DALLAS, May 15 /PRNewswire-FirstCall/ — GAINSCO, INC. today announced net income for the first quarter 2008 of $0.2 million, or $0.01 per common share, basic and diluted. This compares to first quarter 2007 net loss of $2.6 million, or $0.10 per common share, basic and diluted.
Gross premiums written during the first quarter 2008 were approximately 11% below gross premiums written in the comparable 2007 period. Gross premiums written by geographic region for the quarters ended March 31, 2008 and March 31, 2007, were as follows:
Three months ended(dollars in millions)March 31,20082007Regions:Southeast (Florida, South Carolina)$30.331.6South Central (Texas)$12.615.8Southwest (Arizona, Nevada, New Mexico)$8.510.0West (California)$0.61.1Total$52.058.5
GAAP ratios for the quarters ended March 31, 2008 and March 31, 2007, were as follows:
Three months endedMarch 31,20082007Total Company:C & CAE Ratio (1)74.8%84.0%Expense Ratio (2)(3)25.8%23.2%Combined Ratio(2)100.6%107.2%Nonstandard Personal Auto:C & CAE Ratio (1)74.8%86.7%(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, which include interest expense on the note payableand subordinated debentures.(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 quarter of 2008, the Company did not record material development for claims occurring in prior accident years for runoff lines. During the first quarter 2007, the Company recorded favorable development for claims occurring in prior accident years for runoff lines of $1.4 million.
As regards the Company’s nonstandard personal auto business, the Company recorded during the first quarter 2008 unfavorable development for claims occurring in prior accident years of $1.7 million. For the first quarter 2007, the Company recorded unfavorable development for claims occurring in prior accident years for nonstandard personal auto of $6.2 million. In the first quarter 2008, the unfavorable development for prior accident years included approximately $0.3 million related to extra-contractual claims.
As of March 31, 2008, the Company had $67.7 million in net unpaid claims and claims adjustment expenses (“C&CAE”) (Unpaid C&CAE of $75.5 million less Ceded unpaid C&CAE of $7.8 million), compared to net unpaid C&CAE at December 31, 2007 of $66.0 million (Unpaid C&CAE of $74.7 million less Ceded unpaid C&CAE of $8.7 million). These amounts include net unpaid C&CAE in respect of the Company’s runoff lines of $9.9 million at March 31, 2008, and $10.3 million at December 31, 2007. As of March 31, 2008, the outstanding inventory of runoff claims was 51, compared to 47 at December 31, 2007.
As of March 31, 2008, the Company’s Shareholders’ equity was $64.6 million, Subordinated debentures were $43.0 million and Note payable was $1.8 million. These compare to Shareholders’ equity of $66.0 million, Subordinated debentures of $43.0 million and Note payable of $1.9 million at December 31, 2007.
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 auto insurance products are distributed through independent 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 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) 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 subsidiary, 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, 2007, 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, 2008 and March 31, 2007 follow.)
GAINSCO, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)Three months endedMarch 31,20082007Net premiums earned$43,34051,463Net investment income2,1342,422Net realized gains81–Agency revenues2,9853,307Other income, net2652Total revenues48,56657,244Claims & CAE incurred32,41643,226Policy acquisition costs7,1779,424Underwriting and operating expenses7,8556,741Interest expense, net9391,023Income (loss) before Federal income taxes179(3,170)Federal income taxes12(620)Net income (loss)$167(2,550)Income (loss) per common share:Basic$0.01(0.10)Diluted$0.01(0.10)GAINSCO, INC. AND SUBSIDIARIESOTHER INFORMATION(In thousands, except per share data)Three months endedMarch 31,20082007Gross premiums written$51,96658,463GAAP RATIOS:C & CAE Ratio (1)74.8%84.0%Expense Ratio (2)(3)25.8%23.2%Combined Ratio (2)100.6%107.2%(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 theholding company, which include interest on the note payable andsubordinated debentures.(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, both of GAINSCO,INC., i[email protected]
Web site: http://www.gainsco.com/