A.M. Best Affirms Ratings of First Acceptance Insurance Group and Its Members

OLDWICK, N.J.--([ BUSINESS WIRE ])--A.M. Best Co. has affirmed the financial strength ratings (FSR) of B (Fair) and issuer credit ratings (ICR) of abb+a of First Acceptance Insurance Group (First Acceptance) (Nashville, TN) and its members. Concurrently, A.M. Best has affirmed the ICR of aba of First Acceptance Corporation (Delaware) (NYSE: FAC), the groupa�s ultimate parent holding company. The outlook for all ratings remains positive. (Please see below for a detailed listing of the companies.)

"Risk Management and the Rating Process for Insurance Companies"

The affirmation of the ratings is primarily based on the groupa�s historically high underwriting leverage ratios and weak capitalization, along with unstable loss reserve development in recent years. These negative rating factors are partially offset by a stronger balance sheet and improved leverage in recent years coupled with historically positive earnings. The group members operate under an intercompany pooling arrangement and proportionately share in the overall underwriting performance of First Acceptance.

In addition, First Acceptance benefits from the added financial flexibility of its publicly traded holding company to raise capital through equity or debt during favorable investment markets. The holding companya�s current debt-to-capital and interest coverage ratios are modest and within an acceptable range for the current ratings.

Furthermore, these rating actions contemplate that management will successfully navigate through todaya�s challenging markets by continuing to control growth and taking steps to improve; pricing and rate setting processes; fraud detection; underwriting; and upgrading its marketing and distribution strategy.

The ratings have been affirmed for First Acceptance Insurance Group and its following pooled members:

First Acceptance Insurance Company, Inc.
First Acceptance Insurance Company of Georgia, Inc.
First Acceptance Insurance Company of Tennessee, Inc.

The principal methodology used in determining these ratings is [ Besta�s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition ], which provides a comprehensive explanation of A.M. Besta�s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: aRisk Management and the Rating Process for Insurance Companiesa; aUnderstanding BCAR for Property/Casualty Insurersa; a[ Rating Members of Insurance Groups ]a; and a[ A.M. Besta�s Ratings & the Treatment of Debt ].a Methodologies can be found at [ www.ambest.com/ratings/methodology ].

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit [ www.ambest.com ].

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A.M. Best Affirms Ratings of First Acceptance Insurance Group and Its Members