Centris Shareholder Pushes for Sale of Company
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 Costa Mesa company’s stock rose to a 52-week high Tuesday after the proposal by Dorchester Partners in Los Angeles and Michael J. Halpern, president of Dorchester’s general partner. Centris’ shares gained 8.5%, or $1.94, to close at $25.63 on the New York Stock Exchange.
For the record:
12:00 a.m. Dec. 6, 1997 For the Record
Los Angeles Times Saturday December 6, 1997 Home Edition Business Part D Page 3 Financial Desk 2 inches; 40 words Type of Material: Correction
Centris Group Inc.--A story Wednesday about a Costa Mesa medical and property-casualty insurer misstated the condition of its operations. Both of the company’s lines of insurance are growing, though its smaller property-casualty line is growing twice as fast as its medical business.
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. Centris showed strong gains through mid-1996, but has since reported flat earnings of about 60 cents a share for each of the last five quarters.
“The question is what management can do with the business going forward,” said Blair Sanford of Hoefer & Arnett brokerage in San Francisco. “Evidently, Dorchester wants to do something more.”
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.
Centris’ profit 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.
Halpern himself gave half-hearted support for the earlier bid by major shareholders to put the company, then known as US Facilities Corp., on the block.
