The Big Layoff
What will the impending four-digit losses at Travelers mean for Hartford?
By Meir Rinde
April 7, 2005
Gallows humor has reigned in corners of the Cityplace building on Asylum Street since January, when MetLife announced it was purchasing Travelers Life & Annuity from Citigroup. One employee at Travelers’ retirement plan business, who we’ll call Bill, said his coworkers joke about losing their jobs, and wonder aloud how much they could earn as clerks at Blockbuster. When someone takes a vacation day, it’s understood the person is interviewing for a position elsewhere.
“They don’t need us,” said Bill, who asked that his real name not be used because the company ordered workers not to speak to the press. “The reason Metlife bought Travelers is to increase their share of the annuity market. They already have people that do the same thing I do. They need the products, not the people.”
Official layoff announcements are coming Friday, Bill said, and some of his coworkers, mostly suburbanites in the stage in their lives when they have young kids, are expecting babies, or are building houses, now must face the possibility of looking for new jobs. But they’re fairly young — from their early 20s to mid-40s — and they expect to find work in the area. “I’ll probably just end up at another insurance company,” said Bill, who earns about $40,000 a year.
A generation or two ago, changing insurance-company jobs would likely have meant moving your office across the street to your employer’s competitor. But of the insurers where Bill thinks he can find work — he named The Hartford, Lincoln and MassMutual — only the Lincoln job would keep him in the city. The Hartford is headquartered here, but the position he’s interested in is in Simsbury. MassMutual has a facility on Garden Street, but it’s in the process of relocating to Enfield.
Some workers will be moving even farther away. At the Red Plate restaurant next door to Cityplace, co-owner Mike Ludwig said he has a couple of computer tech friends at Travelers who don’t have the option of waiting until the right job turns up in Hartford. “Each of them has two kids and are married, so they’re going to be out of luck pretty soon,” Ludwig said. “One of them believes they’re going to be offered jobs in New Jersey.”
All of which suggests the Travelers layoffs will hit Hartford like a tornado, except that insurance won’t cover the damages. Of the company’s 1,850 employees in the city, MetLife will lay off up to 1,200, according to information leaked by Gov. Jodi Rell’s office last week. Some layoffs will happen immediately, others will wait until the $11.5 billion purchase is final on July 1, and some employees will stay on at least through November.
Travelers has a storied history in Hartford, dating back to its founding as The Travelers Life and Accident Insurance Company in 1864. The firm claims a number of innovations, like the introduction of “double indemnity” policies in 1892 (doubling life insurance payments in cases of accidental death) and auto insurance in 1897, according to the Citigroup website. In 1919 the company built the Travelers Tower; in 1924 it lent its initials to a new radio station it established, WTIC; in 1960 it began using its famous red umbrella logo; and in 1978 the company paid $14.1 million in claims to Hartford when the Civic Center roof collapsed.
In 1992, would-be finance-industry king Sandy Weill bought his first chunk of Travelers Corp., adding it to Primerica and other firms he had purchased. Weill spent his career buying up companies on the theory that a conglomerate could earn more through synergy or cross-selling — that is, selling customer banking, stock brokerage and insurance products at once, or convincing a customer in one area to buy in the others as well. To that end, in 1998 he bet federal laws barring the merger of banking and insurance underwriters would fall, and merged his company with Citicorp, a leading bank.
The federal laws did change, but the promise of cross-selling ultimately did not pan out. Citigroup stock was a favorite among investors, and Weill made billions, but the company got in trouble for a number of Enron-era ethical lapses and paid huge fines. In 2002 the company sold off most of its interest in the casualty and property insurance divisions of Travelers; according to the New York Times, Weill found Citigroup “was getting out of a slower-growth business that had proved to be a disappointment in cross-selling products. It turned out that customers of other Citigroup companies who agreed to buy Travelers’ insurance tended to be poor risks, so the more policies the company cross-sold, the more money it lost.” The division merged with another insurer to form St. Paul Travelers; that company is now often referred to informally as Travelers.
Weill announced he was stepping down in 2003, and in January of this year the new leadership said it was selling its remaining Travelers assets, the life and annuity business. CEO Charles O. Prince said selling life insurance, though profitable, had a lower return than the company’s other financial products. Another executive said, “Earnings will have less volatility when we pull out of the insurance business.”
As hundreds of Travelers workers disappear, so will company spending on a multitude of products, from printing and delivery services to business cards and computers — the bread and butter of small businesses downtown. Once they find new jobs outside of Hartford, workers who already spend their salaries on housing and shopping in the suburbs will spend their lunch money there too, stressing profit margins at downtown restaurants like the Red Plate. Bill said the young parents he works with are unlikely to spend any money in the city if they don’t have to. “I don’t imagine the majority of the employees will be coming back to Hartford unless they get another job here,” he said.
Based on employees’ annual pay, Mayor Eddie Perez estimated the layoffs could constitute a “$60 million hit to the economy” (though most of that money is not spent directly in Hartford). Fred V. Carstensen, director of UConn’s Connecticut Center for Economic Analysis, said each Travelers layoff will also result in one additional job lost in places like restaurants, real estate offices and shoe stores. That means the Hartford metro region could see as many as 2,400 jobs lost, by unemployment, relocation and other factors, as a result of the MetLife purchase.
“It means Stop & Shop sells slightly less food, and they need slightly fewer clerks,” Carstensen said. “Dry cleaners see less demand and consolidate a shop. Plumbers don’t have enough business and they decide to relocate.”
The layoffs are happening as the city tries to attract more young professionals, hoping they will move into several high-end residential developments that are in the offing, helping to repopulate downtown Hartford, revitalize street life and make the city a place people want to live, rather than one they seek to escape. “To some extent, those are the people that are going to be disappearing,” Carstensen said. “This could diminish the success of the downtown housing initiatives linked with Adriaen’s Landing.”
The flow of people to the suburbs that the layoffs represent is part of a decades-long pattern that has more to do with a lack of statewide, regional planning than with any action on the city’s part or even the vagaries of the financial-services industry, Carstensen said. MetLife, for example, says it has actually hired more workers in Connecticut in the past two years, but they’re in Glastonbury, Rocky Hill and Westport. Rather than promoting Hartford and other cities as commercial centers, the state has allowed economic “donuts” to develop, with poor cities in the center. Such sprawling structures are less economically stable in the long run, eat up land without adding to the population, and create desolate landscapes in both city and town, Carstensen said.
“Companies create a barren existence in suburban office parks,” he said. “They’re disconnected from any other activity. They don’t contribute to a vibrant center, a West Hartford Center for example, which is becoming the true downtown center. We’re destroying our quality of life. We’re becoming one big strip mall. If people want to live out in suburban or exurban areas, fine. But don’t pursue policies that encourage it.” ●