Safeco's New CEO Brings Diversified Risk Management Expertise

Strategic Insights -

Paula Rosput Reynolds, the newly appointed CEO of Safeco Corporation, brings a wealth of experience in managing diversified risk, having led AGL Resources through a turnaround and transforming it into a multistate, integrated energy company. Reynolds, who previously served as chairman, president, and CEO of AGL Resources, has spent 27 years in the energy business and is now set to join the insurance industry at Safeco, the 18th-largest U.S. property/casualty insurance company. Reynolds' leadership skills and experience in diversifying risk will be crucial in addressing the challenges faced by Safeco, particularly in the wake of hurricanes Katrina and Rita.

Key Takeaways:

  • Reynolds will succeed Mike McGavick as CEO of Safeco in January 2006, bringing 27 years of experience in the energy business to the insurance industry.
  • Under McGavick's leadership, Safeco cut jobs, shed underperforming business units, increased rates, and refocused on selling homeowners and auto, as well as commercial lines for small and medium-size businesses.
  • Safeco's net underwriting income moved from a loss of $892 million in 2001 to a profit of $453.9 million in 2004, while its combined ratio improved from 120.2 to 91.1 over the same span.
  • Reynolds led AGL Resources through a difficult turnaround, cutting the work force by 25% in the face of deregulation and other industry problems, and grew the company from a regional gas utility to a multistate, integrated energy company.
  • During her five-year tenure as CEO, Reynolds doubled AGL Resources' share price and market capitalization, and increased its dividend by 37%.
  • Reynolds believes that both the energy and insurance industries need to be concerned about diversifying risk, citing the concentration of infrastructure in the Gulf Coast as an example.
  • Reynolds noted that the insurance industry's concentration in the Gulf Coast has led to a high concentration of risk, and that smart management is needed to navigate the gap between current reality and the aspiration to be more diversified.

Statistics:

  • Safeco's net underwriting income moved from a loss of $892 million in 2001 to a profit of $453.9 million in 2004.
  • Safeco's combined ratio improved from 120.2 to 91.1 over the same span.
  • During her five-year tenure as CEO, AGL Resources' share price and market capitalization were doubled.
  • AGL Resources' dividend was increased by 37% during Reynolds' leadership.

Sources:

  • A.M. Best Co.
  • COMTEX
  • Seattle press report
  • AGL Resources' annual reports
  • Safeco Corporation's quarterly conference call
  • Morgan Stanley research note
  • Comtex SmarTrend(SM) Alert