BUILDERS TRUST. the one true reason we exist A N N U A L R E P O R T C O N T R A C T O R S B E L O N G H E R E

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1 the one true reason we exist C O N T R A C T O R S B E L O N G H E R E A N N U A L R E P O R T Workers Compensation Excellence Since 1987 BUILDERS TRUST O F N E W M E X I C O Affiliated with New Mexico Home Builders Association

2 B O A R D O F T R U S T E E S John Jourdan Chairman Hobbs Bob Dolgener Secretary Treasurer Ruidoso Wayne Rutherford Trustee Taos Mike Drunzer Trustee Alamogordo Lee Rawson Trustee Las Cruces Mark Carpenter Trustee Clovis Rick Davis Trustee Albuquerque Kevin McGinley Trustee Mesilla Rick Murphy Trustee Gallup Scott Bealhen Non-voting Member Representing New Mexico Home Builders Association Albuquerque Jack C. Milarch Jr. CEO & Non-voting Member Representing New Mexico Home Builders Association our mission Builders Trust of New Mexico, as an affiliate of New Mexico Home Builders Association, has the mission of providing a long term stable solution to workers compensation obligations and liabilities for members of the New Mexico Home Builders Association who qualify as Participants in the Builders Trust group self insurance fund. Our philosophy is to maximize value and to promote safety to our Participants and their employees. We strive to maintain a favorable workers compensation business climate through active governmental affairs participation.

3 A U D I T E D F I N A N C I A L S T A T E M E N T S December 31, 2009 and December 31, 2008 B A L A N C E S H E E T S Assets Investments 62,006,660 53,060,735 Cash and Cash Equivalents 1,665,167 3,652,787 Certificates of Deposit 2,450,000 Premium Receivable 1,406,707 1,853,650 Insurance Receivable on Paid Losses 305, ,800 Insurance Recoverable on Unpaid Losses 3,722,007 4,642,102 Prepaid Expenses and Other 1,289, ,664 Property and Equipment 1,695,961 1,731,302 Other Receivables 481, ,773 Deferred Income Taxes 742,551 2,119,400 Totals Assets 73,315,728 71,230,213 Liabilities and Surplus Reserves for Losses and ALAE 34,518,531 34,995,635 Participant Deposits 4,415,736 5,432,567 Premium Refund Payable 423,709 1,237,160 Other Payables 781, ,957 Total Liabilities 40,139,093 42,571,319 Surplus 33,176,635 28,658,894 Total Liabilities and Surplus 73,315,728 71,230,213 S T A T E M E N T O F E A R N I N G S Income Premium Income, Net 14,111,155 18,891,750 Investment Income, Net 1,653,090 2,517,299 Other 458, ,030 Total Income 16,222,769 21,934,079 Expenses Losses and Loss Adjustment Expenses 9,126,595 8,805,895 Administrative Expenses 3,212,612 3,182,387 Agents Commissions 1,499,592 1,942,669 Claims Management Expenses 678, ,866 Royalty Fees 181, ,446 Total Expenses 14,698,979 14,893,263 Earnings Before Premium Refund 1,523,790 7,040,816 Premium Refund 807, ,747 Earnings Before Income Taxes 716,185 6,235,069 Provision for Income Taxes (60,376) 2,067,638 Net Earnings 776,561 4,167,431 Net Unrealized Gain (Loss) on Securities 3,741,180 (4,447,288) Total Comprehensive Income 4,517,741 (279,857)

4 CONTRACTORS BELONG HERE. It s a slogan we ve promoted for many years but at Builders Trust it is much more than a slogan, it ultimately is the one true reason we exist. In 2009 we showed our true strength by demonstrating time and again the many reasons why Contractors belong here. While outside forces continued their constant pressure on our industry, Builders Trust remained steadfast, standing beside our Participants. But certainly not just standing by. Strength Financially Fortunately for us all, Builders Trust came into this recession from a position of financial strength. For over two decades now we have managed our fund and invested our money with a conservative, long-term view that has served us all very well. We have sufficient money in reserve to easily cover all of our claim obligations which totaled $34,518,531 in accumulated known obligations at the end of In addition, over time we have built a substantial surplus that will allow us to continue this strength into the future. Our surplus allows our fund comfort and flexibility in a number of ways. For instance, having redundant reserves allows our Participants to forego the usual group self insurance requirement of annual submission of financial statements. Contractors belong here because Participants can rest assured that Builders Trust will be here to take care of our obligations, today and into the future. Strength of Safety Builders Trust is well known throughout New Mexico for our excellent loss prevention consulting through our Field Safety Services. In 2009 our Field Safety Services Specialists made 1,138 Participant contacts. The results speak for themselves. By two measures of loss standards, number of claims filed per dollar of covered payroll and total claim liability per dollar of covered payroll our record continued its positive trend. These indicators show that the drop in both frequency and severity of claims is not just driven by a down turn in business. Our trend is driven by our Participants who continue to promote and practice workplace safety. During the year we encouraged our Participants to take advantage of the business slowdown to create a more productive and safer work force. We encouraged our Participants to tighten their hiring practices, institute better equipment maintenance habits, and implement programs such as new employee mentoring and mandatory drug testing. Contractors belong here because our Field Safety people know our Participants and their operations and they draw on that industry specific experience to provide suggestions, advice and guidance that simply makes sense and keeps employees safer. Strength of Premium Refund In 2009 Builders Trust, for the first time in our history, returned unneeded premium to our Participants twice in the same year. We took this unprecedented action because we recognized the urgency of putting cash back into the hands of our Participants. Contractors belong here because they know when times are tough they can count on the Board of Trustees understanding their needs. In May of 2009 we paid out $805,747 in premium refunds that were declared in Later in 2009 your Board of Trustees, for the first time in the history of our fund, declared an additional $807,605 in premium

5 refunds and that money was paid out in December of Thus, 2009 saw Builders Trust pay out a total of $1,613,352 to our past and current Participants as a Return of Premium! Those dollars covered payroll, made a truck payment, purchased materials, rented equipment and paid off a loan. The word Trust is in our name and we take that seriously. Contractors belong here because as a Group Self Insurance Fund we return excess premium back to our Participants. Strength of Technology Premium income slowed appreciably in 2009 but positive change was nevertheless fast paced here at Builders Trust. To increase internal efficiencies and achieve long-term savings we invested in technology to take our operations into a paperless environment. To go paperless, we purchased ImageRight content management and workflow solution software to streamline operations, increase productivity and enhance our world-class customer service. For example, when a coverage application is received from a prospective new Participant all departments involved in the evaluation Underwriting, Premium Audit, Field Safety Services and Accounting can simultaneously review all application documents for swifter binding of coverage. Our Claims Department can now send hundreds of pages of medical records to a health care provider by moving the scanned documents to a disk with a few clicks of a mouse. The process is immensely faster than locating and pulling a paper file, removing pages, placing them on a copier and then re-inserting those documents back into the paper file and one small CD can be mailed much less expensively than a box of paper. Third party audits can now be done remotely, saving travel expenses. We have redeployed tasks and leveraged the investment in technology to do our jobs faster and more efficiently with fewer employees and along the way we are lowering our operating costs in several ways, including less use of paper and copier toner and a decrease in postage. To better serve you, our staff now has much faster access to over 750,000 documents we manage here at Builders Trust. Contractors belong here because at Builders Trust we continue to invest in technology now to achieve substantial savings in the long run. Strength of Service Our world-class and highly specialized service continues to set us apart from the rest of the industry. Builders Trust, like many of our Participants, has downsized. Even so, we truly believe that we are now able to do a better job of servicing the needs of our Participants than ever before. Each of our staff members is a talented specialist. In 2009 we continued to enhance and expand our popular BT PAL, which is our internet Participant and Agent Link to Builders Trust. Working together we cover all facets of workers compensation for you. We are ready to guide, evaluate, respond and answer. Contractors belong here because we provide one line of insurance for one industry, only in New Mexico. You need only experience our personalized and specialized professional service one time to know that no one does it better than Builders Trust. Jack C. Milarch Jr. Chief Executive Officer Workers Compensation Excellence Since 1987 BUILDERS TRUST O F N E W M E X I C O Affiliated with New Mexico Home Builders Association 5931 Office Blvd. NE, Suite 3 Albuquerque, New Mexico Randy Akin Builders Trust of New Mexico Chief Operating Officer Ronnie Letcher Builders Trust of New Mexico Marketing General Agent Artesia

6 L O S S R A T I O B Y Y E A R Incurred Loss Ratios as of 12/31/2009 (Exclusive of Excess Insurance) 120% 100% 80% 60% 40% C L A I M S I N J U R Y B R E A K D O W N Type of Injury # of Claims % of All Claims Laceration % Sprain 78 12% All Other 96 15% Contusion/Bruise 64 10% Fracture 49 8% Foreign Body 39 6% Puncture 27 4% Strain % Total % C L A I M S P E R Y E A R P R E M I U M R E F U N D D E C L A R E D B Y F U N D Y E A R (In Millions) 1.5 M 1.2 M.9 M M.3 M