Ascent Assurance Notes Q4 Results
Ascent Assurance, Inc. (AASR.OB) today reported net income, excluding preferred stock dividends recorded as interest expense, of $66,000 for the fourth quarter of 2003 as compared to a net loss of ($758,000) for the fourth quarter of 2002. For the year ended December 31, 2003, net income, excluding preferred stock dividends recorded as interest expense, was $503,000 as compared to a loss of ($931,000) for the prior year.
The loss applicable to common stockholders was ($871,000) or ($0.13) per common share, net of preferred stock dividends recorded as interest expense of ($937,000), for the fourth quarter of 2003 as compared to a loss applicable to common stockholders of ($1.6) million or ($0.25) per common share, net of preferred stock dividends of ($847,000), for the fourth quarter of 2002. For the year ended December 31, 2003, the loss applicable to common stockholders was ($3.1) million or ($0.48) per common share, net of preferred stock dividends of ($3.6) million of which ($1.9) million were recorded as interest expense, as compared to a loss applicable to common stockholders of ($4.2) million or ($0.64) per common share for the prior year.
On December 31, 2003, the Company completed an exchange of the preferred stock and restructuring of the notes of the Company held by affiliates of Credit Suisse First Boston (together, “CSFB”) resulting, among other things, in an extension of the maturity dates of such preferred stock and notes from early 2004 to March 24, 2010. The restructuring was effected pursuant to an Exchange Agreement dated as of December 31, 2003 between the Company and CSFB (the “Exchange Agreement”). Under the Exchange Agreement, CSFB received 37,504 shares of a new series of 5.5% Series B Convertible Preferred Stock of the Company (the “Series B Preferred Stock”) in exchange for the shares of 10.25% Series A Convertible Preferred Stock (the “Series A Preferred Stock”) held by CSFB plus accrued and unpaid dividends. As more fully disclosed in the Company’s Current Report on Form 8-K dated December 31, 2003, the Company expects that the Series B Preferred Stock will be fully converted into common stock on or before June 30, 2004. At December 31, 2003, the Series B Preferred Stock had a stated value of $37.5 million and was included as a component of Stockholders’ Equity on the Company’s balance sheet. No Series A Preferred Stock remained outstanding at December 31, 2003.
Operating expenses include interest expense of $2.5 million for both the years ended December 31, 2003 and 2002 related to the note payable to CSFB, the majority of which was paid in kind through the issuance of additional notes payable. The outstanding balance of the note payable to CSFB was $15.3 million at December 31, 2003 as compared to $13.5 million at December 31, 2002. Such interest expense includes $500,000 for each year for the accrual of a facility fee waived pursuant to the restructuring of the note payable. The total accrued facility fee of $1.35 million at December 31, 2003 was reversed and credited directly to stockholders’ equity, net of related expenses. Also, as a result of the restructuring, the interest rate on the notes payable was reduced from 12% to 6% per annum which will result in reduced interest expense for future years.
Total revenues were $28.2 million and $121.2 million for the fourth quarter and year ended December 31, 2003, respectively, as compared to $31.2 million and $131.3 million for the corresponding 2002 periods. Total premium revenues decreased by $2.0 million or 7.5% for the fourth quarter and $9.5 million or 8.5% for the year ended December 31, 2003 as compared to the corresponding prior year periods. The Company’s claims and benefits to premium ratio improved, declining to 65.6% and 67.5% for the fourth quarter and year ended December 31, 2003, respectively, from 68.5% and 70.5% for the corresponding 2002 periods.
Patrick J. Mitchell, Chairman and CEO, commenting on fourth quarter operations said: “We are pleased to report our net income figures excluding preferred stock dividends for both the fourth quarter and year ended December 31, 2003. Upon completion of the conversion of the Series B Preferred to common stock in the first half of 2004, the preferred stock dividend will be eliminated. During the third quarter of 2003, the Company began selling a new line of medical expense products, consisting of three policy types with varying degrees of benefits, designed to provide increased consumer choice and price flexibility for cost conscious consumers. We expect that sales of this new product line and other marketing initiatives will result in first year premium growth for 2004.”
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