First Acceptance Corporation (NYSE:FAC) today reported its
financial results for the three months ended March 31, 2016.
Operating Results
Revenues for the three months ended March 31, 2016
increased 29% to $96.9 million from $75.1 million in the same
period in the prior year.
Loss before income taxes for the three months ended
March 31, 2016 was $8.4 million, compared with income before
income taxes of $0.8 million for the three months ended
March 31, 2015. Net loss for the three months ended
March 31, 2016 was $5.5 million, compared with net income of
$0.5 million for the three months ended March 31, 2015. Basic
and diluted net loss per share were $0.13 for the three months
ended March 31, 2016, compared with basic and diluted net
income per share of $0.01 for the same period in the prior
year.
For the three months ended March 31, 2016, income before
income taxes excluding unfavorable prior period loss development of
$10.3 million was $1.9 million. For the three months ended March
31, 2015, loss before income taxes excluding favorable prior period
loss development of $1.1 million was $0.3 million.
Joe Borbely, President and CEO, commented, “Recent industry
results leave no doubt that a paradigm shift has occurred for
automobile insurance. Like other carriers, we have been challenged
by the unprecedented claims frequency causing us to dig deeper in
updating our products to improve profitability. We are responding
to this shift by re-evaluating our claims handling processes as
well as improving our products to improve profitability. Despite
the unfavorable loss development, our continued cost containment
efforts and a slightly-improved loss ratio did result in a
profitable accident-basis quarter. I was also pleased with the
profitable results of the agency operations of the former Titan
stores and the receipt of a California license for our insurance
company. We are cautiously moving forward on all fronts in these
challenging times.”
Premiums, Commissions and Fee Income. Premiums
earned increased by $13.8 million, or 22%, to $76.4 million for the
three months ended March 31, 2016, from $62.6 million for the
three months ended March 31, 2015. This improvement was
primarily due to higher average premiums and an increase in the
number of policies in force.
Commission and fee income increased by $8.3 million, or 73%, to
$19.6 million for the three months ended March 31, 2016, from
$11.3 million for the three months ended March 31, 2015.
Revenue from the former Titan retail locations acquired on July 1,
2015 contributed towards this increase. Commission and fee income
also increased as a result of higher fee income related to
commissionable ancillary products sold through our
previously-existing retail locations and the increase in the number
of policies in force.
Loss Ratio. The loss ratio was 96.1% for the
three months ended March 31, 2016, compared with 76.6% for the
three months ended March 31, 2015. We experienced unfavorable
development related to prior periods of $10.3 million (which
increased the loss ratio by 13.5%) for the three months ended
March 31, 2016, compared with favorable development of $1.1
million for the three months ended March 31, 2015. The
unfavorable development for the three months ended March 31,
2016 was the result of an increase in losses across all major
coverages and over multiple prior accident periods. The primary
causes of the unfavorable development were a sharp increase in
bodily injury severity and a greater than usual amount of
subsequent payments on previously closed claims.
Excluding the development related to prior periods for the three
months ended March 31, 2016 and 2015, the loss ratios were
82.6% and 78.4%, respectively. The year-over-year increase in the
loss ratio was primarily due to higher than expected claim
frequency and severity across all major coverages. We believe that
an increase in the number of miles driven by insured drivers as a
result of lower gas prices and a favorable economy has been a
contributing factor to an industry-wide increase in frequency. In
response, the Company has continued to implement aggressive rate
and underwriting actions as warranted at a state and coverage
level.
Expense Ratio. The expense ratio was 14.3% for
the three months ended March 31, 2016, compared with 22.7% for
the three months ended March 31, 2015. 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)
and our ongoing efforts on cost containment.
Combined Ratio. The combined ratio increased to
110.4% for the three months ended March 31, 2016 from 99.3%
for the three months ended March 31, 2015.
Titan Acquisition
Effective July 1, 2015, we acquired certain assets of Titan
Insurance Services, Inc. and Titan Auto Insurance of New Mexico,
Inc. (the “Titan Agencies”). These 83 retail locations, which are
now rebranded under our Acceptance Insurance name, sell private
passenger non-standard automobile insurance policies for unrelated
insurance companies for which our revenues are in the form of
commission and fee income. We are currently developing our own
products for California, Arizona, Nevada and New Mexico, and
introducing our current Texas and Florida products into stores in
those states. The California product is expected to be available in
May 2016.
Next Release of Financial Results
We currently plan to report our financial results for the three
months ending June 30, 2016 on August 9, 2016.
About First Acceptance Corporation
We are principally a retailer, servicer and underwriter of
non-standard personal automobile insurance based in Nashville,
Tennessee. Our insurance operations generate revenues from selling
non-standard personal automobile insurance policies and related
products in 17 states. We conduct our servicing and underwriting
operations in 13 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 or driving
record and/or vehicle type.
At March 31, 2016, we leased and operated 414 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,
retail locations in some markets offer non-standard personal
automobile insurance serviced and underwritten by other third-party
insurance carriers for which we receive a commission. 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.acceptance.com.
This press release contains forward-looking statements,
including statements about the expected effects of the recently
completed acquisition. 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, 2015 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 (Loss) Income |
(unaudited) |
(in
thousands, except per share data) |
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2016 |
|
|
2015 |
|
Revenues: |
|
|
|
|
|
|
|
|
Premiums earned |
|
$ |
76,407 |
|
|
$ |
62,615 |
|
Commission and fee income |
|
|
19,581 |
|
|
|
11,348 |
|
Investment income |
|
|
962 |
|
|
|
1,145 |
|
Net realized losses on investments,
available-for-sale |
|
|
(2 |
) |
|
|
(3 |
) |
|
|
|
96,948 |
|
|
|
75,105 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Losses and loss adjustment
expenses |
|
|
73,419 |
|
|
|
47,934 |
|
Insurance operating expenses |
|
|
29,647 |
|
|
|
25,084 |
|
Other operating expenses |
|
|
280 |
|
|
|
323 |
|
Litigation settlement |
|
|
— |
|
|
|
110 |
|
Stock-based compensation |
|
|
37 |
|
|
|
19 |
|
Depreciation |
|
|
651 |
|
|
|
407 |
|
Amortization of identifiable
intangibles assets |
|
|
238 |
|
|
|
— |
|
Interest expense |
|
|
1,050 |
|
|
|
424 |
|
|
|
|
105,322 |
|
|
|
74,301 |
|
(Loss) income before income taxes |
|
|
(8,374 |
) |
|
|
804 |
|
(Benefit) provision for income taxes |
|
|
(2,869 |
) |
|
|
318 |
|
Net (loss) income |
|
$ |
(5,505 |
) |
|
$ |
486 |
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.13 |
) |
|
$ |
0.01 |
|
Diluted |
|
$ |
(0.13 |
) |
|
$ |
0.01 |
|
Number of shares used to calculate net (loss)
income per share: |
|
|
|
|
|
|
|
|
Basic |
|
|
41,060 |
|
|
|
41,016 |
|
Diluted |
|
|
41,060 |
|
|
|
41,304 |
|
|
|
|
|
|
|
|
|
|
FIRST ACCEPTANCE CORPORATION AND
SUBSIDIARIES |
Consolidated Balance Sheets |
(in thousands, except per share
data) |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2016 |
|
|
2015 |
|
|
|
(Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Investments,
available-for-sale at fair value (amortized cost of $125,019 and
$128,304, respectively) |
|
$ |
130,898 |
|
|
$ |
131,582 |
|
Cash and cash
equivalents |
|
|
128,906 |
|
|
|
115,587 |
|
Premiums, fees, and
commissions receivable, net of allowance of $409 and $454 |
|
|
93,123 |
|
|
|
69,881 |
|
Deferred tax assets,
net |
|
|
20,358 |
|
|
|
18,301 |
|
Other investments |
|
|
10,286 |
|
|
|
11,256 |
|
Other assets |
|
|
6,719 |
|
|
|
6,950 |
|
Property and equipment,
net |
|
|
5,065 |
|
|
|
5,141 |
|
Deferred acquisition
costs |
|
|
6,502 |
|
|
|
5,509 |
|
Goodwill |
|
|
29,429 |
|
|
|
29,429 |
|
Identifiable intangible
assets, net |
|
|
8,253 |
|
|
|
8,491 |
|
TOTAL ASSETS |
|
$ |
439,539 |
|
|
$ |
402,127 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Loss and loss
adjustment expense reserves |
|
$ |
132,650 |
|
|
$ |
122,071 |
|
Unearned premiums and
fees |
|
|
109,757 |
|
|
|
83,426 |
|
Debentures payable |
|
|
40,268 |
|
|
|
40,256 |
|
Term loan from
principal stockholder |
|
|
29,760 |
|
|
|
29,753 |
|
Accrued expenses |
|
|
7,356 |
|
|
|
7,345 |
|
Other liabilities |
|
|
19,855 |
|
|
|
15,606 |
|
Total liabilities |
|
|
339,646 |
|
|
|
298,457 |
|
Stockholders’
equity: |
|
|
|
|
|
|
|
|
Preferred stock, $.01
par value, 10,000 shares authorized |
|
|
— |
|
|
|
— |
|
Common stock, $.01 par
value, 75,000 shares authorized; 41,060 issued and outstanding |
|
|
411 |
|
|
|
411 |
|
Additional paid-in
capital |
|
|
457,513 |
|
|
|
457,476 |
|
Accumulated other
comprehensive income, net of tax of $973 and $62, respectively |
|
|
5,182 |
|
|
|
3,491 |
|
Accumulated
deficit |
|
|
(363,213 |
) |
|
|
(357,708 |
) |
Total stockholders’ equity |
|
|
99,893 |
|
|
|
103,670 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
$ |
439,539 |
|
|
$ |
402,127 |
|
|
|
|
|
|
|
|
|
|
FIRST ACCEPTANCE CORPORATION AND
SUBSIDIARIES |
Supplemental Data |
(Unaudited) |
|
PREMIUMS EARNED BY STATE |
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2016 |
|
|
2015 |
|
Gross premiums earned: |
|
|
|
|
|
|
|
|
Georgia |
|
$ |
15,057 |
|
|
$ |
11,745 |
|
Florida |
|
|
11,609 |
|
|
|
9,843 |
|
Texas |
|
|
10,617 |
|
|
|
8,363 |
|
Ohio |
|
|
7,596 |
|
|
|
6,365 |
|
Alabama |
|
|
6,764 |
|
|
|
5,956 |
|
South Carolina |
|
|
6,594 |
|
|
|
4,622 |
|
Illinois |
|
|
5,740 |
|
|
|
5,846 |
|
Tennessee |
|
|
4,881 |
|
|
|
3,619 |
|
Pennsylvania |
|
|
2,418 |
|
|
|
2,260 |
|
Indiana |
|
|
2,277 |
|
|
|
1,846 |
|
Missouri |
|
|
1,753 |
|
|
|
1,402 |
|
Mississippi |
|
|
995 |
|
|
|
815 |
|
Virginia |
|
|
214 |
|
|
|
16 |
|
Total gross premiums earned |
|
|
76,515 |
|
|
|
62,698 |
|
Premiums ceded to reinsurer |
|
|
(108 |
) |
|
|
(83 |
) |
Total net premiums earned |
|
$ |
76,407 |
|
|
$ |
62,615 |
|
|
|
|
|
|
|
|
|
|
COMBINED RATIOS (INSURANCE OPERATIONS) |
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2016 |
|
|
2015 |
|
Loss |
|
|
96.1 |
% |
|
|
76.6 |
% |
Expense |
|
|
14.3 |
% |
|
|
22.7 |
% |
Combined |
|
|
110.4 |
% |
|
|
99.3 |
% |
|
|
|
|
|
|
|
|
|
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, |
|
|
|
2016 |
|
|
2015 |
|
Retail locations –
beginning of period |
|
|
440 |
|
|
|
356 |
|
Opened |
|
|
2 |
|
|
|
— |
|
Closed |
|
|
(28 |
) |
|
|
(1 |
) |
Retail locations – end
of period |
|
|
414 |
|
|
|
355 |
|
|
|
|
|
|
|
|
|
|
FIRST ACCEPTANCE CORPORATION AND
SUBSIDIARIES |
Supplemental Data (continued) |
(Unaudited) |
|
RETAIL LOCATIONS BY STATE |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2016 |
|
|
2015 |
|
|
2015 |
|
|
2014 |
|
Alabama |
|
|
24 |
|
|
|
24 |
|
|
|
24 |
|
|
|
24 |
|
Arizona |
|
|
10 |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
California |
|
|
48 |
|
|
|
— |
|
|
|
48 |
|
|
|
— |
|
Florida |
|
|
39 |
|
|
|
31 |
|
|
|
39 |
|
|
|
31 |
|
Georgia |
|
|
60 |
|
|
|
60 |
|
|
|
60 |
|
|
|
60 |
|
Illinois |
|
|
39 |
|
|
|
60 |
|
|
|
61 |
|
|
|
60 |
|
Indiana |
|
|
17 |
|
|
|
17 |
|
|
|
17 |
|
|
|
17 |
|
Mississippi |
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
Missouri |
|
|
9 |
|
|
|
9 |
|
|
|
9 |
|
|
|
10 |
|
Nevada |
|
|
4 |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
New Mexico |
|
|
5 |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
Ohio |
|
|
27 |
|
|
|
27 |
|
|
|
27 |
|
|
|
27 |
|
Pennsylvania |
|
|
14 |
|
|
|
15 |
|
|
|
14 |
|
|
|
15 |
|
South Carolina |
|
|
23 |
|
|
|
25 |
|
|
|
24 |
|
|
|
25 |
|
Tennessee |
|
|
23 |
|
|
|
22 |
|
|
|
23 |
|
|
|
22 |
|
Texas |
|
|
65 |
|
|
|
58 |
|
|
|
68 |
|
|
|
58 |
|
Total |
|
|
414 |
|
|
|
355 |
|
|
|
440 |
|
|
|
356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTOR RELATIONS CONTACT:
Michael J. Bodayle
615.844.2885
Grafico Azioni First Acceptance (QX) (USOTC:FACO)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni First Acceptance (QX) (USOTC:FACO)
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