GAINSCO Reports 4th Quarter and Year 2009 Results
DALLAS, March 30 -- GAINSCO, INC. (NYSE Amex: GAN) today announced net income for the fourth quarter 2009 of $0.2 million, or $0.05 per common share, basic and diluted. This compares to a fourth quarter 2008 net loss of $0.1 million, or $0.02 per common share, basic and diluted. Net income for the year ended December 31, 2009 was $4.1 million, or $0.85 per common share, basic and diluted. This compares to a net loss of $3.4 million for the year ended December 31, 2008, or $0.70 per common share, basic and diluted.
Gross premiums written decreased approximately 16% during the fourth quarter of 2009 and approximately 1% during the year ended December 31, 2009, from gross premiums written in the comparable 2008 periods. Gross premiums written by geographic region for the quarters and years ended December 31, 2009 and 2008, were as follows:
Quarter ended Year ended
(dollars in
millions) December 31 December 31
----------- -----------
2009 2008 2009 2008
---- ---- ---- ----
Regions:
Southeast (Florida,
Georgia, $21.3 28.7 108.3 110.1
South Carolina)
Southwest (Texas,
Arizona, 14.2 13.4 69.9 69.6
Nevada, New Mexico)
West (California) 0.2 0.4 1.4 2.1
--- --- --- ---
Total $35.7 42.5 179.6 181.8
===== ==== ===== =====
Under accounting principles generally accepted in the United States (GAAP), ratios for the quarters and years ended December 31, 2009 and 2008, were as follows:
Quarter ended Year ended
December 31 December 31
----------- -----------
2009 2008 2009 2008
---- ---- ---- ----
Total Company:
C & CAE Ratio (1) 76.8 % 73.3 % 74.1 % 73.3 %
Expense Ratio
(2)(3) 25.4 % 26.1 % 25.6 % 25.7 %
----- ----- ----- -----
Combined Ratio (2) 102.2 % 99.4 % 99.7 % 99.0 %
====== ===== ===== =====
Nonstandard Personal Auto:
C & CAE Ratio (1) 75.9 % 73.7 % 75.3 % 74.2 %
===== ===== ===== =====
(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 the holding company, which include interest
expense on the note payable and subordinated debentures.
(3) Commissions, change in deferred acquisition costs,
underwriting expenses and operating expenses (insurance
subsidiary only) are offset by agency revenues and are
stated as a percentage of net premiums earned.
The Company continues to adjust and settle claims associated with its runoff lines. For the fourth quarter of 2009, the Company's runoff lines recorded unfavorable development for the settlement of claims occurring in prior accident years of $0.4 million. During the fourth quarter of 2008, the Company recorded favorable development for claims occurring in prior accident years for the Company's runoff lines of $0.2 million. For the years ended December 31, 2009 and 2008, the runoff lines recorded favorable development for claims occurring in prior accident years of $2.1 million and $1.4 million, respectively.
As regards the Company's nonstandard personal auto business during the fourth quarter of 2009, the Company recorded favorable development for claims occurring in prior accident years of $1.0 million. During the fourth quarter of 2008, the Company recorded favorable development for claims occurring in prior accident years for nonstandard personal auto of $0.4 million. For the twelve months of 2009, the Company recorded favorable development for claims occurring in prior accident years for nonstandard personal auto of $4.9 million. For the twelve months of 2008, the Company recorded unfavorable development for claims occurring in prior accident years for nonstandard personal auto of $4.4 million.
As of December 31, 2009, the Company had $72.6 million in net unpaid claims and claims adjustment expenses ("C&CAE") (Unpaid C&CAE of $75.4 million less Ceded unpaid C&CAE of $2.8 million), compared to net unpaid C&CAE at September 30, 2009 of $75.0 million (Unpaid C&CAE of $78.0 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 $3.1 million at December 31, 2009, and $3.0 million at September 30, 2009.
As of December 31, 2009, the Company's Shareholders' equity was $63.0 million, Subordinated debentures were $43.0 million and Note payable was $0.9 million. These compare to Shareholders' equity of $62.9 million, Subordinated debentures of $43.0 million and Note payable of $0.9 million at September 30, 2009.
Results for 2008 and Shareholders' equity for September 30, 2009, have been revised to correct an error discussed in note 1 - "Summary of Significant Accounting Policies" of the "Notes to the Consolidated Financial Statements" under Part II, Item 8 in the Annual Report on Form 10-K for the year ended December 31, 2009.
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, Georgia and South Carolina (Southeast Region); Texas, 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) current and future economic conditions and uncertainties and disruptions in financial markets that may materially and adversely affect our business (including the heightened potential for claims fraud), operations, capital and liquidity, (b) the unpredictability of governmental actions affecting financial institutions, other financial firms and rating agencies, (c) operational risks and other challenges associated with growth into new and unfamiliar markets and states, (d) adverse market conditions, including heightened competition, (e) 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, (f) the Company's ability to adjust and settle the remaining claims associated with its runoff business on terms consistent with its estimates and reserves, (g) the adoption or amendment of legislation or regulations, uncertainties in the outcome of litigation and adverse trends in litigation, (h) inherent uncertainty arising from the use of estimates and assumptions in decisions about pricing and reserves, (i) the effects on claims levels or business operations resulting from natural disasters and other adverse weather conditions, (j) the availability of reinsurance and the Company's ability to collect reinsurance recoverables, (k) the availability and cost of capital, which may be required in order to implement the Company's strategies, and (l) limitations on the Company's ability to use net operating loss carryforwards. Please refer to the Company's recent SEC filings and the Annual Report on Form 10-K for the year ended December 31, 2009, 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 Condensed Consolidated Statements of Operations and Other Information for the quarters and years ended December 31, 2009 and 2008, follow.)
GAINSCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share data)
Quarter ended
December 31,
------------
2009 2008
---- ----
Net premiums earned $43,708 44,620
Net investment income 1,618 1,807
Realized investment gains (losses),
net:
Other-than-temporary impairment
losses (894) (643)
Other-than-temporary impairment
losses transferred to
Other comprehensive loss 780 -
Other realized investment gains
(losses), net 1,281 7
Total realized investment gains
(losses), net 1,167 (636)
----- ----
Agency revenues 2,985 3,206
Other (expense) income, net (413) 13
---- ---
Total revenues 49,065 49,010
Claims & CAE incurred 33,554 32,727
Policy acquisition costs 7,023 7,619
Underwriting and operating expenses 7,803 7,983
Interest expense, net 455 780
Income (loss) before Federal income
taxes 230 (99)
Federal income taxes (15) 12
--- ---
Net income (loss) $245 (111)
==== ====
Earnings (loss) per common share:
Basic $0.05 (0.02)
===== =====
Diluted $0.05 (0.02)
===== =====
Year ended
December 31,
------------
2009 2008
---- ----
Net premiums earned $185,211 176,606
Net investment income 6,677 7,728
Realized investment gains (losses),
net:
Other-than-temporary impairment
losses (3,569) (5,671)
Other-than-temporary impairment
losses transferred to
Other comprehensive loss 3,141 -
Other realized investment gains
(losses), net 2,795 (642)
Total realized investment gains
(losses), net 2,367 (6,313)
----- ------
Agency revenues 12,999 12,461
Other (expense) income, net (439) 52
---- ---
Total revenues 206,815 190,534
Claims & CAE incurred 137,287 129,562
Policy acquisition costs 30,301 29,690
Underwriting and operating expenses 33,000 31,449
Interest expense, net 2,086 3,188
Income (loss) before Federal income
taxes 4,141 (3,355)
Federal income taxes 68 46
--- ---
Net income (loss) $4,073 (3,401)
====== ======
Earnings (loss) per common share:
Basic $0.85 (0.70)
===== =====
Diluted $0.85 (0.70)
===== =====
GAINSCO, INC. AND SUBSIDIARIES
OTHER INFORMATION
($ in thousands)
Quarter ended Year ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
Gross premiums written $35,681 42,458 $179,571 181,849
======= ====== ======== =======
GAAP RATIOS:
C & CAE Ratio (1) 76.8% 73.3% 74.1% 73.3%
Expense Ratio (2)(3) 25.4% 26.1% 25.6% 25.7%
---- ---- ---- ----
Combined Ratio (2) 102.2% 99.4% 99.7% 99.0%
===== ==== ==== ====
(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
the holding company,
which include interest expense on the note payable and subordinated
debentures.
(3) Commissions, change in deferred acquisition costs, underwriting
expenses and operating expenses (insurance
subsidiary only) are offset by agency revenues and are stated as a
percentage of net premiums earned.