State Probes Big Bonuses by GuideOne

The Iowa Insurance Division is investigating bonuses paid to management of the West Des Moines-based insurance company that last week announced the layoff of 200 employees, the Des Moines Register reported Wednesday.

In May, the insurance division asked GuideOne Insurance to reverse an “extraordinary” executive compensation package because the payments “may violate Iowa Code” and insurance division rules. It was unclear Tuesday how much money was involved. Spokesmen for GuideOne and the insurance division declined comment to the newspaper on specifics, including whether any money had been refunded.

Last week, GuideOne announced it would cut 200 jobs at its corporate headquarters as the company eliminated three business lines. The company employs 1,000 people in West Des Moines and another 800 nationwide. More job cuts are expected later at the company’s national field offices. Whether those cuts will affect recent acquisitions such as Waco-based National Lloyd’s remains to be seen, though sources close to the issue say the company will likely be sold.

GuideOne said the cuts were necessary because the property-casualty insurer had pulled back from an earlier growth strategy that would have involved a public stock offering. The company scrapped the plan to sell stock, because of the impression that investors had turned against insurance stocks in the past year. A new plan calls for growth in GuideOne’s core business areas.

In a May 12 letter to GuideOne, state regulators said they became aware of the first installment of the questionable compensation package in January. “The package, standing alone, raised several regulatory issues,” the letter said. Text outlining those issues was removed from a copy of a letter the insurance division provided to The Des Moines Register. Officials reportedly said specifics of the investigation were considered confidential.

The letter mentioned concern about possible violations of two rules. One requires that the insurance commissioner be notified of “agreements involving one-half of 1 percent of an insurer’s surplus.” For the GuideOne companies, 0.5 percent of surplus amounts to just over $1 million. The other rule “prohibits directors and officers from profiting through negotiating the transfer of corporate assets.”

GuideOne issued a written statement Tuesday in response to the Register’s request for an interview. It said: “GuideOne does not share company or individual compensation information. . . . There is no connection between the decision of the company to focus its energies into core lines of business and any previous compensation decision.” Scott Galenbeck, the insurance division’s general counsel, declined to comment on the investigation, but told the Register the financial strength of GuideOne is not an issue. “It’s a very solid company,” he was reported as saying.