Continental Corp. to sell its insurance subsidiary
The group Continental, an insurance company in the midst of rebuilding their financial strength, said yesterday that it was profitable from the sale of a Workers’ Compensation insurance subsidiary in Fremont General Corporation for $ 250 million .
Continental is also on the sidelines of the announcement of an agreement to collect $ 200 million of additional capital from outside investors, financiers of the company said.
The announced sale of accident insurance, a specialist from Chicago to Workers’ Compensation, is the latest in a series of movements Continental to conserve cash and the sale of a portion of their business. Continental executives declined to say how much profit the company would obtain from the sale.
Casualty Insurance collected $ 362 million of premiums during the past year, especially in Illinois and in nearby countries. It amounted to less than half the Workers’ Compensation business in continental Europe and only about 8 percent of its total turnover. The acquisition is almost two times higher than the Workers’ Compensation business of Fremont General, already active in this market in California and Arizona.
Donors, in discussions with Continental, said, on condition of anonymity, said the company expects to announce, as soon as they had found investors willing to provide $ 200 million of additional capital. Half of this sum would come in stock purchased by insurance Partners, an investment group managed by Chase Manhattan Bank. Besides banks, investors are in the group by Robert Bass and the Centre reinsurance company.
The other 100 million would come from the sale of preferred shares to another group of investors, including operations of Zurich Reinsurance Centre Holdings Inc., Central and reinsurance AON Corporation, a Chicago insurer.
Continental, whose headquarters is in New York, went to the notice on the status of their negotiations with investors or changes in management plans. John P. Mascotte, CEO of Continental, it is expected that this position.
Continental-share trade yesterday ended unchanged at $ 13625 at the New York Stock Exchange, while the share of Fremont General were also unchanged at $ 24.
During recent weeks, Continental has eliminated its dividend on shares save $ 55 million per year, a Canadian subsidiary sells for $ 155 million and announced plans to cut 2000 jobs, or 16 per cent of its hand-d ‘work.
A $ 100 million investment in continental Europe on the closing price yesterday, would be equal to 7.3 million shares, or nearly 12 percent of 62.7 million shares to be outstanding. The share of firms by new investors would be based on the price of shares purchased and other agreements of the company to effect the release of additional storage.
Continental has been plagued for years of claims and charges higher than the industry average. In the first half of the year, the company lost $ 84 million, including a special $ 45 million for reorganization expenses.
Insufficient capital gains and a shrinking base, Moody’s Investors Service to pay claims below Continental Rating last month to A-3 A-2, with a warning that the company has remained during the year Other reductions.
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