Pension executives and investment management consultants say the high-profile problems of Prudential's Life Insurance Co. of America won't affect their dealings with Pru's investment management subsidiaries.
Still, they acknowledge it's difficult to ignore the company's well-publicized tribulations.
"I've been to meetings where this has been discussed. Lots of plans have a piece of the rock, but I don't believe there will be any spillover into other investment divisions of the company," said Michael Wright, head of Buck Investment Consulting Group, New York. "I'm comfortable with Jennison (Associates Capital Corp.), Hallmark (Capital Management Inc.) and the others. Once you explain these are different subsidiaries, there really shouldn't be any questions about these other investment firms."
Judith Markland, former John Hancock Mutual Life Insurance Co. executive who now is president of her own insurance industry consulting firm Landmark Strategies, Weston, Mass., said it is unlikely Prudential's trials will affect how institutional investors view its other subsidiaries.
"In any place I've been, I've never heard any discussions by people who would translate any of this to any of the other the institutional markets," she said.
David Van Benschoten, director-investment management at General Mills Inc., Minneapolis, said General Mills uses Jennison to manage a bond portfolio and expects no spillover from Prudential's problems.
"The key asset of any (investment) organization is the people who run it and manage the money. This hasn't bothered us at all," he said.
An overview of recent activities involving Prudential include:
*A 1992 settlement of alleged securities law violations involving sales of limited partnerships in the 1980s and early 1990s by its securities division for $371 million. Sources believe this figure could go higher. In addition, federal prosecutors reportedly are conducting criminal investigations of Prudential executives concerning the partnership sales.
On Jan. 18 Prudential Securities was assessed a temporary suspension and a $1.5 million fine by the Texas State Securities Board following a six-month investigation by the board into sales practice abuses involving Prudential limited partnership interests.
*An investigation by the New York Insurance Department of the Prudential Insurance Co. of America for alleged improper sales of group defined contribution plan contracts not permitted by New York authorities.
*A lawsuit filed by a former Prudential portfolio manager alleging the insurer overvalued real estate properties in its $2.3 billion Prudential PRISA fund.
*The chief investment officer of Prudential Asia Fund Management Ltd., Hong Kong, resigned late last year following an internal audit that revealed accounting problems at the unit.
A Prudential spokesman said the company's institutional investment divisions have not been hurt by problems associated with its securities and real estate divisions. Without disclosing details, he pointed out that sales of institutional investment products were at "record levels" in 1993. He said Prudential experienced "positive earnings in all areas."
The spokesman acknowledged that the ongoing public disclosures of alleged wrongdoing and negative publicity have consumed more time and attention internally at Prudential but that the company expects to remain profitable in all areas in 1994.
"We have had to spend more time addressing these type image questions than we have previously," he said. "Obviously we wish the Prudential Securities Inc. situation had not occurred, but we believe our reputation for financial strength and integrity which we have been building since 1875 will continue."
Some plan sponsors who do business with Prudential say privately, however, that the company will be taken down a notch by its financial and legal difficulties.
"It is a little comeuppance for them. They will be a little less likely to throw their weight around like they used to and to believe they are the only people in the world," said one plan sponsor.
For example, he said, Prudential executives recently complained about his company's plans to establish a book value treasury investment option in its defined contribution plan. He said Prudential officials didn't believe the firm needed to include U.S. Treasury or high-grade agency instruments in the GIC fund but should have turned the entire fund over to Prudential to manage.
"They thought they were in the same category as the U.S. Treasury - safe, stable and untarnished. They are a fine company but they haven't reached that point yet," he laughed.