1. Page 1 Business Architecture – From Business Strategy to the Alignment of IT Rich Waller An Insurance Industry Case Study April 15, 2009

2. Page 2 Overview of the enterprise Insurer at a Glance 100+ years in business $10 billion in revenue, Net Income of $187 million, Statutory surplus of $8.5 B > 9,000 employees U.S. and international operations “A” rated for financial strength by A.M. Best Property & Casualty Operations combined ratio of 98.1% Leading insurer of construction businesses, accountants, lawyers, architects & engineers, and other professionals The company is a U.S. based Commercial Property & Casualty insurer The enterprise is one of the 10 largest U.S. commercial insurers The company provides insurance protection to more than 1 million businesses and professionals in the U.S. and internationally.

3. Page 3 Operations & context for an Enterprise Transformation Framework and Business Architecture Business strategy ( high-level): Continue to grow in a soft market Customer Service wins Centralized IT for Corporate and all international $300-350M in Annual IT Spend 1100 Full Time IT Employees ~750 Contractors 2 Data Centers with 500+ Applications CEO was an advocate of business “Transformation”, CIO is the catalyst Transformation and Business Architecture recently established as key capabilities needed to deliver results Align business strategy  transformational business opportunities  spend on enabling technology Initial Enterprise Objective

4. Page 4 Operations & context for an Enterprise Transformation Framework and Business Architecture Responsibilities Establish framework that enables the enterprise to lead the marketplace in achieving financial and growth targets A standard approach to evaluate, design, and implement process designs across business units A standard performance framework that incorporates operational process scorecards for business units and functions Deliver $100M of Net Operating Income Metrics and data not readily available / common definition of metrics Too many initiatives Accountability “I have to meet my annual numbers” Transparency is a threat “We are different” Process is not important – financials are important “Can’t you just build us a tool?” Skills Challenges

5. Page 5 Approach to establishing a framework 1.Determine customer needs/values and strategic operating goals 2.Design operating model to support strategy 3.Establish process performance metrics and objectives 4.Design and implement process, system and people related changes 5.Establish ownership and governance infrastructure 1 1 2 2 3 3 4 4 5 5 Strategy Understand Our Customer’s needs/values Enterprise Process Model Process Performance Model/Scorecard Operating Model & Process, System/Service, Data, and Organization Redesign Process Ownership & Ongoing Agenda (PMO)

6. Page 6 The Business View – The work we do Our Enterprise Process Model Fee based services Management Processes Speciality Lines Commercial P&C Enabling Processes Customer Needs Customer Value Develop and Maintain Strategy Manage Assets Communicate/ Inform Manage Business Processes Manage Human Resources Manage IT Manage Facilities Procure Goods & Services Research Market & Gather Intelligence Manage Legal Manage Projects Develop And Maintain Products & Services Acquire And Grow The Customer Care For The Customer Deliver Claims And Recovery Services Manage Project Portfolio Manage Risks Appoint & Assess Distributors Provide Marketing and Communication Content Administer Reinsurance Understand MarketsCustomers & Distributors Manage Budgets

7. Page 7 The Business View – What are the gaps and where should we invest FIXBUILDLEAD 12345678910 CORE PROCESSES Understand Markets, Customer, & Distributors Develop And Maintain Products & Services Acquire And Grow The Customer Care For The Customer Deliver Claims And Recovery Services ENABLING PROCESSES Manage Finance & Accounting Manage Human Resources Manage Information Technology Manage Projects Manage Legal Audit Procure Goods & Services Manage Facilities Current State vs. Future State

8. Page 8 The Performance View – establish enterprise wide measurement system Electronic (EDI/XML vs. Manual (Commercial Paper) Transactions 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% ElectronicManual 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 Jul- 00 Aug- 00 Sep- 00 Oct- 00 Nov- 00 Dec- 00 Jan- 01 Feb- 01 Mar- 01 Apr- 01 May- 01 Source: Total Past Due Receivables Month by Month (in thousands) Book to Cash (Setup Account/Reserves) Bill Premiums Issue Invoices Post Premium Payments Manage Accounts Receivable Reconcile Premiums Research & Resolve Non- Payments Pay Sales Commissions Publish Policies & Issue Certificates Deliver Loss Control Services Prepare Account Financial Reports Standard Ad Hoc Utilization Reinsurance Book to Cash (Setup Account/Reserves) Bill Premiums Issue Invoices Post Premium Payments Manage Accounts Receivable Reconcile Premiums Research & Resolve Non- Payments Pay Sales Commissions Publish Policies & Issue Certificates Deliver Loss Control Services Prepare Account Financial Reports Standard Ad Hoc Utilization Reinsurance Care For The Customer Care For The Customer Service Retention Rate 63% 83% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% JanFebMarAprMayJunJul Aug

9. Page 9 Key Tools and Enablers  Financial Return  Customer Satisfaction  Employee Satisfaction  Compliance  Contribution to Community Enabling Budget Customers Insured Distributors Internal PMO Capability Process models (current/future) and framework maintained in enterprise repository Operational metrics will be captured and available in our enterprise metrics portal Enterprise data and Organization maintained in Enterprise Repository Functional capabilities, applications, services, and other architecture building blocks maintained in enterprise tool/repository

10. Page 10 Lessons Learned & Conclusions Must approach build-out from top-down and bottom-up Early success stories will produce more success Focus on a one or a few key processes first Those processes that touch customers have the highest impact on enterprise performance Process Ownership is key Process Ownership is not just one person but a team Establish a dedicated team that owns the analysis and design of business architecture changes for any one major process Key roles include Business Architects, Business SME’s and change agents, production process coordinators/performers There are no IT projects; there are only Business Projects with enabling IT components