Survival Insurance

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LIKE FINANCIAL LEPERS, INSURANCE FIRMS HAVE been widely shunned by most investors. In the past fours years, the industry has had to pay $28 billion in damages, including $7 billion in 1989 after Hurricane Hugo and the San Francisco earthquake. So far this year, insured losses have totaled a record $13 billion. The toll from Hurricane Andrew alone has already exceeded $9 billion. So who would want to buy into an insurance company? Try Sanford Weill, chairman of Primerica, the New York City concern best known for its Smith Barney brokerage subsidiary. Weill agreed to invest $550 million for a 27% stake in Travelers.

Hartford-based Travelers, which took up to $225 million in charges against third-quarter earnings for damages related to Hurricane Andrew, has been struggling under the weight of a huge portfolio of troubled real estate loans. The 129-year-old company, which last week announced 3,500 layoffs, 10% of its work force, has been desperately searching for a major cash infusion. Weill, who earned a reputation for shrewdness after creating what is now Shearson Lehman Brothers and selling it to American Express in 1981, appears to be bottom fishing. Primerica's stake -- at $19 a share -- is valued at about half Travelers' book value. Weill, who is also known as a cost cutter, will take an active role in Travelers' management. Primerica, which already generates 35% of its operating income from its own insurance business, will get four seats on Travelers' 16-member board. Weill will serve as co-chairman of the management committee. While the deal is expected to help nurse Travelers back to health, it is not expected to lead to a complete takeover. Under the agreement, Primerica would be prevented from buying more Travelers stock for five years.