DEAL-STARVED SUNAMERICA OUT TO DOUBLE ITS PLEASURE WITH TWIN BUYS: INSURER TALKING TO PARENT OF BROKERS SPELMAN, SENTRA

In the ultimate display of efficiency, acquisition-hungry SunAmerica Inc. is vying for two San Diego-based brokerages at once. The Los Angeles-based insurer is negotiating to buy his-and-her brokerages: mid-sized firms owned by a married couple.

A SunAmerica spokesman confirmed it is in discussions with Richard and Kaye Woltman who run Sentra Securities Corp. and Spelman & Co., both in San Diego. The Woltmans did not return telephone calls.

“Trying to control distribution of financial service products”

For years, SunAmerica has been acquiring small brokerages that cater to the independent financial adviser, hoping to boost its roster of reps to 10,000 from 9,100 by the end of the century. Many independent advisers formerly were insurance agents and are comfortable selling insurance products. SunAmerica chairman Eli Broad is hoping to acquire enough brokerage firms so that he can boost sales of his favorite product, variable annuities. (See related story, Page 1)

The Woltmans’ firms have 500 reps combined who act as independent contractors, according to competitors.

“SunAmerica is moving to try to control distribution” of annuity and otherInsurer talking to parent of brokers Spelman, Sentra financial services products, says Kenneth Kehrer, an insurance consultant in Princeton, N.J.

Industry executives estimate the purchase price range at $10 million to $15 million based on two formulas – either 25 times gross earnings or 30% of gross revenues. But a skeptical consultant – who used a different formula based on the firms’ expected combined 9.7% growth in gross revenues between 1996 and 1997, per Investment Advisor magazine’s 1997 Broker-Dealer survey – says the firms are worth only about $4 million to $8 million.

If the deal goes through, the Woltmans, who competitors estimate are in their mid-60s, will at least double their money. The Woltmans, along with an investor, acquired Spelman & Co. in 1986 for $1.5 million, says a 1994 article in the San Diego Union-Tribune. In 19
90, the couple acquired a controlling interest in Sentra Securities from an insurance company for about $600,000.

Spelman focuses on fixed-income while Sentra provides more traditional financial planning, say competitors.

Miles Gordon, president of Financial Network Investment Corp of Torrance, Calif., says the buying spree will abate. Revenue growth is expected to slow in 1998, particularly if the stock market stays choppy, he says. “When the business slows down, acquirers’ appetite slows down also,” says Mr. Gordon, who sold his firm last summer to Aetna Inc.