FACO First Acceptance Corporation (QX)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant To Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): August 5, 2014

 

 

FIRST ACCEPTANCE CORPORATION

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware		001-12117		75-1328153
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

3813 Green Hills Village Drive Nashville, Tennessee		37215
(Address of Principal Executive Offices)		(Zip Code)

(615) 844-2800

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02. Results of Operations and Financial Condition.

On August 5, 2014, First Acceptance Corporation issued a press release announcing its results of operations for the quarter ended June 30, 2014. The text of the release is set forth in Exhibit 99 attached to this Current Report on Form 8-K and is incorporated herein by reference.

The information in this Current Report on Form 8-K is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.		Description
99		Press release dated August 5, 2014

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

Date: August 5, 2014

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INDEX TO EXHIBITS

 

Exhibit No.		Description
99		Press release dated August 5, 2014

Exhibit 99

First Acceptance Corporation Reports Operating Results for the Three and Six Month Periods Ended June 30, 2014

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.

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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.

 

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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.

 

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES

Consolidated Statements Income

(Unaudited)

(in thousands, except per share data)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2014				2013				2014				2013
Revenues:
Premiums earned		$	55,854			$	52,118			$	107,602			$	101,521
Commission and fee income			10,051				9,162				19,226				17,759
Investment income			1,257				1,268				2,794				2,544
Net realized gains (losses) on investments, available-for-sale (includes $(42), $(55), $40 and $(42), respectively, of accumulated other comprehensive income (loss) reclassification for unrealized gains (losses))			(42	)			(55	)			40				(42	)
			67,120				62,493				129,662				121,782
Costs and expenses:
Losses and loss adjustment expenses			41,066				39,087				77,883				72,592
Insurance operating expenses			21,162				19,909				45,191				42,249
Other operating expenses			245				223				478				452
Stock-based compensation			66				56				112				140
Depreciation and amortization			437				537				880				1,108
Interest expense			421				427				848				870
			63,397				60,239				125,392				117,411
Net income before income taxes			3,723				2,254				4,270				4,371
Provision for income taxes (includes $(15), $(19), $14 and $(15), respectively, of income tax expense from reclassifications items)			254				188				290				281
Net income		$	3,469			$	2,066			$	3,980			$	4,090
Net income per share:
Basic		$	0.08			$	0.05			$	0.10			$	0.10
Diluted		$	0.08			$	0.05			$	0.10			$	0.10
Number of shares used to calculate net income per share:
Basic			40,978				40,921				40,974				40,915
Diluted			41,274				40,948				41,278				40,942

 

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except per share data)

 

		June 30,				December 31,
		2014				2013
		(Unaudited)
ASSETS
Investments, available-for-sale at fair value (amortized cost of $124,959 and $126,873, respectively)		$	131,284			$	130,248
Cash and cash equivalents			85,408				72,033
Premiums and fees receivable, net of allowance of $407 and $311			53,185				46,228
Limited partnership interests			9,053				7,513
Other assets			5,974				6,471
Property and equipment, net			3,121				3,512
Deferred acquisition costs			3,314				2,902
Identifiable intangible assets			4,800				4,800
TOTAL ASSETS		$	296,139			$	273,707
LIABILITIES AND STOCKHOLDERS’ EQUITY
Loss and loss adjustment expense reserves		$	88,797			$	84,286
Unearned premiums and fees			65,617				55,983
Debentures payable			40,321				40,301
Other liabilities			17,406				16,205
Total liabilities			212,141				196,775
Stockholders’ equity:
Preferred stock, $.01 par value, 10,000 shares authorized			—				—
Common stock, $.01 par value, 75,000 shares authorized; 401,000 and 40,983 shares issued and outstanding, respectively			410				410
Additional paid-in capital			457,129				456,993
Accumulated other comprehensive income			6,325				3,375
Accumulated deficit			(379,866	)			(383,846	)
Total stockholders’ equity			83,998				76,932
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	296,139			$	273,707

 

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES

Supplemental Data

(Unaudited)

PREMIUMS EARNED BY STATE

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2014				2013				2014				2013
Gross premiums earned:
Georgia		$	10,322			$	9,887			$	19,902			$	19,538
Florida			8,657				8,092				16,620				15,713
Texas			7,169				6,168				13,638				11,990
Ohio			5,757				4,684				10,906				9,044
Alabama			5,604				5,523				10,857				10,571
Illinois			5,092				5,327				9,821				10,644
South Carolina			4,235				4,036				8,242				7,694
Tennessee			3,208				3,182				6,394				6,222
Pennsylvania			2,257				2,228				4,403				4,372
Indiana			1,562				1,355				2,994				2,599
Missouri			1,275				982				2,413				1,870
Mississippi			789				703				1,539				1,361
Total gross premiums earned			55,927				52,167				107,729				101,618
Premiums ceded to reinsurer			(73	)			(49	)			(127	)			(97	)
Total net premiums earned		$	55,854			$	52,118			$	107,602			$	101,521

COMBINED RATIOS (INSURANCE OPERATIONS)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2014				2013				2014				2013
Loss			73.5	%			75.0	%			72.4	%			71.5	%
Expense			20.7	%			21.7	%			24.9	%			25.2	%
Combined			94.2	%			96.7	%			97.3	%			96.7	%

POLICIES IN FORCE (FAC ONLY)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2014				2013				2014				2013
Policies in force – beginning of period			168,607				169,424				143,077				145,938
Net change during period			(9,314	)			(15,829	)			16,216				7,657
Policies in force – end of period			159,293				153,595				159,293				153,595

 

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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES

Supplemental Data (continued)

(Unaudited)

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
		June 30,								June 30,
		2014				2013				2014				2013
Retail locations – beginning of period			355				367				360				369
Opened			—				—				—				—
Closed			(2	)			(1	)			(7	)			(3	)
Retail locations – end of period			353				366				353				366

RETAIL LOCATIONS BY STATE

 

		June 30,								March 31,								December 31,
		2014				2013				2014				2013				2013				2012
Alabama			24				24				24				24				24				24
Florida			30				30				30				30				30				30
Georgia			60				60				60				60				60				60
Illinois			60				62				61				62				61				63
Indiana			17				17				17				17				17				17
Mississippi			7				7				7				7				7				7
Missouri			10				11				11				11				11				11
Ohio			27				27				27				27				27				27
Pennsylvania			16				16				16				16				16				16
South Carolina			25				26				25				26				25				26
Tennessee			19				19				19				19				19				19
Texas			58				67				58				68				63				69
Total			353				366				355				367				360				369

SOURCE: First Acceptance Corporation

INVESTOR RELATIONS CONTACT:

Michael J. Bodayle

615.844.2885

 

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