First Capital Lays Off 166 of Its Employees

SAN DIEGO —  Failed First Capital Life Insurance Co. laid off 166 of its 400 employees Friday, three days after it was seized by state insurance regulators.

The layoffs were made in response to regulators’ demand that the insurer make significant cost reductions, company spokesman Mark Longabaugh said. Additional layoffs are possible if the state orders more cost cutting, Longabaugh said.

First Capital, a subsidiary of Los Angeles-based First Capital Holdings, was placed in conservatorship Tuesday after creditors sought to place the parent company in bankruptcy, and a rash of customers sought to cash in their policies. The run was prompted by concerns about First Capital’s deteriorating financial condition, caused by souring junk-bond investments.

Regulators acted to preserve the company’s assets and protect its 283,000 life insurance policy and annuity holders. The company is prohibited from issuing new policies or making redemptions but is paying annuity and death benefits, along with accident and health claims.

“I had hoped we could avoid layoffs, but with the company no longer taking new business, it was impossible to continue at our current staff levels,” Fred A. Buck, the firm’s chief executive, said in a statement.