First Acceptance Corporation Reports Operating Results for the Quarter Ended September 30, 2007

NASHVILLE, Tenn.--First Acceptance Corporation today reported its financial results for the first quarter ended September 30, 2007 of its fiscal year ending June 30, 2008.

Operating Results

Revenues for the three months ended September 30, 2007 were $87.2 million compared with $79.1 million for the same period of fiscal 2007. Net income for the three months ended September 30, 2007 was $1.9 million, or $0.04 per share on a diluted basis, compared with net income of $1.5 million, or $0.03 per share on a diluted basis, for the same period in fiscal 2007.

Premiums earned increased by $6.9 million, or 10%, to $74.8 million for the three months ended September 30, 2007, from $67.9 million for the three months ended September 30, 2006. The increase was primarily due to (1) the premium growth experienced in South Carolina and Texas, where we opened 87 locations in fiscal year 2006, and Chicago, where we acquired 72 locations in January 2006 and (2) an increase in our average premium per policy as a result of recent rate increases. Premiums earned in Georgia and Tennessee were down $1.5 million, or 7%, over the prior year due to softening economic conditions. At September 30, 2007, we operated 458 retail locations (or “stores”) compared with 466 stores at September 30, 2006. Our total number of insured policies in force at September 30, 2007 decreased 2% to 212,511 from 217,308 at September 30, 2006 primarily due to the factors noted above regarding Georgia and Tennessee.

Loss and Loss Adjustment Expense Ratio. The loss and loss adjustment expense ratio was 77.1% for the three months ended September 30, 2007 and 77.2% for the three months ended September 30, 2006. For the three months ended September 30, 2007, we did not experience any significant adverse development for prior accident periods. The three months ended September 30, 2006 included approximately $3.7 million (5.5% of the ratio) of adverse development related primarily to the estimation of the severity of losses in Florida and Texas, where we had significant growth during 2006, and Georgia, where we reduced our physical damage premium rates effective January 2006.

Effective October 1, 2007, we began using new rates for Bodily Injury, Medical Payments, and Uninsured Motorists Coverage in Florida, in conjunction with the change in coverage resulting from the expiration of Personal Injury Protection (“PIP”). The state of Florida has reinstated PIP effective January 1, 2008, at which time we anticipate using new higher rates for most of our coverages.

Expense Ratio. Our expense ratio for the three months ended September 30, 2007 was 19.6%, an increase from 19.2% for the same period in fiscal 2007. This increase was primarily due to the positive impact on the prior year expense ratio from the transaction service fee of $0.6 million, or 0.8%, received during 2006 in connection with servicing the run-off business acquired in our Chicago agency acquisition.

Our combined ratio of 96.7% for the three months ended September 30, 2007 increased slightly from 96.4% for the three months ended September 30, 2006 primarily as a result of the higher expense ratio.

About First Acceptance Corporation

First Acceptance Corporation provides non-standard private passenger automobile insurance, primarily through employee-agents. At September 30, 2007, we leased and operated 458 retail offices in 12 states. Our insurance company subsidiaries are licensed to do business in 25 states. Additional information about First Acceptance Corporation can be found online at www.firstacceptancecorp.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 the Company’s Annual Report on Form 10-K 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. 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
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
		Three Months Ended September 30,
			2007			2006
Revenues:
Premiums earned		$	74,803		$	67,877
Fee income			9,298			8,756
Investment income			3,027			1,947
Other			30			522
			87,158			79,102
Costs and expenses:
Losses and loss adjustment expenses			57,671			52,420
Insurance operating expenses			23,986			22,329
Other operating expenses			505			1,108
Stock-based compensation			324			104
Depreciation and amortization			368			393
Interest expense			1,341			412
			84,195			76,766
Income before income taxes			2,963			2,336
Provision for income taxes			1,071			843
Net income		$	1,892		$	1,493
Net income per share:
Basic and diluted		$	0.04		$	0.03
Number of shares used to calculate net income per share:
Basic			47,615			47,545
Diluted			49,536			49,663

FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands, except per share data) (Unaudited)
	September 30,			June 30,
		2007			2007
ASSETS
Fixed maturities, available-for-sale, at market value	$	182,225		$	176,555
Cash and cash equivalents		45,842			34,161
Premiums and fees receivable, net		70,538			71,771
Receivable for securities		--			19,973
Deferred tax asset		30,012			30,936
Other assets		15,171			15,838
Deferred acquisition costs		5,401			5,166
Goodwill and identifiable intangible assets		144,480			144,492
TOTAL	$	493,669		$	498,892
LIABILITIES AND STOCKHOLDERS' EQUITY
Loss and loss adjustment expense reserves		93,922			91,446
Unearned premiums and fees		85,576			88,831
Notes payable and capitalized lease obligations		17,048			23,490
Debentures payable		41,240			41,240
Other liabilities		12,331			14,401
Total liabilities		250,117			259,408
Total stockholders' equity		243,552			239,484
TOTAL	$	493,669		$	498,892
Book value per share	$	5.12		$	5.03

FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES Supplemental Data (Unaudited)
PREMIUMS EARNED BY STATE
		Three Months Ended September 30,
			2007			2006		Change
		(in thousands)
Premiums earned:
Georgia		$	16,103		$	17,190		$	(1,087	)
Florida			12,361			12,229			132
Texas			8,526			7,117			1,409
Illinois			8,169			6,637			1,532
Alabama			7,504			7,289			215
South Carolina			5,640			1,822			3,818
Tennessee			5,522			5,947			(425	)
Ohio			4,000			3,862			138
Pennsylvania			2,301			1,186			1,115
Indiana			1,968			1,937			31
Missouri			1,470			1,430			40
Mississippi			1,239			1,231			8
Total premiums earned		$	74,803		$	67,877		$	6,926

COMBINED RATIOS (INSURANCE COMPANIES)
	Three Months Ended September 30,
	2007		2006
Loss and loss adjustment expense	77.1%		77.2%
Expense (1)	19.6%		19.2%
Combined	96.7%		96.4%
(1)  Insurance operating expenses are reduced by fee income from insureds and, through December 31, 2006, the transaction service fee received from the Chicago agencies whose business we acquired.

POLICIES IN FORCE
	Three Months Ended September 30,
	2007		2006
Policies in force – beginning of period	226,974		200,401
Net (decrease) increase during period	(14,463)		16,907
Policies in force – end of period	212,511		217,308

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 writing business.
	Three Months Ended September 30,
	2007			2006
Retail locations – beginning of period	462			460
Opened	1			9
Closed	(5	)		(3	)
Retail locations – end of period	458			466

RETAIL LOCATIONS BY STATE
	September 30,				June 30,
	2007		2006		2007		2006
Alabama	25		25		25		25
Florida	41		40		41		39
Georgia	62		63		62		63
Illinois	81		85		81		86
Indiana	23		26		24		26
Mississippi	8		8		8		8
Missouri	16		17		15		18
Ohio	30		30		30		30
Pennsylvania	24		25		25		25
South Carolina	28		26		28		21
Tennessee	20		21		20		20
Texas	100		100		103		99
Total	458		466		462		460