Standard & Poor's affirmed Build America Mutual's financial strength rating at double-A, with a stable outlook.
The rating recognizes BAM's extremely strong capital, strong operating performance and prudent underwriting strategy, in which the company only insures investment-grade municipal bonds from U.S. public-sector issuers and limits its exposure to any single risks, S&P said.
In its annual report on the insurer, S&P emphasized the inherent strength of BAM's unique mutual structure, in which the company's members (the public-sector issuers who utilize BAM's guaranty to save money on their municipal-bond transactions), "are focused on a stable, low-cost source of financial guarantee support rather than a high return on investment."
The report, published on June 29, also stated that BAM's competitive position will remain strong and that S&P expects BAM's risk-adjusted pricing ratio and operating performance to improve and that the outlook also considers a steady increase in BAM's business volume and continued market acceptance by fixed-income investors.
"BAM's mutual structure aligns the interests of our members and the investors who hold their bonds behind the mission of maintaining strong, durable ratings," said Seán W. McCarthy, chief executive officer of BAM. "That is a key credit strength that allows us to focus on expanding our claims-paying resources and insuring only low-risk U.S. municipal credits."
More than 85% of BAM's insured portfolio is rated A-minus or above, and the entire portfolio carries investment-grade ratings. BAM is the only bond insurer with no exposure to Puerto Rico, European or other international credits. BAM emphasizes transparency by publishing an Obligor Disclosure Brief credit summary on every transaction it insures and making the ODBs available for free on their site.
Other factors cited by S&P in support of the rating are: BAM's "high-quality and liquid" investment portfolio; strong enterprise risk-management controls; and veteran management team. S&P has rated BAM AA, which is the highest rating S&P currently assigns to financial guarantors, since it was founded in 2012.
