A future in politics for Safeco's CEO?
The pair drove to the Safeco Tower in the University District and found the underwriter in charge of the family's policy. Mike looked straight into his eyes and promised to change his ways. The agent agreed not to raise their rates.
A quarter-century later, McGavick now runs Safeco, sitting atop the building where he made that vow. In two years, McGavick has pulled the Seattle icon from a financial hole by cutting deeply, laying off 1,200 employees and charging more for policies.
Now people are starting to wonder if McGavick, who has spent most of his life around politicians, is ready to take on an even bigger challenge and tackle the region's problems as a politician.
He recently denied he was eyeing a U.S. Senate seat and insists that building Safeco into one of the country's top insurance firms is what excites him.
McGavick says he has no plans to run for public office.
But he has given passionate speeches on what's wrong with Washington state government. With a sweetened $5 million pay package from Safeco, he's made enough money to fund a statewide campaign, the way Maria Cantwell financed her successful Senate run.
And there's evidence that McGavick, having rebuilt Safeco's executive team, is pulling back from hands-on management. Some company insiders say they wouldn't be surprised if McGavick is getting ready to move on.
"Keep your eyes on Mike," said Bud Coffey, a former top Boeing executive who first met McGavick in the 1980s, when he worked for the Washington Roundtable, a business group. "If he continues to be successful in insurance and the state continues this way, he'll make a run for governor."
In Safeco's shadow
Politics ruled in the McGavick house. His father, Joe, represented Wallingford and Fremont as a Republican in the Legislature, and his home was a center of politics while Dan Evans was governor. Slade Gorton, then a young lawyer running for attorney general, visited often.
Mike McGavick's parents turned his little-boy fascination with trains into a lesson about leadership. "I said you don't want to be the caboose, you want to be the engine that everyone follows," recalls his mother Carole, who now lives in Naples, Fla.
In the summer of 1972, at age 14, Mike took the bus every day across downtown to lick stamps and sort mail for Gorton's second statewide campaign. Joe volunteered to campaign door to door and dragged Mike along. He would drop the boy off at the top of a hill, such as 40th and Bagley in Wallingford, and pick him up at the bottom, on 35th, and move to the next block.
"He was taught that you have to do your very best and be valuable to the community. You have to give something back," says Joe, now a retired political consultant in Edmonds.
Mike was a sponge when top political strategists held planning sessions in the living room. He absorbed a sense of loyalty, defending Richard Nixon against increasing criticism around Watergate — a position that proved embarrassing when Nixon resigned.
"I remember I was standing outside a TV shop waiting for the bus and Nixon was on admitting that he lied to everybody," he said. "I just remember feeling so ashamed, violated. I was angry with myself for trusting him, embarrassed that I supported this guy.
"I'll never fall into that trap again."
As Republicans floundered in Watergate's wake, McGavick looked for a winner to support and became curious about Ted Kennedy's emphasis on the middle class. Dinner-table arguments followed. "I started to say maybe some of this guy we got wrong. Oh jeez, those were violent."
On the road
McGavick pumped gas to help pay for Seattle Prep. He won a state track title his senior year and argued he should take the summer off to train for nationals — and a potential college scholarship.
His dad said no.
When Gorton decided to run against U.S. Sen. Warren Magnuson, then one of the country's most powerful politicians, someone suggested Gorton needed a reliable driver. McGavick, then a University of Washington student, was in the room — and jumped at the chance.
"Driving those long stretches in Eastern Washington, you're the only person he's talking to. And you talk about everything," McGavick recalls. "Over time he starts asking, 'What would you change in what I just said?' And starts using it."
That year, at 22, he ended up running Gorton's campaign in more than half of Washington's 39 counties.
He dropped out of college to follow Gorton to D.C. after Ronald Reagan's 1980 landslide, and immersed himself in the machinery of politics.
As a legislative assistant for defense policy, he saw the Reagan military buildup firsthand, handling details of a proposed sale of AWACS planes to Saudi Arabia.
"He was a college senior but had complete grasp of the issue and what needed to be done," Gorton recalls. "He had the generals saying yessir."
McGavick still holds many political beliefs stemming from that time, including an unsparing view of social policy.
"Reaganomics did more to create opportunity than the welfare society, which has created dependency," he says. "The problem is there's never been a transition strategy. To just go blindly from one strategy to another is to dispossess a generation. We can't afford to squander a generation."
McGavick returned to Seattle after Gorton's chief of staff told him to finish college, and he was soon picked to work at the Washington Roundtable, a business group that put him in contact with influential mentors.
One day, he was invited to the Safeco Tower, to the very office he occupies today, to have lunch with Bruce Maines, Safeco president at the time, and get a lesson in the insurance business. "Politicians demagogue insurance companies," Maines said. "I'm going to teach you how this really works."
'You're going to miss out'
He returned to work for Gorton in 1988, running a successful campaign that is still remembered for negative TV ads. One Gorton ad suggested opponent Mike Lowry wanted to legalize marijuana, and others compared his appearance with that of Yasser Arafat.
One evening that August, while his wife, Kim Rainey, was in labor in Seattle, he told her he needed to attend a campaign meeting on Whidbey Island.
"I said, 'If you get on that ferry, you're going to miss out on things here,' " Rainey recalled recently. He stayed, but, she recalls, "He was on the phone as the baby was being born."
Gorton won and, with the baby weeks old, the McGavicks loaded their car, heading back to D.C.
During his second stint in the capital, McGavick directed Gorton's 40-person staff. His passion for work took its toll on the young family, and politics were becoming less fun. Rainey moved with the baby to Pennsylvania, where she now works as a high-school science teacher. The couple divorced.
Outside the line
McGavick came home to Seattle to start a public-relations firm with other political refugees from Washington, D.C. But with a son to support and a desire to return to the national scene, he took a position with an insurance-industry group trying to streamline liabilities under the national Superfund pollution-cleanup program.
"You've got a billion dollars going to lawyers instead of toward cleanup. Tell me that makes sense?" he says.
That led to a job with Chicago-based CNA insurance. Bernie Hengesbaugh, now CNA's chairman, took him under his wing to teach him the intricacies of the business and groom him to lead the company one day. McGavick was rapidly promoted until he ran the commercial-insurance unit, the company's biggest, with $3.5 billion in revenue.
Then, during a trip to Seattle for a party, McGavick learned that Safeco was looking for a new leader.
Safeco was dying. Its expensive $2.8 billion acquisition of American States Financial in 1997 gave it a national network of agents. But many of the new policyholders were risky, and premiums didn't cover claims and risk.
Coming back to Seattle was a mental hurdle for McGavick, who had promised his second wife, Gaelynn, who was raised in New Jersey, that they wouldn't move farther west than the CNA job in Chicago.
Still, "There was something really troubling about Safeco being in trouble," he said, speaking from his corner office atop Safeco Tower. "It just gnawed on me."
"I didn't grow up knowing about CNA. But this mattered. I watched this building being built."
After McGavick was named chief executive, Jack Donohue, a former rugby buddy whom he coaxed to move to Seattle, came to visit.
"I was in flip-flops and a Hawaiian shirt. We greeted each other formally and then went behind closed doors into his office," Donohue remembers. "As soon as the door closed it was, 'Waaaaah, look at this!' It's the ultimate local boy does good."
Making a real company
McGavick took firm charge at Safeco. He chopped the company's dividend to shareholders in half, sold the credit subsidiary, closed offices, sold other units, and quit 15 business lines. He cut 1,200 employees, or 10 percent, replaced top management, and jettisoned members of the clubby old-Seattle board.
Instead of hiring from within, which was company tradition, he lured new lieutenants from Geico, Pepsi, Accenture and other national firms.
The changes rankled some customers. Some states have seen rates increase by up to a fifth, though the rise here has been smaller. During McGavick's tenure, the number of customer complaints has steadily increased in Washington, according to the state Insurance Commissioner's Office, and now surpasses that of State Farm, which has a much larger business here.
Grumbling grew inside the company, too, where generating profits hadn't been as much of a priority before. Some employees say McGavick is getting credit for a turnaround that took place on their backs. The layoffs added to the workload of remaining employees, and a new performance-based pay structure McGavick implemented uses criteria that some employees complain don't reflect all their work.
McGavick meets less often with the rank and file and personally responds to e-mail less frequently, employees say. He's made increasing the diversity of Safeco's work force a personal priority and often talks about it to business groups.
"Most of the people I'm in touch with say this isn't the old Safeco," said Brian Stargel, a former Safeco executive. "But they all follow up saying that's not a bad thing."
Last month Safeco reported its sixth consecutive quarterly profit, including the first gains from underwriting in nearly five years. Profitability of the insurance lines is improving, earning Safeco new respect on Wall Street, where it was once widely considered a takeover target.
"All we've done is earn the right to build a fierce competitor," McGavick says. "Now we can go out and do what we came to do. It's about standing toe-to-toe with the competition and taking their business."
Going public
Safeco's swift turnaround makes Washington's political paralysis all the more grating to him.
After Referendum 51, the highway-building gas-tax increase, failed at the polls last November, several legislative leaders came to his office to discuss alternatives.
"I made it very plain that I find it irresponsible for the Legislature to send its work to the people," he says. "We elect them for a reason."
Politicians say they have to accept political realities forcing them to avoid choices that might cost them support at the polls. That makes McGavick bristle.
"My answer is you don't bow to political reality," he countered. "You reshape it. That's what leadership is. You don't give up and you don't punt. It's wrong."
He stressed the same theme in an unusually blunt speech last fall to the Greater Seattle Chamber of Commerce.
With a slide of himself as a baby at Seattle's 1962 World's Fair projected overhead, he compared the promise of that era with today's problems: The state's infrastructure is overloaded, schools are stretched, and businesses are thinking twice about investments here.
McGavick left the podium, waving his arms as he paced the stage — upstaging Gov. Gary Locke, who minutes earlier had made a yawn-inducing pitch for R-51. There's no way voters will agree to pay more, McGavick told the audience, unless they're convinced their money is being well spent.
McGavick wants Safeco eventually to have a top-five share of the national auto-insurance market, up from 13th, and to be one of the top 10 insurers overall. Such a climb would mean nearly doubling the amount of business, a feat few companies have managed.
But if he succeeds, Safeco's rising stock could make him even wealthier. With his background — and shares in the company — he may have the means to take on Locke in another forum next year: the ballot box.
Bradley Meacham: 206-515-5066 or bmeacham@seattletimes.com
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