Genworth Financial will lay off 200 in Lynchburg; stock drops more than 21 percent
February 9, 2016 by Jason Ruiter
Genworth Financial Inc. announced Friday it is laying off 200 employees in Lynchburg, more than 16 percent of its workforce in the Hill City.
The layoffs are a result of company restructuring after poor fourth quarter results, suspending “sales” of two business units — traditional life insurance and fixed-annuity products — to address its long-term coverage unit, which it plans to “separate and isolate,” according its earnings statement released Thursday.
Genworth stock plunged more than 21 percent Friday, closing at $2.18 a share.
“Unfortunately, our decision to suspend life insurance and fixed annuity sales means we will be losing valued employees across the U.S. Life Insurance division and headquarters, including Lynchburg,” said a Genworth spokeswoman in an email.
The company also will cut 70 jobs at its headquarters in Henrico County.
Most employees will receive 60 days paid notice, outplacement assistance and — based on years of service —financial compensation, a company statement said. The cutbacks in Lynchburg will leave Genworth with 992 employees at two locations, one downtown and one on Albert Lankford Drive, off Odd Fellows Road.
Genworth suspends life insurance sales, plans restructuring
Sara Bennett, an assistant professor of finance at Lynchburg College, said “it’s not uncommon by any means to sell off divisions or suspend” divisions when a company is struggling.
“There is some uncertainty in terms of the word ‘suspend.’ Are you going to offer this for the future? Suspension doesn’t really answer that,” Bennett said.
“I guess my main takeaway is they are trying to redistribute capital in the company to stem these losses,” she said.
In an interview Friday afternoon, Genworth CEO Tom McInernery said the company has a strong market position in the long-term care industry. In contrast, it does not have as strong a market position in the life and annuity businesses that are being suspended.
“We felt we just couldn’t compete at acceptable returns” in those businesses, he said.
“It’s unfortunate that we have to do it. We always hate to do reductions,” McInernery said.
Long-term care insurance has struggled with losses because costs have been higher than anticipated.
In its fourth quarter earnings statement, Genworth reported a loss of $292 million, compared to $760 million over the same time period in 2014. For the year, it lost $615 million compared to $1.24 billion in 2014.
After reporting the heavy losses in 2014, the company sold its lifestyle protection insurance unit to French company Axa for $400 million in the last quarter of 2015. It also plans to sell its European Mortgage Insurance business this quarter, for approximately $55 million.
The layoffs are not the only recent job cuts hitting Lynchburg in the insurance industry.
In February 2015, Nationwide Insurance announced it would close its Lynchburg call center by mid-2016, leading to the loss of 340 jobs. After the closure, Liberty University plans to move its online education operations to that Graves Mill Road building.
Genworth’s parent company used to be General Electric until the company was spun off in 2003. Before it was acquired by GE in 1996, however, it was First Colony Life Insurance Company, which was chartered in Lynchburg in November 1955. By the time GE first acquired the Lynchburg company, it had approximately 600 employees.
The Richmond Times-Dispatch contributed to this article.
Contact Jason Ruiter at (434) 385-5524 or jruiter@newsadvance.com.
