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Company
survives financial crisis and now thrives in new partnership.
By Kevin Kipp
The king is dead.
Long live the king.
Because of a $6 billion snafu in financial markets in 1999, GenAmerica
Financial Corporation confronted prospects that might have been
familiar to French royalty in 1789. But decisive action by company
leadership averted what might have been a royal debacle for 300,000
policyholders. Instead they’ll receive collectively $1.2 billion
of distributions.
Not quite Camelot, but not a bad job of snatching victory from the
jaws of default.
In his 1999 annual report letter, published in early 2000, Richard
A. Liddy, then-chairman, president and CEO of then-GenAmerica Corporation
wrote: “On August 10, 1999, we requested that the Missouri Department
of Insurance place General American Life Insurance Company under
an order of administrative supervision. The cause of the supervision
order was our inability to satisfy the liquidity demands for some
$6 billion in withdrawals by 37 institutional clients, holders of
funding agreement contracts held by General American.”
Kevin C. Eichner, the new president (since February 2000) and CEO
(since September, consummating a succession plan that was announced
before the crisis) of the renamed GenAmerica Financial Corporation
(since June 2000), explained terms and details that might not be
familiar to non-insurance types: An order of supervision
means the state “takes over responsibility on behalf of policyholders
for overseeing the disposition of the company and any proceeds from
the sale of the company.”
A funding agreement contract is “a way for large institutional
fund managers to park excess fund money until they’re ready to invest
in long-term holdings. It provides a little more interest…everything
from seven day puts to longer arrangements.”
Comeback stories—say, St. Louis Blues overcoming a five-goal deficit
against the Red Wings in the third period—make heroic theatre. Corporate
comebacks do, too, but also make some executives reticent to talk
about the first two periods.
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St.
Louis Mayor Clarence Harmon (left) joined Kevin
Eichner (right), members of GenAmerica’s board of
directors and employees to celebrate January 9 as
“GenAmerica Financial—Stronger Than Ever Day” in
the city of St. Louis. GenAmerica has relocated
more than 100 employees from offices in St. Louis
County to its downtown headquarters. Mayor Harmon
lauded GenAmerica’s 67 years as a leading corporate
citizen in downtown St. Louis.
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But in his telling of the GenAmerica saga, Eichner succeeds in creating
both palpable drama and genuine concern for the players.
It was the business of a GenAmerica subsidiary, Conning Corporation,
to market and manage these contracts with large institutional money
managers, he says to set context. A partner of Conning in these
obligations “got into some financial difficulty.”
He allows in gracious understatement only that the unnamed partner
“wasn’t following the same investment strategy as we were.
“We took action to secure our positions, fully informing the ratings
agencies of our intentions. They said they felt it was the appropriate
action. Nonetheless,” and here Eichner’s mellifluous tone turns
a tad icy, “with very little notice, one major rating agency downgraded
our paper a notch.”
As a result, fund managers started to exercise put options, Eichner
says. “In a matter of a few days we faced almost $6 billion of funding
requirements.”
GenAmerica, he continues, came close to meeting those payment demands,
“but at the eleventh hour, I saw Dick Liddy make one of the most
courageous decisions I’ve ever seen a CEO make: Instead of risking
the interest of 300,000 policyholders for the short term interests
of 37 large fund managers, the only way to stop the run was to ask
Missouri’s Department of Insurance to intervene. Essentially he
called a time-out, knowing full well that it put us on the market
as a company.”
The move impressed others as well, even some insurance executives
who don’t carry GenAmerica products. Dale Finke is CEO of ISU/Corporate
Insurance Management. His agency specializes in organizing, planning
and controlling property and casualty lines for businesses: “We
carry some life [GenAmerica’s strong suit] if a client needs it,
but we don’t do business directly with GenAmerica.”
Finke’s take: “I’m very impressed with how they run their organization,
then and now. It took courage; it was decisive. I was impressed
with how quickly Mr. Liddy called in regulators.”
The alternative, Eichner says, was selling assets at a discount
in a down market. “We would have had a severe hit to our capital
position, endangering policyholder benefits. The total solution
was to seek a partner that could resolve the financial issue, and
that at the same time would value highly the various franchises
we had built up here.”
Enter Metropolitan Life Insurance Company, winnowed from 29 companies
that expressed interest in buying GenAmerica, of which 14 were deemed
to have the requisite wherewithal, and of which five came calling—in
five arduous consecutive days—in St. Louis with due diligence teams.
“Metropolitan Life was the first on site and had the best solution
by far, financially and by strategic fit,” Eichner says. Problems
with short-term liquidity (NOT, Eichner points out, solvency) aside,
GenAmerica had a lot to offer: more than 300,000 policyholders,
more than half a trillion dollars of life insurance in force, a
reputation for quality and innovation, and a franchise name.
But the jewel in the crown in the mind of suitors was GenAmerica’s
distribution channels—independent producers and financial planners—that
long had been regarded as an object of desire in the industry, worthy
of courtship and marriage.
The sales forces at familiar companies like MetLife or Northwestern
Mutual are company-hired-and-paid employees. “Strategically, we
filled a gap,” Eichner says. The sale of GenAmerica to MetLife was
finalized on January 6, 2000.
Liddy says MetLife’s strong position as a “middle market insurer”
was a fabulous fit with GenAmerica’s “top-of-the-market position”
serving small business owners, professionals and individuals of
high net worth. “This rounded out the spectrum of markets for MetLife.”
With the independent producers, he says, MetLife “gained access
to a different market that they’ll reach through a different distribution
system.”
But how did MetLife win in the bidding for GenAmerica?
“Three things I’ll comment on,” Liddy begins. “One was that MetLife
was tremendously quick and responsive. We were impressed with their
capacity to make decisions.”
As an example, he says, “The day before MetLife’s board met to authorize
its own demutualization, the company’s own CEO and vice chairman
flew to St. Louis to meet with our board. That demonstrated to us
the priority they placed on our transaction.”
More Liddy: “Secondly, of all the issues we had to get behind us,
getting back in business quickly was paramount. MetLife had the
clearest and least ambiguous solutions. That worked really well
for us.
“Third,” he concludes, “they had the best financial offer for our
policyholders.”
While MetLife was the right knight, some regard Eichner as Merlin,
just the kind of wizard to put the company together again.
Rocco Russo, an Enterprise Banking vice president and—like Eichner—A
Mark Twain Bank alumnus, says “Kevin was a guru at Mark Twain, and
one of the driving forces for making [Mark Twain founder] Adam Aronson’s
vision real.”
Eichner spent six-and-a-half years at Mark Twain. In his words he
was an “exec vice president and group president, responsible for
both line and staff functions…some fee income areas and a few of
the banks.”
He also had responsibilities in strategic planning, recruiting and
development, and sales management…just the kinds of work he undertook
at Collaborative Strategies, a consulting firm he founded in 1983.
With Fred Eller and Ron Henges, he co-founded Enterprise Bank in
1988.
Enterprise is, as Mark Twain was, a highly entrepreneurial, business-oriented
bank.
By the time GenAmerica bought Collaborative Strategies in 1997,
Eichner had amassed a client list in excess of 200. Moreover, his
strong performance had earned him a seat at the table of successors
who were being assembled in preparation for Dick Liddy’s retirement.
Eichner has a B.A. in Social Change from Ottawa University (where
he also served a stint as director of admissions, essentially a
higher education sales and marketing post), and a Harvard MBA.
Liddy sees more than a fancy degree. “In my career before coming
to St. Louis in 1988, I’d worked with all the national consulting
firms at one time or another,” he says. “When I found Kevin here
in St. Louis, I found somebody as good as they come…anywhere in
the country.”
Russo agrees, “Strategic planning is his forte: having the vision,
creating the plan in collaboration with his colleagues, and then
making the plan sing. He’s always been capable of being the maestro…taking
individual talents and getting them to work together like Toscanini
conducting an opera.”
Apt analogy, and Russo knows it: Eichner sings opera as a hobby,
and has performed with the Saint Louis Symphony chorus.
Liddy says, “Kevin is a person of vision, a quick study with deep
understanding, and an ability to make recommendations or decisions
on behalf of the organization. These are traits that every organization
looks for in a leader, and ultimately in a CEO.”
Let the games begin. Eichner says, “Our very first challenge after
the sale to MetLife was to secure our relationship with our field
force. We are blessed with one of the finest independent agency
systems in the industry. Owing both to their independence and to
the premium on distribution capabilities, they were in the gun sights
of every one of our serious competitors. To secure [their loyalty]
we launched an intense communication program.”
Eichner’s second undertaking: “We had to get our credit ratings
back. Thanks to MetLife and their financial strength, we’re back
to the highest rating in our history.”
Informational materials from GenAmerica show that MetLife has $1.7
trillion of life insurance in force. That compares to something
north of the half-trillion GenAmerica has in force.
“Thirdly, was to seize the position of being one of the top product
manufacturers in the industry,” Eichner says. “We’d always had a
reputation as one of the best product developers in the industry.
It had slipped a little. We needed to make sure our field force
knew we were going to the top again.”
The efforts paid off. “The year 2000 was about securing our field
force. It turned out to be one of our best recruiting years.”
That, Liddy says is “a vote of confidence from professionals who
wouldn’t risk their income or client relationships without the fullest
confidence in GenAmerica.”
Internally, Eichner took steps to “solidify an organization that
had been somewhat traumatized. We engaged employees in an intensive
three-year planning process. This is a great team-building device
that any executive has available, not to mention getting an opportunity
to know what you’re going to do. You get understanding, commitment,
and a strong sense of alignment and team. It’s critical anytime,
but especially coming off a series of events like we were.
“We had 14 units present plans,” Eichner says. “We have about as
good of a line of sight between our goal and those plans as I’ve
ever seen.”
And he has company-wide accord on five strategic priorities, described
in company documents as ranging from “strengthening financial performance”
to “expanding scale”…from “enhancing organizational alignment” to
securing a “reputation as the ‘Choice of Leaders’ in product innovation.”
We restructured the organization according to highest and best use,”
Eichner says. “We moved our top people into larger jobs where they
affect more of the mainstream of the business. It’s already bearing
fruit.”
Another thing: “We moved all of our people from five locations into
two [downtown and a service center in South County]. It gives us
a real sense of solidarity and building on the business plan. And
it enhances informal communication that is so critical.”
By last September, Eichner was quoted in newspapers, reporting that
sales had returned to 80 percent of the level before the liquidity
emergency. Sales had hit rock bottom at one-third the usual rate
in the midst of the emergency.
Momentum seems to favor Eichner and GenAmerica’s odds of achieving
its goal, also reported last September, of doubling sales in the
next three years.
Liddy says the company has already recovered. “The noise from 1999
is now largely a memory. Our [financial] ratings have been fully
restored and thanks to MetLife they’re actually better than they
were in 1999. And our capitalization is extremely strong, thanks
in part to the resources of America’s largest life insurance company.”
Eichner’s not sitting on laurels. For instance, he’s engaging community
banks—$2 or $3 billion in assets—as distribution channels for product.
Or creating value in distribution and re-insurance properties and
then sharing the equity with high-end producers and general agents
brokerage.
“We’re concentrating on the individual line of life insurance, annuities
and investments for retirement planning, protection, wealth accumulation
and business succession,” Eichner says. “That’s the core business
of GenAmerica today, and that’s why MetLife bought us. We play a
key role in the independent distribution of these products.”
Eichner also continues to pay attention to cultural and organizational
design to make good on the unrealized promise in GenAmerica. And
he will take up the cudgel of what he calls Camelot Culture Initiatives.
“We’re developing a culture where people feel like they’re part
of something special, in which they feel prized and valued as individuals,
an organization that embraces change and diversity.”
More Eichner: “And we want them to see we have a winning organization.
There is no Camelot unless you win. This is not an organization
in which the mediocre feel comfortable very long.”
Kevin Kipp runs Bubble Communications, a creative services and community
relations firm in St. Charles. |
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