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Hancock CEO answers critics, defends strategy, girds for change

David D'Alessandro, chief executive at John Hancock Financial Services Inc., sees the day coming when a wave of consolidation will wash over the insurance industry. But not just yet, because most insurers are still too skittish about the economy to make acquisitions.

In an interview from a 59th-floor office atop the office tower that carries his company's name but which, like many other corporate assets, he sold recently, the outspoken D'Alessandro also:

* Defended the $21.7 million he received in compensation during 2002, but said the company could have done a better job of explaining it.

* Said the Boston insurer has been offered the chance in recent months to buy pieces of other companies, although he said there's little talk about wholesale takeovers.

* Pointed to Hancock's 88 percent stock price appreciation since its initial public offering in January 2000, and said "you'll see our strategy isn't exactly stupid."

* Expressed contempt at a lawsuit filed by Boston lawyer Jason Adkins that accused the company of making payments to D'Alessandro and other Hancock executives that violated a Massachusetts regulatory agreement.

* Denied that Hancock's recent $20 million pledge to Boston University has anything to do with his position on the college's board of directors, and said the gift makes perfect business sense for the marketing benefits.

* Said he had time to co-write a forthcoming book, his second, called "Career Warfare," because "I don't spend five hours on a golf course talking to people I don't like," as, he said, other chief executives tend to do.

David D'Alessandro, a college journalism major and advertising consultant who joined Hancock in 1984 as director of corporate communications, has come a long way, ascending quickly up the ladder at Hancock, becoming a driving force in Boston's clubby power circles, and exerting influence throughout the sporting world through Hancock's sponsorships of the Boston Marathon, the Olympic Games, and Major League Baseball.

D'Alessandro, 52, has written off his upbringing as a New York Yankees fan to become a minority owner of the rival Boston Red Sox. He socializes with Governor Mitt Romney, is one of the highest-paid executives in financial services, and frequently scoffs at the corporate-speak that comes from the mouths of many CEOs.

His office, complete with a stunning view of the Boston skyline, a pair of plush leather couches, and a beefy security guard watching the door, is packed with pop culture bric-a-brac: a poster signed by Annie Oakley, a pair of Muhammad Ali's boxing shorts, and a hat worn by John Lennon, among other items.

In recent months, however, the conversation around D'Alessandro has returned to insurance, not his other interests. Talk that he is guiding Boston's biggest life insurer toward almost certain acquisition has heated up in recent months, spurred by a rallying stock market and D'Alessandro's own tendency to speak more freely than other CEOs. This spring, the Globe reported that Hancock has held merger talks with two potential buyers, FleetBoston Financial Corp. and Prudential Financial Corp.

Alternatively pacing his office, slouching on one of his couches, or kneeling on the floor to rifle through papers, D'Alessandro declined in the interview to talk about Fleet or Prudential. But he did say consolidation is coming to the insurance world, and that "you have to grow or die in this business."

"For financial services companies and companies like us, I think it's a time of great reassessment," he said. "What I think is we're about to go through a period where people are not certain whether the American economy is truly in a recovery or whether we're in the eye of a hurricane."

He said companies are getting ready for the coming period of consolidation, and playing it conservatively in the meantime, by selling noncore pieces of their businesses to streamline and stockpile cash. For Hancock, he said, the short-term trend should provide opportunities to make small acquisitions that fit into its life and long-term care business units.

"Smaller companies and blocks of business are being put on the table," he said. "Quietly, more and more little pieces of business are out there. I can't say what they are, because they're not public yet. But the calls you're getting now are, `Would you like to buy this block of business? Would you be interested in X?' "

"That doesn't mean," D'Alessandro continued, "that three months from now somebody won't make an assessment that says let's talk about" buying Hancock. And how would he react? "You always have to do what you think is in the best interests of your shareholders."

D'Alessandro bristled, however, at criticism leveled at him by some analysts and shareholders over his compensation. Company filings show that Hancock paid him $21.7 million during 2002, a year when the company's stock price fell 32.4 percent and its earnings slipped by 15.4 percent.

He said much of the compensation came in the form of restricted stock early in 2002 for performance in 2001, when Hancock's stock price rose by 9.8 percent.

"You don't get all of the money for last year's performance at the same time," he said. "It gets spread out. The [restricted stock] grants were laid out Jan. 5, 2002. The assertion in the media was that the stock went down during 2002, `so how could you pay this guy so much money?' Well, we didn't have a five-day year."

He accepted blame for all the attention the issue received, saying Hancock should have done a better job explaining itself in public documents. He also suggested that the company will probably handle compensation differently in the future. If Hancock's public filing "was clearer and not footnoted and it wasn't so obfuscated, I think it would've been a much clearer understanding for you guys and the analysts, too."

As for the lawsuit filed by Boston lawyer and frequent Hancock critic Jason Adkins on behalf of a shareholder claiming unjust enrichment, which was amended yesterday, D'Alessandro denied Adkins's central claim that the company broke a pre-IPO pledge not to let executives profit directly from the company's switch from a mutual insurer to a publicly traded company.

"We were not allowed to have an actual plan in place that first year" tying compensation to the IPO, he said. "That's all the plan of reorganization says. Nothing says we're precluded later. If we were precluded, wouldn't the opposite effect have been to hold down the stock price until we could profit? What if the stock price had been held down like that? What would the lawsuits be then? You can't have it both ways."

As for the 10.5-acre John Hancock Student Village in the midst of construction next to the Massachusetts Turnpike on the Boston University campus, D'Alessandro said the $20 million pledge that secured naming rights made good business sense. D'Alessandro is vice chairman of BU's board of trustees.

"Our view has been for a long time that you don't give out, you know, $6,000 or $5,000 grants, but you pick some things, you give large to them, you get your name associated with them, and you own them, and everyone values that you did it," he said. "Our naming rights are going to be every place. They're on the dormitories, they're on the actual village, they're on the new tennis arena, on the field house."

D'Alessandro compared the gift to BU with some companies' marketing expenses to sponsor golf tournaments. "They'll put $10 million into a golf tournament that gets a 2.3 Nielsen rating," he said. "That's a very expensive way for the CEO to have a round of golf with Tiger Woods. There's no socially conscious giving associated with that. The BU thing is both a sponsorship and a community gift, in our view."

Regarding his new book, which he said would be published in January, he said the key thing to remember is that he is only co-writer. It's his story and his anecdotes, but another writer does the heavy lifting.

"Some people would say, `Gee, how do you have time to do this?' " he said. "But you know what? That's because I don't do what other CEOs do. I don't spend five hours on a golf course talking to people I don't like." Besides, he said, "the easiest thing is to find a person who's a writer and I have my story to tell, so I'm not really writing the book."

D'Alessandro said he's not sure what will come next for him if and when his company is sold, or after he retires. "If there's another verse to play, I'll play it," he said. "Hancock's been quite good to me. So I'm quite content to do this for as long as it takes. I think the work at Hancock is not complete."

Scott Bernard Nelson can be reached at

Hancock sold

(Globe Staff Graphic / John Bohn)
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