CIO Insurance Summit Presentation October 16-19, 2011

Steven Sheinheit

Chief Strategy & Technology Officer

QBE and QBE the Americas

• Top 20 insurer and reinsurer worldwide with operations in all key global

insurance markets

• Australian-listed company based in Sydney, with offices in 49

countries and more than 16,000 staff worldwide

• The Americas Division, headquartered in New York, conducts

business through property and casualty insurance subsidiaries in the

United States and Latin America

• Third largest manager and provider of capacity in the Lloyd’s market

• Celebrating 125th anniversary in 2011

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QBE the Americas at a glance - 2010

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Based on 2010 gross earned premium.

• Portfolio diversification by business

class, geography and production source

• 2010 GWP of $5.2 billion and 89.7

combined ratio

• 2009 GWP of $4 billion and 89.7

combined ratio

Recent performance

QBE focuses on Underwriting financial performance and continues to perform well in a difficult

market

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QBE the Americas Forecast 2011 GWP

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25.6% Financial Institutions

21.8% Crop

19.2% Program

16.7% Major Brokers & Regional

10.3% Latin America

6.4% Reinsurance

• Estimated 2011 GWP of $7.8B

for FY 2011

Right on Q: QBE the Americas’ 5-year Strategic Plan

Initial Observations

• Establish the Strategic Plan Working

Group to complete a transformation plan

and roadmap

• Create a sense of urgency to ensure

timely actions are taken with clear

accountability

• Commit to improved communication,

strong leadership and more employee

engagement

• Drive strategic plan development with

initial change processes and new

approaches to deliver near-term

improvement, long-term intent and

optimal outcomes

Management Actions

Right on Q was born out of a diagnostic that revealed improvement opportunities

People and

Performance

Product and

Distribution

Process and

Technology

Data

Governance

• Many talented people wanting to excel

• Varied culture and engagement across

locations with risk of increased staff

turnover as economy improves

• Lack of strategic intent and common view

of fundamental business aspirations

• Many loyal producers and agents

requesting easier policy processing

• Multiple iterations, duplicative functions

and activities with no common view on

distribution/product management and

other processes

• Redundant technology environment

requiring streamlining and rationalization

• Lack of data standards and consistency

that create inefficiencies

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Right on Q development approach

Define

Opportunities

Prioritize

Opportunities

and Define

Strategies

Define Future

State

Evaluate current

performance and

productivity, including

• Product profitability

• Distribution reach

• Process efficiency

• Technology

capability

• Data management

• Talent management

• Change readiness

• Economic factors

• Competitors and

best practices

• New products and

channels

• Key operational

benchmarks

• Key opportunities

and potential

initiatives to

achieve best

practice/ target

performance

• Fit with

strategy/capability

• Attractiveness

• Clarify timing and

approach

• Critical path

activities

• Risk mitigation

• High-performing

organization

• Key

products/markets

• Target operating

model

• Supporting tools,

platforms, and

capabilities

Conduct

External

Analysis

Assess Current

State

Business

Imperatives

Strategic Plan

Initiatives

Definition

Costs and

Benefits

October 2009 March 2010

High Level

Roadmap

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• People

• Customer

• Products

• Operational

Excellence

• Information &

Analytics

Right on Q development timeline

Milestones

Activities

Initiation Strategy

Offsite

Board

Meeting

Board

Meeting

July ‘09 Sept ‘09 Oct ‘09 Mar ‘10

Determine Inputs for the

strategic plan

Present strategic plan

approach and status

Present the strategic plan

Prepare for Offsite Develop Strategic Plan Approach Complete Strategic Plan

• The strategic plan was developed by the Strategic Plan Working Group, comprised of 25 full-time

senior resources from all major areas of QBETA, and 5 Strategy Team members

• The QBETA Executive Management Board actively participated in the development of the plan

Implementation

Planning Timeline

Coming up with Right on Q was a very intensive process involving 30 dedicated resources for

almost 9 months

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Right on Q Output

Right on Q selected 10 key initiatives, constructed plans, and identified costs/benefits, owners for

each

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Initiatives Considered

RETAINING AND DEVELOPING PEOPLE

PRODUCT MANAGEMENT

DISTRIBUTION

REGIONAL PORTFOLIO RATIONALIZATION

SPECIALTY MGA/PROGRAM BUSINESS

REINSURANCE PORTFOLIO

TRUE SPECIALTY/ MIDDLE MARKET EXPANSION

AFFINITY AND BANK DISTRIBUTION

WEB BASED DISTRIBUTION

BRANDING STRATEGY

SALES EFFICIENCY

POLICY ADMINISTRATION AND UNDERWRITING SYSTEMS

POLICY ADMINISTRATION CONSOLIDATION AND STP

CLAIMS

PRODUCT ARCHITECTURE

COMPLIANCE/PRODUCT FILING

FINANCE CYCLE TIME REDUCTION

VENDOR MANAGEMENT

MIS

TECHNICAL INFRASTRUCTURE ALIGNMENT

FOOTPRINT RATIONALIZATION

DATA GOVERNANCE

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2

3

4

5

6

7

8

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10

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12

13

14

15

16

17

18

19

20

21

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Resulting Initiatives

PEOPLE AND PERFORMANCE

PRODUCT MANAGEMENT & DISTRIBUTION OPERATING MODEL

REGIONAL PORTFOLIO ENHANCEMENT

MGA OPTIMIZATION

TRUE SPECIALTY EXPANSION/ MIDDLE MARKET LAUNCH

CORPORATE PARTNERS LAUNCH

UNDERWRITING AUTOMATION & POLICY ADMINISTRATION TRANSFORMATION

CLAIMS

VENDOR MANAGEMENT (INCLUDING CLAIMS & REAL ESTATE)

DATA GOVERNANCE

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2

3

4

5

6

7

8

9

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Pro

du

ct

an

d D

istr

ibu

tio

n

Pro

cess a

nd

Tech

no

log

y

Pro

du

ct

an

d

Dis

trib

uti

on

Pro

ce

ss

an

d

Te

ch

no

log

y

Right on Q Impact

Incremental Benefits and Costs to Fund Right on Q Initiatives ($MM)

2015 2014 2013 2012 2011 2010

Non-Tech Costs

Tech Costs

Cost Take-Out

Underwriting Profit

As part of Right on Q, detailed projections of costs and benefits were made in cooperation with

business and IT. Initiatives target cost take outs and underwriting profit increases through

premium growth

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Need for new IT Solutions

Business Shifts IT Solutions

• Complex regulatory environment (US

states)

• Increasing M&A activity

• Increasing direct selling capabilities

• Climate change

• Business intelligence enabling greater

market segmentation

(e.g., affinities, corporate partners,

independent agents, brokers)

• Lifestyle and demographic changes

• Improved speed to filing products

• Lower cost – paperless applications

with electronic workflow

• Speed to market – business rules

updated by the business, modular

architecture

• Straight through processing, including

rules based underwriting

• Sophisticated predictive analytics

• Effective internal and external

interfaces

• Sophisticated business intelligence

tools

• Value added service – self-service

and mobility

Right on Q identified and addressed Business shifts that required new technology solutions

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IT as a Differentiator for business success

Time

Differentiation

Reliability

Cost

Value

Co

mp

lexit

y

Hie

rarc

hy o

f N

eed

s

High Service Level Stable environment with

low number of disruptions and ever-improving

security and protection capabilities

Lower Costs Continued cost efficiency

improvements as business volumes and

services increase

Higher returns New Governance processes

emphasizing project prioritization, project

implementation and benefits tracking

Growth New systems requested by our

Business Units to provide capabilities that will

differentiate QBE in the marketplace

With Right on Q, IT addressed simultaneously all areas of the Hierarchy of Needs

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Ten Critical Success Factors

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1 Bold End Goal • Provide clear and compelling vision

2 Best people • Secure best talent. Don’t settle for “whoever is available”

3 Active Engagement of

Key Stakeholders

• Secure engagement at right seniority level

• Free key stakeholders from their day-to-day jobs

4 Strong Program

Management

• Beware leadership void; make people accountable

• Engage/Hire Program/project manager support, as needed

5 Detailed Roadmap • Provide sufficient detail of milestones and decision calendar

• Factor enough time for project approvals, team mobilization etc

6 Effective Governance &

Empowerment

• Implement process to resolve competing & shifting priorities, maintain focus

and document benefits

7 Formalized Change

Management

• Inform/engage employees not involved in plan design

• Focus on communication and buy-in

8 Business IT Partnership • Jointly agree what IT can deliver given timeframes, legacy systems, funding

and resources

• Avoid scope creep

9 Quick wins along the

way

• Avoid “never-ending” project feeling

10 Evolving Change Plan • Update plan as new priorities emerge (acquisitions, market events, regulation

changes etc) but stay true to original cost and profit objectives