products through 13 retail locations
operated by independent agents. Additional information about First Acceptance
Corporation can be found online at 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, 2012 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.
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
---------------------------- -------------------------------
2012 2011 2012 2011
------------ --------------- --------------- ---------------
(Unaudited) (Unaudited)
Revenues:
Premiums earned $ $ 40,132 $185,644 $167,224
46,080
Commission and 7,269 32,574
29,911
fee income 7,534
Investment 1,909 6,599
8,064
income 1,443
Net realized
gains (losses)
on investments,
available-for- 22 (175) 3,242 (161)
sale
------------ --------------- --------------- ---------------
49,135 228,059
205,038
55,079
------------ --------------- --------------- ---------------
Costs and
expenses:
Losses and loss 32,505 148,223
129,525
adjustment 33,805
expenses
Insurance 19,529 82,127
79,075
operating 19,716
expenses
Other operating 250 922
1,185
expenses 240
Litigation
settlement - - - (4)
Stock-based 604
804
compensation 97 80
Depreciation and 407 2,203
1,415
amortization 597
Interest expense 990 3,025
3,928
449
Goodwill and 21,090
73,524
intangible - -
impairment
------------ --------------- --------------- ---------------
74,851 237,104
289,452
54,904
------------ --------------- --------------- ---------------
Income (loss) (25,716) (9,045)
(84,414)
before income 175
taxes
Provision
105
(benefit) for 79 33 (5)
income taxes
------------ --------------- --------------- ---------------
Net income $ $ (25,749) $ (9,040) $ (84,519)
(loss) 96
------------ --------------- --------------- ---------------
Net income
(loss) per
share:
Basic and $ $ (0.55) $ (0.22) $
(1.76)
diluted 0.00
------------ --------------- --------------- ---------------
Number of shares
used to
calculate net
income (loss)
per share:
Basic 47,182 40,861
47,979
40,877
------------ --------------- --------------- ---------------
Diluted 47,182 40,861
47,979
40,938
------------ --------------- --------------- ---------------
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
December 31,
2012 2011
------------------------ ------------------------
ASSETS
Investments, available-for-
sale at fair value
(amortized cost of
$130,342 and $162,575,
respectively) $ 139,046 $ 172,825
Cash and cash equivalents 59,104
23,751
Premiums and fees 45,286
41,313
receivable, net of
allowance of $306 and $364
Other assets
6,986
6,190
Property and equipment, net
3,315
4,656
Deferred acquisition costs
3,243
3,221
Identifiable intangible
4,800
assets 4,800
------------------------ ------------------------
TOTAL ASSETS $ 262,303 $ 256,233
------------------------ ------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Loss and loss adjustment
expense reserves $ 79,260 $ 69,436
Unearned premiums and fees 55,092
50,464
Debentures payable 40,261
40,221
Other liabilities 14,897
13,383
------------------------ ------------------------
Total liabilities 189,510
173,504
------------------------ ------------------------
Stockholders' equity:
Preferred stock, $.01 par
value, 10,000 shares - -
authorized
Common stock, $.01 par
value, 75,000 shares
authorized; 40,962
and 40,928 shares
issued and outstanding,
respectively 410 409
Additional paid-in capital 456,705
456,056
Accumulated other
10,250
comprehensive income 8,704
Accumulated deficit (393,026) (383,986)
------------------------ ------------------------
Total stockholders' equity 72,793
82,729
------------------------ ------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 262,303 $
256,233
------------------------ ------------------------
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
PREMIUMS EARNED BY STATE
Three Months Ended Year Ended
December 31, December 31,
----------------------------- ------------------------------
2012 2011 2012 2011
-------------- -------------- --------------- --------------
Premiums earned:
$ $ $ $
Georgia 9,373 8,572 38,500 36,002
Florida 6,962 4,961 26,744 19,667
Texas 5,432 5,050 22,481 21,912
Illinois 5,379 5,188 21,896 21,784
Alabama 4,211 3,845 17,157 16,185
Ohio 4,046 3,364 15,788 13,752
South Carolina 3,231 2,471 12,637 9,811
Tennessee 2,848 2,562 11,819 10,415
Pennsylvania 2,070 1,933 8,301 8,409
Indiana 1,164 1,055 4,703 4,382
Missouri 777 617 3,172 2,630
Mississippi 634 557 2,638 2,456
-------------- -------------- --------------- --------------
Total gross
premiums earned 46,127 40,175 185,836 167,405
Premiums ceded to
reinsurer (47) (43) (192) (181)
-------------- -------------- --------------- --------------
Total net premiums $ $
earned 46,080 40,132 $ 185,644 $ 167,224
-------------- -------------- --------------- --------------
COMBINED RATIOS (INSURANCE OPERATIONS)
Three Months Year Ended
Ended
December 31, December 31,
---------------- ----------------
2012 2011 2012 2011
------- -------- -------- -------
Loss and loss adjustment expense 73.4% 81.0% 79.8% 77.5%
Expense 26.4% 30.5% 26.7% 29.4%
------- -------- -------- -------
Combined 99.8% 111.5% 106.5% 106.9%
------- -------- -------- -------
POLICIES IN FORCE
Three Months Ended Year Ended
December 31, December 31,
-------------------------------- ------------------------------
2012 2011 2012 2011
---------------- --------------- --------------- --------------
Policies in 148,799
force - 140,930 141,862 144,582
beginning of
period
Net change
during period (2,861) 932 4,076 (2,720)
---------------- --------------- --------------- --------------
Policies in 145,938
force - end of 141,862 145,938 141,862
period
---------------- --------------- --------------- --------------
The following tables present total PIF for the insurance operations segregated
by policies that were sold through our open and closed retail locations as well
as our independent agents, call center and website. For our retail locations,
PIF are further segregated by (i) new and renewal and (ii) liability-only or
full coverage. New policies are defined as those policies issued to both first-
time customers and customers who have reinstated a lapsed or cancelled policy.
Renewal policies are those policies which renewed after completing their full
uninterrupted policy term. 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 at December 31, 2012.
December 31,
------------------------------------------
2012 2011
-------------------- -------------------
Retail locations:
Open retail locations:
New 65,097 63,250
Renewal 75,667 72,665
-------------------- -------------------
140,764 135,915
Closed retail locations:
New 48 1,204
Renewal 1,521 2,775
-------------------- -------------------
1,569 3,979
Independent agents 1,725 1,890
Call center and website 1,880 78
-------------------- -------------------
Total policies in force 145,938 141,862
-------------------- -------------------
December 31,
-----------------------------------------
2012 2011
------------------- -------------------
Retail locations:
Open retail locations:
Liability-only 81,014 81,849
Full coverage 59,750 54,066
------------------- -------------------
140,764 135,915
Closed retail locations:
Liability-only 904 2,473
Full coverage 665 1,506
------------------- -------------------
1,569 3,979
Independent agents 1,725 1,890
Call center and website 1,880 78
------------------- -------------------
Total policies in force 145,938 141,862
------------------- -------------------
NUMBER OF RETAIL LOCATIONS
Retail location counts are based upon the date that a location commenced or
ceased writing business.
Three Months Ended Year Ended
December 31, December 31,
----------------------------- ------------------------------
2012 2011 2012 2011
-------------- -------------- --------------- --------------
Retail locations -
beginning of
period 369 383 382 393
Opened -- -- -- --
Closed
-- (1) (13) (11)
-------------- -------------- --------------- --------------
Retail locations -
end of period 369 382 369 382
-------------- -------------- --------------- --------------
RETAIL LOCATIONS BY STATE
December 31, September 30,
-------------------------------- -----------------------------
2012 2011 2010 2012 2011
---------- ---------- ---------- --------------- -------------
Alabama 24 24 25 24
24
Florida 30 30 31 30
31
Georgia 60 60 60 60
60
Illinois 63 67 73 63
67
Indiana 17 17 17 17
17
Mississippi 7 8 8 7
8
Missouri 11 12 12 11
12
Ohio 27 27 27 27
27
Pennsylvania 16 16 16 16
16
South Carolina 26 26 26 26
26
Tennessee 19 20 20 19
20
Texas 69 75 78 69
75
---------- ---------- ---------- --------------- -------------
Total 369 382 393 369 383
---------- ---------- ---------- --------------- -------------
SOURCE: First Acceptance Corporation
INVESTOR RELATIONS CONTACT:
Michael J. Bodayle
615.844.2885
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(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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