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Builders Insurance: Caught Red-Handed by AM Best
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Dear Friends,
From the outset of our effort to replace the overcompensated board of Builders Insurance and install normal corporate governance practices, we pledged to communicate honestly and frequently about the process and our progress. The greatest of all news is that the truth is going to continue to come out - and not just from us.
On Monday, Builders Insurance launched its own battle asking you to vote to maintain the status quo - with the same directors in place. To deflect all the issues - such as our demand for transparency and accountability (not to mention a thorough explanation for why collected premiums skyrocketed over the last several years, while your dividends plummeted) they spend page after page trying to portray this as a squabble over the cost of membership in home builder associations. In their propaganda, they make the claim that they were not born out of HBAG. That is a critical point as we ask you to reclaim what is rightfully yours.
Unfortunately for them, others besides us have long and accurate memories, too. You will note below that A.M. Best Company, the organization that rates insurance companies, called Builders Insurance on their blatant misrepresentation of how they originated. While we will provide documentation on all of their misrepresentations, we think it's much more powerful if you see it from a third party.
For all of the reasons we have put forth, the course of action is real clear: Vote the blue form and Builders Insurance will work for you. You will know what is going on at the company. There will be no more rushed meetings to change bylaws and render the policyholders powerless. Compensation for directors will be in line with companies of a commensurate size and purpose. Corporate governance will become real. (Our proposed slate of incoming directors has offered to work without compensation until fair and transparent practices are installed). The company will exist to support you as was its original intention. Again, note what A.M. Best says about the company's formation.
If you vote their white form, you will continue to have directors who are paid more than those at the biggest names in corporate America. That's also a vote for the status quo and you'll never know why the directors felt it was necessary to stop reporting total compensation last year, among many other eyebrow-lifting things.
Vote the blue form and there will be no more unexplained or selfish actions.
Please feel free to contact me or your local Executive Officer with any questions.
Sincerely,
Charlie Eison
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Georgia Mutual Captive in Proxy Fight With Home Builders' Association
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Best's Insurance News
English
Copyright 2008 (c) A.M. Best Company, Inc. All Rights Reserved.
ATLANTA (BestWire) - A mutual captive insurer for construction companies is in a proxy fight with the contractors' association with which it worked since the company's inception.
Builders Insurance (a Mutual Captive Company), based in Atlanta, is fighting an effort by the Home Builders Association of Georgia to call a special policyholders meeting to vote on a new board of directors, the company said in a statement. The company is an underwriter of workers' compensation and general liability insurance, primarily to construction companies, in Georgia and other southeastern states.
A company mailing dated June 2 urged policyholders not to support the proxy effort by the association, which sent a proxy mailing to the policyholders on May 22. That proxy mailing attacked compensation for the company's directors and questioned their plans for the company's future.
During 2007, reports emerged that the compensation for company directors averaged more than $165,000 in 2006, according to an association statement. It also maintained that the company, which says directors' compensation was cut in half in 2007, has not released full information on compensation for that year.
The company was created in 1992, and until this year its sponsoring association was the Home Builders. In April, the company announced that the Contractors Benefit Association became a new sponsoring association, saying that its membership fees were considerably lower.
The company said the association wanted to "force its higher-priced membership costs onto all Builders Insurance policyholders." In its May 22 mailing, the association said CBA was not a truly representative group working on behalf of the policyholders.
The association also accused the company of seeking legislative support in Georgia's state government to enable the board to demutualize the company without policyholder approval.
The Builders Insurance mailing said that the board "consistent with its fiduciary duties...considers strategic alternatives for the company."
The mailing also said that any move to create a stock company "would require policyholder approval."
Although Builders Insurance, in its statement, denies that it was created through the home builders association, a Best's Credit Report said the company was "founded in July of 1992 when the Home Builders Association of Georgia formed a 'self insurers' fund which would pool member companies insurance monies together to form a new insurance mechanism, the Home Builders Association of Georgia Self Insurers Fund."
The report said the fund was converted into a captive mutual company in 1996.
Builders Insurance currently has a Best's Financial Strength Rating of A- (Excellent).
By Alyn Ackermann, Senior Associate Editor
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