AM Best Revises Outlook for Builders Mutual Insurance Group to Negative; Affirms Excellent Credit Ratings
AM Best has adjusted the outlook for the Long-Term Issuer Credit Rating (Long-Term ICR) from stable to negative while affirming the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) for Builders Mutual Insurance Company and Builders Premier Insurance Company, collectively known as Builders Mutual Insurance Group (Builders Mutual), headquartered in Raleigh, NC. The FSR outlook remains stable.
These credit ratings reflect Builders Mutual’s robust balance sheet strength, rated as strongest by AM Best, coupled with its strong operating performance, neutral business profile, and effective enterprise risk management (ERM) practices.
The change in the Long-Term ICR outlook to negative stems from AM Best’s concern regarding the company’s ability to reverse the recent decline in operating performance in the short term. This decline primarily resulted from increased severity of large claims between mid-2022 and mid-2023, despite relatively stable claim frequency. In 2023, Builders Mutual shifted focus from a multi-year technology transformation to an agile approach, incurring significant non-recurring expenses that contributed to the elevated results.
Builders Mutual’s robust balance sheet strength is underpinned by its strong risk-adjusted capitalization, maintaining the strongest level per Best’s Capital Adequacy Ratio (BCAR) as of year-end 2023. Other factors supporting the balance sheet strength include conservative reserving practices, consistent leverage metrics, and favorable liquidity.
With a leading position in workers’ compensation insurance in North Carolina, Builders Mutual serves residential and commercial construction builders, with operations spanning seven other Southeastern states. Additionally, the group holds an endorsement from the North Carolina Home Builders Association to offer all commercial lines of insurance coverage to its members.
The assessment of appropriate enterprise risk management reflects Builders Mutual’s well-established risk framework, including governance committees overseeing risk emergence, identification, assessment, mitigation, and monitoring.
