Monday, October 29, 2007

Severance Insurance

Merrill Lynch wasn't alone last week. It sees the the investment banking crowd at Bank of America didn't quite do so well during third quarter, as in a 93% Q3 earnings free fall in that division. The result...3,ooo jobs are being cut. Wachovia is reported to be about to announce an overall 10% earnings drop. willy bets there might be a job or two that gets lost there.

In an earlier blog I queried the work force as to why they weren't rising up and making their voices heard. Well, duh! They're financially strapped. They're alone. They're scared. The last thing that there going to do is (in their minds) make a bad thing worse. It's almost like they assume there's a blackball system out there.

Well, hang on folks. willy has an idea. It's not insurance, but it is a legal way to engineer severance packages to make them last longer. They will still pay out the equivalent of a worker's take home salary. The big deal is I can cause those payments to last longer. I'm going to call it ENGINEERED SEVERANCE. I can use the leverage the severance insurance guys to save money for the corporations and use it to make severance benefits last longer.

Son of a gun if the old boy (that be me, willy) hasn't really figured out something that isn't complicated, isn't a tax deal, isn't plowing new ground and really works. It's amazing how being unemployed can work to your benefit...once you're no longer pissed off at the dolts that fired you. Hang in there with me. I'll lay this all out for you over the next few blogs.

willy

Sunday, October 28, 2007

Severance Insurance

On October 18th Merrill Lynch announced that it was going to lay off 3,400 workers, about 5% of its workforce. They stated that they were preparing for tougher times ahead and that this move could save them $500 million. I hope they fired those people quickly, because they announced really tougher times six days later!

On October 24th the AP reported that Merrill was taking a $7.9 BILLION writedown on their sub prime mortgage portfolio. Bloomberg confirmed the AP's reporting but said the writedown would be $8.4 BILLION. What's a half a billion dollars among friends? Is Merrill's problem so big that a half a billion is a rounding error? And what did this all lead to?...the biggest quarterly loss in Merrill's history. Do they really think that laying off 3,400 workers will solve billions of dollars of writedowns? Or as a trial balloon floated less than a week before their earnings announcement would soften the blow on Wall Street? Give me a break. Once again workers are the expendable currency for corporate growth.

And how does management position themselves after they make these announcements? They "come clean" and say it was bad judgment and weak risk management strategies, careful to avoid saying that it was their BAD JUDGMENT. Whatever happened to accountability? Whatever happened to credibility? How stupid do they think we all are? Why aren't the shareholders (along with the regulators) banging at Merrill's doors? And why aren't the workers who are getting fired rising up and refusing to sign those general releases that the tough guys in HR make them sign in order to get their severance? Ooops, we know the answer there.

MERRILL LYNCH (and many of its Wall Street counterparts) ARE OUT OF CONTROL! And everybody is losing. What a shame that what was an admired symbol of of all that is good with capitalism has been reduced to a pile of its own excrement...from bull to bullshit. Somebody should write a book with that title.



willy

Wednesday, October 24, 2007

Severance Insurance

That last blog sure was out of character for me! Can you believe it? I actually hypothesized on the funding of severance from the perspective of the corporation. So unlike me! Are the corporations going to see severance insurance (www.severanceinsurance.com) as an opportunity to do something new and innovative that actually benefits the shareholders? Are they going to jump on board the severance insurance band wagon and establish it as the severance funding paradigm? Or are they going to pass it by in the name of, "we have higher priorities." They better get on board or as I see it someone is going to figure out how to take the savings mechanisms used by severance insurance (they're not rocket science) and turn them around to the advantage of the fired worker. Now wouldn't that be interesting?

willy

Friday, October 19, 2007

Severance Insurance

Following up on my last blog which ended with my obvious confusion in trying to identify why severance insurance actually benefits fired workers, let me ask a pretty unpopular question. Is severance, as it is known today, what it was intended (and expected) to be? Or are fired workers getting a sweet deal simply because corporations are scared that if they don't give them what they want, they'll sue. I know I'm not so far off the mark here because most corporations require a worker who is eligible for severance to first sign a general release and waiver (so that they can't sue) before they actually get their severance. Have the lawyers driven severance away from what it was originally designed to do and turned it into a "give me what I want or I'm going to sue your ass" handout.

I'm just beginning to think that the severance insurance guys might be onto something and that maybe they are being driven by the reality that severance has become a separation bonus and that corporations need to wake up and realize that they're getting hosed.

willy

Thursday, October 18, 2007

Severance Insurance

I find it interesting that http://www.severanceinsurance.com/ on its FAQ's page defines its target market as "Corporations in search of significant new cost efficiencies." Big whoop! Like what corporation isn't looking for new cost efficiencies. But these guys aren't all that stupid. You tell me what else new is there out there that can generate savings over current cost of 25% to 40%?

The FAQ's page also sort of answers the question "why would a corporation buy severance insurance?" The answers make it pretty clear as to where these guys' heads are. Reference to "improved returns on equity" would seem to say that these guys are focusing on private equity, the M&A universe and major activist investors. The use of "improved returns on capital" would seem to say that publicly held companies are on its radar screen. That seems to be confirmed by reference to "smoothing earnings".

I can figure out the attraction for corporations. That's pretty simple. Severance insurance saves money. But I'm still struggling with what the benefits are to the displaced worker and what would get Human Resource executives comfortable with a change in severance policy.

As I've said before the severance insurance guys are obviously not stupid, so I suspect they've got their arms around the worker benefit issue. It's probably pretty obvious, but I'm just a little slow in seeing it.

willy

Wednesday, October 17, 2007

Severance Insurance

OK, it's time to be a cynic. Who me? The more time I spend on trying to figure out what is driving the heads behind the http://www.severanceinsurance.com/ website that has "magically" appeared, the more cynical I become. Give me a break...good for the company that is doing the firing and just as good for the poor SOB who gets fired. No way! The corporation saves money. The worker loses money. How does that translate into being good for both sides?
I guess you could take the position that the corporation saves money up front and the worker has his/her severance benefit controlled, so (s)he doesn't get a lump sum and blow it all at once. Wow, that sure gives new meaning to equality.

Struggling to be less cynical, which ain't easy for me, I suppose I could take the position (as I have on occassion before) that there's not a whole lot different between losing your job because of an illness or injury and being eligible for disability, and losing your job because the corporation just doesn't need you anymore and being eligible for severance insurance (disemployment) as a result. They sort of both take care of you, while you're not working.

But how similar are they? Managed disability insurance is a reality. Do you suppose the quants behind severanceinsurance.com are thinking along the lines of managed severance insurance? That would certainly fit with my concept of "service severance".


willy

Thursday, October 11, 2007

Severance Insurance

Geeeezus! Out of nowhere there has appeared within the last few days a new website called http://www.severanceinsurance.com/. Do you think this is just a little bit ironic that this has appeared 90 days or so after I started pushing on the whole concept of severance insurance?

The introduction of this website, if nothing else, confirms my suspicion that someone is out there who happens to think that severance insurance is an economic (and possibly human) option to current severance funding practice. It also confirms through its content that I was right; whoever is doing it has the attention of some of the big boys in the insurance world.

My read is that the people behind this website know what they're doing. They don't tell you who they are. They don't name a broker. They don't name a carrier. They don't want to...nor do they need to. They're probably letting the big boys do their blocking and tackling.

The fact that they don't even try to brand severance insurance, underscores their cocky ass attitude and their sophistication. They obviously know that their chances for succesful branding (albeit not under their name) are far more likely, quickly and profitably to occur if the major players in the insurance universe establish severance insurance as a different way for large corporations to deal with how to fund severance. And after all, if they're nothing more than the brains behind the concept, why would they want to create what already exists on the distribution and risk taking sides...and then compete against them?

This is all really starting to get interesting. I've got my suspicions who the players are, but before I open my mouth and get my butt in trouble, I think I'll make sure I know what I'm talking about.

Stay tuned.

willy