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First Acceptance Corporation Reports Operating Results for the Quarter Ended September 30, 2010

^{Published on 2010-11-05 07:30:54 - Market Wire}
 

NASHVILLE, Tenn.--([ BUSINESS WIRE ])--First Acceptance Corporation (NYSE: FAC) today reported its financial results for the first quarter ended September 30, 2010 of its fiscal year ending June 30, 2011.

Operating Results

Revenues for the three months ended September 30, 2010 were $53.1 million, compared with $57.3 million for the same period in fiscal year 2010. Income before income taxes for the three months ended September 30, 2010 was $0.5 million, compared with $2.9 million in the same period in fiscal year 2010. Net income for the three months ended September 30, 2010 was $0.4 million, or $0.01 per share on a diluted basis, compared with $2.8 million, or $0.06 per share on a diluted basis, for the same period in fiscal year 2010.

Premiums earned for the three months ended September 30, 2010 were $43.9 million, compared with $48.5 million for the same period in fiscal year 2010. The decline was primarily due to the continued weak economic conditions, which have caused both a decline in the number of policies written, as well as an increase in the percentage of our customers purchasing liability-only coverage. The closure of underperforming stores also contributed to the decrease in policies written and premiums earned. At September 30, 2010, the number of policies in force was 150,175, compared with 152,866 at September 30, 2009. At September 30, 2010, we operated 393 stores, compared with 415 stores at September 30, 2009.

Loss and Loss Adjustment Expense Ratio. The loss and loss adjustment expense ratio was 73.0 percent for the three months ended September 30, 2010, compared with 68.4 percent for the three months ended September 30, 2009. For the three months ended September 30, 2010, we experienced favorable development related to prior periods of $2.1 million, compared with favorable development of $3.7 million for the three months ended September 30, 2009. The favorable development for the three months ended September 30, 2010 was primarily due to lower than anticipated severity of accidents, of which approximately $1.2 million related to losses occurring during the first six months of the 2010 calendar accident year and $0.9 million related to calendar accident years 2009 or prior.

Excluding the favorable development related to prior periods, the loss and loss adjustment expense ratios for the three months ended September 30, 2010 and 2009 were 77.7 percent and 75.9 percent, respectively. This increase is 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 Personal Injury Protection claims in Florida.

Expense Ratio. Our expense ratio for the three months ended September 30, 2010 was 25.5 percent, compared with 26.0 percent for the same period in fiscal year 2010. The year-over-year decrease in the expense ratio was due to the reduction in fixed costs and savings realized from the closure of underperforming stores.

Combined Ratio. The combined ratio was 98.5 percent for the three months ended September 30, 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 September 30, 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 asafe harbora 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 aRisk Factorsa 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.