First Acceptance Corporation Reports Second Quarter Financial Results
NASHVILLE, Tenn.--Feb. 9, 2006--First Acceptance Corporation today reported its financial results for the second quarter ended December 31, 2005 of its fiscal year ending June 30, 2006.Net income for the three months ended December 31, 2005 was $3.8 million, or $0.08 per share on a fully-diluted basis, compared to $4.7 million, or $0.10 per share on a fully-diluted basis, for the same period of fiscal 2005. Total revenues for the three months ended December 31, 2005 increased 31% from $40.7 million to $53.5 million, over the same period last year.
Net income for the six months ended December 31, 2005 was $7.5 million, or $0.15 per share on a fully-diluted basis, compared to $8.6 million, or $0.18 per share on a fully-diluted basis, for the same period of fiscal 2005. Total revenues for the six months ended December 31, 2005 increased 45% from $71.6 million to $103.7 million, over the same period last year.
Total weighted average diluted shares for both periods increased from 48.5 million to 49.5 million over the same periods of fiscal 2005 due to the issuance of 750,000 contingent shares pursuant to the USAuto acquisition and from the increase in the dilutive effect of stock options when applying the Treasury Stock method.
Net income for the three and six months ended both December 31, 2005 and 2004 included gains on sales of foreclosed real estate held for sale of $0.01 per share on a fully-diluted basis.
Insurance Operations
-- Key ratios - The Company's loss ratio for the three months ended December 31, 2005 was 67.9%, compared with 65.4% for the same period last year and 66.6% for the quarter ended September 30, 2005. The Company's expense ratio for the three months ended December 31, 2005 was 22.0%, compared with 14.2% for the same period last year and 20.6% for the quarter ended September 30, 2005. As a result, the Company's combined ratio for the three months ended December 31, 2005 was 89.9%, compared with 79.6% for the same period last year and 87.2% for the quarter ended September 30, 2005. The expense ratio for the three months ended December 31, 2005 increased primarily as a result of costs incurred in opening, operating and developing new retail locations.
-- Office Expansion - During the three months ended December 31, 2005, the Company added 25 additional offices, compared to 24 offices added during the three months ended December 31, 2004 and 39 offices added during the three months ended September 30, 2005. The total number of stores increased from 178 as of December 31, 2004 and 348 as of September 30, 2005 to 373 as of December 31, 2005. The Company now leases offices in 12 states, including offices in South Carolina, where the Company commenced operations in October 2005.
-- Premium growth - Total gross premiums earned (before the effects of reinsurance) increased 29% to $44.8 million for the three months ended December 31, 2005 from $34.7 million for the same period last year. The number of insured policies in force serviced by the Company at December 31, 2005 increased 41% over the number of policies in force at December 31, 2004. Net premiums earned increased 44% over this same period as a result of the increase in gross premiums earned, and the increase in the assumed reinsurance percentage for business written in Alabama from 50% to 100% on February 1, 2005.
Real Estate Operations
The Company recognized a pre-tax gain of $0.8 million on the sale of foreclosed real estate held for sale during both the three months ended December 31, 2005 and 2004.
Recent Developments
As reported on January 13, 2006, the Company acquired and is now operating and developing 73 retail stores in the Chicago, Illinois area. In addition, on February 9, 2006, the Company sold three parcels of foreclosed real estate held for sale for net proceeds of $3.6 million that resulted in a pre-tax gain of $2.8 million. After giving effect to this sale, the Company has two parcels of land remaining to be sold in the San Antonio, Texas area, which have a book value of $87,000.
About First Acceptance Corporation
First Acceptance Corporation provides non-standard private passenger automobile insurance, primarily through employee-agents. As of February 1, 2006, the Company leased 457 retail offices in 12 states, including 73 stores acquired in the Chicago, Illinois area on January 12, 2006. The Company's insurance company subsidiaries are licensed to do business in 24 states.
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 in the Company's Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission. Actual operations and results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
($000s EXCEPT PER SHARE DATA)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
Premiums earned $ 44,816 $ 31,071 $ 87,570 $ 52,756
Commissions and fees 6,624 6,321 13,029 12,993
Ceding commissions from
reinsurer -- 1,666 -- 3,603
Gains on sales of foreclosed
real estate 821 755 821 755
Investment income 1,216 741 2,315 1,350
Gains on sale of property and
equipment 4 171 4 171
-------- -------- -------- --------
Total revenues 53,481 40,725 103,739 71,628
-------- -------- -------- --------
Expenses:
Losses and loss adjustment
expenses 30,438 20,317 58,929 33,747
Insurance operating expenses 16,505 11,533 31,728 21,939
Other operating expenses 609 899 1,222 1,267
Stock-based compensation 262 91 346 152
Depreciation 201 298 379 587
Amortization of identifiable
intangible assets 18 190 54 570
Interest expense -- 69 -- 139
-------- -------- -------- --------
Total expenses 48,033 33,397 92,658 58,401
-------- -------- -------- --------
Income before income taxes 5,448 7,328 11,081 13,227
Income tax expense 1,648 2,641 3,568 4,676
-------- -------- -------- --------
Net income $ 3,800 $ 4,687 $ 7,513 $ 8,551
======== ======== ======== ========
Basic net income per share $ 0.08 $ 0.10 $ 0.16 $ 0.18
======== ======== ======== ========
Diluted net income per share $ 0.08 $ 0.10 $ 0.15 $ 0.18
======== ======== ======== ========
Weighted average basic shares 47,457 46,686 47,456 46,672
======== ======== ======== ========
Weighted average diluted
shares 49,490 48,519 49,489 48,514
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FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations - By Business Segment
($000s EXCEPT PER SHARE DATA)
(Unaudited)
INSURANCE OPERATIONS
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
Premiums earned $ 44,816 $ 31,071 $ 87,570 $ 52,756
Commissions and fees 6,624 6,321 13,029 12,993
Ceding commissions from
reinsurer -- 1,666 -- 3,603
Investment income 1,104 500 1,991 855
Other gains 4 171 4 171
-------- -------- -------- --------
Total revenues 52,548 39,729 102,594 70,378
-------- -------- -------- --------
Expenses:
Losses and loss adjustment
expenses 30,438 20,317 58,929 33,747
Operating expenses 16,505 11,533 31,728 21,939
Depreciation and amortization 219 488 433 1,157
-------- -------- -------- --------
Total expenses 47,162 32,338 91,090 56,843
-------- -------- -------- --------
Income before income taxes $ 5,386 $ 7,391 $ 11,504 $ 13,535
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REAL ESTATE AND CORPORATE (1)
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenues:
Gains on sales of foreclosed
real estate $ 821 $ 755 $ 821 $ 755
Investment income 112 241 324 495
-------- -------- -------- --------
Total revenues 933 996 1,145 1,250
-------- -------- -------- --------
Expenses:
Operating expenses 609 899 1,222 1,267
Stock-based compensation 262 91 346 152
Interest expense -- 69 -- 139
-------- -------- -------- --------
Total expenses 871 1,059 1,568 1,558
-------- -------- -------- --------
Income (loss) before income
taxes $ 62 $ (63) $ (423) $ (308)
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(1) Includes activities related to disposing of foreclosed real estate
held for sale, interest expense associated with debt, and general
corporate overhead.
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
($000s EXCEPT PER SHARE DATA)
(Unaudited)
December 31, June 30,
2005 2005
------------ ------------
ASSETS
Fixed maturities, available-for-sale, at
market value $ 101,720 $ 74,840
Investment in mutual fund, at market value 11,239 10,920
Cash and cash equivalents 15,533 24,762
Premiums and fees receivable 45,666 42,908
Reinsurance recoverables 3,108 4,490
Deferred tax asset 44,795 48,106
Other assets 12,432 11,031
Foreclosed real estate held for sale 885 961
Goodwill and identifiable intangible
assets 112,650 112,704
------------ ------------
TOTAL $ 348,028 $ 330,722
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Total policy liabilities 103,127 90,649
Other liabilities 9,885 11,744
------------ ------------
Total liabilities 113,012 102,393
Total stockholders' equity 235,016 228,329
------------ ------------
TOTAL $ 348,028 $ 330,722
============ ============
Book value per share $ 4.95 $ 4.81
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data
($000s EXCEPT PER SHARE DATA)
(Unaudited)
GROSS PREMIUMS EARNED BY STATE
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ------------------
2005 2004 2005 2004
-------- -------- -------- --------
Gross premiums earned:
Georgia $ 16,756 $ 17,316 $ 34,072 $ 34,221
Alabama 7,001 6,278 13,931 12,587
Tennessee 5,880 6,406 12,211 12,807
Florida 4,624 1 7,213 1
Ohio 3,271 2,417 6,571 4,434
Texas 2,843 -- 5,302 --
Indiana 1,367 335 2,528 468
Mississippi 1,267 1,013 2,478 1,974
Missouri 1,223 940 2,457 1,830
Pennsylvania 318 -- 443 --
Illinois 256 10 378 10
South Carolina 34 -- 34 --
-------- -------- -------- --------
Total gross premiums earned 44,840 34,716 87,618 68,332
Premiums ceded (24) (39) (48) (8,379)
Premiums not assumed -- (3,606) -- (7,197)
-------- -------- -------- --------
Total net premiums earned $ 44,816 $ 31,071 $ 87,570 $ 52,756
======== ======== ======== ========
GAAP COMBINED RATIOS (INSURANCE COMPANIES)
Three Months Ended Six Months Ended
December 31, December 31,
------------------- ------------------
2005 2004 2005 2004
--------- --------- --------- --------
Loss and loss adjustment
expense 67.9% 65.4% 67.3% 64.0%
Expense (1) 22.0% 14.2% 21.4% 14.0%
--------- --------- --------- --------
Combined ratio 89.9% 79.6% 88.7% 78.0%
========= ========= ========= ========
(1) Insurance operating expenses are reduced by fee income from
insureds and ceding commissions received from our quota-share
reinsurer as compensation for the costs incurred in servicing the
business on their behalf.
POLICIES IN FORCE
Three Months Ended Six Months Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Policies in force - beginning
of period 125,799 92,885 119,422 91,385
Net increase during period 7,062 1,388 13,439 2,888
--------- --------- --------- ---------
Policies in force - end of
period 132,861 94,273 132,861 94,273
========= ========= ========= =========
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
Supplemental Data (continued)
(Unaudited)
NUMBER OF RETAIL LOCATIONS
Three Months Ended Six Months Ended
December 31 December 31
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Retail locations - beginning
of period 348 154 309 138
Opened 25 24 65 40
Closed -- -- (1) --
--------- --------- --------- ---------
Retail locations - end of
period 373 178 373 178
========= ========= ========= =========
RETAIL LOCATIONS BY STATE
Change in
Locations During
the Three Months
As of As of Ended
December 31, September 30, December 31,
----------------- ----------------- -----------------
2005 2004 2005 2004 2005 2004
-------- -------- -------- -------- -------- --------
Alabama 25 23 25 23 -- --
Florida 37 7 36 1 1 6
Georgia 63 61 63 57 -- 4
Illinois 15 1 15 -- -- 1
Indiana 27 15 25 8 2 7
Mississippi 8 9 8 8 -- 1
Missouri 21 14 21 11 -- 3
Ohio 30 29 30 28 -- 1
Pennsylvania 21 -- 17 -- 4 --
South Carolina 10 -- -- -- 10 --
Tennessee 20 19 20 18 -- 1
Texas 96 -- 88 -- 8 --
-------- -------- -------- -------- -------- --------
Total 373 178 348 154 25 24
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Change in
Locations During
the Six Months
As of As of Ended
December 31, June 30, December 31,
----------------- ----------------- -----------------
2005 2004 2005 2004 2005 2004
-------- -------- -------- -------- -------- --------
Alabama 25 23 25 21 -- 2
Florida 37 7 24 -- 13 7
Georgia 63 61 63 55 -- 6
Illinois 15 1 12 -- 3 1
Indiana 27 15 22 4 5 11
Mississippi 8 9 9 6 (1) 3
Missouri 21 14 18 11 3 3
Ohio 30 29 30 25 -- 4
Pennsylvania 21 -- 14 -- 7 --
South Carolina 10 -- -- -- 10 --
Tennessee 20 19 20 16 -- 3
Texas 96 -- 72 -- 24 --
-------- -------- -------- -------- -------- --------
Total 373 178 309 138 64 40
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