Genworth reduced 220 positions, won’t sell its life and annuity businesses
August 11, 2015 by JOHN REID BLACKWELL Richmond Times-Dispatch
Genworth Financial Inc. confirmed Wednesday that it reduced about 220 positions in the first six months of this year as the Henrico County-based insurer looks to cut costs.
And Genworth executives told analysts that the company is no longer looking at selling its life and annuity insurance businesses.
Thomas J. McInerney, the company’s president and chief executive officer, said in an interview that Genworth had reduced its staffing by more than 200 positions in the first and second quarters. A spokeswoman for the company later clarified the number at about 220 across the company.
Most of the job reductions came through attrition, or not filling open positions, and largely affected the company’s Virginia operations, where the bulk of its employees work, McInerney said.
Besides attrition, about 35 Richmond-area Genworth employees were affected by job cuts in March and May while 10 employees in Lynchburg were affected, a company spokeswoman said.
“We will continue to look to tighten our belts over time,” McInerney said in an interview Wednesday.
Genworth employed the equivalent of 1,332 full-time equivalent employees in the Richmond area as of Jan. 1. It employs more than 1,000 at its two sites in Lynchburg, one downtown and one on Albert Lankford Drive, off Odd Fellows Road.
McInerney said he could not predict the likelihood, specific timing or extent of future job reductions, but he said the company is reducing costs in other ways, such as in marketing expenses.
The staffing reduction was part of a cost-saving initiative and restructuring that Genworth disclosed in February, but the company did not specify then how many jobs would be affected.
The plan is aimed at saving the company more than $100 million, pre-tax, over the next two years.
Genworth said Wednesday that recent head-count reductions and cuts in other expenses are expected to reduce costs by about $30 million pre-tax in 2015, and $40 million to $50 million pre-tax in 2016.
Genworth has been looking to sell business units as part of a plan to simplify its business model and boost capital, as the company has struggled with difficult economics surrounding its long-term care insurance business.
On Wednesday, executives said the company has stopped exploring a sale of its life and annuity business as a whole entity. A potential sale of the business was explored to raise capital and reduce debt.
Instead, the company may seek buyers for blocks of life insurance contracts, executives said.
“I think we spent a lot of time carefully analyzing the life and annuity business,” McInerney said. “We had very good outside financial and strategic advisers giving us their best advice.”
The life and annuity businesses have been “steady and good contributors” to the company’s earnings and also have provided diversity while the company’s long-term care insurance business has struggled, he said. The company also believed that ratings agencies would react negatively to a sale.
“When we looked at all the pros and cons, I think the cons of a sale outweighed the pros,” McInerney said.
Wall Street reacted negatively to the news Wednesday, along with the company reporting a loss late Tuesday for the second quarter after taking a one-time charge on the planned sale of its Europe-based lifestyle protection insurance business.
Genworth shares dropped 19.5 percent, or $1.37, to close at $5.65 on the New York Stock Exchange.
McInerney said the company is making progress in its strategic plan to improve business performance. The company’s global mortgage insurance business had a good second quarter, he said.
To improve returns in its long-term care business, the company recently received approvals in eight states to increase premiums on long-term care policies, which cover the cost of nursing home or in-home care. The average premium increase in those states is about 37 percent over three to five years.
“Overall, we are making progress and making the right strategic decisions, and hopefully we will be able to continue to improve,” McInerney said.
