Fremont General Quits Property-Casualty Line

August 27, 1985|BRUCE KEPPEL | Times Staff Writer

Fremont General Corp., a Los Angeles-based insurer and financial-services holding company, said Monday that it has stopped writing commercial property-liability insurance because of the disproportionate losses that the business has generated. However, Fremont intends to allow present property-casualty policies to lapse rather than cancel them, the company said.

"This has been a very difficult area for us," spokesman James R. McNiel said.

It has been a very difficult area over the last six years for the property-casualty insurance industry in general, which lost a record $3 billion last year. In the face of mounting claims, many insurers are sharply raising prices and restricting coverage and, in some areas, abandoning coverage altogether, noted Jennifer Nicholson of the Western Insurance Information Service in Santa Ana.

Taking Harder Look

"We're going to see a lot more of this," Nicholson predicted.

Insurers generally are taking a harder look at the kind of business and degree of risk that they are willing to take on, agreed Mike Dirienzo, assistant manager of ISO Commercial Risk Services in the City of Commerce.

Fremont's action reflects a general realigning by insurers of their "books of business" to accentuate the positive. As James A. McIntyre, Fremont's president and chief executive, put it: "We are focusing our capital in those areas that promise strikingly improved results following recent traumatic rate increases."

The general property-casualty line contributed just 13% of Fremont's premium revenue in 1984 but accounted for 23% of total underwriting losses, McIntyre said. For the first half of 1985, it contributed about 15% in premiums and suffered 30% of the company's underwriting losses.

Tenth of Premium Income

The discontinued business accounted for only about a tenth of total premiums last year--$37.9 million of $335.3 million. By contrast, workers' compensation premiums accounted for $178.3 million. Reinsurance--assuming risk from other carriers--generated $66.9 million, and medical malpractice premiums totaled $12.7 million. The company will continue writing its other lines of business but intends to limit its reinsurance exposure, McIntyre said.

Fremont reported net income of $20.4 million last year on revenue of $419 million, up from earnings of $1.2 million on revenue of $337.7 million in 1983.

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