Tenneco Agrees to Sell Life Insurance Businesses to ICH
In a move aimed at reducing its debt, Houston-based Tenneco said Monday that it will sell its life insurance businesses to ICH, an insurance holding company headquartered in Louisville, Ky., for $1.5 billion.
The two firms jointly announced the signing of the agreement in principle. The deal would give ICH ownership of Tenneco companies that accounted for 6% of the energy-oriented company’s 1985 profit of $431 million. It had revenue of $15.3 billion last year.
ICH’s major operating units include Bankers Life & Casualty and Massachusetts General Life Insurance. The Tenneco companies that ICH has agreed to acquire include:
- Philadelphia Life Insurance and Southwestern Life Insurance, both engaged primarily in the sale of ordinary life insurance.
- Philadelphia American Life Insurance, which sells group life, accident and health insurance.
- Southwestern General Life Insurance and Security Life Insurance of Georgia, both of which underwrite and market individual life, accident and health insurance.
ICH, which had revenue of $1.5 billion last year, would add about $1 billion of business by acquiring Tenneco’s insurance operations.
Tenneco said it will use most of the proceeds of the transaction, which is dependent on execution of a definitive agreement and approval by regulatory agencies and by both companies’ boards of directors, to reduce its outstanding indebtedness. A spokesman put Tenneco’s total debt at about $7 billion.
Securities analysts considered the reduction of Tenneco’s heavy indebtedness a worthy goal and said disposition of the insurance units makes both financial and strategic sense for a company that some of them consider to be overly diversified.
Tenneco has major oil, gas, petrochemical and manufacturing interests, and last year it acquired International Harvester’s farm equipment business to buttress its JI Case Co. It also has extensive farming interests in California’s Kern County.
Oil exploration and production, pipeline operations and oil processing and marketing accounted for more than half of Tenneco’s revenue and three-quarters of its profit last year. But the energy field has been turbulent since then, due to the steep drop in oil prices. The Tenneco spokesman said moving out of the insurance business would not constitute a major departure or change in strategy for the firm.
In New York Stock Exchange composite trading Monday, Tenneco’s common stock finished up 75 cents at $41. ICH closed at $30, up $2.25, on the American Stock Exchange.