BICO ENTITY TO BE SOLD BY SUPERIOR.

Byline: Deborah Adamson Daily News Staff Writer

Superior National Insurance Group, which is in the midst of acquiring the workers' compensation business of Foundation Health Systems, said Tuesday it will sell the structure of one of the units it will purchase from the HMO.

Superior, a workers' compensation insurer, plans to sell the Business Insurance Co., or BICO, to an affiliate of Zurich Insurance Group in Switzerland. The sale price will be set after its deal with Foundation Health closes in the fall.

The Calabasas-based insurer will keep BICO's 200 employees and offices nationwide, but it will be selling the shell of the company to Zurich.

``It's really a transaction of form than substance,'' said Robert Robotti, an analyst at Robotti & Co. in New York. ``(BICO) was a duplicative asset.''

The company benefits from both deals, he said.

First, Superior is buying Foundation Health's Business Insurance Group, or BIG, for $285 million, considerably below its book value of $380 million. Book value is the worth of an asset as shown on a company's balance sheet.

Foundation Health is selling its workers' compensation business to concentrate on its core HMO operations, which faces stiff competition, Robotti said.

By buying BIG, Superior leapfrogs from being the ninth-largest writer of workers' compensation insurance in the state to the largest, he said.

Included in the purchase of BIG is BICO, which handles workers' compensation business outside of California. Superior will retain the employees, offices and customers of BICO and fold them into one of its subsidiaries. As such, the insurer gets an instant presence in 44 states.

Superior currently operates only in California and Arizona.

``One of the reasons Superior entered into this is to have national exposure,'' said William Gentz, Superior's chief executive.

But since Superior does not need the structure of BICO - the corporate entity and insurance licenses - it profits by selling the shell to Zurich.

The company has no qualms about selling to another insurer in this case, especially since Zurich owns 43 percent of Superior.

While Superior does not have licenses in all the states where BICO operates, it won't be a problem to apply for them, Gentz said.

Superior benefits more from selling the BICO structure and then applying for the licenses itself instead of keeping the subsidiary, Robotti said.

The sale of BICO to Zurich should conclude at about the same time its deal with Foundation Health wraps up, pending regulatory and other approvals.

Separately, Superior disclosed that a subsidiary bought back 245,000 shares from a director, Thomas J. Jamieson and Jaco Oil, a company he controls.