FACO First Acceptance Corporation (QX)

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)

FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)

FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)

PREMIUMS EARNED BY STATE  

COMBINED RATIOS (INSURANCE OPERATIONS)

POLICIES IN FORCE

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.

RETAIL LOCATIONS BY STATE

SOURCE: First Acceptance Corporation

INVESTOR RELATIONS CONTACT:
Michael J. Bodayle
615.844.2885

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