California-based financial services company Fremont General Corp. has reported a fourth-quarter profit, moving from a loss from a year earlier, when it recorded large losses in its workers’ compensation insurance business, according to a Reuters report.
Fremont noted that it is trying to sell their troubled workers’ comp business, Fremont Compensation Insurance Group Inc., giving mutual company Employers Insurance Co. of Nevada exclusive negotiating rights.
Douglas Dirks, president & CEO of Employers, spoke with Insurance Journal about the pending agreement. “At this point they’ve granted us an exclusive negotiation agreement which allows us to perform due diligence for the purpose of executing definitive agreements for an acquisition. That should occur over the next 60 to 90 days.”
Fremont’s wish is to complete the sale of the unit during the second quarter.
Dirks further explained that the discussions were to acquire Fremont’s ongoing book of business, encompassing California, and several other western states. At this time, Fremont does not write business in Nevada.
Dirks added that there would be “no assumption of any previous liability.”
Employers developed an interest in the acquisition of Fremont for several reasons. “First and foremost, it would be an opportunity to expand our geographic reach. Currently we’re conducting business only in Nevada, and with the acquisition of this book of business it would expand our geographic reach. Secondly, they’ve got a very talented group of managers ad staff that we would be looking to bring on to manage that book of business. Finally, they have some systems that also we think would be of value to our company, and would complement our systems very well,” explained Dirks.
Fremont president and CEO Mary-Lou Misrahy released this statement, “Employers has indicated their intention to continue the fronting facility with Clarendon Insurance Group currently in effect with Fremont Comp and expects a seamless transition.”
Additionally, Misrahy commented that the California Department of Insurance is aware of the proposed acquisition by Employers of Fremont Comp’s workers’ comp insurance operation.
The company will continue its ongoing business operations until an agreement has been reached.
Fremont said net earnings totaled $15.2 million, or 22 cents per share, compared with a loss of $258.7 million, or $3.69, the year before.
Excluding a one-time gain in the 2001 quarter and the 2000 workers’ comp losses, which it reclassified as discontinued operations, Fremont reported operating earnings rose to $14.6 million, or 21 cents per share, from $8.6 million, or 8 cents.
Earnings for its financial service business grew 24 percent to $37.4 million prior to taxes, mainly on improved real estate lending.
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