DALLAS, May 14 /PRNewswire-FirstCall/ — GAINSCO, INC. today reported net loss and net loss available to common shareholders for the first quarter 2007 of $2.6 million, or $0.10 per common share, basic and diluted. This compares to first quarter 2006 net income of $0.7 million and net loss available to common shareholders of $1.1 million, or $0.05 per common share, basic and diluted. Net income available to common shareholders for the first quarter 2006 included an approximately $1.4 million write-off of the unaccreted discount on redeemable preferred stock that was fully redeemed during the first quarter 2006.
Gross premiums written during the first quarter 2007 were approximately 6% above gross premiums written in the same period 2006. Gross premiums written by geographic region for the quarters ended March 31, 2007 and March 31, 2006, were as follows:
Three months ended(dollars in millions)March 3120072006Regions:Southeast (Florida, South Carolina)$31.631.5South Central (Texas)$15.815.4Southwest (Arizona, Nevada, New Mexico)$10.05.6West (California)$1.12.7Total$58.555.2
GAAP ratios for the quarters ended March 31, 2007 and March 31, 2006, were as follows:
Three months endedMarch 3120072006Total Company:C & CAE Ratio (1)84.0 %69.4 %Expense Ratio (2)(3)23.2 %30.1 %Combined Ratio(2)107.2 %99.5 %Nonstandard Personal Automobile:C & CAE Ratio (1)86.7 %73.1 %(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 theholding company.(3) Commissions, change in deferred acquisition costs, underwritingexpenses and operating expenses (insurance subsidiaries only) areoffset by agency revenues and are stated as a percentage of netpremiums earned.
The Company continues to adjust and settle claims associated with its runoff lines. For the first quarters of 2007 and 2006, the estimates of ultimate liabilities for prior periods for runoff lines were reduced each quarter by $1.4 million (reduction of 2.7 and 3.7 claims ratio points, respectively).
As regards the Company’s nonstandard personal automobile business, the Company’s estimates of ultimate liabilities for prior periods were increased during the first quarter 2007 by $5.0 million (increase of 9.6 claims ratio points), compared to an increase during the first quarter 2006 of $0.8 million (increase of 2.0 claims ratio points). A portion of the increase in the first quarter 2007 relates to a provision for extra-contractual obligations.
As of March 31, 2007, the Company had $62.7 million in net unpaid claims and claims adjustment expenses (“C&CAE”) (Unpaid C&CAE of $75.6 million less Ceded unpaid C&CAE of $12.9 million), compared to net unpaid C&CAE at December 31, 2006 of $63.5 million (Unpaid C&CAE of $77.9 million less Ceded unpaid C&CAE of $14.4 million). These amounts include net unpaid C&CAE in respect of the Company’s runoff lines of $13.8 million at March 31, 2007, and $15.9 million at December 31, 2006. As of March 31, 2007, the outstanding inventory of runoff claims was 70, compared to 73 at December 31, 2006.
As of March 31, 2007, the Company’s Shareholders’ equity was $82.4 million, Subordinated debentures were $43.0 million and Note payable was $2.0 million. These compare to Shareholders’ equity of $84.7 million, Subordinated debentures of $43.0 million and Note payable of $2.0 million at December 31, 2006.
The Company’s combined policyholders’ surplus at March 31, 2007 was $92.9 million. During the second quarter of 2007, the Company plans to contribute $4 million to policyholders’ surplus of one of its subsidiary insurance companies.
Certain prior year amounts have been reclassified to conform to current year presentation. In addition, some numbers may not add to totals shown due to rounding.
The effect of convertible preferred stock (fully redeemed in the first quarter 2006) caused diluted earnings per share to be antidilutive for the quarter ended March 31, 2006. Therefore, basic and diluted per common share amounts are reported as the same number. Additionally, per common share amounts for all periods presented have been adjusted for the rights offerings in November 2006 and August 2005, as well as the reverse stock split in November 2005.
GAINSCO, INC. is a Dallas, Texas-based holding company. The Company’s nonstandard personal automobile insurance products are distributed through retail agents in Florida and South Carolina (Southeast Region), Texas (South Central Region) and Arizona, Nevada and New Mexico (Southwest Region), and through an independent managing general agency in California (West Region). Its insurance company subsidiaries are General Agents Insurance Company of America, Inc. and 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) operational risks and other challenges associated with rapid growth into new and unfamiliar markets and states, (b) adverse market conditions, including heightened competition, (c) factors considered by A.M. Best in the rating of our insurance subsidiaries, and the acceptability of our current rating, or a future rating, to agents and customers, (d) the Company’s ability to adjust and settle the remaining claims associated with its runoff business on terms consistent with its estimates and reserves, (e) the adoption or amendment of legislation, uncertainties in the outcome of litigation and adverse trends in litigation and regulation, (f) inherent uncertainty arising from the use of estimates and assumptions in decisions about pricing and reserves, (g) the effects on claims levels or business operations resulting from natural disasters and other adverse weather conditions, (h) the availability of reinsurance and the Company’s ability to collect reinsurance recoverables, (i) the availability and cost of capital, which may be required in order to implement the Company’s strategies, and (j) limitations on the Company’s ability to use net operating loss carryforwards. Please refer to the Company’s recent SEC filings, including the Annual Report on Form 10-K for the year ended December 31, 2006, 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 Consolidated Statements of Operations and Other Information for the quarters ended March 31, 2007 and March 31, 2006 follow.]
GAINSCO, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)Three months endedMARCH 3120072006Net premiums earned$51,46338,758Net investment income2,4221,508Net realized losses–(4)Agency revenues3,3072,817Other income, net52(29)Total revenues57,24443,050Claims & CAE incurred43,22626,913Policy acquisition costs7,8096,696Underwriting and operating expenses8,3568,417Interest expense1,023460Income (loss) before Federalincome taxes(3,170)564Federal income taxes(620)(166)Net income (loss)$(2,550)730Net loss available to commonshareholders$(2,550)(1,108)Loss per common share, basic and diluted:Basic$(0.10)(0.05)Diluted*$(0.10)(0.05)* The effect of convertible preferred stock caused diluted earnings pershare to be antidilutive for the quarter ended March 31, 2006.Therefore, diluted income per common share is reported the same as basicincome per common share.GAINSCO, INC. AND SUBSIDIARIESOTHER INFORMATION(In thousands, except per share data)Three months endedMARCH 3120072006Gross premiums written$58,46355,201Net premiums written$58,13454,832GAAP RATIOS:C & CAE Ratio (1)84.0%69.4%Expense Ratio (2)(3)23.2%30.1%Combined Ratio (2)107.2%99.5%(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 theholding company.(3) Commissions, change in deferred acquisition costs, underwritingexpenses and operating expenses (insurance subsidiaries only) areoffset by agency revenues and are stated as a percentage of netpremiums earned.
CONTACT: Scott A. Marek, Asst. Vice President-IR, +1-972-629-4493, orRichard M. Buxton, Senior Vice President, +1-972-629-4408, [email protected],both of GAINSCO, INC.
Web site: http://www.gainsco.com/