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Farmers to Cut Hundreds of Jobs at New Acquisition

Source: LA Times

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Posted on 28 Aug 2009

Los Angeles-based Farmers Insurance Group announced plans to lay off hundreds of employees at the offices of its newly acquired 21st Century Insurance unit in Woodland Hills.

Farmers, the largest auto insurer in California, told employees that it would cut 554 jobs by the end of this year and that the total would reach 750 by the end of 2010.

The Woodland Hills complex, which had been 21st Century's headquarters until last November, currently has 979 employees, Farmers said. Farmers completed its purchase of 21st Century from troubled insurance giant American International Group Inc. on July 1.

With the merger, Farmers -- a traditional insurance company that sells home, auto, life and other insurance products with a network of agents -- added 21st Century's system for selling auto insurance directly to motorists via telephone and the Internet.

After a two-month evaluation, Farmers decided to reduce the Woodland Hills workforce as part of an effort to streamline operations, Senior Vice President Mark Toohey said.

There was no decision on whether the firm would remain at the leased location in Woodland Hills.

Some of the displaced workers could be offered jobs at 21st Century's executive offices in Wilmington, Del., while others could be transferred to other Farmers operations in Southern California, Toohey said.

21st Century specializes in selling competitively priced products from centralized, highly automated call centers. Its salespeople can do their jobs just as well operating in a low-cost state such as Delaware as they could from a more expensive place such as California, said Jack Kyser, the senior vice president and chief economist at the Los Angeles County Economic Development Corp.

"It's kind of easy to move around," he said.

The looming layoffs at 21st Century are one more economic blow to the San Fernando Valley, which has lost thousands of financial service jobs over the last few years as banks and mortgage companies have gone out of business or merged into larger, out-of-state companies, Kyser said.

"This makes the slope upward just a little bit steeper as we start to recover," Kyser said.

Farmers spokesman Toohey called the latest round of layoffs "a difficult business decision" and noted that the company, a subsidiary of Zurich Financial Services Ltd. of Switzerland, is a major employer with about 5,200 employees in the Los Angeles area and 9,000 statewide.

The winnowing of the Woodland Hills operations began after AIG purchased 21st Century in September 2007, he said. Soon after, AIG began the process of rebranding 21st Century as AIG Direct. But the switch to a new name backfired after AIG’s near-collapse.

The wave of bad publicity sent sales skidding, leading to a round of layoffs and office closings earlier this year.

Nationally, the newly bolstered Farmers is the third-biggest auto insurer, behind State Farm Mutual Automobile Insurance Co. and Allstate Corp.


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