If you've got an iffy driving record or let your insurance lapse, can you still get auto coverage? This company answers in the Affirmative. Affirmative Insurance Holdings, through its subsidiaries, writes and sells nonstandard auto insurance policies -- that is, coverage for drivers in high-risk categories due to their age, driving records, and other factors -- in a handful of states. It markets its own policies, as well as nonstandard coverage from other insurers, through some 200 company-owned retail locations (including A-Affordable, Driver's Choice, InsureOne, and USAgencies stores) and through independent and unaffiliated agents. Investment firm J.C. Flowers controls more than half of the company.
Affirmative Insurance offers customers both minimum-liability coverage and full coverage, plus add-ons such as towing and rental coverage. It also provides flexible payment plans (including installment plans and premium financing) for drivers shut out of the standard market because of limited financial resources. In addition to its core nonstandard insurance offerings, Affirmative's retail locations also sell some standard auto insurance and other personal lines issued by third-parties.
While Affirmative Insurance Holdings' subsidiaries are licensed to operate in some 40 states, it only actively markets policies in Alabama, California, Illinois, Indiana, Kansas, Louisiana, Missouri, South Carolina, Texas, and Wisconsin. Citing an unfavorable regulatory climate, in 2010 Affirmative withdrew from Florida and New Mexico and sold its retail operations after losing money in those markets. After an expensive push to expand its independent agents in Michigan, it pulled out of that market in 2011.
Geographic expansion and new product are still part of Affirmative Insurance's growth strategy, but first it needs to stem the flow of red ink across its revenue statements. Its revenues had fallen steadily since 2007, but dropped sharply in 2011 to $249.8 million. The 40% drop from $425.8 in 2010 was tied to $14.7 million in losses from its business in Michigan and a growing trend among its retail customers to buy products from third parties. Those same losses combined with a goodwill impairment charge of $140 million which amounted to a boat anchor attached to the company's net income. Its net income has not been positive since 2008 and in 2011 its losses were $164.2 million.
Affirmative has been working to reverse its losses by increasing some of its rates, shortening the length of some policies, and strengthening some of its standards. However, it will take some time for those actions to have a positive affect upon its revenues.
Private equity firm J.C. Flowers owns 51% of the company and holds two seats on its board of directors. Once a subsidiary of the now defunct Vesta Insurance Group, Affirmative Insurance Holdings was spun off as a public company in 2004. Vesta sold its remaining 40% in Affirmative to J.C. Flowers the following year. – less