Genworth Financial Inc., the seller of life insurance and long-term care coverage, is eliminating 400 jobs as Chief Executive Officer Thomas McInerney seeks to counter the pressure from low interest rates.
The reductions will cost Genworth $15 million to $20 million this quarter and eventually save $80 million to $90 million annually, the Richmond, Virginia-based insurer said today in a statement.
The insurer has been unable to bring profit back to the levels of 2006 and 2007 as losses on mortgage insurance drained capital and low interest rates squeezed investment income. McInerney’s plan involves not filling 150 vacant positions and curtailing information-technology costs. The charge against this quarter’s earnings includes severance expenses for the company, which has about 6,300 employees, according to its annual report.
“These are very difficult decisions to make but the changes are essential to our ongoing work to improve the performance of our businesses,” McInerney, who took over in January, said in the statement.
The job cuts include 76 people in Richmond and 39 in Lynchburg, Virginia, said Al Orendorff, a company spokesman. Genworth has about 1,300 employees in Richmond and 1,200 in Lynchburg, he said.
The insurer is boosting premiums for long-term care coverage to cushion the impact of low interest rates and reached a deal this year to sell its wealth-management unit. Genworth said in January it would isolate its mortgage-insurance business to guard its debt against a downgrade.
Genworth climbed 2.1 percent to $10.57 at 4:01 p.m. in New York. The company has rallied 41 percent this year, the second-best performance in the 22-company Standard & Poor’s 500 Insurance Index.