AssuranceAmerica Corporation Announces Record 2006 Results

ATLANTA--Atlanta-based ASSURANCEAMERICA CORPORATION (OTCBB:ASAM), today announced its unaudited financial results for December 2006 and the twelve months ended December 31, 2006.

Revenues for the month of December 2006 increased 2% to $4.0 million, compared to $3.9 million for the same month of 2005. Revenues for the twelve months of 2006 increased 44% to $53.7 million, compared with $37.2 million for the same period of 2005.

Pretax earnings increased 27% for the month of December 2006 to $51,000, compared to $40,000 in December 2005. Current year pretax earnings for the December period include a charge of $122,000 for stock option expense which, by comparison with the prior year, was not recorded. The Company increased pretax earnings 16% for the twelve month period ended December 31, 2006 to $2.7 million, compared with $2.3 million in the same period last year. Current year pretax earnings include a charge of $429,000 for stock option expense which, by comparison with the prior year, was not recorded.

Net income for the month of December increased to $2.6 million, compared with $40,000 in the same period of 2005. In addition to the stock option charges noted above, December 2006 net income includes a tax benefit recorded in the amount of $2.6 million. Net income for the twelve months ended December 31, 2006 increased 103% to $4.7 million, compared with $2.3 million for the same period of 2005. In addition to the full-year stock option charges noted above, net income for the 2006 period includes a tax benefit recorded in the amount of $2.0 million. Net income in 2005 reflected no provision or benefit for income taxes as the Company was able to fully utilize net operating tax loss carry forwards.

Gross Premiums Produced (a non-GAAP financial measure), which includes gross written premium in the Carrier/MGA's underwriting operations plus premiums for policies sold in the retail Agency subsidiary, decreased 7% from $10.2 million in December 2005 to $9.5 million in December 2006. Gross Premiums Produced increased 31% from $111.6 million for the twelve months ended December 31, 2005 to $146.7 million for the same period of 2006. Gross Premiums Produced is used by management as the primary measure of the underlying growth of the Company's revenue streams from period to period.

In announcing December's and full year results, Lawrence (Bud) Stumbaugh, President and CEO of AssuranceAmerica Corporation said, “It was an accomplishment to increase revenues 44% in 2006 over 2005 especially in a year where we took action to improve our underwriting results in our carrier by either increasing our rates or making program enhancements in virtually every state where we write policies. Finding the optimal mix of revenue growth and profitability in the insurance environment is always a delicate balance and we believe we struck the right balance in 2006. As reflected by industry trends and the actions we took to improve our underwriting results, our rate of growth in our Carrier/MGA moderated in the second half of 2006. We believe that the trend has already begun to reverse itself in the first quarter of 2007. Our 2006 16% pretax earnings increase over 2005, or 35% increase before 2006 stock option expense charges, was also quite an accomplishment. We thank our associates, our agents, and our insureds and customers for their continued commitment to the success of our company.

“Although 2007 will present its share of challenges, I and each of our associates are looking forward to another year of accomplishments and success.”

We are pleased to enclose excerpts of our audited financial results. A copy of the Company’s 2006 Form 10-KSB, which includes the Company’s audited financial statements, are available for viewing, free of charge, at the SEC website at www.sec.gov. A copy of the Company’s 2006 Annual Report to Shareholders and a printed copy of the Annual Report of Form 10-KSB will be mailed to all shareholders.

AssuranceAmerica focuses on the non-standard automobile insurance marketplace, primarily in Alabama, Florida, Georgia, Louisiana, South Carolina, and Texas. Its principal operating subsidiaries are TrustWay Insurance Agencies, LLC ("Agency"), which sells personal automobile insurance policies through its 47 retail agencies, AssuranceAmerica Managing General Agency, LLC ("MGA"), and AssuranceAmerica Insurance Company ("Carrier").

This press release includes statements that may constitute "forward-looking" statements. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements, as discussed in the Company's filings with the U.S. Securities Exchange Commission (SEC). Historical results are not indicative of future performance.

ASSURANCEAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
	December 31, 2006		December 31, 2005
Assets
Cash and cash equivalents	$ 8,185,539		$ 8,668,827
Short term investments	619,843		120,000
Long term investments	10,446,830		8,419,835
Marketable equity securities	2,055,983		—
Other securities	155,000		155,000
Investment income due and accrued	117,363		81,150
Receivable from insureds	18,707,773		13,821,477
Reinsurance recoverable (including $5,130,845 and $4,213,187 on paid losses)	22,563,990		14,790,099
Prepaid reinsurance premiums	14,012,481		11,211,270
Deferred acquisition costs	800,125		798,539
Property and equipment (net of accumulated depreciation of $2,136,512 and $1,606,200)	2,481,660		1,400,667
Other receivables	585,999		1,674,184
Prepaid expenses	273,733		161,415
Intangibles (net of accumulated amortization of $1,824,334 and $1,398,244)	11,114,882		7,359,850
Security deposits	74,140		75,072
Prepaid income tax	668,677		—
Deferred tax assets	2,506,503		—
Other assets	374,365		378,758
Total assets	$ 95,744,886		$ 69,116,143
Liabilities and stockholders’ equity
Accounts payable and accrued expenses	$ 5,039,900		$ 4,802,223
Unearned premium	20,614,781		16,574,473
Unpaid losses and loss adjustment expenses	24,904,492		15,109,874
Reinsurance payable	16,744,406		10,238,081
Provisional commission reserve	2,319,540		1,704,379
Debt, related party	5,797,122		5,568,535
Junior subordinated debentures payable	4,961,852		4,955,185
Capital lease obligations	265,670		220,155
Total liabilities	80,647,763		59,172,905
Commitments and contingencies
Stockholders’ equity
Common stock, .01 par value (authorized 120,000,000 and 80,000,000, outstanding 56,072,971 and 51,167,321)	560,730		511,673
Preferred stock, .01 par value (authorized 5,000,000, outstanding 840,000 and 1,266,000; liquidation preference $4,200,000 and $6,330,000)	8,400		12,660
Surplus-paid in	16,426,292		15,678,015
Accumulated deficit	(1,948,711)		(6,259,110)
Accumulated other comprehensive income:
Net unrealized appreciation on investment securities, net of taxes	50,412		—
Total stockholders’ equity	15,097,123		9,943,238
Total liabilities and stockholders’ equity	$ 95,744,886		$ 69,116,143

ASSURANCEAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31,		2006		2005
Revenue:
Gross premiums written		$ 69,108,965		$ 50,519,371
Ceded premiums written		(47,016,892)		(34,300,556)
Net premiums written		22,092,073		16,218,815
Increase in unearned premiums, net of prepaid reinsurance premiums		(1,239,097)		(2,821,844)
Net premiums earned		20,852,976		13,396,971
Commission income		22,232,993		16,844,593
Managing general agent fees		9,249,488		5,881,026
Net investment income		727,969		253,765
Net investment gains on securities		24,445		—
Other fee income		634,971		739,129
Total revenue		53,722,842		37,115,484
Expenses:
Losses and loss adjustment expenses		15,318,922		9,255,625
Selling, general, and administrative		33,091,167		24,347,233
Stock option expense		429,351		—
Depreciation and amortization expense		1,030,165		612,160
Interest expense		1,141,368		570,873
Total operating expenses		51,010,973		34,785,891
Income before provision for income tax expense		2,711,869		2,329,593
Income tax provision (benefit)		(2,019,730)		—
Net income		4,731,599		2,329,593
Dividends on preferred stock		421,200		506,400
Net income attributable to common stockholders		$ 4,310,399		$ 1,823,193
Earnings per common share
Basic		0.080		0.036
Diluted		0.075		0.036
Weighted average shares outstanding-basic		53,609,956		50,247,505
Weighted average shares outstanding-diluted		63,480,814		64,038,643

ASSURANCEAMERICA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2006 and 2005
	2006		2005
Cash flows from operating activities:
Net income	$ 4,731,599		$ 2,329,593
Adjustments to reconcile net income to net cash provided by operating activities, net of effect of agency acquisitions:
Depreciation and amortization	1,036,832		612,345
Stock-based compensation	429,351		—
Loss on disposal of property and equipment	18,602		47,453
Deferred tax assets	(2,183,791)		—
Changes in assets and liabilities, net of effect of agency acquisitions:
Receivables	(3,367,517)		(10,048,361)
Prepaid expenses and other assets	(77,439)		(473,827)
Unearned premiums	4,040,308		8,741,284
Unpaid loss and loss adjustment expenses	9,794,618		4,454,249
Ceded reinsurance payable	6,506,325		5,301,148
Reinsurance recoverable	(7,773,891)		(4,246,324)
Prepaid reinsurance premiums	(2,801,211)		(5,919,440)
Accounts payable and accrued expenses	(2,424,942)		1,897,584
Prepaid income taxes	(668,677)		—
Deferred acquisition costs	(1,586)		(573,697)
Provisional commission reserve	615,161		643,496
Net cash provided by operating activities, net of effect of agency acquisitions	7,873,742		2,765,503
Cash flows from investing activities, net of effect of agency acquisitions:
Purchases of property and equipment, net	(1,490,247)		(675,261)
Purchase of investments and accrued investment income	(4,538,375)		(7,775,443)
Cash paid for acquisition of agencies, net of cash acquired	(361,700)		—
Net cash used by investing activities, net of effect of agency acquisitions	(6,390,322)		(8,450,704)
Cash flows from financing activities, net of effect of agency acquisitions:
Repayments of notes payable	(1,954,746)		(1,807,744)
Proceeds from debentures issuance, net	—		4,955,000
Preferred dividends paid	(421,200)		(506,400)
Proceeds from capital lease obligations	108,739		—
Repayments of capital lease obligations	(63,224)		(45,390)
Stock issued	363,723		4,699,374
Net cash provided by financing activities, net of effect of agency acquisitions	(1,966,708)		7,294,840
Net (decrease) increase in cash and cash equivalents	(483,288)		1,609,639
Cash and cash equivalents, beginning of period	8,668,827		7,059,188
Cash and cash equivalents, end of period	$ 8,185,539		$ 8,668,827