Can Arthur Ryan Reinvent The Rock?

The Rock may be heading for a shakeup. On Oct. 13, Prudential Insurance Co. of America recruited an outsider chief executive for the first time in its 119-year history, tapping Chase Manhattan Bank President Arthur F. Ryan to replace Robert C. Winters. "He is going to be a terrific addition here, in terms of a different perspective," says Martha Clark Goss, a senior vice-president at Prudential.

He also may presage a reshaping of the nation's largest insurer. Analysts and consultants who have worked with the company expect Ryan to restructure, cut costs, and, perhaps, pull the plug on unprofitable businesses. Layoffs and management shuffling could follow.

Prudential could use new blood. In the past decade, it has taken brutal hits from catastrophe-insurance claims. And this year, it could pay out close to $1.1 billion to settle claims stemming from improper sales of limited partnerships by its brokerage subsidiary. Through much of the turmoil, Winters, 62, who joined the company in 1953 and spent his entire professional life there, has kept a low profile.

But sources close to the company say that this spring, the board, whose members include former Federal Reserve Chairman Paul A. Volcker and former Merck & Co. CEO P. Roy Vagelos, finally grew restive--and began to push for new leadership. Donald E. Procknow, who headed the board's search committee, says Winters was in no way pressured to leave. In an internal memo, Winters told employees he had long intended to retire before age 65.

PATCHWORK. Ryan, 52, says he got a call about the job roughly a month ago and decided to accept it on Oct. 12. "What attracted me was the size, the market share, the name," Ryan says. Certainly, he is well qualified. At Chase, he oversaw the marketing of mutual funds and insurance, both important businesses for the Pru. His technology expertise (he led a large sales operation at Control Data Corp. before joining Chase's data-processing unit in 1972) will help if Prudential expands its asset-management business. And he oversaw numerous asset sales and staff reductions of nearly 8,000, preparing him for the trimming Prudential may need.

Where Chase is on the rebound, though, Prudential is slipping. It has grown into a sprawling empire with $373 billion in assets under management and businesses ranging from securities structuring to individual policy sales. Its complex structure resembles a patchwork quilt: The asset-management group alone includes 20 legal entities.

Prudential has begun taking steps to boost efficiency, bringing in Coopers & Lybrand, McKinsey, Deloitte & Touche, and other consultants. Last spring, it hired E. Gerald Corrigan, ex-president of the Federal Reserve Bank of New York and now chairman of international advisers at Goldman, Sachs & Co., to help revamp the asset-management group.

Still, Ryan will have plenty to do. First, he must determine which businesses to focus on. Retirement-plan management should be high on the list, says Burton Greenwald, managing director of consulting firm B.J. Greenwald Associates: "Even though they have a huge presence in the pension market, they've completely missed the boat on 401(k)" plan management.

Ryan also may have to shed or shut down businesses. Prudential has been trying for over a year to sell its reinsur-

ance business, hit hard by claims from natural disasters. And its property and casualty units required a $1 billion cash infusion after Hurricane Andrew. "The track record of the company doesn't necessarily justify keeping the property/casualty operation," says David Havens, an analyst at Standard & Poor's. Then there is Prudential Securities, the locus of Pru's limited-partnership scandal. Industry observers say the unit's asset-management business fits with the parent's goals; other operations, though, have less synergy.

Ryan may face opposition from old-guard execs and agents resentful of the imported boss. But he's adept, colleagues say, at developing talent. "When you get technical skills and people skills, that's about as good as it gets," says Corrigan. Adds Chase CEO Thomas G. Labrecque, who promoted three executive vice-presidents to share Ryan's responsibilities on top of their existing jobs: "Art is a hell of a talent. On the other hand, we now have a lot of talented people," thanks partly to Ryan's staff development.

Even with new leadership, though, a company that insures one in five Americans won't turn around overnight. "You have a supertanker trying to change directions," says Greenwald. That still beats a rock mired in the mud.


The challenges facing new Chief Executive

Arthur Ryan:

SELL ASSETS Ryan must consider getting rid of or restructuring subsidiaries such as Prudential Reinsurance and scandal-ridden Prudential Securities.

REBUILD MORALE Thousands of agents have been dispirited by Prudential's well-publicized ills. Ryan has to soothe them--and the disgruntled executives passed over for the top spot. Look for a possible management shakeup.

REFOCUS Prudential may build its fast-growing 401(k) fund management and mutual-fund businesses to balance cyclical insurance swings. It needs new capital to fund a vibrant managed-care operation.

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