First Acceptance Corp (FACO)

[Enterprising Investor]

First Acceptance Corporation Reports Operating Results for the Quarter and Year Ended December 31, 2013 (3/04/14)

NASHVILLE, TN, March 4, 2014 -- First Acceptance Corporation (NYSE: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.

http://www.nasdaq.com/press-release/first-acceptance-corporation-reports-operating-results-for-the-quarter-and-year-ended-december-31-20140304-01224