GAINSCO Reports 1st Quarter Results DALLAS, May 13
/PRNewswire-FirstCall/ -- GAINSCO, INC. (OTC:GNAC) (BULLETIN BOARD:
GNAC) today reported net income for the first quarter 2005 of $1.1
million. After the accretion of the discount on the Redeemable
Preferred Stock of $1.1 million (including $0.9 million of
accretion on the Redeemable Preferred Stock that was retired as
part of the January 2005 recapitalization transaction) and
dividends on the Redeemable Preferred Stock of $0.3 million, net
loss available to common shareholders for the first quarter 2005
was $0.2 million, or $0.00 per common share, basic and diluted. For
the first quarter 2004, net income was $1.1 million. After the
accretion of the discount on the Redeemable Preferred Stock of $0.8
million and the accrual of dividends on the Redeemable Preferred
Stock of $0.2 million, net income available to common shareholders
and earnings per common share, basic and diluted, for the first
quarter 2004 were break-even. For all periods presented, the
effects of common stock equivalents and convertible preferred stock
are antidilutive. Therefore, basic and diluted per share results
are reported as the same number. "The Company continued to
experience profitable operating results during the first quarter
from its nonstandard personal automobile insurance business.
Premium revenues also increased substantially as a result of our
multi-state diversification and expansion initiatives.
Additionally, this quarter the Company started making substantial
new investments in infrastructure, management, and operating
personnel in support of our current growth and long- term business
model. While we are excited about our long-term possibilities, the
challenges and risks associated with our strategic plan are
significant," said Glenn W. Anderson, GAINSCO's president and chief
executive officer. Net premiums written and earned for the quarters
ended March 31, 2005 and March 31, 2004, are as follows: Quarter
ended (dollars in thousands) March 31 2005 2004 Net premiums
written $ 22,607 10,886 Net premiums earned $ 14,752 8,500 The
increases in Net premiums written and earned from the prior period
relate to the nonstandard personal auto business in Florida and the
startup nonstandard personal auto operations in Texas, Arizona,
Nevada and California. The Company's capital base (total assets
less total liabilities) at March 31, 2005 was $50.9 million. This
amount consisted of Shareholders' Equity of $34.7 million and
Redeemable convertible preferred stock -- Series A ("Preferred
Stock"), which is classified under generally accepted accounting
principles ("GAAP") as mezzanine financing in the aggregate amount
of $16.2 million. At March 31, 2005, there was $2.1 million of
unaccreted discount on Preferred Stock that remained in
Shareholders' Equity. At March 31, 2005, Shareholders' Equity per
common share was $0.57 (which includes unaccreted discount on
Preferred Stock of $0.04 per common share). Shareholders' Equity
less such unaccreted discount was $0.53 per common share. The
aggregate redemption value of the Preferred Stock at March 31, 2005
was its stated value of $18.1 million. Combined statutory
policyholders' surplus at the end of the first quarter 2005 was
$43.7 million and compares to combined statutory policyholders'
surplus at December 31, 2004 of $41.5 million. The combined
statutory policyholders' surplus at the end of the first quarter
2005 does not include $0.3 million of after-tax, unrealized capital
gains that existed in the statutory bond portfolios. The Company's
net unpaid claims and claim adjustment expenses (Unpaid claims and
claim adjustment expenses of $87.7 million less Ceded unpaid claims
and claim adjustment expenses of $32.4 million) at March 31, 2005
were $55.3 million, compared to $58.5 million (Unpaid claims and
claim adjustment expenses of $95.5 million less Ceded unpaid claims
and claim adjustment expenses of $37.0 million) at December 31,
2004. These balances do not include the beneficial effect of ceded
reserves to a reinsurer under a reserve reinsurance cover agreement
in the amount of $5.5 million at March 31, 2005, and $6.2 million
at December 31, 2004 (the balances of which are included in
Reinsurance balances receivable). The net reduction in the reserve
balances from December 31, 2004 to March 31, 2005 is primarily
attributable to the exiting of commercial lines through ongoing
settlement of these claims. In addition, there was favorable
development in commercial lines and nonstandard personal auto. As
of March 31, 2005, 218 commercial claims remained, compared to 264
at December 31, 2004 and 442 at March 31, 2004. GAAP ratios for the
quarters ended March 31, 2005 and March 31, 2004, are as follows:
Quarter ended March 31 2005 2004 Claims and CAE Ratio 68.0 % 64.2 %
Expense Ratio 24.0 % 30.6 % Combined Ratio 92.0 % 94.8 % The GAAP
combined ratios and GAAP expense ratios presented above do not
include expenses of the holding company. As previously announced,
on January 21, 2005, the Company closed the restructuring
transaction more fully described in the Company's Form 10-K filed
with the Securities and Exchange Commission on March 30, 2005. As a
result of the restructuring transaction, the number of shares of
Common Stock outstanding increased from 21,169,736 to 61,084,960.
Goff Moore Strategic Partners, L.P. owns approximately 33% of the
outstanding Common Stock of the Company, Robert W. Stallings, the
Company's Chairman of the Board, owns approximately 22% and James
R. Reis, Executive Vice President of the Company, owns
approximately 11%. GAINSCO, INC. is a Dallas, Texas-based holding
company. The Company's nonstandard personal automobile insurance
products are distributed through retail agents in Florida, Texas,
Arizona, Nevada and California. Its insurance company subsidiaries
are General Agents Insurance Company of America, Inc. and MGA
Insurance Company, Inc. Statements made in this release that are
qualified with words such as "are excited about our long-term
possibilities," etc. are forward-looking statements. Investors are
cautioned that important factors, representing certain risks and
uncertainties, could cause actual results to differ materially from
those contained in the forward-looking statements, and they should
not place undue reliance on such statements. These factors include,
but are not limited to, (a) the change in operational risks
associated with increased premium production and expansion into new
markets or states, (b) heightened competition from existing
competitors and new competitor entrants into the Company's markets,
(c) the extent to which market conditions firm up, the acceptance
of higher prices in the market place and the Company's ability to
realize and sustain higher rates, (d) contraction of the markets
for the Company's business, (e) factors considered by A.M. Best in
its rating of the Company and acceptability of the Company's
current A.M. Best rating of "B-" (Fair), with a stable outlook, or
its future rating, to its end markets, (f) the Company's ability to
effectively adjust and settle remaining claims associated with its
exit from the commercial insurance business, (g) the ongoing level
of claims and claims-related expenses and the adequacy of claim
reserves, (h) the outcome of pending litigation, (i) the
effectiveness of investment strategies implemented by the Company's
internal investment manager, (j) continued justification of
recoverability of goodwill in the future, (k) the availability of
reinsurance and the ability to collect reinsurance recoverables,
including amounts that may become recoverable from insurers with
less than A.M. Best "Secure" ratings, (l) the limitation on the
Company's ability to use net operating loss carryforwards as a
result of constraints caused by ownership changes within the
meaning of Internal Revenue Code Section 382, and (m) general
economic conditions, including fluctuations in interest rates. In
addition, the actual emergence of losses and loss expenses may
vary, perhaps materially, from the Company's estimates thereof,
particularly with respect to new business and new markets, because
(a) estimates of loss and loss expense liabilities are subject to
large potential errors of estimation as the ultimate disposition of
claims incurred prior to the financial statement date, whether
reported or not, is subject to the outcome of events that have not
yet occurred (e.g. jury decisions, court interpretations,
legislative changes, subsequent damage to property, changes in the
medical condition of claimants, public attitudes and
social/economic conditions such as inflation), (b) estimates of
losses do not make provision for extraordinary future emergence of
new classes of losses or types of losses not sufficiently
represented in the Company's historical data base or which are not
yet quantifiable, and (c) estimates of future costs are subject to
the inherent limitation on the ability to predict the aggregate
course of future events. A forward-looking statement is relevant
only as of the date the statement is made and the Company
undertakes no obligation to update any forward-looking statement to
reflect events or circumstances arising after the date on which the
statement was made. Please refer to the Company's recent SEC
filings, including the Current Report on Form 8-K filed on the date
hereof, for further information regarding factors that could affect
the Company's results. [The GAINSCO, INC. and Subsidiaries
Consolidated Statements of Operations and Other Information for the
quarters ended March 31, 2005 and March 31, 2004 follow.] GAINSCO,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In
thousands, except per share data) Quarter ended March 31 2005 2004
Net premiums earned $ 14,752 8,500 Net investment income 602 608
Net realized gains 0 386 Other income 2,160 1,070 Total revenues
17,514 10,564 Claims & CAE incurred 10,037 5,459 Policy
acquisition costs 2,124 1,309 Underwriting and operating expenses
4,209 2,745 Income before Federal income taxes 1,144 1,051 Federal
income taxes 0 9 Net income $ 1,144 1,060 Net income (loss)
available to common shareholders $ (200) 6 Income per common share,
basic and diluted * $ 0.00 0.00 * The effects of convertible
preferred stock and common stock equivalents are antidilutive for
both periods; therefore, diluted earnings per share is reported the
same as basic earnings per share. GAINSCO, INC. AND SUBSIDIARIES
OTHER INFORMATION ($ in thousands) Gross premiums written $ 22,817
10,936 Net premiums written $ 22,607 10,886 GAAP RATIOS: Claim
& CAE Ratio 68.0% 64.2% Expense Ratio 24.0% 30.6% Combined
Ratio 92.0% 94.8% DATASOURCE: GAINSCO, INC. CONTACT: Scott A.
Marek, Asst. Vice President-IR, +1-214-647-0427, or Richard M.
Buxton, Senior Vice President, +1-214-647-0428, both of GAINSCO,
INC., Web site: http://www.gainsco.com/
Copyright