JMC Group, the annuity marketer stung by a Florida insurance department crackdown on its activities at Barnett Banks Inc., lost money in the second quarter.
JMC, which supplies brokers to banks, posted a loss of $335,134, compared with net income of $255,528 in the same period last year.
The company's chairman, James K. Mitchell, said public allegations that some of his brokers at Barnett illegally offered fees to bank employees for referrals has hurt sales there dramatically, contributing heavily to the 5- cent-a-share loss.
Barnett has contributed 25% of JMC Group's sales this year, making it the marketing firm's most coveted client.
"When there is confusion on what basis bank employees can make referrals, then they pull back," Mr. Mitchell said. "Referrals lead to sales, and if you don't make sales, then you don't make profits."
The Florida insurance department, which regulates annuities sales, began alleging in 1992 that JMC was engaged in "misleading and deceptive" sales practices.
Earlier this month, the insurance department ordered Mr. Mitchell to severely limit sales and advertising of his products. But the department agreed to give him a reprieve, so that he can appeal the order, Mr. Mitchell said.
"Barnett is a big client. To go through this is difficult," Mr. Mitchell said.
The company has relied heavily on annuity sales at the Jacksonville- based Barnett. Last year, Barnett contributed about 55% of JMC's revenues.
But as Barnett, following an industrywide trend, goes about the task of bringing its brokerage operations in-house, JMC has been forced to seek other banking clients.
JMC has been struggling for a few years, consultants said. Indeed, the company reported a loss of $2.3 million in 1994, compared with a $4.8 million gain the previous year.
And JMC is not the only third-party investment products marketing firm that is experiencing a downturn in its fortunes.
Earnings industrywide are flat or down because CD rates are more attractive than annuities and "mutual fund sales haven't come back to compensate," said Kenneth Kehrer of Kehrer Associates in Princeton, N.J.
Mr. Mitchell said he hopes Barnett will continue to do business with his firm in other ways, such as using its computer program that tracks the sales efforts of bank brokers.
JMC's chairman is also aggressively promoting himself to community bank clients.
The company's troubles have industry consultants speculating about JMC as a takeover target. First on the list of potential suitors is acquisition-hungry Liberty Financial Co., a Boston firm that owned a large minority stake in JMC until 1988 when JMC bought back the stock.
But Mr. Mitchell said, "We've had no conversations with Liberty."
