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AM Best Affirms Credit Ratings of Builders Reinsurance S.A. and Builders Direct S.A.

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AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of "a-" of Builders Reinsurance S.A. (Builders Re) (Luxembourg) and Builders Direct S.A. (Builders Direct) (Luxembourg), both subsidiaries of HOCHTIEF Aktiengesellschaft (HOCHTIEF), a large Germany-based construction company that is majority owned by Actividades de Construcción y Servicios, S.A. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Builders Re's balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

Builders Re's balance sheet strength is supported by risk-adjusted capitalisation at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). AM Best expects Builders Re's risk-adjusted capitalisation to remain at the strongest level supported by low underwriting leverage. Offsetting factors in the balance sheet strength assessment include the company's high level of retrocessions to its affiliated (non-rated) reinsurer, Hollenfels Re S.A., and its significant investment allocation to bonds issued by its intermediate parent company, HOCHTIEF.

Builders Re has a track record of strong and stable operating performance, largely driven by robust underwriting results, as demonstrated by a five-year (2014-2019) weighted average combined ratio of 82.8%.

Builders Re's prospective performance is subject to volatility mainly due to the company's exposure to business associated with the cyclical U.S. construction market.

The company's volume of business is expected to contract in 2020 due to the impact of the COVID-19 pandemic on the construction industry in North America. However, this should not have a major impact on the company's profitability, since Builders Re is protected by a comprehensive reinsurance programme and benefits from access to good quality risks.

Builders Re's business profile assessment of limited reflects the company's geographically concentrated portfolio of casualty risks that emanate from HOCHTIEF's construction operations in North America. Additionally, Builders Re reinsures open-market business, including business emanating from its sister company, Builders Direct.

Builders Direct was created in 2013 and provides insurance cover to third-party entities with a focus on mutual companies. Builders Direct's ratings primarily reflect its strategic importance to Builders Re as a source of business growth and diversification, as well as explicit support from Builders Re in the form of reinsurance protection.

This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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