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First Acceptance Corporation Reports Operating Results for the Quarter and Year Ended December 31, 2013

NASHVILLE, TN, March 4, 2014 -- First Acceptance Corporation (FAC) today reported its financial results for the quarter and year ended December 31, 2013.

Operating Results

Revenues for the three months ended December 31, 2013 were $59.2 million, compared with $55.1 million for the three months ended December 31, 2012. Income before income taxes for the three months ended December 31, 2013 was $3.4 million, compared with income before income taxes of $0.2 million for the three months ended December 31, 2012. Income before income taxes for the three months ended December 31, 2013 included favorable development of $2.6 million for losses occurring in prior accident quarters, while the income before income taxes for the three months ended December 31, 2012 included a favorable development of $1.8 million. Net income for the three months ended December 31, 2013 was $3.2 million, or $0.07 per share on a diluted basis, compared with net income of $0.1 million, or $0.00 per share on a diluted basis, for the three months ended December 31, 2012.

Revenues for the year ended December 31, 2013 were $240.5 million, compared with $228.1 million for the year ended December 31, 2012. Income before income taxes for the year ended December 31, 2013 was $9.8 million, compared with loss before income taxes of $9.0 million for the year ended December 31, 2012. Income before income taxes for the year ended December 31, 2013 included favorable development of $3.0 million for losses occurring in prior fiscal years, while the loss before income taxes for the year ended December 31, 2012 included the recognition of a net realized gain on investments of $3.2 million, or $0.08 per share on a diluted basis, and unfavorable development of $4.0 million for losses occurring in prior fiscal years. Net income for the year ended December 31, 2013 was $9.2 million, or $0.22 per share on a diluted basis, compared with net loss of $9.0 million, or $0.22 per share on a diluted basis, for the year ended December 31, 2012.

Premiums earned for the three months ended December 31, 2013 were $48.7 million, compared with $46.1 million for the three months ended December 31, 2012. Premiums earned for the year ended December 31, 2013 were $199.7 million, compared with $185.6 million for the year ended December 31, 2012. This improvement was primarily due to our recent pricing actions.

Loss Ratio. The loss ratio was 70.0 percent for the three months ended December 31, 2013, compared with 73.4 percent for the three months ended December 31, 2012. The loss ratio was 71.5 percent for the year ended December 31, 2013, compared with 79.8 percent for the year ended December 31, 2012.

We experienced favorable development related to prior accident quarters of $2.6 million for the three months ended December 31, 2013, compared with favorable development of $1.8 million for the three months ended December 31, 2012. We experienced favorable development related to prior fiscal years of $3.0 million for the year ended December 31, 2013, compared with unfavorable development of $4.0 million for the year ended December 31, 2012.

The favorable loss development for the year ending December 31, 2013 was primarily related to bodily injury claims occurring in accident years 2010 through 2012, partially offset by unfavorable loss and loss adjustment expense development on Florida personal injury protection claims.  The unfavorable development for the year ended December 31, 2012 was primarily due to higher than expected severity with Florida personal injury protection claims and with Georgia bodily injury claims in older accident periods, and unfavorable loss adjustment expense development that was primarily related to higher than expected legal expenses for bodily injury claims for accident years 2010 and prior.

Excluding the development related to prior fiscal years, the loss ratios for the years ended December 31, 2013 and 2012 were 73.0 percent and 77.7 percent, respectively. The year-over-year decrease in the loss ratio was primarily due to the impact of pricing actions taken throughout 2012.

Expense Ratio. The expense ratio was 24.0 percent for the three months ended December 31, 2013, compared with 26.4 percent for the three months ended December 31, 2012. The expense ratio was 23.9 percent for the year ended December 31, 2013, compared with 26.7 percent for the year ended December 31, 2012. 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 was 94.0 percent for the three months ended December 31, 2013, compared with 99.8 percent for the three months ended December 31, 2012. The combined ratio was 95.4 percent for the year ended December 31, 2013, compared with 106.5 percent for year ended December 31, 2012.

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 12 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, driving record and/or vehicle type, and in most instances who are required by law to buy a minimum amount of automobile insurance. At March 4, 2014, we leased and operated 356 retail locations, 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, during the year ended December 31, 2013, select retail locations in highly competitive markets in Illinois and Texas began offering 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 recently-launched mobile platform. We also sell our products through 10 retail locations operated by independent agents. Additional information about First Acceptance Corporation can be found online at 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, 2013 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 Operations
(in thousands, except per share data)

Three Months Ended Year Ended
December 31, December 31,
2013 2012 2013 2012
(Unaudited)
Revenues:
Premiums earned  $48,712  $46,080  $199,700  $185,644
Commission and fee income           8,734          7,534      35,125      32,574
Investment income           1,699          1,443        5,716        6,599
Net realized gains (losses) on investments,
available-for-sale  (includes $7, $22, $(29) and $3,242, respectively, of accumulated other comprehensive income reclassification for unrealized gains (losses)) 7 22 (29) 3,242
        59,152        55,079    240,512    228,059
Costs and expenses:
Losses and loss adjustment expenses         34,115        33,805 142,839    148,223
Insurance operating expenses         20,428        19,716      82,822      82,127
Other operating expenses              300             240           987           922
Stock-based compensation                49               97           243           604
Depreciation and amortization              460             597        2,053        2,203
Interest expense              437             449        1,738        3,025
        55,789        54,904    230,682    237,104
Income (loss) before income taxes          3,363             175 9,830           (9,045)
Provision (benefit) for income taxes (includes $2, $8, $(10) and $1,135, respectively, of income tax expense from reclassifications items)              205              79             650             (5)
Net income (loss)  $ 3,158  $     96  $ 9,180  $ (9,040)
Net income (loss) per share:
Basic and diluted  $ 0.07    $  0.00    $ 0.22  $ (0.22)
Number of shares used to calculate net income (loss) per share:
Basic     40,946        40,877      40,930     40,861
Diluted     41,161        40,938      41,092    40,861

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

December 31,
2013 2012
ASSETS
Investments, available-for-sale at fair value (amortized cost of
  $126,873 and $130,342, respectively)
 $           130,248  $           139,046
Cash and cash equivalents                 72,033                 59,104
Premiums and fees receivable, net of allowance of $311 and $306                 46,228                 45,286
Limited partnership interests 7,513 --
Other assets                   6,471                   6,190
Property and equipment, net                   3,512                   4,656
Deferred acquisition costs                   2,902                   3,221
Identifiable intangible assets                   4,800                   4,800
TOTAL ASSETS  $           273,707  $           262,303
LIABILITIES AND STOCKHOLDERS` EQUITY
Loss and loss adjustment expense reserves  $             84,286  $             79,260
Unearned premiums and fees                 55,983                 55,092
Debentures payable                 40,301                 40,261
Other liabilities                 16,205                 14,897
Total liabilities               196,775               189,510
Stockholders` equity:
Preferred stock, $.01 par value, 10,000 shares authorized                        -                          -  
Common stock, $.01 par value, 75,000 shares authorized; 40,983
    and 40,962 shares issued and outstanding, respectively
                     410                      410
Additional paid-in capital               456,993               456,705
Accumulated other comprehensive income                   3,375                   8,704
Accumulated deficit             (383,846)            (393,026)
Total stockholders` equity                 76,932                 72,793
TOTAL LIABILITIES AND STOCKHOLDERS` EQUITY  $           273,707  $           262,303

FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
 (Unaudited)

PREMIUMS EARNED BY STATE

Three Months Ended Year  Ended
December 31, December 31,
2013 2012 2013 2012
Premiums earned:
Georgia  $  9,098  $ 9,373 $ 37,957  $ 38,500
Florida            7,356            6,962 30,517          26,744
Texas            5,986            5,432 24,051          22,481
Alabama            5,161            4,211 20,978          17,157
Illinois            4,635            5,379 20,200          21,896
Ohio            4,662            4,046 18,225          15,788
South Carolina            3,767            3,231 15,301          12,637
Tennessee            3,018            2,848 12,334          11,819
Pennsylvania            2,114            2,070 8,624            8,301
Indiana            1,325            1,164 5,218            4,703
Missouri               956               777 3,778            3,172
Mississippi               689               634 2,718            2,638
Total gross premiums earned          48,767          46,127 199,901        185,836
Premiums ceded to reinsurer               (55)               (47) (201)             (192)
Total net premiums earned  $ 48,712  $  46,080 $    199,700  $ 185,644

COMBINED RATIOS (INSURANCE OPERATIONS)

Three Months Ended Year  Ended
December 31, December 31,
2013 2012 2013 2012
Loss 70.0% 73.4% 71.5% 79.8%
Expense 24.0% 26.4% 23.9% 26.7%
Combined 94.0% 99.8% 95.4% 106.5%

POLICIES IN FORCE

Three Months Ended Year  Ended
December 31, December 31,
2013 2012 2013 2012
Policies in force - beginning of period        157,199        148,799        147,500        141,862
    Net change during period          (3,016)          (1,299)            6,683            5,638
Policies in force - end of period        154,183        147,500        154,183        147,500

NUMBER OF RETAIL LOCATIONS

  Retail location counts are based upon the date that a location commenced or ceased writing business.

Three Months Ended Year  Ended
December 31, December 31,
2013 2012 2013 2012
Retail locations - beginning of period             363             369            369             382
Opened  --  --  --  --
Closed  (3)  --              (9)              (13)
Retail locations - end of period             360             369             360             369

RETAIL LOCATIONS BY STATE

December 31, September 30,
2013 2012 2011 2013 2012
Alabama      24      24    24            24            24
Florida      30      30      30     30     30
Georgia      60      60      60     60     60
Illinois      61      63      67     62     63
Indiana      17      17      17     17     17
Mississippi        7        7        8       7       7
Missouri      11      11      12     11     11
Ohio      27      27      27     27     27
Pennsylvania      16      16      16     16     16
South Carolina      25      26      26     26     26
Tennessee      19      19      20     19     19
Texas      63      69      75     64     69
Total    360    369    382   363   369

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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