DALLAS, July 26 (Reuters) - Unistar Financial Service Corp.
(AMEX:UAI), a newly public company that sells car and renter's
insurance, said Monday it scrapped a plan to sell its Unistar
Insurance unit.
Unistar's board had given the thumbs-up to considering
selling the unit as a message to investors that it was
primarily a fee-based company, rather what it described as a
"risk-taking insurance company."
Unistar Chairman Mark Sparks said the company had never
decided to sell the unit definitely, and that it made public
its decision to "squelch the rumors that it was selling the
insurance company."
Sparks also said Unistar may retain the unit, from which it
derives less than 2 percent of its income, and merge it with
its renter's insurance business.
Sparks stressed that Unistar was an insurance retailer
rather than a wholesaler, and that the vast bulk of its income
is based on commissions, fees and net premium interest income.
Unistar on Friday said it canceled plans for a 2-for-1
stock split in light of an ongoing investigation into the
company by the American Stock Exchange. The exchange on July 15
halted trading of Unistar's shares, prompting the company to
issue a statement saying its finances were in order.
The company in May reported first quarter earnings of $1.4
million, or 6 cents a share. Since going public in May,
Unistar's share price has dropped more than 50 percent from a
high of $61.625 on July 13 to trade at $21.625 on Monday.
The company has some 24 million shares outstanding, but
just under a million shares, or 4 percent, make up the public
float.
Sparks on July 16 blamed the company's plummeting share
price on short-sellers, investors who bet on a stock's decline.
Sparks said management's original intention in selling the
insurance unit was to do away with the idea that Unistar was
solely a property and casualty insurance company. Though often
mischaracterized as just an insurance company, the company
generates 95 percent of its income from commissions, fees and
interest income. |
