2016 ANNUAL REPORT

25 YEARS OF SERVICE, SAFETY AND PARTNERSHIP

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LETTER FROM THE CHAIRMAN OF THE BOARD AND THE PRESIDENT & CEO

1992Founded as a self-insurers fund and endorsed by the Home Builders Association of Georgia (HBAG).

1993Builders Insurance Group serves more than 1,400 policyholders and writes $15 million in annual premium.

1996Builders Insurance Group converts from a self-insurers fund to a mutual captive company.

2002Builders Insurance Group begins offering Workers’ Compensation to non-construction businesses in Georgia.

A.M. Best Co. assigned an initial financial strength rating of A- (Excellent) to all member companies of Builders Insurance Group.

This year, Builders Insurance Group marks its 25th 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 2015.• 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 $255 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.

SENIOR EXECUTIVE OFFICERS

Patrick MitchellPresident & Chief Executive Officer

Andrew DunnSenior Vice President ofInformation Technology& Chief Information Officer

Craig EdwardsSenior Vice President,General Counsel & Secretary

Greg KrauseSenior Vice President of Underwriting

Tom MaupinSenior Vice President of Sales & Marketing

Linda McMurraySenior Vice President of Claims& Medical Management

Renee PalinSenior 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

Patrick MitchellPresident & CEO

Allen RichardsonChairman

YEARS O

F

SERVICESAFETYPARTNERSHIP

2003Builders Insurance Group introduces General Liability insurance to Georgia’s residential general and trade contractors.

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25

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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) 2016 2015

Assets

Cash & invested assets $624,252 $567,737 Reinsurance recoverables 63,222 46,805 Receivables 85,719 72,325 Tax assets 5,059 4,657 Other assets 22,140 19,807

Total assets $800,392 $711,331

LiabilitiesLoss & loss adjustment expenses $368,253 $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 552,222 488,016

Members’ EquityPaid-in capital 200 200Retained earnings 227,458 203,100 Accumulated other comprehensive income 20,512 20,015

Total members’ equity 248,170 223,315

Total liabilities & members’ equity $800,392 $711,331

Liabilities & Members’ Equity

Audited Audited

2016 ACHIEVMENTS AND HIGHLIGHTS

• Agency Plant: 660 agency locations.

• Number of Markets: 17 States throughout the U.S.

• 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; 21st 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.

PRODUCTS & TERRITORY

2004Builders Insurance Group introduces Workers’ Compensation insurance to Florida and South Carolina. General Liability insurance introduced in South Carolina.

2005The Company surpassed the $150 million mark in Direct Written Premium, closing the year at $178 million.

2006Builders Insurance Group marks $1 billion in cumulative direct written premium since the company’s inception in 1992. Builders Risk, the Company’s third product line is launched in Georgia.

PRODUCTS & TERRITORY, 2016 HIGHLIGHTS, FINANCIAL POSITION25

2007Despite 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.

2008Builders LITE is launched in Georgia, Florida, Tennessee and Virginia, offering Workers’ Compensation and General Liability to light commercial contractors.

2009Builders continued expanding the Company’s territory by pushing West into Texas with General Liability. The next year, Colorado was also added.

ASSETSTotal 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.

LIABILITIESTotal liabilities were $552.2 million and $488.0million 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.

MEMBERS’ EQUITYMembers’ equity increased $24.9 million, or 11%, to $248.2 million at December 31, 2016. The change is due to 2016 net income of $24.4 million.

DIVIDENDS, ASSET MIX, POLICYHOLDERS’ SURPLUS, RESULTS OF OPERATIONS25

Bonds63%

Other Assets13%

Premium Balances9%

Other Invested Assets5%

Real Estate 1%

Common Stocks7%

Cash & Cash Equivolents2%

ASSET MIX

INVESTED ASSETS: $624MOTHER ASSETS: $176MTOTAL ASSETS: $800M

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 $254,949,895 $227,330,717

2016 2015

Select Combined Statutory Financial Highlights, for the twelve-month period and year ended December 31, 2016

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 173,399 153,381

Income before income taxes 35,100 40,966 Income tax expense 10,742 12,872

Net income $24,358 $28,094

Income Statement ($000) 2016 2015

Revenue:Premiums earned, net $191,048 $177,157 Net investment income 16,881 15,614 Realized gains on investments, net 558 979Impairment of investments (916) (255) Other revenue 928 852

Total revenue 208,499 194,347

Audited Audited

RESULTS OF OPERATIONS FOR THE YEARSENDED DECEMBER 31, 2016 AND 2015

• 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 2015. 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.

$200

$150

$100

$50

$0

$250

$300

$140.9

$114.6$138.2

$155.4$159.2

$170.0 $185.9 $201.8

$149.9

$227.3

$254.9

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2011Builders Insurance Group distributes 15th consecutive dividend of approximately $1.8 million, bringing the total dividends paid to more than $45 million.

2012General Liability, Package and Umbrella launched in new states, Oklahoma and Utah.

2014Introduced an updated Builders Risk product in Georgia. Enhancements included an improved user interface, more coverage options and significantly lower rates for qualified risks.

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2015Builders’ signature charity event, the Charity Classic Golf Tournament, raised $60,000 bringing total amount donated since inception to $650,000.

2016The Company began a year-long Loss Control webinar series conducted monthly aimed at educating our policyholders to develop safe work environments.

CUMULATIVE POLICYHOLDER DIVIDENDS PAID (IN MILLIONS)

19992000200120022003200420052006200720082009201020112012201320142015

19981997

2016

10 20 30 40 50 60

$1$5

$11

$18

$23

$28

$31

$33

$35$37

$41

$42

$43

$43

$45

$46

$47

$48$49

$50

2017 $51

POLICYHOLDERS’SURPLUS (IN MILLIONS)

More than 18,500 policyholders in residential and light commercial construction as well as a variety of non-construction fields rely on Builders InsuranceGroup to protect their most important assets – people and property. Over a span of 25 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-usetechnology 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 www.bldrs.com.

1.800.883.9305 • www.bldrs.comPO Box 723099, Atlanta, GA 31139

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