Standard & Poor's affirmed Build America Mutual's AA stable rating, the rating company's highest score for an active bond insurer.

The municipal-only bond insurer's competitive position and capital adequacy well above the AAA bond insurance capital requirements contributed to the firm's high ranking, S&P said in a report Tuesday. S&P cited the start-up nature of the company, which comes with fixed costs, as a weakness that could hinder operating performance in the near term.

"Although the company's operating history is limited, BAM has produced risk-adjusted profitability modestly greater than its main competitor and created a high-quality underlying credit portfolio," S&P said. "BAM has been successful in differentiating itself from its active competitor by virtue of its focused municipal risk exposure."

BAM has insured a total par amount of approximately $2.8 billion of municipal bonds across more than 350 insured transactions as of Aug. 9, according to the S&P release. Thomson Reuters midyear data showed that BAM accounted for 38% of the bond insurance market, while Assured Guaranty wrapped 60%.

"We're proud to have the industry's highest S&P rating and believe that S&P's affirmation of our AA stable rating attests to the strength of our mutual form of insurance and sole focus on public purpose municipal bonds for the benefit of our municipal owners," BAM chairman Robert Cochran said in a press release.

Assured launched a municipal-only insurer, Mutual Assurance Corporation, last month. The business is rated AA-minus stable by S&P and AA-plus by Kroll Bond Rating Agency.

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