Ending a search that has been ongoing since last October, Michael S. McGavick was named president, CEO and member of the Board of Directors of Seattle-based SAFECO Corporation on Jan. 30. McGavick, a native Washing-tonian, joins SAFECO after having held the position of president and COO of the commercial insurance unit at CNA Financial Corp. since 1997.
Previously at CNA, McGavick also served as executive vice president and senior financial officer of the company’s Commercial Lines Group. He joined the Chicago, Ill.-based company in 1995 as group vice president of a unit of the company’s marketing department.
“[McGavick’s] recent history at CNA shows that he knows how to engineer a successful turnaround,” said William G. “Gary” Reed, who was concurrently elected Chairman of SAFECO’s Board of Directors, during a conference call announcing McGavick’s appointment.
In emphasizing some of McGavick’s accomplishments at CNA, Reed said, “Basically, Mike made the tough decisions that are providing bottom line results. Over an 18-month period, his unit improved its combined ratio by seven points. That’s a positive swing of over $200 million.”
Before joining CNA, McGavick spent four years as director of the American Insurance Association’s Superfund Improvement Project in Washington, D.C.
In the early 1990s, he was a partner of the public relations firm the Gallatin Group in Seattle, where he provided strategic counseling and campaign implementation. In 1988, he became Chief of Staff to then U.S. Senator Slade Gorton (R-WA).
Former SAFECO Chairman and CEO Roger Eigsti’s resignation, announced in August 2000, became effective at the end of the year. At the time, Reed, noting the SAFECO’s directors had been disappointed with the company’s financial performance of recent quarters, indicated that SAFECO was seeking a fresh approach in leadership in order to get the company back on track. Since Jan. 1, Reed has served as acting chairman and acting CEO at SAFECO.
Along with the announcement of these appointments, Boh Dickey, SAFECO’s president and COO since 1996, tendered his immediate resignation. Dickey, said to have been the leading internal candidate for the permanent CEO position, came aboard at SAFECO in 1982 as controller, was named CFO in 1989 and was elected to the company’s Board of Directors in 1993. Since the resignation of Randy Stoddard in August 2000, Dickey had also taken on the responsibilities as president of the SAFECO Property & Casualty companies.
To assist with Eigsti’s replacement, a global search firm was retained by the board, which reportedly reviewed scores of internal and external candidates.
On Jan. 22, 2001, the release of SAFECO’s fourth-quarter 2000 earnings report showed an operating loss for the quarter of $9.6 million for the company’s consolidated operations as well as lower profits for the entire year. For personal auto, SAFECO reported a fourth-quarter combined ratio of 109.8, significantly higher than the 104.5 predicted by Dickey in the third quarter.
The following week, A.M. Best Co. lowered the “A+” (Superior) financial strength ratings of SAFECO’s property/casualty and life/health companies to “A” (Excellent). The company’s senior debt ratings were also downgraded from “a” to “bbb+.”
A.M. Best cited the ongoing deterioration in the company’s operating results, driven primarily by underwriting losses in both the personal and commercial lines segments of its p/c operations, as a major factor in the downgrades.
It was noted, however, that SAFECO still maintains a strong presence in the U.S. p/c market as well as an adequate level of capitalization for its property/casualty unit and ample capitalization of its life/health companies. A.M. Best concluded that the recent appointment of a new president and CEO at SAFECO served to help ease its concerns with regard to leadership and strategic direction at the company.
“The current turnaround plan and plans in place at SAFECO have a couple of characteristics which need attention,” McGavick told analysts during a conference call. “The first is they aren’t showing up at the bottom line in the same degree that they are being talked about…I need to look into that very carefully.
“The second characteristic that I would observe is that SAFECO is a little bit out of sync with the cycle,” McGavick continued. “Historically, throughout the cycles in its various lines, SAFECO has been a good competitor, has always been among the top competitors relative to the cycle, and this time it finds itself further down the ranks. And that is unacceptable.”
Following A.M. Best’s rating action, McGavick issued another statement to the effect that while the downgrades underscored the importance of reversing the negative trend in SAFECO’s financial performance, they should not impact the company’s ability to sell its products. He also reiterated that his top priorities are the improvement of SAFECO’s core lines, reducing expenses and strengthening the company’s balance sheet.
Topics AM Best Property Casualty
Was this article valuable?
Here are more articles you may enjoy.
Florida’s Slide Insurance Secures $210 Million Catastrophe Bond 
US Dog-Related Injury Claims Hit $1.12 Billion in 2023: Triple-I, State Farm Report 
Florida Peninsula Says Reforms Have Had an Impact, Announces 2% Rate Cut 
Soaring Insurance Costs Hit as US Buyers Finally Get a Break on Car Prices From This Issue
