A Major Shareholder Wants Centris Sold

A major shareholder of Centris Group Inc. wants the underwriter of medical and property-casualty insurance to put itself up for sale, marking the second time in four years that investors have pressured management to sell.

The proposal by Dorchester Partners LP in Los Angeles and Michael J. Halpern, president of Dorchester’s general partner, boosted Centris stock 8.5% Tuesday. Shares gained $1.94 to close at a 52-week high of $25.63 a share in New York Stock Exchange trading.

Dorchester and Halpern, who together own 7.6% of Centris, want the Costa Mesa insurer’s directors to consider “strategic options to maximize shareholders’ value, including a sale,” according to a Securities and Exchange Commission filing Monday.

Halpern, who voted on a measure more than three years ago to sell the company, wouldn’t comment on why he thinks the company should be sold now, and his SEC filing was silent about his motivation.

Centris Chairman David L. Cargile said he didn’t know why Halpern wanted the company to be sold. He noted, however, that “everybody believes our stock price is undervalued.”

Lawyers for Centris will review the Dorchester-Halpern proposal, Cargile said, to determine whether it should be presented to shareholders at the annual meeting, scheduled for May 13.

Insurance firms have not enjoyed much growth as an industry, analysts said, and Centris, which showed strong gains through mid-1996, has since reported flat earnings of about 60 cents a share for each of the last five quarters.

“The long-term trend in the company has been going up,” said Blair Sanford of Hoefer & Arnett brokerage in San Francisco. “The question is what management can do with the business going forward. Evidently, Dorchester wants to do something more.”

Centris stock is trading at little more than its book value, which is the value of all its holdings, minus certain assets and liabilities.

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Centris is changing its mix of insurance and reinsurance products, pulling back from medical lines that are losing money and pushing property and casualty policies that are profitable.

“They’re doing some new and different things, and we hope they turn out to be good things,” said analyst James E. Inglis at Philo Smith & Co. Inc. in Stamford, Conn.

Inglis said his company, which owns a stake in Centris, doesn’t want to get involved “in the fracas” fomented by Dorchester.

Centris’ profits over the first nine months this year grew a sluggish 3% over the same period last year. Its third-quarter net income rose 8.5% over last year’s third quarter, but that was spurred by investment gains. On an operating basis, excluding those gains, it lost $4.2 million for the quarter. Revenue, though, soared 34% for the nine-month period and 45% for the quarter.

Centris’ return on equity, a key measure of profitability, has been “well above industry averages of 12-13%,” Cargile said. He put the returns at 17% for 1996 and 22% for 1995.

Analysts said they weren’t sure whether Halpern’s effort would generate much support among other investors.

Halpern himself gave halfhearted support for the earlier bid by major shareholders to put the company, then known as US Facilities Corp., on the block.

Halpern and other investors backed a 1994 move by shareholder Fidelity National Financial Inc. in Irvine to sell US Facilities. Fidelity, the nation’s fourth-largest title insurer, started buying the stock at $9 a share and soon announced plans to buy US Facilities for $15 a share. It sought a shareholder mandate to force the company to take bids.

Fidelity’s measure passed overwhelmingly at the annual shareholder’s meeting. But Fidelity narrowly lost a second vote to elect its slate of directors, which it said was needed to ensure that the mandate was followed.

Halpern’s was the key vote, Fidelity executives said, and he swung the election to US Facilities incumbents.

Over the next 18 months, US Facilities ousted its chairman-chief executive, George Kadonada, and brought in Cargile to give the company a boost.

Cargile’s effort impressed Fidelity, which called off its effort and sold its stock at around $18 a share for a $3.4-million gain.