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For more than a century, Beneficial Financial Group has been selling insurance to members of the LDS Church, heeding the call of prophet Heber J. Grant, who encouraged Beneficial's founding to protect living souls from the suffering he and his widowed mother endured.
On Tuesday, the church-owned company announced it will discontinue issuing life insurance policies and annuities in October, setting Beneficial on a path that will put it out of business, possibly in 50 years, while putting 150 people out of work almost immediately.
Beneficial will halt sales in late August and issue the last new policies Oct. 31. It is taking the actions because the company is too small to compete against bigger, newer rivals that can offer more financial products, said Mark Willes, CEO of Deseret Management Corp., Beneficial's parent company.
Willes said the meltdown of global financial markets also played a part. Because of its exposure to mortgage-backed securities, Beneficial was forced to write down the value of its investment portfolio by $600 million over the past two years. To offset the losses, Deseret Management has had to provide Beneficial with $594 million in additional capital, Willes said.
"So the fundamental rationale for the decision is you end up with a business that because of its size has limited economic potential, [and] is not high enough to make up for the attendant risks involved in the business," Willes said.
The measures announced Tuesday represent the second major decision Willes has made since the former publisher of The Los Angeles Times was asked by the church's First Presidency early this year to take over the reins of Deseret Management. In March, Willes announced a sweeping change of the organization. Church leaders wanted Willes to run Deseret Management as an operating company instead of a holding company.
Tuesday's actions will not affect owners of Beneficial's life insurance policies and annuities, who number 150,000 to 160,000. Willes said the company is well capitalized and "fully able" to meet its obligations until Beneficial is out of business, sometime around the middle of the century.
Instead, the impact will fall on about 70 percent of Beneficial's work force of 214 home office and field representatives who will lose their jobs in the coming four months.
Beneficial CEO Kent Cannon "met with all the employees and broke the news to us," said Brent Burgon, a 34-year employee and managing director of technical services.
"Of course we knew something was in the wind, but this was kind of a surprise. It's hard to realize the company will not be transacting business as it has in the past," Burgon said.
The first employees were laid off Tuesday. Furloughs will continue until Oct. 31. Willes said anyone who loses a job will receive severance packages that grow increasingly generous as the company works from top executives down to workers with fewest job responsibilities and lowest salaries. A long-term employee can receive up to a year in salary.
"We just want to make sure, particularly in this market, that people feel that they have been dealt with in a fair, even generous way," Willes said.
Beneficial was the only company in Utah selling life insurance products when the company was established in 1905, shortly after statehood.
"In that case it was an exceptionally valuable part of the community and part of people's lives, and that continued for decades," Willes said.
"But in the meantime other companies have grown up and are now much larger. So anybody who wants to buy insurance has a number of alternatives, and really there's no need for a church-owned business to sell those products," he said.
Sells life insurance and annuities
Founded in 1905
Headquarters, Salt Lake City
Assets, $3.4 billion
Owned by the LDS Church