“Experiences are as distinct from services as services are from goods.”

1. Flexible FuturesIntegration and MigrationTo Achieve Value Chain ResultsKevin S. Kelly,Managing Director – U.S. Insurance Industry,Microsoft Corporation

2. “Experiences are as distinct from servicesas services are from goods.” Joseph Pine & James Gilmore, The Experience Economy:Work Is Theatre & Every Business a Stage

3. experience

4. experience

5. experience enhancement improvement innovation

6. experience customer employee operations

7. experience • Choice of methods for interaction • Choice of products and services • Speed of delivery • Accuracy in detail • Competitive pricing • Brand-based value-adds customer employee operations

8. experience • Enhanced productivity • Confidence in applications • Intuitive interfaces • Fewer keystrokes to destinations • Reasonable workflow • Appearance of competence to customer • Ability to achieve “customer hero” status customer employeeoperations

9. experience • Return on non-discretionary investments • Effective operations risk management • Efficiency - Once and done • Quality, aggregated & timely reporting • Agile business process change without rebuilding whole organization customer employeeoperations

10. Industry Challenges • Customer satisfaction and retention • Growth and quality of business • Human-intensive, paper-bound workflows • Poor distribution channel integration • Regulatory compliance pressures • High legacy system costs experience Frustration!

11. Policy Administration Systems • High-Cost of Maintenance/Development • Business Demands Now Exceed Capacity to Deliver Regularly • Workflow Desires Meet Temporal Roadblocks … A Dictatorial Platform • Innovation and Differentiation Are Prevented experience Frustration!

12. experience customer employee operations • “For specialty lines, our phone quotes reduced from 800 per month to essentially 0 and our policies written from 400 to essentially 900.“ • Unitrin • “We lowered our ratio of support staff to underwriters from two staff members per underwriter to .5 to .75 members per underwriter.” • - Transamerica Reinsurance • “This application has allowed Farmers to be much more responsive to our customer needs. We’ve been able to reduce our rental car payment process between 30 and 40 percent.” • - Farmers Insurance

13. experience customer employee operations “Based on our Test Drive experience, this architecture fully supports our future product needs and transforms our product development process from a system driven to a business driven process. This new platform will help us to improve our speed to market capability and reduce our costs enabling us to remain competitive. As an added bonus we will be able to convert our existing annuity products onto this same platform which will result in cost and operational efficiencies.” - Merrill Lynch

14. November 2002 Total plans written - 1769 (8 plans per Advisorper annum) Advisor Penetration - 79% Close ratio - 40% Year to Date Q1 2004 Total plans written - 2349 (47 plans per Advisor per annum) Advisor Penetration - 99% Close ratio – 62% experience customer employee operations HSBC Bank USA - Financial Planning Services

15. Product Dev & Configuration Claims Processing Policy Administration Point-of-Sale & Service Underwriting Reinsurance experience customer employee operations business process management + service oriented architecture The Microsoft Insurance Value Chain

16. What Is The Insurance Value Chain? A Business and Technicalapproach for delivering: enhanced, improved and innovative experiences for our insurance customers

17. A Results-Oriented Approach … Successful Relationships Customer Effective Organizations Employee Operational Excellence Operations

18. Self-Service Experiences Assisted Service Experiences Search and Delivery Experiences Inquiry Analysis Collaboration Tracking, BPM / Workflow, Compliance Business and Technical Systems Experiences Development Administration Risk Mgmt. Transactions Reporting R.O.I. … Through Connected Experiences Development / Integration Tools Customer Employee Operations

20. “experiences” to be expected … • Workflow unimagined, becomes possible • Applications can be “orchestrated” and “composed” into logical “processes” that support the functions of the humans who need to use them • IP Assets (yours and those of third-parties) can be summoned and “knit-together” to be utilized in unique and highly customized ways • Productivity can be assumed and increased … not threatened or reduced • Costs can be managed and reduced • Outcomes can become more predictable

21. Connected Systems How Are We Executing?

22. How Are We Executing? We are taking the industry from a segregated set of “siloed” … non-interoperating business processes … … to a streamlined set of integrated applications, workflows and platforms … … all while reducing the overall costs of deploying, modifying and maintaining those processes.

23. How Are We Executing? • Sourcing Microsoft applications that are best-of-breed examples of insurance business processing, ranging from point-of-sales-and-service through re-insurance. • Providing those partners with a “framework” for integrating their applications, based on Microsoft .NET Web Services and industry standards for Forms andEDI transactions. • Pairing and Pre-integrating those applications, in an effort to reduce millions of dollars of post-purchase integration pain on the part of ourinsurance customers.

24. How Are We Executing? • Sourcing Microsoft applications that are best-of-breed examples of insurance business processing, ranging from point-of-sales-and-service through re-insurance. • Providing those partners with a “framework” for integrating their applications, based on Microsoft .NET Web Services and industry standards for Forms andEDI transactions. • Pairing and Pre-integrating those applications, in an effort to reduce millions of dollars of post-purchase integration pain on the part of ourinsurance customers.

25. Insurance Value ChainApplication Areas Support Systems Distribution and Service Channels Financial Management Systems Product Development General Ledger Actuarial Agency Systems Internet Accounting Compensation Mgmt Call Centers Wireless Asset/Liability Mgmt Fraud Detection CRM Investment Acctng Billing & Collections Core Insurance Product 1 Outside Networks Reporting and Analysis Product 2 Financial Reporting Claims Adjusters Underwriting Underwriting Regulatory Reporting Appraisers Policy Administration Policy Administration MIS Insurance Bureaus Claims/Benefits Claims/Benefits Compliance Reinsurers

27. Attach & Integrate Lift & Shift Replace & Innovate

28. Attach and Integrate:Enhance and Extend Features and Functions • Risk Mitigation on Code, Code Skills and Platforms • “Nibble around the edges” • Drill into existing platforms to provide access to data and business logic from new user interfaces and new systems. • Integrate existing assets with newly developed or purchased assets • Trying to workflow-enable legacy systems • Provide capability of accessing IVC partner applications, tools and/or services

29. Lift & Shift:Improvement of Platform and Economic Operations • Risk Mitigation on Code and Code Skills • “Lift” legacy application code off of the mainframe and place it in a COBOL.NET run-time environment • “Shift” underlying hardware and operating system with Intel Platform and Windows 2003 Server • Preserve existing code and coding skills • Alter the economics and performance of the underlying platform by changing Hardware and Software Licensing models • Provide capability of accessing IVC partner applications, tools and/or services

30. Replace & Innovate:Becoming Agile and Dynamic … It’s time! • Risk Mitigation on business-demand lapses and competitive advantage • Bring data and Business Logic over to new systems • Take full advantage of new applications and innovation • Most flexible

31. How Are We Executing? • Sourcing Microsoft applications that are best-of-breed examples of insurance business processing, ranging from point-of-sales-and-service through re-insurance. • Providing those partners with a “framework” for integrating their applications, based on Microsoft .NET Web Services and industry standards for Forms andEDI transactions. • Pairing and Pre-integrating those applications, in an effort to reduce millions of dollars of post-purchase integration pain on the part of ourinsurance customers.

32. Systems People Information Devices .NETSoftware to connect information, people, systems and devices

33. Interoperability Networking UNIX Systems Data Management XML Identity Web Services Industry Standards Applications Languages Legacy Hosts

34. A Global Workflow PlatformIntegrating people and processes Rewiring the Economy Direct connections Web services People and processes

35. Connected NetworksWiring-up people and processes through software Personal Networks Social Networks Business Networks Customer Relationship Networks Value Chain Networks Scientific Networks

36. Connected SystemsSOA (Service Oriented Architecture) Connected SystemsBreakthroughs • Advanced Web services • Workflow and Process control • Empowers the Business-side • Real-time or Real-enough-Time • “Reuse” made real!

37. Connected SystemsSOA (Service Oriented Architecture) • Align IT assets & business vision • Infrastructure to enhance information flow through customers, employees and operations • Leverage and adapt existing investments • Build systems that reflect the dynamic nature of business • “Future-proof” systems (through loose coupling) • Simplified cross platform integration • Secure, Transacted and Reliable business • .NET creates them by default & helps incorporate existing applications

38. Microsoft Working with All Financial Services Standards X9 NACHA ECCHO

40. Competitive Information • How is .NET stacking up against JAVA for developer preference? • How is the Intel platform stacking up against Mainframe performance? • How does the Intel platform stack up against Mainframe pricing? • What do price/performance futures look?

41. Professional Developers (US) “Which one platform will be used for the majorityof your developmentwork in 2004?” Source: Forrester, May 2004

42. Mainframe Performance vs. 32-bit Intel CPUs “I PREDICT THAT THE LAST MAINFRAME WILL BE UNPLUGGED ON MARCH 15, 1996.”Stewart Alsop, InfoWorld, March 1991 MIPS Performance per CPU Same data, logarithmic axis Sources: Intel MIPs – Intel MF MIPS – Gartner Group Alsop’s Prediction

43. Typical System Comparison 1 Gartner Research – Mike Chuba 2 Gartner Research – John Philps, http://www.zjournal.com/PDF/Phelps Article.pdf 3 IBM price reduction press release Aug, 2003 4 $65 per gigabyte for IBM ESS 1.2 terabyte systems, which is the benchmark case 5 Unisys pricing from Unisys sales desk – 16 x 2GHz, 32 GIG RAM, Data Center, 1.2 TB RAID

44. Ratios include server infrastructure hardware costs required to deliver standard data center operations (e.g., application development, testing, quality assurance, agility, high availability), but exclude software and personnel costs. Source: Meta Group

45. How Are We Executing? • Sourcing Microsoft applications that are best-of-breed examples of insurance business processing, ranging from point-of-sales-and-service through re-insurance. • Providing those partners with a “framework” for integrating their applications, based on Microsoft .NET Web Services and industry standards for Forms andEDI transactions. • Pairing and Pre-integrating those applications, in an effort to reduce millions of dollars of post-purchase integration pain on the part of ourinsurance customers.

46. Company A Company B Mobile Employees Mobile Employees Remote Office/Consumers Remote Office/Consumers Customers Partners Suppliers We Are Fulfilling a Technical Imperative

47. And Delivering Business Results “Consistency” “Understanding” Customer Intimacy Operational Efficiency Core Business Practices Employee Innovation Value Chain “Sense & Act” “Leadership” “Throughput”

48. Results, Leadership, Vision The Next Wave: Microsoft Vision, Leadership and Results Business and industry leadership Solid financial performance Unparalleled investments Best partner ecosystem Vision and roadmap for the future

49. The Microsoft Insurance Value Chain The best way to

50. Kevin KellyManaging Director – U.S. Insurance Industry, Microsoft Corporationkevkel@microsoft.comhttp://www.microsoft.com/insurance Questions?