Fremont General to Sell Insurance Unit : Executives Offer $82-Million Deal for Property-Casualty Business
Fremont General Corp. agreed Tuesday to sell its property and casualty insurance business to a group of investors headed by the subsidiary’s senior executives in a deal valued at $82 million.
The Santa Monica-based financial services company, which has sought to divest itself of the cyclical property-casualty insurance business for about two years, will concentrate instead on its profitable life insurance, commercial finance and banking business, President James A. McIntyre said in an interview. The company has reapplied to the Federal Home Loan Bank Board for permission to buy Malibu Savings Bank from U.S. Shelter Corp., McIntyre said. The board rejected the company’s initial application last September.
The divested Fremont Insurance Group will continue to be headed by its current president, David L. McIntyre, brother of James. (The brothers’ father, Lee E. McIntyre, remains as chairman of Fremont General.) David McIntyre and other senior executives will take over the Los Angeles-based insurance unit, whose principal business is providing workers’ compensation coverage.
Financing remains to be completed and, according to Fremont General, will include a package of cash, preferred stock, warrants and zero-coupon notes issued by the buyer. Completion of the deal is expected by mid-June but is subject to approval by regulatory authorities and holders of Fremont General stock, which trades over the counter.
Even with the spinoff, Fremont General will count assets of about $650 million, James McIntyre said.
“The businesses we retain have a lot of potential for growth,” he said. “We are going off in a little different direction--but it is a little more predictable direction than the insurance business.”
Fremont General also reported financial results for its fourth quarter and for 1987.
For the last three months of 1987, the company earned $4.8 million on revenue of $24 million, compared to a quarterly profit of $6.6 million on revenue of $23.6 million in 1986. For the full year of 1987, however, the company reported a loss of $7.7 million, compared to a loss of $23 million in 1986 as the company began to phase out most of its commercial property-casualty insurance business.
