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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 18, 2012 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of “a-” of Builders Insurance (A Mutual Captive Company) and its wholly owned subsidiaries, Association Insurance Company and Vinings Insurance Company, collectively referred to as Builders. All companies are headquartered in Atlanta, GA.
These rating actions reflect Builders’ strong risk-adjusted capitalization, historically profitable operating performance, favorable loss reserve development trends and established market presence providing workers’ compensation and general liability coverage, primarily to the home building industry in Georgia and other states from the Mid-Atlantic through the South and Midwest. Additionally, the ratings reflect the group’s prudent risk selection process, effective loss control practices and effective claims management, which contributed to historically strong business retention.
These positive rating factors are partially offset by Builders’ decline in underwriting and operating profitability in the most recent five-year period compared to its historical level of performance, primarily as a result of the downturn in the construction industry. Additionally, Builders maintains high underwriting expenses and a modestly concentrated business profile.
To offset this concentration, Builders continues to expand its product line and geographic footprint utilizing agency relationships. Despite these concerns, the outlook is based on the company’s strong risk-adjusted capitalization and the expectation of organic surplus growth through profitable operations over the near term.
While the outlook for Builders is stable, future positive rating actions may result if the group outperforms its projections for an extended period of time. However, negative rating actions could result if operating performance falls markedly short of A.M. Best’s expectations or if risk-adjusted capitalization declines significantly.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Rating Members of Insurance Groups”; “Catastrophe Analysis in A.M. Best Ratings”; “Understanding BCAR for Property/Casualty Insurers”; and “The Treatment of Terrorism Risk in the Rating Evaluation.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.