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Enterprise Scorecard Measurement Definitions

Enterprise Scorecard Measurement Definitions. 01/15/99. Contents. Page. Measurement overview ---------------------- 3 Financial Perspective ------------------------- 5 Earnings growth GAAP ROE RBC Capital plan Product & distribution mix

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Enterprise Scorecard Measurement Definitions

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  1. Enterprise ScorecardMeasurement Definitions 01/15/99

  2. Contents Page • Measurement overview ---------------------- 3 • Financial Perspective ------------------------- 5 • Earnings growth • GAAP ROE • RBC • Capital plan • Product & distribution mix • Customer ----------------------------------------- 11 • Rating within peer group • Customer satisfaction index • Retention • Sales versus plan (variance) • Policies under administration • Total policyholders / total members • Product profitability • Process ------------------------------------------- 18 • Growth in target markets • Expense ratios (3) • Technology ROI • Learning & Growth ----------------------------- 22 • PDP’s completed leadership& employees • Incentive alignment • Employee survey results • Leadership strength • Employee ROI • Change initiative status

  3. Enterprise Scorecard To be an innovative, growing, high performance,public financial services enterprise that makes the future better for all our stakeholders. Objectives: Win through people, Grow profitably, Create value Financial Perspective • Earnings growth • Unleveraged GAAP ROE • RBC • Capital plan • Product & distribution mix Customer Perspective • Policies under administration • Sales (Premium) vs. plan (variance) • Product profitability • Retention (Policyholders, Agents, “Partners”) • Customer Satisfaction Index • Rating within peer group Internal Process Perspective • Growth in target market segments vs. plan • Technology ROI • Expense measures (e.g.Ttl general expenses as % of Ttl prem.; Investment expense ratio) Learning & Growth • Employee survey results • PDP’s completed for all leadership & % employees • Leadership strength • ROI (employee) • Incentive alignment • Initiative change status

  4. Enterprise Performance Measures Enhance Economic Value Financial • GAAP ROE1 • Earnings Growth1 • RBC1 • Capital Requirements1 • Policies under administration1 • Total policies / Total members1 • Sales versus plan1 • Product Mix1 • Distribution Mix2 Customer • Retention (lapse) 1 • Customer Sat. Index2 • Product profitability (New & existing products)2 • Rating1 • Target Market Growth2 • Expense Ratios1 • Technology ROI1 Process Frequency Monthly Employee Sat. Index2 Quarterly Learning & Growth Annual % PDP Forms Completed (Leadership) 2 Leadership Strength 2 Employee ROI1 % PDP Forms Completed2 Incentive Alignment2 1Data currently available2 Data requires development Initiative StatusMeasure 1

  5. Financial

  6. Earnings Growth Measure: Earnings Growth Owner: _____________________________ Perspective: Financial Availability: Yes No Critical Success Factor: Quality earnings growth consistent Data Source: Actual and project consolidated with plan Formula: (Current Qtr Profit - Prior Qtr Profit )/ Prior Qtr Profit * 100%. Definition: Percentage growth in consolidated GAAP earnings as defined by: TO BE COMPLETED Frequency: Daily Quarterly Weekly Annually Monthly Other:___________ Benchmark Internal External Source: _______________________________ Current Results: ________________________ Target Results: Short Term: Long Term: 15%Alternative Measure(s): * Comments: Check growth rate targets. % increase over last quarter.

  7. Unleveraged GAAP ROE Measure: Unleveraged GAAP ROE Owner: _____________________________ Perspective: Financial Availability: Yes No Critical Success Factor: Quality ROE consistentwith plan Data Source: Actual and project consolidated Formula: Industry & AUL’s formula FORMULA TO BE COMPLETED Definition: Consolidated GAAP earnings divided by average GAAP equity Frequency: Daily Quarterly Weekly Annually Monthly Other:___________ Benchmark Internal External Source: Moody’s and other (TBD) Current Results: ________________________ Target Results: Short Term: Long Term: 10 - 15%Alternative Measure(s): Comments: Check formula differences. Inclusive of Investment Gains?

  8. Risk-Based Capital Measure: RBC Owner: _____________________________ Perspective: Financial Availability: Yes No Critical Success Factor: Capital & Risk Management Data Source: Blue Book Formula: per NAIC rules Definition: Consolidated GAAP earnings divided by average GAAP equity Frequency: Daily Quarterly Weekly Annually Monthly Other:___________ Benchmark Internal External Source: _______________________________ Current Results: ________________________ Target Results: Short Term: 270% Long Term: TBD (250%)Alternative Measure(s): Capital Plan, ALM Comments:

  9. Capital Plan Measure: Capital Plan Owner: _____________________________ Perspective: Financial Availability: Yes No Critical Success Factor: Capital & Risk Management Data Source: TO BE DETERMINED Formula: Summation of total capital needs for all products by quarter for next 6 quarters and sources of funds Definition: Consolidated quarterly projection of capital needs for all products projected for 6 quarters and sources of funds (e.g. LOB, AUL, other) Frequency: Daily Quarterly Weekly Annually Monthly Other:___________ Benchmark Internal External Source: _______________________________ Current Results: ________________________ Target Results: Short Term: Long Term: Alternative Measure(s): RBC, ALM Comments:

  10. Product & Distribution Mix Measure: Product & Distribution Mix Owner: _____________________________ Perspective: Financial Availability: Yes No Critical Success Factor: Balanced Portfolio of Business Data Source: LIMRA Definition: Sales by product lines* versus the industry Sales by distribution channel10% or greatershare of production (Agents, IMO, Legacy, JointVenture, Strategic Alliance, Other Formula: Sales by product lineSales by channel Frequency: Daily Quarterly Weekly Annually Monthly Other:___________ Benchmark Internal External Source: _______________________________ Current Results: ________________________ Target Results: Short Term: Sales vs. plan 4 Channels with > 10%production Alternative Measure(s): Product line ranking versus industry (goal = top 10) Comments: Annuity production will count only retained business (not 100% reinsured). “Mock Data” “Mock Data”

  11. Customer

  12. Rating within Peer Group Measure: Rating within Peer Group Owner: _____________________________ Perspective: Customer Availability: Yes No Critical Success Factor: Maintain appropriate rating Data Source: Formula: Definition: Ratings from A.M. Best, Duff & Phelps, S&P and Moody’s Frequency: Daily Quarterly Weekly Annually Monthly Other:___________ Benchmark Internal External Source: _______________________________ Current Results: ________________________ Target Results: Short Term: Current ratings Long Term: to be determinedAlternative Measure(s): RBC, Capital Plan Comments:

  13. Customer Satisfaction Index Measure: Customer Satisfaction Index Owner: _____________________________ Perspective: Customer Availability: Yes No Critical Success Factor: Provide quality service meeting Data Source: _________________customer needs Formula: (TBD) Results from 1)CAP Survey, 2) New Business Survey, 3) Surrender Survey (top non-financial reasons), 4) Agent Survey Definition: 4 surveys rating customer satisfaction Frequency: Daily Quarterly Weekly Annually (Agent Survey) Monthly Other:___________ Benchmark Internal External Source: _______________________________ Current Results: ________________________ Target Results: Short Term: LIMRA CAP Survey above industry averages, New Business > 4.5, 95% positive results from agents, Alternative Measure(s): Retention Comments: Agent survey requires annual development (with AGA). Review and redefine Surrender Survey Agent Survey to be developed Mock Data

  14. Retention Measure: Retention Owner: _____________________________ Perspective: Customer Availability: Yes No Critical Success Factor: Provide quality service meeting Data Source: #’s 1 & 4 Availablecustomer needs Formula: (TBD) 1) Lapse study, 2) Policyholders with > 1 policy, 3) IMO’s, GA’s, and Agents meeting minimum requirements, 4) No. of new strategic partners Definition: Retention of policyholders, agents and partners Frequency: Daily Quarterly Weekly Annually Monthly Other:___________ Benchmark Internal External Source: _______________________________ Current Results: ________________________ Target Results: Short Term: Lapse Study: Actual vs. Expected, Minimum contract no.’s: IMA’s 200,000, GA’s 20,000, Agents 5000, Strategic partner growth: 4Alternative Measure(s): Customer Satisfaction Survey results Comments: Develop numbers 2 and 3 in formula

  15. Sales versus Plan (Variance) Measure: Sales versus plan (variance) Owner: _____________________________ Perspective: Customer Availability: Yes No Critical Success Factor: Expand customer base & penetration Data Source: Board Report, End of Mo. Salesof existing customers Formula: Sales: 100% of WL Premium + Target of UL & VUL + 10% x Single Premium + 10% x Annuity premium collected (per month compared to prior year) Definition: Continuous Paid Premium Equivalent comparedto plan (measurement of the variance) Frequency: Daily Quarterly Weekly Annually Monthly Other:___________ Benchmark Internal External Source: _______________________________ Current Results: ________________________ Target Results: Short Term: X% varianceAlternative Measure(s): Policies Under Administration Comments: Ensure formula accurately reflects actual revenue Mock Data

  16. Policies Under Administration Measure: Policies Under Administration (2) Owner: _____________________________ Perspective: Customer Availability: Yes No Critical Success Factor: Expand customer base & penetration Data Source: Available but not monthlyof existing customers Formula: 1) Total policies under administration, 2) # of policies/No. of members Definition: Volume growth in policies under administrationand Policyholders with multiple policies Frequency: Daily Quarterly Weekly Annually Monthly Other:___________ Benchmark Internal External Source: _______________________________ Current Results: ________________________ Target Results: Short Term: Alternative Measure(s): Sales, Policyholders with > 1 policy, # of policies/No. of members Comments: Review prior year performance to assist in target setting. Determine if compared month to month or current month vs. year ago for seasonality adjustments.

  17. Product Profitability Measure: Product profitability Owner: _____________________________ Perspective: Customer Availability: Yes No Critical Success Factor: Develop products that deliver Data Source: _______________________true value to the customer and enterprise Formula: ROI and ROE by product Definition: ROE and ROI for new and existing products Frequency: Daily Quarterly: Existing products Weekly Annually Monthly Other: as-needed for new products Benchmark Internal External Source: _______________________________ Current Results: ________________________ Target Results: GAAP ROE: 12% Subsidiaries: ROI: 12%, TS - 1.75 CAL, ILICo: ROI = 10%, TS = 3.00 CALAlternative Measure(s): Comments:

  18. Process

  19. Growth in Target Markets Measure: Growth in target markets Owner: _____________________________ Perspective: Process Availability: Yes No Critical Success Factor: Alignment of products, services & Data Source: _________________delivery to target customer segments Formula: Premium sales growth by market> (Current Month Sales - Prior Month Sales) / Prior Month Sales Definition: Sales growth. Target Markets: Business Owners and Retirement Savings Frequency: Daily Quarterly Weekly Annually Monthly Other:___________ Benchmark Internal External Source: _______________________________ Current Results: ________________________ Target Results: Short Term: 10% annual growthAlternative Measure(s): Comments: Report requires development. New markets may be added in the future Mock Data Should be % increase Mock Data

  20. Expense Ratios Measure: Expense Ratios Owner: _____________________________ Perspective: Process Availability: Yes No Critical Success Factor: Efficient & Effective Business Data Source: GLFundamentals Formula: 1) General Expenses / Total Premium 2) General Expense/Ave. Assets 3) Expenses + Commissions / Ave Assets Definition: Expenses as a % of premium and assets Frequency: Daily Quarterly Weekly Annually Monthly Other:___________ Benchmark Internal External Source: Moody’s Current Results: ________________________ Target Results: Short Term: Long Term: Alternative Measure(s): Different expense ratios, process cycle times Comments: Sample Data

  21. Technology ROI Measure: Technology ROI Owner: Larry H. Perspective: Process Availability: Yes No Critical Success Factor: Optimize Technology Infrastructure_ Data Source: GL Formula: (Revenue - (General Expenses - IT Expenses))/ (IT Expenses) Definition: Measures value added of investing in informationtechnology. Based on Saratoga’s Human Capital ROI. Frequency: Daily Quarterly Weekly Annually Monthly Other:_________ Benchmark Internal External Source: LOMA TIPE STUDY Current Results: 15 Target Results: Short Term: 18, Long Term 20Alternative Measure(s): Technology Scorecard IndexComments: Excludes outsourcing IT costs

  22. Learning & Growth

  23. PDP’s Completed for All Leadership Measure: PDP’s completed for all leadership Owner: __________________________ Perspective: Learning & Growth Availability: Yes No Critical Success Factor: Development of future and current Data Source: HR (TBD)leaders Formula: # PDP’s completed/(# of managers + officers) Definition: Professional Development Plans completed jointly by employee and manager and reviewed and updated annually Frequency: Daily Quarterly Weekly Annually Monthly Other:_________ Benchmark Internal External Source: _________________________ Current Results: _______________________ Target Results: Short Term: 100% completionAlternative Measure(s): Comments:

  24. PDP’s Completed for All Employees Measure: PDP’s completed for all employees Owner: __________________________ Perspective: Learning & Growth Availability: Yes No Critical Success Factor: Recruiting & Retention Data Source: HR (TBD)and Education & Training Formula: # PDP’s completed/(# of employees - managers - officers) Definition: Professional Development Plans completed jointly by employee and manager and reviewed and updated annually Frequency: Daily Quarterly Weekly Annually Monthly Other:_________ Benchmark Internal External Source: _________________________ Current Results: _______________________ Target Results: Short Term: 50% completion by ‘99Alternative Measure(s): Comments:

  25. Incentive Alignment Measure: Incentive Alignment Owner: __________________________ Perspective: Learning & Growth Availability: Yes No Critical Success Factor: Well aligned incentives Data Source: AIP, LTI, Sales Incentives and Education & Training Formula: (TO BE DETERMINED) Definition: Incentive plans are in place which link individual and corporate success. Ensure a correlation between salaries + bonuses + long term incentives and GAAP ROE Frequency: Daily Quarterly Weekly Annually Monthly Other:_________ Benchmark Internal External Source: _________________________ Current Results: _______________________ Target Results: Short Term: Balanced Scorecard measuresAlternative Measure(s): Compensation benchmark Comments:

  26. Employee Survey Results Measure: Employee Survey Results Owner: __________________________ Perspective: Learning & Growth Availability: Yes No Critical Success Factor: Employee Satisfaction Data Source: Possible LOMA customized survey Definition: Annual employee survey results coveringcritical areas of concern Formula: (TBD) Frequency: Daily Quarterly Weekly Annually Monthly Other:_________ Benchmark Internal External Source: LOMA Current Results: _______________________ Target Results: Short Term: Meet benchmarks Long Term: Exceed benchmarksAlternative Measure(s): Other survey results, exit interview results, new hire survey results, phone calls/requests Comments: Possible index entailing quality of work life, employee involvement, quality service, teamwork and employee morale

  27. Leadership Strength Measure: Leadership Strength Owner: __________________________ Perspective: Learning & Growth Availability: Yes No Critical Success Factor: Developing current & future leaders Data Source: Internal analysis tool (TBD) Definition: Depth of leadership skills and talent at all levelsof the organization to ensure both short and long term success Formula: (TBD) Frequency: Daily Quarterly Weekly Annually Monthly Other:_________ Benchmark Internal External Source: __________________________ Current Results: _______________________ Target Results: Short Term: Alternative Measure(s): PDP’s completed for all leaders, skill bank database, competency assessment Comments: Initial annual assessment and then quarterly. Includes succession planning, talent audit form and discussion of needs vs. resources

  28. Employee ROI Measure: Employee ROI Owner: __________________________ Perspective: Learning & Growth Availability: Yes No Critical Success Factor: Education & Training Data Source: GL Formula: (Revenue - (Operating Expense - Comp Costs - Benefit Costs - PTNW))/ (Comp Costs + Benefit Costs + PTNW) Definition: The value added of investing in the organizationshuman assets Frequency: Daily Quarterly Weekly Annually Monthly Other:_________ Benchmark Internal External Source: Saratoga Report Current Results: _______________________ Target Results: Short Term: Exceed industry benchmarkAlternative Measure(s): Comments: Data available by company size and percentiles. Consider quarterly reporting.

  29. Change Initiative Status Measure: Change Initiative Status Owner: __________________________ Perspective: Learning & Growth Availability: Yes No Critical Success Factor: Employee Satisfaction Data Source: TBD Formula: # of initiatives (started, completed, on-going), status (on-time, ahead, delayed, postponed, Owner, resources involved Definition: Current status of major enterprise changeinitiatives for monitoring and evaluation on resource usage Frequency: Daily Quarterly Weekly Annually Monthly Other:_________ Benchmark Internal External Source: Current Results: _______________________ Target Results: Short Term: Alternative Measure(s): Comments:

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