Home Page
04:05:29 EDT Sun 21 Sep 2014
Enter Symbol
or Name
USA
CA



FIRST ACCEPTANCE CORP
Symbol U : FAC
Recent Sedar Documents

A.M. Best Revises Outlook to Stable for First Acceptance Corporation and Its Subsidiaries

2012-11-20 12:37 ET - News Release


Company Website: http://www.ambest.com
OLDWICK, N.J. -- (Business Wire)

A.M. Best Co. has revised the outlook to stable from positive and affirmed the financial strength rating (FSR) of B (Fair) and issuer credit ratings (ICR) of “bb+” of the pooled subsidiary members (First Acceptance) of First Acceptance Corporation (Delaware) [NYSE: FAC]. Concurrently, A.M. Best has revised the outlook to stable from positive and affirmed the ICR of “b” of First Acceptance Corporation. (See below for a detailed listing of the companies.)

The ratings of First Acceptance are based upon unfavorable operating performance in recent years; concentration of risk in private passenger non-standard auto lines; and challenging economic conditions compounded by a below average interest rate environment. These negative factors are offset in part by strong risk-adjusted capitalization and sound balance sheet liquidity along with action being taken to improve earnings.

Losses in recent years have been negatively impacted by increased claims severity, storm losses and higher expenses, as well as declining revenue from premium writings, investment income and other income items. Premium volume and additional fees charged to policyholders were down due to scaling back production and the weakened economy. Investment income was lower from reductions in invested assets and low interest rates.

Capitalization remains more than supportive of the ratings but has weakened in recent years. First Acceptance Corporation contributed nearly $13.1 million of additional capital to the insurance operations in September 2012. This was to partially offset a reduction in surplus primarily due to operating losses in 2011 and 2012 as well as a dividend paid in 2011 to buy back shares. In addition, management has taken a number of actions to improve earnings, primarily by raising rates, closing under-performing retail stores and improving claims handling and underwriting. However, capitalization may continue to weaken as management executes an aggressive growth plan over the next couple of years. The ratings may be further stabilized by a return to a profitable operating trend that leads to capital appreciation; however, the ratings may be downgraded by further weakening in risk-adjusted capitalization.

The rating of First Acceptance Corporation is based on the consolidated financial strength of the insurance subsidiaries; its acceptable level of financial leverage from debt; its ability to fund the debt without having to take extraordinary dividends out of the insurance companies; and the subordination of the holding company’s creditors to the insurance companies’ policyholders.

The FSR of B (Fair) and ICR of “bb+” have been affirmed for the following pooled subsidiaries of First Acceptance Corporation:

  • First Acceptance Insurance Company, Inc.
  • First Acceptance Insurance Company of Georgia, Inc.
  • First Acceptance Insurance Company of Tennessee, Inc.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Equity Credit for Hybrid Securities”; “Understanding BCAR for Property/Casualty Insurers”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

Contacts:

A.M. Best Co.
Charles M. Huber, 908-439-2200, ext. 5122
Managing Senior Financial Analyst
charles.huber@ambest.com
or
Joseph Burtone, 908-439-2200, ext. 5125
Assistant Vice President – P/C Ratings
joseph.burtone@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Source: A.M. Best Co.

© 2014 Canjex Publishing Ltd. All rights reserved.