PEMCO INSURANCE Creating shared value through corporate social

PEMCO INSURANCE Creating shared value through corporate social

PEMCO INSURANCE Creating shared value through corporate social responsibility MONTANA BLAIR | J. ALEXANDRE GHADIALLY SABEEHA ISLAM | 2 Introduction Section I Recommendation and agenda Introduction | Strategy | Execution | Conclusion | Appendix Hyper-Local Our CSR Plan Environment Environment

Performance Public Safety Goal: Increase company profit performance to deliver shared value to the community Target Areas: Environment & Public Safety Methodology: Hyperlocal implementation and execution 3 Introduction | Strategy | Execution | Conclusion | Appendix Agenda Our structure for todays presentation follows our methodology of creating a CSR strategy solution. Strategy Execution Recap Market Approach: What is PEMCOs industry and position? SWOT Analysis

Positioning Statement Analysis Implications for our CSR Plan Business Theory: What are the elements of a successful CSR plan? Selecting CSR Issues and Structuring a CSR Plan Elements of Successful CSR plans Implications for our CSR Plan Implementation: What is our CSR plan? Strategy explanation Execution tactics NPV/Risk Mitigation Conclusion 4 5 Strategy Section I SWOT analysis and positioning statement Introduction | Strategy | Execution | Conclusion | Appendix 6 SWOT Analysis

PEMCO is a specialized, regional, and value-based firm in a competitive market requiring customer conversion, market growth, and risk reduction to grow. Internal Strengths Specialized understanding of NW market Brand resonates with targeted customer (i.e. hyper-local, community-focused, green, not price sensitive) External Opportunities Reduce costs by decreasing risk and subsequent claims Diversify coverage and product portfolio Grow market share through customer conversion Positive

Weaknesses SWOT Analysis Takeaways Threats Competitive market Large, national, and international competitors Lots of external uncertainty Customer behavior Natural disasters Government regulations Achieve growth by: 1. Facilitating market growth 2. Converting customers 3. Reducing claim risk in value and frequency Lacks a national presence outside of NW Less diverse portfolio (geographic and product) Image may misrepresent the

companys abilities High switching costs Price wars or market erosion through competition with national players Changing government regulations Negative Introduction | Strategy | Execution | Conclusion | Appendix 7 Positioning Statement PEMCO differentiates itself to its local community through regional specialization and trust-worthy products delivered in a quality, high-touch, values-driven manner. Target Competition People who demand a quality, high-touch, values-driven, insurance provider Large, financially driven insurance providers

Point of difference Regionally specialized, trust-worthy products that serve the community Reason to believe Regional size and presence Track record of strong values and service Community engagement, educational roots Positioning Statement Takeaways Our current positional strengths Risk-conscious customers willing to pay a premium Specialized understanding of target customer group Positioned strategically against larger competitors CSR initiatives should not undercut the values-based, high-touch, specialized service we offer CSR initiatives should increase customer perception of our distinctive image relative to larger competitors in the market Introduction | Strategy | Execution | Conclusion | Appendix

SWOT/Positioning Statement Takeaways Based on a SWOT and position analysis, PEMCOs CSR plan must strengthen their regional, trustworthy brand while achieving growth through areas that reflect their hyper-local, values-driven customer. Hyper-Local CSR should Environment Strengthen PEMCOs image as a regionallyspecialized, trustworthy brand Achieve growth by facilitating market expansion, converting customers, and reducing risk of claims Performance Public Safety Target areas that best reflect the interests of PEMCOs customer 8 9

Strategy Section II Elements of a successful CSR plan Introduction | Strategy | Execution | Conclusion | Appendix 10 Integrating CSR The interdependence between business and society creates opportunities for CSR plans to create shared value. mutual dependence Corporations Society creates opportunity for shared value Source: "Harvard Business School." Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility - Article -. N.p., n.d. Web. 21 Feb. 2016. Introduction | Strategy | Execution | Conclusion | Appendix 11

Maximizing Shared Value of Integrated CSR Impactful CSR plans actively seek to maximize the shared value by moving out on the frontier. Pure philanthropy Social Benefit Pure philanthropy Combined social and economic benefit Economic Benefit Social Benefit Pure business Economic Benefit

Source: Porter, Michael E., and Mark R. Kramer. "The Competitive Advantage of Corporate Philanthropy." Harvard Business Review. Harvard Business Review, 01 Dec. 2002. Web. 21 Feb. 2016. Pure business 12 What issues should PEMCOs CSR plan pursue to create shared value Introduction | Strategy | Execution | Conclusion | Appendix 13 CSR Issue Selection To maximize shared value, PEMCO must select issues intersecting with its particular business. This selection process develops a symbiotic relationship in which the success of PEMCO and the community become mutually reinforcing. What are the social needs? What aligns with business

opportunities? Internal Context Source: FSG." FSG. FSG Social Impact Advisors, 24 Sept. 2015. Web. 22 Feb. 2016. Issue Selection What can the company uniquely contribute? External Context What are peers and partners focused on? 14 How should PEMCOs CSR plan

be structured Introduction | Strategy | Execution | Conclusion | Appendix 15 Structuring PEMCOs CSR Plan PEMCO needs to transition from a confetti to a concentrated CSR structure to leverage its core competencies, coordinate branded efforts, and deliver communicable results. Confetti Flexible and broad Lack of strategic clarity and focus Plan limits achievement and communication of results No meaningful progress benchmarks or management Clustered

Source: FSG." FSG. FSG Social Impact Advisors, 24 Sept. 2015. Web. 22 Feb. 2016. Enhanced, clearer focus More informed resource allocation and decision making Often in broad thematic areas without relation to business focus Disconnection limits measurable results to business and society Concentrated Leverages a particular companys capabilities and footprint Defined goals increase accountability and attention Increased measurement and communication of results

Deep, coordinated efforts Introduction | Strategy | Execution | Conclusion | Appendix 16 How? MultiStakeholder Collaboration MultiStakeholder Collaboration Corporate Assets and Expertise Corporate Assets and Expertise How? Grants and Product

Donations Grants and Product Donations Support Communities and Causes Engage Key Stakeholders Build Brand and Reputation Why? Source: FSG." FSG. FSG Social Impact Advisors, 24 Sept. 2015. Web. 22 Feb. 2016. Incubate Shared Value Employee Engagement Clarity of CSR Engagements

PEMCO needs to focus on activities that align well with business competencies and creation of shared value. Support Communities and Causes Environment Public Safety Engage Key Stakeholders Build Brand and Reputation Why? Incubate Shared Value Introduction | Strategy | Execution | Conclusion | Appendix 17 Successful CSR

CSR should be a strategic business decision. The essential test that should guide CSR is not whether a cause is worthy but whether it presents an opportunity to create shared value. Competitive Advantage Opportunity The acid test of good corporate philanthropy is whether the desired social change is so beneficial to the company that the organization would pursue the change even if no one ever knew about it. The best corporate citizenship initiatives involve far more than writing a check: They specify clear, measurable goals and track results over time. Innovation Michael Porter, Mark Kramer Source: "Harvard Business School." Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility - Article -. N.p., n.d. Web. 21 Feb. 2016. Introduction | Strategy | Execution | Conclusion | Appendix 18

Ineffective CSR PEMCOs CSR should be more than just cosmetic. It should measure impact, not hours and dollars, stick to areas of shared value, and aspire to more than just reputation insurance or a charitable deed. Philanthropic initiatives are typically described in terms of dollars or volunteer hours spent but almost never in terms of impact. Reputation Insurance Charitable Deed The most common corporate response has been neither strategic nor operational but cosmetic the centerpieces of which are often glossy CSR reports. Where the company neither creates added value nor derives benefit, should appropriately be left to individual donors following their own charitable inputs. Michael Porter, Mark Kramer Communal Obligation Source: Porter, Michael E., and Mark R. Kramer. "The Competitive Advantage of Corporate Philanthropy." Harvard Business Review. Harvard Business Review, 01 Dec. 2002. Web. 21 Feb. 2016. Introduction | Strategy | Execution | Conclusion | Appendix

Implications for PEMCOs CSR Plan PEMCOs CSR plan must create shared value and be structured in a focused, measurable manner that leverages core competencies. Hyper-Local Environment PEMCOs CSR Plan Framework MUST Create shared value Select issues where PEMCOs internal capabilities potential impact intersect the external opportunities Execute CSR strategies in a focused, measurable, and goaloriented manner MUST NOT Give senselessly and without direction (i.e. confetti or cluster strategy) Exclusively focus on publicity Misalign CSR plans and PEMCOs unique business strategy Environment

Performance Public Safety 19 20 Environment 21 Strategy Section III PEMCOs CSR issue selection Introduction | Strategy | Execution | Conclusion | Appendix Public Safety and Environment Rationale Targeting CSR initiatives in public safety and environment leverages PEMCOs distinct competence in regional insurance in a focused, unique method that creates shared value. Public Safety and Environment both:

Reflect and reinforce distinct competencies Hyper-Local Environment Combine social and economic benefit Satisfy need of PEMCOs unique customer Public Safety Concentrate, rather than scatter effort 22 23 Execution Section I PEMCOs environmental CSR campaign deep-dive

Introduction | Strategy | Execution | Conclusion | Appendix Environment Environmental Campaign Free of charge, our home certifications can help you: Go green: Help environment while reducing property risk and increasing energy efficiency Be safe: protect from preventable fire, flood, and tree damage Save money: reduce your premium or get a free quote FAQs: Who can get this service? Anyone in Seattle, Tacoma or Spokane, other areas coming soon! How much does this cost? Nothing, were doing this to help the community be safe from the environment and go green! 24 Introduction | Strategy | Execution | Conclusion | Appendix PEMCO Home Certification Shared Value The PEMCO Home Certification creates value for society and the company. Benefits to Society Benefits to PEMCO

Increase neighborhood safety by protecting homeowners against environmental disasters including storms, earthquakes, mudslides and fires Reduce carbon emissions by educating users on environmentally friendly home ownership practices and sustainability efforts Direct engagement with our customers and competitors customers Build brand image that resonates with local customers values Increase data and information on specific customer groups and regions to create more tailored approaches and improved claim valuations Reduce number of claims paid in the long-term through decrease of environmental damage and property deterioration mutual dependence Corporations Society creates opportunity for shared value 25 Introduction | Strategy | Execution | Conclusion | Appendix

26 PEMCO Home Certification Execution, KPIs, and Goals The PEMCO Home Certification campaign has distinct goals and measurable impact. Execution First-Year Goal: Impact 4,000 homes Key Performance Indicators (KPIs) GHG: teragram (Tg) Energy efficiency: total kWh, kWh / sq ft for property Water efficiency: gallons / day Roof: reflectivity, composition, resistance, and durability Property risk: pools, location, plumbing, low-quality roofs Create options for customers to opt-in to post-visit evaluations as a means to capture improvements and trends Provide assessment of fire and flood risk, and energy efficiency of surveyed property Alert customers of nearby natural dangers (i.e. trees, disasters, etc.)

Offer advice on how to improve risk and efficiency of property Customers with safer homes receive discount on insurance rates Cross-train examiners and consultants to create sales through visits 27 Execution Section II PEMCOs public safety CSR campaign deep-dive Introduction | Strategy | Execution | Conclusion | Appendix PEMCOs partnership with HomeSight: PEMCO helps over 150 Washington homeowners stay in their home each year through subsidies to their home insurance policies Promotes social and economic equity to preserve and enhance communities through affordable homeownership advocacy Support other HomeSight initiatives to build homes and communities Increasing homeownership helps increase the community living standards through crime reduction and increase of stable citizens

I stood at the door for five minutes and cried, and realized this is MY house. Teresa Everett, HomeSight homeowner 28 Introduction | Strategy | Execution | Conclusion | Appendix PEMCO Public Alliances The PEMCO Public Alliances campaign creates value for society and the company. Benefits to Society Benefits to PEMCO Increased homeownership rates that reduce area crime Provides a stable beginning for individuals, better enabling them to contribute to their community - Habitat for Humanity: Increasing housing affordability increases neighborhood security and serves as a source of economic development and small business creation

Increase stakeholder engagement in areas of initiative Compatible with PEMCOs local, community-oriented brand Gain favorable access to potential new customers Grows market for home-owners to spur policy growth Crime reduction decreases risk of policy-holders Creates model for future partnerships with area nonprofits Aligns with factors of insurance growth and interaction mutual dependence Corporations Society creates opportunity for shared value 29 Introduction | Strategy | Execution | Conclusion | Appendix PEMCO Public Alliances The PEMCO Public Alliances campaign has distinct goals and measurable impact. Execution

First-Year Goal: Subsidize 150 homes Key Performance Indicators (KPIs) Increase in homeownership rates Increase in socioeconomic standards of affected regions Number of new policy holders Percent growth (%) of market size Partner with HomeSight, a local housing nonprofit Provide subsidized rates to homeowners and renters Leverage capability in risk evaluation to assist HomeSight with candidate selection and management Support other homeownership initiatives by HomeSight to develop new homes, communities throughout Washington 30 Introduction | Strategy | Execution | Conclusion | Appendix 31

32 Execution Section III Supplemental initiatives Introduction | Strategy | Execution | Conclusion | Appendix 33 Supplemental Initiatives In addition to PEMCO Home Certification and Public Alliances, many campaigns are possible under our CSR strategic framework. Public Safety Subsidize defensive driving Increases safety of roads, reducing our risk Reduces premium Support local fire departments Increase response capacity, time Relationship with relevant stakeholder Environment Support disaster-relief initiatives Leverage PEMCOs skills into effective support Affected customers represent potential leads

Donate and advocate to marine causes Builds market for boating insurance policies Improves local environment and leisure Introduction | Strategy | Execution | Conclusion | Appendix 34 PEMCOs Current CSR Initiatives Multiple current initiatives can be modified to align with our strategy. Hyper-Local Environment Employee Engagement Maintain employee volunteering, but Target focused, strategic issues Encourage volunteering with HomeSight Track impact beyond hours or dollars Performance Public Safety

Customer Engagement Donating surplus can supplement this strategy, if Customers vote on surplus donation PEMCO recommends responsible charities in our strategic areas Process is gamified 35 Conclusion PEMCOs CSR Introduction | Strategy | Execution | Conclusion | Appendix Hyper-Local Environment Environment Performance Public Safety CSR Strategy Framework

Leverage unique firm capabilities to do good in the local community Create shared benefits Be focused, measurable, and goal-oriented Reinforce position as a quality, high touch, values-driven, insurance provider Assist in growing company in line with market opportunities 36 Introduction | Strategy | Execution | Conclusion | Appendix

Hyper-Local Environment Environment Performance Public Safety 37 38 Im looking forward to hearing the recommendations of the consulting teams. I want to clarify for the teams the difference between brand and campaign Brand is evergreen, campaigns can and should change over time depending on our customers, competitive landscape, company roadmap and leadership vision. Deanna Dukes, Brand Manager 39 Hyper-Local

Environment Q&A Performance Public Safety 40 Appendix Supporting evidence and research Introduction | Strategy | Execution | Conclusion | Appendix Table of Contents Slide 42 Public Safety and Environment Rationale Slide 43 PEMCO Home Certification Details

Slide 44 Campaign Cost/Benefit Analysis (both) Slides 45-47 Campaign Cost Assumptions & Break Even Slide 48 Short-Term Implementation Timeline Slide 49 Corporate CSR Examples Slides 50-52 CSR-Risk Correlation Empirical Research Slides 53-55 McKinsey P/C Insurance Giving Trend Report 41 Introduction | Strategy | Execution | Conclusion | Appendix Public Safety and Environment Rationale Targeting CSR initiatives in public safety and environment leverages PEMCOs distinct competence in regional insurance in a focused, unique method that creates shared value.

Public Safety and Environment Both: Reflect and reinforce distinct competencies Combined social and economic benefit Satisfy need of PEMCOs unique customer Focused, rather than scattered effort Hyper-Local Environment Public Safety Insurance as a Function of Crime and Environmental Factors Public Safety Competency: PEMCOs insurance protection deals extensively with public safety: crime, home ownership, and driving

Shared benefit: As public safety and homeownership increase for citizens, PEMCOs policies rise and risk decreases Social interest: There are high crime rates in urban areas (Seattle is in 2nd percentile of city safety) and customers care about the security and stability of their communities Environment Competency: PEMCOs insurance staff has experience with environmental disasters and infrastructure sustainability Shared benefit: Improving environment reduces risk of policies and improves everyday surroundings for customers Social interest: Environmental disasters emotionally and economically hurt communities 42 Introduction | Strategy | Execution | Conclusion | Appendix PEMCO Home Certification The PEMCO Home Certification execution tactics deliver regional benefits measured through impact on GHG emissions, energy efficiency, and water efficiency. Benefits to Society Execution Increase neighborhood safety by protecting homeowners against environmental disasters including storms, earthquakes, mudslides and fires

- NFPA: residential fire occurs every 82 seconds and causes $30,000 in damage, preventable with green-certified electrical systems - III: water and flood damage causes 25% of claims which is lowered with LEED-certified plumbing systems Reduce carbon emissions by educating users on environmentally friendly home ownership practices and sustainability efforts - EPA: Households contribute to 12% of GHG emissions Provide information on fire and flood risk of surveyed property Alert customers of nearby natural dangers Fault lines Floodplains Hazardous trees Mudslides Provide evaluation of energy efficiency of surveyed property Offer information on how to improve risk and efficiency of property Customers with safer homes receive discount on insurance rates Cross-train examiners and consultants to create sales through visits Benefits to PEMCO Key Performance Indicators (KPIs) Direct engagement with customers Build brand image through display of dedication to local disaster prevention and green efficiency initiatives

Gain access to competitors customers for potential conversions Increase data and information on specific customer groups and regions to create more tailored approaches and improved claim valuations Reduce number of claims paid in the long-term through decrease of environmental damage and property deterioration Units of measure GHG: teragram (Tg) Energy efficiency: kWh and kWh / sq ft. Water efficiency: gallons / day Roof protection: measured by reflectivity, composition, durability, and resistance Sources of risk for properties Pools, location, plumbing, and low-quality roofs Create options for customers to opt-in to post-visit evaluations as a means to capture improvements and trends 43 Introduction | Strategy | Execution | Conclusion | Appendix PEMCO Home Certification Covering Seattle, Tacoma, and Spokane would cost ~$275,000/year

See appendix slide for details on cost and approximate break even analysis Campaign risk Legal liability: mitigated by disclaimers Low customer conversion Financial benefits Converted competitors customers Long-term: better information and premium evaluation, reduce # of claims Non-financial benefits Brand improvement through green efforts, community engagement, and increased customer communication PEMCO Public Alliances Campaign Cost/Benefit Analysis PEMCO Home Certification and PEMCO Public Alliances offer financial and non-financial benefits that outweigh the time and investment costs. Cost/Risk to PEMCO Benefit to PEMCO Subsidizing 50% of homeowners insurance for all of HomeSights new home-owners this year

would cost ~$80k/year See following slides for details on cost and approximate break even analysis Campaign risk Standard insurance claim risk Financial benefits Long-term: increased # of policy holders, better information and premium evaluation Non-financial benefits Brand improvement through public safety and community improvement 44 Introduction | Strategy | Execution | Conclusion | Appendix 45 Details of PEMCO Home Certification Cost Analysis Environment: PEMCO Home Certification. The Numbers Hyper-Local

In total each inspector will cost $50-60k/year all-in and this will cover 720-1200 home-inspections Environment per year. Total = ~$275k Hyper-Local Environment Public Safety Inspector cost assumptions Each inspector costs ~$45,000-58,000/year (based on glass door national average and BLS data) Expect 240 work days per year (5*52-10 nat. holidays-10 vacation) Each inspector can inspect 3-5 houses per day depending on how much reports, lunch-time, driving-time is needed on that day = An inspector can inspect 720-1200 houses per year Gas reimbursements: If each inspector drives 2 hours/day with their own car, each inspector drives ~40 miles/day. At 15mpg and $2/gallon, total cost/day = 40/15*2 = $5.33. 5.33*240 days = $1280/year House sizing assumptions ~3m house units in Washington * 63.2% home-ownership rate = 1.9M (census.gov data) We insure ~10% of homes in Washington (based on case data)

At max 10% of these people would be interested in the service per year = ~19,000 houses would be interested in the service in the state of Washington Benchmarking by population, Seattle would have 1,800 houses interested, Tacoma and Spokane would have about 500 each. (census.gov) Of our competitors homes, 1% would be interested = 1.9M*.9*.01 = 17,000 houses in Washington Benchmarking by population, Seattle would have 1,600 houses interested, Tacoma and Spokane would have about 500 each. (census.gov) In total Seattle would have 3,400 houses interested, Tacoma and Spokane would have 1000 each 4 inspectors together can handle Seattle and Tacoma, and 1 inspector can handle Spokane Source: 33-2021 Fire Inspectors and Investigators." U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics, 25 May 2015. Web. 22 Feb. 2016. "Washington QuickFacts from the US Census Bureau." Washington QuickFacts. United States Census Bureau, 1 Dec. 2015. Web. 22 Feb. 2016. Introduction | Strategy | Execution | Conclusion | Appendix 46 Details of PEMCO Home Certification Break-Even Analysis Environment: PEMCO Home Certification. The Numbers Behind Break-Even Analysis

Goal of this program is not to break-even because there are many non-financial benefits. However understanding breakeven is important. Total Cost of program = ~$275k Revenue additions: come from converting customers Each new customers insurance on average should be between $750-2000 We expect to see 1600 customers from Seattle, and 500 each from Tacoma and Spokane, 2600 total Worst Case Scenario1 Best Case Scenario2 # of customers needed to convert to break even3 367 138 % of competitors customers we need to convert of those we inspect 14% 5% -$80,000

$245,000 Profit if we can convert 10% 1) Based on average insurance rate worth $750. 2) Based on average insurance rate of $2000. 3) Does not include costs to providing insurance Introduction | Strategy | Execution | Conclusion | Appendix 47 Details of PEMCO Public Alliance Cost Analysis Public Safety: PEMCO Public Alliance. The Numbers HyperLocal We could subsidize 50% of each of HomeSights new homeowners insurance, it would cost ~$80k/year. Environment Home insurance cost assumptions Home insurance costs from $500-1500/year (based on home valuation of $100k-200k, in Washington state - generally safe from hurricanes and other major insurance liabilities, and assuming a comprehensive package)

Public Safety Homes built each year by HomeSight Over the past 25 years, HomeSight has created over 2000 home owners. This means ~125-200 homes per year. Hyper-Local Source: 33-2021 Fire Inspectors and Investigators." U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics, 25 May 2015. Web. 22 Feb. 2016. "Washington QuickFacts from the US Census Bureau." Washington QuickFacts. United States Census Bureau, 1 Dec. 2015. Web. 22 Feb. 2016. Introduction | Strategy | Execution | Conclusion | Appendix 48 Short-Term Implementation Timeline PEMCOs Home Certification and Public Alliance campaigns can be initiated and kicked-off within a year. 0 Months

Hire experienced environmental home examiners Construct evaluation tool to guide the consultation Establish metrics and goals for homes Create incentive and discount plan for customers who undertake examination Begin drafting partnership proposal for HomeSight and/or other nonprofits 12 Months Begin promotion of home consultations through digital media and website outlets (Spotify, Netflix, Amazon, etc.) Approach HomeSight with

proposal and negotiate volunteering hours/frequency and provision for home insurance Follow-up with customers who had examination to offer discount and incentives Offer a referral program for home examinations Open the option for current customers to donate directly to the HomeSight partnership Begin post-visit evaluations

to capture improvement trends and data Maintain connection with HomeSight homeowners through semi-annual contact Showcase stories of HomeSight homeowners on PEMCO website and advertising campaigns Introduction | Strategy | Execution | Conclusion | Appendix Corporate CSR Examples There are multiple examples in the corporate world of firms strategically aligning their CSR initiatives to boost financial performance, human resources, or other competitive advantages. The tactics Examples Include: Safeco Insurance: Worked in partnership with nonprofits to expand affordable housing and enhance public safety. As home ownership and public safety increased in its four test markets, insurance sales did too, in some cases by up to 40%. College Retirement Equities Fund (TIAA-CREF) and the California Public Employees Retirement System (CalPERS): Worked with a nonprofit focused on corporate governance to promote improved standards of corporate governance and disclosure, especially in developing countries. As governance and disclosure improved, the markets became more attractive and fair for institutional investors to

participate. Cisco Systems: Supported IT-education initiatives to both boost hiring pool and create technological savvy customers that demanded tech products sold by Cisco. Source: "Harvard Business School." Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility - Article -. N.p., n.d. Web. 21 Feb. 2016.; Porter, Michael E., and Mark R. Kramer. "The Competitive Advantage of Corporate Philanthropy." Harvard Business Review. Harvard Business Review, 01 Dec. 2002. Web. 21 Feb. 2016.; "Simplifying Strategy | FSG." FSG. FSG Social Impact Advisors, 24 Sept. 2015. Web. 22 Feb. 2016. 49 Introduction | Strategy | Execution | Conclusion | Appendix Factors of Economic Performance Economic performance manifests itself in both high financial return and low financial risk. The tactics Economic Performance High Financial Return Low Financial Risk Source: Orlitzky, M., and J. D. Benjamin. "Corporate Social Performance and Firm Risk: A Meta-Analytic Review." Business & Society 40.4 (2001): 369-96. Web.

50 Introduction | Strategy | Execution | Conclusion | Appendix CSR-Risk Correlation Integrative empirical studies have supported the argument that a the higher a firms corporate social performance, the lower its financial risk. The tactics Risk CSR Performance Note: Graph does not depict empirical data, in which correlation ranged from 0.01 to -0.30, but symbolizes negative correlation Source: Orlitzky, M., and J. D. Benjamin. "Corporate Social Performance and Firm Risk: A Meta-Analytic Review." Business & Society 40.4 (2001): 369-96. Web. 51 Introduction | Strategy | Execution | Conclusion | Appendix CSR-Risk Correlation Implications Reduction of risk can lead to increased financial performance that increases capital available for CSR expansion. The tactics Corporate Social

Responsibility (CSR) Increased Capacity for CSR Risk Reduction Economic Performance Source: Orlitzky, M., and J. D. Benjamin. "Corporate Social Performance and Firm Risk: A Meta-Analytic Review." Business & Society 40.4 (2001): 369-96. Web. 52 Introduction | Strategy | Execution | Conclusion | Appendix 53 Corporate CSR Trends Shifting Priorities Insurance firms are shifting their charitable giving to reflect specific business needs. The tactics Exhibit 1 Source: Pritula, Mike, and Ido Segev. "Charitable Giving in the Property and Casualty Insurance Industry: An Update." McKinsey & Company. McKinsey Financial Services Practice, n.d. Web. 21 Feb. 2016.

Introduction | Strategy | Execution | Conclusion | Appendix 54 Corporate CSR Trends Shifting Priorities Insurance firms are increasing giving to health and social services at the expense of education in search of synergies that could lead to increased market knowledge or firm innovation. The tactics Exhibit 2 Source: Pritula, Mike, and Ido Segev. "Charitable Giving in the Property and Casualty Insurance Industry: An Update." McKinsey & Company. McKinsey Financial Services Practice, n.d. Web. 21 Feb. 2016. Introduction | Strategy | Execution | Conclusion | Appendix Corporate CSR Trends Goal Setting and Measurement Lack of insurance firms tracking the social or business impact of their contributions points to an opportunity to improve impact of their giving. The tactics Exhibit 3 Source: Pritula, Mike, and Ido Segev. "Charitable Giving in the Property and Casualty Insurance Industry: An Update." McKinsey & Company. McKinsey Financial Services Practice, n.d. Web. 21 Feb. 2016. 55

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