Executive Spotlight - Peggy Gartin, CIO at AAA-The Auto Club Group

Stewart: Welcome to another edition of the InsuranceAUM.com podcast. I'm Stewart Foley. I'll be your host. Welcome back. We're so happy to have you. This is the InsuranceAUM.com podcast, where we're having as much fun with insurance asset management as our flimsy BCAR scorer will allow. Today, we have a very special guest. We have a CIO spotlight with our good friend, Peggy Gartin. Peggy, welcome. Thanks for being on.

Peggy: Thank you, Stewart. Happy to be here.

Stewart: We're so happy to have you. We've been trying to get this scheduled for quite a while. I'm so happy that you're able to join us today, which is July 19th. I like to timestamp because things change and move and whatever else. You are the senior vice president and chief investment officer of AAA, the Auto Club Group. You have been at Allstate. You've been on the asset manager side of the coin. You've been in all segments of this business. I can't wait to explore that with you. But first, can you tell us where you grew up? What was your high school mascot? What makes insurance asset management cool?

Peggy: Wow. All right. You're mixing it up today, I see. I had my answers ready.

Stewart: I know. That's the brilliance of being... That's the greatest part. I can change the questions because people are starting to send me stuff. They've already got answers to my questions. I'm like, "Ha!" I'll change the questions.

Peggy: Okay. But I do really want to tell you what my first job was, but we can do that later.

Stewart: Good. Good, good, good. Let's add that. Put that in there too. That's perfect.

Peggy: Well, I grew up in Bellbrook, Ohio, which is a suburb of Dayton, Ohio, which was a small little town. 20,000 people. Great place to grow up. My mom said she loved it because whatever we wanted to get involved with, in the schools, we were able to. It's not like there was so much competition that you couldn't be a part of things. That was a great place to grow up.

Stewart: The second question-

Peggy: High school mascot.

Stewart: High school mascot. The Golden Eagles.

Stewart: Wow, there you go.

Peggy: Yeah, very exciting.

Stewart: We were the owls. Golden eagles-

Peggy: The owls.

Stewart: Much more fierce sounding than the owls.

Peggy: Fierce. There was a golden eagle sitting on top of our single-story high school building. That's how small the school was. Occasionally, it would get kidnapped. It would be found somewhere around town, or maybe in a neighboring town, where some high school kids decided-

Stewart: Not near the Gartin home, I trust.

Peggy: No, of course.

Stewart: Of course not.

Peggy: The Gartin girls would never have done anything mischievous like that.

Stewart: That's what I thought. What about what makes insurance asset management so cool to you?

Peggy: Well, I think one thing that makes it very cool is, as an asset manager, the relationship you have with your clients. Early on, I managed assets for pensions and foundations and all kinds of different organizations, and you never actually worked closely with them. You talk to the consultant usually. With the insurance clients, getting to know them, understanding their business, and being a problem solver for them to do what you can from an investment perspective to help their overall business results was really, I thought, much more interesting than some of the other stuff.

Stewart: Yeah. It's a different world over here in the insurance space.

Peggy: Exactly.

Stewart: Okay. What was your first job?

Peggy: Well, my first job was working in a worm factory.

Stewart: No way.

Peggy: Yeah. My mom had a job for a very small manufacturing company that made plastic fishing lures. She pretty much ran the business. Her boss, the owner, was a two-martini-lunch kind of guy. She was always there, keeping things going. They had people who did work in their homes. You could take home all of the equipment that you needed and do your work. The Gartin girls got involved at an early age. I was helping to put those plastic worms in packages by the time I was in, I think, third or fourth grade. It was a good gig until I got bored with that, and I became a lifeguard.

Stewart: See, there you go. Okay. You're a numbers person. You're very quantitative. You've got deep, mad skills. Can you put a number on how many fishing worms you think went through the Gartin home?

Peggy: Oh.

Stewart: I mean, that's a big number, right?

Peggy: Oh, yeah. I'm sure it's in the hundreds of thousands.

Stewart: Wow.

Peggy: Because you would put two worms in a package and then you would seal the package. You got paid 2 cents a package. Once we became proficient, you could do 300 packages in an hour. That was 6 bucks as a fourth grader. That was pretty good.

Stewart: Because at the age of 18, I was making $3.35 an hour at McDonald's.

Peggy: Yeah, exactly. My life-starting job-

Stewart: 6 bucks an hour was a big number.

Peggy: Exactly.

Stewart: That's a big number. That's union scale. That's good stuff.

Peggy: We made the most of it.

Stewart: I love that. Okay. You were at our symposium recently. We started off with an insurer-only session, which was an hour and a half and had no agenda. Several people walked out of the room, saying it was the best session that we did.

What I heard... because I wasn't in the room because I'm not an insurer. I heard that half of the discussion was about recruiting talent. Now, I think that you and I agree that insurance asset management is very complicated. We need best-in-class talent. The question gets around recruiting, diversity, and education. Now, I want to tease a solution coming from us on education in a minute, but I'd love to get your take on... because you've got a great team. I mean, I've met your team. They were there. You have a phenomenal team of folks working with you. How did you find them? How did you recruit them? Nisada was extremely complimentary of your shop when she got there. She made a point of telling me when I saw her. How have you accomplished that?

Peggy: Well, I do think we've gotten a bit lucky in some regards. Our recruiting process is pretty slow. But we have found that by leaving postings out there longer, even when you already have a big list of candidates, we don't close out the postings because you just never know who might come across it later in the process. That has actually helped us.

Certainly, through my network, when I post a position, I do get a lot of inquiries from former colleagues from the asset management space. I think that my background there has been helpful as well. But one thing that I think is really important... And you and I talked about this a little bit in the past, is a lot of people in the investment business tend to focus on those that have degrees from elite institutions. That's a great process. But it's not a guarantee of success. I don't think it should be used to filter candidates.

Stewart: Yeah, I agree.

Peggy: Yeah. I mean, it leaves out so many people. Early in my career, I moved from Dayton, Ohio, where I had my first job, to Boston. After being in Boston for a while, I interviewed with the CEO of a company that will go unnamed. The CEO said to me, "You didn't go to school in the corridor. Why should we hire you?" His view was if you didn't go to school on the East Coast and go to some of these elite institutions, I'm not sure you have a place with us, which was quite an eyeopener for me, obviously, coming from Dayton, Ohio, where we didn't quite have that attitude.

I certainly didn't belong to the right clubs in order to fit into the investment space. But I was lucky enough to come across some people that were open-minded and wanted to focus on the skill set, as opposed to where you went to school. But in terms of our team, we are really diverse. It just happened organically. While we certainly want to have a diverse team, it's been easier than I thought it would be to have that. There's a few moments, because we're a small team, where we've been stuck on candidates. I just thought, "No, we got to keep going on this." Even to find female candidates, we were really struggling for a while. But fortunately, a couple of good hires can make a huge difference for the team. Even with the younger folks, they really have been given a lot of opportunity because we're a small team.

Stewart: Absolutely.

Peggy: It's great to go to a big organization and get exposure to a lot of different things. But I know, early in my career, I worked for a really small mutual fund company in Dayton. They couldn't hire talent from across the street. A couple of senior PMs left. I raised my hand. "Give me a chance to move up here." We've done well with it. We've done a lot of networking too. I need the whole team to help in order to come up with some good candidates. But it's worked out so far.

Stewart: Yeah. I mean, I think it also reflects on you because, I mean, you're well known. You're well-liked. People want to work with you. I think that helps your cause as well. I mean, I'll just throw it out there. IWIN, the Insurance Women's Investment Network... IWIN actually sponsors a job board on our site. It's free for anybody who wants to post a position there. We're happy to host that: a service that we provide to the industry without charge. It's a huge, huge deal.

I mean, I've taught for a number of years. Most recently, I was at Northeastern Illinois University. I had some phenomenal students. I had some phenomenal students from very diverse backgrounds, socioeconomically, every which way you can consider diversity. Yet, to your point, NEIU is not necessarily at the top of everybody's list. I would just say, if you're looking to recruit, there's some really good talent in some institutions that are... They're not maybe as well known.

Peggy: Yeah, exactly. Yeah. You have to go down that path. One interesting thing that I found is recruiting for investment roles within an organization that exists for another purpose, where investment is not our business, is a little bit challenging because you've got an HR department that, as talented as they may be, they're just not familiar with the space. I feel like we, as a team, have to do a little bit of the heavy lifting to help them make the right connections to make sure they know about IWIN and InsuranceAUM, and other organizations that can help us recruit some talent. We're not going to compete with the Goldman Sachs of the world and some of the networking organizations that they have. But I think some of these smaller organizations, where you can get some visibility with your posting, is really important.

Stewart: You make a great point, Peggy, with regard to a small organization because I became the treasurer of a city of Columbia, Missouri, when I was 27. They handed me the keys to the portfolio, which was $130 million or something like that. But that was based on my experience level. A ton of money and discretionary trading authority on it. There's no way that you're going to get that. I mean, I just think that there's something to be said for small shops where you're going to get your... There's a lot of smart money, not just yours but smart money, smaller shops. I mean, look at Joe Eppers at Selective and Aaron Diefenthaler at RLI. You look at TC Wilson at The Doctor's Company. Really smart money folks, and working in places that aren't household names for most college students.

Peggy: Right. Now, having said that, we do... I mean, the background of our team is pretty diverse, too, just in terms of... We have people that have worked for asset managers, for insurance companies. We have one veteran, so military background, who brings great leadership skills to the team. We've got a lot of interesting stuff. I do like the idea of hiring people who may have some experience with asset managers because we outsource a big part of our portfolio. Having been on the asset management side of the business, it's very helpful to understand what's going on over there, what questions we should be asking, and how we make sure that the focus on our portfolio, which may not be their biggest, is appropriate. It's good to have diversity in the background of the team too.

Stewart: I love it. Let's change gears and talk about governance for a second. Can you talk a little bit about the governance process and the importance of independent board members at your firm?

Peggy: Yeah. You were kind enough to ask me to moderate a governance panel at your symposium, which I found really interesting, and took away some great ideas for things that I can do to help educate and communicate with my board. But I also think of governance from a different perspective, like the make-up of the board. I've worked for a lot of different types of organizations, private asset managers, public asset managers, Fortune 500 insurers, and associations. Now, AAA is organized as a federation and private organization. They're all different, both in their businesses but also the culture. I think that can have a big influence on the construction of the board.

Obviously, public companies have a lot of requirements imposed upon them, whether it's regulatory or by shareholders. But when you move away from public entities, things start to get a little bit murky, in my experience. In one situation, I saw the board and committees were made up entirely of connected entities. There were no outside directors there. That can be a problem if the culture of the organization is such that those board members won't challenge each other or even challenge the staff because, at the end of the day, they're also closely connected.

I just think it's really dangerous, in the case of investments, not being comfortable challenging a strategy or even asking a lot of questions, assuming that... "Well, if everybody else is okay with it, then maybe I shouldn't challenge them 'cause I don't that much about investments anyway." I mean, I've seen it lead to really bad results. But in the case of ACG, we are a private company. We are a federation. Yet, our board is very diverse. We have a lot of independent directors. Some of them have come to us through different avenues. But at the end of the day, there's a lot of independence across our board. I see the value of that as compared to other situations that I've seen.

Stewart: Okay. That's super important. We're also going to be doing an investment committee workshop in collaboration with St. John's University and John Gauthier at Talcott Capital in December and trying to work on some of those educational challenges because it's unusual. I mean, it's a very, very specific set of skills to manage insurance money successfully. We're trying to help and educate. We're also working on some professional learning credit capabilities that we're going to roll out later on this year.

I think that's how we can help: is providing strong thought leadership to get people educated on different asset classes and on different subjects and regulations and so forth. But you mentioned running an insurance investment operation inside of an entity whose primary business is not managing money. It's writing insurance. Can you talk a little bit about the importance of aligning with the mission of the organization and the culture?

Peggy: Yeah. I think that's really critical. Especially coming from an asset management background and having worked for them for a long time, my experience when I moved over to work for an insurance company, even though insurance companies had been my client for a long time, was that I didn't expect what happened, which was that I felt a level of pride working for an organization that exists to help people. It really resonated with me. It sounds geeky. But I realized that that felt more true to my make-up than working for asset managers where, of course, making a lot of money for your clients is the name of the game. I really enjoyed that.

I have found it a little bit challenging, especially early on, to find people that will appreciate that aspect of what we're doing. But I think it's really important that you need to hire these skillsets that are not traditionally associated with the insurance space. For example, private equity... You can't hire people who have aspirations to make GP-like money and expect them to adapt and be comfortable with the reality of who we are and how we're doing this.

You really have to manage those expectations and have those honest conversations with candidates during the recruiting process to make sure that they have a good understanding of the mission and the culture of the organization. Because if you don't filter that out early on, it's going to lead to some issues. We had a few missteps in that regard with some early hires 'cause we did make a big shift to how we're investing. Some of that... It just wasn't a good fit culturally. With the turnover that we've had, we've been able to course-correct that and make sure that we are having those conversations with candidates. We even have a video that AAA made after Hurricane Ian last fall in Florida that I have shared.

I actually shared it with Nisada before she joined, even though she's worked for insurance companies. She understands the difference. But I thought it's a great way to make sure that candidates understand what we're here for and how we help our members. Taking advantage of some of those things, I think, is important. We've got some younger team members who are really bright and energetic. They're interested in investing. They may still be trying to figure out what part of the investment space they want to be in. But we're giving them a great opportunity to learn a lot from these more experienced senior folks that we've got on the team. Back to my point about the advantage of joining a small organization where you can really get your hands dirty, you're not going to be pushed back in a corner and asked to process trade confirmations and stuff like that.

Stewart: Yeah. It's interesting. I think the insurance industry has a bad rap in the public, a lot of times, for whatever reason. I've always pointed out to my students and folks in general, is that when the wind blows or something bad happens, it's the insurance company that's standing there with a check in their hand, trying to help rebuild your life back to like it was before that happened. You wreck your car. Your house is damaged in a storm, whatever it may be. I mean, I think it's really important to find your purpose. There's a big difference in working... I mean, I love what I'm doing. I think that's so important. It's really great to hear that you feel like you've found purpose working for an insurance company as opposed to other places that you've been at in your career.

Peggy: Yeah. Exactly.

Stewart: With regard to your career, you mentioned some younger team members. I'm sure that you do a very good job of helping them develop professionally. Would you be willing to share some career advice with our audience based on your experience?

Peggy: Of course. You might look at my resume and say, "Wow. This person has had a lot of jobs." I have. I obviously have former colleagues who stayed in the same spot throughout their careers. That worked for them. But I did struggle early on, I would say, with finding the right balance between being patient within an organization and finding the right fit for you.

I actually got some really great advice early on from a recruiter who had then become my good friend. She recruited me from Dayton, Ohio. I worked for a company called Flagship Financial, which was eventually bought out by Nuveen. She recruited me from there to go work for John Hancock Advisors in Boston. We ended up becoming really good friends, to the point where anytime I was thinking about making a job change, I would always call her and ask, "What do you think? What am I missing? What should I be thinking about?"

She gave me some great advice. She told me that if you're going to change jobs, just make sure it's moving to something that's going to expand your experience and add to your skill set. Do that. For example, when I moved from BlackRock to Allstate, she thought that was a home run because now you're going to see the other side of the business. She's absolutely right. I don't think I would've ever become a CIO if I hadn't made that move. But the other important thing she said was, "You need to be prepared to explain the reasons that you've made the changes that you did. When you change jobs, often you're going to have to walk a recruiter or a potential employer through your thought process of why you did what you did and be honest about whether or not it worked out." That was really important.

Then, there's a couple of other things. I didn't have a lot of confidence in myself early on. It probably didn't help when people said things like, "Well, you didn't go to school in the corridor. Why should we want to hire you?" But it took me a while to start feeling more confident in myself and to have the confidence to speak up when I don't agree with things. Eventually, I found that and, at one point, even decided I had to use that to move on because my voice wasn't being heard or respected. There could be times when you have to do that. But just you got to be able to walk somebody through your thought process on why you've done what you have and how it has benefited you as an individual and as a potential employee.

Stewart: I think it's really interesting. I mean, there's a woman who's been on our podcast named Margaret Milkint, who is now running the insurance channel for Div Search. She said this at an event that was to predominantly female college students. This speaks to your point about... She said women, even if they have all of the required credentials, still may not pursue a position. But men, if they've got 75%/85% of the qualifications... They apply. I don't know what that says, but what I can say to you in all sincerity is you are one of the best-liked, best-known, well-respected CIOs in the industry. You've excelled at every position you've ever had. I mean, I really value you saying that you've lacked self-confidence because I think it takes a lot of courage to say that publicly. I think that a lot of other people, me included, have that. I think it's great that you put it out there.

Peggy: Thank you.

Stewart: We're getting ready to wrap already, believe it or not. Just like I started with new questions, I want to end with a new question because you talked about a great piece of advice that you got. That was one of the two options. You're left with the only other option, which is who would you most like to have lunch with, alive or dead?

Peggy: Wow. There's so many people. I would love to have lunch with Kamala Harris.

Stewart: Wow. There you go.

Peggy: I think she's got a great story. I think it's unfortunate. I don't think she's being showcased in the way that maybe she could be within the Biden administration. But she's fought all the same battles and more that many of us women have in order to be successful and to get to that level in her career. I think that would be pretty interesting.

Stewart: I love it. I've learned a lot. I love the insight. It's been great to have you on, Peggy. Thanks very much for taking the time.

Peggy: Thank you for waiting three years before I said yes. I don't think I could have done this when I first joined AAA.

Stewart: Persistent. What do you want me? It's great. We've been joined today by Peggy Gartin, senior vice president/chief investment officer of AAA, the Auto Club Group. Thanks for joining us. Thanks for listening. If you like us, please rate us, review us on Apple Podcasts or wherever you get your podcast content. My name's Stewart Foley. This is the InsuranceAUM.com podcast.

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