ICH to Try Again to Raise Its Stake in First Executive

ICH Corp., an insurance holding company, said Tuesday that it will try for the second time this year to persuade holders of First Executive Corp. common stock to part with their shares for $12 each in cash.

The latest offer is for up to 6.3 million shares of the Los Angeles-based parent of Executive Life Insurance Co.

ICH, which is headquartered in Louisville, Ky., has sought for months to increase its stake in First Executive to at least 20%. Under industry accounting rules, the company would then be able to claim a proportionate share of First Executive’s earnings to strengthen its own income statement. But in January, when ICH offered the same cash price for up to 11.2 million shares, only about 1.5 million shares had been tendered when the offer expired.

Still, that increased ICH’s holding to 8.4 million shares, or an 11.5% stake in First Executive. ICH said in March that it might buy more shares but also was considering selling its entire interest.

Says It Lacks Merit

Fred Carr, First Executive’s president and chairman, declined to comment on the latest offer, which could be worth as much as $75.6 million.

First Executive’s board of directors took a neutral position on the previous tender offer, but some shareholders proved to be far less reticent, criticizing ICH’s offer as “totally inadequate.” These shareholders also criticized a board-approved “standstill” agreement under which ICH promised not to buy more than 25% of First Executive’s shares but to maintain a holding of at least 20%, a deal the shareholders criticized as a device to entrench management.

A class-action lawsuit filed by a group of First Executive shareholders last February in Delaware made similar charges, which the company described as being without merit. The suit is pending.

ICH on Tuesday attributed its lack of success in its earlier tender offer to “extenuating circumstances.” Vice President Steven B. Bing said these included published false rumors of a competing offer at substantially more than $12 a share.

“We had had a substantial amount of stock tendered prior to that,” Bing said, “and some was withdrawn.”

Bing said the decision not to increase the offer this time stemmed from ICH’s belief that First Executive’s financial position remains “the same as it was back then,” adding: “We’ll just have to see what happens.”

First Executive’s stock closed Wednesday at $11.50 a share, up 50 cents, in over-the-counter trading. ICH’s stock ended the day’s trading on the American Stock Exchange at $7.25, down 25 cents.

ICH initially invested in First Executive in October, 1986, when it bought 9.6% of the company’s common stock. Last October, before the stock market crash, the two companies agreed that ICH would invest more than $180 million in new common stock to be issued by First Executive in a deal aimed at strengthening the financial position of both. The price per share was initially set at $17.15, but the Oct. 19 crash sent First Executive’s common stock to less than $9.

Maverick Firms

This led ICH to revise its strategy to acquire a 20% stake, and it offered $12 a share in January for existing stock rather than newly issued shares.

The Louisville company owns Bankers Life & Casualty of Chicago, a purveyor of individual health insurance policies, and Massachusetts General, Southern, Southwestern and Philadelphia life insurance companies. Both ICH and First Executive are regarded as mavericks in the staid world of insurance, mainly because of their enthusiasm for investing premium income in so-called junk bonds, high-yielding corporate debt that carries less than investment grades from bond-rating agencies.

ICH in its quarter century of life grew first by acquiring small regional insurers for their existing accounts with little regard for new sales, said Bing. More recently it has acquired larger companies with well-developed marketing systems--including the 1986 purchase of Houston-based Tenneco’s $1-billion insurance operation, which doubled ICH’s asset base. The company has financed these moves either internally or by selling its own junk bonds.

“We recognize that a junk bond can still be an awfully good piece of paper,” Bing said at the time. So does First Executive, which has expanded rapidly from its Los Angeles base to the point of developing a national sales presence.