DALLAS, March 11 /PRNewswire-FirstCall/ -- GAINSCO, INC.
(OTC Bulletin Board: GNAC) today reported net income for the fourth quarter
2004 of $1.8 million. After the accretion of the discount on the Redeemable
Preferred Stock of $0.9 million and dividends on the Redeemable Preferred
Stock of $0.3 million, net income available to common shareholders for the
fourth quarter 2004 was $0.6 million, or $0.03 per common share, basic and
diluted.
For the year ended December 31, 2004, net income was $5.5 million. After
the accretion of the discount on the Redeemable Preferred Stock of
$3.4 million and dividends on the Redeemable Preferred Stock of $1.1 million,
net income available to common shareholders for the twelve months ended
December 31, 2004 was $0.9 million, or $0.04 per common share, basic and
diluted.
"Our profit this quarter was due to the Company's continued success in its
nonstandard personal automobile insurance business and the realization of
capital gains in its investment portfolio. With the capital restructuring
transaction accomplished, the Company is now pursuing its long-term growth
plan in nonstandard personal automobile insurance. We began writing business
in Nevada and initiated our California program in the fourth quarter of 2004,
giving us additional momentum going into 2005," said Glenn W. Anderson,
GAINSCO's president and chief executive officer.
The Company is now writing nonstandard personal auto insurance in the five
states of Florida, Texas, Arizona, Nevada and California. As a result of the
expansion and diversification efforts currently in place, the Company
experienced significant growth in premiums written during the first two months
of 2005. The Company's implementation of its expansion plan is occurring in
an increasingly competitive environment and could be adversely impacted by
such market conditions.
Net premiums written and earned for the quarters and twelve months ended
December 31, 2004 and December 31, 2003, are as follows:
Quarter ended Twelve months ended
December 31 December 31
2004 2003 2004 2003
Net premiums written $ 12,031 9,577 $ 43,553 34,582
Net premiums earned $ 11,192 9,864 $ 39,066 34,389
The increases in Net premiums written and earned for all periods relate to
the nonstandard personal auto business in Florida and the startup nonstandard
personal auto operations in Texas, Arizona and Nevada.
The Company's capital base (total assets less total liabilities) at
December 31, 2004 was $46.5 million. This amount consisted of Shareholders'
Equity of $12.9 million and three series of Redeemable Preferred Stock, which
are classified under generally accepted accounting principles ("GAAP") as
mezzanine financing in the aggregate amount of $33.7 million. At December 31,
2004, $3.9 million of unaccreted discount on Redeemable Preferred Stock was
included in Shareholders' Equity. At December 31, 2004, Shareholders' Equity
per common share was $0.61 (which includes unaccreted discount on Redeemable
Preferred Stock of $0.19 per common share). Shareholders' Equity less such
unaccreted discount was $8.9 million or $0.42 per common share. The aggregate
redemption value of Redeemable Preferred Stock at December 31, 2004 was its
stated value of $37.6 million.
Combined statutory policyholders' surplus at the end of the fourth quarter
2004 was $41.5 million and compares to combined statutory policyholders'
surplus at September 30, 2004 of $39.8 million. The combined statutory
policyholders' surplus at the end of the fourth quarter 2004 does not include
$0.5 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 $95.5 million less Ceded unpaid claims
and claim adjustment expenses of $37.0 million) at December 31, 2004 were
$58.5 million, compared to $62.4 million (Unpaid claims and claim adjustment
expenses of $100.5 million less Ceded unpaid claims and claim adjustment
expenses of $38.1 million) at September 30, 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 $6.2 million at December 31,
2004, and $8.4 million at September 30, 2004 (the balances of which are
included in Reinsurance balances receivable). The net reduction in the
reserve balances from September 30, 2004 to December 31, 2004 is primarily
attributable to the exiting of commercial lines and the ongoing settlement of
the remaining commercial lines claims. In addition, there was favorable
development in nonstandard personal auto.
GAINSCO continued to exit the commercial lines business through the
ongoing process of settling and reducing its remaining inventory of commercial
claims. As of December 31, 2004, 264 commercial claims remained, compared to
327 at September 30, 2004 and 525 at December 31, 2003.
GAAP ratios for the quarters and twelve months ended December 31, 2004 and
December 31, 2003, are as follows:
Quarter ended Twelve months ended
December 31 December 31
2004 2003 2004 2003
Claims and Claims Adjustment Ratio 72.2% 82.4% 69.1% 74.2%
Expense Ratio 26.7% 18.4% 27.5% 30.9%
Combined Ratio 98.9% 100.8% 96.6% 105.1%
The expense ratio for the fourth quarter 2003 is lower than the same
period in 2004 due to an increase in fourth quarter 2003 earned premiums and a
decrease, for the same period 2003, in the allowance for doubtful accounts for
reinsurance balances receivable associated with the Company's commutation of a
reinsurer's participation on several reinsurance contracts. Also, the GAAP
combined ratios and GAAP expense ratios presented above do not include
expenses of the holding company.
For the fourth quarter 2003, net income was $1.5 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 for the fourth
quarter 2003 was $0.5 million, or $0.02 per common share, basic and diluted.
For the twelve months ended December 31, 2003, net income was $3.4 million.
After including the effect of the accretion of the discount on the Redeemable
Preferred Stock of $3.0 million and the accrual of dividends on the Redeemable
Preferred Stock of $0.7 million, net loss available to common shareholders for
the twelve months ended December 31, 2003 was $0.4 million, or $0.02 per
common share, basic and diluted. 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.
On January 21, 2005, the Company closed the restructuring transaction more
fully described in the Company's proxy statement dated December 22, 2004. The
recapitalization substantially reduced and extended the Company's previous
Preferred Stock redemption obligations and resulted in cash proceeds to the
Company of $8.7 million (before an estimated total of $2.2 million in
transaction costs, of which $2.0 million was recorded as deferred expenses in
Other assets at December 31, 2004, and $3.4 million used to redeem the Series
C Preferred Stock). 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. now owns 33% of the outstanding Common
Stock of the Company, Robert W. Stallings, the Company's Chairman of the
Board, owns 22% and First Western Capital, LLC, a limited liability company
owned by James R. Reis, owns 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
"could be impacted," 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 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 and twelve months ended December 31,
2004 and December 31, 2003 follow.]
GAINSCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Twelve months
Quarter ended ended
December 31 December 31
2004 2003 2004 2003
Net premiums earned $11,192 9,864 $39,066 34,389
Net investment income 540 719 2,309 3,128
Realized gains 1,000 784 1,910 2,050
Other income 1,637 1,040 5,592 4,762
Total revenues 14,369 12,407 48,877 44,329
Claims & CAE incurred 8,080 8,127 27,008 25,516
Commissions 1,464 1,030 5,816 4,117
Change in deferred acquisition costs (151) (161) (1,090) 383
Interest expense 0 0 0 104
Underwriting and operating expenses 3,183 1,910 11,643 10,833
Income before Federal income taxes 1,793 1,501 5,500 3,376
Federal income taxes 0 0 (9) 0
Net income $1,793 1,501 $5,509 3,376
Net income (loss) available to
common shareholders $587 516 $928 (389)
Income (loss) per common share, basic
and diluted * $0.03 0.02 $0.04 (0.02)
* The effects of convertible preferred stock and common stock
equivalents are antidilutive for both periods therefore, diluted
earnings per share is reported the same as basic earnings per share.
GAINSCO, INC. AND SUBSIDIARIES
OTHER INFORMATION
($ in thousands)
Gross premiums written $12,161 9,572 $43,826 34,594
Net premiums written $12,031 9,577 $43,553 34,582
GAAP RATIOS:
Claim & CAE Ratio 72.2% 82.4% 69.1% 74.2%
Expense Ratio 26.7% 18.4% 27.5% 30.9%
Combined Ratio 98.9% 100.8% 96.6% 105.1%
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SOURCE GAINSCO, INC.
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Related links:
http://www.gainsco.com
CONTACT:
Scott A. Marek, Asst. Vice President-Investor
Relations, +1-214-647-0427, or Richard M. Buxton, Senior Vice
President, +1-214-647-0428, both of GAINSCO, INC., ir@gainsco.com
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