Here is an extensive article(BTW-I pulled out at 30.5 just to lock in it a profit and hope for pullback for re-entry before much expected news )
01/22/1999
Philadelphia Business Journal
Pg. 4
Copyright Philadelphia Business Journal Inc. 1999
Norristown, PA, US, Middle Atlantic --
NORRISTOWN -- Provident American Corp. is planning to split its
business and spin off either its failing insurance operation or an Internet
venture that has been raising shareholders' hopes in recent weeks.
Chances are good that the business it boots out on its own will be the
insurance operation, CEO Alvin H. Clemens said.
No final decisions, however, have yet been made, said Clemens, and the
holding company wants to make sure stockholders who stuck it out
through years of troubles in the insurance business are not cut out of the
action expected from the shiny new e-commerce effort, dubbed
HealthAxis.com "We would probably spin the insurance company out
because it has lesser value, and we want HealthAxis to be free of the
risk," Clemens said.
Provident American spent much of 1998 in over-the-counter trading
limbo, after being booted off the Nasdaq stock market for late financial
statement filings. It finally skidded back on to the Nasdaq in November,
but dribbled around under $7 for awhile before closing the year in the $8
range.
Early January announcements that Provident American was moving to
free HealthAxis.com from the insurance side of its business, however, put
the stock in place to catch the Internet wave of interest. It has traded
above $12 per share for most of 1999, so far.
HealthAxis.com is "very well positioned" in the small new field of Internet
marketers of health insurance, said Gary Craft, analyst with BankBoston
Robertson Stephens in San Francisco. While those peddling insurance
over the Internet have technology and consumer inertia problems to
contend with, Craft said, HealthAxis "has a lot of wind at its sails."
A split that produces two public companies from Provident American 's
will leave stockholders with shares in both of them, Clemens said last
week
As the largest individual shareholder in Provident American , with over
3.5 million shares, Clemens himself has a lot to lose from a split that
would take the Internet marketing operation away from holding company
investors.
Grown largely with capital from outside investors, the new venture is led
by Michael Ashker, a major new investor. HealthAxis operates a Web
site where consumers can shop insurance -- right now, mostly offerings
from Provident American or the Ohio ompany that bought the
Norristown company's health care line.
But other insurers are starting to sign on with HealthAxis, too. Security
Life Insurance Co. of America, based in Minnesota, this week said it
would sell dental and vision coverage through Health.
The plan for the Web business calls for a full Ene of offerings from a
number of insurers like Security Life, who will feed commisions and other
fees to HealthAxis.
Provident American timed its announcement of the plans to split with
news that it had sold its health insurance business to Central Reserve Life
Insurance Co. of Ohio in a $15 million deal
State regulators liked the deal "The acquierer is a much stronger financial
entity," said Steven Johnson, deputy insurance commissioner for
Pennsylvania "The policyholders are probably much better off."
Clemens said Provident American 's remaining insurance business was
in good shape, and was likely to grow, due to a reinsurance pact with
Central Reserve.
But an insurance rating agency disagreed. Weiss Ratings Inc. of Palm
Beach Gardens, Fla., had given the health company that Provident
American sold a " grade, meaning it judged the entity financially weak.
Recently, Weiss downgraded the remaining insurance operation at
Provident Amer can to D-, a rating which puts it in the lower third of
weak companies.
Ted Brownstein, director of insurance safety for Weiss, cited "the fact
that they're losing money on an ongoing basis and not replacing it with
new capital" as the reason for the agency's continued concern about
Provident American 's future in insuranc |
