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Auto Club Group

ACG Direct Mail ProgramSeptember 21, 2009

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Agenda

1. RPM Direct Overview

2. Auto Club Group Overview

3. Auto Club Group Case Study

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RPM Direct – your key to direct success

Response Profitability MarketingRevenueRiskRetention

RPM leverages the drivers of customer profitability through highly sophisticated targeting and a data driven creative development process.

RPM Direct

Overview

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Our Solution

The Turnkey, Outsourced Solution for Highly Targeted, Profitable, Direct Market Auto Insurance Customer Acquisition.

RPM targeting techniques have driven in over $1.5 billion of profitable direct auto insurance premium.

RPM Direct

Overview

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Proprietary Methodology• Methodology developed over the past 12 years.

• Employs a measure of Policyholder Lifetime Value to target each marketing prospect.

• RPM builds discrete multivariate scoring models on the key drivers of insurance profitability: Response, Conversion, Revenue, Risk, and Retention.

• Proprietary methodology integrates multi-dimensional scoring models into a measure of Policyholder Lifetime Value for each prospect.

• Customized for each client.

RPM Direct

Overview

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Insurance Drivers of Profitability+ Policy Premium- Claims- Operating Expense- Acquisition Cost

= Annual Profitx Life of Product

=Lifetime Value of Policy

Revenue Model

Risk Model

Response andConversion Models

Retention Model

RPM Direct

Overview

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RPM Direct Capabilities

Database Marketing Model

RPM Direct

Overview

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Monthly Targeting Cycle

RPM Direct

Overview

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Auto Club Group

• Began operations as Chicago Motor Club in 1906

• Currently operates 6 AAA clubs in 8 Midwest states

• 4 million members

• 5,000 associates

• Home office in Dearborn, MI

ACG Overview

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ACG-Major BusinessesRoad Service

– North American network of 42,000 towing providers

• Travel

– Full service agency

– $300 million annual sales

• Insurance

– Auto/Home/Life

– Sales through ACIA and joint ventures with other AAA clubs

ACG Overview

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Auto Club Insurance Association• Insurance sales in 12 states

• Distribution through captive and independent agents, partner clubs and call centers

• 1 million policies in force

• $1.8 billion in assets

• “A” Rating (excellent) from A.M. Best.

ACG Overview

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Auto Club Group Case Study• RPM has been working with ACG since 2005.

• Direct mail is a major lead generation channel for ACG.

• Direct mail targeting selections based on fixed allowable through June 2008.

• Tiered allowables implemented in July 2008.

ACG Case Study

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Tiered Allowables

• ACG developed separate allowables for each risk tier.

• Allowables reflect differences in lifetime value by risk tier.

• Differences in lifetime value are driven by differences in losses, persistency, premium and other related expenses.

• Targeting for each tier is done on the basis of index to allowable (CPS/Allowable).

ACG Case Study

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Claims by Credit Tier

Low Medium High

Credit

Cla

ims

Freq

uenc

y

ACG Case Study

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Persistency by Credit Tier

Low Medium High

Credit

Ave

rage

Life

(Ye

ars)

ACG Case Study

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Targeting Using Fixed Allowable

Fixed Allowable

ACG Case Study

All Prospects

Credit

Cos

t Pe

r Sa

le

Target Do Not Target

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Targeting Using Fixed Allowable

Fixed Allowable

ACG Case Study

Low Medium High

Credit

Cos

t Pe

r Sa

le

Target Do Not Target

Untargeted segment tends to be high credit

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Targeting Using Tiered Allowables

Tiered allowables reflect customer value

Fixed Allowable

Tiered Allowable

ACG Case Study

Low Medium High

Credit

Cos

t Pe

r Sa

le

Target No Longer Target New Target Do Not Target

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Targeting Using Tiered Allowables

Fewer low-credit prospects targeted

ACG Case Study

Low Medium High

Credit

Cos

t Pe

r Sa

le

Target No Longer Target New Target Do Not Target

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Targeting Using Tiered Allowables

Additional high-credit prospects targeted

ACG Case Study

Low Medium High

Credit

Cos

t Pe

r Sa

le

Target No Longer Target New Target Do Not Target

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Targeting Using Tiered Allowables

Net effect is to produce a better credit mix

ACG Case Study

Low Medium High

Credit

Cos

t Pe

r Sa

le

Target No Longer Target New Target Do Not Target

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Results-Change in Marketing MetricsChange Associated with the Use of Tiered Allowables

ACG Case Study

Metric % Change

Response Rate -16%

Conversion Rate 5%

Cost Per Sale 13%

Allowable 175%

Index to Allowable -59%

But…

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Results-Change in Business Mix

ACG Case Study

0%

10%

20%

30%

40%

50%

60%

70%

Low Medium High

Fixed Allowable Tiered Allowable

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Results-Change in Business Mix

Low Medium High

Credit

Cla

ims

Freq

uenc

y

Low Medium High

Credit

Ave

rage

Life

(Ye

ars)

Claims Persistency

Remember these…

ACG Case Study

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Results-Change in Business Mix

ACG Case Study

0%

10%

20%

30%

40%

50%

60%

70%

Low Medium High

Fixed Allowable Tiered Allowable

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Results

Tiered allowables produce:

• Higher credit mix of business.

• Higher persistency.

• Lower claims risk.

• Higher overall Net Present Value.

• Higher cost per sale.

ACG Case Study

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Lessons Learned

• Working closely with Risk and Product people leads to better decisions.

• The use of tiered allowables lets you focus on your market niche.

• Don’t rely on traditional marketing statistics alone.

• Tie targeting to profitability.

ACG Case Study

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RPM Direct, LLC24 Arnett Avenue, Suite 100, Lambertville, NJ 08530

Ph. 609.566.7150 | Fx. 609.566.7155

www.r4pm.com