Attached files
| file | filename |
|---|---|
| 8-K - 8-K - FIRST ACCEPTANCE CORP /DE/ | fac-8k_20150310.htm |
Exhibit 99
First Acceptance Corporation Reports Operating Results for the Quarter and Year Ended December 31, 2014
NASHVILLE, TN, March 10, 2015 – First Acceptance Corporation (NYSE: FAC) today reported its financial results for the quarter and year ended December 31, 2014.
Operating Results
Income before income taxes for the three months ended December 31, 2014 was $3.1 million, compared with income before income taxes of $3.4 million for the three months ended December 31, 2013. Net income for the three months ended December 31, 2014 was $22.0 million, or $0.53 per share on a diluted basis, compared with net income of $3.2 million, or $0.07 per share on a diluted basis, for the three months ended December 31, 2013. The provision (benefit) for income taxes for the three months ended December 31, 2014 includes a decrease in the valuation allowance for the deferred tax asset of $20.2 million.
Income before income taxes for the year ended December 31, 2014 was $9.7 million, compared with income before income taxes of $9.8 million for the year ended December 31, 2013. Net income for the year ended December 31, 2014 was $28.1 million, or $0.68 per share on a diluted basis, compared with net income of $9.2 million, or $0.22 per share on a diluted basis, for the year ended December 31, 2013. The provision (benefit) for income taxes for the year ended December 31, 2014 includes a decrease in the valuation allowance for the deferred tax asset of $22.4 million.
Joe Borbely, the Company’s President and CEO commented “We are pleased to have had our tenth consecutive profitable quarter. This achievement led to the release of our deferred tax asset valuation allowance which contributed towards increasing our book value per share to $2.61. In addition, during the most recent quarter, we continued our retail expansion with three new locations in Memphis, Tennessee. In January, we also began writing business through our website and call-center in Virginia, our first new state since 2005.”
Revenues. Revenues for the three months ended December 31, 2014 were $67.9 million, compared with $59.2 million for the three months ended December 31, 2013. Revenues for the year ended December 31, 2014 were $263.2 million, compared with $240.5 million for the year ended December 31, 2013.
Premiums earned for the three months ended December 31, 2014 were $56.3 million, compared with $48.7 million for the three months ended December 31, 2013. Premiums earned for the year ended December 31, 2014 were $218.3 million, compared with $199.7 million for the year ended December 31, 2013. This improvement was primarily due to an increase in policies in force (“PIF”) from 143,077 at December 31, 2013 to 163,712 at December 31, 2014, in addition to a higher percentage of full coverage policies sold and our recent pricing actions which have increased our average premium per policy.
Loss Ratio. The loss ratio was 74.5 percent for the three months ended December 31, 2014, compared with 70.0 percent for the three months ended December 31, 2013. The loss ratio was 73.9 percent for the year ended December 31, 2014, compared with 71.5 percent for the year ended December 31, 2013.
We experienced favorable development related to prior accident quarters of $2.6 million for both the three months ended December 31, 2014 and 2013. We experienced favorable development related to prior fiscal years of $4.9 million for the year ended December 31, 2014, compared with favorable development of $3.0 million for the year ended December 31, 2013.
The favorable loss development for the year ended December 31, 2014 was primarily related to bodily injury claims occurring in accident years 2010 through 2013. 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.
Excluding the development related to prior fiscal years, the loss ratios for the years ended December 31, 2014 and 2013 were 76.1 percent and 73.0 percent, respectively. The year-over-year increase in the loss ratio was primarily due to an increase in claims frequency across multiple coverages.
Expense Ratio. The expense ratio was 20.8 percent for the three months ended December 31, 2014, compared with 25.0 percent for the three months ended December 31, 2013. The expense ratio was 22.7 percent for the year ended December 31, 2014, compared with 24.9 percent for the year ended December 31, 2013. 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).
1
Combined Ratio. The combined ratio was 95.3 percent for the three months ended December 31, 2014, compared with 95.0 percent for the three months ended December 31, 2013. The combined ratio was 96.6 percent for the year ended December 31, 2014, compared with 96.4 percent for year ended December 31, 2013.
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 instance, these individuals are seeking to obtain the minimum amount of automobile insurance required by law.
At March 10, 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.
2
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share data)
|
|
|
Three Months Ended |
|
|
Year Ended |
|
||||||||||
|
|
|
December 31, |
|
|
December 31, |
|
||||||||||
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
||||
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums earned |
|
$ |
56,344 |
|
|
$ |
48,712 |
|
|
$ |
218,315 |
|
|
$ |
199,700 |
|
|
Commission and fee income |
|
|
10,410 |
|
|
|
8,734 |
|
|
|
39,733 |
|
|
|
35,125 |
|
|
Investment income |
|
|
1,187 |
|
|
|
1,699 |
|
|
|
5,123 |
|
|
|
5,716 |
|
|
Net realized gains (losses) on investments, available-for-sale (includes $(13), $7, $23 and $(29), respectively, of accumulated other comprehensive income reclassification for unrealized gains (losses)) |
|
|
(13 |
) |
|
|
7 |
|
|
|
23 |
|
|
|
(29 |
) |
|
|
|
|
67,928 |
|
|
|
59,152 |
|
|
|
263,194 |
|
|
|
240,512 |
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
|
41,979 |
|
|
|
34,115 |
|
|
|
161,302 |
|
|
|
142,839 |
|
|
Insurance operating expenses |
|
|
21,670 |
|
|
|
20,428 |
|
|
|
87,515 |
|
|
|
82,822 |
|
|
Other operating expenses |
|
|
274 |
|
|
|
300 |
|
|
|
996 |
|
|
|
987 |
|
|
Stock-based compensation |
|
|
34 |
|
|
|
49 |
|
|
|
185 |
|
|
|
243 |
|
|
Depreciation and amortization |
|
|
464 |
|
|
|
460 |
|
|
|
1,767 |
|
|
|
2,053 |
|
|
Interest expense |
|
|
431 |
|
|
|
437 |
|
|
|
1,706 |
|
|
|
1,738 |
|
|
|
|
|
64,852 |
|
|
|
55,789 |
|
|
|
253,471 |
|
|
|
230,682 |
|
|
Income before income taxes |
|
|
3,076 |
|
|
|
3,363 |
|
|
|
9,723 |
|
|
|
9,830 |
|
|
Provision (benefit) for income taxes (includes $(5), $2, $8 and $(10), respectively, of income tax expense from reclassifications items) |
|
|
(18,892 |
) |
|
|
205 |
|
|
|
(18,345 |
) |
|
|
650 |
|
|
Net income |
|
$ |
21,968 |
|
|
$ |
3,158 |
|
|
$ |
28,068 |
|
|
$ |
9,180 |
|
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.54 |
|
|
$ |
0.07 |
|
|
$ |
0.68 |
|
|
$ |
0.22 |
|
|
Diluted |
|
$ |
0.53 |
|
|
$ |
0.07 |
|
|
$ |
0.68 |
|
|
$ |
0.22 |
|
|
Number of shares used to calculate net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
40,997 |
|
|
|
40,946 |
|
|
|
40,985 |
|
|
|
40,930 |
|
|
Diluted |
|
|
41,294 |
|
|
|
41,161 |
|
|
|
41,283 |
|
|
|
41,092 |
|
3
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
|
|
|
December 31, |
|
|||||
|
|
|
2014 |
|
|
2013 |
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
|
Investments, available-for-sale at fair value (amortized cost of $119,119 and $126,873, respectively) |
|
$ |
125,085 |
|
|
$ |
130,248 |
|
|
Cash and cash equivalents |
|
|
102,429 |
|
|
|
72,033 |
|
|
Premiums and fees receivable, net of allowance of $392 and $311 |
|
|
56,344 |
|
|
|
46,228 |
|
|
Deferred tax asset, net |
|
|
16,521 |
|
|
|
— |
|
|
Other Investments |
|
|
10,530 |
|
|
|
7,513 |
|
|
Other assets |
|
|
6,234 |
|
|
|
6,471 |
|
|
Property and equipment, net |
|
|
3,173 |
|
|
|
3,512 |
|
|
Deferred acquisition costs |
|
|
3,459 |
|
|
|
2,902 |
|
|
Identifiable intangible assets |
|
|
4,800 |
|
|
|
4,800 |
|
|
TOTAL ASSETS |
|
$ |
328,575 |
|
|
$ |
273,707 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense reserves |
|
$ |
96,613 |
|
|
$ |
84,286 |
|
|
Unearned premiums and fees |
|
|
67,942 |
|
|
|
55,983 |
|
|
Debentures payable |
|
|
40,341 |
|
|
|
40,301 |
|
|
Other liabilities |
|
|
16,715 |
|
|
|
16,205 |
|
|
Total liabilities |
|
|
221,611 |
|
|
|
196,775 |
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, 10,000 shares authorized |
|
|
— |
|
|
|
— |
|
|
Common stock, $.01 par value, 75,000 shares authorized; 41,016 and 40,983 shares issued and outstanding, respectively |
|
|
410 |
|
|
|
410 |
|
|
Additional paid-in capital |
|
|
457,242 |
|
|
|
456,993 |
|
|
Accumulated other comprehensive income, net of tax $923 and $0, respectively |
|
|
5,090 |
|
|
|
3,375 |
|
|
Accumulated deficit |
|
|
(355,778 |
) |
|
|
(383,846 |
) |
|
Total stockholders’ equity |
|
|
106,964 |
|
|
|
76,932 |
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
328,575 |
|
|
$ |
273,707 |
|
4
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
(Unaudited)
PREMIUMS EARNED BY STATE
|
|
|
Three Months Ended |
|
|
Year Ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
|||||||||||
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
||||
|
Premiums earned: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia |
|
$ |
10,606 |
|
|
$ |
9,098 |
|
|
$ |
40,792 |
|
|
$ |
37,957 |
|
|
Florida |
|
|
8,537 |
|
|
|
7,356 |
|
|
|
33,519 |
|
|
|
30,517 |
|
|
Texas |
|
|
7,381 |
|
|
|
5,986 |
|
|
|
28,017 |
|
|
|
24,051 |
|
|
Ohio |
|
|
5,805 |
|
|
|
4,662 |
|
|
|
22,315 |
|
|
|
18,225 |
|
|
Alabama |
|
|
5,423 |
|
|
|
5,161 |
|
|
|
21,717 |
|
|
|
20,978 |
|
|
Illinois |
|
|
5,527 |
|
|
|
4,635 |
|
|
|
20,552 |
|
|
|
20,200 |
|
|
South Carolina |
|
|
4,123 |
|
|
|
3,767 |
|
|
|
16,407 |
|
|
|
15,301 |
|
|
Tennessee |
|
|
3,222 |
|
|
|
3,018 |
|
|
|
12,748 |
|
|
|
12,334 |
|
|
Pennsylvania |
|
|
2,161 |
|
|
|
2,114 |
|
|
|
8,426 |
|
|
|
8,624 |
|
|
Indiana |
|
|
1,619 |
|
|
|
1,325 |
|
|
|
6,155 |
|
|
|
5,218 |
|
|
Missouri |
|
|
1,265 |
|
|
|
956 |
|
|
|
4,902 |
|
|
|
3,778 |
|
|
Mississippi |
|
|
745 |
|
|
|
689 |
|
|
|
3,030 |
|
|
|
2,718 |
|
|
Total gross premiums earned |
|
|
56,414 |
|
|
|
48,767 |
|
|
|
218,580 |
|
|
|
199,901 |
|
|
Premiums ceded to reinsurer |
|
|
(70 |
) |
|
|
(55 |
) |
|
|
(265 |
) |
|
|
(201 |
) |
|
Total net premiums earned |
|
$ |
56,344 |
|
|
$ |
48,712 |
|
|
$ |
218,315 |
|
|
$ |
199,700 |
|
COMBINED RATIOS (INSURANCE OPERATIONS)
|
|
|
Three Months Ended |
|
|
Year Ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
|||||||||||
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
||||
|
Loss |
|
|
74.5 |
% |
|
|
70.0 |
% |
|
|
73.9 |
% |
|
|
71.5 |
% |
|
Expense |
|
|
20.8 |
% |
|
|
25.0 |
% |
|
|
22.7 |
% |
|
|
24.9 |
% |
|
Combined |
|
|
95.3 |
% |
|
|
95.0 |
% |
|
|
96.6 |
% |
|
|
96.4 |
% |
POLICIES IN FORCE
|
|
|
Three Months Ended |
|
|
Year Ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
|||||||||||
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
||||
|
Policies in force – beginning of period |
|
|
161,330 |
|
|
|
147,855 |
|
|
|
143,077 |
|
|
|
145,938 |
|
|
Net change during period |
|
|
2,382 |
|
|
|
(4,778 |
) |
|
|
20,635 |
|
|
|
(2,861 |
) |
|
Policies in force – end of period |
|
|
163,712 |
|
|
|
143,077 |
|
|
|
163,712 |
|
|
|
143,077 |
|
5
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 |
|
|
Year Ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
|||||||||||
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
||||
|
Retail locations – beginning of period |
|
|
353 |
|
|
|
363 |
|
|
|
360 |
|
|
|
369 |
|
|
Opened |
|
|
3 |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
Closed |
|
|
— |
|
|
|
(3 |
) |
|
|
(8 |
) |
|
|
(9 |
) |
|
Retail locations – end of period |
|
|
356 |
|
|
|
360 |
|
|
|
356 |
|
|
|
360 |
|
RETAIL LOCATIONS BY STATE
|
|
|
December 31, |
|
|
September 30, |
|
||||||||||||||
|
|
|
2014 |
|
|
2013 |
|
|
2012 |
|
|
2014 |
|
|
2013 |
|
|||||
|
Alabama |
|
|
24 |
|
|
|
24 |
|
|
|
24 |
|
|
|
24 |
|
|
|
24 |
|
|
Florida |
|
|
31 |
|
|
|
30 |
|
|
|
30 |
|
|
|
31 |
|
|
|
30 |
|
|
Georgia |
|
|
60 |
|
|
|
60 |
|
|
|
60 |
|
|
|
60 |
|
|
|
60 |
|
|
Illinois |
|
|
60 |
|
|
|
61 |
|
|
|
63 |
|
|
|
60 |
|
|
|
62 |
|
|
Indiana |
|
|
17 |
|
|
|
17 |
|
|
|
17 |
|
|
|
17 |
|
|
|
17 |
|
|
Mississippi |
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
Missouri |
|
|
10 |
|
|
|
11 |
|
|
|
11 |
|
|
|
10 |
|
|
|
11 |
|
|
Ohio |
|
|
27 |
|
|
|
27 |
|
|
|
27 |
|
|
|
27 |
|
|
|
27 |
|
|
Pennsylvania |
|
|
15 |
|
|
|
16 |
|
|
|
16 |
|
|
|
15 |
|
|
|
16 |
|
|
South Carolina |
|
|
25 |
|
|
|
25 |
|
|
|
26 |
|
|
|
25 |
|
|
|
26 |
|
|
Tennessee |
|
|
22 |
|
|
|
19 |
|
|
|
19 |
|
|
|
19 |
|
|
|
19 |
|
|
Texas |
|
|
58 |
|
|
|
63 |
|
|
|
69 |
|
|
|
58 |
|
|
|
64 |
|
|
Total |
|
|
356 |
|
|
|
360 |
|
|
|
369 |
|
|
|
353 |
|
|
|
363 |
|
SOURCE: First Acceptance Corporation
INVESTOR RELATIONS CONTACT:
Michael J. Bodayle
615.844.2885
6