Can A Bevy Of Bankers Buoy The Pru?Tim Smart
Want to get ahead in the insurance industry? Then go work for a bank. That seems to be the magic recipe these days, as lumbering insurance giants turn to the banking industry for executive talent. Aetna Life & Casualty's recent recruitment of former Continental Corp. Vice-Chairman Richard L. Huber to be the company's vice-chairman for strategy and finance is a notable example. But bankers have virtually taken over troubled Prudential Insurance Co. of America, which saw its capital drop 11% last year after paying out more than $1 billion in fines and settlements resulting from its limited-partnerships scandal.
Late in 1994, Pru hired Arthur F. Ryan, 52, former president of Chase Manhattan Corp., as chief executive. Ryan, who has a reputation as a cost-cutter unafraid to ditch underperforming assets, is the first non-Pru person to take the top job at the nation's largest insurer. Ryan, in turn, recruited two Chase colleagues: In February, John V. Scicutella, 45, joined Pru as head of operations and systems, a post similar to the one he held at Chase. And on May 18, Mark B. Grier, 42, a former Chase executive vice-president, became Pru's new chief financial officer.
FINANCIAL DISCIPLINE. The influx of bankers stems largely from pressure from insurer boards for greater returns--even at mutuals such as Pru that are owned by policyholders rather than stockholders. Bankers are not always regarded as the most innovative financial executives. But the best ones are attuned to the demands of Wall Street and bring a financial discipline that has been lacking in the staid insurance industry. Financial types such as former American Express executive Sanford I. Weill have also made inroads in the insurance industry. "There's a general view that bankers are more highly focused on the cost of capital and earnings," says Larry G. Mayewski, senior vice-president at A.M. Best Co., an insurance-industry rating service.
Prudential, which declined to comment for this story, could use a little more focus. It lost $907 million last year, as its insurance operations suffered from such losses as the Northridge (Calif.) earthquake and as its mortgage-lending unit fell victim to rising interest rates. An unwieldy mix of insurance, mutual funds, securities, and real estate, Pru is one of the largest financial-services players in the world, with more than $300 billion in assets. But it lacks the sharply defined strategy of some other financial conglomerates, such as GE Capital Services Inc.
When he joined Pru, Ryan promised he would move in 1995 to improve earnings and capital. In March, he outlined plans to sell the Pru's $75 billion mortgage-servicing business. The unit could fetch $1 billion, analysts say, though no deal has yet been reached. Other moves could include further trimming of the property-casualty unit, which is in retrenchment, and greater emphasis on the sale of products to the retirement market. Bringing in the bankers is just a first step.