Talent Solutions for Mutual Insurers January 25, 2017
Agenda Introduction Aon s Integrated Approach About Aon Hewitt & Ward Group Talent, Rewards and Performance Industry Challenges and Initiatives Human Capital Strategy Survey Review Closing Summary and Q&A Additional Resources and Contacts Proprietary & Confidential 2
Introduction Aon s Integrated Approach Moderator: Chris Delhey Senior Managing Director, Aon Benfield Mutual Insurance Practice Group Leader +1.312.381.5566 chris.delhey@aonbenfield.com Speaker: Jeff Rieder, CPA Partner and head of Ward Group +1.513.746.2400 jeffrey.rieder@wardinc.com Speaker: Brian Ruggeberg, Ph.D. Partner, Aon Hewitt +1.516.342.2708 brian.ruggeberg@aonhewitt.com Proprietary & Confidential 3
An Overview of Talent, Rewards & Performance For most firms, talent is their largest expense and their greatest asset. Recruit Assess Engage Effectively determining reward strategies are critical to motivating and retaining a firm s key talent. What to pay How to pay it Objectively measuring performance against internal goals and the external market is key to assessing the effectiveness of the reward strategy. Benchmark Optimize Assess Proprietary & Confidential 4
Industry Challenges and Initiatives Proprietary & Confidential 5
An Active Industry Speed of Change Advanced analytics Focus Driving efficiency with new enterprise systems Product/Geographic expansion Marketing and servicing efforts are changing to focus on the millennial generation Sales/Distribution strategy continues to evolve Proprietary & Confidential 6
Management Perspective Senior leadership becoming less optimistic about the state of the industry. State of the Industry in 2016 Compared to 2015 Commercial Lines Personal Lines Overall Benchmark Moderately better 8% 17% 12% About the same 59% 50% 54% Moderately worse 33% 29% 32% Significantly worse 0% 4% 2% 0% 20% 40% 60% 80% 100% Source: Ward Group 2016 Business Environment Survey Proprietary & Confidential 7
U.S. Quarterly Year-over-Year Direct Premium Change Post 9/11 Total Personal Commercial Post Katrina 25% 20% 15% 10% 5% 0% -5% -10% 2016 Q3 marked the first time in 6 years total quarterly premium declined over prior year for commercial lines Source: SNL Financial Proprietary & Confidential 8
YTD Change in Direct Premium Through Q3 2016 (Versus YTD 2015) Fire & Allied -2.7% Med Prof Liab Comm'l Multi Prl 0.1% 0.6% Workers' Comp 1.6% Home / Farm 2.5% Fidelity & Surety 3.4% Comm'l Auto Liab 4.6% Private Auto (Est.) 7.0% Personal 5.6% Commercial 1.4% All Lines 3.6% -4% -2% 0% 2% 4% 6% 8% Source: SNL Financial Proprietary & Confidential 9
Direct Loss Ratio Total Personal Commercial 70.2% 63.4% 65.3% 63.3% 64.1% 62.5% 65.9% 59.2% 60.1% 62.3% 59.7% 56.2% 61.0% 56.3% 57.1% 60.0% 54.4% 52.2% 51.0% 51.0% 53.1% 2010 2011 2012 2013 2014 2015 2016-YTD Source: SNL Financial Proprietary & Confidential 10
Key Performance Measures - US Combined Ratio Net Premium Written to Surplus Total Expenses Worse 160% 140% 120% 100% 80% 60% 40% 20% 100.5% 75.0% 40.1% 2000 2015 Average 101.9% 93.2% 39.9% Better Source: Ward s Results Combined ratio is prior to effect of policyholder dividends Expenses include Underwriting, Loss Adjusting and Investment Projections are based upon first 3 quarters trends and do not try to anticipate reserve changes by companies Proprietary & Confidential 11
Employee Costs on the Rise Salaries & Benefits as % of Net Premiums Written 14% Ward's 50 Total Industry 13% 12% 13.0% 11% 10% 10.8% 9% 8% 7% 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Proprietary & Confidential 12
Hiring for Succession The workforce is changing, 42% of workers are over 50 while millennials (those born after 1980) make up approximately 21% of the employee population. Employee Age Distribution Percent of Workforce over 50 >60 11.4% <30 11.6% 32.6% 34.3% 36.2% 38.4% 42.7% 31-40 19.5% 51-60 31.3% 41-50 26.1% 2008 2010 2012 2014 2016 HR led employee training costs have increased 44% since 2013, from $421 per FTE to $606. Employee engagement has become more challenging. Remote workers expected to double in the next 3 years. *Source Ward Group HR and Employee Benefit Practices Study, 2016 Proprietary & Confidential 13
Hiring for Innovation 81% of insurance executives are looking to hire a broader range of talent with different perspectives and diverse skills. Focus on recruiting a unique mix of talent and demographics; think about out of the industry talent. Proprietary & Confidential 14
Hiring for Diversity 85% of organizations with a diversityfocused staffing strategy report increased performance Diversity is key to promoting innovation and creativity Bringing together diverse teams has proven to create a culture of adaptability and productivity Proprietary & Confidential 15
Insurance Carrier Employment 1540 1520 6.67% In Thousands 1500 1480 1460 1440 1420 1400 94,700 new jobs since April 2011 1380 1360 Source: U.S. Bureau of Labor Statistics Proprietary & Confidential 16
Job Openings in Finance and Insurance 300 250 220 224 253 274 In Thousands 200 150 100 121 176 162 182 50 0 2009 2010 2011 2012 2013 2014 2015 2016 Source: U.S. Bureau of Labor Statistics Proprietary & Confidential 17
12-Month Staffing Plans Increase vs. Expected Revenue Growth 100% 90% 80% 70% 66% 65% 66% 75% 69% 77% 86% 81% 87% 85% 84% 79% 80% 79% 60% 50% 40% 30% 56% 35% 44% 39% 44% 44% 51% 54% 56% 54% 62% 58% 66% 65% 66% 66% 20% 10% 0% Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Expected Revenue Growth Increase Employees Proprietary & Confidential 18
Recruiting Difficulty Continues Executives Technology Actuarial Underwriting Product Management Analytics Compliance Sales/Marketing Claims Underwriting-Reinsurers Accounting Operations July 2016 July 2015 0 2 4 6 8 10 On a scale of 1 10 (10 being most difficult), companies responded that positions are still moderately difficult to fill and recruiting is slightly more difficult in most disciplines than it was a year ago Positions rated 5 or above are considered moderate or difficult to fill Product line has a significant impact on the ease of filling positions 7 of 12 categories have seen recruiting difficulty increase slightly over the past year Proprietary & Confidential 19
Human Capital Strategy Assessment Survey Proprietary & Confidential 20
Human Capital Strategy Assessment Survey The Human Capital Strategy Assessment Survey assesses the human capital programs of insurance carriers to help determine how the talent spend is linked to business strategy Proprietary & Confidential 21
Profile of Participating Organizations Number of Participants 69 2015 Direct Premium Written (in Millions) Property and Casualty $523,792 Life and Health $166,573 Financial Metrics 2015 Average Revenue (in Millions) $500,368 2015 Average Premium Growth 2.5% 2015 Average Return on Equity 7.1% 2015 Average Return on Revenue 8.0% 2015 Average Expense Ratio (P&C) 43.1% 2015 Average Expense Ratio (L&H) 33.3% 2015 Average Combined Ratio (P&C) 97.5 Employee Statistics Annual employee turnover 8.8% Survey was conducted from May through July, 2016 Average tenure of employee population 10.5 Proprietary & Confidential 22
Top Business Priorities 70% of companies indicated that Human Capital/Talent Management is one of their top five business priorities over the next three years Human Capital/Talent Management Technology Implementation Operational Efficiency/Cost Management Customer/Client Service Revenue Growth Executing on Major Investments/Initiatives Innovation Product or Technology Competitive Positioning/Gaining Market Share Improve Loss Performance Risk and Regulatory Compliance Geographic Expansion Product Expansion Mergers & Acquisitions Improve/Manage Captial Adequacy Organizational Restructuring 1% 19% 17% 14% 10% 7% 7% 28% 36% 35% 39% 57% 57% 57% 70% Proprietary & Confidential 23
Effectiveness of Human Capital Programs and Processes + Strengths Opportunities 75% or more respondents consider the following programs and processes to be effective, highly effective, or exceptionally effective within their organizations. 52% or more respondents consider the following programs and processes to be ineffective or only moderately effective within their organizations. Benefits 90% Compensation 81% Retention of Top Talent 80% Organization Culture 77% Sourcing and Recruiting 75% Human Capital Analytics 83% Career Pathing and Mobility 65% Succession Planning 62% Leadership and Development 54% Diversity and Inclusion 52% Note: Full rating scale for effectiveness is Exceptionally Effective, Highly Effective, Effective, Moderately Effective, Ineffective Proprietary & Confidential 24
Effectiveness of Human Capital Programs and Processes Ineffective Moderately Effective Effective Highly Effective Exceptionally Effective Benefits Compensation Retention of Top Talent Organization Culture Sourcing and Recruiting Communication and Feedback Onboarding Employee Engagement Employee Assessment and Selection Employee Training Performance Management Reward and Recognition High Potential Development Diversity and Inclusion Leadership and Development Succession Planning Career Pathing and Mobility Human Capital Analytics 0% 25% 50% 75% 100% Proprietary & Confidential 25
Program Support and Alignment with Strategic Business Priorities Many organizations agree that human capital programs and processes regardless of effectiveness are not highly supportive of or aligned with strategic business priorities: Human Capital Programs and Process Percent of respondents rating as highly / completely supportive and aligned Top Five Most Effective Retention of Top Talent Benefits Organization Culture Compensation Sourcing and Recruiting Top Five Least Effective 52% 49% 48% 41% 40% Only 40%-52% of respondents rated the top five most effective HC programs and processes as highly or completely supportive and aligned. Leadership and Development Retention of Top Talent Diversity and Inclusion Career Pathing and Mobility 13% 29% 29% 28% 7%-29% of respondents rated the top five least effective HC programs and process as highly or completely supportive and aligned. Human Capital Analytics 7% Note: For the purposes of this reporting, the midpoint of the rating scale was excluded. The full supportive/aligned scale is: Not at all supportive or aligned; Somewhat supportive and aligned; Reasonably supportive and aligned; Highly supportive and aligned; Completely supportive and aligned Proprietary & Confidential 26
HR Function Components While many organizations agree that key components of their HR Functions are effective, less than half rated their HR Functions as supportive of or aligned with strategic business priorities: Over 70% of respondents rated key components of their HR Functions as effective, highly effective, or exceptionally effective However, less than 42% of respondents believe that their HR Function components are supportive of and aligned with their business priorities HR Technology and HR Processes represent specific risk areas 100% 80% 71% 74% 82% 82% 60% 40% 20% 0% 24% HR Processes 41% 16% HR Technology Note: For the purposes of this reporting, the midpoint of the rating scale was excluded. The full supportive/aligned scale is: Not at all supportive or aligned; Somewhat supportive and aligned; Reasonably supportive and aligned; Highly supportive and aligned; Completely supportive and aligned Proprietary & Confidential 27 32% HR Organization Design HR Capabilities 41% 39% HR Governance % of respondents rating HR component as effective, highly effective, or exceptionally effective % of respondents rating HR component as highly / completely supportive and aligned
Assessment of Organizational Capabilities Extent to which participants agreed or disagreed that the following organizational capabilities and skills met their organization's future business priorities. Policyholder understanding and intimacy Strongly Disagree Disagree Neutral Agree Strongly Agree Operational efficiency Technology aptitude Sales accumen Developing integrated solutions across business units Innovation Analytics and big data competency 0% 25% 50% 75% 100% Proprietary & Confidential 28
Capabilities Required to Meet Current and Future Business Priorities + Strengths Opportunities Meeting Current Business Priorities: Meeting Current Business Priorities: 62-76% of respondents strongly agree or agree that they have the following organizational capabilities and skills required to meet current business priorities Policyholder understanding and intimacy 76% Technology aptitude 72% Developing integrated solutions across business units 62% 12-18% of respondents strongly disagree or disagree that they have the following organizational capabilities and skills required to meet current business priorities Analytics and big data competency 18% Sales acumen 13% Developing integrated solutions across business units 12% Meeting Future Business Priorities: 63-71% of respondents strongly agree or agree that they have the following organizational capabilities and skills required to meet future business priorities Policyholder understanding and intimacy 71% Operational efficiency 65% Technology aptitude 63% Meeting Future Business Priorities: 13-25% of respondents strongly disagree or disagree that they have the following organizational capabilities and skills required to meet future business priorities Analytics and big data competency 25% Developing integrated solutions across business units 18% Technology aptitude 13% Note: For the purposes of this reporting, the midpoint of the rating scale was excluded. The full scale is: Strongly Disagree; Disagree; Neutral; Agree; Strongly Agree Proprietary & Confidential 29
My Company Has Practices Required to Meet Future Business Priorities The chart demonstrates number of participant s that agreed or strongly agreed that their organization had the practices to meet their organization's future business priorities. 64% 61% 60% 54% 49% 49% 38% 32% 30% Employee value proposition helps to attract and retain the employees Company has an attractable organizational culture Workforce composition is appropriate and adequate Appropriate organizational structure and spans of control are in place Current workforce has sufficient skills and capabilities Current workforce has ample geographic mobility Organization has requisite change management processes and capabilities Organization has a defined Human Capital Strategy Have talent pools and leadership pipeline needed to fill key roles Proprietary & Confidential 30
Practices Required to Meet Current and Future Business Priorities + Strengths Opportunities Meeting Current Business Priorities: Meeting Current Business Priorities: 74-80% of respondents strongly agree or agree that they have the following company-wide priorities required to meet current business priorities Current workforce has sufficient skills and capabilities 80% Workforce composition is appropriate and adequate 75% Company has an attractable organizational culture 74% Meeting Future Business Priorities: 60-64% of respondents strongly agree or agree that they have the following company-wide priorities required to meet future business priorities Employee value proposition helps to attract and retain the employees 64% Company has an attractable organizational culture 61% Workforce composition is appropriate and adequate 60% 19-32% of respondents strongly disagree or disagree that they have the following company-wide priorities required to meet current business priorities Have talent pools and leadership pipeline needed to fill key roles 32% Organization has requisite change management processes and capabilities 20% Organization has a defined Human Capital Strategy 19% Meeting Future Business Priorities: 28-45% of respondents strongly disagree or disagree that they have the following company-wide required to meet future business priorities Have talent pools and leadership pipeline needed to fill key roles 45% Organization has a defined Human Capital Strategy 30% Organization has requisite change management processes and capabilities 28% Note: For the purposes of this reporting, the midpoint of the rating scale was excluded. The full scale is: Strongly Disagree; Disagree; Neutral; Agree; Strongly Agree Proprietary & Confidential 31
Critical Needs for the Future Participants were asked what will be the most critical business needs for the future. Top 5 Most Common Themes Technology Talent Customer Centricity Analytics / Data Leadership Proprietary & Confidential 32
Practices to Start, Continue and Stop Participants were asked what activities the human resources organizational should Start, Continue and Stop in order to meet future needs Activities to Start Activities to Continue Activities to Stop 1. 2. 3. 4. 5. 1. 2. 3. 4. 5. 1. 2. 3. 4. Planning Talent Development Succession Planning Leadership Development Organizational Analytics Proprietary & Confidential Talent Development Employee Training Focus on Culture Employee Engagement Succession Planning Manual/Outdated Processes Rigid Performance Evaluations Operate on Old Technology Eliminate Paper 33
Implications and Q&A Financial results are losing steam more quickly. Expense management is becoming a greater priority with market headwinds. Finding and retaining top talent is more difficult than ever. Data analytics driving more company-wide decisions but companies indicate weakness in their capabilities. The labor market is very competitive and expected to remain that way. Many companies feel a need for new technology and updated processes in order to be successful in the future. Human Capital/Talent Management is a top priority of most organizations to ensure proper alignment to business strategy to help meet current and future business objectives. Proprietary & Confidential 34
What questions do you have?
For more information or to schedule a one-on-one meeting: Visit Aon Benfield s Mutual Insurance webpage for an overview of our offerings including: Growth strategies Industry leading analytics Capital solutions Operational consulting and benchmarking Innovative reinsurance Aon Benfield inquiries, contact: Chris Delhey at +1.312.381.5566 or chris.delhey@aonbenfield.com Ward Group inquiries, contact: Jeff Rieder, CPA at +1.513.746.2400 or jeffrey.rieder@wardinc.com Download Aon s Talent Solutions Info Sheet Aon Hewitt inquiries, contact: Brian Ruggeberg, Ph.D. at +1.516.342.2708 or brian.ruggeberg@aonhewitt.com Proprietary & Confidential 36
Biographies Chris Delhey - Leader of Aon Benfield's Mutual Insurance Practice Group Chris has 30 years of industry experience including servicing a highly diverse book of business: general casualty/cmp, personal lines, national and regional property, workers compensation, professional liability, directors and officers, financial institutions, fidelity/surety, and miscellaneous errors and omissions. One point of concentration within Chris s current client partnerships is reinsurance specific to carriers insuring non-profits, mutual insurance companies, and other cooperative financial institutions. Jeff Rieder - Partner and Head of Ward Group Jeff has 22 years of experience in the insurance industry with expertise in the propertycasualty and life segments. He has been involved with over 400 projects for domestic and international insurance companies, covering a range of performance and strategic evaluations. Jeff leads Aon s global performance benchmarking practice for insurance and the U.S. insurance compensation practice. Brian J. Ruggeberg, Ph.D. Partner, Aon Hewitt Dr. Ruggeberg has 25 years of consulting experience and has been involved in the development and implementation of various assessment and selection, leadership assessment and development, performance management, and training programs. He also serves as the Talent Enablement leader for Aon Hewitt s Talent practice. Proprietary & Confidential 37
About Aon Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 72,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative risk and people solutions. For further information on our capabilities and to learn how we empower results for clients, please visit: http://aon.mediaroom.com. Aon plc 2017. All rights reserved. The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Proprietary & Confidential 38