E.F. Hutton Plans to Sell Insurance Unit : First Capital Holdings of L.A. to Pay $300 Million

January 12, 1987|Associated Press

NEW YORK — E. F. Hutton Group said Friday that it intends to sell its insurance group for $300 million in cash to First Capital Holdings Corp., a financial services concern based in Los Angeles.

But the company said that while the sale could boost its 1987 results, it expects to post "a substantial loss" for 1986 because it established a special reserve of about $130 million in the fourth quarter for reasons unrelated to the insurance unit sale.

Hutton said it had signed a letter of intent to sell its E. F. Hutton Insurance Group and its subsidiaries that include E. F. Hutton Life Insurance Co. It had put the group up for sale in November.

The sale is subject to signing a definitive agreement and approval by appropriate regulatory authorities, Hutton said, and would result in a pretax gain of about $100 million in 1987.

Better Use of Capital

Robert P. Rittereiser, president and chief executive of Hutton, said the company intends to remain a major distributor of insurance products.

But he said the sale of the insurance unit "will allow us to deploy our capital more effectively in our basic businesses--the sale and distribution of investment products and services to individuals and institutions."

First Capital Holdings is a financial service holding company whose principal subsidiaries are Fidelity Bankers Life Insurance Co. of Richmond, Va., and Pilgrim Group Inc., which handles the Pilgrim Group of mutual funds.

Hutton purchased the insurance company, then called Life Insurance Co. of California, in 1978.

Hutton Insurance Group had net earnings of $12 million for the nine months ended Sept. 30 on revenue of $549.2 million. It had more than $2.7 billion in assets and more than $17.5 billion in life insurance in force on that date.

The parent company said a major portion of the special reserve was to protect its clients against losses on certain floating rate and zero coupon municipal securities issued in the early 1980s and on tax shelter products affected by last year's tax law.

E. F. Hutton Group had earnings of $43.6 million on revenue of $2.6 billion for the first nine months of 1986.

In the fourth quarter in 1985, Hutton posted a loss of $12.1 million on revenue of $896.3 million.

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