A three-year transition period at USLICO Corp. drew to a close this month when Charles V. Giuffra replaced Leslie P. Schultz as chairman.

Giuffra, who joined the company in 1966, was elected president of Arlington-based USLICO in January 1987, became chief operating officer five months later and was promoted to chief executive officer early in 1988.

His ascent through the ranks, according to longtime USLICO observer Elizabeth Malone, has been accompanied by a slow modernization within the 53-year-old insurance holding company, with an emphasis on lowering costs, improving employee-management relations and marketing USLICO stock more aggressively.

"The company has become more forward-looking and more dynamic," said Malone, editor of the Alex. Brown Insurance Review, a quarterly publication of the Baltimore-based investment house.

Giuffra is eager to talk about his vision for USLICO, which ranked 21st among the area's publicly held companies in the 1990 Washington Post Top 100 and is in the second year of a five-year overhaul that aims to increase operating earnings 15 percent a year; boost USLICO stock, which has a book value of $28.40 but now sells for $21.75; and limit cost increases to 1.5 percent annually.

"The question of financial stability in a very unstable financial atmosphere is affecting {public} perception of all financial institutions," he said.

Giuffra said a drop in profit in 1989 to $31.3 million from $34.2 million in 1988 stemmed mostly from a decline in revenue after the company finished selling foreign subsidiaries it acquired when it bought the International Bank of Washington in 1985.

Now, life insurance accounts for 88 percent of USLICO assets. Property and casualty insurance comprise another 10 percent. A Liberian ship registry service, the only remnant of the 1985 acquisition, provides the remaining 2 percent.

Giuffra said USLICO is more stable than many of its counterparts in the industry because junk bonds make up only 3 percent of its total investments. It is not unusual for insurance companies to invest as much as 20 percent of their assets in junk bonds, Malone said.

In addition to restating financial priorities, Giuffra has spent his first month as chairman reaching out to every echelon of his employees.

He abolished the executive dining room and decreed that everyone at USLICO headquarters in Arlington should dine in the employee cafeteria. Last week, he met with two groups of 25 employees for an informal discussion of the company's first-quarter earnings as part of a plan to decentralize management and include more people in decision-making.

Employees will receive cash bonuses when operating costs fall below the ceiling increase of 1.5 percent a year, Giuffra said, and the company will match employee savings plans based on profit increases. "All of our employees can share in whatever success we have," he said.

Malone, who has followed Giuffra's career for several years as he rose through USLICO's ranks, said the programs fit in with his general approach to management.

"He's a very democratic type of manager," she said, "who respects people's opinions whether it's his chief investment officer or an agent in the field."