A.M. Best has affirmed the Financial Strength Rating (FSR) of C++ (Marginal) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “b” for the subsidiaries of First Acceptance Corporation (collectively referred to as First Acceptance Group) (Delaware) (NYSE:FAC). (See below for a detailed list of companies). Concurrently, A.M. Best has affirmed the Long-Term ICR of “cc” of First Acceptance Corporation. The outlooks of these Credit Ratings (ratings) remain negative.

The ratings reflect First Acceptance Group’s balance sheet strength, which A.M. Best categorizes as weak, as well as its marginal operating performance, limited business profile and marginal enterprise risk management. First Acceptance Group’s weak risk-adjusted capitalization is attributable to adverse loss reserve development recognized during 2016. The group is concentrated in the private passenger non-standard automobile business, an industry segment that continues to be under pressure. Due to improvements in the economy, the automobile segment as a whole has experienced increased claims activity in the past few years, contributing to First Acceptance Group’s recent underwriting losses. The significant decrease in the company’s surplus during 2016 has resulted in elevated net underwriting leverage.

Conversely, the group has substantial fee income which partially offsets underwriting expenses and is a significant component of the product pricing that has contributed to surplus growth in earlier years. Additionally, the purchase of the Titan Agencies by First Acceptance Corporation, which closed on July 1, 2015, has improved financial flexibility by alleviating some of the pressure on the subsidiaries to provide dividend capital to the holding company.

The FSR of C++ (Marginal) and the Long-Term ICR of “b” have been affirmed with negative outlooks 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.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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