GuideOne Insurance, which has been divesting some of its operations in recent years to boost profitability and hone its focus, has agreed to sell its life insurance business for $91 million to Kansas City Life Insurance Co.

Under the terms of the sale, GuideOne will be paid $78 million in cash, and will receive another $13 million from the assets of life insurance unit, said Jim Wallace, GuideOne’s chief executive. GuideOne also said it had established an alliance with Kansas City Life in which each company would promote the other’s products.

The sale price represents a 44 percent premium to the division’s $63 million book value, Wallace said.

About 10 of the unit’s 40 employees will immediately lose their jobs as a result of the transaction, which is expected to be completed by June. The remaining 30 workers will continue to operate out of GuideOne’s West Des Moines headquarters until mid to late 2004, when those functions will be moved to Kansas City, Mo., where Kansas City Life is based.

It’s the fourth time that Wallace has engineered the sale of one of GuideOne’s businesses in the nearly two years that he has led the company. Previous divestitures include auto insurance companies in California and Ohio that cater to higher-risk drivers and a unit that is based in Tulsa, Okla.

Prior to Wallace’s arrival at GuideOne from West Des Moines-based National Travelers Life Co., where he spent five years as president and chief executive, GuideOne’s leadership had completed several acquisitions in an attempt to boost sales and, eventually, sell the company’s stock to the public.

That strategy, which got GuideOne involved in businesses it was unfamiliar with, led to losses in 2000 and 2001. Wallace put a halt to that plan. The company’s life insurance business, which it has operated since the 1950s, is the last sale Wallace is planning, he said.

To boost growth, Wallace has been focusing on the businesses GuideOne knows best, including insuring churches, senior-living communities and colleges and universities. The company insures about 50,000 churches, about 19 percent of the nation’s total, making it the largest insurer in that niche of the industry.

The proceeds from the life insurance sale will help GuideOne increase the amount of insurance it can underwrite for its remaining customers, or will allow it to take on new customers faster than it previously could.

GuideOne’s life insurance company, which had assets of about $347.7 million as of Dec. 31, wasn’t large enough to offer as many products as the bigger life insurers can, Wallace said. At the end of 2002, GuideOne Life had about 78,000 life and annuity policies in force. The unit had net income of $7.5 million last year.

By comparison, Kansas City Life had 2002 revenues of $440.2 million and had assets of $3.9 billion at the end of last year. Kansas City Life was ranked as the 88th largest on Best Review’s list of top life insurance companies, based on its 2001 assets.

Stamford, Conn.-based Philo Smith & Co., which specializes in providing investment banking services to insurance and other financial services companies, advised GuideOne on the transaction.

A strategy, in brief:  For more than 18 months, property and casualty insurers have been raising premiums to make up for losses related to corporate bankruptcies, the slumping stock markets and the claims resulting from the terrorist attacks of September 2001.

The trend is known to industry insiders as a hard market.

By selling the company’s life insurance business now, GuideOne will be able to increase the number of policies that it writes, using the extra cash from the proceeds of the sale to increase the amount of money it’s able to set aside for reserves.

Jim Wallace, GuideOne’s chief executive, is confident that the current environment of increasing premiums will last longer than previous cycles because of losses in investment portfolios and other factors.

“So many companies are having difficulty building surpluses and they’re finding out that their reserves are inadequate,” he said.