Explaining Experian. Contents. May 2008

Transcription

1 Expaining Experian Contents May 2008

2 Contents Introduction 1.00 Overview of the business 1.01 Group strategy 1.02 Saes by activity 1.03 Major databases 1.04 Market and cient profie 1.05 Financia anaysis 1.07 Key detais 2.00 What we do Credit Services 2.03 Consumer credit 2.05 Business information 2.07 Automotive services 2.09 Insurance services 2.10 FARES (First American Rea Estate Soutions) 3.00 Detaied financia anaysis 3.01 Saes and profit by geography 3.03 Saes and profit by principa activity 3.04 Saes by geography and principa activity 3.05 Cost anaysis 3.06 Cash fow 4.00 Main products and services 4.00 Credit Services 4.01 Decision Anaytics 4.02 Marketing Services 4.04 Interactive 4.05 Major databases Decision Anaytics 2.13 Credit anaytics and decision support software 2.21 Fraud soutions Marketing Services 2.25 Data and data management 2.31 Research services 2.33 Digita services 2.35 Business strategies Interactive 2.41 Consumer Direct 2.43 Lead generation

3 Expaining Experian Introduction Experian is the goba eader in providing the information and decision anaytics needed to expand consumer and commercia credit in major economies around the word. We hep organisations to find new customers and to deveop and manage existing reationships by providing data, decision-making soutions and processing services. We aso hep consumers to understand, manage and protect their persona information and to make more informed purchasing decisions. Experian s vision is for its peope, data and technoogy to become a necessary part of every major consumer economy around the word. The information in this document has been prepared soey in order to assist sharehoders, customers, suppiers and the pubic to understand the Experian business and does not purport to be a compete anaysis of the Experian business or set out a the risks and benefits that are associated with it. This document is not intended to form the basis of any investment decision and those intending to invest in Experian shares shoud make their own independent assessment of the business prior to making any investment and shoud not rey on Expaining Experian in making their judgement on whether to invest. No representation or warranty, express or impied, is given and, so far as is permitted by aw, no responsibiity or iabiity is accepted by any person, with respect to the accuracy or competeness of Expaining Experian or its contents. In particuar, but without imitation, no representation or warranty is given as to the achievement or reasonabeness of, and no reiance shoud be paced on, any projections, targets, estimates or forecasts contained in this document. Experian undertakes no obigation to provide any additiona information or to update this document or any additiona information or to correct any inaccuracies which may become apparent.

4 Expaining Experian 1.00 Overview of the business 1.00 Overview of the business Our business is managed on a geographic basis across North America, Latin America, the UK and Ireand and EMEA/Asia Pacific. We aso categorise our business into four principa activities. Credit Services provides the information needed to extend credit to consumers and businesses. We maintain arge, comprehensive databases containing the credit appication and repayment histories of consumers and businesses. Decision Anaytics unocks the vaue of the Credit Services data and heps cients by appying anaytica toos and software to convert data into business decisions. Marketing Services heps cients target, acquire and retain customers. Our arge and comprehensive databases contain geographic, demographic and ifestye information on consumers. Interactive is an internet marketing business with two types of activity: directto-consumer, which provides credit information directy to consumers, and ead generation, which connects consumers with businesses on the internet.

5 1.01 Expaining Experian Group strategy Experian s vision is for our peope, data and technoogy to become a necessary part of every major consumer economy. Through our data resources and anaytica capabiities, Experian provides one of the buiding bocks for growth in consumer economies around the word. Our Credit Services and Decision Anaytics businesses hep consumers and organisations obtain access to affordabe credit, whie bringing increased safety and soundness to banking systems. Our Marketing and Interactive businesses hep organisations to reach new markets and to find and keep profitabe customers. In order to capitaise on the market opportunities avaiabe to us and to drive ong-term sharehoder vaue, we have centred our strategy around three eements: Focus on data & anaytics Drive profitabe growth Optimise capita efficiency Focus on data and anaytics Our core expertise ies in the ownership and operation of comprehensive databases about consumers and businesses. From these we are abe to extract significant, extra vaue by appying our own proprietary anaytics and software. The combination of data and anaytics is a key differentiator. Drive profitabe growth Experian s growth is supported by favourabe ong-term dynamics in our two end-markets of credit and marketing. We have exceent positions in these markets and our aim is to drive organic revenue growth by everaging our scae and focusing on best-in-cass performance. Our strategic framework for driving profitabe growth has the foowing components: Expand our goba reach: by expanding our goba network and extending our existing capabiities into new geographic and vertica markets. Innovate to stay ahead: by promoting a cuture of innovation and investing in new data sources and enhanced anaytics that deiver significant vaue to our cients. Drive operationa exceence: by everaging our goba scae and common patforms to aow us to depoy goba products quicky into new markets. Optimise capita efficiency We aim to use our strong cash fow efficienty by continuing to reinvest to retain competitive advantage and to make targeted acquisitions that fit our strategy and meet our financia hurdes. We aim to strike the right baance between investment for growth and returning cash to sharehoders via dividends or share buy backs. Experian s businesses are characterised by their market-eading positions, high barriers to entry, goba reach and potentia for ong-term growth, as we as their attractive financia characteristics. We are therefore focusing our investment on deveoping these core capabiities in order to buid market-eading positions in credit risk management and high ROI marketing. Credit-reated activities: Growth is underpinned by rapidy expanding demand for sophisticated anaytics and software that hep organisations to predict and manage risk in both deveoped and emerging markets. Experian s appications are proven to drive growth in the markets we serve. Marketing-reated activities: Growth is underpinned by the emergence of new, information-rich channes and by the increasing importance of high ROI customer acquisition and retention. These channes are stimuating demand for more targeted, faster, more effective and more measurabe marketing campaigns. Experian s core data and anaytics expertise provide the science for cients to execute better marketing campaigns. We are aso taking advantage of extensive synergies across our credit and marketing activities, where we are abe to everage a significant amount of our data management processes to serve cients in both areas.

6 Expaining Experian 1.02 Saes by activity Principa activities Credit Services Decision Anaytics Marketing Services Interactive Consumer credit Business information Automotive services Credit anaytics and decision support software Fraud soutions Data and data management Research services Digita services Consumer direct services Lead generation Insurance services Business strategies Saes by activity Credit Services Decision Anaytics Marketing Services Interactive Saes (US$m) 1 1, Percentage of saes 47% 12% 20% 21% 12 months to 31 March 2008 underying growth 2 1% 7% 1% 9% 1 Saes are for the 12 months to 31 March 2008 and excude discontinuing activities 2 Growth excuding discontinuing activities and corporate acquisitions at constant exchange rates

7 1.03 Expaining Experian Major databases US Consumer credit database: 215 miion consumers. Nationa business credit database: more than 19 miion businesses. Nationa vehice database: more than 500 miion vehices. INSOURCE database: consumer marketing information on 215 miion consumers in 110 miion househods. BehaviorBank: sef-reported consumer marketing information submitted by 40 miion individuas and 35 miion househods. Z-24 cataogue database: over 2.8 biion cataogue orders across 109 miion househods. UK Consumer credit database: 45 miion consumers. Nationa business database: records on 4 miion imited and non-imited active UK businesses, with over 5 miion contact names. Limited companies database: over 5.2 miion companies of which 2.4 miion are current and 2.8 miion dissoved. Over 15 miion directorship records. Car Data Check: 31 miion vehices and over 90 miion DVLA registration records. Marketing databases: ifestye data on 8.4 miion househods and 14 miion individuas. Motor insurance database: 25 miion motor insurance poicies and 30 miion vehices, with 1.8 miion onine enquiries received each month.

8 Expaining Experian 1.04 Market and cient profie Market profie Goba Pubishing/media 2% Teecom/utiity/ insurance 7% Government 2% Automotive 6% Other 4% Retai/home shopping 10% Financia services 52% Direct-to-consumer 17% Approximate percentage of saes by vertica market Saes are for the 12 months to 31 March 2008 and excude discontinuing activities Cient profie Goba 47% of saes A other eements 36% of saes Top 50 cients 17% of saes Top 10 cients Saes are for the 12 months to 31 March 2008 and excude discontinuing activities and Consumer Direct Of the top 50 cients, at east 85% have been doing business with Experian for five years or more

9 1.05 Expaining Experian Financia anaysis Geographic spit 2008 Saes (US$m) EBIT (US$m) Empoyees (FTEs) % 3,777 24% 2,061 51% 324 8% % % 75 7% 87 9% % 5,817 37% 4,106 26% 1,975 13% n North America n UK and Ireand n EMEA/Asia Pacific n Latin America n North America n UK and Ireand n EMEA/Asia Pacific n Latin America n North America n UK and Ireand n EMEA/Asia Pacific n Latin America A anaysis excudes discontinuing activities Cost profie Goba percentage of saes EBIT 22% Labour 43% IT Data Customer acquisition/marketing 5% 5% 11% Other Corporate costs 13% 1% Costs are for the 12 months to 31 March Direct business ony, excuding FARES and discontinuing activities Other incudes other depreciation, occupancy, royaties and voice teecommunications

10 Expaining Experian 1.06 Saes mix North America Credit Services Decision Anaytics Marketing Services Interactive Saes (US$m) Percentage of saes 39% 4% 19% 38% 12 months to 31 March 2008 underying growth 2 0% 7% 2% 5% 1 Saes are for the 12 months to 31 March 2008 and excude discontinuing activities 2 Growth excuding discontinuing activities and corporate acquisitions Latin America Credit Services Decision Anaytics Marketing Services Saes (US$m) Percentage of saes 95% 2% 3% 12 months to 31 March 2008 underying growth 2 n/a 43% n/a 1 Saes are for the 12 months to 31 March 2008 and excude discontinuing activities 2 Growth excuding discontinuing activities and acquisitions at constant exchange rates UK and Ireand Credit Services Decision Anaytics Marketing Services Interactive Saes (US$m) Percentage of saes 30% 26% 37% 7% 12 months to 31 March 2008 underying growth 2 1% 0% (3)% 95% 1 Saes are for the 12 months to 31 March 2008 and excude discontinuing activities 2 Growth excuding discontinuing activities and acquisitions at constant exchange rates EMEA/Asia Pacific Credit Services Decision Anaytics Marketing Services Saes (US$m) Percentage of saes 70% 18% 12% 12 months to 31 March 2008 underying growth 2 3% 20% 11% 1 Saes are for the 12 months to 31 March Growth excuding acquisitions at constant exchange rates

11 1.07 Expaining Experian Key detais Some major cients American Express Bank of America Barcays BMW Financia Services BNP Paribas Boots Capita One CarMax Citicard Commerzbank Coors Brewers UK Crate and Barre Crédit Agricoe Crédit Lyonnais Debenhams De Discover ebay Egg First American Ford France Teecom HBOS Hiton Internationa Househod HSBC IBM ICICI JCB Koh s Kookmin Bank Lego Loyds TSB Marks & Spencer Morgan Staney Nationa Austraia Bank Next Orange Procter & Gambe Roya Mai Siebe Société Générae Somerfied Stapes Tesco Toyota UNICEF Washington Mutua Westpac Yahoo! Experian operates in 38 countries and ses to cients in over 65 countries around the word Countries where we have offices: Argentina Austraia Austria Begium Brazi Bugaria Canada Chie China Czech Repubic Denmark Estonia Finand France Germany Greece Hong Kong India Ireand Itay Japan Maaysia Mexico Monaco Netherands New Zeaand Norway Poand Romania Russia Singapore South Africa South Korea Spain Sweden Turkey United Kingdom United States

12 Expaining Experian 1.08 Key markets and soutions Austraia/NZ Brazi Bugaria/Romania/Russia Canada China France/Begium/ North Africa Germany/Austria/ Switzerand Itay Japan Latin America Midde East/Pakistan Netherands Norway/Sweden/ Denmark/Finand/Estonia Repubic of Ireand South Africa Other Asia Pacific Spain/Portuga Turkey UK US Credit Services Consumer bureaux t t Business information Automotive databases Insurance services Decision Anaytics Decision support Appication processing Fraud soutions Marketing Services Data and data management Research services Digita services Business strategies: Micromarketing t Economic forecasting Interactive Consumer Direct services Lead generation Service offered t Service offered via third party Key goba competitors Acxiom Credit Services Decision Anaytics Marketing Services Interactive Information D&B Equifax Fair Isaac Harte-Hanks infousa Inc Interactive Corp TransUnion Consumer Direct Lead generation

13 Expaining Experian 2.00 What we do 2.00 What we do Data At the core of Experian are comprehensive databases of credit and marketing information on consumers and businesses. These databases are derived from both pubic and private sources and contain extensive, high quaity information with considerabe historica depth. Our comprehensive portfoio of data is maintained and owned by Experian and offers a greater breadth of information than any singe competitor, making us a partner of choice to many cients. Decisions Buiding on this foundation of data, Experian uses proprietary anaytica toos to hep cients turn raw data into critica decisions in a timey and consistent manner. Our toos aso hep consumers to make faster and more informed financia and purchasing decisions. Distribution Experian ses to cients in more than 65 countries around the word and has offices in 38 countries. We aso serve cients in many different markets, incuding the financia services, retai, teecommunications, automotive and pubic sectors. This broad distribution patform is unmatched within the goba information soutions industry.

14 Expaining Experian 2.02 What we do : Credit Services Credit Services acquires, processes and manages comprehensive databases containing the credit appications and repayment histories of consumers and businesses. Using proprietary search and match systems and appication software, we deiver a wide variety of credit reports and reporting services on consumers and businesses to our cients. This heps them to end profitaby to their customers, and to maximise revenue and minimise risk. Other activities incude Experian s rea estate information joint venture caed FARES and our automotive and insurance databases.

15 2.03 Expaining Experian What we do : Credit Services : Consumer credit Experian s goa as a consumer credit reporting agency is to hep enders make better informed ending decisions and to make it quicker and easier for consumers and sma businesses to obtain finance. When a consumer appies for credit, enders usuay contact a credit reporting agency for a consumer credit reference check to confirm the person s identity and creditworthiness. Lenders use this information to manage the risks associated with ending money, such as determining whether to offer oans, setting credit imits or assessing accounts that are in defaut. Over the past four decades, Experian has deveoped core expertise in acquiring, processing, managing and operating very arge and comprehensive databases. These are the foundation of our consumer credit business. Experian operates 15 consumer credit bureaux across the word, maintaining information on over 400 miion consumers. In the US, our consumer credit bureau maintains very detaied historica information on how over 215 miion adut consumers have fufied their past and current credit obigations. The US consumer credit database is ranked by industry anaysts as one of the argest databases in the word and incudes over 10 biion ines of data. In addition to the US, Experian maintains consumer credit histories on over 260 miion consumers in the UK, Brazi, Spain, Itay, Norway, Denmark, Netherands, Ireand, South Africa, Bugaria, Russia, Romania, Estonia and Canada. Experian aso icenses proprietary credit bureau software to organisations in Turkey, Kuwait, Saudi Arabia, Nigeria, Kenya and Pakistan for the deveopment and operation of independenty owned credit bureaux. A credit reporting agency is an independent broker of information, provided either by enders or sourced from third parties. This data varies by country, but typicay may incude credit account information, which is provided by enders to aow them to access each other s credit history information. Typica exampes of credit account information are mortgages, persona oans, credit and charge cards, mobie phone accounts and renta information; court judgments or their equivaent for the country of operation; bankruptcy information; information on repossessions; information provided by the financia services industry on suspected frauduent appications; previous and forwarding addresses; association and aias information; coections data; eectora ro records. To check a consumer s credit history and store information with a credit reference agency, a company must have a egitimate need or permissibe purpose for accessing the data and must notify the appicant of their intention to contact a credit reference agency. In the UK, a company must hod a consumer credit icence (typicay hed by banks, buiding societies, finance houses, major retaiers and teephone companies). In the US, permissibe purposes for accessing a consumer credit report are defined by federa aw. The aws of each country wi vary in respect of the hosting of such data and access to it. Experian does not make ending decisions or offer any comment or advice on particuar appications, but simpy provides factua information. Lenders then use that information, often in conjunction with other information, such as that incuded in an appication form or in any previous agreements with the appicant, to hep decide whether or not to end. As we as credit reports, cients can aso use Experian s suite of notification services to drive their marketing, risk and retention programmes. The suite incudes: Risk triggers, which provide daiy notification of changes in a customer s credit behaviour, incuding new deinquent account information, new pubic record fiings or other negative credit information. It enabes cients to take quick action on potentia high credit risk accounts. Marketing triggers, which provide daiy notices of creditactive consumers who are most ikey to respond to specific pre-approved credit offers. Retention triggers, which identify customers within a cient s customer base who have started new credit account reationships or made new inquiries. It heps cients understand the ongoing credit activities of their most profitabe customers. VantageScore SM has been deveoped jointy by the three nationa credit reporting companies, with the aim of deivering consistent, objective credit scores on consumers from across their respective databases. VantageScore was deveoped as a direct resut of cient demand for a more consistent and objective approach to credit scoring.

16 Expaining Experian 2.04 Serasa is the fourth argest credit bureau in the word and maintains the argest database in Brazi comprised of information on 161 miion individua taxpayers (consumers). Credit information is currenty negative data ony and incudes pubic record data such as bankruptcies and coection suites, bounced cheques and defauts. Core consumer credit products incude: Credit Bureau: The most comprehensive Braziian report on consumers. It is a soution to hep companies to mitigate risk, increase profitabiity and improve their credit and business decisions with consumers. Concentre Consumer: Information on individuas creditor composition, bankruptcies, coection suites, bounced cheques and defauts. PEFIN/REFIN: Information on consumers with past due debts with financia institutions and other companies. ACHEI-Recheque: Largest database in Brazi on consumers who issue bounced, suspended, stoen, ost or canceed cheques. Scorings: Customer scoring risk to indicate defaut probabiity in a certain timeframe. Benefits of consumer credit reporting: Underpins economic growth by providing the information and toos necessary for extending credit to consumers and businesses. Heps consumers obtain credit, where appropriate, quicky and convenienty. Heps enders estabish an appicant s credit worthiness and grant credit prompty, where appropriate. Keeps interest costs ower than they woud otherwise be, as enders can make aowances for bad debt risks. Heps combat fraud. Enabes consumers to obtain a copy of their consumer credit fie at any time to understand what information the credit reference agency hods. Case study Major US retaier seects Experian for its consumer credit data The cient Koh s Department Stores operates famiy-oriented stores that feature quaity excusive and nationa brand merchandise priced to provide vaue to customers. Their stores se cothes, footwear, accessories and home products targeted to midde-income customers shopping for their famiies and homes. Koh s offers a convenient shopping experience through easiy accessibe ocations, we aid-out stores, centra checkouts and a good in-stock position which aows the customer to get in and out quicky. The issues/chaenges Koh s was searching for a business partner to provide consumer credit data for a aspects of their retai private abe credit card business. The company wanted to utiise a custom soution that focused on its business needs and objectives. In addition, it required quaity, accurate and timey consumer credit data to manage its credit decisioning process, approva rates and deinquencies whie maintaining a superior customer satisfaction rating. The soution Koh s seected Experian as its primary source for a consumer credit data. With Experian s custom soutions, it was abe to utiise Experian s credit data for account acquisition, account management and coections processes. In addition, Koh s used Experian s account review and notification services for account management purposes. By seecting Experian for its consumer credit data needs, Koh s has achieved its desired business resuts for its private abe retai credit card by meeting its targets for approva rates, deinquency rates and coections. Koh s has recenty decided to continue its partnership with Experian for another two year period.

17 2.05 Expaining Experian What we do : Credit Services : Business information Experian owns nine business credit bureaux across the word, maintaining information on about 30 miion businesses, typicay sma to medium-sized enterprises. We hep cients by providing them with industry-eading data to assist them in making credit and marketing decisions. Experian owns and operates business credit bureaux in the US, UK, Brazi, China, Itay, Denmark, Norway, Estonia and Ireand. A business information report contains pubicy avaiabe information from oca or nationay avaiabe sources such as Companies House in the UK or pubic record fiings in the US, together with other avaiabe sources of information. Experian s business information is avaiabe in various eves of detai, with deivery by a number of mechanisms, incuding the internet. As part of a typica report, the user wi receive some or a of the foowing: US company registration and incorporation detais, company number and registered address; ownership detais and principa activity of the company; trading addresses and phone numbers; names, home addresses, nationaity of company directors and company secretary (outside of US); payment behaviour (up to a 12-month history of how quicky the business is paying its bis); Commercia Dephi (Internationa) or Commercia Inteiscore (US) a company credit risk score and rating; Sma Business Inteiscore (US), which combines commercia and persona information on a business and its owner; any negative information such as county court judgments, winding-up petitions, tax iens and Uniform Commercia Code fiings or bankruptcies in the US; turnover, profit and oss and baance sheet information (UK up to ten years history where avaiabe). Nationa Business Credit Database: more than 19 miion business records with over 200 summarised credit attributes avaiabe. Pubic Record Extract: approximatey 30 miion credit records from state and federa pubic records. This provides users with access to corporate records, fictitious business names, bankruptcies, tax iens, judgments and Uniform Commercia Code fiings for direct marketing purposes. UK Limited Companies Database: a dynamic version of pubic record information on over 5.2 miion UK imited iabiity companies, incuding detais of payment behaviour, credit information and risk assessments. The resut is a comprehensive up-to-date anaysis of the financia and trading performance of UK companies. Directors Database: persona detais on a UK Company Directors and Secretaries; current/previous/dissoved directorships, secretaryships and partnerships; convictions; disquaifications; pus fu consumer detais. Nationa Business Database (NBD): is a comprehensive database of business information compied specificay for B2B marketing purposes. The NBD can hep businesses get the most out of their marketing budget. Database soutions incude targeted prospects and integrated direct marketing campaigns, database management and customer insight. Non-Limited Company Database: a vauabe decisionmaking too for evauating the track record of sma businesses and making informed risk management decisions. By providing insight into the financia background and payment history of a sma business, aong with reevant persona information on its proprietors, the depth of Experian s non-imited information is extensive, with information on over 2.9 miion UK sma businesses, partnerships and soe traders. Brazi Serasa maintains the argest and most comprehensive database in Brazi with information about how businesses of a sizes manage their credit obigations. Serasa maintains information on virtuay a businesses in Brazi, about 9 miion corporate taxpayers, and data incudes information such as pubic record information incuding bankruptcies, coection suites, bounced cheques, and credit obigations and payment behaviour. Core business credit products incude: Reato: Fu report on business behaviour incuding information on payment habits and fraud aerts. Credit Rating: fu report on company s credit record, economic, financia and behavioura information and credit risk rating. Concentre Business: Information on businesses incuding creditor composition, bankruptcies, coection suites, and financia pending matters. PEFIN/REFIN: Information on past due debts with financia institutions and other companies. Serasa Soution SMEs: consistent reiabe information about sma businesses for credit granting and doing business with the segment.

18 Expaining Experian 2.06 Ireand registration detais on registered Irish companies; financia information on over 100,000 registered Irish companies; detais of registered judgments against businesses since 1991; Itay detais of directors of companies in Ireand; registration detais of business names in Ireand. integrated database of pubic positive and negative information (from Courts, Chambers of Commerce and Land Registry offices), with more than 19 miion records registered; Itaian Chamber of Commerce data on companies (reports, baance sheets, company structure, judgments, administrators fies); rea estate data more than 1.5 miion reports on Itaian properties. Denmark registration detais on 550,000 Danish companies; registration detais on directors and board members of Danish companies; financia data on 170,000 registered Danish companies. Norway registration detais on 750,000 Norwegian companies; unique registration detais on managing directors and board members of Norwegian companies; financia data on a imited companies that have been in business for more than 12 months. Estonia registration detais on 150,000 Estonian companies; registration detais on directors and board members of Estonian companies; financia data on 64,000 registered Estonian imited companies; register for bad payers. Case study Taking the risk out of commercia easing The cient The cient is part of a arge commercia finance company, a goba eader in deveoping and providing financia soutions and services to equipment manufacturers, distributors, deaers and their end users. The issue/chaenges The cient wanted to shorten its turnaround time when screening appications for ease funding whie at the same time improving the quaity of the decisions that were made. The soution Experian s Commercia Lease Decision Score was chosen because of two key attributes. Firsty, Experian deveoped an industry-specific easing risk mode that was an idea fit for the cient. Secondy, Commercia Lease Decision Score was avaiabe via mainframe deivery, which meant that it coud be instaed within the cient s automated credit appication process. The cient s automated decisioning system retrieves an Experian Commercia Lease Decision Score and integrates the risk score into the cient s decision matrix that generates either an approva for a specific monetary amount or a referra to a credit anayst for individua attention. The Commercia Lease Decision Score enabes faster, accurate and consistent decisions, saving the cient time and improving credit quaity.

19 2.07 Expaining Experian What we do : Credit Services : Automotive services Experian provides vehice history information in the US, UK, Hoand and Itay to hep manufacturers, deaers, finance providers, insurers, auction houses, government agencies and consumers to understand the risk associated with any given vehice. Our vehice history information is used to estabish whether a vehice is currenty registered as stoen, has outstanding finance or has been registered as a write-off. A vehice history check can aso hep estabish the market vaue of a vehice, whether or not the vehice has changed owners or been imported and the accuracy of the odometer reading. Frauduent representation of used vehices poses a significant risk for consumers and a potentia iabiity for deaers, finance providers and insurers. In the US, around 40% of a vehices that are decared a tota oss or write-off are eventuay rebuit and put back on the road, often in different ocations, making it very difficut for the buyer or seer of a vehice to detect the fraud. Benefits of using a vehice history report: Heps consumers discover any adverse information to assist them in making an informed buying decision. Heps deaerships reduce risk, both financiay in terms of making a sound investment and egay in terms of compiance with egisation. Heps finance institutions and insurers reduce financia risk by providing specific vehice history. Heps provide auction houses with fu discosure at auction, enabing quaity standards to be maintained and increasing residua resae vaue. Heps government bodies assist aw enforcement in tracking vehices. Some of the various eements that an Experian vehice history report may feature (dependent on country ocation) are: vauation based on the age, type and mieage of the vehice (UK ony); make/mode, noted mieage, year of manufacture, coour, date of registration and engine number; number of previous vehice owners and date of ast change; mieage from odometer readings to identify possibe mieage discrepancies; detais of outstanding finance on the vehice even if the number pates have been changed; damage from major accident aong with cassification code of damage (UK ony); feet information whether a vehice is known to be rented, a taxi-cab or a company vehice (US ony); forfeiture information whether a vehice has been abandoned or repossessed (US ony); theft reported ost/stoen or recovered from theft; CO 2 emissions.

20 Expaining Experian 2.08 Case study Experian s Autocheck vehice history reports hep buid buyer confidence The cient CarMax is the argest retaier of used cars in the US and currenty operates 80 used car superstores in 38 markets. The issues/chaenges To improve the customer buying experience and increase buyer assurance, CarMax wanted to provide accurate and timey information on the history of a vehice through a soution that coud be easiy integrated into the company s onine inventory and its rigorous on-site vehice inspection process. Utiising its experience within the industry, Experian Automotive worked cosey with CarMax to hep them impement soutions that woud meet both its needs as we as those of its customers. This incuded providing access to the most up-to-date information on a vehice s history which woud aso revea any possibe undiscosed or unknown probems that coud affect an automobie s safety and resae vaue. CarMax Auto Finance aso utiised Experian s coections, fraud protection and credit soutions to evauate a customer s credit and pair them with the best financing option. The soution Experian Automotive s AutoCheck vehice history reports have been adopted as part of CarMax s comprehensive inspection process for a vehices they se in their outets. Experian Automotive s AutoCheck FreeLink service, has heped CarMax to buid buyer confidence and provide added peace of mind by offering free, customised vehice history reports on over 25,000 avaiabe vehices. In addition, CarMax Auto Finance uses Experian s Coection Report to hep reduce abour costs for critica account management practices such as ocating a debtor or debt coection. The finance house aso uses Experian Credit Reports to evauate consumer credit and assess risk for new and used vehice financing, and Experian s Fraud Shied SM to assess both credit risk and gain a fu perspective on an account s fraud or potentia first-payment defaut risk. This has heped CarMax to reduce the abour costs associated with prioritising and pursuing errant debtors.

21 2.09 Expaining Experian What we do : Credit Services : Insurance services Experian s insurance services in the UK provide dedicated saes, account management, systems and business consutancy service teams, who work with insurance organisations to deiver comprehensive information soutions for marketing, underwriting, risk assessment, caims handing and fraud prevention and detection. The range of services enabes insurers to target new customers more precisey, improve pricing accuracy, prevent fraud, reduce costs and buid more successfu customer reationships. A number of databases and services have been deveoped or taiored specificay by Experian for insurance organisations. Caims and Underwriting Exchange (CUE): UK insurance industry shared databases of househod, motor and persona injury caims. This data is used at a stages of the customer ife cyce, from quotation and poicy acceptance, through to renewa and caim. Insurers benefit from fraud prevention through the identification of non-discosure and concurrent caim activity with other insurers, improved customer service through reduced ca time and confirmation of caims history and more accurate pricing. Motor Insurance Database (UK): Experian operates the Motor Insurance Database, a UK motor insurance initiative to combat uninsured driving, on behaf of the Motor Insurers Bureau. The Motor Insurance Database hods detais on a UK insured drivers, covering 25 miion private insurance poicies, 30 miion private vehices and over 4 miion commercia vehices, with a motor insurers required to suppy information. The database is centra to the fight against uninsured driving and receives around 75,000 enquiries a day from the poice. Peris: data modes providing rating and geographica information on subsidence, theft, wind, coasta and river fooding, freeze and fire to assist insurers in the rating process and verify pricing. For caims, Peris data can hep assess potentia fraud and anayse and vaidate caims. Uncaimed Assets Register (UAR): a database of over five miion owners of uncaimed financia assets. The UAR heps financia institutions, such as insurers, pension companies, unit trusts and isted companies to address the issue of ost customers and gone-away investors by providing sophisticated eectronic tracing and a centra repository for owners of uncaimed investments. The UAR s search service heps consumers and probate professionas recover ost investments, such as ife poicies, pensions, unit trusts and share dividends. Existence Verifier: a database to assist the pension industry in determining the ikeihood of pensioners being deceased in order to identify and cease overpayments. Information from the Office of Nationa Statistics is enhanced with Experian data to provide an effective verification process for pension schemes and annuity providers. Vehice provenance/history checks: advanced vehice identity and provenance systems, containing detais of a registered vehices (marketed as Car Data Check through the AA in the UK and AutoCheck in the US and Itay). These systems are widey used in the motor insurance quotation, underwriting and caims processes. Eectronicay avaiabe vehice information instanty confirms a vehice s identity and highights any inconsistencies. Benefits to insurers incude minimising fraud and data inaccuracies and increased efficiency through reduced ca duration and better customer service. In addition to its speciaist insurance services, many products from Experian s wider portfoio provide support to the UK insurance market.

22 Expaining Experian 2.10 What we do : Credit Services : FARES (First American Rea Estate Soutions) In December 1997, Experian contributed its US property database businesses into a joint venture with First American Corporation. The joint venture, known as First American Rea Estate Services (FARES), is a subsidiary of First American Corporation (NYSE symbo FAF) and is 20% owned by Experian. Experian accounts for FARES as an associate, showing its 20% share of FARES profits but no saes. First American Corporation speciaises in offering mortgage enders a of the information required to underwrite mortgage oans in the US. This incudes tite insurance, which insures against the risk that a newy acquired piece of property has a defective tite, such as an undiscovered tax ien or a forged deed. FARES forms the major part of First American s Information Technoogy division. Products and services of the FARES joint venture FARES aim is to offer a one-stop shop for information required on property transactions (incuding re-financing). The information is normay provided to mortgage enders, rather than to those purchasing the property. Services incude: Data content The database incudes the foowing types of data: compete owner name and address; property ocation information; detaied property characteristic information, where avaiabe; saes and transfer records, arm s-ength transactions, nomina transfers, forecosures and deeds to trust; mortgage financing records; tax assessor maps. CoreLogic In February 2007, First American merged the FARES business with CoreLogic Systems to expand further its mortgage risk anaytics business. The merger is majority owned by FARES and creates a singe unified company with unique data and predictive anaytics that enders, investors and consumers need throughout the mortgage process. Mortgage credit information through FARES c.30% ownership of First Advantage Corporation (FADV). Tax monitoring: FARES advises property mortgage enders of the status of property tax payments due on rea estate securing their oans (i.e. whether they have been paid or not). Food certification: FARES has a food reporting database, giving detais of a reported insurance caims resuting from food damage, enabing it to certify where a property is not at materia risk from fooding. Property vauations: these can be either manua (based on an appraiser visiting the property) or automated (using FARES database information on the size and ocation of the property). Mortgage document preparation. Property inspections: this is the physica inspection of properties in the forecosure process. Sources of data Property data is coected from pubic sources (e.g. county/ municipa tax assessor and recorder s offices) and from commercia and private sources, which enhance the data with demographics, property characteristics and amenity information. The nationa coverage extends to 85% of the entire rea estate activity in the US, with data on 100 miion properties updated annuay and an average of two miion property and mortgage transactions each month.

23 Expaining Experian 2.12 What we do : Decision Anaytics Decision Anaytics unocks the vaue of Experian s vast Credit Services data assets and other data sources by appying anaytica toos, scoring, software and systems to convert data into vauabe business decisions. Decision Anaytics offers two key services: credit anaytics and decision support software and fraud soutions. Decision Anaytics products are used by mutinationa cients to standardise their operations around the word and are often used as the key method of entry into new geographic markets. They are a significant growth opportunity for the business because of their potentia for goba reach and their position at the forefront of product deveopment and innovation. Decision Anaytics toos can utiise a cient s data or other third party data and operate most effectivey when using Experian s own credit data.

24 2.13 Expaining Experian What we do : Decision Anaytics : Credit anaytics and decision support software Experian has deveoped a goba expertise in statistica anaysis and scorecard deveopment to enabe cients to make consistent, high quaity and efficient decisions about credit risk, customer marketing and account management. Its products fa into four main categories: Scoring Strategy Management Strategy optimisation Appication processing Scoring Statistica anaysis of data is used to define the characteristics (variabes) that are most predictive of a consumer s future behaviour. A scorecard typicay contains a ist of characteristics each of which is assigned points that refect whether it is a positive or negative indicator of future behaviour. Usuay, the characteristics that are associated with high risk resut in an appicant osing points, whie those inked to ikey good performance (number of accounts paid on time, for exampe) wi gain points. When the points for a the characteristics are added together, the resut is the fina score for each individua. This fina score is judged against a pre-set range that the ender has determined is an acceptabe risk, based on the ratios of good accounts to bad accounts. A credit cut-off score is the owest acceptabe fina score. Any appications that score beow this are rejected or are offered a product with different pricing and terms. There is not usuay one singe characteristic that woud cause an appication to be rejected the scorecard baances a eements and it is the overa picture that counts. Types of scoring modes avaiabe incude: Appication scoring modes are used by enders at the time of issuing a new credit arrangement to assess the statistica probabiity of the account faing into arrears in the future. Scoring enabes enders to identify correcty the quaity of an appicant against their own criteria before choosing whether to accept or decine the appication. Behavioura scoring is used throughout the customer ife cyce to hep enders assess a customer s suitabiity for additiona products, based on their previous account payment history and credit behaviour. Credit risk scoring uses previous payment history to predict the ikeihood of future credit risk. Credit risk scoring heps reduce the number of ow quaity, high-risk credit appicants that woud previousy have been accepted by the ender. Credit risk scores are aso used to hep set pricing and terms for new credit offers. Credit marketing response scores are used to predict the ikeihood of a consumer responding to a new offer of credit. Experian aso offers bespoke decision support software to enabe cients to process appications more efficienty and to impement, manage and optimise customer strategies. Benefits of using scorecards for organisations: unbiased anaytica assessment, not reiant on an individua judgment; decisioning is consistent whenever and wherever it is appied; provides the ender with improved contro over acceptance eves and bad debt eves; reduces bad debts typicay by 15%-30% over traditiona subjective decisioning. Benefits of using scorecards for consumers: appicants are treated equay and are not subject to the persona views of credit underwriters; offers made are reevant and targeted; creditworthy appicants are more ikey to have their appications accepted; by screening out those accounts most ikey to go bad, companies can expand the number of other appications that are accepted; by controing bad debts, companies are keeping costs down and thus interest rates, making products more affordabe.

25 Expaining Experian 2.14 Strategy Management Experian s Strategy Management soutions hep eading companies around the word to make more inteigent, faster decisions about whether to accept new (and unknown) customers, extend the credit arrangements for existing customers or target them with new products. Strategy Management is used at every point of the reationship with a customer, from first targeting and accepting the customer into the organisation, to monitoring their performance and determining when woud be the best time to offer new or additiona products. In the event that an account fas into arrears, Strategy Management can define what processes to adopt in managing the account through to coections and recovery, incuding suggesting appropriate foow-up actions at every stage of the process. One of the key features of Experian s Strategy Management soutions is that from their own PC, cients can design and test new strategies. By segmenting customers based on simiar characteristics and appying scorecards for a range of objectives, an organisation can accuratey assess an individua against their objectives and make the right decision in order to achieve their goas. Strategy Management soutions may be integrated with appication processing, marketing or customer management systems. They may aso operate independenty in an organisation to guide strategy and poicy decision-making. Typica users of Experian s Strategy Management soutions incude credit risk underwriters (making the decisions about who to end to), credit marketers (deciding which variation of a product to offer a given appicant or existing customer and on what terms) and credit risk managers (deciding on the mix of appicants for the company to baance financia risk and returns). Benefits for a credit-issuing organisation: increase the number of accepted credit appications without increasing financia risk; reduce origination costs; generate customer oyaty by providing rapid and taiored decisions for each individua; provide greater speed and contro in the deveopment and deivery of customer acquisition and customer management strategies; ensure consistency of rues and strategies depoyed throughout a branch network and over mutipe geographies. Benefits for a consumer: faster acceptance of credit appications; better customer service, with quicker acceptance and more targeted marketing offers; not reiant on subjective decisions of individuas. Strategy optimisation Experian s Strategy Optimisation heps eading companies around the word make the best decisions about each account in a portfoio in order to yied the highest profit and return on investment. Strategy Optimisation maximises profit and return on investment by identifying the most profitabe decision for each and every customer interaction. Experian s optimisation technoogy uses patented mathematica agorithms to cacuate these decisions across portfoios or on a recurring basis such as is required in appication processing. Strategy Optimisation can be used at every point of the reationship with a customer. The optimisation technoogy can be depoyed stand-aone or within Experian s Strategy Management soutions to ensure an efficient, integrated and superior decisioning soution. Benefits for a credit-issuing organisation: maximises profitabiity and return on investment for every customer interaction; fexibe, easy to use software; abiity to arbitrate across competing business goas, objectives and operationa constraints; robust simuation and decision panning.

26 2.15 Expaining Experian Case study Experian Strategy Management to hep HSBC make biions of ending decisions each year The cient HSBC is one of the word s argest banking and financia services organisations, with over 125 miion customers in 82 countries. Everyday, HSBC makes miions of decisions in the management of its customers accounts and appications. It may be to authorise a payment to faciitate an internet or in-store purchase, to consider an appication for a new or increased credit imit, to determine the most appropriate product to offer, or to decide whether a customer can access money from a cash machine. The issues/chaenges The abiity to make those decisions quicky and accuratey is critica to the success of HSBC s different deivery channes and operations around the word. Just as important is that each decision is made in a timey, consistent and fair manner, wherever they are made and whatever the circumstances. The soution Faced with increasingy compex requirements and customer demands, HSBC chose Experian s Strategy Management software to assist in the deivery of mission-critica soutions. Strategy Management is a sophisticated business too, used by over 600 organisations wordwide, that enabes organisations to automate or simpify arge voumes of decisions. It does this by assessing reevant information and customer requests against a wide array of reguatory, business and commercia requirements and objectives. Experian s Strategy Management soution wi become an integra part of our goba business, expains Chris Hawkes, Head of Group Retai Credit & Risk at HSBC. It is enabing us to achieve consistency in decision-making across HSBC s diverse operations, whist improving the speed and quaity of our decisions. For our customers, it means that we can provide quicker decisions, offer a wider range of products and provide options that are more reevant to their particuar needs and circumstances. In short, it is an essentia component to deivering high quaity customer service. Once we have roed it out fuy across our business, Strategy Management wi be heping us make the biions of decisions we need to make each year. Experian and HSBC have a ongstanding reationship spanning 21 years and six continents. Like HSBC, Experian operates gobay, but with a strong oca focus on the markets in which it operates in order to provide oca soutions says Chris Hawkes. In Experian we have a trusted goba partner with the experience and technoogy to support our business going forward.