West Des Moines was listed in a September 25, 2008 issue of BusinessWeek as one of twenty cities that could be hurt hardest by the financial crisis. You can read the article and view the other cities listed online at Business Week.
West Des Moines issued a response to BusinessWeek, explaining why our city is not as susceptible to problems as their methodology predicts. Read the response below.
West Des Moines is not suffering like Wall Street
Just how susceptible is West Des Moines, Iowa to a financial meltdown? A recent BusinessWeek article ranked West Des Moines fourth on their list of “Towns that Could Be Hit Hardest by the Financial Crisis.” The BusinessWeek listing used a simple methodology—ranking cities by percent of people employed in finance, real estate, and insurance in 2007—to select cities for the list. A more thorough analysis can provide context as to the stability or vibrancy of the employers actually located in the community.
The article noted that 22% of West Des Moines residents work for one of the above mentioned industries. This high concentration of finance and insurance jobs is not a surprise to anyone familiar with West Des Moines, and it is also not alarming when you consider how stable these companies are. With just over 55,000 residents, West Des Moines is home to corporate offices for nearly 7,000 employees working in finance and insurance. Additionally, the City benefits from its close proximity to the City of Des Moines, a headquarters for several finance and insurance companies.
In order to truly determine how vulnerable West Des Moines is to the problems facing the financial market, it is imperative to take a closer look at the stability of the larger financial and insurance companies that employ our residents. Economist David Swenson at Iowa State University agrees, noting, “You have to temper that conclusion with an evaluation of the kind of financial and insurance industry that exists here.” He suggests in the September 29, 2008 Des Moines Register that Central Iowa businesses are “only tangentially linked to some of the stress that is happening on Wall Street.”
Wells Fargo (11,000 employed in Metro)
According to their records, Wells Fargo Bank, N.A. is the only bank in the U.S. and one of only two banks worldwide to have the highest possible credit rating from both Moody’s Investors Service (Aaa) and Standard & Poor’s Rating Services (AAA). These ratings demonstrate solid confidence in the company and its operations. Wells Fargo & Company reports to hold $609 billion in assets and remains strong as a corporation based on the diversity of services they provide including banking, insurance, investments, mortgage, and consumer finance.
Principal Financial Group (7,600 employed in Metro)
Principal Financial Group maintains a strong financial position as well. The Principal reports that its exposure to entities involved in the turmoil—AIG, Lehman Brothers, and Washington Mutual—is minimal, and tallies less than one percent of its total invested assets. The company states it has experienced minimal losses from their subprime residential mortgage holdings, totaling less than one-tenth of one percent of total invested assets. As of June 30, 2008, The Principal had $6.6 billion of equity or assets in excess of liabilities. The Principal has also maintained strong financial strength ratings by S & P and Moody’s.
FBL Financial (1,125 employed in Metro)
As of June 30, 2008, FBL Financial Group (the parent company of Farm Bureau Life Insurance Company and EquiTrust Life Insurance Company) claims total invested assets of $11.3 billion diversified by individual issue, industry, and asset class. FBL has limits in place for each credit exposure and reports that less than 0.3 percent of its total investments are in AIG and Lehman Brothers.
GuideOne Insurance (525 employed in Metro)
GuideOne is a unique company that specializes in working with churches, churchgoers, private schools and colleges, and not-for-profit senior living communities. One of the country’s largest church insurers, GuideOne asserts that it serves nearly 43,000 churches. The company is one of the top five senior living community insurers as well.
According to the 2007 Business Record Book of Lists, the top 10 largest private employers in Central Iowa are:
1) Wells Fargo & Co
2) Principal Financial Group
3) Mercy Medical Center – Des Moines
4) Iowa Health – Des Moines
5) MidAmerican Energy Company
6) Pioneer Hi-Bred International, Inc
7) Firestone Agricultural Tire Company
8) Hy-Vee, Inc
9) UPS
10) Allied Insurance
Note the absence of investment banking firms from the list of larger employers in the Des Moines metropolitan area. Investment banking firms and the communities that house them are being hardest “hit” by the recent financial turmoil. The financial companies in the Greater Des Moines area also do not have as much exposure to securities linked to falling house prices as the institutions that have fared the worst had.
We can also look to West Des Moines’ largest employers from all sectors to evaluate the City’s financial position. In addition to the large financial firms mentioned here, West Des Moines Community Schools, the City of West Des Moines, the State of Iowa, and Polk County securely employ several thousand central Iowans. Nearly 25% of the City’s 53,400 jobs are in education, health, social services, professional and scientific categories, areas that are generally more resilient in an economic decline. The City of West Des Moines itself maintains a AAA bond rating from Standard and Poor’s thanks to sound financial planning.
Overall, it is fitting to conclude that West Des Moines will not be financially hit harder than any other community in the United States. The City’s local financial institutions are solid, housing is still strong, two new hospitals are being built, and the City’s workforce is highly educated. Although every community will feel the fallout to some extent, West Des Moines’ economic future is looking up, not down, as evidenced by two recently announced additions to the local economy. The first is an eventual 1.3 million square foot North American headquarters for Aviva Insurance, the first phase of which will total 360,000 square feet and bring in 1500 employees. The second is the development of a Microsoft Data Center valued at $500 million.
Sources:
Wells Fargo information:
“Wells Fargo Senior EVP Oman To Retire By Year-End ‘09” (8.25.08)
Principal Financial Group information:
“The Principal Financial Group: Strength and Stability During Turbulent Times” (9.26.08)
FBL Financial Group, Inc. information:
“FBL’s Financial Strength” (2008)
GuideOne Insurance nformation:
“America’s Leading Insurer of Churches, Churchgoers, and Faith-Based Institutions” (2008)
Business Record 2007 Book of Lists (December 2006) published by Business Publications Corporation, Des Moines, Iowa.
Des Moines Register
“Is magazine right about WDM's risk in crisis?” (9.29.08)