Greg Diamond - Managing Director, IR Jay Brown - CEO William Fallon - President and COO Edward Chaplin - President, CAO and CFO Anthony McKiernan - EVP and Chief Portfolio Officer.

Pete Taurasi - Barclays Brian Charles - RW Pressprich Nagendra Jayanty - Claren Road.

Welcome to the MBIA, Inc.'s Second Quarter 2015 Financial Results Conference Call. I would now like to turn the call over to Greg Diamond, Managing Director of Investor Relations at MBIA. Please go ahead..

Thank you, Maria. And yes, welcome to the MBIA's conference call for our second quarter financial results.

After the market closed yesterday, we issued and posted several items on our websites, including our financial results, press release, 10-Q, quarterly operating supplements, and statutory financial statements for MBIA Insurance Corporation and National Public Finance Guarantee Corporation.

We also posted updates to the listings of our insured portfolios. Please note that anything said on today's call is qualified by the information provided in the company's 10-Q, 10-K and other SEC filings, as our company's definitive disclosures are incorporated in these filings.

We urge investors to read our 2014 10-K and our second quarter 2015 10-Q as they contain our most current disclosures about the company and its financial and operating results. The 10-K and 10-Q also contain information that may not be addressed on today's call.

Regarding the non-GAAP terms included in our remarks today, the definitions and reconciliations for those items may be found in our most recent 10-K and 10-Q, financial results press release for the quarterly operating supplement.

The recorded replay of today's call will become available approximately one hour after the end of the call, and the information for accessing it is included in yesterday's financial results press release. And now here is our Safe Harbor disclosure statement. Our remarks on today's call may contain forward-looking statements.

Important factors such as general market conditions and the competitive environment could cause our actual results to be materially different than the projected results referenced in our forward-looking statements. Risk factors are detailed in our 10-K, which is available on our website at mbia.com.

The company cautions not to place undue reliance on any such forward-looking statements. The company also undertakes no obligation to publicly correct or update any forward-looking statement if it later becomes aware that such statement is no longer accurate.

For our call today, Jay Brown, Bill Fallon and Chuck Chaplin, will provide some introductory comments. Then Anthony McKiernan will join Bill and Jay and Chuck for the question-and-answer session that will follow. Now, here's Jay..

Good morning and thank you for joining our call this morning. I am pleased today to report that MBIA, Inc. had a good quarter with 19 million of operating income and adjusted book value that increased to $27 per share. Premium earnings and investment income were higher and operating expenses lower than the comparable quarter of 2014.

However, our attention and the market's attention was focused on development and news coverage about Puerto Rico. We have devoted considerable resources towards working with the government of the Commonwealth their advisers and other creditors towards the consensual restructuring of the Electric Power Authority and has a credits that we ensure.

That work is ongoing and we don't yet have concrete results to share with you at this time. But I do want to spend few minutes on some of the significant issues. First off, our view of the Puerto Rico related credits hasn't changed materially since our last conference call.

With respect to PREPA, we continue to believe that improvements to its operations and liquidity are achievable without cost of litigation or court intervention. Our commitment to negotiated outcome was an evidenced by our purchase last Friday of the previously disclosed market rate bond issued by PREPA.

That corporate bonds provides with some interim liquidity puts it on a better near-term floating and allows it to focus on operational improvements that have already been identified. Several proposals have been made by PREPA and various creditor groups.

Any successful proposal must include operational and government improvements and an increase in the base rate for electricity which is contractually and legally required.

A base rate increase would result in the electric rates to the consumer that are still lower in the other Caribbean Irelands and lower that the rates that were in the factor in Puerto Rico just the few months ago. Although none of these proposals have been accepted by all sides.

We continue to believe that PREPA can be an effectively restructured by ultimately paying all of its debts in fall. PREPA has made all of its debt service payments today. Net, net even after our purchase of PREPA bonds last week, our exposure to PREPA has declined by $23 million. So some positive directions.

Nevertheless, we continue to see press reports and analyst assessments that project significant losses for the bond ensures. While the ultimate outcome is indeed uncertain there are few facts about our position been on point to focus on.

First and foremost, we guarantee the timely payment of scheduled principal and interest and timely payment of scheduled principal and interest on insured obligations. So even in the case of interruption of payments by an issuers, the bonds are not accelerated against us.

We would make only scheduled payments on the issuer’s behalf and have rights to be reimburse for our claim payments and with interest. Where we are financing an essential assets such as PREPA our past experience have typically resulted now repayments that have substantially or totally mitigated our losses.

In fact, a number of the statements made by PREPA so far have been consistent with such an outcome. We first established loss reserves for our insured Puerto Rico credits during the second quarter of 2015. Our approach to loss reserving on PREPA considers the potential for short term liquidity stress.

We evaluate different probably weighted payment default and we cover a scenarios with the range of potential values for the reimbursements we would expect to receive.

That evaluation is done every quarter and the probabilities that we assigned at the different scenarios consider the status of our discussions with PREPA, the long-term essentiality of PREPA the statements made by PREPA and its advisers and importantly our legal rights.

While there has no a lot of press coverage recently about PREPA that suggest a wide range of losses for bond holders there isn't anything concrete that we have learned in the quarter that suggest any material change in our assessment of PREPA.

More generally, we have found that many of the comparisons of Puerto Rico's debt for urban or taxation levels with those of US states present very and complete pictures.

We often quoted $72 billion of Commonwealth debt includes all of the debt of the municipalities and agencies at Puerto Rico while the debt of US states to which it is typically compared does not include the debt of those lower level issuers.

In addition and most importantly, most tax payers in Puerto Rico pay no federal income tax, which for citizens in the US is levied in part to pay the Federal debt. Many of the comparisons also fail to adjust for this difference.

When we adjust for these differences and for relative income levels Puerto Rico’s debt burn on its tax fare is among the lowest of the U.S. sales instead of being the highest as suggested by many of these comparisons.

The comparisons of the Commonwealth to state debt loads that we’ve seen in many news stories overstate the problem that the Ireland faces. When we compare Puerto Rico to sovereign debt levels it also looks more of -. Its total debt is about 70% of its GDP which would not be considered high first sovereign by comparison.

By comparison the United States debt is a 103% of GDP, Greece’s a 180% and Japan is over 200%. However this characterization is also too simple to drive much useful information.

What is true is that Puerto Rico economy and population have been shrinking which has increased fixed fiscal pressure on its citizen at the same time that some of the key benefits it received under the U.S. tax code were being phased out. It took a long time for the government in Puerto Rico to begin to react to this.

But responding to that stress the Commonwealth has implemented many of the appropriate changes. Reform of public pensions, some reduction in public sector employment, tax rate increases et cetera. More recently the governor of Puerto Rico has appointed a task force to develop a five year stability plan for the Ireland by September 1st.

we’re looking forward to that next step in the process. We believe that most of the other Puerto Rico credits that we ensure also have passed to medium term stability.

As we have previously mentioned all the issuers made the July 1st debt service payments and our overall exposure to Puerto Rico including PREPA was reduced by 205 million net of a 45 million bond that we purchased last week. This Monday one of the public financing corporations didn’t make a full payment on its appropriation based debt.

While this is unwelcome news none of the debt that we’ve ramped depends on legislative appropriations for the payment of debt service. Our exposures are backed by dedicated revenue streams and or the full faith in credit of the Commonwealth.

Lately there have been some efforts to make Chapter 9 Bankruptcy protection available to Commonwealth or to some of its constituent public entities. We review Chapter 9 as the process not a solution onto itself. Based on our experience Chapter 9 does not avoid litigation or guarantee of streamline process.

The only certainty is that Chapter 9 takes a long time and is very expensive. Consider that Detroit paid a 178 million in adviser legal fees in just 18 months of bankruptcy. Each of the Puerto Rico issuers have a different debt profile with different revenue streams and it’s more appropriate to address them separately.

We continue to believe as I said before that our concessional approach to restructuring is best. If the Commonwealth or its public corporations are retroactively granted access to Chapter 9 creditors would likely be motivated to litigate to pursue share contractual rights and remedies.

The increased cost in disruption would be an undesirable additional cost for the governments, its tax fare and bond holders many of whom are retail investors and retirees including many who are citizens of the Ireland.

In a long run however we continue to believe that the biggest cape to fiscal sustainability for Puerto Rico is to get its economy growing again. In the near term a concessional resolution at PREPA can give the Commonwealth time to achieve stability and restore market confident to pave the way for that growth.

We will be posting a presentation to our website in the next few days that summarizes these points and provides additional context for the Ireland’s current financial status and national’s position. The press coverage uncertainty around these credits has already taken its toll on our share price.

As a result the primary method by which we can increase shareholder value in the short term is through active capital management including prudent share repurchases. Back in December of last year our board authorized a $200 million share buyback.

We saw extraordinary opportunities to buy shares in the first half of 2015 and so last week we have used all but about 60 million of that authorization. In addition we received specific authorization from our Board that permitted National to buy 8 million shares from the secondary offering of MBIA common stock.

Overtime we expect that those shares will be sent up to MBIA, Inc. as part of dividends or other payments that National will make to the holding company. But our share count for financial reporting purposing has already been reduced by National’s purchase. Overall we have reduced our share count by 24 million shares or 13% so far in 2015.

Last week we announced that the Board terminated the existing authorization and approval and new $100 million share repurchase authorization.

We will continue to balance stock repurchases against our liquidity and leverage targets but we are well aware of the value creating power of share repurchases and we will continue to look for prudent ways to employ it.

Now Bill will take you through additional details on National’s progress and Chuck will review our financials with an emphasis on our capital and liquidity positions..

Good morning. We continue building our sales and marketing organization. As I mentioned last quarter Tom Weyl joined in January the head of this effort since then we have bolstered our team by hiring Andy Nakahata to lead our Western regional marketing and Tom Metzold to lead our capital markets operation.

We are also bringing on some additional - so we can respond to the increasing market opportunities that we are seeing. I believe we are building the best possible teams so that we are positioned to take advantage of both current opportunities as well as the higher volumes and penetrations that we think will accompany a higher interest environment.

Our new business production ramp up has been slower than we anticipated when we return to the market last year due impart to the low interest rate environment. However I am pleased to report that we are closing business with more intermediaries while maintaining our underwriting discipline.

In the second quarter we were up $272 million of par, our pipeline is robust as we are getting more FX than in earlier quarters. In the second quarter we reviewed over half of all negotiated transactions that’s sold with insurance. So we are starting to develop some momentum on the new business side.

It will take many quarter though before our new business production replaces that which rolls off our books. In the second quarter as I said we were up $272 million of new par but we saw $10 billion of par refunded and another $5.4 billion that matured.

Refundings in the first half of this year were 80% higher than last year this benefits us from an earnings perspective and helps to drive National’s outperformance of last year’s second quarter operating income.

We have recently completed our rating agency annual reviews and the conclusions of Kroll, S&L and Moody’s were all made with an acknowledgement of the uncertainty around the Puerto Rico situation.

Each of them have firmed our ratings concluding that National’s capitalization of liquidity can withstand their stress case assumptions about Puerto Rico losses. We have estimated that National has approximately $1 billion of excess capital to the S&P AAA requirements after the purchase MBIA, Inc. shares in the second quarter.

Consideration of extraordinary dividends from National will come after we achieve greater clarity on our Puerto Rico exposures.

Last time I mentioned that the heightened attention we are given to our Chicago credits as well since our last call the rating agencies downgraded both the board of education and the city’s geo bonds with Moody’s bringing both to below investment grade and meet challenges relating pension funding and public employee contract negotiations.

We don’t foresee either credit causing any impairment to our positions at this but we are continuing to gather information about their ability to address the current challenges. Overall our portfolio continues to perform well the credit quality distribution has remained consistent.

In the first quarter of 2009 at National’s inception 90% of the portfolio was rated A and above as of June 30, 2015 89% is rated A and above. Now I will turn it over to Chuck to go through some financial information..

Thanks Bill and good morning everyone. As Jay has mentioned this quarter was a favorable one from an earnings perspective. With combined operating income of $19 million or $0.11 per share compared to $2 million or $0.01 per share in last year’s Q2.

Some of the drivers here were higher refunded premium and higher rate investment income and lower loss and loss adjustment expense and lower operating expenses. For the largest impact this quarter was on the tax line where last year we posted a reserve for an uncertain tax position in the second quarter.

We've a normal provision of 35% of pretax operating income in this year second quarter. ABB increased to $27 per share compared to $24.87 per share at December 2014. The drivers that I mentioned contributed with the biggest impact is from our share buyback activity was contributed $1.85 to this increase.

Given that I'll spend a few minutes now on share buyback activity and capacity. As Jay summarized the board authorized a $200 million program at the end of the 2014.

We bought back 1.2 million shares under this authorization for $12 million before December 31 of last year and then from January 1 until last Thursday we bought back 15.5 million shares for $127 million in MBIA, Inc.

In addition, in May the board gave us specific authorization for National to purchase 8 million shares in the secondary offering for approximately $70 million.

We went to the board because we wanted to be clear from a governance perspective and we could purchase shares from other than the holding company and we wanted to make sure that we wouldn't exhaust the $200 million authorization while operating under 10b5-1 plan.

Last week the board terminated the remainder of the authorization from December and gave us a new authorization of $1 million which clearly covers all MBIA amenities. The purposes of this sort of give us some additional authorization capacity and also to clarify that any of our amenities can engage and buybacks under this authorization.

We only talk about the capacity that we have at the holding company and in National. We consider generally three constraints on our ability to buy back shares. One leverage, two liquidity and three alternative investments.

At today’s stock price we don't currently see any material alternative uses of our resources that offer better returns and buybacks. And now we're just using any excess resources for stock repurchases. And as Bill has said we estimate that we have excess capital in National over and above the S&P AAA level on the order of $1 billion.

We've obviously deployed a small amount of that in share repurchases about $70 million. At this point although we are fully reserved against our Puerto Rico exposure given the current uncertainty around the outcome.

We think it's prudent to hold off on significant additional buyback activity in National or seeking regulatory approval for extraordinary dividends until we have greater clarity. Longer-term National could be an even more potent source of liquidity to our holding company.

At the holding company level we are focused on achieving and maintaining investment grades credit metrics, to achieve a lower cost of capital and to support National AA range ratings and that implies achieving and maintaining reasonable leverage levels and liquidity cushions.

We have been working toward achieving debt leverage ratios consistent with middle investment credit ratings by 2018 via a combination of growth and shareholders’ equity and debt reduction from free cash flow at the holding company.

After the buybacks in the first half, we're still basically on track to achieve this goal and we expect to continue to balance our buyback activity with that objective. In addition to leverage, we also need to maintain a conservative liquidity position at the whole core level.

We want to hold enough liquidity to bridge a medium term interruption and cash flows from the operating subsidiaries. In setting our target from minimal liquidity we consider our upcoming debt maturities the run rate of operating expenses, stresses that can effect collateralization requirements and capital markets access.

Our liquidity position at the holding company was $497 million at June 30, which was an access of our minimum. The major cash flows into the holding company come from the releases on the tax escrow account which have been in January each year and dividends from national that have been processed in the fourth quarter.

Both of these are dependents are on National's operating performance. Ordinary dividends are currently limited by National's net investment income and those dividends do not require regulatory approval. The tax escrow exists because National has taxable income while MBIA, Inc. the tax payer has a net operating loss carry forward.

As National's pretax income it payments of the tax liability into the escrow account in MBIA Inc. Those payments must stay in the escrow for two tax years and can be released to the holding company if Nationals not do a tax refund. We don't consider those deposits to be part of our liquidity until they're actually released from the escrow account.

We've previously disclosed that our next expected dividend from National should be approximately $115 million and our next expected distribution from the tax escrow in January 2016 will be approximately $105 million. That distribution will be related to taxes paid by National back in the 2013 tax year.

The payments that National is making this year 2015 become the leasable in 2018.

Over the next few years we expect to be sources dividends and releases from the tax escrow will provide enough cash for all of our operating expense and debt service requirements with the reasonable cushion, but they are subject to risk and that's why we've hold the liquidity cushion.

So let me give an example of how these mechanics would work in a stress situation. National's pretax income for the six months of 2015 was over $140 million and it paid taxes into the tax escrow of about $50 million. Just for the sake of this example, let's assume that this performance were to be repeated in the second half.

Then National would have full year pretax income of $280 million and would have made $100 million of payments into the escrow which we would then project to be release to the holding company out in 2018.

Now if National were also to recognize additional incurred insurance losses this year, its pretax earnings would be reduced and therefore the payments into the escrow account this year would be lower. That would impact our liquidity position out in 2018.

As the extreme if National were to have additional incurred losses of $280 million there would be no pretax income in 2015 there will be no payments into escrow and therefore nothing to release in 2018. Going further, if National's 2015 were to become negative for this reason it would be do a tax refund from the holding company.

A refund for National's 2015 tax year would reduce the amounts scheduled to be released from the escrow in early next year. We know that the amount expected to be release in January 2016 is $105 million.

So continuing our scenario if National had additional incurred losses of greater than $280 million and otherwise would have had taxable income of $280 million it would be doing refund related to that excess. If the incurred losses were more we're its $560 million the tax refund would be about $105 million.

And therefore there would be nothing to release from the escrow in 2016. That would reduce the holding companies 2016 expected cash inflows by about half. In this case, the tax escrow would still hold about $93 million expected to be released in 2017.

However if the additional incurred losses that we saw this year were significant enough to say $850 million the holding company would owe national a refund equal to all the assets in the tax escrow again. And therefore, projected inflows in 2016 and '17 would be reduced by about half.

Finally, if the additional incurred loss were even more than that national would have a net operating loss carry forward reducing its tax liability on its future profitability. In these scenarios where cash inflows are reduced MBIA, Inc. might need some of its liquidity cushion to pay operating expenses and debt service.

Note that national, in this scenario will still have an as of right dividend capacity and of course we will have a substantial liquidity cushion at the beginning of this stress period. We believe that these resources should be enough to carry our total holding company obligations for a lengthy period.

In summary, and based on my example if a hypothetical discrete additional incurred loss were to incur in 2015 and be below $280 million, the impact our holding company liquidity would be felt in 2018 which gives us substantial time to react.

If that loss were to be between $280 million and about $850 million, liquidity in 2016, 2017 would also be affected. While these scenarios have very remote probabilities, we believe the holding company has resources to manage through them.

However, maintaining those resources are a constraint on our ability to buy back shares and to make other investments. But I hope that this has given you a sense of how we're working to balance maintaining sound positions at the holding company level with realizing on the opportunity of share buybacks.

Now, moving on to MBIA Corp., it had a statutory loss in the quarter of $47 million compared to $29 million in last year's Q2. The biggest driver is loss and loss adjustment expense where we've reported $69 million in the second quarter of 2015 compared to $54 million last year.

We had increases initiative reserve this year on the CDO portfolio and on our second lean book. MBIA Corp. has basically operated at a breakeven level on a statutory net income basis for the trailing four quarters. MBIA Corp's liquidity position was $412 million as of June 30th. And it started out the year 2015 at $443 million.

The second lean RMBS portfolio was cash flow positive so far this year generating about $18.5 million as excess spread was greater than charge-offs of delinquent loans. We made payments on CMBS exposures in the six months of a similar amount. Now, a too high yield CDO exposure Zohar 1 and 2 on which we have previously reported an expected loss.

The first deal with $151 million in principle amount due in November 2015. And the second due in January 2017 had $808 million of principle amount as of June 2015.

While we believe that a global negotiated solution that would refinance or restructure the Zohar's CDO is in the best interest of all parties, a proposal to that end has not materialized at this point and may not occur prior to the November 20th maturity date.

Though we stand ready to make the November payments and then to vigorously exercise our rights to ensure that there is an acceptable resolution prior to the second deals majority in January 2017. Other than the high yield CDO's the other meaningful liquidity contingency in MBIA Corp is around the receipt of our recoverable from Credit Suisse.

On that we are confident about recovering our carrying value that we're still uncertain about the timing. In summary, our combined financial results have a positive trajectory at this point. The momentum in National is building and we've been successful at having the future shareholder value to share buyback so far in 2015.

And MBIA Corp continues to have adequate resources again its expected claims. So at this point we'll be happy to respond to your questions..

Thank you. [Operator Instructions] Our first question comes from the line of Andrew Gadlin of Orient [ph] Capital Group..

Hi, good morning..

Good morning..

Wanted to ask a question on COFINA which you mentioned in the recovery marks and it’s - exposure for the company.

It became very controversial in recent months and as I wonder if you could share the company's views on COFINA?.

Yeah, it’s Bill speaking. As you know it is getting a lot of attention and there are different views. Our position I think is in the camp where COFINA is one of the more secured bonds that people talk about with regard to Puerto Rico and within that we have the senior lean COFINAS.

So again hasn't come up with regard to discussion around any mispayments at this point and we feel at this point comfortable with the COFINA exposures..

And there was recently a group with manual forms to group of COFINA bondholders.

Is the company involved with that group? And given the thoughts on when negotiations on COFINA could take center stage?.

We are aware of the group through the newspaper reports that you referred to with - manual.

We are not part of that group and at this point there has been no specific talk of any negotiations around COFINA, as we said all the payments are being paid and so therefore there is really nothing to talk about and as I said within that there may be some different classes of tiers of the COFINA.

But again we feel very comfortable with our exposure on --..

Okay and then GDB there is a sizable payment later this year there is another group there involved, any thoughts on that?.

Yeah, with regard to our GDB exposure in some ways ours is a little bit different than most and that our GDB exposure actually has a commonwealth guarantee on it which putted in the minority of the GDB debt that is outstanding.

So as we show in our exposure reports we have 267 million of principle which is up only exposure to GDB that mature at the end of this year and again given everything that's been said with protecting the GO in the commonwealth credit. We would expect to that payment would be made. But again we are waiting to see what happens in December..

Got it. Okay. And then final question. I think Chuck mentioned the possibility of dividend in from National the shares the hold co shares up to the hold co.

Any idea on what happened this quarter or interest in maintaining liquidity, could that be done in our 10 point later in the future?.

Yeah, there are couple of different ways to do this. The two major payments if you look at National makes it holding company or dividends and payments into the tax escrow and I talked a little bit about the mechanics of that.

So to the extent that National's making payment to the tax escrow and were to make those payments in part by transferring some of the common then you actually have an impact on holding company liquidity. But it's a future impact rather than a current impact.

Right now I think that with respect to dividends we're expecting them to be paid in cash because that is current liquidity at the holding company level..

Got it. And if you were dividend then that obviously you bought the shares little higher with where they are today.

Would that create negative investment income which would somewhat AAA at the dividend let's say next year?.

No, the shares will be valued at market at the time. So it doesn't affect the amount of the dividend..

Got it. Okay. Thank you very much..

Our next question comes from the line of Nagendra Jayanty of Claren Road..

Actually my question on dividend on shares has been answered. Thanks..

Our next question comes from the line of Brian Charles of RW Pressprich..

Good morning. Chuck, a couple of questions about MBIA corp.

First of all, do you have any color on the migration of your BBB CMBS exposure? I know you had a couple of pools you had exposure to your paying out one year-to-date, I know if you have any color on the - on what kind of payments and what kind of exposure you have remaining there?.

Hi, this is Anthony. I think as we said before we got one transaction and we are paying claims on. We continue to take claims on that. It's more recent - those 7 BBB CMBS, remainder of our exposures actually performing in line with expectations. We don't really expect any issues with the remainder of the exposure..

Okay. Can you release how much of the remaining exposure for the - exposure that you are paying out on remains it was about 300 million I think at the end of the year.

Where would that stand now?.

That's 271 million right now..

271. Okay, thanks. And away from that just regarding the reserved the loss in LEE expenses you took during the quarter.

I, is it safe to assume a lot of those reserves were associated with is a hard exposure?.

In the second quarter we had reserve increases related to CDOs but also on our second lean in RMBS as we did see a spike in voluntary pre-payment activity early in the quarter that caused us to reduce the carrying value on the access spread assets- are those two components..

Okay.

And do you have any guidance on what the breakdown of the two components is in the loss is LEE charge for the quarter?.

We don't want to break that amount down any further..

Okay. That's fair enough. Just if I can -.

To be clear, we have reserved on the assumption that the payment will be made Zohar in November..

Okay..

That's included in our scenario. So you won’t see another adjustment next quarter..

So, what you are reserving for around sort of the upcoming payment has been reserved for at this point?.

It's included in our scenarios..

Okay.

And I'm sorry, you're actually step ahead of me I was about to ask that question and I'm just wondering when taking a reserve for an upcoming payments say that might be about $150 million in November of this year, does you reserve that net reserve in vision recovery on the other side of that or for now you just reserving for that payment and then as you as a proposal comes forward may be in off course 2016, it might come up with a recovery estimate for your recovery there or you're already taking that into account when you make a reserve a loss in LEE adjustment now?.

Anytime we evaluate reserve. We look at both the amount going out the door and the range of possible its dollars coming back in and then probably wait back. So the short answer is we have anticipated that there will be some recoveries, if not all the recoveries on that payment that will be made in November..

Okay. Alright, good thank you. And then just finally where you do the state that there has been no proposal for coming yet.

I imagine you have been in regular contact with future partners regarding some certain regulation?.

No comment..

Fair enough. Okay, thank you..

[Operator Instructions] Our next question comes from the line of Pete Taurasi of Barclays..

Good morning guys. I just have a follow up question on your Zohar exposure.

During an interview on CNBC in early May representative from Patriarch Partners referenced to potential that loans in Zohar one would be put out to bid in May, can you confirm if that occurred?.

We can't comment on that..

Okay.

And then, I mean other than the legal final majority date in November or there are other milestone dates that we should be aware of either in the CLO documents or the actual financial guarantee policy?.

We got the first Zohar deal maturing in November of this year, the second maturing in January 2017. So those are the two rational dates for the exposures in sales. And then obviously there is the ongoing SCC issues which have their own dates as well towards progress on that front..

Okay. Great, thank you..

Our next question comes from the line of Ed Grocan [ph] of High Analytics..

Are you there?.

Sorry. Thank you. First let me say thank you for taking my questions.

Just want to focus on capital during your prepared remarks you said you have about a $1 billion of access capital at national just to make sure and stand that that was relative to S&P and Moody's ratings is that correct?.

That is relative to the S&P capital model..

Okay..

AAA requirements..

And how about on statutory basis.

Do you provide any information about how much access capital you have on statutory basis?.

The S&P capital model really focuses on statutory capital in its calculation..

Okay.

So what would be the key elements that the state regulator would focus on when they are looking at your capital because lately the questions I may get in haven't focused on - you are talking about $150 million of dividends from national to the hold co and there seems to be some interest into - are there specific items that would lower or limit that dividend from National to the hold co?.

Again the - as of right dividends that National can make to the holding company are limited by its net investment income to the extent that some things happen that cause net investment income to be higher or lower that will have an impact on the dividend able amount..

Okay. And then my last question is several times during your remarks you mention that for the outlook for Puerto Rico and for PREPA that nothing concrete is no material changes.

Can I view those comments to me in that - and there hasn't been any material changes in the reserves that National has taken relative to its Puerto Rico exposure during the quarter?.

We do update the reserves every quarter and just one effect we would be aware of is that for our GAAP reporting in our operating income. We do update the discount rates that are used every quarter. So as rates rise there has been impact on our loss reserves to extent that rates fall there is also small impact.

So there is that volatility that exist in any reserves were looking at a long tail cash flow analysis..

Right, so aside from the rate volatility has there been any other changes?.

I think just to be clear we took a very long look that's in the second quarter last year and rejected out over the next several years what we thought might occur in Puerto Rico in terms of payment interruptions and potential recoveries.

What we said this quarter was everything we saw was consistent with what we had forecast in the past and we saw no material change in our views. So year ago to your point we didn't make any major change in scenarios or reserve levels at this point based on what we've seen..

Fantastic, I appreciate that. Thank you very much for taking my questions..

At this time, there are no further questions. I would now like to turn the floor back over to Greg Diamond for any additional or closing remarks..

Thank you, Maria and thanks to everyone to who joined us for today’s call. Please contact me if you have any additional questions. We also recommend that you visit our website at mbia.com for additional information on our company. Thank you for your interest in MBIA. Good day and goodbye..

Thank you. This concludes today’s call. You may now disconnect and have a wonderful day..