When Takes Over Beneficial Finance announced its intention to buy American Centennial Insurance, it faced regulatory hurdles. The deal eventually fell through because of the insurer’s dire financial condition, but it left Beneficial free to focus on its core businesses. Its largest business was reinsurance, and it offered 14 percent interest rates on second mortgages and 23 percent interest on unsecured personal loans. It also expanded into Europe, opening offices in Leipzig and Dresden in former East Germany.
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Beneficial bought Western Auto Supply Co.
In 1964, Beneficial Finance Corp. completed the sale of its Chicago mail order catalogue subsidiary, Spiegel Inc., to German company Otto Versand (GmbH & Co.). This deal left Beneficial with a book loss of $40 million in the third quarter of 1981. The company has a network of consumer finance offices in most U.S. states, including Kansas City.
Founded in 1909, Western Auto currently owns more than 1,200 retail automotive supply stores and sells wholesale to approximately 1,570 independent car dealers in the United States. In 1988, the company generated sales of $930 million and earned $10.5 million. It has five regional distribution centers in the United States. It also operates stores in Puerto Rico.
Beneficial bought American Centennial Insurance
The acquisition of American Centennial Insurance in 1985 gave Beneficial Finance access to an insurance company that had a history of fraud. The insurer had a history of diverting millions of dollars in premiums and distribution to fraudulent reinsurers while grossly under-reporting its losses. Because of the scandal, Beneficial was forced to put up $200 million in capital to restructure its reinsurance operation, which had been a cash cow. As a result, it was forced to close 22 Canadian offices and stopped making certain kinds of loans. The acquisition helped Beneficial expand into Europe, opening offices in Dresden and Leipzig in the former East Germany.
Beneficial Finance also purchased American General, a consumer-finance company based in Richmond, Va., which targets lower-middle-class families. This move will give the company an additional 1,000 sales agents, concentrated in four big Southeastern states. American General has a total of $61.2 billion in assets. The merger is expected to add more than $20 million to the company’s earnings within a year. The two companies expect to combine their operations to reduce costs.
Beneficial bought Household Finance Corporation
The sale of Household Finance Corporation was a difficult one, complicated by regulatory hurdles, but it went through, and Beneficial was able to focus on its core business of consumer finance. Beneficial, which was founded in 1926, was the largest private lender in the United States and Canada, with $8.4 billion in assets. Its loan products ranged from unsecured personal loans to second mortgages, charging an average of 22 percent interest. In addition, the company expanded into Europe, opening offices in Dresden and Leipzig in former East Germany.
The company’s California subsidiary, Beneficial California Inc., has been under investigation since last year for its predatory lending practices. This was the cause of a multi-state complaint filed by over 45,000 California consumers. The company’s practices included multiple loans to the same customer, draining the remaining equity in the customer’s home.
Beneficial’s reinsurance operation was defrauded
The company’s reinsurance Banks Loan Money With Bad Credit operation was defrauding the company for millions of dollars. Beneficial had hired 10 managing general agents to handle this business, including American Centennial Insurance. These agents diverted millions of dollars in premiums to fraudulent reinsurers and grossly under-reported losses. As a result, Beneficial had to inject $200 million into its reinsurance operation. Despite the debacle, the company managed to make $101.2 million in 1985 on revenues of $2.1 billion.
Beneficial’s business began to rebound in the late 1960s after the U.S. economy recovered from World War II. The company expanded to other industries and in 1958 began offering a “fly now, pay later” plan to Pan American World Airways. The company also launched an office leasing division. In 1959, it opened more than 60 offices in the U.S. and Canada, and by 1980 it had a total of 1,200 branches.
Beneficial’s diversification strategy went awry
In the past Banks Loan Money With Bad Credit, diversification has been an afterthought, or secondary objective, in allocation strategies. However, in recent years, it has been elevated to a primary objective. Many new strategies have been touted for their diversification potential, and existing strategies are often repurposed in the name of diversification. Many managers, however, see diversification as a way to justify lower returns. There is a reason why diversification is sometimes called a “free lunch.”
Diversification offers companies the opportunity to develop new skills and competencies. For example, Canon, which was originally in the laser printer business, developed capabilities in sophisticated electronics. It used this knowledge to diversify its photocopying business. Today, its machines can detect paper jams and offer more sophisticated electronic controls.
Beneficial closed offices in 2007
In 2007 the non-prime retail mortgage division of HSBC bank closed 300 offices nationwide, causing a loss of 1,500 jobs. Due to the credit crunch and weak demand for loans, HSBC decided to streamline its operations and close 260 of its retail lending branches. Many of these locations were located in California and New Jersey, which have experienced rapid home price declines.
Beneficial began to grow and had more than 1,600 loan offices nationwide. By the time of the financial crisis, the company had made 1.7 million loans and earned over $950 million. In the 1970s, the company diversified by buying Chicago-based mail-order merchandiser Spiegel Inc. The company sold ninety percent of its goods on credit and earned most of its profits from interest. However, the company suffered when many of its dealers were taken over by other retailers that offered attractive franchise pacts.
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