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 |
|
$ 46,080 |
|
$ 40,132 |
|
$185,644 |
|
$167,224 |
Commission and fee income |
|
7,534 |
|
7,269 |
|
32,574 |
|
29,911 |
Investment income |
|
1,443 |
|
1,909 |
|
6,599 |
|
8,064 |
Net realized gains (losses) on investments, |
|
|
|
|
|
|
|
|
available-for-sale |
22 |
|
(175) |
|
3,242 |
|
(161) |
|
|
55,079 |
|
49,135 |
|
228,059 |
|
205,038 |
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
33,805 |
|
32,505 |
|
148,223 |
|
129,525 |
Insurance operating expenses |
|
19,716 |
|
19,529 |
|
82,127 |
|
79,075 |
Other operating expenses |
|
240 |
|
250 |
|
922 |
|
1,185 |
Litigation settlement |
|
-
|
|
- |
|
- |
|
(4) |
Stock-based compensation |
|
97 |
|
80 |
|
604 |
|
804 |
Depreciation and amortization |
|
597 |
|
407 |
|
2,203 |
|
1,415 |
Interest expense |
|
449 |
|
990 |
|
3,025 |
|
3,928 |
Goodwill and intangible impairment |
|
-
|
|
21,090 |
|
- |
|
73,524 |
|
|
54,904 |
|
74,851 |
|
237,104 |
|
289,452 |
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
175 |
|
(25,716) |
|
(9,045) |
|
(84,414) |
Provision (benefit) for income taxes |
|
79 |
|
33 |
|
(5) |
|
105 |
Net income (loss) |
|
$ 96 |
|
$ (25,749) |
|
$ (9,040) |
|
$ (84,519) |
|
|
|
|
|
|
|
|
|
Net income (loss) per share: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ 0.00 |
|
$ (0.55) |
|
$ (0.22) |
|
$ (1.76) |
|
|
|
|
|
|
|
|
|
Number of shares used to calculate net income (loss) per
share: |
|
|
|
|
|
|
|
|
Basic |
|
40,877 |
|
47,182 |
|
40,861 |
|
47,979 |
Diluted |
|
40,938 |
|
47,182 |
|
40,861 |
|
47,979 |
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 receivable, net of allowance of $306 and
$364 |
|
45,286 |
|
41,313 |
Other assets |
|
6,190 |
|
6,986 |
Property and equipment, net |
4,656 |
3,315 |
Deferred acquisition costs |
|
3,221 |
|
3,243 |
Identifiable intangible assets |
|
4,800 |
|
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 comprehensive income |
|
8,704 |
|
10,250 |
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 Ended |
|
Year
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 force - beginning of period |
148,799 |
|
140,930 |
|
141,862 |
|
144,582 |
Net change during period |
(2,861) |
|
932 |
|
4,076 |
|
(2,720) |
Policies in force - end of period |
145,938 |
|
141,862 |
|
145,938 |
|
141,862 |
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
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