Affirmative Insurance To Cut 150 Jobs As It Tries To Shed $10 Million In Expenses

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July 8, 2009 Wednesday 12:12 PM EST

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Affirmative Insurance to Cut 150 Jobs as It Tries to Shed $10 Million in Expenses

Chad Hemenway

ADDISON, Texas

Affirmative Insurance Holdings Inc. said it would eliminate about 150 jobs in an effort to trim $10 million pretax in expense savings annually. The company said it is also looking into in-house changes such as consolidation of insurance operations and evaluating agency and claims operations, according to a statement and a filing with the U.S. Securities and Exchange Commission.

It also said it and Executive Vice President M. Sean McPadden have "mutually agreed" to end McPadden's employment.

McPadden has resigned his position as the executive vice president, chief underwriting officer and president of Affirmative's insurance company subsidiaries.

Chief Executive Officer Kevin R. Callahan assumed most of McPadden's duties and Michael J. McClure, executive vice president and chief financial officer, will take over the actuarial responsibilities, Affirmative (NASDAQ: AFFM) said.

Affirmative's statement did not say what led to the agreement for McPadden's departure. McClure said the company would have no comment. The company will pay McPadden about $1 million in severance, expect to be reflected in second-quarter earnings, Affirmative said.

In addition, the company is suspending its employer matching contributions to its 401(k) plan, another move expected to add $1 million annually, pretax.

Affirmative said it sold all of its retail stores and franchise business in Florida, which is expected to improve pretax income by about $1 million to $1.5 million annually. McClure said the company was losing money on the retail side. Florida has "higher leasing costs and is more expensive to operate" in than other states, he added. The company does about 6.1% of its business in Florida, according to an AMB Credit Report.

Through various subsidiary companies Affirmative is engaged in underwriting, servicing and distributing nonstandard personal automobile insurance policies and related products and services to individual consumers in highly targeted geographic markets.

Affirmative Insurance Group currently has a Best's Financial Strength Rating of B (Fair).

On the morning of July 8, shares of Affirmative Insurance Holdings stock were selling at $3.43, down about 0.30% from the previous close.

(By Chad Hemenway, associate editor, BestWeek: [email protected])

July 9, 2009