GAINSCO Reports 3rd Quarter 2010 Results

DALLAS, Nov. 11, 2010 /PRNewswire-FirstCall/ — GAINSCO, INC. (NYSE Amex: GAN) today announced net income for the third quarter 2010 of $3.9 million, or $0.82 per common share, basic and diluted. This compares to third quarter 2009 net income of $0.2 million, or $0.04 per common share, basic and diluted. Net income for the nine months ended September 30, 2010 was $7.6 million, or $1.60 per common share, basic and diluted. This compares to net income of $3.8 million for the nine months ended September 30, 2009, or $0.80 per common share, basic and diluted.

During the third quarter of 2010 the Company reduced the valuation allowance associated with the deferred tax asset by approximately $1.9 million. As of September 30, 2010, the Company had three years of cumulative taxable income amounting to approximately $7.5 million. Based on a review of available evidence in accordance with applicable accounting literature, management concluded that it is more likely than not that the Company will have future taxable income to utilize this $1.9 million deferred tax asset prior to its expiration. As of September 30, 2010, the deferred tax benefit before valuation allowance was $26.1 million and the valuation allowance was $24.2 million ($5.06 per share).

Gross premiums written decreased approximately 10% during the third quarter of 2010 and approximately 17% during the nine months ended September 30, 2010, from gross premiums written in the comparable 2009 periods. Gross premiums written by geographic region for the quarters and nine months ended September 30, 2010 and 2009, were as follows:

__

__ __ Quarter ended__ __ Nine Months ended__

(dollars in millions)__ __ September 30__ __ September 30__

__ __ 2010__ 2009__ __ 2010__ 2009__

Regions:__ __ __ __ __ __ __

Southeast (Florida, Georgia, South Carolina)__ $__ 26.5__ 26.0__ __ 75.5__ 87.0__

Southwest (Arizona, California, Nevada, New Mexico, Texas)__ __ 14.8__ 19.7__ __ 44.6__ 56.9__

Total__ $__ 41.3__ 45.7__ __ 120.1__ 143.9__

__ __ __ __ __ __ __

__Under accounting principles generally accepted in the United States (GAAP), ratios for the quarters and nine months ended September 30, 2010 and 2009, were as follows:

__

__ Quarter ended__ __ Nine Months ended__

__ September 30__ __ September 30__

__ 2010__ 2009__ __ 2010__ 2009__

Total Company:__ __ __ __ __ __

C & CAE Ratio (1)__ 71.5 %__ 75.8 %__ __ 73.2 %__ 73.3 %__

Expense Ratio (2)(3)__ 25.3 %__ 26.2 %__ __ 24.6 %__ 25.6 %__

Combined Ratio (2)__ 96.8 %__ 102.0 %__ __ 97.8 %__ 98.9 %__

__ __ __ __ __ __

Nonstandard Personal Auto:__ __ __ __ __ __

C & CAE Ratio (1)__ 71.5 %__ 77.8 %__ __ 73.2 %__ 75.2 %__

__ __ __ __ __ __

(1) C & CAE is an abbreviation for Claims and claims adjustment expenses, stated as a percentage of net premiums earned.(2) The Expense Ratio and Combined Ratio do not reflect expenses of the holding company, which include interest expense on the note payable and subordinated debentures.(3) Commissions, change in deferred acquisition costs, underwriting expenses and operating expenses (insurance subsidiary only) are offset by agency revenues and are stated as a percentage of net premiums earned.__The Company continues to adjust and settle claims associated with its runoff lines. For the third quarter of 2010, no material development for claims occurring in prior accident years for the Company’s runoff lines was recorded. During the third quarter of 2009, the Company’s runoff lines recorded favorable development for the settlement of claims occurring in prior accident years of $0.9 million. For the nine months ended September 30, 2010, no material development for claims occurring in prior accident years for the Company’s runoff lines was recorded. For the nine months ended September 30, 2009, the Company’s runoff lines recorded favorable development for the settlement of claims occurring in prior accident years of $2.4 million.As regards the Company’s nonstandard personal auto business during the third quarter of 2010, the Company recorded favorable development for claims occurring in prior accident years of $0.7 million. During the third quarter of 2009, the Company recorded favorable development for claims occurring in prior accident years for nonstandard personal auto of $0.4 million. For the nine months ended September 30, 2010, the Company recorded favorable development for claims occurring in prior accident years for nonstandard personal auto of $3.3 million. For the nine months ended September 30, 2009, the Company recorded favorable development for claims occurring in prior accident years for nonstandard personal auto of $3.8 million.As of September 30, 2010, the Company had $65.3 million in net unpaid claims and claims adjustment expenses (“C&CAE”) (Unpaid C&CAE of $68.6 million less Ceded unpaid C&CAE of $3.3 million), compared to net unpaid C&CAE at June 30, 2010 of $67.1 million (Unpaid C&CAE of $70.5 million less Ceded unpaid C&CAE of $3.4 million). These amounts include net unpaid C&CAE in respect of the Company’s runoff lines of $2.1 million at September 30, 2010, and $2.5 million at June 30, 2010.As of September 30, 2010, the Company’s Shareholders’ equity was $71.7 million and Subordinated debentures was $43.0 million. The Company paid off the remaining outstanding balance on the Note payable of $0.9 million during the third quarter. These compare to Shareholders’ equity of $66.3 million, Subordinated debentures of $43.0 million and Note payable of $0.9 million at June 30, 2010.GAINSCO, INC. is a Dallas, Texas- based holding company established in 1978. The Company, through its insurance brand, GAINSCO Auto Insurance(R), specializes in minimum- limits personal auto coverage and actively distributes its nonstandard personal auto products through independent retail agents in Florida, Georgia and South Carolina (Southeast Region) and in Arizona, New Mexico and Texas (Southwest Region). Its insurance company subsidiary is MGA Insurance Company, Inc.Some of the statements made in this release may be forward-looking statements. Forward-looking statements relate to future events or future financial performance and may involve known or unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.These forward-looking statements reflect current views but are based on assumptions and are subject to risks, uncertainties and other variables which should be considered when making an investment decision, including (a) current and future economic conditions and uncertainties and disruptions in financial markets that may materially and adversely affect our business (including the heightened potential for claims fraud), operations, capital and liquidity, (b) the unpredictability of governmental actions affecting financial institutions, other financial firms and rating agencies, (c) operational risks and other challenges associated with growth into new and unfamiliar markets and states, (d) adverse market conditions, including heightened competition, (e) the Company’s ability to sustain adequate premium volume to operate profitably, (f) factors considered by A.M. Best in the rating of our insurance subsidiary, and the acceptability of our current rating, or a future rating, to agents and customers, (g) the Company’s ability to adjust and settle the remaining claims associated with its runoff business on terms consistent with its estimates and reserves, (h) the adoption or amendment of legislation or regulations, uncertainties in the outcome of litigation and adverse trends in litigation, (i) inherent uncertainty arising from the use of estimates and assumptions in decisions about pricing and reserves, (j) the effects on claims levels or business operations resulting from natural disasters and other adverse weather conditions, (k) the availability of reinsurance and the Company’s ability to collect reinsurance recoverables, (l) the availability and cost of capital, which may be required in order to implement the Company’s strategies, and (m) limitations on the Company’s ability to use net operating loss carryforwards. Please refer to the Company’s recent SEC filings and the Annual Report on Form 10-K for the year ended December 31, 2009, for more information regarding factors that could affect the Company’s results.Forward-looking statements are relevant only as of the dates made, and the Company undertakes no obligation to update any forward-looking statement to reflect new information, events or circumstances after the date on which the statement is made. All written or oral forward-looking statements that are made by or are attributable to the Company are expressly qualified in their entirety by this cautionary notice. Actual results may differ significantly from the results discussed in these forward-looking statements.[The GAINSCO, INC. and Subsidiaries unaudited Condensed Consolidated Statements of Operations and Other Information for the quarters and nine months ended September 30, 2010 and 2009, follow.]

GAINSCO, INC. AND SUBSIDIARIES__

CONSOLIDATED STATEMENTS OF OPERATIONS__

($ in thousands, except per share data)__

__

__ __ __ __ __ __ __ __ __ __

__ __ Quarter ended__ __ __ Nine months ended__

__ __ September 30__ __ __ September 30__

__ __ 2010__ __ 2009__ __ __ 2010__ __ 2009__

Net premiums earned__ $__ 37,984__ __ 47,363__ __ $__ 117,003__ __ 141,503__

Net investment income__ __ 1,373__ __ 1,704__ __ __ 4,363__ __ 5,059__

Realized investment gains (losses), net:__ __ __ __ __ __ __ __ __ __

Other-than-temporary impairment losses__ __ (38)__ __ (120)__ __ __ (385)__ __ (2,675)__

Other-than-temporary impairment losses transferred to__ __ __ __ __ __ __ __ __ __

Other comprehensive loss__ __ 0__ __ 0__ __ __ 0__ __ 2,361__

Other realized investment gains, net__ __ 442__ __ 811__ __ __ 2,062__ __ 1,514__

Total realized investment gains, net__ __ 404__ __ 691__ __ __ 1,677__ __ 1,200__

Agency revenues__ __ 2,614__ __ 3,430__ __ __ 8,040__ __ 10,014__

Other (expense) income, net__ __ (14)__ __ (3)__ __ __ 12__ __ (26)__

Total revenues__ __ 42,361__ __ 53,185__ __ __ 131,095__ __ 157,750__

Claims & CAE incurred__ __ 27,168__ __ 35,921__ __ __ 85,671__ __ 103,733__

Policy acquisition costs__ __ 5,810__ __ 7,709__ __ __ 18,175__ __ 23,278__

Underwriting and operating expenses__ __ 6,819__ __ 8,879__ __ __ 19,986__ __ 25,197__

Interest expense, net__ __ 488__ __ 487__ __ __ 1,387__ __ 1,631__

__ __ __ __ __ __ __ __ __ __

Income before Federal income taxes__ __ 2,076__ __ 189__ __ __ 5,876__ __ 3,911__

Federal income taxes__ __ (1,866)__ __ 20__ __ __ (1,772)__ __ 83__

Net income__ $__ 3,942__ __ 169__ __ $__ 7,648__ __ 3,828__

__ __ __ __ __ __ __ __ __ __

Earnings per common share:__ __ __ __ __ __ __ __ __ __

__ __ __ __ __ __ __ __ __ __

Basic__ $__ 0.82__ __ 0.04__ __ $__ 1.60__ __ 0.80__

Diluted__ $__ 0.82__ __ 0.04__ __ $__ 1.60__ __ 0.80__

__ __ __ __ __ __ __ __ __ __

__ __ __ __ __ __ __ __ __ __

__ __ __ __ __ __ __ __ __ __

GAINSCO, INC. AND SUBSIDIARIES__

OTHER INFORMATION__

($ in thousands)__

__

__

__ __ Quarter ended__ __ __ Nine months ended__

__ __ September 30__ __ __ September 30__

__ __ 2010__ __ 2009__ __ __ 2010__ __ 2009__

Gross premiums written__ $__ 41,281__ __ 45,739__ __ $__ 120,148__ __ 143,890__

__ __ __ __ __ __ __ __ __ __

__ __ __ __ __ __ __ __ __ __

GAAP RATIOS:__ __ __ __ __ __ __ __ __ __

C & CAE Ratio (1)__ __ 71.5%__ __ 75.8%__ __ __ 73.2%__ __ 73.3%__

Expense Ratio (2)(3)__ __ 25.3%__ __ 26.2%__ __ __ 24.6%__ __ 25.6%__

Combined Ratio (2)__ __ 96.8%__ __ 102.0%__ __ __ 97.8%__ __ 98.9%__

__ __ __ __ __ __ __ __ __ __

__ __ __ __ __ __ __ __ __ __

(1) C & CAE is an abbreviation for Claims and claims adjustment expenses, stated as a percentage of net premiums earned.__

(2) The Expense Ratio and Combined Ratio do not reflect expenses of the holding company, which include interest expense on the note payable and subordinated debentures.__

(3) Commissions, change in deferred acquisition costs, underwriting expenses and operating expenses (insurance subsidiary only) are offset by agency revenues and are stated as a percentage of net premiums earned.__

SOURCE GAINSCO, INC.

Originally published by GAINSCO, INC..

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