AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) of Builders Mutual Insurance Company and Builders Premier Insurance Company, collectively referred to as Builders Mutual Insurance Group (Builders Mutual) (Raleigh, NC). The outlook of the FSR is stable.

The Credit Ratings (ratings) reflect Builders Mutual’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The revision of the Long-Term ICR outlook to negative from stable reflects AM Best’s concern that the company will not be able to reverse the negative trend in operating performance over the near term. The deterioration in performance is due mostly to a period of heightened severity of large claims experienced from mid-2022 to mid-2023. The frequency of claims remained relatively stable throughout the period. In 2023, Builders Mutual made an intentional pivot away from a multi-year technology transformation in favor of adopting an agile approach. This shift came with a sizeable non-recurring expense compounding the elevated results.

Builders Mutual’s balance sheet strength assessment is supported by its risk-adjusted capitalization, which has remained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), at year-end 2023. Other balance sheet strength considerations include conservative reserving practices, consistent leverage metrics and favorable liquidity.

The neutral business profile reflects Builders Mutual’s position as a leading workers’ compensation insurer in its home state of North Carolina. Serving residential home builders and commercial construction builders, Builders Mutual’s footprint encompasses seven other states mostly located in the Southeast USA. The group also carries an endorsement from North Carolina Home Builders Association to provide all commercial lines of insurance coverage to its members.

Builders Mutual’s ERM assessment of appropriate reflects the group’s established risk framework, which includes governance committees that focus on all aspects of risk emergence, identification, assessment, mitigation and monitoring.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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