This Insurer May Be Up For Grabs

When a Wall Street visitor talked to brass at Washington National (WNT) recently, he expected to get a routine rundown on how the Lincolnshire (Ill.) insurance holding company was doing. Instead, he got insight that prompted him to buy shares. He's convinced that management is looking for a buyer for the Big Board company.

Why would Washington National-- whose main operating companies are Washington National Insurance and United Presidential Life Insurance--opt to be taken over? One analyst explains that Washington National is in a couple of "strong niches" but isn't large enough to flourish. The company focuses on three businesses: individual and group health insurance, disability insurance for teachers, and individual life insurance and annuities. Prices on health coverage have become more competitive, as carriers vie for market share.

As a result, Washington National's stock has been dormant but has perked up somewhat in recent days. "The stock has been selling at a low valuation of about 8 times earnings," notes one investment strategist at a New York securities firm.

He reckons that the shares, now at 23, are worth 33 in a buyout. The company posted revenues of $657 million last year and has a book value of about $33 a share. James English, director of research at Philo Smith, a Stamford (Conn.) investment bank, expects Washington National to make $2.70 a share this year and $2.90 next, up from $2.53 in 1994. The company didn't return calls.

Before it's here, it's on the Bloomberg Terminal.