Group Nine Acquisition (NASDAQ:GNAC)
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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/