UPDATE 1-Unitrin says unit to exit auto finance business

* Fireside unit to exit automobile finance business

* Unit to suspend all new lending

* Shares down nearly 2 percent

March 24 (Reuters) - Financial services company Unitrin Inc UTR.N said its Fireside Bank unit will suspend all new lending activity as part of a plan to exit the automobile finance business.

The company said Fireside is solvent and that it decided to exit the automobile finance business to redeploy its investment in Fireside elsewhere.

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

The company plans to wind-down Fireside's operations over the next several years and expects to "substantially" recoup its investment in Fireside of about $240 million over time.

Unitrin expects to incur termination costs between $3 million and $6 million and employee termination costs in the range of $6 million to $10 million.

Fireside engages in financing of automobiles through the purchase of retail instalment contracts from automobile dealers. The borrowers under contracts purchased by Fireside have marginal credit histories.

For the year to end Dec 31, Fireside posted a loss of $22.3 million due to higher provisioning.

Shares in the company were trading about 2 percent lower at $13.67 in the morning trade on the New York Stock Exchange. (Reporting by Archana Shankar in Bangalore; Editing by Anil D'Silva)