GAINSCO Reports 4th Quarter and Year 2008 Results

 

Thursday, Mar 26,2009, 2:16:19 PM   Click:

PRNewswire-FirstCall
Published: Tuesday 24 March 2009
DALLAS, March 25 / PRNewswire-FirstCall / - GAINSCO, INC. (NYSE AMEX: GAN) today announced a net loss for the fourth quarter 2008 of $ 0.2 million, or $ 0.01 per share, of Basic and diluted. This compares to a fourth quarter 2007 net loss of $ 11.0 million, or $ 0.44 per common share, basic and diluted. Net loss for the year ended December 31, 2008 was $ 3.5 million, or $ 0.14 per common share, basic and diluted. This compares to a net loss of $ 18.6 million for the year ended December 31, 2007, or $ 0.74 per common share, basic and diluted.

During the fourth quarter of 2008, the Company recorded net realized losses of approximately $ 0.6 million ($ 0.03 per diluted share) primarily related to securities that are determined to have been less-declining market value. For the year ended 31 December 2008, the Company recorded net realized losses of approximately $ 6.3 million ($ 0.26 diluted earnings per common share), of which approximately $ 5.7 million related to reductions for the lowest decrease in the fair value of various investments. For each of the quarter and year ended 31 December 2007, the Company recorded net realized gains of approximately $ 4.6 million ($ 0.18 and $ 0.19 per diluted share, respectively). This amount was primarily due to a gain on sale in fourth quarter 2007, an affiliated insurance subsidiary, General Agents Insurance Company of America, Inc.

Gross premiums written increased by approximately 15% and decreased by approximately 2% in the fourth quarter and twelve months ended December 31, 2008, respectively, of gross premiums written in the same period in 2007. Gross premiums written by geographic region for the three and twelve months ended December 31, 2008 and 2007 were as follows:

Quarter endedTwelve months ended (millions of dollars) December December 31 312008200720082007 ----------------( Unaudited )----------- regions: South East (Florida, South Carolina) $ 28.721.1110.1102.2South Central (Texas) 7.08.041.245.4Southwest (Arizona, Nevada, New Mexico) 6.47.228.433.7West (California) 0.40.62.13.6 ------- ----- Total $ 42536 .9181.8184.9 ==================

Under accounting principles generally accepted in the United States ( "GAAP"), the ratios for the three and twelve months ended December 31, 2008 and 2007 were as follows:

Quarter endedTwelve months endedDecember 31 December 312008200720082007 ---------------- Total Company: C & CAE Ratio (1) 73.3% 87.8% 73.3% 81.7% Ratio costs (2) (3) 26.1% 28.6% 25.7% 25.9 %------ ------ ------------ Combined ratio (2) 99.4% 116.4% 99.0% 107.6 ======= ============ = %====== Nonstandard Personal Auto: C & CAE Ratio (1) 73.7% 87.9% 74.2% 82.9 %====== ====== ====== ======( 1) C & CAE is an abbreviation for Claims and claims adjustment expenses as a percentage of net premiums earned. (2) The expense ratio and combined ratio does not reflect expenses theholding company, which includes interest expense on subordinated debentures payableand Note (3). Commissions, change in deferred acquisition costs, underwritingexpenses and operating expenses (insurance subsidiaries only) areoffset by the agency and revenues are expressed in percentage of netpremiums won.

The Company continues to adjust and settle claims related to the flow of its lines. For the fourth quarter of 2008, the Company recorded runoff lines favorable development for claims occurring in prior accident years of $ 0.2 million. During the fourth quarter of 2007, the Company's runoff lines did not need to record material development for claims occurring in prior accident years. For the twelve months ended December 31, 2008 and 2007, runoff lines of favorable development for claims occurring in prior accident years of $ 1.4 million and $ 2.3 million, respectively.

Regarding the Company nonstandard personal auto business in the fourth quarter of 2008, the Company recorded favorable development for claims occurring in prior accident years of $ 0.4 million. During the fourth quarter of 2007, the Company recorded unfavorable for applications development occurring in prior accident years for nonstandard personal auto of $ 5.5 million. For the twelve months of 2008 and 2007, the Company recorded unfavorable for applications development occurring in prior accident years for nonstandard personal auto of $ 4.4 million and $ 16.0 million, respectively.

As of December 31, 2008, the Company has $ 73.1 million net of outstanding claims and claims adjustment expenses ( "C & CAE") (C & CAE unpaid $ 75.5 million less Ceded unpaid C & CAE of $ 2.4 million), compared to net unpaid C & CAE at September 30, 2008 of $ 69.6 million (Unpaid C & CAE of $ 72.6 million less Ceded Unpaid C & CAE of $ 3.0 million). These amounts include net unpaid C & CAE in respect of the Company's runoff lines of $ 7.1 million at December 31, 2008, and $ 7.6 million at September 30, 2008. As of December 31, 2008, outstanding receivables from the disposal of stocks was 30, compared to 38 at September 30, 2008.

As of December 31, 2008, the Company's shareholders was $ 55.3 million, Subordinated debentures were $ 43.0 million and Note payable was $ 0.9 million. These compare to shareholders of $ 56.3 million, Subordinated debentures of $ 43.0 million and Note payable of $ 1.6 million at September 30, 2008.

GAINSCO, INC. is a Dallas, Texas based holding company. The Corporation of the nonstandard personal auto insurance products are distributed through independent retail agents in Florida, South Carolina, and from the second quarter of 2009, Georgia (Southern), Texas (Central Region South) and Arizona, Nevada and New Mexico (Southwest Region), and through an independent agency of general management, California (Western Region). Its insurance company subsidiary MGA Insurance Company, Inc.

Certain statements in this press release May be forward-looking statements. Forward-looking statements relate to future events or future financial performance in May and involve known and unknown risks, uncertainties and other factors that May, the 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 the views, but are based on assumptions and are subject to risks, uncertainties and other variables that should be taken into consideration when making an investment decision, including: (a) current and future economic conditions and uncertainties and disruptions in financial markets in May that a material adverse effect on our business, operations, capital and liquidity, (b) the unpredictability of government actions affecting financial institutions, on the other financial companies and rating agencies, (c) operational risks and other challenges to growth in new and unfamiliar markets and states, (d) adverse market conditions, including increased competition, (e) the factors considered by AM Best rating of our insurance subsidiary, and acceptability of our notice, or a future rating, to agents and customers, (f) the ability of the society to adapt and settle other claims associated with its runoff business on terms consistent with its estimates of reserves, (g) the adoption or amendment of legislation or regulation, uncertainties in the outcome of litigation and adverse trends in litigation, (h) arising from the uncertainty inherent in the use of estimates and assumptions in decisions on prices and reservations, (i) the effects on the levels claims or operations resulting from natural disasters and other adverse weather conditions, (j) the availability of reinsurance and the Company's ability to collect reinsurance recoverable, (k) the availability and cost of capital, which in May be necessary in order to implement strategies of the Company, and (l) limitations on the Company's ability to use reports of net operating loss. Please refer to the Company's recent SEC and the Annual Report on Form 10-K for the year ended December 31, 2008, for more information concerning factors that could affect the outcome of the society.

Forward-looking statements are relevant only in the dates and the Company does not undertake to update forward-looking statements to reflect new information, events or circumstances after the date on which the declaration 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. May actual results to differ materially from the results discussed in these forward-looking statements.

[The GAINSCO, INC. and Subsidiaries Condensed Consolidated unaudited results and other information for the three and twelve months ended December 31, 2008 and 2007, continued.]

GAINSCO, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three months ended Twelve months endedDecember 31, December 31 ,-------------------- - --- 2008200720082007 ---------------- Net premiums earned 44,62043,430 $ 176606 $ 192767Net investment income1, 8072,2077,7289,201 Net realized (losses) gains (636) 4597 (6313) 4629Agency revenues3, 2063,04312,46112,795 Other products net1319527 ------- Total revenues49, 01053,296190,534 219399Claims & CAE incurred32, 72738,150129,562 157524Policy acquisition costs7, 6198, 46029,69035,652 underwriting and operating expenses8, 0327,87031,49830,474 Interest expense, net7811, 0333,1884,110 ------------------ Loss before the federal income tax (149) (2217) (3404) (8361) the federal income tax expense128, 7684610.192 --------------- Net loss $ ( 161) (10,985) $ (3450) (18553) = ==== ======= ============== Loss per share: Basic $ (0.01) (0.44) (0.14) $ (0.74 )===== ================= Diluted $ (0.01) (0.44) (0.14) $ (0.74 )================== ==== GAINSCO, INC. SUBSIDIARIESOTHER AND INFORMATION (in thousands, except per share data) Three months Twelve months ended 31 December endedDecember ----------- 31----------- ---------------- 2008200720082007 Gross premiums 42,45836,947 issued 181849 184870 $ $ === ==== ======== ============= GAAP RATIOS: C & CAE Ratio (1) 73, 3% 87.8% 73.3% 81.7% Expense Ratio (2) (3) 26.1% 28.6% 25.7% 25.9 %----------- - ---- Combined ratio (2) 99.4% 116.4% 99.0% 107.6 %==================( 1) C & CAE is an abbreviation for Claims and claims adjustmentexpenses, expressed as a percentage of net premiums earned. (2) The expense ratio and combined ratio does not reflect the costs of the holding company, which includes interest expense on subordinated debentures notepayable and (3). Commissions, change in deferred acquisition costs and underwritingexpenses operating expenses (insurance subsidiaries only) areoffset by the agency and revenues are expressed in percentage of netpremiums won.