The document outlines Latin American & Caribbean GOE Allocation Model. It discusses the objectives to standardize and automate the allocation process across 33+ entities. Currently, entities use varying methods from sophisticated to basic. The new model aims to allocate costs in a transparent, fair, and logical manner. It will use cost drivers like headcount, transactions, and floor space to distribute compensation and non-compensation expenses. Challenges include gaining buy-in, training, integrating differing source files, and ongoing maintenance.

1. 1
Latin American & Caribbean GOE Allocation Model
Sean Clifford – Controller Latin American Region
Douglas Magill – Latin American Controls Team
June 6, 2012

2. 2
Agenda
 Current State
 Objectives
 Benefits
 Cost Drivers
 Compensation vs. Non-Compensation Expense Categories
 Allocating Compensation Expenses
 Checks & Balances
 Demo
 Challenges

3. 3
Current State of GOE Allocation
 33+ Entities with their own methods of allocation.
 Examples:
- Somewhat sophisticated
- Very Basic GPW/Headcount
- Use of 3rd party vendor
- Subject to manual reclassifications
 Direct and Indirect charges to minor lines.
 Directly impacts of pricing.
 Misallocation of resources.

4. 4
Objectives of the new GOE Allocation Model
 Standardized
 Transparent
 Fair
 Logical
 Automated and Easy to Use
 Flexible
‘Establish an active Business Performance Management Model at all levels
of the organization to enable Management to make informed tactical &
strategic decisions which improve business results’
Source: Six Core Finance Initiatives (R. Schimek) – Capital Management & Business Performance

5. 5
Benefits of new GOE Allocation
Model
Profit Centers must assume ownership for costs
 Clear appreciation of all supports costs necessary to support the business
 Greater focus on the business to drive down costs rather than influencing how those costs are allocated
 Greater level of confidence that expenses are factored into product pricing
 Facilitates more accurate ROE and ROC calculations
 Gives greater justification for potential divestment strategies
Cost Reductions
 Expense between countries should be more comparable
 Drives process improvements and best practices
 Leverage economies of scale
Reporting
 More informative
 Reduces level of manual effort required to calculate and report monthly GOE allocations via MOR and Expense By Cat

6. 6
Cost Drivers
 Metrics used by minor line of business.
- Foreign General Results
1. GPW
2. NPW
3. NLI
4. NPE
- CL106 (Claims)
1. Claims Count (Sum of open reserve count and closed claims cases)
2. Claims Count Weighted
3. Closed Claims
4. Salvage and Subrogation Count
4. GLI
- Policy Transaction Count Report from Operations
1. Policy Transaction Count Unweighted
2. Policy Transaction Count Weighted
-. FAC Count
-. Headcount (To the fraction)
-. Operating Minor Lines
-. Manual Entry
1. Number of Direct Marketing Campaigns
2. Floor Space
3. Engineering Surveys
 30+ hybrid drivers derived from above Statistics

7. 7
Metrics Entry Page
Cost Drivers / Minor Lines
Aviation Line
Casualty
Auto
Excess
Casualty
General
Liability
Workers
Compensatio
n
Floor Space Occupied 0.00 8.40 1.30 8.40 0.00
Engineering Cost Driver 0.00 0.00 0.00 0.00 0.00
Marketing Campaigns Per LOB 0.00 0.00 0.00 0.00 0.00
GPW FGen $0 $1,053 $330 $766 $0
GPW FGen Except Global Market $0 $1,053 $330 $766 $0
Commercial Lines FGen GPW $0 $1,053 $330 $766 $0
Commercial Lines except Global Market
FGen GPW $0 $1,053 $330 $766 $0
Consumer Lines FGen GPW
NPW FGen $0 $1,050 $219 $660 $0
Commercial Lines FGen NPW $0 $1,050 $219 $660 $0
Consumer Lines FGen NPW
NLI FGen $0 $568 $0 $0 $0
Commercial NLI FGen $0 $568 $0 $0 $0
Consumer NLI FGen
GLI
0.00
1,780,082,6
87.06
496,919,42
1.72
1,077,529,7
95.07 0.00
Commercial GLI
0.00
1,780,082,6
87.06
496,919,42
1.72
1,077,529,7
95.07 0.00

8. 8
Metrics Percentage Page
Cost Drivers / Minor Lines
Aviation Line
Casualty
Auto
Excess
Casualty
General
Liability
Workers
Compensa
tion
Floor Space Occupied 0.00% 0.35% 0.05% 0.35% 0.00%
Engineering Cost Driver 0.00% 0.00% 0.00% 0.00% 0.00%
Marketing Campaigns Per LOB 0.00% 0.00% 0.00% 0.00% 0.00%
GPW FGen 0.00% 1.97% 0.62% 1.44% 0.00%
GPW FGen Except Global Market 0.00% 2.28% 0.72% 1.66% 0.00%
Commercial Lines FGen GPW 0.00% 2.87% 0.90% 2.09% 0.00%
Commercial Lines except Global Market
FGen GPW 0.00% 3.57% 1.12% 2.60% 0.00%
Consumer Lines FGen GPW
NPW FGen 0.00% 3.09% 0.65% 1.95% 0.00%
Commercial Lines FGen NPW 0.00% 5.55% 1.16% 3.49% 0.00%
Consumer Lines FGen NPW
NLI FGen 0.00% 4.16% 0.00% 0.00% 0.00%
Commercial NLI FGen 0.00% 7.55% 0.00% 0.00% 0.00%
Consumer NLI FGen
GLI 0.00% 3.50% 0.98% 2.12% 0.00%
Commercial GLI 0.00% 4.30% 1.20% 2.60% 0.00%

9. 9
Compensation vs. Non-Compensation
Expense Categories
Expense categories and the % of overall expenses they represent in Latin America for 2010
 Salary & Comp – 60%
 Consultancy – 8%
 Rent – 7%
 Insurance Taxes, Licenses and Fees – 4%
 Data Processing – 3.8%
 Amortization of Mass Marketing – 3%
 Communication – 3%
 Advertising – 2.5%
 Depreciation – 1.7%
 Travel – 2%
 Office Supplies – 2%
 Other Costs - 2%
 Amortization of EDP Projects - 1%

10. 10

11. 11
Profit Center Employee Allocation Page
Employee Profit Center Minor Line 1
Perce
nt %
Profit Center Minor Line 2
Percent
%
Employee 1
Accident and Health
All Accident and
Health
100%
Employee 2
Accident and Health
All Accident and
Health
100%
Employee 3
Accident and Health
All Accident and
Health
100%
Employee 4
Accident and Health
All Accident and
Health
100%
Employee 5
Accident and Health
All Accident and
Health
100%
sin nombre
Accident and Health
All Accident and
Health
100%
Employee 6 Accident and Health Direct to Consumer 81% Financial Lines Loyalty 4%
Employee 7
Accident and Health Direct to Consumer
70%
Accident and
Health Group PA
20%
Employee 8 Accident and Health Direct to Consumer 81% Financial Lines Loyalty 4%
Employee 9 Accident and Health Direct to Consumer 81% Financial Lines Loyalty 4%
Sales Employee Accident and Health Direct to Consumer 81% SBS AIG Combined 7%

12. 12
Service Center Employee Allocation Page
Employee
Service
Center 1
Activity 1 Cost Driver / Direct Profit Center 1
Direct Minor
Line 1
Perc
ent
%
Employee 1
Administration Administering
x 30 Percent By Operating Minor Lines and 70 Percent
based on Headcount
50%
Employee 2
Administration Administering
x 30 Percent By Operating Minor Lines and 70 Percent
based on Headcount
100%
Employee 3
Administration Administering
x 30 Percent By Operating Minor Lines and 70 Percent
Based on Policy Transaction Count Weighted
100%
Employee 4
Administration Administering
x 30 Percent By Operating Minor Lines and 70 Percent
Based on Policy Transaction Count Weighted
100%
Employee 5
Claims
Claims
Handling and
Adjusting Direct Accident and Health
Direct to
Consumer
45%
Employee 6
Claims
Claims
Handling and
Adjusting Direct Personal Lines
Extended
Warranty
33%

13. 13

14. 14
Profit Centers
Direct Marketing
Campaign
Expenses
Advertising
Expense Non
DM
Total
Advertising Cost
Accident and Health Total $66,574,723 $1,405,000 $72,076,008
Direct to Consumer $66,574,723 $66,574,723
Individual Travel $1,405,000 $5,501,285
Life $0
Voluntary Employee Benefits $0
All Accident and Health $0
Aviation Total $0 $0 $0
Aviation Line $0
Service Centers
Advertising Cost
to Service
Centers
Executive $17,832,922 $17,832,922
Finance and Accounting $0
Human Resources $0
Legal $0
Other $1,868,172 $1,868,172
Company Wide Total Unallocated
General $0
Total: $146,036,408 $23,092,577 $173,225,270

15. 15

16. 16
Checks & Balances
Payroll Import File = Sum of GL Salary Expense Accounts
Every employee must allocate 100% of his/her activity to a
profit center or support department
Payroll Import deletes employees not in payroll and forces
the 100% allocation of new employees prior to running
Salary Data hidden, protected and encrypted
All Cost Drivers must = 100%
Model will alert when all newly created cost centers or GL
expense accounts are not mapped
Mapping of Local General Ledger Accounts to Expense By
Category determines allocation driver bucket

17. 17
Cost Center / Minor Line Total Direct Costs Total Indirect Costs
Total FGEN GOE
Results
Percentage of
FGEN GOE
Results
Accident and Health $1,109,750,301 $331,937,111 $1,540,672,246 38.08%
Direct to Consumer $1,003,597,511.74 $193,627,303.58 $1,272,217,255 31.44%
Group PA $35,580,772.25 $55,186,770.72 $97,965,284 2.42%
Group Travel $20,134,725.14 $16,419,039.01 $40,031,697 0.99%
Individual Personal Accident $5,443,774.29 $499,306.25 $6,020,390 0.15%
Individual Travel $34,946,220.47 $52,367,039.50 $98,224,733 2.43%
Life
$0.00 $0 0.00%
Voluntary Employee Benefits $10,047,296.87 $13,837,652.38 $26,212,886 0.65%
Aviation $4,022,919 $0 $4,022,919 0.10%
Aviation Line
$4,022,919.00 $4,022,919 0.10%
Casualty $84,954,658 $83,787,411 $191,507,996 4.73%
Casualty Auto $47,717,793.67 $47,524,604.11 $109,319,566 2.70%
Excess Casualty $11,704,340.94 $13,269,050.52 $27,867,439 0.69%
General Liability $25,532,523.03 $22,993,756.84 $54,320,991 1.34%
Workers Compensation
$0 0.00%
Total GOE Results

18. 18
Cost Center / Minor Line
Direct Data
Processing Costs
Indirect Data
Processing Costs Total DP Results
Percentage of DP
Results
Accident and Health $59,783,539 $41,958,059 $101,741,598 30.68%
Direct to Consumer $51,878,632.31 $21,638,312.58 $73,516,945 22.17%
Group PA $1,779,069.86 $8,167,530.75 $9,946,601 3.00%
Group Travel $1,657,391.09 $2,275,544.96 $3,932,936 1.19%
Individual Personal Accident $141,140.00 $80,679.29 $221,819 0.07%
Individual Travel $3,840,920.13 $7,398,651.81 $11,239,572 3.39%
Life
$0.00 $0 0.00%
Voluntary Employee Benefits $486,385.61 $2,397,339.51 $2,883,725 0.87%
Aviation $0 $0 $0 0.00%
Aviation Line
$0 0.00%
Casualty $4,971,175 $11,243,202 $16,214,377 4.89%
Casualty Auto $1,631,898.00 $6,402,334.35 $8,034,232 2.42%
Excess Casualty $1,581,470.00 $1,928,616.57 $3,510,087 1.06%
General Liability $1,757,807.00 $2,912,250.73 $4,670,058 1.41%
Expense by Category Results

19. 19
Service Center / Activity
Driver Direct Costs Indirect Costs
Total Property
Line
Percentage of
Property Line
Percentage of
Overall Cost
Category
Actuarial $0 $0 $0 0.00% 0.00%
Actuarial Duties
$0 0.00% 0.00%
Administration $0 $585,316 $585,316 0.16% 6.16%
Administering
$585,316 $585,316 0.16% 6.16%
Claims $7,566,809 $188,373 $7,755,181 2.17% 5.70%
Claims Handling and Adjusting $33,151 $188,373 $221,523 0.06% 0.45%
Manage Claims Department
$7,533,658 $7,533,658 2.11% 8.64%
Salvage and Subrogation
Processing $0 0.00% 0.00%
Compliance $0 $1,511,727 $1,511,727 0.42% 10.72%
Comp. Audit and Reporting
$1,511,727 $1,511,727 0.42% 10.72%
Property Minor Line GOE Results

20. 20
Challenges
Buy-in of PCMs
Training
Access to Payroll
Differing source files to be imported (Payroll, Trial
Balances, CL106,Policy Transaction Count, FAC Count)
Maintenance of Mappings
Excel 2003 and 2007 compatibility issues.
Time Sheets

21. 21
Q&A