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M. PONZI KAY3/20/2006

Multinational Benefits Pooling

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• Globalization is here, industry searches for cost efficient labor that is often times outside the U.S.

• Companies must look to grow globally in order to obtain return on investment: • They must be closer to the market• They must consider raw materials costs• They must have the right talent to manage

effectively

Planning ‘The Grid’

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Key Issues for HR

• According to a recent Hewitt Associates study (HR Magazine, May 2004) 45% of 500 senior finance and HR execs surveyed said their firms are offshoring or considering offshoring in the next few years.

• Only 8% of those surveyed considered their current offshoring completely successful.

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Multinational Pooling: Is it Right for you?

• How do I plan the ‘Grid’ a network of providers supporting my company’s growth?• How to gather data worldwide to perform an evaluation?• Preparing the RFP for the process• How to evaluate potential pooling providers • Analyzing the data from the various plans• Achieving immediate and ongoing savings • Selling the process internally to diverse geographic locations/businesses

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Elements of ‘The Grid’

• International assignment policies to foster mobility

•Benefits package to support them•Global operations able to access equivalent benefits platforms

•Cost-effective consistent plans•Future cost containment in order to continue to provide competitive programs

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WHAT’S A COMPETENT

HR PERSON TO DO?

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The Vision: A Grid of Global Plans

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What’s your firm’s objective?

•Operations located appropriately to markets and customers

•Company able to seize the opportunities for development and expansion

•Personnel willing to strategically deploy corporate directives

•Employees able to access standard benefits platform

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What is Multinational Pooling ?

•A method of pooling financial experience across borders•It is an aggregation of local contracts:experiences of several countries can be pooled if local contracts can be written with insurers who are participating in the same network•Local benefits plans / levels do not need to be changed (only carrier might change)•Expenses and Risk charges adjusted to reflect pooling of benefits

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Key Outcomes for HR

• Maximize efficiencies of employee benefits programs• Achieve consistent annual financial savings (average of 10% of pooled premium)• Reduce internal administrative work and costs• Improve service on global employee benefit programs through use of limited number of insurance networks• Improve management and control of global risk programs through use of multinational pooling

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Key Outcomes of Pooling

Savings through:Finding new pooling provider or restructure existing poolsOptimization of current pooled contracts- reducing risk charges, administration& commissions, optimization of claims experience, premium levels, investment returns, local profit shareReview of the contracts that currently not pooled and identify preferred insurers networksProactive management of the pools in the future

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You must think infrastructure:

• Benefits have intricate complexityntricate complexity• Each country has regulations, state-Each country has regulations, state- mandated benefits, pensionsmandated benefits, pensions• How to benchmark?How to benchmark?• How to choose surveys? How to choose surveys? • Use internal or external sourcesUse internal or external sources• Applicable tools, software?Applicable tools, software?

What do you currently have in place to achieve ‘The Grid’?

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Cost-Effective Global Benefits

• Conduct an audit of your insurance programs globally

-Are they set up to facilitate easy management?

-Do they leverage your size/geography?

-Are they consistent across locations and boundaries?

- Do they support mobility and growth?

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Why should a global audit be performed?

•Opens up the lines of communication about efficiency of the current networks

•Creates a process to identify coverage gaps and duplications

•Ensures coverage is in alignment with the larger company objectives

•Facilitates participation of local companies in corporate growth and changes required for success

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Multinational Pooling analysis

Country Type of coverage InsurerLives

insured

Annual premium, USD, 2002

Death/AccidentRetirement pensions

Health Insurance

Death/AccidentHealth Insurance

DisabilityRetirement pensions

Widow's and orphans' pension

Retirement pensionsWidow's and

orphans' pensionDisability

POLAND Death/Disability Commercial Union 2 1,633

CANADA Disability Standard Life 78 45,331

MEXICO Death/AccidentGrupo Nacional

provincial 33 2,632TOTAL 944 2,082,359

Delta Lloyd Levensverzekering

107 249,936

NETHERLANDS

Storebrand Life Insurance Co Ltd

NORWAY

47 110,530

AMERICAS

BELGIUM

FRANCE

EUROPE

Fortis AG 418 1,448,095

GAN EUROCOURTAGE

VIE51 115,202

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Proposal Phases

Phase I Baseline Analysis Report with:•Current pool charges•Analysis of pooled contracts •Identification of loss leading contracts•Review of funding Vehicles•Analysis of non-pooled contracts•Estimation of ROI expected from expanding and managing pools proactively.

Phase II Pooling questions and RFP framework •Analysis of responses•Attend finalist presentations

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Proposal Phases

Phase III Negotiate improved pooling parameters•Restructure pools and set up new contracts for any pools created

Phase IV Pool Implementation•Project management •Globally switching contracts to new network or networks•Outlining strategy to proactively manage going forward

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What are the stages in the process?

Stage 1: Analysis of Local Contracts and existing pooling arrangements, audit and contact with local insurers (3-4 weeks)

Stage 2: Depending on results of Stage 1, either identify new provider or plan to re-structure existing pools; obtain and review bids from pooling networks (6-8 Weeks)

Stage 3: Implementation: switching of contracts to preferred network or networks (6-12 months*)

*existing contracts may have to expire

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What resources are needed ?

A combination of internal and external resources can be used depending on current HR/Benefits staffing and optimizing cost for results.

External expertise can be used at different stages:• analysis of current financial arrangements• develop framework and bid specifications • analysis of bids • negotiation of improved pooling arrangements • create strategy for managing pools in the future

Proposals can be considered from consultants, and providers themselves.

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What are the questions to ask?

1. How long have they been providing pooling?2. What is their current portfolio of clients ?3. How many clients with stand alone pools do they have?4. How many clients are in small group or multi client

experience pools? 5. What has been the average dividend experience of the

stand alone pools over the last 3 years?6. Their small group or multi client experience pools over

the last 3 years? 7. What is their structure in serving pooling clients. 8. How are country specific questions answered?

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What are the questions to ask?

9. Describe a typical accounting cycle. Please confirm if network will guarantee to deliver the annual pooling report within 6 months of the end of the last accounting period.

10. Can accounting reports be customized to the client's specifications?

11. Please detail specifically, by country, any countries and

coverages that are unable to be pooled. 12. Please explain any guarantees you offer on your risk and

administrative charges shown. 13. Please describe what service standards and guarantees are

available.14. Do they reinsure the pooled contracts risk with a central insurer?

If so, what is the name of the central insurer and at what levels of risk is the contracts reinsured?

15. Please supply the names of three (3) companies and a contact person that we may call for references.

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What are the measures?

92%

95%

60%

65%

70%

75%

80%

85%

90%

95%

100%

Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04

Pc

t. o

f M

ea

su

red

Co

un

trie

s

Medical Claims TAT Life Claims TAT

Graph 1: Percentage of Measured Countries Meeting Local Standards on Medical Claims and Life Claims Turnaround Time (TAT)*

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Measures: Overall Dividend Projections

Consolidation Using Assumptions

# of Countries pooled

# of Lives

Premiums

Poolable income

Claims

Reserves

Investment Income

Risk Charge

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The Finalists

Network OverviewBackground; Structure and TeamCapabilitiesGeographic Match with company

RFP ResponseFinancialsQuestionnaire

ImplementationProcedures involved in setting up new pooling contractProcedures to set up new local contractMajor tasks, roles, responsibilities and timeframe

Questions and Answers

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Next Steps

Communicate with your Finance TeamShow the results of the financialsHave them evaluate your analysisLet them meet the network providers

Communicate with your Country Heads/RegionsDon’t forget who makes this happenGain buy in, resolve issues, overcome objections

ImplementationKickoff meeting for all key participants/contributorsEnsure all contacts/info has been distributedSet timeframe for results/cost savings

Communicate to organization

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Ongoing Support

Data CollectionMake sure you have a way to refresh the dataProvide feedback to new networks on any issuesSchedule analysis meeting to check on progress

UpdatesHave there been any network changes?Any world issues that need resolving-entry into new countries,

etc.?Management Consensus

Remember it’s the discontent outliers who can cause problems going forward

Stay on top of any disconnects with remote regions and providers

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Global benefits deployment

• You have competitive world-class benefits accessible to employees.

• Your global team is highly motivated due to being able to access appropriate benefits.

• Your finance team and shareholders enjoy the cost containment effects on the bottom line.

• Your ‘high potentials’ profit from the benefits infrastructure supporting global displacement and retention.

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Strategic global benefits

• You can offshore or inshore at will

• You can outsource or insource as you wish

• You can acquire new companies or operations for growth knowing you can accommodate benefits plans

• You have just the right plans in the right place at the right time, you have...