Through its subsidiaries, Gainsco Inc. focuses its efforts on the property and casualty insurance business, with an emphasis on the nonstandard personal automobile market. Writing on classes of risks which are not generally insured by many of the standard companies, the company markets its nonstandard personal auto line of insurance on an admitted basis through independent agency locations in Arizona, Florida, Georgia, Nevada, New Mexico, South Carolina, Texas and one general agency in California.
Nonstandard personal auto insurance is usually purchased by drivers who do not meet an insurance company’s “standard” or “preferred” underwriting criteria. These drivers generally pay higher premiums than for standard policies. Data published by A.M. Best indicates that approximately 48% of the entire U.S. nonstandard personal auto market of nonstandard personal auto insurance was written in the states currently being served by Gainsco in 2008.
Considered to be trading at undervalued levels, Gainsco’s stock trades at a P/E of 11.6, P/S of 0.25 and Price/Book of 0.72. In the most recently reported quarter, net income increased dramatically from $0.02, or $0.04 per common share, to $3.9 million, or $0.82 per common share. Also notable, insiders hold 72.71% of the shares outstanding, closely aligning management’s interests with shareholders.
As of September 30, 2010, the company’s shareholders’ equity was $71.7 million and subordinated debentures was $43.0 million. Solidly positioned in a niche market within the lucrative insurance industry, Gainsco is on our watch list.