Dallas-based GAINSCO INC. reported net income for the first quarter 2004 of approximately $1.1 million. After the accretion of the discount on the redeemable preferred stock of approximately $0.8 million and the accrual of dividends on the redeemable preferred stock of approximately $0.2 million, net income applicable to common shareholders and net income per common share, basic and diluted, were approximately break-even.
For the first quarter 2003, net income was approximately $0.1 million. After the accretion of the discount on the redeemable preferred stock of approximately $0.7 million and the accrual of dividends on the redeemable preferred stock of approximately $0.2 million, net loss applicable to common shareholders for the first quarter 2003 was approximately $0.8 million, or $0.04 per common share, basic and diluted. For all periods presented, the effects of common stock equivalents and convertible preferred stock are antidilutive. As a result, basic and diluted per share results are reported as the same number.
“The company’s insurance business continued to produce profitable results this quarter due to the solid performance of our nonstandard personal automobile insurance business. We continued to exit the unprofitable commercial lines business through the ongoing process of settling and reducing our remaining inventory of commercial claims. Additionally, the company is continuing to work on its significant capital structure issues,” said Glenn Anderson, GAINSCO’s president and CEO.
The company’s net unpaid claims and claims adjustment expenses at March 31, 2004 were $68.3 million, compared to approximately $76.6 million at Dec. 31, 2003. These balances do not include the beneficial effect of ceded reserves to a reinsurer under a reserve reinsurance cover agreement in the amount of approximately $10.6 million at March 31, 2004, and approximately $13.8 million at Dec. 31, 2003 (the balances of which are included in Reinsurance Balances Receivable). The principal components of the net reduction in the reserve balances from Dec. 31, 2003 to March 31, 2004 are the settlement of claims in the normal course of business and favorable development in 2004 for nonstandard personal auto and commercial lines estimated ultimate liabilities. As of March 31, 2004, 442 commercial claims remained, compared to 525 at Dec. 31, 2003 and 850 at March 31, 2003.
The combined ratio under GAAP for the first quarter of 2004 was 94.8%, compared to a combined ratio of 119.0% for the 2003 first quarter, in each case including both the commercial lines business from which the company is exiting and the continuing personal lines business. The GAAP claims and claims adjustment expenses ratio for the 2004 first quarter was 64.2%, compared with 86.1% for the first quarter of 2003. The GAAP expense ratio for the first quarter 2004 was 30.6%, compared to 32.9% for the 2003 first quarter.
GAINSCO’s nonstandard personal automobile insurance products are distributed primarily through retail agents in Florida, Texas and Arizona. Its primary insurance subsidiaries are General Agents Insurance Company of America Inc. and MGA Insurance Company Inc.
Was this article valuable?
Here are more articles you may enjoy.