AFFM » Topics » PART IV

These excerpts taken from the AFFM 10-K filed Mar 31, 2009.

PART I

 

Item 1.

BUSINESS

Affirmative Insurance Holdings, Inc., formerly known as Instant Insurance Holdings, Inc., was incorporated in Delaware in June 1998 and completed an initial public offering of its common stock in July 2004. In this report, the terms “Affirmative,” “the Company,” “we,” “us” or “our” mean Affirmative Insurance Holdings, Inc. and all entities included in our consolidated financial statements. We are a distributor and producer of non-standard personal automobile insurance policies and related products and services for individual consumers in targeted geographic markets. Non-standard personal automobile insurance policies provide coverage to drivers who find it difficult to obtain insurance from standard automobile insurance companies due to their lack of prior insurance, age, driving record, limited financial resources or other factors. Non-standard personal automobile insurance policies generally require higher premiums than standard automobile insurance policies for comparable coverage.

As of December 31, 2008, our subsidiaries included insurance companies licensed to write policies in 40 states, underwriting agencies, and retail agencies with 219 owned stores and 33 operating franchise retail store locations and relationships with two unaffiliated underwriting agencies. We are currently active in offering insurance directly to individual consumers through retail stores in 10 states (Louisiana, Texas, Illinois, Alabama, Florida, Missouri, Indiana, South Carolina, Kansas and Wisconsin) including our franchised stores in Florida and distributing our own insurance policies through 8,000 independent agents or brokers in 10 states (Louisiana, Texas, Illinois, California, Michigan, Florida, Missouri, Indiana, South Carolina and New Mexico).

On January 31, 2007, we completed the acquisition of USAgencies L.L.C. (USAgencies), a non-standard automobile insurance distributor and provider headquartered in Baton Rouge, Louisiana, in a fully-financed all cash transaction valued at approximately $199.1 million. At the time of acquisition, USAgencies had two insurance companies, 91 operating retail sales locations in Louisiana, Illinois and Alabama selling its products directly to consumers through its owned retail stores, virtual call center and internet site and a premium finance company. The acquisition gives us a leading market position in Louisiana, the twelfth largest non-standard automobile insurance market. The transaction was effective as of January 1, 2007.

PART I

 





Item 1.

BUSINESS

SIZE="2">Affirmative Insurance Holdings, Inc., formerly known as Instant Insurance Holdings, Inc., was incorporated in Delaware in June 1998 and completed an initial public offering of its common stock in July 2004. In this report, the terms
“Affirmative,” “the Company,” “we,” “us” or “our” mean Affirmative Insurance Holdings, Inc. and all entities included in our consolidated financial statements. We are a distributor and producer of
non-standard personal automobile insurance policies and related products and services for individual consumers in targeted geographic markets. Non-standard personal automobile insurance policies provide coverage to drivers who find it difficult to
obtain insurance from standard automobile insurance companies due to their lack of prior insurance, age, driving record, limited financial resources or other factors. Non-standard personal automobile insurance policies generally require higher
premiums than standard automobile insurance policies for comparable coverage.

As of December 31, 2008, our
subsidiaries included insurance companies licensed to write policies in 40 states, underwriting agencies, and retail agencies with 219 owned stores and 33 operating franchise retail store locations and relationships with two unaffiliated
underwriting agencies. We are currently active in offering insurance directly to individual consumers through retail stores in 10 states (Louisiana, Texas, Illinois, Alabama, Florida, Missouri, Indiana, South Carolina, Kansas and Wisconsin)
including our franchised stores in Florida and distributing our own insurance policies through 8,000 independent agents or brokers in 10 states (Louisiana, Texas, Illinois, California, Michigan, Florida, Missouri, Indiana, South Carolina and New
Mexico).

On January 31, 2007, we completed the acquisition of USAgencies L.L.C. (USAgencies), a non-standard
automobile insurance distributor and provider headquartered in Baton Rouge, Louisiana, in a fully-financed all cash transaction valued at approximately $199.1 million. At the time of acquisition, USAgencies had two insurance companies, 91 operating
retail sales locations in Louisiana, Illinois and Alabama selling its products directly to consumers through its owned retail stores, virtual call center and internet site and a premium finance company. The acquisition gives us a leading market
position in Louisiana, the twelfth largest non-standard automobile insurance market. The transaction was effective as of January 1, 2007.

FACE="Times New Roman" SIZE="2">Our Operating Structure

We believe that the delivery of non-standard personal
automobile insurance policies to individual consumers requires the interaction of three basic operations, each with a specialized function:

 







  

Insurance companies, which possess the regulatory authority and capital necessary to issue insurance policies;

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 







  

Underwriting agencies, which supply centralized infrastructure and personnel required to design and service insurance policies that are distributed
through retail agencies; and

 







  

Retail agencies, which provide multiple points of sale under established local brands with personnel licensed and trained to sell insurance policies and
ancillary products to individual consumers.

Our three operating components often function as a
vertically integrated unit, capturing the premium and associated risk and the commission income and fees generated from the sale of an insurance policy. There are other instances, however, when each of our operations functions with unaffiliated
entities on an unbundled basis, either independently or with one or both of the other two operations. For example, our retail stores earn commission income and fees from sales of non-standard automobile insurance policies issued by third-party
insurance carriers.

We believe that our ability to enter into a variety of business relationships with third-parties
allows us to maximize sales penetration and profitability through industry cycles better than if we employed a single, vertically integrated operating structure.

SIZE="1"> 


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PART II

 

Item 5.

MARKET FOR REGISTRANT’S EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PART II

 





Item 5.

MARKET FOR REGISTRANT’S EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

STYLE="margin-top:6px;margin-bottom:0px">Market Information

Our common stock
is traded on the NASDAQ Global Select Market (formerly known as the NASDAQ National Market) under the symbol AFFM. The following table sets forth, for the periods indicated, the high, low and closing sales prices for our common stock as reported on
the NASDAQ Global Select Market:

 














































































































































































  First Quarter
Ended
March 31
 Second Quarter
Ended
June 30
 Third Quarter
Ended
September 30
 Fourth Quarter
Ended
December 31

2008

    

High

 $10.30 $8.96 $7.05 $4.39

Low

  7.13  6.25  2.53  0.80

Close

  7.98  6.80  3.16  1.45

Cash dividends declared per share

  0.02  0.02  0.02  0.02

2007

    

High

 $18.73 $18.43 $15.97 $11.88

Low

  15.84  13.75  11.23  9.05

Close

  17.30  15.25  11.50  10.38

Cash dividends declared per share

  0.02  0.02  0.02  0.02

PART III

 

Item 10.

Directors, Executive Officers and Corporate Governance

The information relating to this Item 10 is incorporated by reference to the disclosure in the sections headed “Item 1 — Election of Directors,” “Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance” in the Proxy Statement for our 2009 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2008.

 

Item 11.

Executive Compensation

The information relating to this Item 11 is incorporated by reference to the disclosure in the sections headed “Compensation Discussion and Analysis,” “Compensation Committee Report” and “ Executive Compensation” in the Proxy Statement for our 2009 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2008.

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information relating to this Item 12 is incorporated by reference to the disclosure in the sections headed “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement for our 2009 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2008.

PART IV

 

Item 15.

Exhibits and Financial Statement Schedules

 

  (a)

Financial Statements: See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Form 10-K.

 

  (b)

Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Form 10-K.

 

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PART III

 





Item 10.

Directors, Executive Officers and Corporate Governance

ALIGN="justify">The information relating to this Item 10 is incorporated by reference to the disclosure in the sections headed “Item 1 — Election of Directors,” “Executive
Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance” in the Proxy Statement for our 2009 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange
Commission no later than 120 days after December 31, 2008.

 





Item 11.

Executive Compensation

FACE="Times New Roman" SIZE="2">The information relating to this Item 11 is incorporated by reference to the disclosure in the sections headed “Compensation Discussion and Analysis,” “Compensation Committee Report” and
“ Executive Compensation” in the Proxy Statement for our 2009 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2008.

STYLE="font-size:18px;margin-top:0px;margin-bottom:0px"> 





Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%" ALIGN="justify">The information relating to this Item 12 is incorporated by reference to the disclosure in the sections headed “Equity
Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement for our 2009 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no
later than 120 days after December 31, 2008.

PART IV

 





Item 15.

Exhibits and Financial Statement Schedules

 






 (a)

Financial Statements: See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Form 10-K.

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 






 (b)

Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Form 10-K.

 


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These excerpts taken from the AFFM 10-K filed Mar 17, 2008.

PART IV

 

Item 15.

Exhibits and Financial Statement Schedules

 

  (a)

Financial Statements: See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Form 10-K.

 

  (b)

Exhibits: Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Form 10-K.

 

105


PART IV

 






Item 15.

Exhibits and Financial Statement Schedules

 






 (a)

Financial Statements: See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Form 10-K.

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px"> 






 (b)

Exhibits: Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Form 10-K.

 


105








This excerpt taken from the AFFM 10-K filed Mar 16, 2007.
Part III
 
Item 10.   Directors, Executive Officers and Corporate Governance
 
The information relating to this Item 10 is incorporated by reference to the disclosure in the sections headed “Item 1 — Election of Directors,” “Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance” in the Proxy Statement for our 2007 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2006.
 
Item 11.   Executive Compensation
 
The information relating to this Item 11 is incorporated by reference to the disclosure in the sections headed “Compensation Discussion and Analysis,” “Compensation Committee Report” and “Executive Compensation” in the Proxy Statement for our 2007 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2006.
 
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
The information relating to this Item 12 is incorporated by reference to the disclosure in the sections headed “Item 2 — Adoption of the Affirmative Performance Based Incentive Plan” and “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement for our 2007 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2006.
 
Item 13.   Certain Relationships and Related Transactions, and Director Independence
 
The information relating to this Item 13 is incorporated by reference to the disclosure in the section headed “Certain Relationships and Related Transactions” in the Proxy Statement for our 2007 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2006.
 
Item 14.   Principal Accounting Fees and Services
 
The information relating to this Item 14 is incorporated by reference to the disclosure in the section headed “Corporate Governance — Audit Committee — Fees Paid to Independent Auditor” in the Proxy Statement for our 2007 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2006.


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