Republic American Acts to Repurchase Its Stock
Directors of Republic American Corp. have authorized the company to buy back up to 1 million of its 22.8 million shares in the open market, largely because the stock has fallen nearly 15% in the four months since its first public offering.
Richard M. Haverland, president of the Encino-based workers’ compensation insurance company, said Republic American is shelving its plans to pursue acquisitions of other insurers in favor of the possible stock repurchase. He said that Republic American has decided that most of the insurers that could be bought are overpriced.
The directors’ action does not commit the company to actually repurchasing its stock. Neither does it set any time or spending limits. The move simply empowers the company to repurchase its stock over an indefinite period.
Republic American’s big earnings increases have given it plenty of money to buy stock. In the third quarter, the company’s net income rose 33.9%, to $8.3 million, as investment income soared.
Republic American’s stock closed Monday at $15.12 1/2, down from $17.50 when the company went public in July. Haverland said he believes the decline came partly because some influential Wall Street insurance analysts soured on the industry in recent weeks.
Trading Scandal Cited
Haverland said he also believes that the company’s stock was hurt by news of the insider-trading scandal revolving around takeover-stock speculator Ivan F. Boesky. Republic American was among the many clients of investment banker Drexel Burnham Lambert to suffer in the stock market since Boesky’s settlement with the Securities and Exchange Commission was announced Nov. 14. Drexel Burnham financed many of the takeovers that yielded insider profits.
Republic American is the holding company for Republic Indemnity Co. of America. It was spun off by Cincinnati financier Carl H. Lindner’s American Financial Corp., which retains a controlling interest of 31.3%. If Republic American buys back all shares it is authorized to purchase, American Financial’s stake will rise to 32.7%.
