University of Houston Bauer College of Business April 13, 2006 presentation by: Robert B. Hixon

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University of HoustonBauer College of
BusinessApril 13, 2006presentation
byRobert B. Hixon
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Take-Away Concepts

• Agent vs. Broker Is there a difference?
• Salesmen or Professional Service provider?
• What services are offered
• Where is the brokers value added
• Where does your allegiance reside?
• Contractual Issues with the Insured and the
  Insurer
• Compensation Issues
• Commission
• Fee

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Sample Broker Presentation
Response to Request for Proposal
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Discussion Items

• The Wortham Difference
• Insurance Market Update
• Available Services
• Team Selection Support
• Casualty and Energy Claim Handling Services
• International Capabilities
• Cost of Risk and Retention Analysis
• Energy, Liability and Casualty Insurance Renewal
  Strategies
• Employment Practices Liability
• Alternative Programs
• Broker Relationship Compensation
• Closing Comments

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The Wortham Difference
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The Wortham Partnership

• Houston based
• Continuous operation since 1915
• Over 1 billion in annual premiums
• Client focused
• No bias in recommendations
• No outside stockholders (partnership)
• Transparent and open communication

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The Wortham Difference

• 76 Managing Directors or owners of the Firm
• Depth and experience of technical staff
• Distinction is superior service to customers
• High retention ratio
• Continuity of staff
• Employees tenure averages over 12 years
• Managing Directors tenure is over 20 years

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Mission Statement
Service to handle our clients insurance
business as if it was ours Quality Coverages to
develop coverages and risk management tools that
allow clients to better compete in their
business Price to forge relationships between
carriers and our clients that will add value and
be long term
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The Wortham Difference

• Partnership We have no outside stockholders, so
  we focus on serving you
• Reputation Underwriters trust us, giving you a
  competitive edge
• Innovation We partner you with markets to
  develop new solutions to your unique risk profile
• Independence We also have no ownership in other
  insurance providers, so we find you unbiased
  options with transparent compensation arrangements

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Available Services
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Service DifferentiationRisk Management Support

• Partner in risk management problem solving
• Provide presence when required
• Administrative consultation
• Underwriter meetings
• TPA/claims support meetings
• Trigger technical support
• Submitting frequent open items lists
• Advise as insurance market conditions change

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Critical Wortham Services

• Risk Management Information Systems (RMIS)
  support
• Internet portal
• Electronic certificates
• Contract review
• Retention analysis
• Exposure survey
• Loss control / safety support
• Alternative risk products

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Team Selection Support
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Goals in Team Selection

• Experience in industry, very significant accounts
  and specialization requirements
• Availability to deliver Worthams standard of
  service
• Depth to provide appropriate and timely solutions
  

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Service Team

• Primary account service team members chosen to
  meet Your needs
• Access to Worthams 425 member team of experts
• Continuity the average tenure of our partners
  and professionals is over 20 years

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Your Wortham Team
Partner Account Executive
Assistant
Partner Risk Mgmt. Services Partner RMIS Loss
Control
Partner Alternative Risk Partner Prof.
Indemnity Partner Crime/Bond Manager
Partner Marine Partner Marine
Partner Casualty International Casualty Partne
r Casualty Claims
Partner Energy Partner Energy
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Casualty and Energy Claim Handling Services
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Casualty Claim Services

• Assistance in selecting claim service providers
• Monitoring of insurance company or independent
  claims services
• Review of claims prior to statistical filings
• Monitoring of questionable claims and active
  involvement in large claim settlements
• Resolution of coverage questions/disputes
• Assistance in locating qualified defense counsel
• Claim/reserve audits as needed
• Periodic status reports with action
  recommendations
• Self-insured program design and implementation
• Structured settlement and portfolio transfer
  consulting services, as requested

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Energy, Well Control and Property Claims

• Worthams Energy and Property Departments have
  successfully collected over 1,000,000,000 in
  claims, which have resulted from upstream oil and
  gas operations during the past five years.
• Our technicians handle all physical damage and
  control of well claims personally. Wortham
  believes that the clients interest is best
  served when the individual that negotiated the
  terms of coverage pays an integral role in the
  collection of a claim. We believe this approach
  provides a better service to the client.

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International Capabilities
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WorthamNet

• Business partnerships with 179 successful
  brokerages in 134 countries worldwide
• In-country knowledge and expertise
• Wortham quality, service and standards of coverage

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Cost of Risk and Retention Analysis
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Risk Retention Factors

• Materiality of extraordinary losses
• Frequency and severity of expected losses
• Cost and availability of insurance excess of
  various retention levels
• Companys degree of risk aversion

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Renewal Strategies
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Alternative Programs
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Outside the Box Ideas

• Risk Financing Programs
• Captive and finite risk programs could be
  considered for retention management purposes
• Potential tax planning opportunities
• Retention Adjustment Structures
• Structures allow for adjustment of retention
  based on current economic / business indices
  rig count, for instance
• Provides for lower retentions and greater risk
  transfer when business is soft

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Outside the Box Ideas

• Loss Portfolio Transfer (LPT)
• Reduction of balance sheet reserves
• Reduction of required collateral
• Environmental Cost Caps
• Funding vehicle plus risk transfer for overruns
• Reduction of balance sheet reserves
• Potential tax planning opportunities

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Broker Relationship Compensation
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Closing Comments
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Why Wortham?

• Our partnership business model is dedicated to
  providing very broad, high quality, meaningful
  service to our customers with long- term view
• Our strategy is to lower your overall cost of
  risk
• You would be an important energy related account
  for Wortham and would be handled with a sense of
  urgency
• We invite you to check our reputation with
  clients, underwriters and service providers

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THANK YOU