Utility exec new Safeco CEO

Safeco has hired a utility company CEO with Puget Sound-area ties to replace Mike McGavick as chief executive.

Paula Rosput Reynolds, 49, will become the insurer's president and CEO on Jan. 1, Safeco said Wednesday. She has been CEO of Atlanta-based AGL Resources since 2000.

Her husband, Stephen Reynolds, has been chief executive of Bellevue-based Puget Energy since 2002.

Rosput Reynolds, who will also sit on the Safeco board, said in a phone interview from Atlanta, "It's a great company that's got a bright future."

McGavick had said in July he would step down to consider a job in public service. He now is in the 2006 U.S. Senate race.

He will depart as Safeco's CEO and chairman Dec. 31 and will help with the transition for two months after that.

Director Joseph Brown, chairman of financial-services company MBIA in Armonk, N.Y., will be Safeco chairman.

Rosput Reynolds led AGL Resources through a difficult turnaround after she took the helm, cutting the work force by 25 percent to cope with deregulation and other problems.

She has also overseen acquisitions by AGL, which has 2.3 million natural-gas customers in Florida, Georgia, Maryland, New Jersey, Tennessee and Virginia.

Its stock price has more than doubled during her tenure.

She isn't likely to face the same turnaround situation at Safeco, where McGavick has spent almost five years restoring the insurer to financial vitality.

When he announced his decision to leave, McGavick said Safeco was "a great match for someone temperamentally organized for the long march."

It remains to be seen if that describes Rosput Reynolds, who told The New York Times in March "a person can become addicted to these turnaround situations because they have a certain rhythm to them."

Rosput Reynolds anticipates no withdrawal symptoms.

"I'm on the board of Delta Air Lines, so my addiction is very well fed right now," she said, referring to the bankrupt Atlanta-based carrier.

She also is on the boards of Coca-Cola Enterprises and the United Way of Metropolitan Atlanta.

P>"In the beginning of a turnaround, the house is on fire, and you spend a lot of time with hoses and not doing all the things around people, processes, investments in technology, markets and customer relationships that are the things that do you well for the long run," Rosput Reynolds said.

Although AGL Resources is the largest natural-gas distributor in the East, it is smaller than Safeco.

The utility had 2004 operating revenue of $1.8 billion and profit of $153 million. Safeco, by contrast, had revenue of $6.2 billion and a profit of $562 million last year.

Rosput Reynolds also faces a transition between industries, which some experts say can be difficult.

"She's going from one highly regulated industry to another, but the difference between them is quite extreme," said Warren Batts, an adjunct professor of strategic management at the University of Chicago Graduate School of Business.

Batts would know. He's been CEO of companies in four industries, has worked for Georgia Power and sat on the board of the insurer Allstate.

"If I were her, I'd try to find good sources of interested, but not political, advisers," he said.

Rosput Reynolds' 2006 salary is set at $925,000, plus a bonus of $1.11 million to $2.22 million. If she forfeits her bonus from AGL Resources, Safeco will also give her $1.125 million in cash.

Her salary and bonus at AGL for 2004 totaled $1.6 million.

She also will receive stock options and rights to buy restricted stock.

McGavick's 2004 salary and bonus totaled $3 million.

In return for staying until a new CEO is in place, helping with the transition and agreeing not to compete with Safeco or to recruit its employees for three years, McGavick will be able to exercise stock options worth about $4.5 million. He otherwise would have given up the options when he left.

He will forfeit about $8.2 million in stock awards.

Safeco this week also granted Michael LaRocco — president of product, underwriting and claims, and a contender for the CEO spot — rights to $2.1 million worth of restricted stock to encourage him to stay. They will vest in December 2006 and December 2007.

Safeco is expected to name a chief financial officer after Rosput Reynolds arrives. Current CFO Christine Mead said in August she will retire Dec. 31.

Safeco's announcement Wednesday came after the stock markets closed. In regular trading, the stock lost 70 cents to $56.40. After hours, it slipped 23 cents more.

Seattle Times researcher David Turim contributed to this report.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com