Updated from 12:30

Shares of

Reliance Group

(REL)

fell more than 23% Tuesday after its chief executive, Saul Steinberg, said he would step down Tuesday in the wake of a surprising loss as the troubled insurance company moved to restructure.

George Baker, who has been a special assistant to the chairman for about four months, will replace Steinberg as chief executive. Steinberg will remain chairman of the board.

Baker also will replace Robert J. Miller Jr., who resigned as president after only three months.

Reliance's stock fell 1 1/4 to end trading at 4 1/8 Tuesday, well off its 52-week high of 10 7/8.

The New York-based insurer said that it would take a series of steps to rehabilitate the company, including an agreement to sell Reliance Surety to Travelers Property Casualty, a unit of

Citigroup

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, for $580 million in cash. The transaction is expected to close in the second quarter.

The company also will consolidate its operations. Its banking group will extend the maturity of credit. Reliance will suspend the cash dividends on the stock and explore spinning off for initial public offering the company's Internet operations and information technology consulting group.

"We recognize the dramatic nature of these actions." Steinberg said in a statement. "However, we believe they are appropriate and give the company the best opportunity to build and deliver shareholder value over the long term."

For the fourth quarter ended Dec. 31, Reliance reported a loss of $123 million, or $1.08 a diluted share, compared with earnings of $30.8 million, or 25 cents a share, in the year-earlier quarter. Analysts polled by First Call/Thomson Financial had been expecting earnings of 2 cents in the latest quarter.

Excluding a $117 million after-tax charge for a settlement with Unicover Managers over a workers' compensation lawsuit, as well as other one-time items, Reliance lost 36 cents a share in the latest period.

Revenue was basically flat at $800.5 million, compared with $795.3 million a year earlier.

As part of its restructuring, Reliance arranged with its bankers to push back the maturity of its $237.5 million credit to Aug. 31 from March 31. The company said it plans to restructure its debt prior to the later date. Before this, Reliance had $500 million of debt obligations maturing in March and November, according to Standard & Poors, a credit rating firm.

Also, shareholders should not expect dividends, as the company will use those funds to reduce its outstanding debt.

Reliance hopes to further reduce its debt by consolidating some of its operations and saving $80 million. The company could not be reached for comment on which operations would be affected.

"As a result of the substantial progress we have made increasing capital, we believe we will have our debt and claims-paying ratings reaffirmed," Baker, the new chief executive, said. "Notwithstanding recent losses, much of our business remains profitable."

Steven Rautenberg, a company spokesman, would not say whether Steinberg would retain his $9.9 million salary as chairman. "The compensation of top management is based on results," he said.

Steinberg and his family own about 40% of the company.