State of Telcom 2012...Stock Investment Report …as of 12/31/2011 Active SharesActive Shares -...

Because it has always been a matter of trust…

National Telcom Corporationp

The State of the Companyp y

A Proud and Secure History and Futurey

Presented by:Peter J. Elliott, CPCUPresident and CEO


Mission Statement Our purpose is to enable telecommunication businesses to p pmanage their financial risk by means of industry-specific insurance and risk management solutions. We build value through the strength of our relationships with our family ofthrough the strength of our relationships with our family of insureds, the knowledge we have gained of the risks of the industry we serve, the coverage and claims advocacy we offer, and by consistently producing sound solutions that fit the needs of each of our customers.

The end product of our efforts is the earned trust of our insureds.


Vision Statement

“Aggressively pursue opportunities that will position (TIG) to be the premier direct writingposition (TIG) to be the premier direct writing insurance provider of coverage and risk management services to all members in a cost geffective manner for the benefit of our customers.”


ShareholdersCen-Ark Cellular, Inc.Central Arkansas Telephone Cooperative, Inc.Craw-Kan Telephone Cooperative, Inc.Etex Telephone Cooperative, Inc.Farmers Telephone Cooperative, Inc.Glenwood Telephone CompanyHancock Rural Telephone CorporationHorry Telephone Cooperative, Inc.Industry Telephone CompanyKanOkla Telephone Association, Inc.


ShareholdersMid-South TelecommunicationsMid South TelecommunicationsNational Telecommunications Cooperative AssociationPanhandle Telephone Cooperative, Inc.Paul Bunyan Rural Telephone CooperativePaul Bunyan Rural Telephone CooperativePembroke Telephone CooperativePeoples Telecommunications, LLCPeoples Telephone Cooperative IncPeoples Telephone Cooperative, Inc.Piedmont Rural Telephone CooperativePioneer Telephone Association, Inc.Pi n r T l ph n C p r ti InPioneer Telephone Cooperative, Inc.Pioneer Telephone CooperativePolar Communications


ShareholdersRandolph Telephone Membership Corporationp p p pRiviera Telephone Company, Inc.Rock Port Telephone CompanySanta Rosa Telephone Cooperative, Inc.p p ,Scott County Telephone Cooperative, Inc.Skyline Telephone Membership CorporationSouthwest Arkansas Telephone CooperativeSouthwest Arkansas Telephone CooperativeStanton Telecom, Inc.Star Telephone Membership CorporationSurry Telephone Membership CorporationSurry Telephone Membership CorporationTaylor Telephone Cooperative, Inc.Totelcom Communications, LLC


ShareholdersTwin Lakes Telephone Cooperative CorporationTwin Lakes Telephone Cooperative CorporationWest Carolina Rural Telephone Cooperative, Inc.West Kentucky Rural Telephone Cooperative CorporationWiggins Telephone AssociationWiggins Telephone Association Wilkes Telephone Membership CorporationYadkin Valley Telephone Membership Corporation

Thank you for your support!


DirectorsRobbie L. Allen- RetiringCharles H. Creason, Jr.Loren L. DuerksenPeter J. ElliottF. Bradley ErwinMichael HaggggRaymond P. HenaganLeroy H. Lage


DirectorsGeorge W NostrandGeorge W. NostrandEdgar L. OlsonRichard C. Parker-Vice ChairL i D P dLonnie D. PedersenThomas E. Preston David E. SchultzRi h d K V h Ch i R i iRichard K. Veach-Chair-Retiring

Pending: Catherine Moyer & Bill Gaylean

Thank you for your guidance!


Joyce Hermann “The Herminator”Joyce Hermann The Herminator

CT, DE, ME, MD, MA, NH, NJ, NY, NC*, PA, RI, VT, VA* WV FL GA SC AL TN MSVA*, WV, FL, GA, SC, AL, TN, MS * These states are primarily served by Green and Wooten Insurance Agency with Joyce acting as a corporate contact

Chris Jones “Resident of Texas”

AR, AZ, KS, MO, NM, OK ,TX


Greg Hill “Now One of Us-ex NFU Employee”g p y

CA, CO, ID, MT, NE, NV, UT, WY

Kim Powell “ The Original-Now One of Us-ex NFU Employee”p y

AK, OR, WA, LA, MN, ND, SD


Julie Gogel “Our Direct Line to Christmas”

IL, IA, IN, KY, MI, OH,WI,

Thank you for helping us grow!


Pete ElliottPete Elliott

In addition to his corporate duties, he will b il bl t ll NTCA M mb r nd llbe available to all NTCA Members and all insureds. He looks to strengthen our relationship with the management and directorship of the companies.


Stock Investment Report

…as of 12/31/2011

Active Shares - 1,496Active Shares 1,496

Net Asset Value as of 12/31/2010 - $4,719

Unaudited Net Asset Value as of 12/31/11 - $4,868

*Th 12/31/11 l d b i l fi i l d h b di d*The 12/31/11 results are generated by an internal financial report and have not been audited


State of the Insurance Industry2011 Combined Ratio 111.5% estimated ISO2010 Combined Ratio 102.4% as reported by ISO2009 Combined Ratio 101% as reported by ISO

* Rate of Return 5.8% 2008 C bi d R i 105 1% d b ISO2008 Combined Ratio 105.1% as reported by ISO1959-2008 Average COR 104% as reported by ISO

2006 2007 was the last time where two years of underwriting profit back to2006-2007 was the last time where two years of underwriting profit, back-to-back, have been earned. 2001-2004 was all positive but 2008-2011 was not positive.

Credit risk, terrorism, asbestos, and coastal property are issues that still present challenges.

*initial report by Fitch


State of the Insurance Industry

2012-2011 Rates and Premiums: MarketScout reports the composite rate for all lines of US property and

l b i 2% F b 2012 I 2011 f ll bcasualty business were +2% as February, 2012. In 2011, rates fell by 2.25% annually. 2011 was the seventh year of a soft marketplace, which is excessive by industry standards.


State of the Insurance Industry2012 Rates and Premiums:2012 Rates and Premiums: After seven years of a soft market for consumers and four years of continued unprofitable underwriting operations, the industry will, at a minimum hold the line on rates Hold the line means low singlea minimum, hold-the-line on rates. Hold-the-line means low single digit reductions or increases in rate. There maybe further deterioration when an account is profitable, but widespread, across th b d d ti A t l d di tthe board, reductions are gone. A natural or man-made disaster could raise rates, but there would need to be significance to the event. For Example: The BP oil spill was not significant enough to ffaffect rates.


The Beginning - Serving NTCA Members

• Formed in 1982 and domiciled in Vermont (VT)

• 30th Year of being in business for NTCA Members

• 8 Original Policyholders and 7 are still insureds!

Owned by National Telecommunications Cooperative Association and 39 members

1st association captive and currently the 3rd overall captive in Vermont


Today Serving NTCA Members

National Telcom Corporation - Serves 155 of 580 members (26.72% up from 25.51%)

Developed Telcom Insurance Services Corporation in 1989 - Serves 257 of 580 (44.48%)( )

Insureds in 41 states


Financials-A Snapshot of Operation Resultsp pProfit and Loss2006 - $ 58,339 operational profit2007 - $218 415 operational profit2007 $218,415 operational profit2008 - $404,995 operational profit 2009- $277,869 operational profit2010- $179 091 operational profit2010- $179,091 operational profit2011- $100,000 estimated profit*

Driven by TISC agency revenue and investment incomeDriven by TISC agency revenue and investment income

*internal, unaudited financial projections


Then and Now

Then and Now

2003- 80 cents for 1.55 oz Hershey Bar purchased at Quik (privately owned convenience store), Randolph NJ(privately owned convenience store), Randolph NJ2011- 95 cents for 1.55 oz., Acme supermarket, Randolph NJ

1806- Best dinner with pint of good beer or cider 37 5 cents1806- Best dinner with pint of good beer or cider 37.5 centsOld Inns and Taverns in West Jersey 2011- Cuisine: American- Dinner Average Cost $24.00Old River House Clinton NJOld River House-Clinton, NJ


Then and Now

2004 Property Rate Coastal SC .134/100 of value2011 Property Rate Coastal SC .146/100 of value

2004 General Liability Rate 3.924/1000 of payroll2011 General Liability Rate 3.360/1000 of payrolly p y

2004 Flat Cost of Automobile Insurance $573/unit2011 Flat Cost of Automobile Insurance $466/unit2011 Flat Cost of Automobile Insurance $466/unit


Then and Now

2004 Property Rate TX .169/100 of value2011 Property Rate TX .123/100 of value

2004 General Liability Rate 4.537/1000 of payroll2011 General Liability Rate 3.484/1000 of payrolly p y

2004 Flat Cost of Automobile Insurance $590/unit2011 Flat Cost of Automobile Insurance $453/unit2011 Flat Cost of Automobile Insurance $453/unit


2012: Looking Ahead2012: Looking Ahead

OPPORTUNITY- op·por·tu·ni·ty

advantageous chance: a chance, especially one that offers some kind of advantage

favorable conditions: a combination of favorable circumstances or situations


2012: Looking AheadAn Investment Opportunity that offers dividend return and premium reliefAn Investment Opportunity that offers dividend return and premium relief for the group and the investor. There is an opportunity, a window of extremely favorable conditions that may never be better than at this moment in time but will be good regardless to move NTC from a Captivemoment in time, but will be good regardless, to move NTC from a Captive insurer to a Direct Insurer.

P ibilit th t i t i 5% l di id d d 5%Possibility that investors can receive a 5% annual dividend and 5% reduction in insurance cost. In 10 years, the face value of the investment will be returned and the investment is still in place and appreciating.

Goal is to raise $10m.This is not a formal offer; formal legal offer and documentation is anticipated in 2012


2012: Looking AheadIn 2011, we launched a personal lines insurance products for employees of the p p p ytelecommunications companies that belong to NTCA with MetLife. Products including home, automobile, boat, recreational vehicles, and umbrella will be written at a deviation of 30% off the standard rates for NTCA Members.Rating: A (Excellent)Financial Size Category: XIV ($1.5 Billion to $2 Billion)Outlook: StableAction: Affirmed Effective Date: November 04, 2010

Growth of Cellular Handset Replacement Product called Stay Connected.

Addition of Cellular Phone Recycling Program that removes old phones from piles ofAddition of Cellular Phone Recycling Program that removes old phones from piles of clutter and pays the customer and telco for any remaining value they have. It is through Wireless Alliance.


The Value of Family and Community

There has always been an exclusive nature to the Telcom Insurance Group’s Program. The best products and services are only available to NTCA Members. In an effort to diversify and to take advantage of the expertise of staff, we engage the telecommunications industry as a whole and they have benefited from our involvement in their insurance and risk management

H h ld i if h NTCAprograms. However, they could gain even more if they were NTCA members. This group receives exclusive benefits and are members of a community that no one else can belong to. Membership has advantages!


Thank you!!!y

Telcom Insurance Group6301 Ivy Lane Suite 5066301 Ivy Lane, Suite 506Greenbelt, MD 20770

800 222 4664800.222.4664www.TelcomInsGrp.com

State of Telcom 2012...Stock Investment Report …as of 12/31/2011 Active SharesActive Shares -...

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