Deloitte partner gets CFO post at First Executive; new appointments help this junk-bond-battered stock.

Deloitte partner gets CFO post at First Executive

New appointments help this junk-bond-battered stock

The announcement of several new appointments to senior management at First Executive Corp. helped buoy the stock of the beleaguered West Los Angeles life insurer.

The stock rose $.63 on Thursday, the day after the announcement, to close at $3.44.

Noteworthy among the appointments was William L. Sanders to chief financial officer. Until last week Sanders was the partner at the downtown office of the accounting firm Deloitte & Touche who headed the outside audits of First Executive for the past four years.

As one Atlanta-based stock analyst said, "Why would this guy who knew the ins and outs of First Executive leave his job to go there if he felt the company was in danger of going out of business?

While the market seemed to take note of Sanders' vote of confidence, the stock has a long way to go before it reaches its 52-week high of $9.88. Before the stock can recover some of this lost ground, the company will have to begin selling new policies again, the stock analyst said. To do that, the company will have to "make changes to get agents excited about the company and convince people to buy their annuities again," the analyst remarked.

First Executive has managed to stop the drain from policy surrenders which began after the rash of negative publicity earlier this year, the analyst noted. During the first quarter $1.3 billion of annuities and $150 million of life insurance policies were surrendered. He added, however, without new policies the company's business will deteriorate even with a normal rate of policy surrenders.

That may be why the stock price has yet to rise more than marginally from the $2-to $3-range it has traded at for most of 1990 following the announcement in January of fourth-quarter losses resulting from a deteriorating junk bond market. At that time the company took a write-off on its junk bonds of $515 million.

The junk bonds are now carried on the books at $6.9 billion but have a market value more in the neighborhood of $5.4 billion. The company has total assets of $18 billion.

In addition to Sanders, William C. Adams was named senior vice president in charge of the new corporate services group at Executive Life, the principal subsidiary of First Executive. He will have responsibility for general administrative services, including personnel and two new departments for corporate communications and corporate planning and analysis.

The stock analyst attached little significance to the creation of either of these departments.

Those at the company, as would be expected, would differ. Adams suggested the new corporate communications department reflects a new openness by the company. While repairing some of the damage from the hullobaloo surrounding the company's junk bond is the department's first order of business, its mission is much larger, Adams said. "I see corporate communications as a basic function of a large corporation," he remarked.

To combat some of the negative press the company received from its junk bond holdings, Adams pointed to the company's strong capital position, which still exceeds the industry average.

The department will ultimately have six or so professionals, Adams anticipated.

To enhance First Executive's reputation on Wall Street, Vice President Merle Horst will assume responsibility for industry relations, a newly defined function. In that capacity he will manage the firm's relations with investors, creditors, security analysts, rating agencies and insurance regulators.

Adams' new planning department will seek to develop new products and distribution channels as well as deciding what businesses Executive Life should target, Adams said. He does not foresee a significant mergers and acquisition thrust, unlike the typical strategic planning unit of the early 1980's, when such units were all the rage.

Adams expects three people will join the department.

Adams himself comes from a strategic planning background. He served in this function both as executive vice president of Essex Life Insurance Co., a start-up operation based in West Orange, N.J., and at Dean Witter Reynolds Securities Inc. before that.

Sanders, the other high-level appointee, denied he was hired to impose tighter controls on the insurance holding company or to insulate the controversial chairman and CEO, Fred Carr, as reported last week in The Wall Street Journal. "I am going to be a normal member of the management team and will work to improve the company's future operations and growth," he said.

Sanders said he is optimistic about First Executive's future: "They are in an excellent position to come out of the crisis stronger; with Fred Carr and Alan Snyder at the helm, I see better profitability in the near term and the development of new innovative products and continued growth in the long-term."

Alan Snyder is currently president and chief operating officer of First Executive.

Sanders said the company will seek to diversify its investment holdings. He acknowledged that a wider mix of investments, more in line with other insurers, may make it more difficult for First Executive to achieve the astounding returns it formerly enjoyed on paper.

Sanders said he was hired, at least partly, because he knew the "complexities of the company" and "they knew me and how I function under pressure."

As an auditor, Sanders acknowledged he had differences with the company from time to time, mainly because "the accounting literature was evolving very quickly." Recently he worked out with the company the identification of more than $1 billion securities the company was likely to sell within a year, made up primarily of junk bonds which were then marked to market.