Madison-based American Family Insurance on Wednesday laid off 87 people, almost all in Madison and all from the company's information services division, as part of an ongoing effort to cut costs.
The workers — some with 20 years' experience — were asked to leave immediately after they learned their jobs were eliminated, company spokesman Steve Witmer confirmed.
"We tried to strike a balance of being very respectful to the people and talking to them face to face," Witmer said, "but it's also understood that these are people that work in very sensitive positions. So while we believe that our employees are good, honest people, we also need to make sure that we're safeguarding our systems."
The cut positions included 85 people based at the company headquarters at 6000 American Parkway and its other Madison location, off Milwaukee Street, plus two people outside Madison. There are 850 people remaining in the company's information services division, making the job reductions equal to about a 10 percent cut there.
"It's one of our larger divisions, and we asked all of our divisions to look at their operations and see if there were opportunities to be more (economical)," Witmer said. "Other divisions have seen position reductions, but it's mostly been by attrition."
Witmer described Wednesday as "a difficult day for everyone" but said it was necessary to serve customers more efficiently.
Last year, American Family saw a nearly 40 percent decline in net income compared with 2010. It has been in cost-cutting mode since the economic downturn began, with 730 jobs — equal to about 10 percent of the company's total workforce — eliminated mostly by attrition over the last four years.
The company last year also responded to a record of nearly $1.2 billion in claims, as deadly and destructive wind and hail storms hit the Midwest.
As an insurance company, American Family's ratio of expenses to premium revenue is a "really key internal measure" in determining efficient operations, Witmer said.
And with premium revenue falling in recent years — as the economy contracted and fewer people bought policies for autos, homes, health, farms or businesses — expenses need to come down, too.
"We've talked externally about our efforts to operate more efficiently," Witmer said. "And we've had some very encouraging numbers the past few months. We're really looking to continuing that momentum in a whole host of ways."
American Family offers policies in 19 states, with some 7,600 employees, including about 3,700 in Madison before the cuts.
American Family continues to hire for vacant and new positions that are "essential to operating our business, and providing exceptional service to customers," Witmer said, noting recent "all-time highs" in customer satisfaction and business retention.
Witmer also said American Family, which reported net income of $295.2 million in 2011, was "financially strong" and committed to moving forward with plans to grow and compete better in the marketplace.