FACO First Acceptance Corporation (QX)

NASHVILLE, TN, August 5, 2014 -- First Acceptance Corporation (NYSE: FAC) today reported its financial results for the three and six month periods ended June 30, 2014.

            Income before income taxes for the three months ended June 30, 2014 was $3.7 million, compared with income before income taxes of $2.3 million for the same period in the prior year. Net income for the three months ended June 30, 2014 was $3.5 million, or $0.08 per share on a basic and diluted basis, compared with net income of $2.1 million, or $0.05 per share on a basic and diluted basis, for the same period in the prior year.

            Income before income taxes for the six months ended June 30, 2014 was $4.3 million, compared with income before income taxes of $4.4 million for the same period in the prior year. Net income for the six months ended June 30, 2014 was $4.0 million, or $0.10 per share on a basic and diluted basis, compared with net income of $4.1 million, or $0.10 per share on a basic and diluted basis, for the same period in the prior year.

            Joe Borbely, the Company's President commented "We are pleased that the recent investment in our people, operations and product is being realized in our top-line results. Acceptance is becoming recognized as a market leader for auto insurance in the communities we serve. Our multi-channel approach offers our customers the ability to purchase insurance products the way they want: by clicking, calling or visiting one of our 353 neighborhood locations."

            Revenues. Revenues for the three months ended June 30, 2014 were $67.1 million, compared with $62.5 million for the same period in the prior year. Revenues for the six months ended June 30, 2014 were $129.7 million, compared with $121.8 million for the same period in the prior year.

Premiums earned for the three months ended June 30, 2014 were $55.9 million, compared with $52.1 million for the same period in the prior year. Premiums earned for the six months ended June 30, 2014 were $107.6 million, compared with $101.5 million for the same period in the prior year. This improvement was primarily due to a higher percentage of full coverage policies sold and our recent pricing actions.
  
Loss Ratio. The loss ratio was 73.5 percent for the three months ended June 30, 2014, compared with 75.0 percent for the three months ended June 30, 2013. The loss ratio was 72.4 percent for the six months ended June 30, 2014, compared with 71.5 percent for the six months ended June 30, 2013. We experienced favorable development related to prior periods of $2.4 million for the three months ended June 30, 2014, compared with favorable development of $1.4 million for the three months ended June 30, 2013. For the six months ended June 30, 2014, we experienced favorable development related to prior periods of $4.4 million, compared with favorable development of $2.5 million for the six months ended June 30, 2013. The favorable development for the three and six month periods ended June 30, 2014 was primarily due to ­­­­­­­­­­­­­­­­­­­­­­lower than expected development related to bodily injury emergence in recent accident quarters.

Excluding the development related to prior periods, the loss ratios for the three months ended June 30, 2014 and 2013 were 77.8 percent and 77.7 percent, respectively. Excluding the development related to prior periods, the loss ratios for the six months ended June 30, 2014 and 2013 were 76.5 percent and 74.0 percent, respectively. The year-over-year increase in the loss ratio was primarily due to weather-related claims frequency in the collision and property damage coverages.

Expense Ratio. The expense ratio was 20.7 percent for the three months ended June 30, 2014, compared with 21.7 percent for the three months ended June 30, 2013. The expense ratio was 24.9 percent for the six months ended June 30, 2014, compared with 25.2 percent for the six months ended June 30, 2013. The year-over-year decrease in the expense ratio was primarily due to the increase in premiums earned which resulted in a lower percentage of fixed expenses in our retail operations (such as rent and base salary).

Combined Ratio. The combined ratio was 94.2 percent for the three months ended June 30, 2014, compared with 96.7 percent for the same period in the prior year. For the six months ended June 30, 2014, the combined ratio was 97.3 percent, compared with 96.7 percent for the same period in the prior year.

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 June 30, 2014, we leased and operated 353 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 to renters underwritten by us. In addition, select retail locations in highly competitive markets in Illinois and Texas began offering 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 11 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.

FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements Income
 (Unaudited)
(in thousands, except per share data)

FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)

FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
 (Unaudited)

PREMIUMS EARNED BY STATE

COMBINED RATIOS (INSURANCE OPERATIONS)

POLICIES IN FORCE (FAC ONLY)

NUMBER OF RETAIL LOCATIONS

                Retail location counts are based upon the date that a location commenced or ceased writing business.

RETAIL LOCATIONS BY STATE

SOURCE:  First Acceptance Corporation

INVESTOR RELATIONS CONTACT: 
Michael J. Bodayle
615.844.2885

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