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Safeco's Bottom Line
Safeco sells personal auto and homeowners insurance, small and medium-size business insurance, life insurance and investment products. It's basically a commodity business: Price and service are the only ways to differentiate one company's policies from another's, says Glenn Sieber, managing partner of the insurance practice for North America at Accenture Ltd. in Hartford, Conn. To beef up the bottom line, McGavick had to reduce Safeco's risk, make the premiums competitive and improve its service. "The solution was and is technology," says Sieber.
Before he could think about the long term, though, McGavick had to stabilize the company. His first decision as CEOreducing the stock dividend by 50 percentwas easy, given the desperate need to preserve cash. Then he cleaned up the balance sheet by writing off $1.2 billion in goodwill derived from the American States acquisition. To reduce debt further, he put a subsidiary, Safeco Credit Co., and its debt on the block, taking in $250 million while reducing Safeco's debt by half, to $1.5 billion.
A series of layoffs and consolidations followed, which executives expect will add some $100 million annually to the bottom line.
Then McGavick turned his attention to the future. Safeco needed to improve its communication with its agents over the Internet, spruce up its Web site to help potential customers locate its agents, and develop internal systems that could segment potential policyholders into different risk classes so it could start pricing its products to reap greater profits.
As he looked around Safeco, however, McGavick found little of the technology and tech experience required to make his vision reality. He realized that if technology was to be at the center of strategic opportunity, then he would need someone who knew what technology could and could not do to help guide that strategic thinking. That someone turned out to be Senegor, whom McGavick hired in September 2001 to serve as both CIO and director of strategic planning. It was a radical move, and a rare one in a generally conservative industry where CIOs have traditionally served at the whim of the heads of finance. But Senegor was up to the challenge. A former head of Accenture's insurance industry practice, Senegor had piloted a team of more than 30 partners who provided consulting and IT services to many of the nation's leading insurance companies. "I wanted someone who understood our challenges and how technology could solve them," McGavick says.