Here it is boys and girls
Riscorp, Zenith haggle over worth
By Michael Pollick
STAFF WRITER
Riscorp stock lost 35 percent of its value Tuesday after a $200 million-plus price dispute surfaced between the Sarasota company and the California insurer that is acquiring Riscorp's insurance business.
Riscorp shares sank to 1 3/8 Tuesday, down 3/4 from Monday's 2 1/8, on brisk volume of 539,100 shares.
Zenith Insurance Co. of Woodland Hills, Calif., took over Riscorp's book of business April 1, but the companies are engaged in an elaborate dance over the price.
Riscorp contends that the final price, which is to be based on book value, should be $141 million. In a recent filing with the Securities and Exchange Commission, however, Zenith argued quite the opposite. Rather than being worth anything, the business had a negative net worth of as much as $68 million, according to Zenith.
Not even the $35 million downpayment that Zenith put into escrow last year is safe, because Zenith charges that Riscorp breached its contract.
''These breaches may result in recovery by Zenith of a portion of the purchase price otherwise payable by Zenith Insurance,'' Zenith told the SEC on July 10.
It took a similar filing by Riscorp this week to catch the interest of those speculating on Riscorp's value.
The filing, made after the market closed Monday, reiterated the $209 million discrepancy. But Riscorp added that it ''intends to dispute Zenith's suggested changes ...''
Riscorp's filing triggered Tuesday's sharp selloff.
The two companies have engaged a ''Big Six'' accounting firm to serve as neutral auditor and actuary in resolving the dispute, a Riscorp spokesman said Tuesday.
''We're hoping to have it all wrapped by Oct. 31,'' said Walter Riehemann, Riscorp's corporate secretary.
Riscorp shares were delisted by NASDAQ last summer after the company failed to file its audited financial statements for 1996 on time.
Since then, Riscorp's independent auditor, KPMG Peat Marwick, has filed audited financials for 1996 and 1997, indicating a year-end 1997 net worth of $160 million.
Proposed legal settlements and other expenses lowered the number to $141 million by the closing date with Zenith, which was April 1.
''I think Zenith is clearly low-balling,'' said Randall Arnaud of Sarasota-based Financial Services Network. ''Riscorp didn't make these numbers up. They were based on KPMG's audited numbers for the fiscal year which ended 12/97.''
Another observer, insurance analyst John Gwynn, said he trusts Zenith's numbers more than Riscorp's. Riscorp claims it has $48 million coming from the state-run Special Disabilities Trust Fund. Most of those claims, he suspects, are undocumented and unrecoverable.
''I think Zenith will end up with a hell of a deal,'' said Gwynn, whose J.D. Gwynn & Co. is based in Ponte Vedra. ''They bought themselves a significant market share in the state of Florida.''
Story Filed By The HERALD TRIBUNE, SARASOTA, FLORIDA
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