Build America Mutual reported an increase in claims paying sources and narrowed its pre-tax loss in the third quarter, as the municipal bond insurer guaranteed 170 transactions.

BAM's claims-paying resources increased by $10.8 million to $686.7 million, according to its third quarter financial report Friday. The company also reported statutory comprehensive income of $1.1 million for the quarter.

Bob Cochran

“BAM posted a strong quarter, with growing investor demand for our guaranty offsetting the broader decline in new-issue municipal bond sales,” said Bob Cochran, BAM’s chairman. “We achieved our goals for primary market par insured and guaranteed about half of all insured new issue transactions. Pricing continued to strengthen in line with demand for our guaranty and helped drive the continued increase in our capital resources.”

On Nov. 8, White Mountains Insurance Group LTD., the insurance holding company that lent the municipal bond insurer its startup investment in 2012, reported pre-tax loss related to BAM of $12 million in the third quarter and $36 million of in first nine months of 2017, under generally accepted accounting principles. That compared with a GAAP pre-tax loss of $14 million in the third quarter and $30 million in first nine months of 2016.

The decrease in the pre-tax loss during the third quarter of 2017 was primarily driven by higher realized and unrealized investment gains on BAM’s fixed income portfolio. The increase in the pre-tax loss during the first nine months of 2017, compared to the first nine months of 2016, was primarily driven by lower realized and unrealized investment gains on BAM’s fixed income portfolio and higher operating expenses.

BAM also said that it was selected to insure 170 primary market transactions that priced in the third quarter, totaling $2.3 billion of par, up 3.4% from the same period in 2016, even as overall market new-issue volume fell 16%. Total premiums for priced transactions rose 24.5% to $23 million. Gross par outstanding rose 4.2% to $39.2 billion.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.