First Acceptance Corporation
Reports Operating Results for the Quarter Ended March 31,
2015
NASHVILLE, TN, May 12, 2015 - First Acceptance
Corporation (NYSE: FAC) today reported its financial results for
the quarter ended March 31, 2015.
Operating Results
Income before income taxes for three months ended
March 31, 2015 was $0.8 million, compared with income before
income taxes of $0.5 million for the three months ended
March 31, 2014. Net income was $0.5 million for both the three
months ended March 31, 2015 and 2014. Basic and diluted net
income per share were $0.01 for both the three months ended
March 31, 2015 and 2014.
Joe Borbely, the Company's President and CEO
commented "I am extremely proud of the strong sales results
produced by our retail, internet and call center channels during
the first quarter. With the February-March tax refund season
historically setting the tone for the balance of the year,
achieving a 14.2% increase in policies in force has Acceptance
positioned for a strong 2015. While we remain challenged by an
increased loss ratio, we will continue our focus on pricing
initiatives and product design to maintain profitability. On the
other hand, through leveraging our predominately fixed cost sales
platforms, we were pleased with our 22.8% expense ratio."
Revenues. Revenues for the
three months ended March 31, 2015 increased 20% to $75.1
million from $62.5 million in the same period in the prior year.
Premiums earned increased by $10.9 million, or
21%, to $62.6 million for the three months ended March 31,
2015, from $51.7 million for the three months ended March 31,
2014. This improvement was primarily due to an increase in policies
in force from 168,607 at March 31, 2014 to 192,613 at
March 31, 2015, in addition to a higher percentage of full
coverage policies sold and our recent pricing actions.
Loss Ratio. The loss ratio
was 76.5% for the three months ended March 31, 2015, compared
with 71.1% for the three months ended March 31, 2014. We
experienced favorable development related to prior periods of $1.1
million for the three months ended March 31, 2015, compared
with favorable development of $2.9 million for the three months
ended March 31, 2014. The favorable development for the three
months ended March 31, 2015 was primarily related to bodily
injury and uninsured motorist bodily injury claims occurring in
accident year 2014.
Excluding the development related to prior periods
for the three months ended March 31, 2015 and 2014, the loss
ratios were 78.4% and 76.8%, respectively. The year-over-year
increase in the loss ratio was primarily due to higher than
expected claim frequency and severity across multiple
coverages.
Expense Ratio. The expense
ratio was 22.8% for the three months ended March 31, 2015,
compared with 29.6% for the three months ended March 31, 2014.
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 decreased to 99.3% for the three months ended March 31,
2015 from 100.7% for the three months ended March 31,
2014.
Pending Acquisition
On April 27, the Company announced that it has
entered into an agreement to acquire certain assets of Titan
Insurance Services, Inc. and Titan Auto Insurance of New Mexico,
Inc. These agencies sell private passenger non-standard automobile
insurance from 83 retail stores, principally in California, but
also in Texas, Arizona, Florida, Nevada and New Mexico.
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 13 states and are licensed as an insurer in
12 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 or driving
record and/or vehicle type. In most instances, these individuals
are seeking to obtain the minimum amount of automobile insurance
required by law.
At May 12, 2015, we leased and operated 355 retail
locations and a call center 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 for renters
underwritten by us. In addition, select retail locations in highly
competitive markets in Illinois and Texas offer 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. On a limited basis, we
also sell our products through selected 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, 2014 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 Income
(unaudited)
(in thousands, except per share data)
|
|
Three
Months Ended |
|
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
Revenues: |
|
|
|
|
|
|
|
|
Premiums earned |
|
$ |
62,615 |
|
|
$ |
51,748 |
|
Commission and fee income |
|
|
11,348 |
|
|
|
9,175 |
|
Investment income |
|
|
1,145 |
|
|
|
1,537 |
|
Net
realized (losses) gains on investments, available-for-sale |
|
|
(3 |
) |
|
|
82 |
|
|
|
|
75,105 |
|
|
|
62,542 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
|
47,934 |
|
|
|
36,817 |
|
Insurance operating expenses |
|
|
25,194 |
|
|
|
24,029 |
|
Other operating expenses |
|
|
323 |
|
|
|
233 |
|
Stock-based compensation |
|
|
19 |
|
|
|
46 |
|
Depreciation and amortization |
|
|
407 |
|
|
|
443 |
|
Interest expense |
|
|
424 |
|
|
|
427 |
|
|
|
|
74,301 |
|
|
|
61,995 |
|
Income before income taxes |
|
|
804 |
|
|
|
547 |
|
Provision for income taxes |
|
|
318 |
|
|
|
36 |
|
Net
income |
|
$ |
486 |
|
|
$ |
511 |
|
Net
income per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.01 |
|
|
$ |
0.01 |
|
Diluted |
|
$ |
0.01 |
|
|
$ |
0.01 |
|
Number of shares used to calculate net income per share: |
|
|
|
|
|
|
|
|
Basic |
|
|
41,016 |
|
|
|
40,970 |
|
Diluted |
|
|
41,304 |
|
|
|
41,283 |
|
FIRST ACCEPTANCE
CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
(Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Investments, available-for-sale at fair value
(amortized cost of $122,244 and $119,119,
respectively) |
|
$ |
129,234 |
|
|
$ |
125,085 |
|
Cash and cash equivalents |
|
|
110,312 |
|
|
|
102,429 |
|
Premiums and fees receivable, net of allowance of
$405 and $392 |
|
|
74,835 |
|
|
|
56,344 |
|
Deferred tax assets, net |
|
|
15,978 |
|
|
|
16,521 |
|
Other investments |
|
|
10,696 |
|
|
|
10,530 |
|
Other assets |
|
|
6,247 |
|
|
|
6,104 |
|
Property and equipment, net |
|
|
2,997 |
|
|
|
3,173 |
|
Deferred acquisition costs |
|
|
4,797 |
|
|
|
3,459 |
|
Identifiable intangible assets |
|
|
4,800 |
|
|
|
4,800 |
|
TOTAL ASSETS |
|
$ |
359,896 |
|
|
$ |
328,445 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Loss and loss adjustment expense reserves |
|
$ |
104,361 |
|
|
$ |
96,613 |
|
Unearned premiums and fees |
|
|
90,511 |
|
|
|
67,942 |
|
Debentures payable |
|
|
40,222 |
|
|
|
40,211 |
|
Other liabilities |
|
|
16,691 |
|
|
|
16,715 |
|
Total liabilities |
|
|
251,785 |
|
|
|
221,481 |
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, 10,000 shares
authorized |
|
|
- |
|
|
|
- |
|
Common stock, $.01 par value, 75,000 shares
authorized; 41,016
issued and outstanding |
|
|
410 |
|
|
|
410 |
|
Additional paid-in capital |
|
|
457,261 |
|
|
|
457,242 |
|
Accumulated other comprehensive income, net of tax
of $1,269 and $923, respectively |
|
|
5,732 |
|
|
|
5,090 |
|
Accumulated deficit |
|
|
(355,292 |
) |
|
|
(355,778 |
) |
Total stockholders' equity |
|
|
108,111 |
|
|
|
106,964 |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
359,896 |
|
|
$ |
328,445 |
|
FIRST ACCEPTANCE
CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
PREMIUMS EARNED BY STATE
|
|
Three
Months Ended |
|
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
Gross premiums earned: |
|
|
|
|
|
|
|
|
Georgia |
|
$ |
11,745 |
|
|
$ |
9,581 |
|
Florida |
|
|
9,843 |
|
|
|
7,963 |
|
Texas |
|
|
8,363 |
|
|
|
6,468 |
|
Ohio |
|
|
6,365 |
|
|
|
5,253 |
|
Illinois |
|
|
5,956 |
|
|
|
4,729 |
|
Alabama |
|
|
5,846 |
|
|
|
5,149 |
|
South Carolina |
|
|
4,622 |
|
|
|
4,008 |
|
Tennessee |
|
|
3,619 |
|
|
|
3,186 |
|
Pennsylvania |
|
|
2,260 |
|
|
|
2,146 |
|
Indiana |
|
|
1,846 |
|
|
|
1,431 |
|
Missouri |
|
|
1,402 |
|
|
|
1,138 |
|
Mississippi |
|
|
815 |
|
|
|
750 |
|
Virginia |
|
|
16 |
|
|
|
- |
|
Total gross premiums earned |
|
|
62,698 |
|
|
|
51,802 |
|
Premiums ceded to reinsurer |
|
|
(83 |
) |
|
|
(54 |
) |
Total net premiums earned |
|
$ |
62,615 |
|
|
$ |
51,748 |
|
COMBINED RATIOS (INSURANCE
OPERATIONS)
|
|
Three
Months Ended |
|
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
Loss |
|
|
76.5 |
% |
|
|
71.1 |
% |
Expense |
|
|
22.8 |
% |
|
|
29.6 |
% |
Combined |
|
|
99.3 |
% |
|
|
100.7 |
% |
POLICIES IN FORCE
|
|
Three
Months Ended |
|
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
Policies in force - beginning of period |
|
|
163,712 |
|
|
|
143,077 |
|
Net change during period |
|
|
28,901 |
|
|
|
25,530 |
|
Policies in force - end of period |
|
|
192,613 |
|
|
|
168,607 |
|
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 |
|
|
|
March 31, |
|
|
|
2015 |
|
|
2014 |
|
Retail locations - beginning of period |
|
|
356 |
|
|
|
360 |
|
Opened |
|
|
- |
|
|
|
- |
|
Closed |
|
|
(1 |
) |
|
|
(5 |
) |
Retail locations - end of period |
|
|
355 |
|
|
|
355 |
|
RETAIL LOCATIONS BY STATE
|
|
March 31, |
|
|
December 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2014 |
|
|
2013 |
|
Alabama |
|
|
24 |
|
|
|
24 |
|
|
|
24 |
|
|
|
24 |
|
Florida |
|
|
31 |
|
|
|
30 |
|
|
|
31 |
|
|
|
30 |
|
Georgia |
|
|
60 |
|
|
|
60 |
|
|
|
60 |
|
|
|
60 |
|
Illinois |
|
|
60 |
|
|
|
61 |
|
|
|
60 |
|
|
|
61 |
|
Indiana |
|
|
17 |
|
|
|
17 |
|
|
|
17 |
|
|
|
17 |
|
Mississippi |
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
Missouri |
|
|
9 |
|
|
|
11 |
|
|
|
10 |
|
|
|
11 |
|
Ohio |
|
|
27 |
|
|
|
27 |
|
|
|
27 |
|
|
|
27 |
|
Pennsylvania |
|
|
15 |
|
|
|
16 |
|
|
|
15 |
|
|
|
16 |
|
South Carolina |
|
|
25 |
|
|
|
25 |
|
|
|
25 |
|
|
|
25 |
|
Tennessee |
|
|
22 |
|
|
|
19 |
|
|
|
22 |
|
|
|
19 |
|
Texas |
|
|
58 |
|
|
|
58 |
|
|
|
58 |
|
|
|
63 |
|
Total |
|
|
355 |
|
|
|
355 |
|
|
|
356 |
|
|
|
360 |
|
SOURCE: First Acceptance
Corporation
INVESTOR RELATIONS
CONTACT:
Michael J. Bodayle
615.844.2885
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: First Acceptance Corporation via
Globenewswire
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