Mercury Finance Co. sold its life insurance subsidiary last week for less than its book value.

The beleaguered Lake Forest, Ill., subprime auto finance company said Friday that it would sell Lyndon Insurance Group to Frontier Insurance Group Inc., Rock Hill, N.Y., for $92 million.

Standard & Poor's Corp. said Monday that it was reviewing Frontier's credit rating for a possible downgrading as a result of the purchase.

Mercury bought Lyndon from ITT Corp. in October 1995 for $72.5 million as the Illinois company, then the darling of the booming subprime industry, sought to diversify.

"We need to get people to understand we don't just finance cars," former Mercury chief executive officer John W. Brincat said at a meeting with investors in New York last November.

But Mercury has been reeling since January, when it disclosed that fraudulent accounting had caused it to overstate earnings by $90 million over four consecutive years.

Mercury stock plummeted on that news, and analysts predicted the company would have to sell subsidiaries to avoid bankruptcy.

Shortly after the accounting fraud came to light, Lyndon president Roland Anderson told Bloomberg News that the insurance unit was untainted by the debacle and worth over $100 million.

A spokesman for Mercury Finance refused to take questions.

"At this particular time, the interests of Mercury's shareholders and creditors lie more in the direction of the additional liquidity that this deal gives the company," said William A. Brandt, Mercury's president and chief executive, in a press release.

The company said representatives of Mercury's creditors have reviewed the agreement and expressed support for it. Mercury stock closed up 12.5 cents, at $2.625 a share.

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