Centris Group Seeks Buyer as Quarterly Profit Drops

Medical insurer Centris Group Inc. on Wednesday posted a 76% slump in fourth-quarter operating profits and said it is in talks to sell the company.

Other insurers have asked Costa Mesa-based Centris about a purchase, the company said. It would not identify the other companies.

Centris directors are ready to accept an offer “that truly recognizes the company’s current value and future prospects,” though no sale can be assured, Centris said.

The company’s stock closed Wednesday at $10.56, up 6 cents a share.

Profit from continuing operations in the fourth quarter fell to $700,000, or 6 cents a share, from $2.86 million, or 23 cents, a year earlier. Revenue from those operations grew 13% to $46.6 million from $41.3 million.

Including the results of USF Re Insurance Co., a property-casualty division that is being sold to another insurer, Centris lost $20.9 million, or $1.78 a share, for the quarter, compared with a profit of $3.8 million, or 31 cents a share, a year earlier.

Centris agreed to sell its USF unit to Folksamerica Holding Co. Inc. The company, which expects to sign a definitive agreement in the immediate future, recorded the unit as a discontinued operation in the quarter.

Still, the slump in operating profits was disappointing, Centris Chairman and Chief Executive David Cargile said in a statement. Centris faced mounting competition in medical insurance, and its reinsurance unit suffered bigger storm losses, Cargile said.

The company is trying to focus on sales of “stop-loss” policies, which cover medical bills in excess of $50,000 for employers who run their own group-health insurance plans. It also sells “provider excess insurance” policies that cover hospitals’ and physicians’ losses resulting from emergency care for patients outside the regions covered by their managed health plans.

In its talks with potential acquirers, Centris is being advised by Advest Inc., the Hartford, Conn., investment bank that also advised on the USF sale.

Centris gave a hint of what might constitute a reasonable bid two months ago, when it rebuffed an offer of $143 million, or $13.25 a share, from Houston insurer HCC Insurance Holdings Inc. At the time, Centris stock was trading at about $14.

Cargile and other executives at Centris declined to be interviewed.

For the year, the company recorded a net loss of $13.4 million, or $1.09 a share, including a $23.3-million loss from discontinued operations. The company earned $15.2 million, or $1.25 a share, in 1997. Revenue from continuing operations rose 7% to $168.3 million from $157.7 million.

On Monday, the company disclosed in its annual proxy statement that Centris directors approved a 5% salary increase for Cargile for “his contribution in revitalizing the company” after taking over its operations in 1994. Cargile earned $449,435 in 1998, up 2.7% from 1997. He also received $258,813 to cover tax and loan-related expenses as part of relocation to California from Georgia. At his request, he received no bonus or stocks options for 1998.

Cargile’s total 1998 compensation came to $708,248, down 29% from $997,766. His 1997 package included a $300,000 bonus.