Job Cuts Hit St. Paul Travelers, State Farm

St. Paul Travelers Co. announced plans to make cuts Monday as part of company chief executive officer Jay Fishman's pledge to wring an estimated $350 million in cost savings from the merger that was announced last year, and is now reporting its first quarter as a combined company.

While not predicting any large-scale industrywide cutbacks, Robert Hartwig, chief economist for the Insurance Information Institute, said even robust profits and a growing economy might not forestall static job growth in the industry.

"The industry remains highly competitive and is becoming more so, so keeping the expense structure low is an essential element of remaining competitive," he said. "Separately, technological advances also permit such consolidations."

State Farm, the nation's largest insurer, made its job cut announcement following a 14-month study of the operations in the Virginia cities of Frederick and Charlottesville.

"These decisions, while difficult, are the best business decisions for balancing the long-term benefits of our customers, company, employees and agents," Randy Garrett, State Farm's vice president of operations, said in a statement.

But as if to prove that the cuts are not part of an overall retrenching, the company also announced this week plans to add about 400 employees to operations in Mufreesboro, Tenn.

Those additions are related to a decision to consolidate certain tasks handled at State Farm offices nationwide. Besides besides Murfreesboro, the work will go to Birmingham, Jacksonville, and its home town of Bloomington, Ill., the company said.

In a conference call last week, Mr. Fishman offered no specifics as to the location and type of jobs that will be axed. Company officials have said that layoffs of this number are not surprising in a consolidation the size of St. Paul's and Travelers.

During Mr. Fishman's conference call there was discussion of a $1.63 billion charge to increase reserves for future claims, which ultimately could lead to more job cuts than originally planned.

Some analysts said that if the magnitude of the deficiency was known at the time, shareholders might have turned down the merger. But a company spokesman said this was par for the course when two companies' differing actuarial and accounting approaches must be melded in the first period they report together.