Analysts see cheery prospect for Fremont General stock this year.

Fremont General Corp. is positioned to see strong stock price increases in 1993, despite a heavy exposure in workers' compensation insurance, according to analysts.

Santa Monica-based Fremont General Corp. -- a holding company engaged through its subsidiaries in the insurance and financial service businesses -- reported better than expected third quarter 1992 earnings. Pre-tax earnings for the first nine months of 1992 gained 16 percent of $35.8 million from $30.8 million a year earlier.

"We're optimistic about 1993. We've restructured the whole business and downsized the company," said James McIntyre, chairman and chief executive officer of Fremont. "We're not the only ones in America to have done that, but it took awhile to reflect on the bottom line."

The company holds a portfolio of investment grade bonds and its financial services division, including asset-based lending subsidiary Fremont Financial Corp., has seen pre-tax earnings in the past year grow 52 percent. Since going public in 1977, the company has paid a cash dividend in 64 consecutive quarters.

"Their stock is just flying now," said Mark Matheson, an analyst at Crowell, Weedon & Co. in downtown L.A., who issued a report in December recommending a buy on Fremont stock.

The company's stock was priced at $24.25 a share during the end of September and by the first week of January had increased to $34.75 a share. Analysts said the stock could be in the 40s by mid-year.

The Crowell report concludes that "Fremont has an unusual blend of growth, income and value potential," finding that the "worst has passed" in the workers' comp industry and that the current difficult climate will allow "more efficient players, such as Fremont," to emerge with greater market share.

Analysts are bullish on Fremont, despite the company's heavy emphasis on the workers' comp sector.

"Everybody keeps talking about the problems in workers' comp, but the worst is over. Everyone is talking about it, so now is the time to buy," said Matheson.

He noted in the report that Fremont is seeing a decline in certain workers' comp claim categories, with stress claims in Los Angeles County down more than 50 percent in 1992 from 1991. He said he believes the current state law allowing workers to make stress claims will be modified by state lawmakers this year.

However, other analysts shied away from concluding that other insurers with heavy workers' comp exposure, such as Burbank-based CII Financial Inc., Encino-based Pac Rim Holding Corp. and San Jose-based Citation Insurance Group, are also poised to see stock price increases.

"It's possible you will see some better numbers this year (from other workers' comp insurers), but I don't think you will see some startling changes," said Gloria Vogel, first vice president with Shearson Lehman Brothers Inc. in New York.

The market has "seriously undervalued" Fremont for years because of concerns in general about the California insurance industry, said Walter P. Fitzgerald, an analyst with RAS Securities in New York.

"We were tainted with the brush of these other small companies," said Wayne R. Bailey, vice president and chief financial officer with Fremont. "We are attacking the very issues, such as fraud, that (State Insurance Commissioner John) Garamendi is talking about."

Fremont is known for its successful anti-fraud campaign, started in 1991.

Bailey claimed that out of 17 workers' comp indictments statewide in 1992, 16 cases were from Fremont's anti-fraud unit.

"We're fighting fraud with a vengeance here," he said.

Crowell recently raised its 1993 earnings estimate by 20 cents or 4.5 percent, from $4.40 to $4.60. The brokerage firm predicts that earnings per share in 1993 could "even surge as workers' comp claims fall and as California payrolls rebound."

Crowell made the finding despite the fact that Garamendi denied a rate hike last year.

Steve Gavios, an analyst who specializes in workers' comp at Kidder, Peabody & Co. in New York does not closely follow Fremont, but has stock hold recommendations on other California insurance companies, including Citation, and CII.

"I may be the one (analyst) that is closest to the (workers' comp insurance) situation, but I wouldn't say I'm the most bullish," he said.

He said he could not comment at this time on Fremont or other insurance companies he follows. However, he said he may be able to talk in a few weeks.

Frank Foellmer, an analyst with L.A.-based Quincy Cass Associates, said he is very bullish on Fremont, noting that the management track record shows a conservative attitude in reserving for loan and investment losses. He said this helped Fremont survive disastrous write-offs associated with the casualty insurance and reinsurance ventures in the 1980s.