Unitrin Inc. (UTR) said its Fireside Bank unit will suspend all new lending as part of the company’s plan to exit the automobile-finance business.

The financial-services company said Fireside is solvent, and that its decision to exit the business was driven by a desire to use its investment in Fireside elsewhere. Unitrin had said it was considering a sale of the business, but will instead wind down Fireside’s operations over the next several years.
Fireside has a big concentration in subprime auto loans in California. Borrowers are becoming increasingly delinquent for such loans like other forms of lending, and California has one of the nation’s weakest economies at present amid the slump in housing prices. The bank, which doesn’t make home-related loans, recorded significant losses the past two years because of “substantial” increases to its loan-loss provisions.

“The turmoil in the economy, coupled with changes in the used-car marketplace and increased capital requirements has led to this decision,” said Unitrin Chief Executive Don Southwell.

He added the company believed it was in the best interest of shareholders to exit the risks associated with auto lending and that Unitrin should be able to recover its investment in Fireside over the next several years.

Unitrin said Fireside will likely have early lease termination costs of $3 million to $6 million and costs related to job cuts ranging from $6 million to $10 million. It didn’t give any indication of how many employees it might cut.

The company’s woes don’t stop at the auto-lending business, though. Unitrin and its life-insurance operations were recently downgraded by Fitch Ratings amid the units’ deteriorating capital levels caused by weak earnings amid catastrophe losses and increased investment losses, a scenario faced in recent months by nearly all life insurers amid the slumping stock markets.

Unitrin’s shares closed Monday at $13.93 and haven’t traded premarket. The stock has lost more than half its value the past six months.