JMC Group, the holding company for James Mitchell & Co., is restructuring operations, following a third-quarter loss and a drop in sales.

The San Diego-based investment products marketing company lost $2.6 million in the third quarter, mostly due to a $2.5 million charge it took to write off costs from its acquisition of an investments marketing company.

The third-quarter loss came on $7.8 million of sales, compared with $12.2 million of volume in last year's third quarter.

JMC Group has been hard hit by its clients' sluggish annuity sales. Moreover, the company, which currently has just seven banks, including Barnett Banks, on its client roster, will soon have an even shorter list.

In a conference call with analysts last week, James Mitchell, chairman of JMC Group, disclosed that the company will soon lose Sacramento Savings Bank, because the bank is being acquired by First Interstate Bancorp.

JMC Group also plans to cut ties with Sumitomo Bank of California, ending a program that never gathered steam.

It now plans to set its sights on bringing in new business.

The company will spend 1995 aggressively going after new bank clients, some with assets as low as $200 million, Mr. Mitchell said.

He said JMC Group is looking for a group of banks whose total assets are around $16 billion, and will service them from the company's home office.

This is a switch from Mitchell's traditional approach of working with a handful of larger financial institutions and supporting them through field offices.

At this point, the firm is comfortable that its home-base marketing and oversight systems can keep tabs on programs, Mr. Mitchell said.

The approach has cost benefits, he said. "We will have the potential to do as much or more business as in the past, but with substantially less overhead."

Mr. Mitchell also disclosed the extent of the company's previously announced agreement to allow Barnett Banks to recruit JMC Group's annuity salespeople.

Barnett has the fight to hire up to 72 of the 90 annuity salespeople the marketing firm currently has stationed in Barnett branches. Barnett would then place these employees on its own payroll as brokers, Mr. Mitchell said.

If Barnett chooses to hire all 72, JMC Group will hire new annuity salespeople to bring its force up to 30, Mr. Mitchell said.

He also said the marketing company has fired back in its ongoing battle with Florida insurance commissioner Tom Gallagher.

Mr. Gallagher has filed an action against JMC Group alleging that the company's sales program violates Florida insurance law.

An administrative law judge last month upheld some of Mr. Gallagher's claims, but dismissed most of the allegations.

It now falls to Mr. Gallagher to issue a final order on the matter.

But attorneys for JMC Group have filed a motion requesting that Mr. Gallagher disqualify himself from issuing that order.

The marketing firm alleges that Mr. Gallagher and his staff "had decided what their final order would say" without considering the administrative hearing officer's findings, or JMC's defense of the program.

Dennis Silverman, an attorney representing Mr. Gallagher, said the insurance department is reviewing the marketing firm's motion before responding to it.

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