Founded in 1912, Liberty Mutual is a global property and casualty insurer with over 50,000 employees in 30 countries and 2014 revenues of almost $40 billion. Over the last three years, the company completed an ambitious and successful turnaround of its operations. The results were impressive: revenue increased by 7.3 percent, net income jumped more than 120 percent to $1.8 billion, and the combined ratio (a measure of profitability) decreased from 105 to 98. Standard & Poor's raised the insurer's rating from A– to A in the summer of 2014.
Liberty's CEO, David Long, recently sat down with Mike Shanahan, a BCG senior partner, to discuss the challenges of undertaking a major corporate transformation and other topics. Edited excerpts from that conversation follow.
Looking back, is there anything you would have done differently, knowing what you know now?
What I know now is that the capacity and the capabilities of my management team and the resiliency of this company are a lot stronger than maybe I thought, and so I probably would try and do a little bit more, a little bit faster. As you know, we have four business units and we took the two big domestics and pushed them pretty hard to improve, and we left the specialty in the international off to the side and picked that ball up 18 to 24 months later. Looking back, we probably could have done them all at the same time.
Given what I know now about the capabilities and how we're structured, maybe I was worried more about my own capacity and capabilities, which are less important if you have the right people. But yes, a little bit sooner, a little bit faster in a company that was capable of moving more quickly than I thought. But I will chalk that one up to me and not the folks that I have. With the four separate units, I thought that there might be too much disruption in the organization to have them all changing at the same time.
I've heard many CEOs say that organizations have a "swallow rate," that they're limited by that swallow rate, and that sometimes the pace of change has to slow down. It's interesting that you had the opposite experience.
It depends on how you're set up. If you're a single business with a single mission, it might be a little tough for the python to swallow a crocodile. But if you have four pythons swallowing four pigs, then it's not quite so bad—as long as you feel like your pythons are hungry.
Speaking of pace, what's your view on digital disruption? How profound will the changes be? Do you think you're ready?
Our mantra—particularly in the consumer businesses—is that there will be more change. There was more change in the last five years on the consumer side than we had in the ten before. There will be more change in the next two than there were in the last five. The change is not abating. It is accelerating and however you look at it, in every step of every process of every industry, there is somebody out there trying to disrupt you.
Insurance is no different, whether it's who is the best at gathering data and analytics, who is the best in terms of service quality, who is the best in terms of new technologies and innovation, and so forth. We think that ultimately the customer is going to decide how you're going to interact with them. How will they live their lives? We don't get to determine that. Today, digital it is all about ease of access, lots of choices, and open and transparent service.
We no longer have the luxury of providing the best service in the insurance business. We get compared to the best service in every industry. We need to be prepared for transparency, whether in pricing or in what people are saying about how well or poorly you did. We need to push a lot harder on innovation. We need to push a lot harder to make sure we have the right talent with the right attitude.
Never get comfortable. Never think that you're moving fast enough. Get the right people, disrupt yourself, and worry about the fact that change is coming at a rapid pace. That is the mantra that we're operating under.
In this day and age, financial services companies are not held in high esteem by the public, to say the least. What's your view on that? Do you think it's changing?
Financial institutions and mistrust are almost synonymous since 2008—and some of that is deserved. But we're all getting painted with the same brush. There are a fair number of people out there who think we sit around and come up with ways to take advantage of our customers to enrich ourselves. If you stop and think, that is a horrendous business model. For a company that has been around this long, that wouldn't have worked. Quite the opposite is true.
We're here to make sure that this company is financially sound and fulfills the promises and obligations of all of our policyholders. So there is a real disconnect there, and many others as well, particularly with regard to leadership and the classic one percenters, but it goes with the territory. The fact of the matter is we've got 55,000 middle-class people working for this company that do a hell of a job trying to do a good job. Painting those people with the same brush is just patently unfair. Is it going to change? Well, it's been six and a half years since the financial crisis and I haven't seen much of a change yet.
From our perspective we just keep plowing ahead, operating with integrity, adhering to regulations, fulfilling our promises, doing the right thing, and moving forward. If people have painted a picture of you, the only way you can change that is to behave in the manner that you should.
Were you surprised when you took over as CEO just how much you were suddenly exposed to stakeholders?
Ultimately, I mostly think about people, our customers, and our business partners. If you have your employees focused on customers, and engaged and feeling as if they have the responsibility and the authority to take care of customers, then they will feel empowered to do so. You make sure that they treat people with dignity and respect and that all decisions are made within the confines of what’s best for our customers.
Compliance is nonnegotiable, regulation is an absolute, and our debt holders will get paid, but if you have your people focusing in the right place—and that is on service and customers—the rest takes care of itself.
Thinking about how you spend your time, has anything changed since you became CEO?
Look, I'm responsible for the overall strategy and direction of the enterprise and its overall risk profile, so regardless of what happens, we need to be open for business tomorrow. That is my responsibility.
I'm responsible for making sure that I get the best people in the positions that report to me and expect that they do the same down the line. And I am the ultimate keeper of the brand and the culture, so I don't want anything out there about Liberty Mutual that portrays us in a way that is inconsistent with what we are. I want to make sure that the folks in this organization understand how we want them to be. That is the scope of my responsibilities.
Then I get to do all the figurehead stuff. If somebody wants an official position from Liberty or wants someone out there, then that is me. I don't have that fun sort of "I am in charge of this business" every day. I consciously stay back and then insert myself where I think I can help.
Have you thought about your legacy? What's the one thing you'd like to be remembered for?
People have asked me this before or asked about my brand, and I don't care about that. My legacy isn't about me, it's about how this company is. If I were to look back and feel good about something, it would be that Liberty Mutual is a company where everyone—of any background, gender, race, height, weight, sexual preference, ability, or disability—would feel valued and respected here, and believe that they had an equal shot at success.
1983, BA in mathematics, Hartwick College
1979, MS in finance, Boston College
Awarded an honorary doctorate degree from Hartwick College in 2014
1985–present, Liberty Mutual Insurance Group. Elected president in June 2010, became CEO in June 2011, and was elected chairman in June 2013. A member of the company's Board of Directors since 2010.
Previously held positions in international operations, commercial markets, underwriting and financial, and mergers and acquisitions at Liberty.
Board member, multiple Liberty Mutual affiliate companies
Chairman, Liberty Mutual's annual fundraiser for Aspire, which provides social services and development opportunities for children and young adults on the autism spectrum
Director, Massachusetts General Hospital’s President’s Council
Board Member, Greater Boston Chamber of Commerce
Member, President’s Advisory Committee for Trade Policy and Negotiations