BAM Launch Announcement

NEW YORK, July 23, 2012

Build America Mutual Assurance Company (“BAM”) today launched the financial guaranty industry’s first mutual bond insurer. Rated AA/Stable by Standard & Poor’s Ratings Services (S&P) and regulated by the New York State Department of Financial Services, BAM is chartered to serve the U.S. municipal market. BAM’s doors are open for business, and it is actively considering transactions. BAM expects to write its first policy in September.

BAM is led by co-founders Robert P. Cochran, Managing Director and Chairman of the Board, and Seán W. McCarthy, Managing Director and Chief Executive Officer, both veterans of the bond insurance industry. Mr. Cochran co-founded Financial Security Assurance (FSA) in 1985 and was Chief Executive Officer from 1990 to 2009. Mr. McCarthy was President and Chief Operating Officer of FSA and subsequently held the same position at Assured Guaranty, following its acquisition of FSA.

As a mutual bond insurer, BAM is 100% owned by its policyholders, the municipal issuers using BAM’s insurance to lower their cost of funding. “BAM is a new and improved insurer of U.S. municipal bonds that delivers substantial interest cost savings to municipal bond issuers and durable protection against loss for their bondholders,” said the Co-Founders. “Based on our mutual structure, BAM will employ significantly lower risk leverage against capital and claims- paying resources than the traditional bond insurance model. As a result, BAM expects to maintain substantially greater capital resources than historically required for AAA ratings. BAM has built a strong foundation for ratings stability and robust claims-paying ability through a wide range of potential adverse circumstances.

“We are also pleased to announce that BAM is sponsored by the National League of Cities. We believe this to be a strong endorsement of the value we can add to the municipal market and tangible proof of the demand for bond insurance, particularly at the retail level.”

“BAM’s model as a mutual is attractive to cities as it allows them to receive additional benefits as the program grows,” said Donald J. Borut, Executive Director, National League of Cities. “Also, BAM’s board members bring extensive experience in local government management and a thorough understanding of the economics and processes of local government. Their experience will provide insightful guidance and ensures that BAM’s focus remains on serving our nation’s local governments. BAM’s insurance will help cities gain access to new capital, at lower cost to make significant improvements in our local communities.”

BAM differs from traditional financial guaranty insurers

BAM’s unique corporate structure distinguishes it from traditional, legacy financial guarantors in three primary ways:

--BAM’s underwriting guidelines and credit policies permit BAM to insure only U.S. essential public purpose municipal issuers of fixed rate, fully amortizing debt. Further, BAM starts with a clean balance sheet, and it has no exposure to the asset classes that caused losses for bond insurers during the recent financial crisis;

--BAM’s mutual model generates capital growth to support growth in the insured portfolio. This eliminates the need to “go public” to raise capital, to drive earnings growth to satisfy equity markets, or to engage in mission creep by taking on risks outside of the core municipal market;

--In addition to its own strong capital base, BAM will have the benefit of collateralized first-loss reinsurance protection for losses up to the first 15% of par on each policy written.

BAM has strong capitalization and low leverage

BAM will be sizably capitalized on Day 1, with half a billion dollars in initial funding (plus $100 million pledged in the collateral trusts), and BAM’s capital will grow as its insured portfolio grows. Each municipal issuer that purchases insurance from BAM will become a “member” of BAM. The payment for a BAM policy includes a risk premium and a member surplus contribution to BAM, which will fund the growth of BAM’s claims-paying resources. BAM’s claims-paying resources are further strengthened by first loss reinsurance protection up to 15% of each insured issue, which is collateralized and held in trusts. The combination of BAM’s low risk business, low single risk limits and strong capital resources results in low operating leverage on an absolute and risk-adjusted basis.

BAM provides policyholders with interest cost savings and other financial benefits

In addition to interest cost savings, BAM members have the right to 1) participate in future dividends on member surplus contributions, subject to regulatory approval; 2) to pay only a 10- year risk premium up front at closing and annual premiums after 10 years if bonds are not refunded; and 3) to re-utilize the member surplus contribution for the life of any refunding issue. Each of these elements of BAM membership is unique and will lower the long-term cost of public borrowing.

To ensure issuer representation in governance and policy making, BAM’s Board of Directors includes three external directors with extensive public finance experience and expertise: The Honorable Richard Ravitch, former Lieutenant Governor of the State of New York and currently Co-Chair of the New York Budget Crisis Task Force; The Honorable Edward G. Rendell, former two-term Governor of Pennsylvania and Mayor of Philadelphia; and Robert A. Vanosky, former Head of the Public Finance Division of RBC Dain Rausher Incorporated.

BAM offers the public finance market unprecedented transparency

In order to allow issuers and investors in BAM-insured bonds to monitor our financial strength, each quarter BAM will disclose claims-paying resources, leverage ratios, capital ratios and material information on its insured portfolio.

Additionally, to increase liquidity and transparency for BAM-insured bonds, BAM will publish obligor disclosure briefs on every bond issuer insured. These briefs are easily accessible by CUSIP, obligor, state and sector on BAM’s website. This information is also meant to assist broker-dealers in meeting disclosure rules for secondary market transactions.

BAM starts out with a deep bench of experienced managers

Joining Co-Founders Mr. Cochran and Mr. McCarthy are a senior team of highly experienced financial guaranty and municipal market professionals:

Scott C. Richbourg, BAM’s Head of Public Finance, formerly Executive Director and Manager of the Southern Group for Public Finance at Morgan Stanley and, before that, Managing Director of Public Finance at FSA;

Elizabeth “Beth” Keys, BAM’s Chief Financial Officer (CFO), joining from Guy Carpenter, where she was Vice President and CFO;

Alex Makowski, General Counsel, joining from Assured Guaranty and formerly FSA, where he was a Managing Director;

Suzanne Finnegan, Chief Underwriting Officer, formerly Executive Vice President at Wells Fargo Bank, N.A., where she was the Senior Credit Officer overseeing credit transactions in the Government Banking segment;

Elizabeth “Betsy” Hill, Head of Surveillance, joining from FSA in a similar position;

Laura Levenstein, Chief Risk Officer, and formerly Senior Managing Director for Global Public, Project and Infrastructure Finance at Moody’s Investors Service;

David McIntyre, Chief Technology Officer and formerly Managing Director, Global Head of Development Standards and Control at BlackRock, Inc.; and

Betsy Castenir, Head of Corporate Communications, and formerly Managing Director of Corporate Communications at FSA and later Assured.

Key Facts


Insured Portfolio

Claims-Paying Resources

First Loss Protection Single Risk Limits Operating Leverage

About BAM

AA/Stable from Standard & Poor’s Ratings Services

U.S. essential public purpose municipal issuers (municipal entities qualifying under Section 115 of the Internal Revenue Code)

$600 million on Day 1, growing over time from member surplus contributions from municipal issuers and additions to the collateral trusts securing first loss reinsurance

15% first loss reinsurance on the par amount of each policy, secured by high quality collateral held in trusts

20% of BAM qualified statutory capital for A or higher-rated bonds; 15% for BBB

BAM starts today with no exposure against its capital. As municipal bond insurance exposure grows, BAM’s surplus and claims-paying resources will grow. Target operating leverage over the long term is 50-60:1.

Domiciled in New York, Build America Mutual Assurance Company is a mutual, monoline bond insurer of essential public purpose U.S. municipal bonds. As a mutual, the Company is 100% owned by its policyholders, the municipal issuers using BAM’s insurance to lower their cost of borrowing. BAM is rated AA/ Stable by S&P and regulated by the New York State Department of Financial Services. BAM is also a member of the National Association of Mutual Insurance Companies.

For further information, please contact:

Betsy Castenir, Head of Corporate Communications, 212-257-6148