Market Overview

A.M. Best Affirms Credit Ratings of First Acceptance Corporation and Its Subsidiaries


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
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating
Action Press Releases

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