February 25th, 2010
Irvine’s AccentCare caters to sick and frail seniors who’d rather stay in their homes.
AccentCare, a privately owned, venture capital-backed company, provides skilled nursing and non-medical services such as dressing, bathing and bathroom help to seniors in their homes.
The company operates in California, New York, Arizona, Ohio and Washington and employs 9,500 workers in all, including about 70 at its Irvine Spectrum headquarters.
For the 12 months ended March, AccentCare did about $200 million in revenue. The business is profitable, according to Chief Executive William “Biff” Comte.
AccentCare’s services are paid for by government healthcare programs Medi-care and Medicaid, long-term care insurance or by clients themselves or their adult children.
It also has contracts with the Department of Veterans Affairs and other government agencies. Health maintenance organizations and other insurers make up the rest of the business, part of what AccentCare refers to as its private pay business.
“If the economy’s hurting and the private pay business gets reduced, our other (government) business may be doing just fine,” Comte said. “It always works out that when one business is up, the other business is down.”
AccentCare has shifted its business through the years. Early on, it was primarily involved with non-medical services for seniors. Now skilled nursing makes up about half of AccentCare’s business, Comte said.
“In California, for sure, we’re one of the largest providers of home health Medicare services,” Comte said.
Comte has done his share of work with Medicare and other health-related government programs. His background includes 20 years as a hospital executive and serving as chief operating officer at Concentra Inc., a Dallas-based company that helps businesses and insurance companies manage workers’ compensation claims.
“I’m certainly familiar with Medicare and the twists and turns it can take you on,” he said.
AccentCare’s clients come from various sources, including referrals from health-care agencies and word of mouth, Comte said.
The company isn’t looking to go public or be bought anytime soon, according to Comte.
“At $200 million (in yearly revenue), we still believe we’re too small,” he said. “(The) venture guys continue to cover us. Some day, there will be some sort of exit.”
Early on, AccentCare received $25 million in funding from a group led by Three Arch Partners of Menlo Park and Boston-based Highland Capital Partners LLC.
AccentCare hasn’t had to “pull any money down from the venture guys in about three or four years,” Comte said.
It recently got a $35 million loan from CapitalSource Inc., a Chevy Chase, Md.-based financing company known locally for its 2008 acquisition of branches from failed Brea-based Fremont General Corp.
AccentCare is using the loan money for operations, to refinance its debt and possibly to buy smaller companies.
Beyond possible acquisitions, AccentCare is looking for growth with a rebound in its private pay business.
Growth also will “somewhat depend” on whether home health payments are cut from Medicare through ongoing healthcare reform in Congress, Comte said.
Healthcare Reform
As Congress continues to debate healthcare reform, AccentCare argues that it and other home healthcare companies can play a part in reducing costs.
According to AccentCare, studies have shown that people who receive healthcare in their homes are less likely to have repeat hospitalizations or visit the emergency room—two major factors in increasing costs.
Lawmakers “are going to see that people want to be in their homes and be taken care of in their homes,” said Comte, who’s been AccentCare’s chief executive for nearly seven years.
Competitors include Amedisys Inc. of Baton Rouge, La., Atlanta-based Gentiva Health Services Inc., National Healthcare Corp. of Murfreesboro, Tenn.,
and Almost Family Inc., based in Louisville, Ky.
Apria Healthcare Group Inc., a Lake Forest-based home healthcare provider, is different from AccentCare in that it primarily provides breathing treatments to patients in their homes, Comte said.
“They’re oxygen. They don’t do what we do in home health,” Comte said.
AccentCare last year got out of providing intravenous drug treatments to patients in their homes, another Apria specialty.
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February 25th, 2010
Health insurance—how to provide it and how to pay for it—has dominated the national reform discussion.
But medical device makers are watching the reform debates for other reasons—mainly to predict how it will affect business.
“It is still premature to determine the impact any legislation will have on medical device companies, but soon the squares will become aligned and we will better understand the potential impact,” said Michael Mussallem, chief executive of Irvine-based heart valve maker Edwards Lifesciences Corp. and chairman of AdvaMed, a Washington, D.C.-based trade association.
Some are concerned that potential healthcare reform could push device makers’ sales and profits down, but others see more insured patients as creating demand for medical devices.
“There’s a lot of fear that is (affecting) the revenue side of the business,” said Matthew Hudes, a U.S. biotechnology practice leader for Deloitte Consulting LLP, which has a Costa Mesa office. “There’s a concern that there will be downward pressure on cost.”
But Hudes also said if actual patient volume picked up because of more people with health insurance, “it could be pretty good for the life science (industry).”
Much of the healthcare reform guidelines stress quality and efficiency, which to device makers means new equipment, according to Mussallem.
Mussallem said he and other health industry groups met with President Obama in the spring, “and we agreed on the principles that should drive healthcare cost reform: improved health and quality, continued innovation, streamlined administration and efficient care.”
Device makers’ healthcare reform lobbying efforts have mainly centered on increasing competition for government contracts. The lobbyists call for comparing different drugs to cut out wasteful spending on treatments that aren’t effective.
But that could be a double-edged sword for drug and device makers if doctors take the government’s findings as mandates.
But the device maker lobbyists are quick to point out the difference between drug makers and device makers, to try to gain favor with the legislators.
“Medical devices are designed to fix a health problem, whereas drugs may sometimes only relieve symptoms without addressing the underlying cause,” Mussallem said.
As an example of potential cost savings, Mussallem said Edwards’ less-invasive replacement heart valves could potentially shorten both heart procedure times and hospital length of stays, “which would significantly reduce costs to the system.”
Edwards’ Sapien heart valve, which is sold in Europe, is in a major clinical trial with an eye toward Food and Drug Administration clearance in late 2011.
Healthcare reform will give Irvine medical software maker Quality Systems Inc., which has been a Wall Street darling in recent years, “three cubbyholes of work,” said Chief Executive Sheldon Razin.
Quality expects to gain more business from American Indian healthcare clinics, federally qualified health centers and the $20 billion that’s already been earmarked from Obama’s earlier economic stimulus bill to allow doctors’ groups to install electronic medical records systems, Razin said.
“That’s a big pie,” Razin said.
Quality had “been doing all right before the stimulus package. With the stimulus package, it’s like, to me, (pouring) gasoline on a fire. We’re going to have a lot more opportunities for business,” Razin said.
In the diagnostic device segment, Beckman Coulter Inc., a maker of biomedical testing equipment and supplies, also expects to benefit from reform, according to Chief Executive Scott Garrett.
If healthcare reform results in more people with insurance coverage, Beckman would benefit because its customers would ramp up medical testing, Garrett said. Beckman makes instruments and reagents for a range of medical tests and sells them to hospitals, clinical laboratories and research facilities.
“I think more people having coverage will require more testing,” Garrett said. “Getting them into the healthcare system sooner will likely lead to better and earlier diagnosis and more cost-effective healthcare.”
Healthcare reform likely would require doctors and providers to use more data in caring for their patients, and that data would probably come from clinical laboratories, Garrett said.
“So I think we have a chance to play an even more prominent role in the future in healthcare,” said Garrett, who’s also on AdvaMed’s executive committee.
That view’s echoed by Deloitte’s Hudes. He said he sees diagnostic device makers, such as Beckman, benefiting from healthcare reform because “we’ll see a shift to treating people with chronic conditions rather than only in an emergency room-type situation.” Previously uninsured or underinsured people only visited emergency rooms, where their healthcare costs were covered.
But Hudes said he doesn’t expect healthcare reform to have “a huge impact” on those companies that make devices for treating very sick patients because there’s not a large segment of the population that doesn’t have access to treatment for acute, life-threatening conditions. Very sick people that are either without health insurance or are underinsured, meaning their coverage is not adequate to meet their needs, can access care via emergency rooms.
There are proposals to the healthcare plan that would create a taxpayer-sponsored public healthcare plan. While it has faced opposition, device makers are bracing for what it would do to their payments.
“We don’t know where reimbursement is going to end up, (but) it’s unlikely that it’s going to go up,” Hudes said.
Chilling Effect
Overall, Hudes said there’s “sort of a chilling effect” on the medical device industry as it awaits resolution of the healthcare reform issue.
In the meantime, device makers and life science companies have looked to control expenses, including cutting back on research and development, Hudes said.
“They need to be prepared for potentially lower prices, but higher volume,” Hudes said.
But Hudes also said he didn’t see “the same level of fear” among the medical device industry about current reform as he had seen in the early 1990s, during an unsuccessful attempt to reform healthcare under former President Clinton’s administration.
“In some ways, it’s going to be refreshing when we get past this and attention can be paid to bringing innovative products to market,” Hudes said.
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February 25th, 2010
It’s a side of the healthcare reform debate that is seldom heard.
Physicians at a recent town hall meeting at Northridge Hospital Medical Center strongly voiced concerns with a system they said is driving them out of practicing medicine, and sent the message that healthcare reform won’t work if doctors don’t want to be doctors anymore.
One after the other, they lined up to give impassioned speeches about the financial strains to their practices caused by fewer reimbursements; the burdens of excessive administrative work required of them, and the constant threat of malpractice litigation, among other things.
“I’m here speaking before you because unfortunately I’m one of those young physicians in the area thinking about quitting medicine, “said Dr. Larry Kyle Gambrell, an otolaryngologist practicing in Mission Hills.
“I don’t like working under the HMO system…I don’t like facing liability issues. I have a new family…I don’t see options,” he said.
A system where doctors can’t afford to be doctors is collapsing under its own weight, they said.
Neurosurgeon, Dr.Asher H. Taban, who has practiced for nearly 33 years, said he’s had to pay taxes out of his savings for the past five years. Keeping his office open in Northridge costs between $300-$400 dollars an hour and he’s only getting reimbursed for a fraction of that.
“For the past year and a half Medicare has not paid me a single penny,” he said.
The financial burden on him and his family lingers despite being well regarded and even “famous here in the hospital,” he said.
The Medical Director of Northridge Hospital Medical Center, Hooshang Semnani, M.D. raised his voice, lined with anger and outrage at times, while driving the point across that physicians should not suffer any more cuts under a new healthcare reform plan.
“I have to work three times as much to make half the money that I did ten years ago,” he said.
Despite the increasing cost of practicing medicine as a result of rising malpractice premiums, rents, staff salaries, professional membership fees, license fees and costs needed to comply with the various regulations; many physicians like Dr. Semnani are receiving less payment for an office visit than they did ten years ago.
Without the ability to unionize or join forces to lobby Washington, Dr. Semnani was skeptical that physicians could stand a chance against who he called “the big guys”, including pharmaceutical companies, hospitals, insurance companies and HMO’s, in reform efforts to lower escalating healthcare costs.
“Physicians fasten your seatbelts,” he said, adding that doctors will likely suffer even more financial hardship under a reform plan approved in the Obama administration.
Dr. Saied Dallalzadeh, a pediatric gastroenterologist in Encino, spoke about facing lawsuits even after saving the patient’s life.
“They are degrading doctors here in this country, we want dignity for doctors,” he said.
Dallalzadeh also said doctors should not be harried with reimbursement issues, and the system should recognize that different medical situations require different medical skill levels and amounts of time with patients.
“Doctors should be able to spend as much time with patients as is needed, especially when dealing with complex medical problems. I spend an hour and a half providing care for a patient, I get reimbursed $19 dollars,” he said.
Other doctors and nurses that participated in the meeting spoke about the importance of addressing the growing shortage of primary care doctors due to the lower remuneration.
The town hall meeting to discuss healthcare reform was moderated by Michael L. Wall, President and CEO of Northridge Medical Center.
“I’ve been here ten years… I have never heard the passion from doctors that I heard tonight,” he said.
Town Hall Meeting
The town hall meeting featured a panel discussion on healthcare reform including: Patricia Suarez, Chair of the Northridge Hospital Community Board of Directors; Bruce Ackerman, President and CEO of the Valley Economic Alliance; Bill Gil, President and CEO of Facey Medical Foundation; James Lott, Executive Vice President of the Hospital Association of Southern California; and Stan Lyles, SEIU/UHW, Contract Specialist, who was representing the Labor Unions.
Gil pointed out major structural flaws to the healthcare system including the lack of coverage where 50 million uninsured people are a tax to communities more than government; that the lack of efficiency in delivering healthcare that is driving up costs; and the lack of integration in healthcare systems.
From a business perspective, Ackerman said companies are “struggling with the spiraling cost of providing healthcare insurance to our employees,” and are also concerned with the time lost when employees get sick because of unhealthy practices.
“We’re interested in a system that maximizes care for patients in the community,” said Suarez, adding that the ingredients for health reform must include “fairness, prudence and a little compassion.”
Lyles called for access to healthcare for all.
“If you lose your job after working for a company for 20 years and you have a pre-existing illness, you can’t get insurance coverage,” he said.
“We need cost containment,” Lott added. “Currently we spend 16 cents out of every dollar on healthcare. If we do nothing, by 2025 we will be spending 25 cents out of very dollar.”
Health care premiums have grown four times faster than wages in the last eight years; healthcare spending has doubled over the past decade; and the high cost of healthcare causes a bankruptcy in America every 30 seconds, according to healthcare facts provided at the meeting.
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February 25th, 2010
Santa Ana-based First American Corp. is getting down to details in its plans to spin off its dominant title insurance business.
After waiting out the worst of the housing market and economy for nearly two years, First American is hustling to get a spinoff—the largest of its kind seen in Orange County in years—done by April.
Financial details for the spinoff, which will be called First American Financial Corp., were filed last month with the Securities and Exchange Commission.
The filing “is a key milestone for the spinoff,” Chief Financial Officer and Treasurer Anthony “Buddy” Piszel said.
The filing introduces a title insurance and financial services company that’s set to operate out of First American’s existing Santa Ana campus.
The new company is expected to have a market value of about $2.1 billion and annual revenue of more than $4 billion.
That’s a roughly one-third drop in revenue at the title business from the peak of the housing market in 2005.
The new company will have some $1.8 billion of equity, $614 million in cash and $324 million of debt, Piszel said during a conference call last month.
First American Financial also expects to pay $24 million in dividends annually, according to the SEC filing.
Despite being the spinoff, the new business will keep First American’s “FAF” New York Stock Exchange ticker.
First American’s faster-growing data and information services business—which has $2.1 billion in yearly revenue—is set to stay part of the current parent company. It will have a new name and a differentNew York Stock Exchange ticker.
Officials expect the data business to have a book value of $1.5 billion to $1.6 billion and hold about $609 million of debt, including all of First American’s existing bonds.
That would give it a 24% debt-to-capital ratio, which is “at the low end” compared to its tech-heavy peers, according to Piszel.
First American Financial’s debt-to-capital ratio will be about 15%, also conservative compared to its title insurance peers, he said.
The two companies will remain tight.
In addition to having both operate from First American’s sprawling campus off the Costa Mesa (55) Freeway, Piszel said the title business initially will own about $250 million of the data services company’s stock.
“Given the continued uncertainty in the real estate and mortgage markets, we decided to strengthen the liquidity, capitalization and flexibility of (the title company) through this investment,” Piszel said.
The title company plans to sell the shares within five years, he said.
The spinoff also calls for the title company to transfer about $100 million in cash to the parent company. That will give the data services business about $400 million in cash.
In addition to navigating through various regulatory approvals, a few details still are being worked out prior to the separation. Both companies plan to get new lines of credit in the first quarter, according to Piszel.
And First American still is looking to fill in a key management role, following the recent departure of Frank McMahon, chief executive of the company’s data services division. He long had been expected to keep that role after the spinoff.
Following McMahon’s departure, First American appointed Anand Nallathambi as the president and chief operating officer of the unit.
He previously served as president and chief executive of First Advantage Corp., a onetime publicly traded subsidiary that’s now part of First American’s data services group.
First American said a search is under way for a chief executive for the data services business. Nallathambi is a candidate, according to the company.
The title business spinoff, led by Chief Executive Dennis Gilmore, will be much slimmer than it was at the peak of the housing market.
First American Financial is set to have close to 14,000 employees at the time of its expected spinoff, which is down by nearly 10,000 workers from what it had in 2005.
More financial details for the remaining company, including a projected employee count, will be provided later, according to company officials.
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February 25th, 2010
Insurance brokers have turned to consulting work as a parachute to slow a drop in their business as their clients have shrunk in the past two years.
But even consulting work couldn’t offset revenue declines at Orange County insurance brokerages for the 12 months through June.
Revenue at the local offices fell about 4% from a year earlier to $460 million, according to this week’s Business Journal list.
The brokerages on our list haven’t seen a decline in more than six years.
“Insurance carriers are feeling the pinch from the economy because of the stock market hurting their investment returns,” said Arthur Schuler, managing director at No. 3 Aon Risk Insurance Services West Inc. of Irvine. “As a result, everyone is feeling pressure one way or another.”
When the economic downturn first hit in the fall of 2007, companies sought out insurance brokers for help controlling costs and protecting investments.
But the brokerages now are seeing the effects of layoffs, furloughs and plant closures, which reduce companies’ exposure, or possibility of loss, and their overall need for insurance.
“Exposure is still playing a big role in what’s going on right now,” said Tim Casey, executive vice president of No. 5 Orange-based Brown & Brown of California Inc.
Nine brokerages on the list saw lower revenue for the 12 months through June. Five saw pickups in business. Five were Business Journal estimates. Year-ago revenue for two brokerages was unavailable.
Brokerages kept their property and casualty brokers even during the past year, employing 345 people in OC, the same as a year earlier.
But the companies saw a 6.6% decline in benefits brokers to 254 people, as clients cut back on employee benefits to save money.
The number of support staff workers declined 2% to 1,227 people.
No. 1 Newport Beach-based Alliant Insurance Services Inc. grew revenue 4.1% to $68 million. The brokerage has 19 licensed property and casualty producers and five benefits producers here, down one each from a year earlier.
The company’s local support staff declined 4% to 143 workers.
Alliant works with hospitals, counties, school districts, law firms, oil and gas companies, American Indian tribes, real estate companies and others.
Healthcare and law clients keeping up risk management coverage helped offset a drop in business from real estate and other clients, according to Alliant.
No. 2 Newport Beach-based Marsh Risk & Insurance Service/Mercer, formerly known as Marsh & McLennon Cos., has more clients in industries hit especially hard by the recession, including real estate and construction.
It saw its revenue drop 14% to $48.4 million.
The company has 15 licensed property and casualty producers, 27 benefits producers and 154 staff workers at its Newport Beach office.
The company, which also works with technology and other industries, wasn’t available for comment.
No. 3 Aon saw revenue decline 29% to $42.5 million as the recession also cut business for some of its clients, which generally are in the real estate, construction, retail, medical and technology industries.
Aon saw its number of property and casualty brokers decline 7% to 65 people. Aon’s number of benefits producers and support staff remained flat from a year earlier. Aon has 32 benefits producers and 15 members on its support staff.
Aon has seen a boost in consulting work, Schuler said.
Clients are tapping the company to help them handle risk management as they try to position themselves to ride out or take advantage of the downturn, Schuler said.
“We’ve been taking a look at their financial ability to take risks and guide them in their decisions,” he said. “Customers are looking to their broker to help them manage costs and find ways to manage risks more appropriately.”
Aon’s clients in the technology and medical industries are seeking insurance coverage for patents and patent infringement, while real estate clients are seeking insurance for their negotiations with lenders, Schuler said.
As companies are looking for security in an uncertain marketplace, they’re becoming more selective about where they are getting their insurance and consulting work from, he said.
No. 5 Brown & Brown saw its revenue grow 4.6% to $34.6 million.
The company lost a couple national, long-term accounts—one to an acquisition and the other it dropped as a client—but since has found companies to replace the lost business.
“The loss of business hurt us from a top line point, but we’ve since filled in the hole,” Casey said.
Consolidation
Uncertainties in the marketplace have pushed some companies to consolidate.
San Mateo-based Edgewood Partners Insurance Center, a retail property, casualty and employee benefits insurance brokerage, expanded its operations in OC through the acquisition of Complete Insurance Inc. in Irvine in December.
The Irvine unit now is No. 14 Com-plete/Epic Insurance Inc.
The company saw its revenue surge 52.4% to $12.5 million due to the acquisition, according to Anthony Joseph D’Asaro, managing partner at the Irvine office.
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February 25th, 2010
Construction companies and similar businesses beware: Workers’ compensation insurance rates could soar if a plan to sell part of the State Compensation Insurance Fund comes to fruition.
The budget compromise reached earlier this year by Gov. Arnold Schwarzenegger and the Legislature calls for the state to get $1 billion from the state fund. The only realistic way of doing so is by selling off its most profitable lines, which have been subsidizing workers’ compensationinsurance rates for risky clients.
The state fund’s constitutional role is the insurer of last resort for tens of thousands of businesses such as construction companies and others with a high risk of worker injury. Through the years, the State Fund—which is run like a private company by a government-appointed board—has expanded to offer market rate coverage for lower-risk companies, such as advertising agencies and others.
Drive Up Premiums
The planned sale is significant because it likely would drive up premiums for the thousands of Orange County employers in high-risk industries since lower-risk policies subsidize riskier ones.
But the sale plan, little noticed amid the larger state budget battle, faces a hurdle. The 11-member state fund board—nine of whom were appointed by Schwarzenegger—has voted to oppose the sale of its business assets, saying it not only would harm the solvency of the state fund but also would hurt the state’s economy.
The administration contends the budget provision will be enforced despite the board’s opposition.
Even if the administration can force a sale, it’s unclear whether other carriers would step forward to buy the customer portfolio and at what price.
Business groups, struggling with the recession, fear their members will be hit with premium hikes without the possibility of buying affordable policies elsewhere. They’re concerned about a return to the situation of six years ago, when rates doubled and even tripled, forcing companies to lay off workers or leave the state.
The plan comes at a tough time. The entire workers’ compensation insurance market appears headed for an extended period of rate hikes and turmoil as medical and other claim costs have outstripped premium revenue.
For roofing companies, a spike in the state fund’s rates could force smaller operators to skirt the law.
“This will hit hardest those of us who are playing by the rules,” said Dave Chapman, president of Chapman Coast Roofing in Fullerton who also is president of the Roofing Contractors Association of South-ern California.
Chapman said his own company and most other roofing contractors are insured through the state fund.
“If this state fund sale happens and rates go up, I guarantee you more roofers will misclassify their employees so that they won’t have to pay the higher premiums,” Chapman said. “The more they raise the rates, the more cheating will go on.”
Past Example
Some fear a return to the workers’ comp market of a few years ago.
From 2000 to 2004, more than two dozen insurers dropped their California workers’ comp businesses and many employers saw their premiums triple in four years. As a result, thousands of employers flocked to the state fund, which by 2004 swelled to encompass more than half of all premium revenue in the state.
The state fund’s board members cited that recent history in their decision to reject the governor’s proposal.
State fund spokeswoman Gina Simons contends no sale could go forward without the board’s agreement.
The administration disputes that. The Department of Finance has hired a “sale side adviser” to analyze what parts of the state fund are most suitable to put on the block.
“We are moving forward with this. It was the intent of both the Legislature and the governor and it is now enacted state policy,” said H.D. Palmer, spokesman for the department.
The issue could end up in court, tying up any sale of the state fund’s book of business for months.
Fine is a staff writer with the Los Angeles Business Journal. Andrea Rangno contributed to this story.
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February 25th, 2010
The mortgage meltdown of 2007 led to some sleepless nights for executives at Impac Mortgage Holdings Inc.
“I didn’t sleep at that time,” said Joseph Tomkinson, Impac’s chairman and chief executive. “And I can say the same for (President) Bill Ashmore, because a lot of the time we would call each other at four in the morning.”
A long nightmare seems to be easing for the Irvine-based company, which is starting to hire again with plans to get into mortgage lending and other businesses.
Impac was one of the bigger employers in Orange County when it peaked at slightly more than 1,200 employees two years ago.
At the time, Impac acquired home loans from brokers that were made to people with imperfect credit or less than complete documentation. Impac held the mortgages as investments.
Impac focused on what are known as Alt-A borrowers—those in between the riskiest subprime borrowers and those with the best credit.
The early 2007 collapse of Irvine-based subprime lender New Century Financial Corp. sparked an industry crash that saw financiers pull funding for Impac and others.
“If you lose your funding like that, there’s not a whole lot you can do,” said one Wall Street analyst who asked not to be named because he no long covers Impac. “Essentially that’s what happened to them—they had to downsize pretty materially.”
By the end of 2008, Impac had shrunk to about 110 employees. Its prestigious New York Stock Exchange listing was pulled.
Impac now trades on the low-profile Pink Sheets exchange with a recent market value of about $15 million, down from a peak of $1.3 billion in mid-2005.
Executives shut down the company’s Florida and Chicago offices and sublet five of the seven floors of the company’s 200,000-square-foot local headquarters near John Wayne Airport.
The prospect of bankruptcy was real for Impac. But Tomkinson said he and Ashmore vowed to avoid it.
“Bill and I, two years ago, we sat down across from each other at a table, and we said, ‘Lets just gut this out, get it right and we’ll come out of it on the other end,’” Tomkinson said.
The company wound down its credit lines and began selling chunks of the $850 million in loans that it had on its books.
For the past two years, Impac largely has survived by collecting payments and handling other administrative work for mortgages it once owned, as well as providing other real estate-related services.
Growth
At about 250 workers now, Impac is looking to add another 30 people across the board from now until the end of the year, according to Tomkinson.
Impac even has stopped subleasing one of the floors at its headquarters, which has been known as Impac Center since 2005.
“You don’t build a company unless it’s cash flowing, and it’s cash flowing again,” Tomkinson said.
To grow, he said it is looking to acquire an undisclosed title insurance company, which would put it into an industry that’s undergone consolidation in the past year and is dominated by Santa Ana-based First American Corp. and Florida’s Fidelity National Information Services Inc.
The company said it expects the California Department of Insurance to approve its acquisition of a title company any time now.
Impac’s also gearing up to start making mortgages directly to borrowers, something it flirted with during the lending boom.
The company’s in talks for a line of credit it hopes to get before year’s end that will allow it to start making loans in 2010.
Impac plans to focus on simple mortgages that fit standards set by federally backed buyers of mortgages such as Fannie Mae, Freddie Mac and the Federal Housing Authority.
Much of that business now is dominated by the big banks that picked up the pieces of the mortgage meltdown.
“It’s a tough business to just originate to the government standards because there are gigantic companies doing that and the competition is pretty intense,” said the analyst who once followed Impac.
Impac is close to getting $160 million worth of loans off its books, the last trace of the mortgage investing that led to its downfall.
“We’re a little Orange County company that without any government help is re-emerging,” Tomkinson said. “And all those predictions that we’re going bankrupt, that wasn’t an option as far as I was concerned.”
Shvartsman is a freelance writer based in Irvine.
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February 25th, 2010
Balboa Thrift and Loan, a $200 million asset lender based in Chula Vista, has been put on notice by the Federal Deposit Insurance Corp. that it has been operating in an unsafe and unsound manner with policies that are detrimental to thethrift.
Thrift and loans are similar to industrial banks and differ from most commercial banks in one key area: They do not offer checking accounts to their customers.
Ted Monzingo, Balboa’s president and CEO since 1990, said he and his board “definitely don’t agree with them (FDIC), so we’re disputing the charges and giving notice that we want a formal hearing.”
The actual date for the hearing before an administrative law judge hasn’t been set, but will likely take place in August, Monzingo said.
He said Balboa has been operating in the same manner as in past years, hasn’t changed its policies, and received passing bank examinations in 2006 and 2007.
“They (the past exams) were always good, everything was right, except this last one wasn’t, even though we haven’t changed anything,” Monzingo said.
Charges Leveled
Among the charges leveled in the FDIC order that was filed Dec. 15 and announced in late January are that Balboa doesn’t provide guidelines for restructuring loans, doesn’t comply in its reporting of restructured loans with generally accepted accounting practices, is deficient in its policies covering loan concentrations, its reserve allowances, capital maintenance, and subprime loans, and has resisted adopting regulators’ recommendations from the current and past examinations.
The charges are the result of a bank exam based on the thrift’s 2008 results and completed in March 2009.
Founded in 1980, Balboa Thrift and Loan has reported profits in recent years, and has been well-capitalized. According to its most recent call report filed with the FDIC, it reported net income of $361,000 in 2009, compared with $179,000 for 2008 and $909,000 for 2007.
Balboa also has plenty of capital or core reserves, another key metric used to measure a financial institution’s health.
Solid Numbers
As of the end of last year, its Tier 1 leverage ratio was 9.46 percent, and total risk-based capital was 12 percent. Both ratios are regarded as well-capitalized.
Balboa’s reported nonperforming assets at the end of December were $2.5 million, or 1.2 percent of total assets of $205 million, compared with holding 1.59 percent in nonperforming assets as of December 2008. Those are ratios of problem assets most lenders would love to have, given how the recession has wreaked havoc on most portfolios.
Balboa Thrift and Loan has concentrated on making mainly car loans, and has about $155 million, or 86 percent of its portfolio, in car loans, according to its latest call report.
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February 25th, 2010
Executive compensation is a hot topic. At times it can be a lightning rod. More often it’s an unseen, strategic asset. The task of setting executive compensation can make or break a business.
San Diego-based Barney & Barney LLC has opened a compensation consulting practice, the insurance brokerage said earlier this month.
Jeremy Anderson, who joined the firm Jan. 1 as a principal, leads the practice, which will serve businesses nationally.
The new practice also deals in sales effectiveness consulting and broad-based rewards advisory services. The firm said the new practice has expertise in the life sciences and technology sectors.
Prior to joining Barney & Barney, Anderson worked for leading compensation consulting firms. He helped hundreds of companies design and implement executive compensation programs, sales incentive plans, equity strategies and performance management systems.
Shawn Pynes, another Barney & Barney principal, called the new compensation practice “an integral part of our growth strategy.”
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February 25th, 2010
The San Diego Open has been renamed the Farmers Insurance Open after the Farmers Insurance Group agreed to become the title sponsor for the area’s premier golf tournament, according to a Jan. 18 announcement.
The one-year agreement between Farmers and the PGA Tour includes a long-term option, but financial terms of the deal weren’t revealed.
The tour, which runs Jan. 28 to 31, has a total purse of $5.3 million.
The PGA Tour and the Century Club of San Diego, the local nonprofit that organizes what formerly was called the Buick Open, had been searching for a replacement titlesponsor after Buick said it was unable to continue its relationship in August. The division of General Motors had been the sponsor since 1992, but had to give it up after the parent firm filed for bankruptcy last year.
The golf tournament at San Diego’s Torrey Pines Golf Courses has been a major event of the PGA Tour for many years, although the absence of Tiger Woods this year will have a dampening impact.
Tom Wornham, president and general manger of the Century Club, said while the event was prepared to go on without a title sponsor, “this is truly wonderful news that provides a tremendous boost to the tournament.”
Farmers’ parent firm, Zurich Financial Services Group, has been a sponsor of the New Orleans Open since 2005.
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February 25th, 2010
Eight years ago, University of California officials noticed an unsettling statistic that prompted a rewrite of the rules on campus health care.
The figureheads found that, systemwide, an estimated 40 percent of undergraduates were living without health insurance or lacked adequate coverage. About a quarter of the students who were dropping out did so because of medical reasons, a significant portion of which was linked to inadequate coverage or none at all, according to a 2001 Board of Regents report prepared by the UC Advisory Committee on Student Health.
In response, the regents authorized the UC president to establish mandatory health insurance as a condition of enrollment beginning with the fall term of 2001. Next week, they plan to consider a similar plan for all university graduate students, beginning with the 2010 fall term.
Universities such as UC San Diego have been addressing the problem for years, but lawmakers have nearly left them out of the current health care debate, according to Aaron Speer, a spokesman for the left-leaning consumer advocacy group Calpirg.
“I think they’re being overlooked,” Speer said. “They’re being seen as the invincible generation.”
Last week, the group released a report called “Uncovered: How the Health Care System Is Failing Young Californians,” calling attention to the 18- to 29-year-old age bracket. The category represents the biggest group of uninsured, according to the report, with 20 percent of college students ages 18 to 23 living without insurance.
Among other initiatives, the group is pushing for changes in health care reform that would allow dependents to remain on their parents’ health care plan until age 26.
Speer said this is a major problem for the 53 percent of 19- to 29-year-olds who aren’t eligible for coverage through their California employer.
“The system makes it very difficult for them to join,” he said.
• • •
Home Is Where The Help Is: If one major theme emerged from the TedMed meeting held late last month at the Hotel del Coronado, it was the move toward home-based care for an aging population.
Grandma, it seems, will live more independently under the auspices of new robotic monitoring devices and better sensors that detect bodily changes.
In a presentation that had the audience roaring, iRobot Corp. CEO Colin Angle showed a series of robot depictions through time, from the primitive, boxy kind used in early films to hostile cartoon alien robots.
He jokingly asked the audience what problem did they have with these friendly creatures? His point, though, was to drive home the fact that for every person needing care, only one or two family members will be able to provide them the support they need.
“Robots aren’t going to replace me,” Angle said. “The point of the robots is extending independent living.”
Ron Kinder, president of Home Care Assistance Corp. of San Diego, said he’s also noticed increasing demand for home-based care, particularly after families visit their loved ones for the holidays.
“As our population ages, those technologies, I think, will be very helpful in supplementing home care,” he said.
But nothing, he said, can replace the feel of a home-cooked meal. At least not yet.
Healthier State: A report released last week indicates a healthier California than just a year earlier.
United Health Foundation, the American Public Health Association and Partnership for Prevention released the 20th anniversary edition of America’s Health Rankings showing that California ranks 23rd compared with the health of other states. The Golden State ranked 24th last year.
Contributing to its improvement was a low prevalence of obesity and smoking.
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February 25th, 2010
The Federal Deposit Insurance Corp. said late Oct. 30 that regulators closed San Diego National Bank.
The federal agency said San Diego National branches will reopen as branches of Minneapolis-based U.S. Bank.
Local bankers had been expecting the move.
In all, U.S. Bank took over the deposits and essentially all of the assets of nine failed banks, the FDIC said.
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