Allstate to Sell Mortgage Unit in Public Stock Offering : Insurance: The company wants to concentrate on its core property, casualty and life insurance businesses.
Allstate Corp. said Tuesday that it plans to sell its mortgage insurance subsidiary in an initial public stock offering to focus better on its core property, casualty and life insurance businesses.
Northbrook-based Allstate, which itself is being spun off by Sears, Roebuck & Co., said it expects to eventually sell all of PMI Group Inc., parent of the nation’s third-largest mortgage insurer and part of the Allstate family since 1973.
Allstate also raised its estimate of losses from the Northridge earthquake to $1.5 billion from $1.3 billion and said the losses will reduce 1994 earnings by $975 million after taxes, up from the $845 million previously estimated. In addition, Allstate said it expects little or no effect on its results from the earthquake that hit central Japan early Tuesday. Its Japanese insurance unit, based in the Tokyo area, focuses on automotive insurance.
“We would expect little or no impact on Allstate because we have minimal exposure there,” spokeswoman Kathleen Hogan said.
Allstate said the planned initial public offering will be for up to 24.5 million shares of PMI stock and notes that are exchangeable for as much as another 10.5 million PMI Group shares.
“We are selling PMI in order to realize the return on our long-term investment in the company and focus our resources on core areas of Allstate’s business--auto, home and life insurance,” Chairman Jerry Choate said in a statement.
Allstate said it and PMI Group, whose main subsidiary is PMI Mortgage Insurance Co., have filed registration statements with the Securities and Exchange Commission for the offerings.
If underwriters sell all the stock and notes offered, and the notes are then exchanged for stock, Allstate would no longer own any of PMI, Allstate said.
Right after the stock offering and until the exchange of the notes takes place, Allstate and its subsidiaries would continue to own as much as 38.6% of PMI, depending on how much stock the underwriters sell.
The underwriters will be led by Goldman, Sachs & Co.; Dean Witter Reynolds Inc.; Morgan Stanley & Co.; Salomon Bros. Inc., and their international affiliates.
Chicago-based Sears, the nation’s third-largest retailer, spun off 19.9% of Allstate in 1993 and announced plans late last year to spin off the rest to shareholders in mid-1995. Sears is divesting Allstate to concentrate on its core retailing business.
Allstate said it will use proceeds of the PMI stock and note offerings for general corporate purposes.
Allstate shares were unchanged at $24.50 on the New York Stock Exchange.