Transamerica to Post a Loss
In an effort to solve some big problems at its commercial lending unit, insurance giant Transamerica Corp. said on Thursday that it will take a one-time $130-million charge that will result in an $80-million fourth-quarter loss.
The after-tax charge involving Transamerica Commercial Finance Corp., based in Chicago, will primarily cover the costs of reducing lending to computer equipment dealers and eliminating loans to owners of low-end stores where customers buy electronics gear and appliances through monthly payments.
Both of those businesses have been particularly hard hit during the economic slump.
Analysts described the move as strong but necessary medicine for Transamerica, the nation’s fifth-largest insurance and financial services company known for its needle-pointed headquarters tower in San Francisco.
“This has been a millstone around their neck,” said Michael J. Morrissey, chairman and chief executive of Firemark Insurance Research, an investment firm in Parsippany, N.J. “This represents putting the problem behind them.”
Since becoming president and chief executive of the money-losing commercial lending subsidiary in March, 1990, Robert A. Watson has “turned the organization upside down,” said Jamie Guenther, a vice president at the Duff & Phelps credit-rating agency in Chicago. Thursday’s announcement, Guenther said, makes it clear that Watson wants to “get back to basics.”
Transamerica said its other businesses are doing well and that it expects in February to report a profit for 1991 of $100 million. That will be before a $50-million after-tax charge relating to the adoption of a mandatory accounting change to cover future liability of retirees’ medical benefits.
