First Capital and Partner Bid for Seized Insurer

First Capital Holdings Corp. of Beverly Hills and Acadia Partners, a Ft. Worth investment group that includes billionaire Robert M. Bass, on Thursday announced a new bid for First Capital’s Virginia-based insurance subsidiary, Fidelity Bankers Life Insurance Co.

First Capital and Acadia propose to pump $70 million of additional capital into Fidelity Bankers to help it return to profitability and, if all goes well, not only pay off policyholders and creditors but eventually provide a return to the insurer’s stockholders as well.

Like its larger sister company, San Diego-based First Capital Life Insurance Co., Fidelity Bankers was seized by insurance regulators in its home state last May after parent First Capital Holdings filed for Chapter 11 bankruptcy protection because of losses from risky junk bond investments.

In March, Virginia authorities tentatively approved a plan by ITT Hartford Insurance Group to take over Fidelity Bankers.

But just ahead of a state-imposed deadline, First Capital and Acadia put forward their competing bid, which they say would take equally good care of Fidelity Bankers’ 184,000 policyholders--paying them 100 cents on the dollar--and provide greater value for the insurer’s creditors.

The creditors committee supports the new bid, said Charles Perkins, spokesman for First Capital and Acadia.

As part of their offer, First Capital and Acadia propose to give policyholders the option of accepting a cash settlement for their policies from ITT Hartford, as outlined in the ITT Hartford bid.

Patrick Contillo, special deputy receiver for Fidelity Bankers, said there are some unresolved questions about the new bid, such as whether ITT Hartford would agree to work with First Capital and Acadia. The parties have not spoken, Perkins acknowledged.

The new bid will be evaluated by the Virginia Corporation Commission. A state court will hold hearings on the bids before deciding who should be allowed to acquire the insurer.