By Dan Hust
ROCK HILL — September 29, 2000 — Continuing along its restructuring efforts following last year’s devastating losses, Frontier Insurance Group announced Wednesday that more people were laid off at the company’s Rock Hill headquarters, and top management officials – including CEO and President Harry Rhulen – are taking pay cuts amounting to 25 percent of their combined annual salaries.
At the same time, Frontier announced the purchase of $800 million in aggregate reinsurance from National Indemnity Company to cover approximately $514 million in loss and loss adjustment expense reserves held on June 30 for the years 1999 and prior.
“Although the implementation of salary cuts and additional layoffs are difficult, these actions are necessary to reach appropriate staffing and related expense levels to support Frontier’s current and forecasted volume of business,” said Rhulen in a press release issued Wednesday. “Both the purchase of the aggregate stop loss and the continued implementation of expense measures are important steps toward achieving our goals of protecting the company’s surplus, improving our outlook and supporting Frontier’s ongoing viability.”
Reeling from more than $230 million in losses last year, Frontier hired a restructuring specialist to bring it out of a near collapse. Part of that restructuring involved layoffs, to the tune of nearly 300 people in Rock Hill and close to 1,000 employees overall. Frontier currently employs 680 people, with approximately 400 in Rock Hill.
Frontier Insurance Executive Vice-President Richard Seyffarth did not return a call for comment, so no firm figure on how many people were laid off this time could be ascertained – although other news reports put it around 30. Frontier officials said in the press release, however, that more reductions in staff will be forthcoming soon.
Although profits have regained some ground, as of yesterday, Frontier’s stock was trading at 62 cents a share, up from a low of 28 cents earlier this month, but a far cry from the double-digit dollar figures it commanded a year ago.
The pay cuts (senior managers earn hundreds of thousands of dollars a year, plus bonuses) and the reinsurance move (necessary to ensure claims are covered, since Frontier’s initial problem was that it underestimated how much money to keep in reserve to pay out claims) are hoped by Frontier to bring it back into a healthy financial position, though Wall Street has not taken kindly to its situation.