Becoming a contender: new leadership, tighter focus, financial restructuring and stronger underwriting have turned Safeco around and prepared it to compete with the major players.

From the look of it, Safeco's presence in Seattle is rock solid, with its 22-story office complex dominating the skyline some four miles north of downtown. But little more than two years ago, the business foundation of the 80-year-old company was badly cracked: Safeco had chalked up six straight years of declining return on equity and, in 2001, lost nearly $1 billion. The company was, as its new chief executive officer put it, bleeding profoundly.

But that was before Mike McGavick became Safeco's chairman, president and CEO, and helped lure executives away from CNA, Geico, Hartford Financial Services, GE Employers Reinsurance Corp. and Travelers Property Casualty Corp. to the Pacific Northwest to minister to the ailing insurer. And it was well before Safeco's new management decided to concentrate on its core competencies--small commercial, personal lines and the life and investment side, mainly the commodities products area. In fact, focus is what Safeco is all about these days.

"I think this organization learned a valuable lesson in the last few years," said Jim Arciere, vice president of claims for Safeco Personal Insurance, the company's line of automobile, homeowners and other personal insurance products. Losing focus--I don't think we're going to let that happen?

The lesson was a tough one to absorb at times. In 2001, trader McGavick's leadership, the company laid off 1,200 people--10% of its work force--and wrote off $l.2 billion in good will, largely the result of paying too much for its problem-filled acquisition of American States Financial Corp. in 1997.

The company also reduced its equity holdings in a volatile market, and shored up its flagging auto insurance business by raising rates, automating underwriting and segmenting the market to better set premium rotes and to expand its reach to nearly all potential customers.

By the end of 2002, the company's fortunes clearly had reversed. Safeco made $300 million that year and led the industry in stock performance. Its Life & Investments posted record profits, the number of auto customers was higher than ever, and there was double-digit growth in small commercial.

Safeco has indeed completed its restructuring, said Andrew E Colannino, assistant vice president, A. M. Best Co. "There's been teal improvement there," he said, citing the company's financial restructuring, its targeting of three core markets, the new executive talent and the re-establishment of underwriting criteria. "But they were helped by the market turnaround in general--the hardening of the market--and the fact that 2002 was a favorable weather year," Colannino said.

Going forward, Safeco must face the challenges of reducing its expense ratio and profitably growing the business, he said.

These are the very goals that Safeco's leadership is training its steely focus on now. In a conference call on second quarter earnings, McGavick told analysts that Safeco management had addressed most of the fundamental issues previously facing the company. "The one nagging challenge that remains is bringing our expenses in line with our best competitors'," he said. That's a message he's been delivering to his executive team.

Shaving Expenses

Finding ways to cut expenses is an important role for Christine Mead, senior vice president and chief financial officer. She says she wants to make sure Safeco is competitive because that is critical to its pricing. During the past two years, Mead noted, there's been an important emphasis on improving processes in Safeco's claim and service organizations, so that once the turnaround was over and growing the business became paramount, "we could take on new business without ramping up expenses to the same degree" Mead said.

Still, Safeco's expense ratio runs four or five points higher than the better competition, she said. While that isn't harming the company at present, Safeco has to address the expense issue now or "it's going to hurt us down the road," said Yom Senegor, senior vice president of corporate strategy and chief information officer. "I think technology is at the center of expense reduction. We want to uncomplicate the processes and automate them."

Kim Garland, a vice president of Safeco Personal Insurance who directs auto products for the East, said one way his trait is trying to shave costs is by being fanatical about identifying expenses in detail. "If we understand our expenses first, then we can see where we need to cut back," he said. "The other thing is just cultural--spend the money like it's your own."

On the homeowners from, the key to cutting expenses is to leverage technology, then encourage agents to use it and move away from the old underwriting approach, said Brian Guimond, assistant vice president of personal property for Safeco Personal Insurance. "This has been more difficult than you might have imagined, but I think we're getting there," he said. "It's going to take a little more time, but it's "all about technology now--for our agents--from our standpoint." Safeco's homeowners business, like its auto business, has adopted a multitiered product that has been rolled out in 38 states.

Arciere sees Safeco's new drive-in claims service as a huge efficiency, doubling the number of damaged cars an adjuster can see in a day. "Other competitors have it, but it's a sound model for the direction and the strategy that we have," he said. Safeco launched this program in April 2003, and operates more than 250 drive-in claim centers in 44 states. The centers have gone from fewer than 1,000 drive-in appointments in the beginning of 2003, to 22,000 through the second quarter, Arciere said.

"Being an efficient company is critical for our long-term survival," said Michael E. LaRocco, president and chief operating officer for Safeco Personal Insurance. "Getting turned around is one thing; for us to grow, we have to be an efficient organization because every dollar we save in cost, we can pass on to our customers in lower prices. We're trying to save money not to make our margins greater but to pass those savings on to the customer."

Aiming High

When it comes to profitable growth, Safeco has some lofty national ambitions. Now listed as 13th in direct premiums written for total auto, the insurer wants to move into the ranks of the top five U.S. auto writers within seven years. And its business insurance unit, currently fifth in the nation in small business, wants to occupy the No. 1 spot in four years.

The first part of the auto writing goal calls for doubling the amount of direct premiums written by 2007 from 2002 standings, which would boost Safeco to No. 7 or 8; the second phase would call for another doubling by 2010, Garland said. "If" we did that, that would make us a top five carrier," he said.

This is going to take a lot of hard work, acknowledged LaRocco. "One reason we believe we're going to get there is the quality of the people who work here and the partnership that we have with the independent distributors across the country," he said. "The commitment they've made to Safeco has been beyond anything we could have expected."

Part of Safeco's strategy for growth has involved the introduction of a new, multitiered auto product which includes nonstandard. "What we're able to do now is reach 95% to 97% of the market, whereas in the past, Safeco was very much focused on third market," or the preferred market, which represents 50% to 60% of the total market available, said John Blodnick, a vice president of Safeco Personal Insurance who directs auto products in the West. "So we've expanded our reach, and we're now able to go into agencies and say Safeco can handle pretty much anything."

Safeco has made it easier for agents to sell nonstandard by incorporating preferred standard and nonstandard in one automated system, said Garland, one of the architects of Safeco's automated underwriting platform for personal auto insurance.

Previously, there was one computer system for preferred standard and another for nonstandard, often leaving agents to retype and re-enter all of a customer's information into the nonstandard system when it was rejected in preferred.

Management figures that the more inefficiencies it can drive from the system, the more it will attract agents. "If we lower the agents' cost of doing business with us, they'll make more on a total return with us--that's how we look at it--we want the total return for the company and total return for the agency," Garland said.

Concentrating Efforts

Another of Safeco's long-term goals is to become the leading writer in the small-business market by 2007. The top five writers--State Farm, Hartford, Travelers, CNA and Safeco--are all within striking distance of the No. 1 spot, said Dale Lauer, president and chief operating officer of Safeco Business Insurance. Safeco has annual revenues in excess of $1.5 billion in its commercial line.

"It's a very fragmented market--the top five only have 15% of the market--so there are huge possibilities," Lauer said, noting that this represents a $74 billion industry. "While I personally have an aggressive time line to get us to No. 1, I think it's doable."

Prior to mid-2001, Safeco had two separate commercial operations. One dealt with small and medium-sized businesses, was headquartered in Indianapolis and came from the American States acquisition. This operation also worked with a lot of agencies, Lauer said. The second operation was Safeco Commercial Insurance, headquartered in Seattle, which focused on large commercial accounts and program business. Safeco wrote these policies with a small number of agencies, he said.

Early in his tenure at Safeco, McGavick and the commercial lines staff decided to concentrate the company's efforts on the small-business market. "We had gotten a lot of expertise from American States," said Mike Hughes, senior vice president of Safeco Business Insurance. "We looked at predictability of losses and volatility of pricing, and we'd become very comfortable in the $100,000-and-under premium arena, rather than the over $100,000 arena."

Lauer, who had worked on the small-business side of the company, called it the biggest sector in the marketplace, the fastest growing, and where Safeco had its size and scale. On the other hand, the large account business was seeing deteriorating results, he said. Small business also offered greater opportunity for Safeco's business distributors, some 5,400 independent agents, who derive about 70% of their revenue from this sector.

So the company determined that it would get out of rite program business and place significantly less focus on large commercial business--those accounts having $100,000 or more in premium. Safeco has gone from 19 program businesses to four, "and the four we have kept are profitable--that's why we kept them," Hughes said.

But since some producers felt Safeco should continue to be a market for their large commercial accounts, the company decided to accommodate them, provided they gave Safeco what it judged to he enough business in the small and middle market range. So Safeco has kept some large commercial accounts while investing heavily in the small and middle business area, Hughes said.

The use of automated platforms on Safeco's personal auto side also got Safeco Business Insurance thinking its trait could take a similar tack, employing much more rigorous underwriting capabilities aligned along the same kind of platforms or models, complete with a multivariate analysis, financial scoring and data mining, Lauer said. As a result, agents will be able to quote and sell small-business policies in a one-step procedure that means the process takes only minutes instead of days.

Small-business owners are involved in every facet of their business and don't have a lot of time to attend to insurance issues, Lauer said. "If you can put a distributor in the place of providing a one-step solution in a matter of minutes, you have created a significant value to these business owners," he said.

Safeco launched the first platform of this business entry model in January and February 2003 for its business owners policy. "We are seeing that the system is working very well," Lauer said. The automobile platform was launched in July 2003 and workers' compensation will be launched late this year. "So we essentially will have all our small-business policies running through an automated platform," he said.

Hughes said the company also reached the conclusion that in the classes of small business it wanted, it wasn't doing enough to distinguish individual characteristics. "We were more or less taking a class and giving it a very similar price--a good business got a 5% credit, a bad business got a 5% debit--but there wasn't enough distinction" he said.

Using the new business entry model, however, translates to better renewal retention, and more competitive and more stable loss ratios because the company gets the pricing right the first time, he said.

In using the model, Safeco Business Insurance has seen its loss ratios decrease 10 points over the year before. Also, the organization has noted a significant increase in volume of business-owners policy business, up 40% in July 2003 from July 2002, and up 46% in the second quarter of 2003 alone. "We'll be approaching the 50% increase in volume as a result of this new business capability," Lauer said. "There hasn't been a real significant change in the product or in the price of the product, so we know that enabling agents to have a guaranteed price in a matter of minutes and being able to complete that process with customers is a significant driver of this business."

Employing an automated platform for Safeco's small-business sales means its underwriting force can concentrate on the small middle-market business, where premiums range from $50,000 to $100,000, Hughes said. The underwriters have gained more time for training to make sure they exposure underwrite, understand the accounts, and meet the needs of agents either by phone or face-to-face contacts, he said.

Going After Goliaths

To reach its growth goals, Safeco will have to challenge some industry greats. McGavick lists one of his company's most noteworthy competitors as Progressive, "the gold standard now on the auto side," he said. "On the homeowners side, probably the most sophisticated operator out there is All-state, and in small commercial, we would hold out The Hartford, with Travelers close behind."

With each of those, Safeco has a competitive edge that makes it more likely to win the race, McGavick said. "For Progressive, their monoline niche clearly creates competitive opportunity for us so long as we're not back in the business of giving away the homeowners product," he said. "For The Hartford or Travelers on the commercial side, their very broad business mix means that their leadership just can't have the same kind of focus that we have. And if you look at the lines we've chosen to focus on, what you really see is a suite of products that can be automated, that can be transacted with our agents in an electronic way that will increase our ability to sell multiple lines of business across the same platform."

That means that Safeco will be able to leverage its scale not just in one line but across the entire set of lines that can be handled similarly, McGavick said. And the company's focus is on the agents who depend on those kinds of lines for most of their profits. "This is a very different situation from our competitors because of that focus," he said.

Safeco has increased some of the front-end commission for agents on new auto sales, raising it from a 10% commission to 17% with a 10% renewal. "That's up from the 10-10 we were offering before and was done explicitly to inspire additional new sales" as well as to fulfill the third part of the company's threefold mission: to offer agents more products to sell, to make it easier to sell them and to provide more money to be made, McGavick said. Agents have responded, with auto sales rising 20% in the fourth quarter of 2002 over the same period a year earlier, he noted.

This month, the company also will be offering agents a choice of alternatives so that they can select a contingency plan that fits their agency. "All agencies are not created equal--there are small shops, big shops, big regionals," LaRocco said. "To try to fit one for all that group never made sense to us. So we are going to offer up a small number of alternatives and then they can choose whatever meets their needs the best."

In hindsight, Arciere admits that his group probably didn't communicate as well as they should have with agents as the leadership team struggled to turn Safeco around. "As we went through all of these model changes or contractions and expansions, I'm not sure the agents understood what was happening," Arciere said. "When I got here, the first thing I did was go out and find out what the agents were looking for. They wanted somebody to talk to with a name, somebody they knew and could go to if they needed help. And that was just something they were accustomed to having all along."

Safeco says it is doing a better job of getting agent feedback these days with the establishment of advisory council meetings. Each business unit now meets with core groups of agents who then relay information to all the other agents. "We've been doing it monthly and recently, because we've attacked a lot of the major issues, the agents said they thought we could do this every other month," Arciere said. "I thought that was a victory for us--they feel that the issues are being addressed."

In 2002, McGavick and some members of the executive team visited 22 cities in 40 days and met with some 3,000 agents. It was the right thing to do, said LaRocco. "It was at times painful, but it was more positive than pain," he said. "There was very candid conversation on both sides. Right from the beginning, one of the things that we've been able to establish is some level of credibility--if you ask us a question, you're going to get a very straightforward answer--we're not pulling any punches, we're not sugarcoating anything, we're going to tell you exactly how we feel. We encouraged the same kind of participation from them and we got it."

The executives are doing the same tour again this fall, but this time because the turnaround is completed, they expect a different reception, LaRocco said.

"What we've done is survive the first phase," McGavick said. "Now we have to create a great competitor on a relative basis, not just relative to ourselves. But we've achieved the first target, and we're proud of it."

LaRocco sees the real opportunity for Safeco to start chipping away at the auto rankings beginning in 2004.The past two years have laid the foundation, he said, and the new auto product is expected to be in all 44 states in which the company operates by the end of 2003. "We're still going through that process of rolling everything out, but next year should be a very good year for us" LaRocco said.

Late this year also should see improvements in Safeco's homeowners business, which expects to lift moratoriums on writing new business in six of seven states, with the possible exception of California, Guimond said. In 2002, Safeco's overall homeowners rate filings reached about 19.5%. In 2003, the figure will be closer to 12%, he said. "Then I think it will taper off and become more maintenance oriented," Guimond said. But Safeco will not hold down prices just to grab more business. "We won't do that again--that was the mistake we made for two decades and it won't happen again," he said.

William M. Wilt, of MorganStanley, noted in his recent research paper that Safeco's recovery has not been marked by any bolt of lightning. Each quarter, however, the company has been making "steady progress toward improving its operating fundamentals," he said.

The management team says it is committed to continuing that progress--and then some. "This was never just about getting back to stability--that was just the first step in a long-term plan to make Safeco a feared competitor out there," LaRocco said. "I think the real story for Safeco has yet to be told."

Total Auto, Top Writers--2002

Safeco wants to move into the
ranks of the top five U.S. auto
writers within seven years. The
company is now ranked 13th.

                                        Direct
Company                       Premiums Written

State Farm Group                   $28,645,260
Allstate Insurance Group            15,834,659
Zurich/Farmers Group                 9,770,108
Progressive Insurance Group          9,479,492
Nationwide Group                     7,309,004

Safeco Insurance Cos.                2,370,515

Source: A.M. Best State/Line Product

Personal Auto Net Premiums Written

Introduction of a new product that includes nonstandard has
enabled Safeco to reach 95% to 97% of the auto market.

($ Millions)
               Growth over prior
               year same quarter
2001
 1Q    $448
 2Q    $433
 3Q    $456
 4Q    $457

2002
 1Q    $478         6.7%
 2Q    $488        12.6%
 3Q    $536        17.6%
 4Q    $523        14.4%

2003
 1Q    $566        18.3%
 2Q    $571        17%

Source: Safeco

Note: Table made from bar graph.

Personal Lines

In refocusing on personal lines,
one of its core competencies,
Safeco is working to reduce its
expense ratio and profitably grow
the business.

* Currently 5th-largest
writer
through
independent
agents

* 3rd-largest
homeowners
writer through
independent
agents

* 13th largest
overall

Net Premiums Written

Specialty        7%
Personal Auto   67%
Homeowners      26%

Total 2002: $3 Billion
(65% of Total Property/Casualty NPW)

Source: Safeco

Note: Table made from pie chart.

Safeco profile.

Safeco Corp. provides auto, homeowners, business and life insurance, as well as investment products and financial services. Its three core business lines are Safeco Personal Insurance, Safeco Business Insurance and Safeco Life & Investments.

* Established: 1923

* Headquarters: Seattle

* Employees: 11,000

* Product Distribution: Independent agents for property/casualty; varied distribution channels for Life & Investments

* Stock Symbol: NASDAQ: SAFC

* 2002 Revenues: $7.1 billion

* Second-Quarter 2003 Highlights: Net income rose to $111.9 million, from $105.2 million a year earlier; operating earnings at $97.2 million were more than double those of second quarter 2002; auto insurance generated a $3.3 million underwriting profit; and group stop-loss medical insurance produced pretax operating earnings of $24.5 million.

* Rating: Safeco Insurance Cos. is rated A (Excellent) by A. M. Best Co. (as of Sept. 8, 2003)

Source: Safeco Corp.

A Centered, Simple Life

Safeco's Life & Investments had a turnaround of its own in 1998 when Randy Talbot became president and introduced a market-driven sales culture to the business.

He eliminated Safeco Life's silo marketing, with the different life product lines having their own sales and marketing staffs, and substituted channel distribution. Talbot, an insurance agent himself for 25 years, told his staff at Safeco that back when he was an agent, there were some weeks when he might have had five Safeco Life people calling him, each telling a different story.

"It's been very successful because for the last five years that Randy has been here, it's just been record profit after record profit," said Greg Clarke, vice president, multiline distribution, for Safeco Life & Investments, located just outside Seattle in Redmond, Wash. In 2002, for example, Safeco generated a 9% increase in Life & Investments revenues.

About three years ago, the life company took a major step by introducing a concept called Easy Ap, which simplified the questions on a life insurance application, Clarke said. The Easy Ap poses only two or three basic medical questions and then the agent can fax the completed form into the home office. The rest of the queries are posed in person by a paramedic. "That helped us increase our business by 10%" Clarke said.

The next step was developing an online life insurance sales tool. This originally appeared as the Virtual Producer Program and was aimed directly at the buying public. But when Safeco found that the agency force was going online instead and using the program to help its customers, the carrier transitioned to what it calls Safeco Now, "and we truly made it an agency tool," Clarke said.

With the Easy Ap, the application process takes about six minutes to complete. Customers who answer "No" to two of the three medical questions and pay for the policy with a credit or debit card are immediately issued a paper temporary insurance binder for up to $250,000 worth of face amount. Unlike a conditional receipt that stipulates that the applicant has to meet underwriting requirements to be covered if he or she dies before the policy has been endorsed, Safeco's temporary insurance agreement assures immediate coverage, Clarke said.

"There are other temporary ones out there, but I know of no one else who prints out an immediate temporary agreement," Clarke said.

About 40% of Safeco Life's business comes in on Safeco Now, he said. The system handles sales of term, universal life and income annuities.

Clarke said Safeco Now also has opened up opportunities from new sources--those customer service representatives and agents who were uncomfortable asking medical questions of applicants or were uncomfortable with the process and did not know where to obtain forms. "You just go on Safeco Now and you press quote, apply, bind and you're done," Clarke said. "And that policy then comes to Safeco, and it automatically creates a link for the paramed service. They ask the medical questions and they obtain the client signature."

The life company now prides itself on its ability to change quickly or develop a product quickly, Clarke said. That wasn't the old Safeco, he noted. Years ago, Safeco's product development used to be a multi-year process.

"Now, we can put products out in 90 days, products that we think we can get filed and approved by states," Clarke said. "With the new structure, it's easy to make a change because the product line only has to work on the product. They can have marketing work on the marketing material; they can have state filing units work on the state filings--all the things that used to be done in one silo. It's made us very nimble to go out into the marketplace and meet the challenges."

During the past 18 months, in fact, Safeco Life has sold more than $1 billion of fixed annuities in its new bank channel, going from product introduction in June 2001 to No. 5 in the country by the end of September 2001, Clarke said.

Widening the Circle

Safeco has a long history of contributing to its home base of Seattle, from launching a ground-breaking AIDS prevention program in the early 1980s, to forging a partnership with the YMCA to promote strong, safe neighborhoods and support youth, an effort that kicks off this fall.

"It's not just writing checks; it's being involved in the community," said Gordon Hamilton, vice president of public relations. Safeco's formal community relations program began in 1967, he said.

In fact, this long-term commitment was one reason Safeco was selected by the Seattle Mariners to name their home ballpark Safeco Field, Hamilton said.

Lately, Safeco has been seeking to increase the diversity of its staff and its agents, an initiative that is strongly supported by Chief Executive Officer Mike McGavick.

"The company has started to be very aggressive in the hiring of people of color," said Eric Pettigrew, a communications consultant for Safeco and a member of the Washington State House of Representatives.

In 2002, the company reported it had increased minority managers by more than 2% over the previous year. The rationale is that Safeco needs to understand all markets and serve all markets and, to do so, the company must hire the best people available, Pettigrew said.

Pettigrew has been instrumental in developing Safeco's urban center strategies, which give Safeco an avenue for investing in diverse markets. The company is operating two centers--one in Seattle and the other in Atlanta.

"Safeco's presence in urban neighborhoods generates business and relations," Pettigrew said. "The company has always had a white shirt reputation, but it also has always bad a reputation for stepping out there in the community." In an era when many insurers were accused of redlining--or discriminating against residents of urban areas--Safeco was able to build its credibility locally, Pettigrew said.

RELATED ARTICLE: Building a top team to lead the charge.

By the time that Mike McGavick came on board in 2001 as Safeco's chief executive officer, the business problems at the well-respected company had become deeply rooted, said Yom Senegor, senior vice president of corporate strategy and chief information officer.

He and other managers point to Safeco's $2.8 billion acquisition of American States Financial Corp., an insurance holding company, in October 1997 as a chief source of the problems. "It was a bad price they paid, and they didn't do this consolidation fast enough," Senegor said.

The transition from bad to better was an "exciting, frightening" time, recalled Michael E. LaRocco, president and chief operating officer for Safeco Personal Insurance. LaRocco, who joined the company two years ago from Geico, said he and other newly hired executives became aware of a number of significant problems at Safeco. "But there were a lot of core strengths that we identified early on, too," he said.

During this period, the focus of the new leadership was almost totally directed toward fixing the products, LaRocco said. "The personal lines products were broken," he said. "They had not been brought up to speed in terms of segmentation, automation, rate level, and that was the first and foremost challenge to the team."

Although some outsiders were brought in, many of the people who fixed the products were experienced Safeco employees, he noted. "Quite frankly, they had made suggestions for a number of years to make those changes," LaRocco said.

Secondly, the team focused on field organization and putting a system of accountability in place. "People had to be held accountable for their areas of responsibility, so we brought in leadership in the area of sales, service and claims," he said.

Once these core pieces were in place, the company turned to implementing its automated platforms. Senegor, who came to Safeco from Accenture, the international consulting firm, had been instrumental in developing automated underwriting capabilities and integrated computing systems for some of the nation's largest insurers. He brought his expertise to Safeco in 2001 after McGavick told him, "there were some problems in the engine room," namely, that Safeco needed technology solutions to make its products easier to buy and sell.

John Blodnick, vice president of Safeco Personal Insurance, joined the company four years ago to help found Safeco's nonstandard auto business, insurQuest. "They had never really tapped into nonstandard auto," Blodnick said.

Historically, Safeco had been known as a very well-respected underwriting company, he noted. Underwriting, to Safeco, meant having teams of underwriters working on individual accounts, trying to determine whether a risk was acceptable or not acceptable. "There was not a great deal of analysis being done as far as pricing risks," he said.

Safeco didn't respond as quickly as its competitors to the underwriting changes sweeping the industry in the mid-1990s, Blodnick said. The primary change was ha the analysis of data, the determination of rate levels based on that analysis, and the development of underwriting models to properly price risks, he said.

"Our analysis, when we did it, was very individualized and somewhat haphazard," said Brian Guimond, assistant vice president of personal property for Safeco Personal Insurance and a 19-year veteran of Safeco. "It was more art than science, and we've learned that science has a much bigger role in what we do with it than we might have admitted to ourselves in the past."

Today, Safeco is still an underwriting company, but the underwriting has changed, Blodnick said.

Under Senegor's guidance, Safeco expects within the next year to be operating Web-based automated underwriting platforms for all of its property and casualty business. The platforms will be the same, no matter whether agents are selling auto policies or business owners policies. So far, automated platforms are in place for business owners, homeowners, commercial, workers' compensation and personal auto.

"Every time we've introduced a new platform, we've seen increases of 40% and more in production," Senegor said.

For many years, Guimond recalled, Safeco was "a very good, conservative routine company," he said. "We were highly respected; we had our talented people. When you'd been here awhile, you imagined yourself retiring here, and things just going along the same way."

'Muddy Trackers' Move On

Safeco people were often called "Muddy Trackers," meaning that during adverse markets, they excelled when every other company was struggling, and when the market improved, they plugged along in the middle of the pack to the pleasure of stockholders, he said. But after things started to go south, "it was very chaotic; it was insecure," Guimond said.

That's all changed since McGavick and the leadership team began turning things around. "It's been the best couple of years of my existence here," Guimond said. "You finally feel accountable for what you're doing. I think in the past, there wasn't a level of accountability necessary for results--now there's no question about it. It feels a little more like we're driving the bus instead of sitting in the back hoping the driver knows how to drive."

His executive team says McGavick is a straight shooter who knows how to motivate people and to deliver his message. For example, McGavick encourages all of Safeco's 11,000 employees to e-mail him with questions or concerns, and he answers every e-mail personally. McGavick, a Seattle native who was a top executive at CNA before joining Safeco, also has been director of the Superfund Improvement Project for the American Insurance Association, and held a series of public affairs positions.

"He's a pleasure to work with," said Christine Mead, senior vice president and chief financial officer, who joined Safeco in January 2002 from Travelers Property Casualty Corp. "He has a great vision for the company and he's a great communicator. Those are the things that have really served us well."

A recent survey of Safeco employees showed that more than 77% knew the company's strategy, Senegor said. "That's it, the McGavick signature right there--communicate, communicate, communicate. Everybody needs to know where we're going."

Guimond said that McGavick's message is consistent, whether he's delivering it to a board meeting or the public. "He makes it very clear that there is no room for spin, which I think is really critical for Safeco as we come through tiffs period," Guimond said.

No matter what the issue is, employees will learn about it in e-mails, a video that pops up on their computer screens, or at a staff meeting. "It doesn't matter if you're a vice president or a customer service rep, you can have the same intelligence," Blodnick said.

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The thrust of Safeco's new marketing strategy is to "uncomplicate" the process of buying insurance for consumers and agents alike. To that end, the company is testing its new message in selected markets this fall, complete with television, radio, outdoor boards and print ads.

"We say we will make the experience of buying, selling, owning insurance easier," said Bruce Allenbaugh, senior vice president ha charge of Safeco's Marketing and Communications Department. "It doesn't happen overnight; it's a pretty big claim. But we have a maniacal focus on our agents--it's all about what's in it for the agents."

The idea for the campaign jelled after Safeco's ad agency asked its employees, on camera, to explain the difference between comprehensive and collision in auto policies. Their baffled expressions mad lame responses made Safeco realize that the public needed a simpler explanation of auto coverage.

The television ads that air will show real people who are stymied when asked about the specifics of their insurance policies, said Michelle McEttrick, assistant vice president and director of integrated marketing. The way to "uncomplicate" insurance, the ads suggest, is through the independent agent, Safeco's distribution channel.

The company will test in areas that are not traditionally strong Safeco markets but show potential for growth, Allenbaugh said.

"We're hoping that it is a refreshing tone of voice for an insurance company, not only to differentiate ourselves from the competition, but to acknowledge that we intend to be very measured in our marketing programs," she said. If Safeco has only one message to give, "we'd better say it in a way that's different from everyone else," McEttrick said.

In years past, Safeco had a marketing organization that wasn't great, wasn't bad, but was "absolutely average," Allenbaugh said. "We are determined to make our marketing absolutely world class."

With that in mind, the company is launching a new brand campaign, including a new logo, in red and black, with the Safeco name printed in upper and lower case, making it easier to read.

"We started to look at getting ready to escalate our marketing activity both to agents and policyholders," McEttrick said. "We looked at the tools we had in our arsenal and thought about the power that a strong logo has in helping to communicate who you are and what you stand for. And we realized the time was really ripe for its to make a revision rather than investing a lot of time, energy and resources into a logo that was absolutely average."

On a national level, Safeco gains exposure every time the Seattle Mariners baseball team plays a home game at Safeco Field in downtown Seattle, where the company's logo is prominently displayed right behind home plate.