NEW YORK -- Fed by a bull market on Wall Street and robust margins between borrowing and lending costs for its Baltimore-based Commercial Credit consumer finance company, Primerica Corp. reported record first-quarter profits yesterday.
In a news release, Chief Executive Sanford Weill cited the record profits when overall economic conditions were poor and said: "We believe the quarter's achievements represent an auspicious start to our sixth year as a public company. These outstanding results were combined with significant steps to further streamline our company and divest non-strategic assets."
Primerica's results exceeded the expectations of most securities analysts. The stock closed at $39.50 a share, up 87.5 cents a share, on the New York Stock Exchange.
Primerica's operating profits last year were $154 million, or $1.37 a share, with the largest gain recorded by its investment firm, Smith Barney, whose income was up 91 percent to $56.1 million.
Smith Barney's strong earnings came as many investment firms are announcing improved results, but analysts said Smith Barney's were unusual in that they were greater and came atop unusually good gains last year.
"I'm looking for securities firms to report increased earnings o10, 20, or 30 percent but nothing like the 91 percent of Smith Barney," said James Hanbury of Wertheim Schroder. "It was a wonderful quarter."
How much more profitable over the long term remains a subject of debate. "Clearly, they are earning more than they should on a normalized basis," said David S. Penn, an analyst with Legg Mason in Baltimore. "Certainly, it's nice to see how profitable Smith Barney can be in a good market, but it's probably not sustainable in the near term."
Primerica announced nearly $70 million in additional gains from the sale of interests in Margaretten, a mortgage finance company; Inter-Regional Financial Group, owner of the Dain Bosworth Inc., brokerage firm; and Musicland, a retailer.
Commercial Credit earned a reported $44.7 million, an increase of about 10 percent. Actual results for Commercial Credit were probably higher, analysts said, but the full benefit of lower funding costs from the recent decline in interest rates is partially obscured by how Primerica reports results.
%Three months ended 3/31/92
.. .. .. .. Revenue .. .. .. Net .. .. .. Share
'92 . ..1,305,700,000 ..220,800,000. ..1.96
'91 . ..1,256,700,000 ..105,900,000. ..0.95
% change .. .. .. +3.9 .. .. . +108.5 . +106.3