Centris to Sell Its Reinsurance Subsidiary

A New Hampshire insurer has agreed to pay Centris Group Inc. $97.5 million for the Centris unit that sells reinsurance, which insurers use to limit losses, the companies said Friday.

Fund American Enterprises Holdings Co. agreed to pay Costa Mesa-based Centris $97.5 million for its USF RE Insurance Co. unit.

The price is about equal to USF RE’s book value, Centris said in a statement.

The agreement comes after HCC Insurance Holdings Inc. of Houston on Wednesday withdrew an offer to buy all of Centris, a medical insurer, for $143 million, or $13.25 a share.

Fund American, based in Hanover, N.H., will pay $77.5 million in cash and $20 million in five-year notes for USF RE. The amount of the debt can be reduced if claims on policies Fund American is buying exceed forecasts.

The unit complements Fund American’s Folksamerica Holding Co., which also sells reinsurance. USF RE had $32.9 million of property and casualty reinsurance premiums in 1997, compared with $94.4 million for Folksamerica, according to A.M. Best Co.

“It is in the best interest of all parties for USF RE to be aligned with” a reinsurer, Centris Chairman and Chief Executive David Cargile said. Centris, he added, is focusing on medical coverage and other insurance market niches.

The company sells so-called stop-loss policies that 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 hospital and physicians’ group losses resulting from emergency care for patients outside the regions covered by their managed health plans.

Centris stock fell $1.25 to $10.50 a share. The companies said they expect to reach a definitive agreement on the sale within 30 days.