Downtown Chicago’s skyline presents many mysteries to anyone who looks up.
Why are jewel settings atop 35 E. Wacker Drive? Why was a large slice cut out of 150 N. Michigan Ave.? What the heck is “Unitrin,” the logo on 1 E. Wacker Drive?
After 13 years as chief executive of Unitrin Inc., Richard Vie, has decided to answer the question to an audience other than denizens of his industry–insurance.
But his public relations strategy has a timing problem.
Vie, 67, missed out in the 1990s, when his company’s handsome share price growth might have attracted profiles in a business press eager to exalt an up-and-coming CEO.
Now, CEOs are anti-heroes. On Feb. 10, Vie stepped before the Executives’ Club of Chicago and spoke about “communicating in a cynical age.”
“Good morning. I’m Richard Vie, chairman and CEO of Unitrin, an insurance and financial-services company with more than $9 billion in assets headquartered here in Chicago.”
Who knew? But the next day, an index of multiline insurance stocks, including Unitrin, peaked. The subsequent plunge reflected charges of fraud and bid-rigging by New York Atty. Gen. Eliot Spitzer against American International Group Inc., a giant multiline insurance company.
Unitrin was not touched directly by the charges. Its sales practices differ from AIG’s and have not been questioned. But its stock was hit.
Annual returns on Unitrin, with a 3.8 percent dividend yield, have climbed nearly 10 percent in the current decade. AIG lost an average 6 percent.
Nonetheless, you can understand why Vie would say, in an interview earlier this month, “the trick is to raise your visibility without creating problems for yourself.”
With first-quarter results due this week, Vie is comforted by advice he received many years ago from Henry Singleton, founder of Unitrin’s predecessor, Teledyne Inc. “Henry Singleton figured if you can’t understand by looking at the financials what this company does, there’s no need trying to explain it to you.”
Now, Singleton’s heirs are divesting their substantial holdings in Unitrin, increasing the shareholder base and Vie’s incentive to reach out.
Ironically, Vie’s opportunity to tout his company’s financials and its employees stems from another black eye in the insurance business: the collapse of Kemper Insurance Cos. in suburban Long Grove.
When Kemper was imploding, Unitrin acquired its auto and homeowner’s insurance business in 2002, a move that more than doubled its presence in the so-called personal lines of insurance.
The deal, completed ahead of schedule, has “provided the size, scale and geographic reach for Unitrin to now be a formidable national competitor” in auto insurance, wrote analyst Mark Finkelstein at Cochran, Caronia Securities.
Unitrin has climbed aboard the direct-sale insurance business, which uses the Internet and telephone, rather than agents, to sell policies.
Rival Geico Corp., a unit of Warren Buffett (the last name as published has been corrected in this text)’s Berkshire Hathaway Inc., with its endearing gecko, advertises heavily the advantages of saving 15 percent on car insurance through direct purchase.
Vie is happy to ride the lizard’s advertising coattails.
“People aren’t sure what Geico means any more than what Unitrin means. But the better they do, the better we do. People are encouraged to get on a computer or respond to a mailer. We don’t spend a dime, but I see that as the fastest-growing piece of Unitrin.”
Unitrin’s direct-sales business, started in 2001, posted a quarterly profit for the first time in the fourth quarter of 2004–at least four years ahead of schedule, Vie said.
“We’re peaking out on the pricing side of property and casualty [insurance], but in that environment some will do better than others,” he said. “I think we’re going to do fine.”
Meanwhile, consistent cash flow from life and health businesses provides a buffer.
“Life is the slowest growing, but it is a big cash generator–always has been, always will be,” Vie said. “Most of the assets are invested in bonds, and we’ve been waiting for the increase in bond yields.”
Unitrin has $4 billion in short-term bonds. “If yields go up 1 percentage point, that’s $40 million straight to the bottom line,” Vie said.
“Consumer finance keeps growing,” he added. “We’re branching into new states.”
“For the businesses that Unitrin is in, 2005 is going to be great,” he said, barring property/casualty disasters.
Meanwhile, Vie will focus on a goal he may never see met: making Unitrin a household name in 20 years.
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bbarnhart@tribune.com
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A name that didn’t cost much
The Unitrin name was cobbled together in 1989 by George Roberts, a former Teledyne executive who reported to founder Henry Singleton. As Teledyne prepared to spin off its financial-services business, Roberts combined the names of two insurance units–United and Trinity, CEO Richard Vie recalled.
“The quickest way to get thrown out of Henry’s office was to suggest that you get a consultant for anything,” Vie said. “George thought, `I don’t want to do that.’ He proposed Unitrin, and Henry thought it was great because it was free.”
–Bill Barnhart
