Fremont General Cuts WC Losses, Continues to Reduce P/C Workforce

Fremont General Corp.reported net income of $10,936,000 for the third quarter of 2000, comprised of net income from continuing operations of $6,272,000 and an after tax gain on the extinguishment of debt of $4,664,000. The third quarter net income from continuing operations of $6,272,000 compares to a net loss from continuing operations of $60,913,000 for the same quarter a year ago.

For the nine months ended September 30, 2000, the company reported a net loss of $247,653,000 comprised of a net loss from continuing operations of $254,562,000 and an after tax gain on the extinguishment of debt of $6,909,000. This compares to a net income from continuing operations of $8,373,000 for the same period a year ago.

P/C Unit

The property and casualty insurance operations, represented primarily by workers’ compensation insurance, recorded a pre-tax loss of $6,379,000 for the third quarter of 2000 as compared to a loss of $104,361,000 for the third quarter of 1999. Additionally, the combined ratio was 114.8 percent for the third quarter of 2000, as compared to 163.8 percent for the same prior year quarter.

In an effort to reduce its property and casualty insurance operations expenses, the company initiated in the fourth quarter of 2000 the closure of 17 of its 41 production and claims servicing offices. This action, coupled with workforce reductions completed in the third quarter of 2000, is expected to collectively result in the reduction of approximately 25 percent of the property and casualty insurance operations’ workforce and is in conjunction with an expected decrease in the company’s future premium writings.

Fremont says it will take advantage of internally developed operating efficiencies and the outsourcing of certain claim processing functions to continue the effective handling of claims. The company continues to consider various adverse loss development reinsurance structures and other alternatives with the requisite state insurance regulatory authorities to mitigate the adverse impact on the company’s property and casualty insurance operations of the gross loss and loss adjustment expense reserve actions recognized in the second quarter of 2000.

The company’s financial services subsidiary, Fremont General Credit Corp., recorded pre-tax income of $28,131,000 for the third quarter of 2000, up 62 percent from $17,417,000 for the third quarter of 1999. Loans receivable, before allowance for loan losses, were approximately $3.29 billion at September 30, 2000, as compared to $3.20 billion at June 30, 2000. Loans are comprised of commercial and residential real estate loans, as well as syndicated loans. The ratio of net charge-offs to average loans was 0.16% (annualized) during the third quarter and 0.14% (annualized) for the nine months ended September 30, 2000.

Topics Profit Loss Property Casualty