This Insurer Should Take Cover

Will U.S. Facilities, a provider of specialty insurance, need an insurance policy of its own against a possible hostile takeover bid? So far, Chairman and CEO George Kadonada doesn't think so. He has publicly stated that the company isn't for sale and that he is unaware of any interest in a deal. Yet U.S. Facilities is of rising interest to some pros.

One New York money manager insists that another insurer is very interested in U.S. Facilities' growing share of the booming medical stop-loss insurance market. Medical stop-loss insurance limits the liability of a self-insured employer under its group health plan.

This pro believes shares of U.S. Facilities, now trading at 9 1/2, are "enormously undervalued," trading below the company's book value of $10 a share. He notes that this is one reason why at least three investment groups, including one led by New York investor Gary Siegler and SC Fundamental, have been accumulating shares in the company. The stock hit a high of 11 in early May, fueled by rumors of a takeover offer by one of the groups. That fizzled out, and now there are whispers about the takeover interest of a large private insurance company.

One big investor says U.S. Facilities is worth $20 a share in a takeover deal. The talk is that the company is considering buying back shares and initiating paying a cash dividend. Analyst Fred Hill at Hermitage Capital sees the company earning $1.25 this year and $1.45 in 1994, vs. 1992's $1.10.

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