Zenith National Wins Bidding for Cal-Farm : Overall Value of Deal Is About $84.5 Million
In a surprise move, Zenith National Insurance won the bidding Tuesday for troubled Cal-Farm Insurance, outbidding another Los Angeles-based insurer, Fremont General, with a $56.5-million offer.
In addition, Zenith accepted claims responsibility for about $28 million in current policies, bringing the total value to about $84.5 million.
The original bidder, Nationwide Mutual of Columbus, Ohio, withdrew its offer at the outset of bidding, which was conducted in a Sacramento Superior Court, moments after Fremont offered $28 million. Zenith quickly topped that and, during the next five minutes, the bidding rose by increments of several million dollars to $54.5 million.
Zenith Bid Unchallenged
After a recess, Zenith bid $56.5 million unchallenged.
Judge James Ford and representatives of the California Department of Insurance, which had placed Cal-Farm under a conservator on March 29, quickly gave the bid their blessing. The sale is expected to close within the next few weeks.
The purchase price includes all assets of Cal-Farm’s property-casualty business, its life insurance operation and a company headquarters in Sacramento, valued at $18 million.
The building serves as headquarters of the California Farm Bureau Federation, with which Cal-Farm is affiliated. Farm Bureau President Henry J. Voss expressed satisfaction at the sale price and prompt regulatory approval of the bid, which he said was about double that anticipated.
The sale will remove the federation from the insurance business, but Voss said Zenith had expressed interest in retaining a business relationship with the federation’s network of county farm bureaus in the state.
Will Pay Claims
For Zenith, whose headquarters is in Encino, the acquisition will move it into life insurance while broadening its stance as a property-casualty insurer. The company’s primary business has been writing workers compensation coverage.
A Zenith spokesman said Cal-Farm has about 160,000 auto, homeowner and farm-owner policies in effect along with 60,000 life insurance policies--all in California.
Shorn of its insurance business, Cal-Farm will use proceeds from the sale to pay claims stemming from the bond defaults that brought about its downfall. According to Cal-Farm Executive Vice President Carl Santillo, a Cal-Farm agent, Eagle Bonds & Insurance Brokers of Agoura, improperly issued the bonds in Cal-Farm’s name, guaranteeing millions of dollars in mortgage loans, many of which have defaulted.
Cal-Farm has paid $14 million on those claims so far and expects to pay another $39.4 million, Santillo said. The company has a lawsuit pending against Eagle in Los Angeles Superior Court, he added.