2016 ANNUAL REPORT 25 YEARS OF SERVICE, SAFETY AND PARTNERSHIP

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1 2016 ANNUAL REPORT YEARS OF SERVICE, SAFETY AND PARTNERSHIP

2 LETTER FROM THE CHAIRMAN OF THE BOARD AND THE PRESIDENT & CEO This year, Builders Insurance Group marks its th anniversary of providing industry-leading property and casualty insurance products to the home building community. In 1992, after other insurance carriers abandoned the Georgia market, a group of Georgia-based home builders formed a self-insurance fund to provide Workers Compensation insurance to home builders. The Company quickly established itself as one of the most important writers of Workers Compensation insurance for home builders in Georgia. In 1997, Builders Insurance Group paid its first member dividend totaling nearly $1 million. Since then, the Company has paid 21 consecutive dividends to qualifying policyholders totaling $50.5 million. Today we mark our silver anniversary with a track record of strong business and financial growth through a variety of economic conditions. In 2016, we achieved a number of milestones that further strengthen our Company s standing as a reliable, long-term partner for independent insurance agencies and policyholders. Some of these outstanding Company achievements in 2016 include: Direct Written Premium reached $208 million, a $14 million increase over We achieved a combined Ratio of 88.5%, reflecting strong expense control and underwriting profit. Our Statutory Surplus, one of the strongest indicators of financial health, grew $28 million to a record high of $5 million. Policy counts increased from approximately 17,300 in 2015 to 18,500 resulting from growth in new business as well as strong persistency in our renewal business. A.M. Best Company, the leading provider of ratings, news and financial data for the insurance industry, upgraded the Financial Strength Rating of all our member companies to A (Excellent) from A- (Excellent). We also revised our Builders Risk product in response to policyholder requests, launched a year-long online Safety Webinar series for our agents and policyholders, and implemented a number of behind the scenes technology enhancements to improve our service. Going forward, we will seek to maintain our continued, steady growth through careful expansion into new markets and to preserve our financial strength with conservative underwriting and loss control tools. In doing so, we strengthen our financial foundation and our ability to meet the needs of our agents and policyholders. Through all of this, our partners can remain confident in our ability to continue to deliver outstanding products and services. YEARS OF SERVICE SAFETY PARTNERSHIP SENIOR EXECUTIVE OFFICERS Patrick Mitchell President & Chief Executive Officer Andrew Dunn Senior Vice President of Information Technology & Chief Information Officer Craig Edwards Senior Vice President, General Counsel & Secretary Greg Krause Senior Vice President of Underwriting Tom Maupin Senior Vice President of Sales & Marketing Linda McMurray Senior Vice President of Claims & Medical Management Renee Palin Senior Vice President, Chief Financial Officer & Treasurer BOARD OF DIRECTORS Allen M. Richardson (Chairman) John Christopher Bowles (Vice Chairman) Salvatore Correnti Frederick E. Fisher G. Eugene Hill David J. Jasmund Patrick J. Mitchell Charles M. Potok 1992 Allen Richardson Chairman 1993 Patrick Mitchell President & CEO Founded as a self-insurers fund and endorsed by the Home Builders Association of Georgia (HBAG). Builders Insurance Group serves more than 1,400 policyholders and writes $15 million in annual premium. Builders Insurance Group converts from a selfinsurers fund to a mutual captive company. Builders Insurance Group begins offering Workers Compensation to nonconstruction businesses in Georgia. A.M. Best Co. assigned an initial financial strength rating of A- (Excellent) to all member companies of Builders Insurance Group. Builders Insurance Group introduces General Liability insurance to Georgia s residential general and trade contractors.

3 PRODUCTS & TERRITORY, 2016 HIGHLIGHTS, FINANCIAL POSITION PRODUCTS & TERRITORY FINANCIAL POSITION AS OF DECEMBER 31, 2016 AND 2015 The information below is a condensed version of the audited financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP). Expanded audited GAAP and Statutory financial statements, including accompanying notes, are available upon request. Balance Sheet ($000) Assets Cash & invested assets $624,2 $567,737 Reinsurance recoverables 63,222 46,805 Receivables 85,719 72,3 Tax assets 5,059 4,657 Other assets 22,140 19,807 Total assets $800,392 $711,331 Liabilities & Members Equity 2007 Despite the U.S. market downturn, the Company demonstrated financial stability, earning $11.6 million in profit and total asset growth of $33.0 million. Policyholder surplus rose by 6% to $149.9 million Builders LITE is launched in Georgia, Florida, Tennessee and Virginia, offering Workers Compensation and General Liability to light commercial contractors. Agency Plant: 660 agency locations. Number of Markets: 17 States throughout the U.S ACHIEVMENTS AND HIGHLIGHTS Policyholder Count: more than 18,500 Workers Compensation, General Liability, Package, Umbrella and Builders Risk policies in force. Number of Employees: 152 insurance, claims, finance, marketing and administrative professionals. Dividends: 2015 Dividends of $1 million paid in 2016; 21 st distribution of $1 million in second quarter of 2017 bringing cumulative dividends paid since 1997 to $50.5 million. Product Development: The Company continued to enhance our technology infrastructure to deliver faster, more efficient online services for both policyholders and agents. In addition, a year-long safety webinar series was launched to provide new tools for policyholders to create and maintain safe work environments Builders Insurance Group introduces Workers Compensation insurance to Florida and South Carolina. General Liability insurance introduced in South Carolina The Company surpassed the $150 million mark in Direct Written Premium, closing the year at $178 million Builders Insurance Group marks $1 billion in cumulative direct written premium since the company s inception in Builders Risk, the Company s third product line is launched in Georgia. Liabilities Loss & loss adjustment expenses $368,3 $329,459 Unearned premiums 85,341 78,659 Policyholder dividends payable 1,591 1,507 Other payables 37,972 36,094 Notes payable 47,386 40,878 Other liabilities 11,679 1,419 Total liabilities 552, ,016 Members Equity Paid-in capital Retained earnings 227, ,100 Accumulated other comprehensive income 20,512 20,015 Total members equity 248, ,315 Total liabilities & members equity $800,392 $711,331 ASSETS Total assets were $800.4 million and $711.3 million at December 31, 2016 and 2015, respectively. The change in the asset base includes primarily increases in cash and invested assets. LIABILITIES Total liabilities were $552.2 million and $488.0 million at December 31, 2016 and 2015, respectively. Contributing to the increase in liabilities were increases in liabilities for loss and loss adjustment expenses and unearned premiums Builders continued expanding the Company s territory by pushing West into Texas with General Liability. The next year, Colorado was also added. MEMBERS EQUITY Members equity increased $24.9 million, or 11%, to $248.2 million at December 31, The change is due to 2016 net income of $24.4 million.

4 $300 $0 $200 $150 $100 $50 $0 DIVIDENDS, ASSET MIX, POLICYHOLDERS SURPLUS, RESULTS OF OPERATIONS CUMULATIVE POLICYHOLDER DIVIDENDS PAID (IN MILLIONS) 2017 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $1 ASSET MIX INVESTED ASSETS: $624M OTHER ASSETS: $176M TOTAL ASSETS: $800M $ POLICYHOLDERS SURPLUS (IN MILLIONS) $149.9 $114.6 Premium Balances 9% Other Invested Assets 5% Real Estate 1% Cash & Cash Equivolents 2% $138.2 Common Stocks 7% $155.4 $159.2 Other Assets 13% $ Builders Insurance Group distributes 15th consecutive dividend of approximately $1.8 million, bringing the total dividends paid to more than $45 million General Liability, Package and Umbrella launched in new states, Oklahoma and Utah Introduced an updated Builders Risk product in Georgia. Enhancements included an improved user interface, more coverage options and significantly lower rates for qualified risks. $185.9 $201.8 Bonds 63% $227.3 $ RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 Income Statement ($000) Revenue: Premiums earned, net $191,048 $177,157 Net investment income 16,881 15,614 Realized gains on investments, net Impairment of investments (916) (5) Other revenue Total revenue 208, ,347 Expenses: Loss & loss adjustment expenses 113,757 96,670 Operating and administrative expense 56,175 53,330 Interest expense 2,015 1,900 Policyholder dividends 1,452 1,481 Total expenses 173, ,381 Income before income taxes 35,100 40,966 Income tax expense 10,742 12,872 Net income $24,358 $28,094 Net income was $24.4 million and $28.1 million for the years ending December 31, 2016 and 2015, respectively. Premium earned in 2016 was $191.0 compared to $177.2 million in The increase in premium revenues reflects growth in new states and products. Net investment income was $16.9 million and $15.6 million for the years ending December 31, 2016 and 2015, respectively Realized net gains on investment sales totaled $0.6 million and $1.0 million for the years ending December 31, 2016 and 2015, respectively. Incurred loss and loss adjustment expenses were $113.8 million and $96.7 million for the years ending December 31, 2016 and 2015, respectively. Select Combined Statutory Financial Highlights, for the twelvemonth period and year ended December 31, Direct premium written $207,463,796 $193,978,105 Net premiums earned $191,048,385 $177,157,533 Underwriting gain $ 20,210,982 $ 27,607,792 Combined ratio 88.5% 83.8% Surplus as regards policyholders $4,949,895 $227,330, Builders signature charity event, the Charity Classic Golf Tournament, raised $60,000 bringing total amount donated since inception to $650, The Company began a yearlong Loss Control webinar series conducted monthly aimed at educating our policyholders to develop safe work environments.

5 More than 18,500 policyholders in residential and light commercial construction as well as a variety of nonconstruction fields rely on Builders Insurance Group to protect their most important assets people and property. Over a span of years, the Company has evolved into a dynamic, financially secure and dedicated partner with a philosophy of providing outstanding products, backed by exceptional customer service and easy-to-use technology solutions. Headquartered in Atlanta, the Company delivers innovative Workers Compensation, General Liability, Property, Builders Risk and Umbrella insurance through independent agents to customers in 17 states throughout the U.S. Builders Insurance Group and all of its member companies are rated A (Excellent) IX by A.M. Best Company. For more information, please visit our Web site at PO Box , Atlanta, GA 31139