XY-Z

1. AAA INSURANCE LEADERSHIP INSTITUTE XY-Z ORGANIZATIONEFFECTIVENESS & PLANNING EXECUTIVE DEVELOPMENT PROGRAM EXECUTIVE DEVELOPMENT PROGRAM Gen X/Gen Y Opportunity March 9, 2012

2. Project XY-Z: Objectives • The original project definition as defined under the Action Learning Project within the AAA Insurance Leadership Institute was: To develop a better understanding of how the Generation X and Y segments view insurance, the AAA brand, and the decision process leading through to final purchase, account management, renewal, and referral of insurance products. • The early life-stage purchase drivers of the young adult market were key, rather than a specific focus on generation or age bracket was undertaken. The resulting longer-term approach for marketing as identified through this work, is to focus on Life-stage Triggers and Cultural Nuances along with additional (traditional) points of reference. • Objectives of Project XY-Z for this target segment are: • (1) develop a deeper understanding of the market opportunity; • (2) map opportunity to company’s strategic plan • (3) collaborate with ACP to share information • (4) develop a value proposition based on additional cultural/generational markers and personas • (5) recommend AAA IE go-to-market approach

3. Internal knowledge base (Values Filter) Marketing Strategy & Process- for new market segment target High PerformanceCulture Industry/regional strategies Enterprise Strategy* Exceptional Marketing & Direct Sales World-ClassAgencyPartnership Business Unit & Enterprise Strategic Planning Member-centric product development Top-Tier Claims Experience Current/ Potential AAA Capabilities Delivery Easy Selling & Servicing How to Win Industry/vertical Customer Messaging Decisions Value Propositions & Programs Competitor Positioning • Target segments by age, customer profile • Critical messaging success factors • Sales enablement & communication strategies • Channel (messaging) implications • Offers & Pricing AAA Share (all 24 states) Market Size Relative Economic Value Segment Profiles Customer Strategy Segment Definitions

4. Six Strategic Initiatives Drive Our Success Strategy Definition Tactic High Performance Culture World-Class Agency Partnership Exceptional Marketing & Direct Sales Member-Centric Product Development & Management Top-Tier Claims Experience Easy Selling and Servicing

5. Cultural Markers – Common to all Gen Y

6. Two Main Gen Y/Millennial Consumer Groups We identified two main groups that would be most applicable to the AAA IE marketing strategy: Independent: This group is comprised of individuals that have no direct or indirect (via friends/family) relationship with the AAA/AAA IE brands They would be reliant on brand advertising, word of mouth and social media for their awareness and consideration. Generational: This group is comprised of individuals that have a direct (via parents/relatives) relationship with the AAA/AAA IE brands They are part of the extended member base and can be reached in a variety of less expensive ways using lower cost media channels. The Generational group represents the “lowest hanging fruit” for AAA IE.

7. Independents Micaela Edwards 30, Single Education Bachelor’s Degree Occupation Marketing Program Mgr., Fortune 1000 Company Income $65,000 Goals Needs basic coverage at best price. Has short commute to office park on outskirts of city. “I feel comfortable doing everything online; I would prefer it. I use ratings sites, read online reviews, and trade notes with my housemates and friends on Facebook.” Generational Jackson McFarland 24, Single Education Bachelor’s Degree Occupation Teacher Income $36,000 Goals Needs minimal coverage. Living at home but has transitional job before deciding on graduate school or relocating for better opportunity. “I get whatever my parents have. However, I to complete most transactions online. The web saves me time so I can do other things like go snowboarding with friends.” Gen Y Personas

8. Independents Micaela Edwards Day in the Life Micaela moved to the city 8 years ago and found some roommates on Craigslist. She commutes to an office park outside the city in her civic hybrid vehicle. When she returns home, she has dinner with housemates, watches X Factor, and then reads spy novel before bed. She uses the internet for research primarily and will buy commodity-like products without talking to anyone. Clothing is rarely purchased online since she likes to try things on. Michaela has been financially independent since college and does not discuss financial matters with her parents. Offline Media Vogue, The New Yorker, Vegetarian Times Favorite Websites Etsy, Huffington Post, USTA.com, Banana Republic, Facebook, Kayak Technographics iPad, iPhone, MacBook Pro Generational Jackson McFarland Day in the Life Jackson recently completed a 5-yr teaching program. After a year with Vista, he moved back in with his parents and is in a transition period career-wise. He has lived in the same state his entire life. His parents are nearing retirement and have actively used a financial planner throughout their working lives. Jackson was typically just asks his parents what they have and do when it comes to finances and insurance. After a day of teaching in the local public school, he spends time watching movies on Netflix and playing a variety of games from Zynga and Electronic Arts. Although he lives at home now, he’s saving money and looking for the next opportunity; relocation is an option. Offline Media Rolling Stone, magazines coming to parents’ house (e.g. Consumer Reports and Reader’s Digest). Favorite Websites Threadless, Zynga, Gap, Twitter, Espn, Monster Technographics iPod, Android, Bose Wave Soundsystem Gen Y Personas (continued)

9. Customer Value Proposition Model – “Independents” Single Point of Difference / Positioning Statement For our “independent” customers looking for (Target Audience = Lifestage ‘20s’)…a relationship with their insurance company where they chose their level and type of engagement that will adapt to their changing needs. Only we (AAA IE) can rightfully claim to be (Single Point of Difference)…an insurance company that offers the value of membership and knows you better than other insurance companies. Based on this knowledge, we provide services geared toward your specific insurance needs and adapts to changing needs. • This is backed by our (Reason to Believe)… • Customer generated accolades regarding the member and insurance experience. • Superior claims coverage. • Help in understanding insurance economics which allows you to make the best decisions for your coverage choices. • Flexible engagement model that allows you the interaction choice. And gives our audience the benefit of (Customer Value)… Education Engagement Choice Evolving Coverage Peace of Mind + + = Compliment your learning with our expertise Online, mobile, phone & agent Changes with your lifestyle changes Insurance you don’t have to worry about

10. Customer Value Proposition Model – “Generational” Single Point of Difference / Positioning Statement For our “generational” customers looking for (Target Audience = Lifestage ‘20s’)…a relationship with their insurance company where they chose their level and type of engagement that will adapt to their changing needs. Only we (AAA IE) can rightfully claim to be (Single Point of Difference)…an insurance company that offers the value of membership and knows you better than other insurance companies. Based on this knowledge, we provide services geared toward your specific insurance needs and adapts to changing needs. • This is backed by our (Reason to Believe)… • Relationship with your relatives who have a personal relationship with the brand. • Rich heritage of superior claims service and company stability. • Help in understanding insurance economics which allows you to make the best decisions for your coverage choices. • Flexible engagement model that allows you the interaction choice. • Quality coverage commensurate with price. And gives our audience the benefit of (Customer Value)… Education Engagement Choice Evolving Coverage Peace of Mind + + = Validates what you know from relatives Agent already established, lower start up “costs” For full insurance coverage needs A brand you inherit, A brand you pass on

11. “Generational” is the first play Pick the low hanging fruit – before you climb the tree Marketing to Generational will result in lower policyholder acquisition costs while at the same time allowing the Insurance Exchange to remain relevant with the member and policyholder households that we serve. • Generational Trends • Sharp increase in multi-generational households according to a 2011 U.S. Census Bureau: • 19% of young men aged 25-34 live with their parents • 10% of young women aged 25-34 live with their parents • 59% of young men aged 18-24 live with their parents • 50% of young women aged 18-24 live with their parents • Generational evolve into Independents • Generational Opportunity • Multi-generational homes provides an immediate opportunity for increased penetration within existing member and policyholder households. Auto potential market = 10.8M • Parents will continue to influence money behaviors and beliefs • Parent and Generational belief systems will be closely aligned • Parental experiences (e.g., claims) will have a lasting impression • Brand relevance will persist as experiences are shared with Generational • Generational policy acquisition costs are significantly less • Generational Recommendation • Target Generational first. Most Generational will evolve into Independents. Independents will follow as new products and service capabilities are developed and deployed.

12. Leadership Learning – Team Learning • Scope management in any project is key • Defining outcomes on front-end is critical • Marketing process much more detailed than what we understood • Learning about another part of the organization has been invaluable, felt like a “Marketing Internship” • SMEs (Kevin Smith and Marvin Pannell) were incredibly valuable to the dialogue and shaping the outcome • Was a true team effort • Working well with a remote team member can be done • Face to face ACP meeting • Courage to reach out to key stakeholders • Collaboration and information sharing is critical • Potential to extend beyond marketing efforts

13. Appendix

14. Segment Definition – new market segment target Demographics Size/Value: Gen Y Usage • Shares experiences, “tweets” on Twitter & “likes” on Facebook • Technology capability – online payments, billing & customer service is important • Price point; high value • Seamless customer experience • Personal: must feel valued as individual • Peers/Parents influence • Caring & Socially Responsible • Energetic & Tech Savvy • Frugal, Single (vs. Household) • Value diversity • Now-oriented, always “On” • Social Media Influenced • Financial Security is Important • Job Stability is a concern • 25-35 yrs old (priority now) • The District of Columbia is home to the largest proportion of Generation Y, followed by Utah and Alaska • Average target population size across all IE states = 13% Behavioral (How they buy) Attitudinal (Why they buy) • Required need & protection of Insurance • Service/Quality (general policies & claims) • Me first, others next: Self confident • Civic responsibility • Price & Value motivated (Fees?) • Ease & transparency of doing business • Easy to stay a customer • Cumbersome to change (ie they hold a AAA debit card) • Want to give input and be heard for product or service improvement • Urban, experience oriented (vs. possessions) • Online research driven • Expectation of transparency • User-generated content/reviews are critical • Portion buy online • Other portion via phone • Use agency least amount • Buy electronically • Debit card capability is important Value Added Solutions • Services for which they would be willing to pay money • Like “free” services • Experiential ie AAA as a ‘portal’ for organized carpooling or volunteer events with members? AAA would have to be viewed as a go-to place (cheapest gas, frugal & health life & planet tips) • Immediacy of service (?) • Quality of “Caring” • Services that would lead them to choose a certain supplier • Values/Community contributions • Personal involvement in product development or service improvement • Sustainable practices & programs (LEED certified buildings or Wellness focus) AAA Capabilities Core processes: Purchase, Manage, Renew, Claims. The purchase process can be broken into 4 distinct stages: Research, Contact, compare, and make decision.

15. Segment Profile – new market segment target Insights • AAA Capabilities delivery arm must focus on the individual for Gen Y • Hear them, involve them in the pursuit of a better Product & world Profile • Caring & Socially Responsible • Always “on”, Me first • Immediacy & Transparency very important • Tech Savvy, Social Media • Want to co-create products • Frugal & Value driven • Diverse • Urban • Mobile & online interaction with members • Offer a means for members to share their ideas or experiences • Ease & immediacy of receiving service equated with high value may be the key to attract and retain this segment • Drive home the idea of a club, you are a member, you belong to…….a lifestyle? With AAA; you belong Successful Offer Reason to Believe Differentiation of Offer • Internal technology (systems, portal) that delivers speed, clarity and immediate coverage • Immediate and caring service that includes the opinion or experience of our member • Low Cost, High Value, interesting products & services • Value pricing – only paying for services you need and nothing you don’t • Product features that fit your current needs and change as your lifestyle does • Flexible communication and sales channels, making it easy to shop & buy • Transparency & timely communication throughout the claims process • Experiences- social media • Now & Frugal - insured now, pay later • Price point/Value • Caring/Values-what AAA does for communities

16. Market Size: All United States vs. IE States (by Age Groupings) Average Size of Ages 25-34: (Across All IE States) 21,546,050 (13%) *Note: states that are only partially in the IE territory are still counted in full

17. Relative Economic Value: Consumers Age 25-34 Profile States in the IE Footprint* *Note this was conducted at state level, so states that are only partially represented in IE footprint are counted in full **Data only available for age range 25-44. Interpret with caution.

18. AAA Share: Estimating Age 25-34 Market Size Across the IE States* *Note this was conducted at state level, so states that are only partially represented in IE footprint are counted in full

19. Competitor Positioning: What are National Insurers doing online?

20. Competitor Positioning: Where AAA could focus to differentiate itself online

21. Competitor Positioning: Website Strategy Summary We exist to create valued insurance relationships with AAA members through mutually beneficial partnerships with our ACP club partners and other club agencies to enhance the relevance and viability of AAA.

22. Competitor Positioning: Strategic Core Pillars