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First Acceptance Corporation
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FIRST ACCEPTANCE CORPORATION
3813 Green Hills Village Drive
Nashville, TN 37215
(615) 844-2800
QUARTERLY REPORT
FOR THE QUARTER ENDED SEPTEMBER 30, 2025
ISSUER’S EQUITY SECURITIES
Common Stock
Par Value $.01 per share
75,000,000 Shares Authorized
36,646,366 Shares Outstanding at September 30, 2025
First Acceptance Corporation is responsible for the content of this Quarterly Report. The securities
described in this document are not registered with, and the information contained in this report has not
been filed with, or approved by, the U.S. Securities and Exchange Commission.
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Forward-Looking Statements..................................................................................................................................................................... 3
Item 1. The Exact Name of the Issuer and Address and Telephone Number of Issuer’s Principal Office ................................................ 4
Item 2. Shares Outstanding ........................................................................................................................................................................ 4
Item 3. Interim Consolidated Financial Statements ................................................................................................................................... 4
Item 4. Management’s Discussion and Analysis of Financial Condition and Results of Operations ........................................................ 4
Item 5. Legal Proceedings........................................................................................................................................................................ 11
Item 6. Defaults upon Senior Securities ................................................................................................................................................... 11
Item 7. Other Information ........................................................................................................................................................................ 11
Item 8. Exhibits ........................................................................................................................................................................................ 11
Item 9. Issuer’s Certifications .................................................................................................................................................................. 12
Exhibit 3.1 Interim Consolidated Financial Statements ........................................................................................................................... 13
Consolidated Balance Sheets ............................................................................................................................................................... 13
Consolidated Statements of Income .................................................................................................................................................... 14
Consolidated Statements of Stockholders’ Equity ............................................................................................................................... 15
Consolidated Statements of Cash Flows .............................................................................................................................................. 16
Notes to Consolidated Financial Statements ............................................................................................................................................ 17
2
This report reviews the financial condition and results of operations of First Acceptance Corporation. The information in this report
updates the Annual Information and Disclosure Statement and Annual Report for the year ended December 31, 2024, previously filed
by the Company with the OTCQX. Accordingly, this report should therefore be reviewed in conjunction with these year-end reports
and any other interim reports or updates since provided.
This report contains forward-looking statements. All statements made in this report, other than statements of historical fact, are
forward-looking statements. You can identify these statements from our use of the words “may,” “should,” “could,” “potential,”
“continue,” “plan,” “forecast,” “estimate,” “project,” “believe,” “intent,” “anticipate,” “expect,” “target,” “is likely,” “will,” or the
negative of these terms and similar expressions. These forward-looking statements may include, among other things, statements and
assumptions relating to:
the accuracy and adequacy of our loss reserving methodologies;
income, income per share, and other financial performance measures;
the anticipated effects on our results of operations or financial condition from recent and expected developments or
events;
the financial condition of, and other issues relating to the strength of and liquidity available to, issuers of securities held in
our investment portfolio;
and our business and growth strategies.
We believe that our expectations are based on reasonable assumptions. However, these forward-looking statements involve
known and unknown risks, uncertainties, and other important factors that could cause our actual results, performance or achievements,
or industry results to differ materially from our expectations of future results, performance or achievements expressed or implied by
these forward-looking statements. In addition, our past results of operations do not necessarily indicate our future results. We discuss
these and other uncertainties in “Risk Factors” in our Annual Report for the year ended December 31, 2024, filed by the Company
with the OTCQX.
You should not place undue reliance on any forward-looking statements. These statements speak only as of the date of this
report. Except as otherwise required by applicable laws, we undertake no obligation to publicly update or revise any forward-looking
statements or the risk factors described in this report, whether as a result of new information, future events, changed circumstances, or
any other reason after the date of this report.
3
Item 1. Exact Name of the Issuer and Address and Telephone Number of Issuer’s Principal Office
First Acceptance Corporation
3813 Green Hills Village Drive
Nashville, TN 37215
615-844-2800
www.firstacceptance.com
Item 2. Shares Outstanding
Common shares 9/30/2025 12/31/2024
75,000,000 shares 75,000,000 shares
36,646,366 shares 38,191,217 shares
9,632,239 shares 10,410,461 shares
Number of beneficial holders approx. 1,100 holders approx. 1,100 holders
owning at least 100 shares:
208 holders 226 holders
Preferred shares
10,000,000 shares 10,000,000 shares
0 shares 0 shares
0 shares 0 shares
0 holders 0 holders
Item 3. Interim Consolidated Financial Statements
The interim consolidated financial statements of First Acceptance Corporation as of September 30, 2025 are attached hereto as Exhibit
3.1 and are hereby incorporated by reference into this Quarterly Report, including:
(1) Consolidated Balance Sheets;
(2) Consolidated Statements of Income;
(3) Consolidated Statements of Stockholders’ Equity;
(4) Consolidated Statements of Cash Flows; and
(5) Notes to Consolidated Financial Statements
Item 4. Management’s Discussion and Analysis of Financial Condition and Consolidated Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements
that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include those discussed in “Risk Factors” in our Annual Report for the year
ended December 31, 2024, filed by the Company with OTCQX. The following discussion should be read in conjunction with our
consolidated financial statements included with this report and our consolidated financial statements and related Management’s
Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2024 included in our
Annual Report for the year ended December 31, 2024 filed by the Company with the OTCQX.
4
General
First Acceptance is an insurance company headquartered in Nashville, Tennessee. We offer non-standard personal automobile
insurance through our own underwritten insurance policies primarily through independent agents in 15 states, and we are also licensed
to write insurance in 11 other states that are not currently utilized. Non-standard personal automobile insurance is sought after by
individuals because of their inability or unwillingness to obtain standard insurance coverage due to various factors including their
payment preference, failure to have maintained continuous insurance coverage, or their driving record. We also sell an insurance
product for renters that we underwrite.
For the nine months ended September 30, 2025, two single independent agent groups produced 45% and 39% of premiums
earned, respectively. At September 30, 2025, we also had approximately 700 other active independent agent locations who primarily
represent the balance of the Company’s business.
The Company’s largest independent agent operates primarily from retail locations, including the ones that it purchased from the
Company in December 2023. The second largest agent utilizes a technology-driven method of distribution.
Current Underwriting Outlook
The trade environment continues to introduce significant uncertainty for vehicle and parts costs. The United States
implemented a 25% tariff on all imported vehicles effective April 3, 2025, and extended that tariff to imported auto parts on May 3,
2025. Tariffs of at least 10% have also been applied to most imported production inputs for domestically manufactured parts.
In addition, recent retaliatory measures and tightening export controls on rare earth elements (“REE’s”) and permanent
magnets, critical inputs for vehicle electronics and electric powertrains, have emerged as a major supply-chain concern. China’s
restrictions on REE exports have already disrupted component manufacturing in multiple markets and are contributing to elevated cost
inflation and repair delays. These dynamics compound existing tariff effects and create a more volatile cost environment for both
imported and domestically assembled vehicles.
On May 30, 2025, a federal appeals court stayed a decision by the U.S. Court of International Trade that found the
administration had not met legal requirements to levy certain tariffs, with oral arguments held on July 31, 2025. No final decision has
been issued, and the tariffs remain in effect. The administration has since announced additional tariffs, including a 50% duty on steel
and aluminum and the potential for further increases on Chinese exports in response to REE export controls. The outcome of these
proceedings and policy adjustments remains uncertain. On October 30, 2025, the administration announced that it would not further
increase overall tariffs and roll back some implemented on China earlier this year, though few details have been provided.
While the ultimate impact of tariffs and supply-chain disruption cannot yet be quantified, the automobile insurance industry
continues to brace for higher physical damage loss severities stemming from increased costs of vehicles and parts. The Company
believes that the elevated loss severity experienced during the nine months ended September 30, 2025 was primarily attributable to
price increases in anticipation of these tariffs and related market uncertainty. These pressures appear to have stabilized somewhat but
remain above historical norms. The recent escalation in REE and component supply risks suggests that inflationary pressure on repair
and replacement costs may persist longer than previously expected. Extended repair times due to part shortages and more costly
substitutes are additional contributing factors.
At the same time, claim frequency has shown modest improvement within the non-standard auto segment. Economic
uncertainty and reduced discretionary driving among lower-income consumers have led to fewer miles driven, especially in urban and
near-urban markets where costs have risen most sharply. This dynamic has provided a partial offset to the inflationary pressure on loss
severity. However, the sustainability of this trend remains uncertain, given continued volatility in employment and wage growth.
Broadly, 2025 has reflected a “tale of two economies.” Equity market appreciation and strong investment income have
bolstered investment portfolio returns. Yet, for many consumers in the non-standard market, persistent inflation, higher borrowing
costs, and uneven labor participation have eroded real disposable income. This divergence reinforces both affordability pressure and
sensitivity to rate changes, highlighting the Company’s need for disciplined pricing and empathetic communication to sustain
retention.
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In response, the Company is actively adjusting underwriting standards and has filed targeted premium rate changes with
regulators to offset higher loss severities and improve risk targeting. Ongoing monitoring of cost trends, claim frequency, and
economic indicators will inform additional adjustments as necessary. The Company is also evaluating segmentation by vehicle type
and age to better align pricing and underwriting with emerging cost drivers while maintaining focus on customer retention and
fairness.
Consolidated Results of Operations
Overview
Our insurance operations generate revenues from selling non-standard personal automobile insurance policies. We currently
conduct our underwriting operations in 15 states through three insurance company subsidiaries: First Acceptance Insurance Company,
Inc., First Acceptance Insurance Company of Georgia, Inc., and First Acceptance Insurance Company of Tennessee, Inc. Our revenues
are primarily generated from:
premiums earned, including policy and renewal fees and managing general agency fees from sales of policies written and
assumed by our insurance company subsidiaries;
billing fees and service charges on policies written and assumed by our insurance company subsidiaries; and
investment income earned on the invested assets of the insurance company subsidiaries.
The following tables present premiums earned by state (in thousands). Premiums earned are presented in the state in which the
underlying insured risk of the related insurance policy is located.
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Georgia $ 41,386 $ 40,502 $ 114,691 $ 120,219
Florida 25,398 34,553 87,612 106,360
South Carolina 12,285 10,541 37,354 30,577
Texas 11,515 6,843 30,121 16,991
Alabama 9,721 7.373 27,084 24,221
Pennsylvania 9,337 5,647 25,526 16,356
Arizona 8,372 7,586 25,762 20,191
California 5,804 5,753 18,344 17,060
Tennessee 5,488 5,830 16,621 18,744
Ohio 3,838 4,258 11,960 14,018
Illinois 3,737 2,830 10,470 7,513
Indiana 2,039 2,140 6,133 6,900
Mississippi 1,180 1,584 3,663 4,981
Virginia 1,095 579 2,766 994
Missouri 15 21 54 74
$ 141,210 $ 136,040 $ 418,161 $ 405,199
Premiums ceded (27,754) (24,418) (75,946) (24,418)
$ 113,456 $ 111,622 $ 342,215 $ 380,781
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The following map presents the percentage of net premiums earned by state for the nine months ended September 30, 2025:
Our insurance companies present a combined ratio as a measure of their overall underwriting profitability. The components of
the statutory combined ratio are as follows:
Loss Ratio - Loss ratio is the ratio (expressed as a percentage) of losses and loss adjustment expenses (“LAE”) incurred to
premiums earned and is a basic element of underwriting profitability. We calculate this ratio based on all direct and assumed
premiums earned, net of ceded reinsurance.
Expense Ratio - Expense ratio is the ratio (expressed as a percentage) of insurance operating expenses (including depreciation
and amortization) to net premiums earned. Insurance operating expenses are reduced by billing fees and service charges from insureds.
This is a measurement that illustrates relative management efficiency in administering our insurance companies.
Combined Ratio - Combined ratio is the sum of the loss ratio and the expense ratio. If the combined ratio is at or above 100%,
an insurance company cannot be profitable without sufficient investment income.
The following table presents the loss, expense, and combined ratios for our insurance companies:
Three Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Loss 63.5 % 76.0% 70.4 % 72.7%
Expense 29.8 % 19.2% 25.9 % 24.6%
Combined 93.3 % 95.2% 96.3 % 97.3%
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Three and Nine Months Ended September 30, 2025 Compared with the Three and Nine Months Ended September 30, 2024
Consolidated Results
Revenues for the three months ended September 30, 2025 increased 9% to $140.7 million from $129.3 million in the same
period in the prior year.
Income before income taxes, for the three months ended September 30, 2025 was $13.2 million, compared with $6.9 million for
the three months ended September 30, 2024. Net income for the three months ended September 30, 2025 was $10.2 million, compared
with $5.4 million for the three months ended September 30, 2024. Diluted net income per share was $0.27 for the three months ended
September 30, 2025, compared with $0.14 for the same period in the prior year.
For the three months ended September 30, 2025, we recognized favorable prior period loss and LAE development of $14.2
million compared with unfavorable prior period loss and LAE development of $3.3 million for the same period in the prior year. As a
result of this development, for the three months ended September 30, 2025, we recognized a corresponding increase in commission
expense of $4.5 million from a contingent commission adjustment to an independent agent, and for the three months ended September
30, 2024, we recognized a $1.0 million corresponding reduction in this commission expense.
Revenues before ceded reinsurance for the nine months ended September 30, 2025 increased 6% to $482.3 million from $456.6
million in the same period in the prior year. Revenues for the nine months ended September 30, 2025 and 2024, were reduced by
ceded premiums earned of $75.9 million and $24.4 million, respectively, from the new reinsurance contract that went into effect July
1, 2024. (There were nine months of reinsurance in 2025 compared to three months in 2024.) Revenues for the nine months after
ceded reinsurance ended September 30, 2025, decreased 6% to $406.4 million from $432.2 million in the same period in the prior
year.
Income before income taxes, for the nine months ended September 30, 2025, was $27.0 million, compared with $23.9 million
for the nine months ended September 30, 2024. Net income for the nine months ended September 30, 2025 was $21.0 million,
compared with $18.1 million for the nine months ended September 30, 2024. Diluted net income per share was $0.55 for the nine
months ended September 30, 2025, compared with diluted $0.46 for the same period in the prior year.
For the nine months ended September 30, 2025, we recognized favorable prior period loss and LAE development of $11.4
million compared with unfavorable prior period loss and LAE development of $13.5 million for the same period in the prior year. As a
result of this development for the nine months ended September 30, 2024, we recognized a $11.0 million corresponding reduction in
this commission expense. However, for the nine months ended September 30, 2025, we recognized a decrease in commission expense
of $3.2 million from a contingent commission adjustment to an independent agent as a result of unfavorable loss development for this
independent agent for the 2024 accident year.
Premiums Earned
After reinsurance, net premiums earned increased by $1.9 million, or 2%, to $113.5 million for the three months ended
September 30, 2025, from $111.6 million for the three months ended September 30, 2024. Before reinsurance, direct and assumed
premiums earned increased by $5.2 million, or 4%, to $141.2 million for the three months ended September 30, 2025 from $136.0
million for the three months ended September 30,2024.
For the nine months ended September 30, 2025, after reinsurance, net premiums earned decreased by $38.6 million, or 10%, to
$342.2 million from $380.8 million for the nine months ended September 30, 2024. Before reinsurance, direct and assumed premiums
earned increased by $13.0 million or 3%, to $418.2 million for the nine months ended September 30, 2025 from $405.2 million for the
nine months ended September 30, 2024. The nine months ended September 30, 2025, included nine months of reinsurance as
compared to only three months in the same period in the prior year.
These increases before reinsurance were driven through a combination of an increase in policies in-force compared to the prior
year and premium rate increases.
Billing Fees, Service Charges and Managing General Agency Fees
Billing fees, service charges and managing general agency fees increased by $8.6 million, or 70%, to $20.8 million for the three
months ended September 30, 2025, from $12.2 million for the three months ended September 30, 2024. For the nine months ended
8
September 30, 2025, billing fees, service charges and managing general agency fees increased by $10.8 million, or 29%, to $47.0
million from $36.2 million for the nine months ended September 30, 2024.
Investment Income
Investment income increased by $0.6 million, or 13%, to $5.2 million for the three months ended September 30, 2025, from
$4.6 million for the three months ended September 30, 2024. For the nine months ended September 30, 2025, investment income
increased by $1.0 million, or 7%, to $14.8 million, from $13.8 million for the same period in the prior year. These increases were
primarily the result of higher returns from fixed maturities and short-term cash and the overall increase in the amount of invested
assets.
At September 30, 2025 and 2024, the tax-equivalent book yields for our managed fixed maturities and cash equivalents portfolio
were 4.3% and 4.1%, respectively, with effective durations of 3.35 and 2.91 years, respectively. Yield has increased as the Company
has investined previously uninvested cash and reinvested portfolio maturities at higher interest rates. The duration also increased
during the recent quarter as a result of the sale of $25.1 million of fixed maturities and their longer-duration reinvestment.
Loss and Loss Adjustment Expenses
The loss ratio was 63.5% for the three months ended September 30, 2025, compared with 76.0% for the three months ended
September 30, 2024. For the nine months ended September 30, 2025, the loss ratio was 70.4% compared with 72.7% for the nine
months ended September 30, 2024.
We experienced favorable development related to prior periods of $14.2 million and $11.4 million for the three and nine months
ended September 30, 2025 compared to unfavorable development of $3.3 million and $13.5 million for the three and nine months
ended September 30, 2024, respectively.
The favorable development for the three and nine months ended September 30, 2025 was primarily attributable to lower-than-
expected frequency on bodily injury losses in the accident quarter ended March 31, 2025, and lesser-than-expected severity on
physical damage losses in the 2024 accident year and the first six months of 2025 (for the three months ended September 30, 2025
only). The unfavorable development for the three and nine months ended September 30, 2024 was primarily attributable to higher-
than-expected loss severity on bodily injury and property damage losses in the 2023 accident year.
Excluding the development related to prior periods, the loss ratio for the three months ended September 30, 2025 was 76.1%
compared with 73.0% for the three months ended September 30, 2024. Excluding the development related to prior periods, the loss
ratio for the nine months ended September 30, 2025 was 73.9% compared with 69.1% for the nine months ended September 30, 2024.
The higher loss ratios for the current periods were primarily attributable to increased severity on bodily injury and physical
damage losses. The Company believes that this increased loss severity was largely attributable to tariff-related price increases on
imported autos and auto parts and the market uncertainty surrounding these actions.
Insurance Operating Expenses
Insurance operating expenses increased to $53.8 million for the three months ended September 30, 2025 from $35.8 million for
the three months ended September 30, 2024. For the nine months ended September 30, 2025, insurance operating expenses increased
to $132.9 million from $126.3 million for the nine months ended September 30, 2024.
The increase in operating expenses for the three months ended September 30, 2025 included the increase in commission expense
of $4.5 million from a contingent commission adjustment to an independent agent and an increase in policy fees paid to an
independent agent as additional commission compensation.
Insurance operating expenses are net of ceding commission income from the new reinsurance contract that was effective July 1,
2024. Therefore, the nine months ended September 30, 2024 only reflect three months of ceding commission income.
The insurance companies’ expense ratio was 29.8% for the three months ended September 30, 2025, compared with 19.2% for
the three months ended September 30, 2024. The insurance companies’ expense ratio was 25.9% for the nine months ended September
30, 2025, compared with 24.6% for the nine months ended September 30, 2024.
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Provision for Income Taxes
Income tax expense was $2.9 million for the three months ended September 30, 2025, compared with $1.5 million for the three
months ended September 30, 2024. For the nine months ended September 30, 2025, income tax expense was $6.0 million compared
with $5.8 million for the nine months ended September 30, 2024. The effective tax rate was 22.2% and 24.1% for the nine months
ended September 30, 2025 and 2024, respectively. The decrease in the effective rate was primarily attributable to state income taxes.
Interest Expense
For the three and nine months ended September 30, 2025, interest expense decreased slightly compared to the same periods in
the prior year, primarily as a result of a modest decrease in the applicable variable interest rate. For additional information, see
“Liquidity and Capital Resources” in this report.
Liquidity and Capital Resources
Our primary sources of funds are premiums, billing fees, service charges, managing general agency fees and investment income
from our insurance company subsidiaries. Our primary uses of funds are the payment of claims and operating expenses. Net cash
provided by operating activities for the nine months ended September 30, 2025 was $28.8million, compared with $45.6 million for the
same period in the prior year. This decrease was primary the result of the new reinsurance contract commencing July 1, 2024 which
was only in effect for three months of the nine months ended September 30, 2024.
Net cash used in investing activities for the nine months ended September 30, 2025 was $55.3 million, compared to $85.6
million for the same period in the prior year. This change was primarily the result of a decrease in the amount of net securities
purchased in the current period. During the three months ended September 30, 2025, sales of investments included the sale and longer-
duration reinvestment of $25.1 million of fixed maturities to increase portfolio duration.
Our holding company requires cash for general corporate overhead expenses and debt service related to our debentures payable.
Following the sale of our insurance agency, the holding company’s primary source of unrestricted cash to meet its obligations are
managing general agency fees, dividends from the insurance companies, and the remaining proceeds to be received through 2026 from
the sale of the insurance agency as noted in the following paragraph. As of September 30, 2025, our holding company had adequate
unrestricted cash of $12.6 million to meet current obligations. We also believe that these funds and the additional anticipated
unrestricted cash from the sources noted above will be sufficient to pay our future cash requirements outside of the insurance company
subsidiaries.
As a result of the sale of our insurance agency in December 2023, the Company is eligible to receive additional maximum
contingent consideration of $10 million and $20 million on December 1, 2025 and 2026, respectively, based upon achievement of
certain annual production targets. The cash from the contingent consideration payments to the Company would be unrestricted unless
required by the insurance companies to maintain $100 million of statutory capital and surplus as per the purchase agreement. At
September 30, 2025, statutory capital and surplus was approximately $187 million.
The holding company has debt service requirements related to the debentures payable. The debentures are interest-only and
mature in full in July 2037. The debentures accrue interest at a variable rate equal to an adjusted Three-Month CME term SOFR rate
plus 375 basis points, which resets quarterly. The interest rate related to the debentures for the nine months ended September 30, 2025
ranged from 8.291% to 8.322%. In October 2025, the interest rate reset to 7.850% through January 2026.
State insurance laws limit the amount of distributions that may be paid from our insurance company subsidiaries. As of
September 30, 2025, the amount of available ordinary dividends that could be paid to the holding company without regulatory
approval was $16.6 million.
During the nine months ended September 30, 2025, the Company repurchased 1.7 million shares of its common stock at a total
of $6.6 million in five private transactions.
We have three insurance company subsidiaries that are organized and domiciled under the insurance statutes of Texas, Georgia,
and Tennessee. Our insurance company subsidiaries also operate under licenses issued by various state insurance authorities. Such
licenses may be of perpetual duration or periodically renewable provided we continue to meet applicable regulatory requirements.
10
The National Association of Insurance Commissioners (“NAIC”) Model Act for risk-based capital provides formulas to
determine each December 31 on an annual basis the amount of statutory capital and surplus that an insurance company needs to ensure
that it has an acceptable expectation of not becoming financially impaired. Failure to meet applicable risk-based capital requirements
could subject our insurance company subsidiaries to further examination or corrective action imposed by state regulators, including
limitations on their writing of additional business, state supervision or even liquidation. As of December 31, 2024, the insurance
company subsidiaries were above the company action levels. There are also statutory guidelines that suggest that on an annual
calendar year basis an insurance company should not exceed a ratio of net premiums written to statutory capital and surplus of 3-to-1.
For the twelve month period ended September 30, 2025, each insurance company subsidiary was within this guideline.
We believe that existing cash and investment balances, when combined with anticipated cash flows as noted above, will be
adequate to meet our expected liquidity needs, for both the holding company and our insurance company subsidiaries, in both the
short-term and the foreseeable future.
Item 5. Legal Proceedings
The Company is named as a defendant in various lawsuits, arising in the ordinary course of business, generally relating to its
insurance operations. All legal actions relating to claims made under insurance policies are considered by the Company in establishing
its loss and loss adjustment expense reserves. The Company also faces lawsuits from time to time that seek damages beyond policy
limits, commonly known as bad faith claims, as well as class action and individual lawsuits that involve issues arising in the course of
the Company’s business. The Company continually evaluates potential liabilities and reserves for litigation of these types using the
criteria established by FASB ASC 450, Contingencies (“FASB ASC 450”). Pursuant to FASB ASC 450, reserves for a loss may only
be recognized if the likelihood of occurrence is probable and the amount can be reasonably estimated. If a loss, while not probable, is
judged to be reasonably possible, management will disclose, if it can be estimated, a possible range of loss or state that an estimate
cannot be made. Management evaluates each legal action and records reserves for losses, as warranted, by establishing a reserve in its
consolidated balance sheets in loss and loss adjustment expense reserves for bad faith claims and in other liabilities for other lawsuits.
Amounts incurred are recorded in the Company’s consolidated statements of comprehensive income in losses and loss adjustment
expenses for bad faith claims and in insurance operating expenses for other lawsuits unless otherwise disclosed.
Item 6. Defaults Upon Senior Securities
None.
Item 7. Other Information
None.
Item 8. Exhibits
3.1 Interim Consolidated Financial Statements
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Item 9. Certifications
I, Kenneth D. Russell, Chief Executive Officer, certify that:
1. I have reviewed this quarterly disclosure statement of First Acceptance Corporation;
2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this disclosure statement; and
3. Based on my knowledge, the financial statements, and other financial information includes or incorporated by reference in
this disclosure statement, fairly present in all material respects the financial condition, results of operations and cash flows of
the issuer as of, and for, the periods presented in this disclosure statement.
November 4, 2025
/s/ Kenneth D. Russell
Kenneth D. Russell
Chief Executive Officer
I, Brian Dickman, Chief Financial Officer, certify that:
1. I have reviewed this quarterly disclosure statement of First Acceptance Corporation;
2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this disclosure statement; and
3. Based on my knowledge, the financial statements, and other financial information includes or incorporated by reference in
this disclosure statement, fairly present in all material respects the financial condition, results of operations and cash flows of
the issuer as of, and for, the periods presented in this disclosure statement.
November 4, 2025
/s/ Brian Dickman
Brian Dickman
Chief Financial Officer
12
Exhibit 3.1 Interim Consolidated Financial Statements
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
September 30, December 31,
2025 2024
(Unaudited)
ASSETS
Investments in fixed maturities, available-for-sale at fair value (amortized cost of $352,291
and $304,547, respectively) $ 351,964 $ 298,064
Investments in equity securities at fair value (cost of $21,827 and $17,228, respectively) 26,059 16,115
Cash, cash equivalents, and restricted cash 53,036 85,917
Premiums, fees, and commissions receivable, net of allowance of $464 and $324,
respectively 204,430 155,458
Consideration receivable from the sale of insurance agency, at fair value 28,212 26,734
Deferred tax asset, net 2,701 2,767
Other investments 8,275 7,722
Other assets 9,195 22,656
Operating lease right-of-use assets 4,686 4,381
Reinsurance recoverables 50,051 28,572
Prepaid reinsurance premiums 50,765 28,552
Property and equipment, net 3,165 3,450
TOTAL ASSETS $ 792,539 $ 680,388
LIABILITIES AND STOCKHOLDERS’ EQUITY
Loss and loss adjustment expense reserves $ 269,334 $ 240,447
Unearned premiums and fees 203,283 168,129
Debentures payable 40,700 40,666
Operating lease liabilities 5,023 4,734
Income taxes payable 1,820 3,152
Deferred ceding commissions, net 7,062 2,207
Amounts due to reinsurers 44,890 26,710
Other liabilities 30,629 24,782
Total liabilities 602,741 510,827
Preferred stock, $.01 par value, 10,000 shares authorized — —
Common stock, $.01 par value, 75,000 shares authorized; 36,646 and 38,191 issued and
outstanding, respectively 366 381
Additional paid-in capital 451,166 456,804
Accumulated other comprehensive income (loss), net of tax of $(1,250) and $(2,543),
respectively 923 (3,941)
Accumulated deficit (262,657) (283,683)
Total stockholders’ equity 189,798 169,561
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 792,539 $ 680,388
See notes to consolidated financial statements.
13
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Premiums earned $ 113,456 $ 111,622 $ 342,215 $ 380,781
Billing fees, service charges and managing general agency fees 20.803 12,208 46,969 36,252
Investment income 5.196 4,607 14,802 13,776
Net gains on investments 1,228 820 2,441 1,386
140,683 129,257 406,427 432,195
Losses and loss adjustment expenses 72,072 84,863 241,528 276,604
Insurance operating expenses 53,829 35,794 132,863 126,338
Other operating expenses 207 203 724 733
Stock-based compensation 257 232 783 709
Depreciation and amortization 260 320 848 979
Interest expense 888 991 2,642 2,962
127,513 122,403 379,388 408,325
Income before income taxes 13,170 6,854 27,039 23,870
Provision for income taxes 2,923 1,452 6,013 5,752
Net income $ 10,247 $ 5,402 $ 21,026 $ 18,118
Basic $ 0.28 $ 0.14 $ 0.57 $ 0.48
Diluted $ 0.27 $ 0.14 $ 0.55 $ 0.46
Basic 36,646 38,151 37,046 38,120
Diluted 37,552 39,120 37,940 39,021
Net income $ 10,247 $ 5,402 $ 21,026 $ 18,118
Net unrealized change in investments, net of tax of $398, $1,789,
$1,293 and $1,363, respectively 1,497 6,730 4,864 5,128
Comprehensive income $ 11,744 $ 12,132 $ 25,890 23,246
Net realized gains (losses) gains on sales and redemptions $ (24) $ 562 $ 209 $ 582
Net unrealized gains (losses) on equity securities (includes
reclassification for realized (gains) losses of $0, $(588), $(239)
and $(345), respectively) 1,252 258 2,231 804
Net gains on investments $ 1,228 $ 820 $ 2,440 $ 1,386
See notes to consolidated financial statements.
14
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Accumulated
Additional other Total
Shares Amount capital loss deficit equity
Balances at December 31, 2023 38,265 $ 382 $ 456,309 $ (4,869) $ (309,974) $ 141,848
Net income — — — — 18,118 18,118
Net unrealized change on investments (net of
tax provision of $1,363) — — — 5,128 — 5,128
Stock-based compensation 31 — 709 — — 709
Issuance of shares under Employee
Stock Purchase Plan 34 1 68 — — 69
Vested restricted stock units, net of
repurchases 106 1 — — — 1
Retirement of treasury stock (285) (3) (634) — — (637)
Balances at September 30, 2024 38,151 $ 381 $ 456,452 $ 259 $ (291,856) $ 165,236
Accumulated
Additional other Total
Shares Amount capital income deficit equity
Balances at December 31, 2024 38,191 $ 381 $ 456,804 $ (3,941) $ (283,683) $ 169,561
Net income — — — — 21,026 21,026
Net unrealized change on investments (net of
tax provision of $1,293) — — — 4,864 — 4,864
Stock-based compensation 8 — 783 — — 783
Issuance of shares under Employee
Stock Purchase Plan 68 1 212 — — 213
Vested restricted stock units, net of
repurchases 96 1 (93) — — (92)
Retirement of treasury stock (1,717) (17) (6,540) — — (6,557)
Balances at September 30, 2025 36,646 $ 366 $ 451,166 $ 923 $ (262,657) $ 189,798
See notes to consolidated financial statements.
15
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
Nine Months Ended
September 30,
2025 2024
Net income $ 21,026 $ 18,118
Adjustments to reconcile net income to cash provided by operating activities:
Unrealized gains on equity securities (2,231) (804)
Depreciation and amortization 848 979
Accretion of present value discount of sales consideration receivable (1,478) (2,475)
Stock-based compensation 783 709
Deferred income taxes (1,226) (4,912)
Investment income from other investments (658) (600)
Realized gains on sales and redemptions of investments (209) (582)
Other (579) (98)
Premiums, fees, and commission receivable (48,832) (15,169)
Loss and loss adjustment expense reserves 28,887 57,435
Unearned premiums and fees 35,154 10,722
Reinsurance recoverables (21,479) (18,111)
Prepaid insurance premiums (22.213) (31,625)
Other assets 13,461 (2,459)
Income taxes payable (1,332) (5,637)
Deferred ceding commissions, net of deferred acquisition costs 4,855 14,458
Amounts due to reinsurers 18,180 27,052
Other liabilities 5,847 (2,216)
Other 18 38
Net cash provided by operating activities 28,822 45,646
Purchases of investments (111,637) (123,485)
Maturities and redemptions of investments 30,630 23,523
Sale of investments 26,198 1,868
Purchases of other investments (515) (1,552)
Distributions from other investments 620 571
Capital expenditures (563) (261)
Receivable/payable for securities — (1,510)
Collections on consideration receivable from sale of insurance agency — 15,250
Net cash used in investing activities (55,267) (85,596)
Purchase of treasury stock at cost (6,557) (637)
Net proceeds from issuance of common stock 213 69
Other (92) —
Net cash used in financing activities (6,436) (568)
Net change in cash, cash equivalents, and restricted cash (32,281) (40,518)
Cash, cash equivalents, and restricted cash, beginning of period 85,917 109,780
Cash, cash equivalents, and restricted cash, end of period $ 53,036 $ 69,262
See notes to consolidated financial statements.
16
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
The consolidated financial statements of First Acceptance Corporation (the “Company”) included herein have been prepared
without audit. Accordingly, certain information and disclosures normally included in financial statements prepared in accordance with
U.S. generally accepted accounting principles (“GAAP”) have been omitted. In the opinion of management, the consolidated financial
statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the interim periods.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the
full year. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial
statements included in its Annual Report for the year ended December 31, 2024 filed by the Company with OTCQX.
For the nine months ended September 30, 2025 and 2024, two single independent agent groups produced 45% and 39% and
45% and 35% of premiums earned, respectively.
2. Investments
Investments, Available-for-Sale
The following tables summarize the Company’s investment in fixed securities (in thousands).
Gross Gross
Amortized Unrealized Unrealized Fair
September 30, 2025 Cost Gains Losses Value
Fixed maturities, available-for-sale:
U.S. government and agencies $ 37,618 $ 297 $ (14) $ 37,901
Political subdivisions 1,774 11 (18) 1,767
Revenue and assessment 18,577 144 (14) 18,707
Corporate bonds 139,109 2,325 (178) 141,256
Asset-backed securities 67,425 761 (9) 68,177
Agency backed 86,362 981 (5,124) 82,219
Non-agency backed – residential 694 520 (9) 1,205
Non-agency backed – commercial 732 — — 732
Total fixed maturities, available-for-sale $ 352,291 $ 5,039 $ 5,366 $ 351,964
The following tables set forth the amount of gross unrealized losses by current severity (as compared to amortized cost) and
length of time that individual securities have been in a continuous unrealized loss position (in thousands).
Fair Value of
Securities with
Length of Gross Gross Severity of Gross Unrealized Losses
Gross Unrealized Losses Unrealized Unrealized Less 5% to Greater
at September 30, 2025: Losses Losses than 5% 10% than 10%
Three months $ 24,885 $ (95) $ (95) $ — $ —
Six months 4,127 (49) (49) — —
Nine months 2,059 (39) (6) (33) —
Twelve months 2,769 (19) (19) — —
Greater than twelve months 46,776 (5,164) (347) (93) (4,724)
Total $ 80,616 $ (5,366) $ (516) $ (126) $ (4,724)
17
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The fair value and gross unrealized losses of investments in fixed maturities for the nine months ended September 30, 2025
by length of time that individual securities have been in a continuous unrealized loss position follows (in thousands).
Less than 12 months 12 months or longer
Gross Gross Total
Fair Unrealized Fair Unrealized Gross
September 30, 2025 Value Losses Value Losses Losses
Fixed maturities, available-for-sale:
U.S. government and agencies $ 7,051 $ (9) $ 510 $ (5) $ (14)
Political subdivisions — — 788 (18) (18)
Revenue and assessment 1,121 (1) 3,167 (13) (14)
Corporate bonds 11,648 (69) 10,946 (109) (178)
Asset-backed securities 1,057 (4) 1,668 (5) (9)
Agency backed 11,980 (111) 29,697 (5,013) (5,124)
Total fixed maturities, available-for-sale $ 33,840 $ (203) $ 46,776 $ (5,163) $ (5,366)
For the nine months ended September 30, 2025, the Company had 32 fixed maturities with gross unrealized losses that have
been in a gross unrealized loss position for less than or equal to 12 months and 41 fixed maturities with gross unrealized losses that
have been in a gross unrealized loss position for greater than 12 months.
For the nine months ended September 30, 2025 and 2024, the Company did not recognize any other-than-temporary
impairment ("OTTI") charges on its fixed maturities, available for sale in net income. Unrealized gains and losses on equity securities
(preferred stocks and mutual funds) are recognized as a component of net income. The Company believes that the securities having
unrealized losses at September 30, 2025 were not other-than-temporarily impaired and are attributable to the increase in interest rates
since the time when they were originally purchased. The Company also does not intend to sell any of these securities, and it is more
likely than not that the Company will not be required to sell any of these securities before the recovery of their amortized cost basis.
18
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Losses and Loss Adjustment Expenses Incurred and Paid
Information regarding the reserve for unpaid losses and loss adjustment expenses (“LAE”) is as follows (in thousands).
Three Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Liability for unpaid losses and LAE at beginning of period, gross $ 267,435 $ 210,297 $ 240,447 $ 165,346
Reinsurance balances receivable (40,483) (1) (23,347) (2)
Liability for unpaid losses and LAE at beginning of period, net 226,952 210,296 217,100 165,344
Provision for losses and LAE:
Current period 86,285 81,521 252,922 263,095
Prior periods (14,213) 3,342 (11,394) 13,509
Net losses and LAE incurred 72,072 84,863 241,528 276,604
Losses and LAE paid:
Current period 17,694 23,012 89,638 103,707
Prior periods 55,870 62,030 143,530 128,124
Net losses and LAE paid 73,564 85,042 233,168 231,831
Liability for unpaid losses and LAE at end of period, net 225,460 210,117 225,460 210,117
Reinsurance balances receivable 43,874 12,664 43,874 12,664
Liability for unpaid losses and LAE at end of period, gross $ 269,334 $ 222,781 $ 269,334 $ 222,781
The favorable development for the three and nine months ended September 30, 2025 was primarily attributable to lower-
than-expected frequency on bodily injury losses in the accident quarter ended March 31, 2025, and lesser-than-expected severity on
physical damage losses in the 2024 accident year and the first six months of 2025 (for the three months ended September 30, 2025
only).
The unfavorable development for the three and nine months ended September 30, 2024 was primarily attributable to higher-
than-expected loss severity on bodily injury and property damage losses in the 2023 accident year.
4. Income Taxes
The (benefit) provision for income taxes consisted of the following (in thousands).
Three Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Current $ 2,933 $ 2,239 $ 6,830 $ 8,889
Deferred (172) (839) (1,200) (3,962)
2,761 1,400 5,630 4,927
Current 196 350 409 1,775
Deferred (34) (298) (26) (950)
162 52 383 825
$ 2,923 $ 1,452 $ 6,013 $ 5,752
19
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The provision for income taxes differs from the amounts computed by applying the statutory federal corporate tax rate of 21% to
income before income taxes as a result of the following (in thousands).
Three Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Provision for income taxes
at statutory rate $ 2,766 21.0% $ 1,438 21.0% $ 5,678 21.0% $ 5,012 21.0%
income (13) -0.1% (10) -0.2% (39) -0.1% (31) -0.1%
compensation
benefits not realized — — — — (25) -0.1% (1) 0.0%
State income taxes, net
of federal income tax
benefit and state
valuation allowance 150 1.1% (21) -0.3% 337 1.2% 460 1.9%
Other 20 0.2% 45 0.7% 62 0.2% 312 1.3%
$ 2,923 22.2% $ 1,452 21.2% $ 6,013 22.2% $ 5,752 24.1%
ASC Topic 740, Income Taxes, establishes procedures to measure deferred tax assets and liabilities and assesses whether a
valuation allowance relative to existing deferred tax assets is necessary. Management assesses the likelihood of realization of the
Company’s deferred tax assets and the need for a valuation allowance concerning those assets based on the weight of available
positive and negative evidence. As of September 30, 2025 and December 31, 2024, management determined that a valuation
allowance of $2.9 million and $2.1 million, respectively, was necessary relative to certain state tax net operating loss carryforwards
and OTTI which are not expected to be realized. Management also determined at September 30, 2025 and December 31, 2024, that it
is more likely than not that the results of future operations will generate sufficient taxable income to realize the remaining deferred tax
assets not covered by this valuation allowance.
The deferred tax asset ("DTA") valuation allowance may be adjusted in future periods if management determines that it is more
likely than not that some portion or all of the DTA will not be realized, or previously recognized valuation allowance should be
released. In the event the DTA valuation allowance is adjusted, the Company would record an income tax expense for the adjustment.
For the nine months ended September 30, 2025, $8.3 million and $ 0.2 million of federal and state taxes, respectively, were paid.
For the nine months ended September 30, 2024, $14.3 million and $2.1 million of federal and state taxes, respectively, were paid.
The majority of state income taxes are incurred in the state of Georgia.
5. Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use
(“ROU”) assets and lease liabilities on our consolidated balance sheet. The Company does not have any finance leases.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the
Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the
commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an
implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in
determining the present value of lease payments. Lease terms may include options to extend the lease when it is reasonably certain
that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
20
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company has operating leases, which include corporate offices, certain equipment and vehicles. The leases have remaining
lease terms of two years to seven years. Both operating lease costs and cash flows for the nine months ended September 30, 2025 were
$0.8 million. Both operating lease costs and cash flows for the three months ended September 30, 2024 were $0.9 million.
Supplemental balance sheet information related to leases was as follows:
September 30,
2025 2024
Operating lease liabilities 5,023 4,898
Weighted average remaining lease term 5.81 years 6.95 years
Weighted average discount rate 6.5% 6.5%
For the Year Ended December 31, Amount
2025 (excluding the nine months ended September 30, 2025) $ 285
2026 1,150
2027 1,166
2028 952
2029 789
Thereafter 1,660
Total lease payments $ 6,002
Less imputed interest (979)
Total $ 5,023
6. Premiums and Reinsurance
Net premiums written and earned are summarized as follows (in thousands).
Three Months Ended Nine Months Ended
September 30, 2025 September 30, 2025
Written Earned Written Earned
Direct $ 135,603 $ 137,049 $ 440,117 $ 407,471
Assumed 5,167 4,161 13,106 10,690
Ceded (32,198 ) (27,754) (98,159 ) (75,946 )
Total $ 108,572 $ 113,456 $ 355,064 $ 342,215
Three Months Ended Nine Months Ended
September 30, 2024 September 30, 2024
Written Earned Written Earned
Direct $ 140,947 $ 132,070 $ 403,696 $ 394,514
Assumed 5,271 3,970 12,173 10,685
Ceded (56,042) (24,818) (56,042) (24,418)
Total $ 90,176 $ 111,622 $ 359,827 $ 380,781
Effective for business in force since July 1, 2024, the Company utilizes quota-share reinsurance with an unaffiliated reinsurer to
reinsure a portion of the business produced by its second largest independent agent which utilizes a technology-driven method of
distribution. For the period from July 1, 2025 through June 30, 2026, the reinsurance is limited to a combined total of $150 million of
ceded premiums written. Although the reinsurance agreement contractually obligates the reinsurer to reimburse the Company for their
share of losses, it does not discharge the primary liability of the Company, which remains contingently liable in the event the reinsurer is
unable to meet their contractual obligations.
program with a county mutual insurance company and assumed by the Company through 100% quota-share reinsurance.
21
FIRST ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At September 30,2025, the Company had unsecured aggregate reinsurance receivables of $50.1 million. These receivables
were all from a single reinsurer that is rated A++ (Superior) by AM Best.
Ceded premiums earned and reinsurance recovered on losses and loss adjustment expenses (“LAE”) are summarized as
follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Ceded premiums earned $ 27,754 $ 24,418 $ 75,946 $ 24,418
Reinsurance recovered on losses and LAE $ 16,030 $ 15,848 $ 55,432 $ 15,848
7. Related Parties
In March 2025, the Company repurchased 878,240 shares of the Company’s common stock from a retiring member of its Board
of Directors for total consideration of $3.6 million.
8. Recent Accounting Pronouncements Adopted
As of January 1,2025, the Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax
Disclosures, which provides for expanded disclosures primarily related to income taxes paid and the rate reconciliation. As a result,
the Company has adopted the disclosure requirements of this pronouncement in Note 4 – Income Taxes to the consolidated financial
statements.
22