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Claude Bebear Pursues His American Dream



The chairman of France's Axa covets Equitable--warts and all

Claude Bebear has one obsession: to become a big player in the U. S. insurance business. The 55-year-old chairman of French insurer Axa tried and failed, in a marathon bid for California's Farmers Group in 1989. Now, Bebear is back on the acquisition trail. And he seems to have found his prey: Equitable Life Assurance Society of the U. S. This time, the quarry may be willing. Equitable, a mutual company, aims to raise up to $1 billion to bolster its capital base, weakened by a decade-long junk-bond binge and soured real estate deals. As soon as regulators give the green light, the New York-based company wants to demutualize, or sell shares to the public. Now, Equitable is technically owned by its 2.5 million policyholders. A $1 billion investment would buy Axa more than 50% of Equitable--and control of the U. S.'s No. 3 insurer. Neither company will comment, but sources close to both insurers confirm that talks are under way.

The prospect of diving into a sea of troubles doesn't faze Bebear, an unrelenting fighter who in just 15 years has built up France's biggest private insurance empire. Bebear took the helm at Axa in 1974, when the company was pulling in a mere $130 million in annual premiums. He set off on a buying tear, and today Axa has $8.6 billion in premiums and earnings of $630 million.

Unlike the upper-crust executives who run most French insurers, Bebear is a schoolteacher's son, known as a scrapper who takes on some of the biggest figures in French business. His first battle pitted him against French construction king Francis Bouygues, from whom he wrested an ailing insurer. In 1988, an alliance between Axa and Compagnie du Midi, headed by financier Bernard Pagezy, created Axa-Midi, to be run jointly by both men. But the honeymoon was short. Pagezy saw the new entity as a far-flung financial holding company, while Bebear wanted to stick with insurance. By 1989, Bebear had engineered a boardroom coup for the first time ever in France--and Pagezy was out.

Today, one-third of Axa's sales are outside France, mainly in Britain, where he owns Equity & Law. But when state-owned French insurers are included, Axa still ranks only third at home and 30th in the world--a ranking Bebear badly wants to improve.

That desire led him into a frustrating episode in the U. S. in 1989, when British financier Sir James Goldsmith launched a $24 billion takeover bid for British American Tobacco Co., whose holdings included Farmers. Goldsmith promised Bebear Farmers in exchange for a $4.5 billion contribution to the takeover bid.

NO DEAL. But Bebear faced a monster. Farmers is composed of mutual companies based in 11 different states, each of whose regulators had to approve the deal. Still recovering from heart surgery, Bebear went on a five-month pilgrimage to state capitals in Idaho, Arizona, Illinois, Texas, and elsewhere to plead with regulators. He shipped 100 boxes of documents to the various states and endured countless hearings. All to no avail. Goldsmith's deal got hopelessly tangled in lawsuits and was dropped in April, 1990, and Bebear lost his claim on Farmers.

An Equitable takeover could have its own pitfalls. Experts believe it will take at least a year before Equitable's plan to sell stock clears New York State regulatory hurdles. The state's deputy superintendent of insurance, Kevin Foley, says New York will have to approve any deal. Then, Bebear may have to buy out individual policyholders, who could get at least half of the company's stock as part of the financial restructuring.

Then there's Equitable's sorry condition. For 1990, the insurer's capital fell by a worrisome 17.5%, to a mere $1.7 billion. The company is in no danger of failing, but troubles are hurting sales, and fresh capital would do much to bolster confidence. Sources close to Axa say that Equitable's strength in the life business, vs. riskier businesses such as casualty insurance, makes it attractive, as does its extensive sales operation. The asset portfolio, littered with bad real estate, is still being scrutinized by Axa.

Bebear waved away problems at Farmers in 1989, saying "the best time to invest is when things aren't going that well." He would likely say the same today. And since the Farmers debacle, more foreigners have bought up U. S. insurers: Germany's Allianz snapped up Fireman's Fund for $1.1 billion last year. With $1 billion that Equitable so desperately needs in his pocket and a track record to match, Bebear may yet make it across the Atlantic.Blanca Riemer in Paris, with Larry Light in New York

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