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USAA navigating rough financial waters


San Antonio-based USAA recently reported its first full loss for a year since 1923 and has laid off more employees. TPR's Jerry Clayton spoke with Michael Taylor, a business and finance columnist for the San Antonio Express-News who recently penned a column about the troubles at USAA.

Clayton: When you interviewed USAA’s corporate treasurer, he put a fairly positive spin on the story. Can you tell me what he said?

Taylor: I think first and foremost they say to themselves as well as to me, look, we're 70% an insurance company. So if you try to lump us in with the bank runs or the bank failures, don't do that. That's not fair. I think the second part is we have much stickier deposits. And then I think the third part is the losses that I was asking about are what we would call long term hold to maturity bond losses.

And we can dig into that if you want, but essentially that says we're allowed to hold these for 20, 25, 30 years because we have offsetting liabilities that as a bank and insurance company we are holding. So we're holding these assets for the long run.

Clayton: So what part of USAA are these losses primarily coming from?

Taylor: I was highlighting a ten and a half billion dollars loss, which they called the other comprehensive income loss, and they said 50% of it more or less comes from the insurance side assets and 50% comes from the banking side assets. So they split 50-50.

In particular, the big ten and a half billion dollar loss is mostly bonds, mostly very safe bonds that they haven't sold. So they still have them on their books. And in a sense, they're waiting for them to recover their value or to mature a decade from now, two decades from now — that kind of thing.

Clayton: Can you explain a bit further why USAA says it's not susceptible to failures like other banks have failed recently?

Taylor: They have a much smaller (about 7%) of what we would call over the FDIC limit for non insured deposits. That's the money that turned out quite fast when Silicon Valley Bank failed and other banks have failed — they've had non insured deposits. USAA doesn't have that. They don't have a tremendously high net worth customer base in their bank. And so people are not yanking their deposits quickly, moving them somewhere else, either out of fear or, "oh, I got a slightly higher rate somewhere else." So they're not really subject to that kind of fast moving money.

Clayton: Now, there's been another round of layoffs, bringing the total number of people to around 700* (approximately 900 have now been laid off in 2023) that have been laid off for the year. Is this a sign of trouble at USAA?

Taylor: It makes sense to me that when management is faced with the first loss in 100 years, people there, they have a board of directors and they have constituents and they would say, Well, how are you reducing costs? What are the obvious ways that they have to think about that as do we reduce headcount?

So it feels at the very least a reaction to the past year. I don't know to what extent this is in the ordinary course of anticipating recession or some places just got too big or what it is, exactly. But it makes sense that when you lose money, management reduces headcount.

Clayton: Your column about USAA's losses elicited quite a few responses from readers. Tell me about that.

Taylor: One of the surprising things I got, and I had mentioned it, I was a customer of USA and actually quite like them was how many people then took the opportunity to tell me why they did not like USAA anymore or how it had changed over the last five or ten years. That surprised me. I had not seen changes as a customer, but other people wanted to make sure I knew they were unhappy with the direction of the business.

Some of those commentary were about customer service. Some were about executive pay. Some were about risk taking that they perceived in the bank. And one of them had a complaint about the politics of the bank. They said, when you go woke, you go broke. I had not noticed that USAA was particularly woke, but I took note of the headline of the email that came my way.

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Jerry Clayton can be reached at jerry@tpr.org or on Twitter at @jerryclayton.