GAINSCO Takes Loss for Q2, First Six Months

GAINSCO Inc., a property/casualty insurance holding company based in Dallas, announced losses in net income for the second quarter and first six months of 2003 but the company noted that the losses are significantly less than for the same periods the previous year.

Net income for the second quarter ended June 30, 2003, was $0.8 million. After including the effect of the accretion of the discount on the redeemable preferred stock of $0.7 million and the accrual of dividends on the redeemable preferred stock of $0.2 million, net loss applicable to common shareholders was $0.1 million, or $0.01 per common share, basic and diluted.

For the six months ended June 30, 2003, net income was $0.9 million. After including the effect of the redeemable preferred stock, accretion of the discount of $1.4 million and the accrual of dividends of $0.4 million, net loss applicable to common shareholders was $0.9 million, or $0.04 per common share, basic and diluted.

For the second quarter 2002, net loss was $4.8 million. After including the effect of the redeemable preferred stock, accretion of the discount of $0.6 million and the accrual of dividends of $0.2 million, net loss applicable to common shareholders for the second quarter 2002 was $5.6 million, or $0.27 per common share, basic and diluted.

After including the effect of the accretion of the discount on the redeemable preferred stock of $1.3 million and the accrual of dividends on the redeemable preferred stock of $0.3 million, net loss applicable to common shareholders for the six months ended June 30, 2002 was $10.6 million, or $0.50 per common share, basic and diluted.

“Our earnings this quarter were the result of profits produced by our ongoing personal automobile business. We continue to be encouraged by the improving loss ratio and profit trends of this business,” said Glenn W. Anderson, GAINSCO’s president and chief executive officer.

“We continued to steadily exit the unprofitable commercial lines business. At June 30, 2003, only 60 commercial lines policies remained in force, and we expect these to expire in the second half of the year. Concurrently, we continued to settle and reduce our inventory of commercial lines claims. At June 30, 2003, there were 681 claims associated with our overall runoff book outstanding, compared to 850 at March 31, 2003 and 1,322 at June 30, 2002,” said Anderson.

Combined statutory policyholders’ surplus at the end of the second quarter 2003 was $40.0 million and compares to combined statutory policyholders’ surplus at March 31, 2003 of $38.2 million. The combined statutory policyholders’ surplus at the end of the second quarter 2003 does not include approximately $2.5 million of after-tax, unrealized capital gains that existed in the statutory bond portfolios.

The company’s net unpaid claims and claims adjustment expenses at June 30, 2003 were $84.4 million, compared to approximately $91.4 million at March 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 $17.9 million at June 30, 2003 and approximately $20.1 million at March 31, 2003.

The combined ratio under generally accepted accounting principles (GAAP) for the second quarter of 2003 was 102.2 percent, compared to a combined ratio of 126.0 percent for the 2002 second quarter. Included in the combined ratio for the second quarter 2003 is a $0.5 million charge to income for an adjustment that reduced deferred commission expense for personal auto. The GAAP claims and claims adjustment expenses ratio for the 2003 second quarter was 62.2 percent, compared with 104.4 percent for the second quarter of 2002.

For the six months ended 2003, the GAAP combined ratio was 111.1 percent, compared to 124.8 percent for the same period in 2002. The GAAP claims and claims adjustment expenses ratio for the six months ended 2003 was 74.8 percent, versus 95.3 percent for the six months ended 2002.

GAINSCO’s nonstandard personal automobile insurance products are distributed through retail agents in Florida. Its primary insurance subsidiaries are General Agents Insurance Company of America Inc. and MGA Insurance Company Inc.