Accurate Valuation of Your Corporate Assets

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Accurate Valuation of Your Corporate Assets
Where Insurance and Accounting Meet...

• Telcom Insurance Group
• www.telcominsgrp.com

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The goals of todays presentation

• Create an interactive environment
• Identify Telcoms purpose to NTCA members
• Review specific information necessary and suggest
  a format you could use to provide property
  valuations to your insurance agent/broker to make
  sure you are properly protected

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Hard Market vs Soft Market

• Soft markets have been around for at least the
  last 10 years in the insurance industry because
  the financial outlook of many insurance carriers
  was very positive.
• Competition for policyholders, often times
  allowed carriers to be irresponsible with pricing
  for exposures--buying the business.
• The current change in the economic outlook has
  had a dramatic effect on the insurance
  marketplace causing us to be in hard market.

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Some Specific Causes of a Hard Market

• General economic conditions
• Events of September 11--largest insured event in
  history to date
• The Enron WorldCom accounting scandals are
  affecting many financial institutions
• Unpredictable weather Floods, hurricanes,
  tornadoes, hail/ice--storms appear to be
  increasing

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How Does a Hard Market Affect the Consumer?

• Restricted coverages
• Uncontrollable price increases to the consumer
• Less options of carriers who will underwrite
  risks
• Policy non-renewals

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What can a Captive do?

• Direct relationship with the insurance
  marketplace
• Telco-specific underwriting expertise
• Loss cost sharing
• Owned by Those we Serve

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National Telcom Corporation

• Fourth Captive Domiciled in Vermont
• First Vermont Association Captive
• Association and Member Owned
• Organized July 16, 1982
• Certificate of Authority Granted November 24,
  1982
• First Premium Written January 1, 1983

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Telcom Insurance Services Corporation

• Wholly-owned Captive Agency/Brokerage Facility
• Organized June 8, 1989
• Licensed in all NTCA Member States
• Expansion of Service Capabilities for the Captive

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Mission Statement
The Telcom Insurance Group is dedicated to
providing every NTCA member system with the best
possible property and casualty coverage program
at a fair price. We will support NTCA, our
sponsor, through our participation in, and
promotion of, Association programs. We will
strive to exemplify the highest standards of
integrity, excellence in personalized customer
service, and leadership in offering specialized,
telecommunications-specific coverage packages.
We will partner with our fellow members by
providing educational programs designed to assist
them in their quest to protect their corporate
assets and provide stability for the corporate
entity through a variety of insurance risk
management programs. Achieving success in these
areas will fulfill the mission of the NTCA
originators and NTC shareholders by. . .
Bettering the World of Commercial Insurance for
Rural Telephony . . . One NTCA Member at a Time.
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Accurate Recordkeeping

• Especially important in the accounting field
• Assumption most use the JSI list of codes for
  accounting purposes
• Discussion is strictly of Asset Accounts

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Real Property Valuation Methods

• Cost Per Square Foot Method- Based on local labor
  and material costs and takes into account unique
  features of a property
• Unit Count Method- Used for homogeneous type
  properties where each room cost roughly the same
  amount
• General Ledger Trial Balance Method- Utilizes the
  insureds accounting records to determine value
• Professional Appraisal- Most accurate done by a
  personal visit to the site and recording all
  facts and details about the structure

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Personal Property Valuation

• General Ledger Trial Balance- Takes into account
  the cost new it needs to be adjusted for
  inflation periodically
• Purchase Invoice Records- A detailed record of
  all purchases to determine value
• Professional Appraisal- Certain items like
  antiques, fine arts, jewelry and precious metals
  are best appraised by an expert in their
  respective field

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Key Terms to Consider

• Replacement Cost- The cost to repair or replace
  with a new item of like kind or quality
• Functional Replacement Cost- The cost to repair
  or replace with similar property that will
  perform the same function
• Actual Cash Value- The cost to repair or replace
  less depreciation
• Agreed Amount- The insured and insurer agree to a
  value and schedule the amount on the policy
• Other Valuation Types ( Non-insurance)- Tax
  Appraised, Loan Amount, Real Estate Value,
  Historical Cost, Accounting Book Value and
  Reproduction Cost

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Property Spreadsheet
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Electronic Data Processing Code 2124
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Contractors/Heavy Equipment Codes 2114 and 2116
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Auto ScheduleCodes????
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Payroll Calculations

• 8901 Inside Employees (have a desk and
  primarily are office employees)
• 7600 Outside Employees
• Misc sales people
• Executive payroll and state limitations

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Accounts Receivable

• How much coverage is enough?
• This coverageInsures against loss of sums owed
  to the insured by your customers that are
  uncollected because of damage by an insured peril
  to AR records.
• Coverage applies to toll tape and valuable papers

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Toll Tape

• How and where is your toll tape stored?
• How often is that data backed up?
• Where is the backup stored? Off-site?

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Valuable Papers

• What are valuable papers?
• Deeds, trusts, contracts, stock certificates
• How do we protect them?
• Where are they stored?
• Fire-proof
• Bank vault

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Fine Arts

• Coverage provided under inland marine for works
  of art
• Example antique switchboard on display in your
  lobby or old photographs/paintings
• Appraisal value is key

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Questions???

• Check out our website at www.TelcomInsGrp.com
• Call us at 800-222-4664
• Fax us at 301-474-6196
• Email us at TIG_at_TelcomInsGrp.com