A.M. Best Affirms Rating of First Acceptance Insurance Group; Assigns Issuer Credit Ratings

Business Wire, Dec 13, 2006

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of B (Fair) for First Acceptance Insurance Company, Inc. and separately-rated First Acceptance Insurance Company of Georgia, Inc., both members of the First Acceptance Insurance Group (First Acceptance) (Grand Prairie, TX). The rating outlook is stable.

In addition, A.M. Best has assigned issuer credit ratings (ICR) of "bb" to the operating insurance subsidiaries of First Acceptance and an ICR of "b-" to First Acceptance Corporation (NYSE: FAC), the publicly-traded holding company. The outlook for these ratings is stable.

The ratings reflect First Acceptance's above average underwriting leverage and historical premium growth. These negative rating factors are somewhat mitigated by First Acceptance's profitable business model and conservative investment strategy.

First Acceptance has experienced significant premium growth due to increased exposures, higher rate levels, assumed business growth and expansion into new states. Despite the continued strong surplus growth as a result of capital contributions and operating profits, the group maintains an elevated underwriting leverage position, which has constrained overall risk-adjusted capitalization.

First Acceptance's market presence has been developed through the extensive utilization of advertising, which has provided strong local brand recognition in its territories of operation. The high traffic environment generated by the company-owned retail offices presents it with opportunities to offer additional products and fee-based services. In recent years, favorable loss experience has been attributed to management's commitment to pricing, growth in its renewal book and more efficient use of technology.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.