Build America Mutual reported that its claims-paying resources grew to a new high of $601.4 million at the end of 2015. Total par outstanding reached $22.5 billion, an increase of 82% from the end of 2014.
"BAM exceeded its financial and strategic objectives in 2015," said Sean McCarthy, chief executive officer. "We fulfilled our mission by helping more than 800 municipal issuers reduce their borrowing costs while building our claims-paying resources to protect our policyholders."
White Mountains Insurance Group LTD., the venture capital firm that gave the insurer its startup investment when it was founded in 2012, reported that in 2015, BAM insured $10.6 billion of municipal bonds, $10.0 billion of which were in the primary market, up 36% from 2014. The average total premium (including both risk premiums and member surplus contributions), weighted by insured par, of insurance provided by BAM in the primary markets in 2015 was 48 basis points, up from 36 basis points in 2014.
Unlike the other two active bond insurers that are writing new business – Assured Guaranty and MBIA's subsidiary National Public Finance Guarantee, which are both publically owned – BAM is a mutual insurance company whose affairs are managed on a statutory accounting basis. It doesn't report stand-alone financial results in general accepted accounting principles.
Each municipal issuer insured by BAM becomes a "member" of BAM. The cost of policies issued by BAM is comprised of a risk premium and a contribution to BAM's qualified statutory capital (a "member surplus contribution").
"BAM's 'claims-paying resources' represent the capital BAM has available to pay claims and, as such, is a key indication of BAM's financial strength," according to White Mountains' report. "BAM's claims-paying resources include BAM's qualified statutory capital, including member surplus contributions, net unearned premiums and the first loss reinsurance protection provided by HG Re, which is collateralized and held in trusts. BAM expects member surplus contributions and HG Re's reinsurance protection to be the primary drivers of continued growth of its claims-paying resources."
In 2015, BAM's claims paying resources increased 3% to $601.3 million at December 31, 2015. The increase was primarily driven by $29 million of Member Surplus Contributions and a $17 million increase in the HG Re collateral trusts, partially offset by BAM's 2015 statutory net loss of $32 million.
Since its launch in 2012, BAM said it has provided insurance for $24.3 billion of municipal bonds in 2,860 transactions for more than 1,700 municipal bond issuers.
"The growing demand for our guaranty shows that investors are recognizing the benefits they receive from BAM insured bonds. Most notably, usage of BAM Credit Profiles more than doubled, as we maintained our commitment to enhancing transparency for small- and medium-sized issuers by publishing free reports that are updated annually," said McCarthy.
