BAM Primary Market Insurance Jumps

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Build America Mutual wrapped $2.1 billion of municipal bonds in the first quarter, a 58% increase led by deals in the primary market.

The par value of primary market deals with BAM insurance surged almost 83% from a year earlier to $2.01 billion. As of March 31, BAM's total claims paying resources were $582 million on total par insured of $14.4 billion. The results were included in the quarterly earnings released Monday by White Mountains Insurance Group Ltd., which provided the initial capital for BAM's launch in the form of surplus notes. 

 "BAM benefited from both an increase in new-issue municipal bond sales and growing demand for its insurance in the first quarter," said Robert Cochran, chairman of BAM.

White Mountains reported $9 million of pre-tax losses under generally accepted accounting principal relating to BAM in both the first quarter of 2015 and the first quarter last year. BAM's affairs are managed on a statutory accounting basis, and it does not report stand-alone GAAP financial results. BAM's statutory net loss was $8 million in both the first quarter of 2015 and the first quarter last year.

As a mutual insurance company that is owned by its members, BAM's results do not affect White Mountain's adjusted book value per share. However, White Mountains is required to consolidate BAM's results in its GAAP financial statements and its results are attributed to non-controlling interests.

"BAM's commitment to promoting transparency and disclosure by municipal issuers reached a milestone in February, when we published our 1,500th Obligor Disclosure Brief ("ODB") - the credit summaries we make available on our web site for every insured exposure, updated annually," Cochran said. "The ODBs provide unique value for investors who are seeking to monitor the underlying credit quality of their municipal bond portfolios, as well as for regional dealers and issuers who are paying more attention to compliance with SEC disclosure initiatives in the wake of the Municipal Continuing Disclosure Compliance initiative. As a result, ODB utilization more than doubled from the fourth quarter of 2014 to the first quarter of 2015, advancing our efforts to position BAM as a utility for the municipal market."

White Mountains reported an adjusted book value per share of $664 at March 31, 2015, break-even for the quarter, including dividends. The report also stated that adjusted comprehensive loss was $3 million in the first quarter of 2015, compared to adjusted comprehensive income of $88 million in the first quarter last year, while net income attributable to common shareholders was $84 million in the first quarter of 2015, compared to $96 million in the first quarter last year.

"It was a flat quarter," said Ray Barrette, chairman and chief executive officer for White Mountains. "Foreign currency losses of $8 per share offset what was an otherwise decent quarter. Our investment portfolio returned about 1% in local currencies, an OK performance in a quarter where interest rates fell again."

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