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Profile Checksheet Of Agency Heading Toward Bankruptcy
How healthy is your agency? This checksheet and financial analysis criteria can give you the answer. Use these 10 items to check the financial health of your agency: Trust ratio under 1.1 x More than 15% of accounts receivable more than 90 days old Commission growth greater than 5% Producer compensation greater than 30% on renewal Debt service greater than profit Made acquisitions equal to 25% or more of total current revenue at price above 1.5x in last three years Property/Casualty commission per producer less than $250,000 Revenue per employee less than $90,000 Expense budget not prepared or monitored monthly Salary caps and compensation planning for staff not set at start of each year If you checked three or more of these items, you’re in the danger zone! Here’s an analysis of the basic criteria you can use for agency financial analysis: BALANCE SHEET ANALYSIS TRUST RATIO Cash plus accounts receivable/premiums payable should _____ be greater than 1.1x. If less than 1.0x, you're spending carrier premium. RECEIVABLES RATIO Accounts receivable/premiums payable. The lower the _____ better. Should be .65 or less; if above 1.0, you're advancing funds. CURRENT RATIO Current assets/current liabilities. Should be greater _____ than 1.1 x. If less than 1.0x, must retain profits. NUMBER OF DAYS WORKING CAPITAL Current assets minus current liabilities equals net _____ working capital. Total agency expense divided by 365 equals total _____ daily expense. Net working capital divided by daily expense equals _____ number of days working capital reserve. Should be minimum 30 days. DEBT SERVICE ANALYSIS Reported Pre-tax Profit _____ Add: Interest Expense + _____ Add: Depreciation and Amortization Expense + _____ Total Cash Flow for Debt Service = _____ Less: Projected Debt Service Payments (Next 12 Months) _____ Net Cash Flow = _____ NOTE: To be safe, total cash flow for debt service should equal 130% of projected debt service payments. THREE-YEAR INCOME STATEMENT VARIANCE ANALYSIS WORKSHEET A. Calculate average annual growth in commission (excluding contingents) over last three years _____% B. Calculate average annual increase for last three years for major line-item expenses: Staff costs _____% Producers _____% Benefits _____% Travel and entertainment _____% Rent _____% Equipment costs _____% C. Identify variances and attempt to explain why variance occurred. D. Develop action plan to correct variance. EMPLOYEE PRODUCTIVITY ANALYSIS Current Year Previous Year Revenue per employee (includes owners and producers) _______ _______ Commission per C/L staff (exclude producers) _______ _______ Commission per P/L staff (include any full-time P/L salespeople) _______ _______ Commission per producer _______ _______ Revenue per administrative staff _______ _______ COMMISSION SPLIT AVAILABLE TO PRODUCER Industry % Your Agency % Targeted agency profit 20 _____ Less: five-year average contingents and interest <10>% <_____>% Targeted profit on commissions only 10% _____% Commission available to cover all expenses (100% less targeted profit on commissions) 90% _____% Less: Business development expense <9.5 >% <_____>% Less: Operating/administrative expense <16.0 >% <_____>% Less: Staff costs* <37.0>% <_____>% Balance of each commission dollar available to pay producer 27.5% _____% *NOTE: Staff costs consist of management override -5.0%, staff personnel -22.5%, and employee benefits -9.5% Chris Burand can be reached at Burand & Associates, LLC, PMB 345, 1829 S. Pueblo Blvd., Pueblo, CO 81005, (719) 485-3868, fax (719) 485-3895, E-mail [email protected], Web site www.burand-associates.com.

Salvaging Your Investment After The Earthquake
The Northridge earthquake has resulted in billions of dollars of property damage. Insurance, private assistance, and public assistance do not bring order to the chaos suffered by private investors, who must now repair or restore their property and hope to recover pre-earthquake levels of income stream and equity. To the property owner with no Earthquake insurance or with typically high deductibles, the prospect of recovery may seem insurmountable. But sources of recovery and legal strategies are available to salvage an investment. Apartment owners whose buildings suffered earthquake damage are in a quandary over the following predicaments: 1) Some or all of the units may be uninhabitable, reducing the income stream. This not only affects the owner's cash flow, but probably makes it impossible to pay monthly mortgage installments. 2) The owner did not have Earthquake insurance or has a deductible that the owner is incapable of paying. In the latter case, even Earthquake insurance payments that are available can't kick in because the deductible is too high for the owner to pay-putting off repair of the property and thus prolonging the economic stoppage. 3) Through various forms of assistance, the owner may be able to borrow the money to make necessary repairs (or pay the deductible portion of any insurance). This, however, increases debt service on the property and reduces the owner's equity. In the current depressed real estate market, this increased debt service could result in negative cash flow and loss of a substantial portion of the equity. There may be alternate policies that can be used to repair earthquake damage. Or third parties may be liable to the owner for some or all of the earthquake damage. Know Your Coverage Owners must know exactly what kind of insurance they have. Frequently, the only part of the policy that the owner retains is the declaration page, which lists the name of the insured and the amount and types of coverage. Often, insurance agents send only the declaration page when the policy is renewed, thinking it's unnecessary to give the insured another copy of the policy being renewed. However, a renewed policy can vary in its terms. The standard declaration does not describe the particular rights of the insured. Before doing anything else, a policyholder must obtain the printed multi-page form of the policy. An owner who does not have a copy should insist on getting one from the agent. If the agent does not have the form (he or she should), get it directly from the carrier, which maintains all the policy forms it has ever used. Only by reading the policy can you determine what coverage actually exists. It is generally imprudent to rely on the agent's description of the coverage. The agent is not a lawyer and cannot make an effective legal analysis of the rights existing under the policy. Some carriers issue a variety of forms at different times, and policy forms change over time and vary between companies, so an agent may have only a loose understanding of an obsolete policy form. The agent's only basis for knowing the insured's rights is what the insurance company says they are-and the company may be inaccurate or misleading. What the agent understands can turn out to be quite different from what the law will determine. Recovering Lost-Rent Income The non-earthquake provisions of Casualty or General Apartment Owner's policies may prove to be helpful. A loss of rents provision will allow the landlord to recover lost income. Exclusions for earthquake damage or loss from earth movement (for example, personal property damaged by an earthquake) might not include loss of rent, even when the renters' damage is clearly caused by the earthquake. Even if the policy does not reimburse for lost rent, the loss of rents may affect the amount of money available for repairs. For example, a devastated building that would cost $1 million to repair is subject to a $100,000 deductible. The lost rents may be included in the money used to make up the deductible. If the insurance policy is All-Risk and covers loss caused by earthquakes, the lost rents are included within the covered loss, even though the maximum payment that the insurance company might make is for repair or replacement of the property. Other Forms of Assistance Federal assistance from either disaster relief or loans may pay the owner's deductible. Owners, however, must be wary in accepting assistance to compensate for the cost of repairing the property. Insurance policies contain subrogation clauses, which entitles insurance companies reimbursement for part of its losses to the extent the owner is able to recover the loss with an alternative source of money. The right of the insurer to subrogation is contained in the policy, but despite language in the policy, the insurer may not be able to recover any money from the insured until he or she has been made whole. This means that the insurance company may seek to receive some of the disaster relief granted to owners to reduce its own losses, but has no right to receive any until the owners have been paid for their loss in full. Owners obtaining relief should conscientiously determine their losses from physical damage to a building, damage to any personal property that is used in operating the property, and lost rents. This will allow them to allocate disaster assistance to certain items and use available insurance payments to maximum effect. Certain physical components of the building may have had latent defects that were only uncovered by the earthquake. In such cases, owners should determine if insurance other than Earthquake coverage will pay for property repairs. Insurance policies can pay for repairing many of a building's components. For example, pre-earthquake damage caused by faulty plumbing and electrical or mechanical systems may be covered. Many older buildings have asbestos in 'cottage cheese' ceilings or as part of the building's insulation; for these, special and separate repair measures may be covered by Liability policies. Third-party liability provides a significant source of funds for repair. For example, damage may be the result of poor construction. Experts should determine whether the property had met codes and standards, including seismic safety standards. If the building was defectively constructed and the defects contributed to the earthquake damage, the builder or prior owner may be liable for the cost of repair. It is important to take lots of photographs of the property's damage. Pictures of newly exposed beams and other normally hidden parts of the structure can be particularly valuable. Ideally, a construction expert should inspect the nature of the damage. It's best that this expert be hired by the owner's attorney rather than the owner directly, even though the owner will pay for the services. This allows attorney-client privilege to cover the expert's report, lending greater flexibility to the owner's case. Even if this 'consulting' expert is not an expert in litigation, he or she will be able to provide the attorney with the factual basis for knowing if a claim exists and how that claim can best be proven. The Mortgage Factor Because the mortgage holder is named as an additional insured, any checks from the insurance company require the lender's endorsement. As a condition of the endorsement, a lender may require that a construction disbursement account be established and that all of the necessary funding (including the deductible) be deposited in the construction disbursement account to assure the lender that all of the necessary repairs will be made. The requirements imposed on a borrower to ensure completion of improvements are generally determined by the loan instrument. Undoubtedly, some lenders who felt before the earthquake that their loan was 'underwater' (not equal to the value of the property used as security) will attempt to force the borrower to use the insurance payments for the loan rather than to restore the property. Under California law, the borrower must use the proceeds to repair the property or the lender will be entitled to apply them to the loan. The fact that the property is being repaired does not excuse the owner/borrower from meeting mortgage payments. Thus the owner may have to default on the loan, giving the lender an excuse to take the insurance proceeds if no payment can be made. This is not always undesirable. As a result of the insurance payments, the owner may be able to pay off the loan and demolish the building-which could be more desirable than the owner's pre-quake condition, since the owner might then have some insurance money and own the land free and clear of debt. When the value of the property before the earthquake was less than the loan, the borrower may find that bankruptcy provides an excellent opportunity to restructure the debt and regain some equity. The rules of bankruptcy are complicated. However, a bankrupt borrower can, under the right circumstances, force the lender to reduce the loan to the value of the property and then pay interest on the loan at the reduced amount. When the property is rebuilt, the owner may have some equity because it will now be worth more than the reduced loan. Moreover, the property can be designated as cash flow as a result of lower debt. For many people bankruptcy is not acceptable. On filing bankruptcy, all of an individual's assets become subject to control of the court. However, a partnership or real estate investment company with a limited number of properties in its asset and operational base may greatly benefit by filing a bankruptcy proceeding during this difficult time. Many strategies exist for owners of apartments who want to salvage their hard-earned investment from the devastation of the Northridge earthquake. Owners need to understand all of the insurance policies available, the physical and structural causes of damage from the earthquake, and their rights as a borrower. Thorough and meticulous planning and investigation can enable the owner to realize value from an investment that seemed hopelessly lost after the January quake.

Prevent Identity Theft: Be Aware, Be Proactive, Be Assertive
An incorrect billing statement could be a simple error, or someone might be trying to impersonate you. Forged credit cards remain the bane of credit card users everywhere. But oddly enough, credit card fraud is not the biggest problem with identity theft. Chris Wright offers some practical tips to prevent identity theft and to begin the process of restoring your good name. Identity theft involves acquiring key pieces of a person's identifying information in order to impersonate them, usually for financial gain. Such theft might include a person's name, address, date of birth, social security number, driver's license number, mother's maiden name, license plate number, or other identifying personal data. Once the thief has acquired this information, they can use it to commit numerous forms of fraud, including but not limited to: Taking over the victim's financial accounts; Opening up new bank accounts; Purchasing an automobile; Applying for loans or credit cards; Renting apartments; Obtaining social security benefits; and Establishing public services with phone companies and utilities BE AWARE The biggest problem is that you might never know you're a victim until you notice something is amiss — you receive an invoice for something you didn't buy or a statement from a credit account you never opened. Perhaps you're denied credit based on negative information on your credit report. When you investigate, you discover charges and late payments that you didn't authorize and knew nothing about. It pays to keep your eyes open. If you think you might be a victim, tackle the problem immediately. Any delay will only hurt you and your credit further. BE PROACTIVE While you can't prevent identity theft entirely, you can minimize your risk by managing personal information wisely, cautiously, and with awareness of the potential for identity theft. Effective guidelines for information management include, but are not limited, to: Don't reveal any personal identifying information until you know how it will be used and whether the information will be shared with others. Ask if you have a choice about the use of your information and whether it can be kept confidential. Pay attention to your credit card billing cycles. Follow up with creditors if your bills don't arrive on time. A missing credit card bill could mean that a thief has changed your billing address to cover their tracks. Guard your mail. Deposit outgoing mail in post office collection boxes or at your local post office. Remove mail from your mailbox promptly after it has been delivered. If you're planning to be away from home, request a vacation hold on your mail. Put passwords on your credit card, bank, and phone accounts. Don't carry more identification information and credit cards than you actually need. Don't give out personal information on the phone, through the mail, or over the Internet unless you initiated the contact or know with whom you're dealing. Legitimate organizations with which you do business have the information they need and won't ask you for it. Shred charge receipts, copies of pre-approved or actual credit applications, insurance forms, physician statements, checks, bank statements and other financial information. Do not simply discard them in the trash. Be cautious about where you leave personal information in your home. This is especially true if you have roommates, employ outside help, or are having service work done to your home. Verify that your personal information at work is kept in a secure location. Finally, give your Social Security Number (SSN) only when absolutely necessary. Your employer and financial institution will likely need the number for wage and tax purposes. Some businesses might ask for your SSN to do a credit check. However, you do not have to give a business the number just because they ask for it. Before providing your SSN, ask these questions: Why do you need my SSN? How will it be used? What law requires me to give you my SSN? What will happen if I don't give you my SSN? BE ASSERTIVE If you suspect that your personal information has been stolen to commit fraud or theft, take action immediately and keep a record of your conversations and correspondence. You should almost always take these three steps: First, contact the fraud departments of each of the three major credit bureaus. Tell them that you believe you're an identity-theft victim. Request that a 'fraud alert' be placed in your file, as well as a 'victim's statement' asking that creditors call you before opening any new accounts or changing your existing accounts. At the same time, request a copy of your credit report from each of the credit bureaus. They must give you a free copy if your report is inaccurate because of fraud or if you have been denied credit. Otherwise, you can obtain a copy for a small fee. The three major credit bureaus are: CREDIT BUREAU TO ORDER A REPORT TO REPORT FRAUD Equifax www.equifax.com (800) 685-1111 P.O. Box 740241 Atlanta, GA 30374-0241 (800) 525-6285 P.O. Box 740241 Atlanta, GA 30374-0241 Experian www.experian.com (888) EXPERIAN (888) 397-3742 P.O. Box 2104 Allen, TX 75013 (888) EXPERIAN (888) 397-3742 P.O. Box 9532 Allen, TX 75103 Trans Union www.tuc.com (800) 916-8800 P.O. Box 1000 Chester, PA 19022 (800) 680-7289 P.O. Box 6790 Fullerton, CA 92634 Fraud Victim Assistance Second, contact your creditors for any accounts that have been tampered with or opened fraudulently. Such creditors might include credit card companies, phone companies and other utilities, and banks and other lenders. Ask to speak with someone in the creditor's security or fraud department and follow your conversation with a letter. Credit card companies must be notified in writing as part of the statutory consumer protection procedure for resolving errors on credit card billing statements. Third, file a report with your local police or the police in the community where the theft occurred. Get a copy of the police report in case you need proof of the crime when dealing with creditors. It's also a good idea to contact the U.S. Secret Service. Although the Secret Service generally investigates cases in which the dollar loss is substantial, your information might provide evidence of a larger pattern of fraud requiring their involvement. You can find a local office in the telephone directory, or go to www.treas.gov/usss. OTHER STEPS Stolen mail. If an identity thief has stolen your mail to get a new credit card, bank, and credit card statements, pre-screened credit offers, or tax information, or has falsified change-of-address forms, report the theft to your local postal inspector. Contact the local post office for the phone number or use the Postal Service Web site (www.usps.gov/websites/depart/inspect). Change of address on credit card accounts. If you discover that an identity thief has changed the billing address on an existing credit card account, close the account. When you open a new account, ask that a password be required before any inquiries or changes can be made on the account. Bank accounts. If you have reason to believe that an identity thief has tampered with your bank accounts, checks, or ATM card, close the accounts immediately. Again, when opening new accounts, insist on password-only access to the accounts. Stolen or misused checks. Place stop payments on them and request the major check verification companies to notify retailers using their databases not to accept these checks. The major check verification companies are: National Check Fraud Service: (800) 571-2143; SCAN: (800) 262-7771; TeleCheck: (800) 710-9898 or (800) 927-0188; CrossCheck: (707) 586-0551; Equifax Check System: (800) 437-5120; and International Check Services: (800) 526-5380. Investments. If you believe that an identity thief has tampered with your security investments or a brokerage account, immediately report the problem to your broker or account manager and to the Securities and Exchange Commission (http://www.sec.gov/). Phone service. If an identity thief has set up new phone service in your name or is misusing your existing regular or cellular phone service, contact your service provider immediately and cancel the account. If you're having trouble settling the issue with the local phone company, contact the local Public Utility Commission for local service providers or the Federal Communications Commission for long-distance and cellular providers at (888) CALL-FCC or go to http://www.fcc.gov/complaints. Employment. If you believe that someone is using your SSN to apply for a job, call the Social Security Administration's Fraud Hotline at (800) 269-0271. Also call the SSA at (800) 772-1213 to verify the accuracy of the earnings reported on your SSN and to request a copy of your Social Security Statement. Follow up your calls in writing. Driver's license. If you suspect that an identity thief is using your name or SSN to get a driver's license or a non-driver's ID card, contact the Department of Motor Vehicles. If your state uses your SSN as a driver's license number, ask to substitute another number. Bankruptcy. If you believe that someone has filed bankruptcy using your name, write to the U.S. Trustee in the Region where the bankruptcy was filed. For a listing of the U.S. Trustee Program's Regions, go to www.usdoj.gov/ust. You should also file a complaint with the U.S. Attorney or the FBI in the city where the bankruptcy was filed.