SAFECO Management Changes, Refocuses

A lot has been happening up in Seattle-at SAFECO’s headquarters in particular. On Aug. 3, Roger Eigsti, chairman and CEO of SAFECO Corp., announced his retirement, effective Dec. 31, 2000. That same day, Randy Stoddard, president of SAFECO Property & Casualty Companies, submitted his resignation, effective immediately. These announcements followed closely on the heels of the company’s disappointing second-quarter results.

In the wake of Stoddard’s resignation, SAFECO President and COO Boh Dickey has been asked to take over responsibilities as president of SAFECO’s largest business unit. Meanwhile, the SAFECO Board of Directors is moving quickly to find a new chairman and CEO-looking at candidates from both inside and outside the company. Reportedly, Dickey is a top candidate to become Eigsti’s replacement.

But Dickey isn’t going to worry too much about that. “The best thing I can do in the next five months is put my nose to the grindstone and do my job every day,” Dickey said. “Our business plan inside of the property and casualty company is a very good one, and therefore there are not a lot of major changes that we’re making as a result of what’s gone on.”

Last year, SAFECO launched a recovery plan expected to take at least 24 months to fully implement. Elements include returning rates to adequate levels, disciplined underwriting of policies, and aggressive expense management. “Because of the lack of promptness in us turning our profitability back to where it used to be as a company, [the board] determined that a new style of leadership would be a benefit for the company,” Dickey explained.

Five key areas that Dickey plans to tackle include: balancing growth and profit; being aggressive with rates; reducing the expense ratio; focusing on underwriting; and putting the independent agent in the forefront of each of the strategies.

“None of these are really new, but I would say that we’ve had a multitude of other things that we’ve been doing inside the company in the past two years,” Dickey said. “Probably the biggest change right now…is that instead of doing 50 things, we’re doing five…and we’re doing them exceptionally well, exceptionally focused, and exceptionally clear and concise.”

SAFECO recently posted a 60.2 percent decrease in its second-quarter net income. Two areas where performance declined during the quarter were homeowners insurance, where the company experienced large weather-related losses mainly in the Midwest; and SAFECO Commercial Insurance, where large losses (including fires, workers’ comp and GL losses) were above normal.

Results for the American States Business Insurance (ASBI) line improved substantially during the quarter. SAFECO acquired American States for $2.8 billion in 1997 and struggled with the integration of the company for months.

“What we’re doing on the ASBI side is focusing our underwriting on a much more intensive basis,” Dickey said. “We’ve actually gone through and reviewed the whole book of business that we bought from American States.”

LeRoi Brashears, spokesman for SAFECO, feels that this is a fairly aggressive strategy. “We’ve non-renewed quite a bit of business that we’ve identified as either having unsatisfactory high loss ratios or just being classes of business that we don’t want to be involved in,” he said. “It’s about 3 percent of the business in the ASBI, or roughly about $128 million in premiums, so we forecast that with that we’ll begin to save $107 million per year in losses.”

SAFECO recently reported that it has secured approval to increase homeowners rates in 33 states and to increase auto rates in 32 states.

Combined, these rates are increasing by more than 5 percent, but the company won’t realize the full effect of the rate adjustments until existing policies are renewed later this year and well into 2001.

In addition to Eigsti retiring and Stoddard resigning, Dickey noted “two other significant management changes.” “Bill Lebo, executive vice president of SAFECO Property & Casualty Companies, is taking on more responsibility and will now supervise our 13 regional offices,” he said. “And George Johnson, who is vice president of corporate marketing, is now senior vice president of corporate marketing and operations.”

The company is looking to Johnson to continue expense cutting in his new areas of responsibility. Promoted Aug. 3, Johnson’s new duties include assuming the additional responsibilities for SAFECO’s administrative and information systems (IS) organizations. His other duties include overseeing the company’s four new customer contact centers. The first of four new contact centers opened in June, and the company plans to have a gradual rollout of the other centers by the middle of next year.

Johnson explained how SAFECO is planning to increase the level of its branding activities. “We started with SAFECO Field as the cornerstone for a national name awareness-not necessarily branding-and we will begin to add meaning to that around the country…on a very targeted, strategic basis,” he said. “As we get healthier as a company and are able to afford more, we will step up our efforts in our branding activity-both in real space and cyberspace.”

Umbrellas are one thing that SAFECO has been pushing this year, according to Nancy Carlson, vice president of marketing. “Our largest response rate that we’ve been getting has been our individual, term-life solicitation-up to 18 percent,” she said.

Carlson said retention is a big focus for SAFECO, and by cross-selling accounts the company is able to increase-and keep-the amount of business its agents write.

“We’ve got a great distribution network out there,” Carlson said. “So if we can make it easier for them, then ultimately as an organization we’re going to write more business.”

Topics Property Casualty