Tuesday, September 22, 2009

Farmers to Make 1,200 Job Cuts at 21st Century

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Farmers Insurance Group said it will eliminate up to 1,200 positions at its newly acquired direct-carrier unit over the next 16 months. The job losses represent about 20% of the work force at 21st Century Insurance Co. and come less than two months after it was acquired by Farmers, a Los Angeles-based subsidiary of Zurich Financial Services Group.

The most sweeping and immediate cuts will occur over the next four months as Farmers moves to eliminate 554 positions at 21st Century's Woodland Hills, Calif.-based operation. Fifty-six individuals were told Aug. 27 that their positions were being eliminated, according to Farmers spokesman Mark Toohey. Another 196 positions at that operation could be eliminated before the end of 2010.

Farmers said on Aug. 27 that 128 positions will also be eliminated at 21st Century's operation in Alpharetta, Ga., where it operated as a support system for that company's independent agent channel. Toohey said those operations will be folded into another Farmers subsidiary, Bristol West Insurance Co., before the end of 2010. A total of 447 jobs could be eliminated altogether at that operation, though Toohey said 154 of those positions would remain until the end of 2010.

"Anytime there's an integration after any acquisition, especially one of this size, you're going to find yourself faced with difficult decisions in an attempt to streamline operations," Toohey said. "This is the result of that."

Farmers' $1.9 billion acquisition of 21st Century from American International Group Inc., which closed on July 1, 2009, is the largest in the company's history.

The deal accelerated Farmers' entry into the direct-to-consumer market. Direct automobile insurance premium sales accounted for 75% of the $3.6 billion in 2008 total premium at 21st Century, according to a previous AIG statement. The balance of premium was generated by independent agents.

Farmers and 21st Century combined for 2008 net private passenger auto premium of $12.54 billion, according to A.M. Best State/Line data. The acquisition places Farmers just ahead of two chief competitors in the direct business for passenger auto: Geico, $12.52 billion; and Progressive at $11.68 billion (BestWire, April 16, 2009).

The corporate headquarters for 21st Century was completely shifted to Wilmington, Del., in November 2008. A total of 979 employees worked for 21st Century at the two leased buildings in Woodland Hills, Calif., which focused on direct sales. The company had about 6,000 employees when the sale closed (BestWire, July 1, 2009).

Both the Farmers Insurance Group and Zurich Insurance Co. currently have Best's Financial Strength Ratings of A (Excellent).