Affirmative Insurance Holdings Reports First Quarter 2009 Fi

ADDISON, Texas, May 11, 2009 (GLOBE NEWSWIRE) -- Affirmative Insurance Holdings, Inc. (Nasdaq:AFFM), a leading distributor and producer of non-standard personal automobile insurance policies, today reported consolidated financial results for the first quarter ended March 31, 2009.

For the First Quarter of 2009:-- Total gross premiums written for the three months ended March 31,2009 decreased $7.0 million to $112.2 million, or 5.9%, comparedwith the first quarter of 2008.-- Net investment income declined by $2.1 million, or 45.8%, to $2.5million for the three months ended March 31, 2009, compared with$4.6 million in the first quarter of 2008. The average investmentyield in 2009 was 2.98% (4.17% on a taxable-equivalent basis),compared with 4.29% (6.00% on a taxable-equivalent basis) in2008.-- Losses and loss adjustment expenses for the three months endedMarch 31, 2009 decreased $1.7 million, or 2.4%, to 74.7% of netearned premium (the loss ratio), compared with a loss ratio of75.2% in the first quarter of 2008.-- Selling, general and administrative expenses increased $6.2million, or 17.7%, to $41.6 million, compared with $35.4 millionin the first quarter of 2008.-- Operating income for the three months ended March 31, 2009 was$4.2 million, a 64.5% decrease from the $11.9 million in the sameperiod of the prior year.-- Total interest expense was $4.1 million, compared with $5.5million in the same period of the prior year.-- Net income for the three months ended March 31, 2009 of $10.8million, or $0.70 per share, compared with net income of $4.6million, or $0.30 per share, in the first quarter of 2008.

Additional Financial Information

Certain events affected the comparability of 2009 versus 2008 quarterly results, as outlined below.

-- On March 27, 2009, the Company entered into an amendment to oursenior secured credit facility, which was considered anextinguishment of debt under generally accepted accountingprinciples. As a result, the Company recorded a $19.4 millionpretax, non-cash gain on extinguishment of debt. The $19.4million debt extinguishment gain resulted from a $24.2 milliondiscount representing the difference between the carrying valueof the original credit agreement and the fair value of the newmodified credit agreement, net of $0.7 million of term lenderconsent fees and the write-off of $4.1 million of deferred debtissuance costs relating to the original credit agreement.-- As a result of the debt extinguishment, the Company's twointerest rate swaps no longer qualified for hedge accounting.Accordingly, the amount recorded in accumulated othercomprehensive loss through March 27, 2009 of $4.4 million wasreclassified to earnings as loss on interest rate swaps.-- $4.3 million of the increase in selling, general andadministrative expenses in the first quarter of 2009 was relatedto a reduction in ceding commission income. Effective January 1,2009, the Company discontinued ceding 25% of its Louisiana andAlabama business under the previous quota share agreement.Amortization of deferred policy acquisition costs is a majorcomponent of selling, general and administrative expenses.

About Affirmative

Affirmative Insurance Holdings, Inc. is 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.

The Affirmative Insurance Holdings, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3443

AFFIRMATIVE INSURANCE HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(in thousands, except per share data)Three Months EndedMarch 31,---------20092008----------------(Unaudited) Revenues Net premiums earned$ 93,225$ 94,868 Commission income and fees21,62021,485 Net investment income2,4694,559 Net realized gains (losses)(2,004)22 Other income2,598------------------Total revenues117,908120,934----------------Expenses Losses and loss adjustment expenses69,67671,361 Selling, general and administrative expenses41,61635,368 Depreciation and amortization2,4132,352----------------Total expenses113,705109,081----------------Operating income4,20311,853Gain on extinguishment of debt19,434-- Loss on interest rate swaps4,430-- Interest expense4,1425,513---------------- Income before income tax expense15,0656,340 Income tax expense4,2411,712----------------Net income$ 10,824$ 4,628================Net income per common share:Basic$0.70$0.30================Diluted$0.70$0.30================Weighted average common shares outstanding:Basic15,41515,415================Diluted15,41515,415================Dividends declared per common share$--$0.02================

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CONTACT: Affirmative Insurance Holdings, Inc.Michael J. McClure, Chief Financial Officer(630) 560-7205