NEW YORK -- Baltimore-based Commercial Credit continues to thrive, but Primerica Corp., the financial services conglomerate grafted on top in a 1988 merger, has been something of a flop, according to an article in Forbes magazine that hits newsstands today.
On the cover, beside a headline reading "Did he get taken this time?" is a morose-looking Sanford I. Weill, chief executive of New York-based Primerica who made his reputation merging a string of brokerage firms into the company now known as Shearson Lehman Bros. He joined a recovering Commercial Credit in 1986 as part of its buyout from Control Data Corp.
Noting that Primerica already suffered from at least one bad deal at the time of the $1.5 billion acquisition by Commercial Credit, Forbes asks, "Why would this troubled giant interest Weill? Ego, in part. Weill was impatient to get back to Wall Street and to run a name-brand company."
Included under the Primerica umbrella is the mid-sized brokerage firm Smith Barney, Harris Upham; specialty retailing companies; and a vast term and life insurance operation. Mr. Weill hoped to expand the brokerage and insurance businesses while selling off the retail ones.
But according to Forbes, "the insurance operations are a can of worms," the core of the retail segment couldn't be sold and are worth only two-thirds what Mr. Weill had thought at the time of the acquisition, and Smith Barney has shown progress and is profitable but is losing market share.
"Primerica does have one crown jewel," Forbes declared, "the company Sandy Weill started with: Commercial Credit."
With Commercial Credit providing the engine, earnings have continued to grow at Primerica, Forbes said, concluding that "Weill might have delivered a much better return to his shareholders had he never bought Primerica. The bottom line seems to be that he overpaid in terms of current prospects because he hoped to improve Primerica's operations. The evidence shows that he underestimated the problems."
Responding to the article, Primerica Vice President Mary McDermott said, "Although the story in Forbes was inaccurate in a number of instances, they were at least correct about how well Commercial Credit continues to perform. We expect that Primerica's continued earnings growth and financial strength from Commercial Credit as well as our other businesses will demonstrate that Forbes' conclusion was incorrect as well." Forbes Editor James W. Michaels said, "We believe our assessment is the correct one."