Dallas-based GAINSCO Inc. announced that shareholders at its annual meeting approved all the matters put before them, including the following:
* Elected eight directors each to serve until the next annual meeting of shareholders and until their respective successors are duly elected and qualified. The directors approved by shareholders are: Glenn W. Anderson, Robert J. Boulware, John C. Goff, Joel C. Puckett, Sam Rosen, Robert W. Stallings, Harden H. Wiedemann and John H. Williams.
* Approved a one for four reverse stock split of all of the company’s issued and outstanding common stock, par value $0.10 per share. Each fractional share that would otherwise be issued shall be rounded to a whole share. The company expects the reverse stock split to be effective beginning Nov. 21, 2005. There are 80,800,012 shares of Common Stock and 18,120 shares of Series A Preferred Stock (which were convertible into 3,552,941 shares of Common Stock) currently outstanding.
* Approved the 2005 Long-Term Incentive Plan.
GAINSCO also reported net income for the third quarter 2005 of $1.4 million, compared with net income of $1.6 million for the third quarter 2004. For the nine months ended Sept. 30, 2005, the company’s net income was $3.4 million, compared with a net income of $3.7 million for the same period in 2004.
“The company continued to experience profitable operating results from its nonstandard personal automobile business, but at reduced levels from the previous quarter due to incrementally higher operating expenses and loss ratios associated with the geographic expansion and infrastructure build-up of our nonstandard personal automobile business,” said Glenn W. Anderson, president and chief executive officer. “The company’s earnings for the quarter also included favorable development in the estimated ultimate liabilities of our commercial business, which continues in run-off.”
Through nine months, the company wrote $ 76.2 million in gross premiums, an approximately 141 percent increase over 2004 levels. GAINSCO continues to diversify its business beyond its historical core state of Florida through initiatives in the states of Texas, Arizona, Nevada and California. Through nine months, these new states have generated approximately 32 percent of the company’s gross premiums written this year, compared to approximately 7 percent in 2004.
The challenges and risks associated with GAINSCO’s long-term business plan are significant. The company, in support of the long-term plan, continues to make significant investments in expanded facilities, information technology, operating personnel, and marketing initiatives. Over the past nine months, the company’s work force has increased approximately 78 percent to a total of 247 employees at Sept. 30, 2005.
GAINSCO experienced increased claims related to hurricanes in 2005. It continues to maintain reinsurance for catastrophic risk exposures with a self-insured retention of $500,000 per occurrence, and $750,000 in the aggregate.
The company’s capital base (total assets less total liabilities) at Sept. 30, 2005, was $66.9 million. This amount consisted of Shareholders’ Equity of $50.5 million and Redeemable convertible preferred stock – Series A, which is classified under U.S. generally accepted accounting principles (“GAAP”) as mezzanine financing in the aggregate amount of $16.4 million.
As of Sept. 30, 2005, the company had $56.5 million in net unpaid claims and claims adjustment expenses (“C&CAE”) (Unpaid C&CAE of $84.7 million less Ceded unpaid C&CAE of $28.2 million). In respect of its runoff lines, at Sept. 30, 2005, the company had net unpaid C&CAE of $33.7 million and 181 remaining claims. This represents a decrease in claims remaining from Dec. 31, 2004, of 83.
GAINSCO distributes nonstandard personal automobile insurance products through retail agents in Florida (Southeast Region), Texas (South Central Region), Arizona and Nevada (Southwest Region) and California (West Region). Its insurance company subsidiaries are General Agents Insurance Company of America Inc. and MGA Insurance Company Inc.
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