Time to Transform: Business Realities Demand Newer Life and Annuity Core Systems

2. Time to Transform: Business Realities Demand Newer Life and Annuity Core Systems David Shively October 1st 2014 Oracle Confidential – Internal

3. Program Agenda 1 Insurance Market: Overview & Assessment Time of Challenges - Business Realities Transformation through System Replacement Transformation through Outsourcing Time to Transform 2 • 3 • 4 • 5 Oracle Confidential – Highly Restricted

4. Market Assessment – “Growth In 2013, global life insurance premiums written were USD 2 608 billion, with growth slowing to 0.7% from 2.3% in 2012”(Source - Swiss Re Sigma ) “Strong growth in Western Europe and Oceania was offset by a contraction in North America and stagnating sales in advanced Asia. Premiums contracted by 7.7% in the US. This was mainly because large corporate deals that had boosted group annuity business in 2012 were not repeated. In emerging markets, life premium growth improved to 6.4% in 2013. Growth was solid in Latin America and Africa, and resumed in China and India. In advanced countries, post-crisis average premium growth has been well below pre-crisis levels. In emerging markets the same is true in emerging Asia only. This is because of sharp declines in China and India coming after regulatory changes in both in 2011.”

5. Market Assessment – “Interest Rates have been falling for the last three decades and are now at historic lows….” (Source - Swiss Re Sigma ) “According to sigma estimates, in 2012 about USD 27 000 billion of funds (about 12% of global financial assets) were managed and invested by the global insurance industry. Thus a one percentage point reduction in interest rates would ultimately cut insurers’ investment income by about USD 270 billion per year. That represents around 6% of global annual premium income (in 2012 terms).”

6. Market Assessment – “Life insurers across the globe are looking for better growth and profitability. Unfortunately, their legacy policy administration systems have been largely inflexible and unable to adapt to constantly changing market dynamic….” (Source - Capgemini) “Leveraging multiple distribution channels and managing a diverse product range are other important drivers in the need for transformation of the policy administration function. Regulatory compliance has also become more critical due to changing regulations and global expansion. The life insurance industry is increasingly looking for vendor packages and outsourcing to control cost and leverage best practices.”

7. Market Assessment – “There are significant opportunities from the emerging markets as awareness of the need for advice around Financial Services products increases especially amongst the emerging middle classes.” (Source - E&Y)

8. Market Assessment – The life insurance industry is increasingly looking for vendor packages and outsourcing to control cost and leverage best practices. (Source - Capgemini) “These changes have led to an increase in the following key trends related to policy administration for life insurance firms globally: ■ Consolidation of policy administration systems. ■ Adoption of vendor packages for policy administration. ■ Outsourcing of policy administration functions. ■ Need for a policy administration system that supports a global expansion strategy.”

9. Insurance Market: Business Realities Insurance companies globally willing to extend their IT Budget Demand for Policy Administration has been on consistent rise through last year

10. Quick Assessment – Business Realities SOME GROWTH SOME CONTRACTION FALLING INTEREST RATES LEGACY ISSUES INVESTMENT

11. Options to approach Transformation & Gain Competitive Advantage Wrap Replace Transformation Options Renovate Outsource

12. End of Life Challenge for Legacy Applications Wrap Replace Transformation Options Renovate Outsource

14. Transformational System Replacement Common Front End Transform this Unit Linked Endowment System Permanent Health Insurance System Individual Annuity System Protection Product System Guaranteed Bonds System Personal Pension System Traditional Endowment System Umbrella Funds System Group Management System Common Front End Into this Multiple Lines Common Platform

15. Time to Gain Competitive Advantage • Respond rapidly to changing market conditions • Streamline operational models and cost structures • Resolve legacy system challenges to achieve long-term operational excellence and profitability • Adopt a balanced product mix, shifting focus to protection rather than investment and savings • Respond to evolving customer preferences • Explore expanded investment allocation strategies

16. Time to Transform • In order to take advantage of all the benefits of transformation & avoiding pitfalls of the challenges, a new age Policy Administration System should ideally be: • Flexible, rules-based configuration, this speeds creation and launch of products • User-friendly visual configuration tool to enable business ownership • Able to manage all types of life insurance contracts at both individual and group level across multiple lines of business • Integrated Support for New Business and Underwriting • Out-of-the-box functionality to accelerate speed to market • Product cloning promotes reuse of rules and decreases development time • Support for seamless SOA-based integration with external applications

17. Oracle Insurance Policy Administration Industry-Leading, Fully Configurable, Rules-Driven Solution • Full record-keeping and transaction processing support for all types of Life and Wealth products • Highly configurable solution to adapt to customer specific needs without having to compromise base functionality • Supports Full Policy Lifecycle – New Business to Claims • Available on multiple technology platforms

18. Supports Life, Annuity, & Group Support Any Product Through Rules-Based Configuration

19. 19 OIPA Platform Support for Full Policy Lifecycle • Contract and Money Flow • Issue / Activation • Surrender • Partial , Systematic Withdrawal • Billing / Money In • Limited-pay options • Grace / Lapse • Monthaversary , Anniversary • Maturity • Accounting • Fund transactions • Dollar Cost Averaging • Asset Rebalance • Interest Crediting • Automatic Increase Rider • Accounting • APL • Reduced Paid-up NFO • Extended Term NFO • Dividend processing • PUAs • Paid-up processing Focus on Recent R&D Investments on End-to-End Policy Lifecycle Support • Claims and settlement • Death • ADB Claim • Waiver of Deductions Claim • Monthly Disability Claim • Children Term Rider Claim • ABR Claim • Annualization • Settlement payment • Disability income payment • Claim assignment • Claim adjudication • Claim update • Claim verification with reinsurer • Claim filing with reinsurer • Beneficiary determination and split Policy / Client Changes • Cancel / Freelook / Rescission • Reinstatement • Rider Termination / Rescission • Rider Add • Face Decrease • Face Increase • Smoker Status / Underwriting Change • Non Contractual Change • Ownership Change • Address Change • Beneficiary Change • Payor Change • DOB Change • DBO Change • Agents / Commissions • On Boarding • Commissions • Bonus • Advances • Chargeback • Hierarchy management • License tracking • Statement • Tax Considerations • Required Minimum Distributions • 7702/7702A compliance processing • Canada exemption testing • Withholding and reporting for Canadian Registered/Non-Registered plans • Withholding and reporting for US Qualified/non-qualified plans • MEC Permission / Update / Prevent • Material Change • Exchange Update • Outbound Exchange • Loans • Loan • Loan Capitalization • Loan Repay • Overloan

20. OIPA - Open Architecture Advantage Highly Scalable and Proven to SupportExtreme Performance • Web-based, built in Java, and can be deployed on numerous technology stacks • Open architecture integrates with existing IT infrastructure and maximizes system lifespan • Fully SOA-enabled supporting integration through Web Services • Largest industry performance benchmark conducted to date • 100 million active policies cycle < 2.5 hours • Demonstrated high performance and scalability • Ongoing commitment to optimizing performance Performance Benchmark Environment Oracle Insurance Policy Administration for Life and Annuity, Version 9.3, and Oracle Exadata X2-2

21. OIPA - Platform Independent Supported Platforms Database Application Server Operating System Version 11.2.0.2 WAS 8.5.5.0 WAS 7.x.x..x (with JDK 1.6.x) Version 11 Version 5.8 Version 9.7 SP7 through 10.1 Fix Pack 2 AIX 64 bit 7.1 (IBM P Series Hardware) IBM OS/400 Version 10.3.4 Version 2008 R2 Version 2008 R2 for SQLServer

22. Source: Gartner (September 2014) Oracle Insurance – Top of the Market • “The system architecture gives insurers the ability to externalize business rules and product calculations to get products to market more quickly and efficiently, while also reusing rules and calculations with other systems via Web services. “ • “Oracle Insurance Policy Administration for Life and Annuity is one of the most highly configurable systems offered in the market. “ • “Oracle Insurance Policy Administration for Life and Annuity is a single system that supports a range of individual and group product lines (not including health-related product lines). “ Source:Magic Quadrant for North American Life Insurance Policy Administration Systems Gartner (September 2014)

23. Life & Annuity Policy Administration Market Momentum – Recent Production Rollouts & New Sales • Continued LOB expansion at Securian, Genworth, and VOYA • Implemented to manage agent hierarchies and commissions for all distribution networks of La Capitale • Selected for roll-out of group and individual products for Jamaican carrier NCB • MIG selected OIPA for post-acquisition consolidation with existing WULA business • Implementing OIPA in Nigeria for Old Mutual • Recently selected for Group Life and Health products at Guidestone

25. Outsourcing on Legacy Applications - Issues Books maintained on older platforms Vendor support ending Increasingly expensive to own & maintain Difficult to respond to regulatory changes Poor productivity Training overhead for users Limited opportunity for multi tasking Maintaining/Monitoring of SLA’s a problem

26. Outsourcing Considerations Most Important Considerations for Outsourcing Closed and Open Book Operations, 2012 Not Important Very Important Source: Capgemini Analysis, 2012; World Insurance Report 2012, Capgemini and Efma Oracle Confidential – Internal

27. Transformational Outsourcing Obtain the Best of Both Worlds Oracle Confidential – Internal

28. Benefits of OIPA Based Transformational BPO Oracle Confidential – Internal

29. Why Oracle Insurance Policy Administration? • Product Excellence • Leadership Position in analyst rankings for 7+ years • Single platform for Group / Individual & Risk-based / Investment products • Most Investments in Any Modern PAS Product • Strong Capital Investment in Core Insurance Solutions • Significant Organic Investment over last 5 years • True Vendor Product / Solution • Focus on license sales, not consulting revenue • Commitment to a strong product roadmap • Homogenous Technology • Customer Focused Strategy • Executive commitment to project success • Growing momentum in Group Life, mid-market, and emerging markets • Flexible Engagement Model • Traditional License, BPS, Hosted, SaaS, and BPO Options

30. Oracle Confidential – Internal