COMPANIES TO WATCH TURNAROUND AT PRIMERICA The stock has jumped by one-third, even though some people still don't understand the company.
By Terence P. Pare

(FORTUNE Magazine) – SANFORD I. WEILL strung together marginally successful brokerage houses like beads on a wampum belt to create Shearson Loeb Rhoades, which he sold to American Express in 1981. Such a virtuoso performance might seem hard to top. But now it looks as if Weill just may have another hit on his hands. He stepped to center stage again last year when he merged his latest company, Commercial Credit, the Baltimore-based consumer lending outfit, with Primerica, the fabulously complicated but faltering financial services company out of Greenwich, Connecticut. The deal produced an instant behemoth -- albeit a sick behemoth, some said -- with $14 billion in assets. As a second act, the new Primerica opened to tepid applause. The stock prices of both Commercial Credit and Primerica dropped after Weill announced the deal. According to critics, he was trying to build a diversified financial services operation when everyone else was streamlining theirs. But this time, Weill says, his aim is not size: ''We do not want to be all things to all people. We want to be the efficient deliverer of financial products to different demographic segments of the financial consumer.'' Primerica certainly offers a variety of products, everything from insurance -- life, credit, accident and health, and property and casualty -- to mutual funds to mortgage banking. The company and its affiliates issued five different SEC form 10-Ks for the 1988 fiscal year: those of Primerica, Primerica Holdings, mutual fund company American Capital Management & Research, Commercial Credit, and life insurer A.L. Williams. ''It's a rats and mice business,'' says an industry analyst who, like many others, stopped following the company when it became too much of a maze. But Weill's restructuring scheme has focused on bringing clarity out of the chaos. On November 1 shareholders for A.L. Williams, which generates the lion's share of Primerica's earnings, approved a long-awaited exchange of stock that gave Primerica ownership of the 30% of Williams it had not already bought. A.L. Williams's founder, Art Williams, the charismatic former high school football coach who discovered term insurance the way some folks discover religion, tossed in his private general insurance agency -- for $75 million -- thus turning control of a 190,000-person sales force over to Weill. Primerica has shut down other life insurance units and sold its Dunham's Athleisure sporting goods unit and Commercial Credit's Baltimore headquarters. It has put its PennCorp Financial subsidiary on the block. The expected proceeds, $300 million, will help reduce debt. Smith Barney, the venerable brokerage house to the carriage trade, had fallen on hard times under the old Primerica management, largely as a result of the October 1987 crash. Weill installed longtime friends Frank G. Zarb, 54, as chief executive officer, and Lewis Glucksman, 63, as a vice chairman. They began rebuilding. About 120 people were let go, many from the once strong municipal securities division. But 400 top-flight brokers from Drexel Burnham Lambert were added this April when Smith Barney picked up 16 of Drexel's retail offices for $4 million, almost the price of the furniture. Shortly thereafter Jon M. Burnham, 53-year-old Drexel vice president and son of founder I. W. Burnham II, signed on as a special assistant to the chairman. The risk arbitrage department, closed down by previous management after the 1987 crash, has been resurrected. - The results so far have impressed Wall Streeters. Primerica's earnings have jumped each quarter of 1989, reaching $78 million in the three months that ended September 30. In the first half of this year, institutions and mutual funds have been big buyers of the stock, up $7 from the beginning of the year to $28 a share recently. Says fund manager Diane Jarmusz, who last spring purchased 410,000 shares for the $1 billion Oppenheimer Equity-Income Fund: ''It bothers me that Primerica is a kind of grab bag, but that's an emotion. My job is to make money any legal way I can.'' Morgan Stanley's Allerton Cushman Jr. expects earnings to grow 13% annually over the next five years, even though, as he admits, ''Primerica is still very much an unfinished painting.'' A few clouds remain in the picture. Weill has not been able to command the price he wants for Fingerhut Cos., which markets household goods and apparel through the mail; earnings for the unit keep heading south. Smith Barney's move to get back into risk arbitrage came just in time for the 1989 minicrash. And third-quarter earnings for Gulf Insurance, the property and casualty operation, are down 41% from a year ago, battered by storm damage from a Texas hurricane. Expect further brushstrokes from the master's hand.