Greg Diamond - Managing Director, Investor and Media Relations Jay Brown - CEO Bill Fallon - President & COO Chuck Chaplin - President, Chief Administrative Officer & CFO Anthony McKiernan - EVP and Chief Portfolio Officer.

Geoffrey Dunn - Dowling & Partners Securities Andrew Gadlin - Odean Capital Group Brett Gibson - JP Morgan Brian Charles - RW Pressprich Peter Troisi - Barclays Capital Seth Glasser - Decade Capital Jordan Dinwith - Philadelphia.

Welcome to the MBIA, Inc. Fourth Quarter and Full-year 2015 Financial Results Conference Call. I’d now like to turn it over to Greg Diamond, Managing Director of Investor and Media Relations at MBIA. Please go ahead..

Thank you, Maria. Welcome to MBIA's conference call for our fourth quarter and full-year financial results of 2015.

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

We also posted updates to listings of our insurance portfolios and an additional 8-K this morning. Regarding today’s call, please note that anything said on the call is qualified by the information provided in the Company's 10-K and other SEC filings, as our Company's definitive disclosures are incorporated in those documents.

We urge investors to read our 10-K as it contains our most current disclosures about the Company and its financial and operating results. The 10-K also contains information that may not be addressed on today's call.

Regarding the non-GAAP terms included in our remarks today, the definitions and reconciliations of those terms may be found in our 10-K, our financial results press release and our quarterly operating supplements.

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 conference 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 Web site 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 brief introductory comments. Then Anthony McKiernan will join them for the question-and-answer session that will follow. Now, here's Jay..

Thanks, Greg. First, on behalf of the entire management team, thank you for your interest in MBIA. And particularly for the ongoing interest of those shareholders who have been with us through the financial crisis and subsequent recession.

While we’re still in a rebuilding phase, I continue to believe that we’ve ample opportunity to create value for you over time. And you can see evidence of that in our results and activities for 2015. While our operating income per share declined from $0.97 per share in 2014 to $0.52 per share in 2015.

Book value per share increased by $4.14 and adjusted book value or ABV increased by nearly $5 per share from roughly $25 per share to approximately $30 per share. Operating income per share declined primarily due to a couple of unusual and favorable results that occurred in 2014.

The release of a $61 million tax reserve and the receipt of an $18 million E&O insurance policy recovery. The 19% improvement in ABV was primarily driven by our significant share repurchase activity, which I will have more to say about later.

There has been a lot of activity in the four months since our last quarterly call, so we’ve a lot to cover today. Bill Fallon is going to provide an update on National’s new business activities, but I’d like to point out that National insured $600 million of par amount of new business in 2015 compared to $400 million in 2014, and nothing in 2013.

More importantly, from a transaction perspective, we issued five policies in the first quarter of 2015, then nine in the second quarter, 19 in the third quarter and 26 in the fourth quarter. The new business momentum in National is clear and has been accelerating.

This despite having a modest rating differential compared to the other two active bond insurers that are writing new business, and historically low muni bond interest rates.

Bill will also review the most recent events affecting National’s insurance portfolio and then Chuck Chaplin will take you through our financial results, highlights, and our liquidity positions. But before we hear from them, there are few more things I’d like to address first.

First, the ongoing uncertainty about Puerto Rico continues to create an extremely meaningful headwind for our share price. Some progress has been made with PREPA recently. From a fundamental perspective where we struck an agreement that demonstrates that credits of this type can be successfully renegotiated outside of court protection.

While implementation of the agreement is subject to certain conditions. The expected outcome for National under the agreement demonstrate -- demonstrates that some of the initial perspectives on the magnitude of potential losses for National’s were rather harsh.

Bill will have more to say about PREPA and our Puerto Rico exposures in a couple of minutes.

Suffice it to say, we’re confident that National’s balance sheet and liquidity are more that adequate to manage our existing $3.8 billion in Puerto Rico exposures, which I should note, have declined by more than $675 million of gross par amount in $1 billion of debt service since year-end 2014.

At the same time, we believe that we’ve created substantial value for our shareholders by using our available liquidity resources to buyback common stock at advantageous prices, while continuing to maintain an adequate liquidity cushion.

In October of last year, the Board gave us a new $100 million authorization for share buyback, which we’ve now fully used and which reduced share count by around an additional 10% or nearly 16 million shares. On a pro-forma basis, that adds another $2.55 to ABV assuming everything else remains unchanged.

Over the past 15 months, we reduced our share count by about 30% and at the same time we’ve continued to make progress towards a stronger holding company balance sheet by also reducing holding company debt by $128 million.

Last week our Board authorized another $100 million for share repurchases, which will take a bit longer to execute, given MBI’s current liquidity profile and absent a special dividend from National.

At MBI Insurance Corp, we continue to work to maximize the margin of safety for its policy holders and the long-term returns for its surplus note holders.

While its insured portfolio has decreased appreciably and the remaining volatility of its insured’s credits have subsided, MBI Corp continues to face uncertainty related to the Zohar CLO’s it has insured. We paid off the Zohar I notes in November of last year and we’re now seeking recoveries from its underlying assets.

We continue to believe that we will be successful and eventually recover 100% on the Zohar I notes. The Zohar II notes are scheduled to mature in January of 2017. Presently $776 million of principal remains outstanding on those notes.

We continue to work on a plan that will enable MBI Corp to pay any shortfall that might arise under our insurance coverage of the Zohar II notes.

The plan entails a potential reduction in the outstanding principal amount of the Zohar II notes or a restructuring of the maturity of the notes combined with raising liquidity at MBI Insurance Corp to enable it to make any payment due on the maturity date.

Given the ongoing litigation related to Zohar and the confidentiality agreements associated with the transactions and our insurance coverages. There is not much more that we can say at this time on the Zohar situation. Turning to personnel matters, we recently disclosed that Chuck will be retiring from our Company at year-end.

He has been with us for 10 years and he has been a constant resource for our investors. His moving on, clearly represents a big change for us. I want to thank Chuck for his outstanding service to the Company, especially as much of it occurred over the most difficult period in our history.

I wish him nothing, but the best in any and all of his future endeavors. Chuck will continue to be available to help through the transition for the rest of the year and I expect that the transition will be smooth. Anthony McKiernan, will become our newest CFO on March 11.

Anthony has a well-known quantity among our associates, the rating agencies, our regulators and several of our investors. As he has been responsible for many of the high profile remediations, that we’ve achieved in MBI Corp over the last several years. Anthony will be responsible for the preparation of our financial results for our first quarter.

I’m gratified that our Company has maintained a deep senior management team throughout and after the financial crisis, which has allowed for an orderly succession. Now Bill will provide an update on National’s activities..

Thanks, Jay, and good morning, everyone. I’m pleased to report that National enters 2016 with positive momentum built up over the course of 2015. We began to provide new business in the fourth quarter of 2014 and in December 2015 we reached the milestone, having written $1 billion of new business.

We insured $158 million of par in the fourth quarter and our production this year through February is already $135 million. That compares to $38 million of par in the entire first quarter of 2014. The quarter-to-quarter improvements are encouraging and we continue to focus on long-term positive trends and maintaining underwriting discipline.

The interest rate increased in 2015, they reversed course in 2016 which may have a negative impact on new business opportunities. We’ve had success in building out our sales and marketing team, and the infrastructure that supports them.

As we’ve mentioned in prior calls, we added three senior new business executives in 2015, Tom Weyl, Andy Nakahata, and Tom Metzel. We also added five experienced credit analysts to support them. As a result, we’ve made headway establishing relationships with many of the underwriters and financial advisors that are important for National’s future.

We’ve had some success in large deals since the beginning of 2015; our largest deal was in excess of $200 million. But the primary focus of our business today is the smaller issuers in the $10 million to $25 million range.

We continue to improve on these relationships, and are insuring a more diverse number of transactions with a broader set of underwriters and financial advisors. Industry penetration in 2015 was a 6.7% of total municipal issuance going rack compared to 5.5% in 2014. What we consider the insurable market, insured penetration was 14.1%.

Our definition of the insurable market consist of municipal issuance rated BBB and A. We believe our industry will experience steady positive growth over the coming years and National is positioned to benefit from that growth. In the meantime, our value creation will largely come from capital management.

During 2015, our portfolio reduced by 27% to $161 billion. We estimate that our excess capital relative to the S&P AAA criteria grew by almost $0.5 billion to $1.5 billion. While S&P will conduct its own analysis in the coming months, we’re confident that National continues to strengthen its balance sheet relative to its insured liabilities.

We manage our capital conservatively and expect always to hold a cushion to the various internal and external capital requirements relevant to our Company. Achieving the highest possible ratings and optimizing capital structure are priorities. As we’ve stated in prior calls, at the appropriate time we will seek special dividends from National.

Now let’s focus on our Puerto Rico credits. As Jay referenced, in the fourth quarter our exposure to the Government Development Bank was paid off and our exposure to Highway and Transportation Authority was reduced.

Together with the debt service payments on January 1, our total Puerto Rico exposure declined by $675 million, excluding accretion on wrap capital appreciation bonds.

At PREPA, we negotiated an agreement with the debtor and ad hoc group of bond holders that provides for an exchange, added discount for the ad hocs and an increase in the security for the wrap bonds with no discount. In return for a surety policy that we believe will enable the exchange bonds to achieve investment grade ratings.

The creditor group also agreed to buy $111 million of new three-year bonds from PREPA to further enhance its liquidity position. As you know, the governor has signed the law which enables the entire agreement to be implemented.

While passing this legislation was a major step, the agreement remains in an implementation phase with a number of conditions precedent pending. We believe the agreement appropriately balances the interest of PREPA, its creditors and other stakeholders and we expect this transaction will come to fruition over the next several months.

Our exposure to PREPA is currently $1.4 billion. Turning to our other exposures in Puerto Rico, we believe the Commonwealth’s general obligation debt is well secured, having a clear, first dollar priority in repayment under the constitution of Puerto Rico.

The Commonwealth’s invocation of the claw back of certain revenues to repay this debt, though, subject to the litigation is clear evidence of the strength of the priority repayment pledge supporting these bonds. We’ve $986 million of exposure to the Commonwealth general obligation debt.

The COFINA bonds that we’ve wrapped are senior lean capital appreciation bonds that do not have any debt service payments due until 2040. As such, these bonds do not impact Commonwealth liquidity. And current sales tax collections, which secure the bonds are adequate to service future debt service, without requiring growth in the sales tax.

The original par amount of our wrap senior lean COFINA bonds was approximately $700 million and current accretion stands at $1 billion. At the Highway and Transportation Authority, the government’s decision to call back petroleum tax revenues to help service the GO debt impacts most of our exposure to the Authority.

Of our $715 million of HTA exposure, $87 million of this debt can continue to be serviced from non-callback revenues. The remaining $628 million, however, does rely on petroleum tax receipts for up to 70% of pledge revenues.

We believe the callback is not a permanent appropriation of revenues, what is in intercept mechanism designed to protect the GO’s during periods of severe liquidity stress. All our HTA debt enjoy cash funded that service reserve funds, wholly for the benefit of bondholders.

And these funds are sufficient to meet debt service, shortfalls into late 2017. By which time we believe a solution to the Commonwealth liquidity needs can be in place. We are also monitoring effects to create improved fiscal oversight of the Commonwealth and tourists equitably restructure some of the common wealth debt.

We believe that we will see some additional clarity on Puerto Rico exposures over the course of 2016. But it likely take several years and a resumption of economic growth before the situation in Puerto Rico normalizes. Beyond Puerto Rico, our portfolio continues to perform satisfactory.

We’ve exposure to both Chicago public schools and the city of Chicago. We continue to monitor the situation there closely. Current budget impact is understandable as the state, city, and CPS continue to wrestle with large pension liabilities and disagree on policy.

Although the media often conflates the two, the budget process is separate from the obligation to repay debt. These issuers have access to significant resources, gain market access to fulfill their mandate. We’ve not altered our favorable view of the debt repayment profile these issuers.

At this point, I’ll turn it over to Chuck, for a review of our financial results highlights..

Thanks, Bill, and good morning folks. Our combined operating income in the fourth quarter was $10 million or $0.07 per share compared to $22 million or $0.12 per share in the year-ago quarter. The difference is that loss and loss adjustment expense, about $15 million higher than in the Q4 to 2014.

Lower operating expenses in the most recent quarter provide a partial offset. For the full-year 2015, operating income was $87 million or $0.52 a share compared to $185 million or $97 per share in 2014. The negative variance here is primarily attributable to a positive events in 2014 that did not recur which Jay described.

The release of a tax reserve and an E&O recovery. Book value and adjusted book value per share both grew significantly 2015, primarily reflecting the favorable effect of Share repurchase. Book value increased from about $20 to $25 per share and ABV from 25 dollars to $30 per share.

Share account has decreased from $192 million at year-end 2014 to $152 million at year-end 2015. During our last call, in November 2015, I indicated that the Board has given us another $100 million authorization, which we expected to use if prices remained low. And it turned out just that way.

Share price did in fact remain low and we’ve now used that entire authorization. Most of these buybacks occurred in the first six weeks of 2016. So at this point, since year-end 2014, we’ve reduced shares outstanding by 29% to $137 million shares. The average buyback price during this period was $7.25 per share.

We believe this represents substantial longer term value for our ongoing shareholders. Couple of comments on the highlights in the segments. National’s operating income was $44 million compared to $56 million in 2014 Q4. The driver of the negative variance was increased lost and loss adjustment expenses.

On PREPA, we believe that the agreement that Bill refer to has a good chance of being implemented. All other things being equal, this would result resulted in a reduction in reserves. However, we also increased reserves for a variety of other credits, primarily other non-PREPA Puerto Rico policies.

The year-over-year variance in loss expense was $15 million, essentially explaining half of that variance between 2015s operating results and 2014s. We also did not have the gains on fund investments in ’15 that we had in ’14, and we took a write down on the salvage asset in 2015.

For the full-year, National’s operating income was $188 million compared to $221 million in 2014. Higher loss reserves contributed to the reduction as did, again, some positive items in 2014 that did not recur. We continue to be very comfortable with National’s capital adequacy and liquidity.

Bill has referenced our excess capital level, compared to the S&P AAA standard at nearly $1.5 billion. And the vast majority of National’s $4.5 billion investment portfolio is comprised of highly marketable asset.

The challenge for us in the medium term will be to get some of that capacity, deployed into higher yielding investments either within National or at the holding company level. As we continue to see positive momentum on the Puerto Rico credits continue. The potential for near-term extraordinary dividends or other actions should increase.

In 2015, National paid $114 million dividend to MBIA Inc, and paid $113 million into the tax escrow account pertaining to its 2015 tax year. And that cash will become free at the holding company. In early 2018. Moving on to the corporate segment, its operating loss in the fourth quarter was $34 million, level with the loss in 2014s fourth quarter.

Higher taxes and the fourth quarter of -15 basically offset lower operating expenses. For the full-year, where operating loss was $101 million, compared to $35 million in 2014. Virtually the entire variance can be explained by the release of a tax reserve of $61 million in 2014.

As has been said, our primary near-term strategy for increasing shareholder value has been VS share buybacks, from 2014 to today. We’ve spend $397 million buying back 55 million shares. And the Board of Directors gave us another $100 million added to meeting last week.

In Using it will be guided as Jay has said by our liquidity and holding company leverage positions. And we expect that the pace of repurchases will be slower than we’ve seen in the last nearly five quarters.

Now make a few comments about MBI Corp, whereas Jay has referenced our intent is to maximize the margin of safety for policy holders and maximize the ultimate recovery for the surplus note holders. We measure our results here on a statutory basis. Start capital ended the year at $885 million compared to $859 million of year-end 2014.

This is the second year of relative financial stability for Corp and the first year, since before the financial crisis, in which it stack capital actually grew At this point the most important focus is on liquidity. MBI Corp ended 2015 with $264 million in liquid asset. After paying 149 million to retire the Zohar I bond in November.

Zohar II matures in January of 2017 with about $776 million currently expected to come due. There maybe intermediate pay downs between now and then. In fact, a pay down occurred as recently this is January to bring the balance down to $776 million. That’s $776 million.

We intend to exercise our rights to recoveries under Zohar I, work with the new collateral manager to maximize the pay down of the Zohar II bond and to build liquidity within MBI Corp. We issued an 8-K earlier this morning, to clarify the comment that we’ve made in our earnings release. We’re working with pediatric partners and other parties.

The final solution for Zohar II. At this point, our efforts are focused on replacing Patriarch’s collateral manager of the Zohar CLO’s, but we’re not actively working with Patriarch at this point. We will work with the new collateral manager when named.

Returning to MBI Corp’s balance sheet, it contains $2.4 billion of claims paying resources, but much of that value is tied up in illiquid assets, recoveries, like those from Zohar I, and Credit Suisse, excess spread recoveries on our second lien RMBS policies, future installment premiums and investments and subsidiaries.

We are working on ways to increase MBI Corp’s liquidity ahead of the Zohar II maturity. Now the outcome of all this is relevant to MBI Corp’s ongoing policy holders and to the surplus note holders. We don’t believe that there will be any material financial impact on National or MBI Inc. though one way or the other.

Finally, beyond the resolution of the Zohar’s we believe that MBI Corp will be a much more stable entity, that at any time since the onset of the financial crisis a decade ago.

In conclusion, we believe the Company has created substantial value for our shareholders in 2015 by reducing the share count at advantageous prices, and by beginning the reintroduction of National to the bond insurance market, and growing its market presence quarter-by-quarter.

Some of the important first steps to resolving on Puerto Rico exposure have also taken place. We believe that these accomplishments will provide a solid base for future shareholder returns. At this point, we’d be pleased to respond any questions that you may have..

The floor is now open for questions. [Operator Instructions] Our first question comes from the line of Geoffrey Dunn of Dowling & Partners..

Thank you. Good morning. First, just a quick number question.

Chuck, the cash flow for the Holding Company this quarter, there was a $21 million inflow, what is the source or sources of those $10 million, $20 million, $30 million per quarter type of numbers that we are seeing?.

They’re just miscellaneous flows that relate to subsidiaries and vendor payments and the like..

Okay. And then, with respect to the ….

Geoff, I wouldn’t expect it to be recurring..

Okay. And then Jay, I thought your comments were clear, and Chuck as well, about the pace of buyback will slow. But you said something similar last quarter, I thought, so I was surprised by how aggressive you were able to be to start this year.

So when we look at this new authorization, as well as the cash flow plans and debt repayment targets, is this an authorization that, within your flows, could be completed over the next two years, or do we really need a special dividend to get this next incremental 100 done?.

Geoff, when we put it out there it’s because we believe we can get it done. But we don’t attach this specific timetable. There is a lot of things that can happen both in the near-term and the longer term.

So from our point of view, looking at it, if prices remain low, we’re going to do our best to figure out ways to utilize that in a shorter time as possible. That said, there is no specific timetable or plans of when that will be executed. .

Okay.

And my last question, could you outline the next steps in PREPA that we need to see to move towards a finalization of the agreement?.

Yes, Geoff, as you know there is several things. One, there is a rate increase that will be submitted by PREPA to the commission.

Then I think the activity really turned to the exchange bonds which would be the banker working for PREPA with the rating agencies, and so those are kind of two of the important things over the next short period of time to outlook for..

All right. Great. Thank you very much..

Our next question comes from the line of Andrew Gadlin of Odean Capital Group..

Good morning. Thanks for taking my questions. Gentlemen, at National I’m trying to bridge a couple of different numbers here. The loss reserves at National on a GAAP basis increased by $15 million but they're actually brought down on a statutory basis.

Can you explain what's the difference there and what drives that?.

Sure. The biggest difference is in the discount right. There are a couple of nuances that are different between that and GAAP, but the big impact that you’re seeing here is on discount rate.

I mentioned that when we look at the PREPA case specifically, the way that we have modeled it had been where there are cash outflows and then cash inflows over a very long kind of extended period of time. The discount rate for GAAP is the risk free rate.

And so, the discount on the recovery if you will is very small, the discount on the recovery for statutory is much more significant. And so, the -- I said that all other things being equal you would expect to see a reduction in reserves because of the positive progress that had been made on PREPA.

That reduction is much smaller on a GAAP basis than it is for statutory, and it’s because of the discount on the recovery..

Got it.

Even though, I mean, the basic, the last plan that came out essentially leave no outgoing client payments from National, right?.

Yes, but again we’ve indicated that there is still implementation risk associated with it. So we’re not regarding it as a 100% certainty at this point..

Could you repeat what the dividend was from National to holding company?.

It was $114 million -- $114 million..

Got it. And on the cash flow statement for National, it shows up as only $14 million.

What drives that?.

Yes. At the time that the dividend was paid in October, we actually transfer $14 million of cash and a $100 million of high grade securities which then matured over the next several weeks. We didn’t think that it made sense to have to liquidate those securities in National to make the dividend payment..

Got it, okay. Okay, so those were transferred somewhere else. And so, National continues to own shares ….

They were transferred to the holding company and then they matured..

Right, right. And then, does National still own shares in MBIA Inc..

It does. Yes..

How many shares?.

I’ve forgotten the number of shares. Yes, I’ll have to get back to you. I don’t have the number of shares with me..

Okay.

And its listed as an asset for National, am I understanding that right?.

Yes. That’s right..

Okay. And then, Bill, mentioned in his remarks that National is targeting some smaller new business as opposed to large new business.

Can you talk a little bit about what drives that strategic direction, is it better pricing? Is it lower risk in a sense, because you don’t have the potential for these large Puerto Rico exposures that can create bigger headaches?.

Yes, primarily it’s where the market has moved to since the financial crisis and the change in the model lines. What you’ve seen is obviously much lower penetration than pre-financial crisis. And what you’re seeing really is, the smaller issuers in that $10 million to $25 million range.

In fact the average deal these days is sort of in the $14 million or $15 million range for the entire industry. And again it’s those who really get the most benefit from an insurance policy, in terms of the reduction in issuance costs. So that’s really where the focus is.

Again you still see some of the larger deals as I mentioned, but most of the activity is in that $10 million to $25 million range..

And how is pricing in that range, in the $10 million to $25 million?.

Pricing these days as we’ve mentioned has been influenced by spreads and by the very low interest rates. So because of low interest rates, relative to historical norms, it is lower, that is pricing has been lower.

And so one of the things we keep looking at is making sure we’re looking for interest rates to go up, we’ll wait and see what that does remainder of the year, which we think will lead to more attractive pricing. But right now pricing I would categorize as sort of adequate..

And one more question on the PREPA deal if possible. You mentioned that part of the surety bond being issued by National, but the reason for it is to help the new PREPA issuance get an investment grade rating. Can you talk about some of the conversations you’ve had with rating agencies, or get us comfortable that, that can happen.

That they can get that rating with your surety bond?.

Yes. As you can imagine, we’re not at liberty to discuss the -- all the conversations that take place. But as I think both Chuck and Jay and I have mentioned, we’re optimistic that the deal will take place later this year..

Got it. All right. Thank you very much..

Our next question comes from the line of Brett Gibson of JP Morgan..

Great. Good morning, Jay and Chuck. You guys mentioned a goal to reduce the amount of Zohar notes outstanding. Can you just help me understand, just implying the Corp could or would purchase them or should we be thinking about some other mechanism for that like the pay down that you referenced earlier? And then ….

We can't really comment anymore on, Zohar. As I said in my comments, there’s a limited amount of information we could discuss publicly..

Okay.

But even the mechanism of how Corp would think about going about that, over the last quarter?.

Including the mechanism ….

And then, I think that, this is more of a Corp question than that. I mean, can you give us examples of where the liquidity might come from? I think you referenced also trying to build liquidity at Corp in advance of that.

Can you talk about where it might come from?.

Chuck, gave you the four sources of liquidity which he’ll repeat..

Sure. MBIA Corp has a -- it has invested assets obviously, and that makes up the $264 million of liquid assets that we have described.

But then it also holds a little over $2 billion of comparative illiquid assets, and they are the recovery from Zohar 1, our Credit Suisse recovery, excess spread in the second lien RMBS, and those that follow us know that that’s been cash flow into us for the past roughly five quarters or six quarters, installment premiums on policies that is not yet -- have not yet been received.

Oh yes, sorry, and investments in subsidiaries..

Right. I guess my question is, do you need to accelerate the monetization of any of those? Is there a way that you can sell those? Or is there anything you can do? I think that was the issue in the question..

Yes, again plans are underway as Jay, has referenced and we don’t want to go into the details at this point..

Okay. And then, I think this is also just a tangential question not related directly to Zohar.

But have you identified all the parties that own Zohar 2 bonds?.

Yes. We know who they are..

Perfect. Okay, and then just my last question or two.

So I appreciate the disclosure in the 10-K on the possible rehabilitation or stock order payment at Corp, and what that might mean? But Chuck, maybe specifically, can you give us some detail on what the acceleration of claims might look like including how that would work, and what kind of magnitude we’re talking about the claims being presented would be?.

Yes, again very hypothetical situation which we do not expect at this point to occur. Obviously we have cautionary language in the 10-K, but by in large the policies that we have are not acceleratable, and that we pay timely interest and principal on them..

Is there anything in the 10-K that can help us size the potential magnitude of the policies that were insured in CDS form, I think that’s what the question is getting to..

In our supplement, there is a table that shows what the volume of par insured is that’s in CDS form. Let’s see if we can dig that up..

Hang on one minute; we’ll get that for you..

Okay. So it’s on page 30. And so it shows that, you have $2.9 billion of insured credit default swap based policies..

$1 billion of that is scheduled to come due second half of this year..

Right. And again, and a $1 billion of that is maturing in 2016. They would have about $2 billion left..

Okay.

But we don’t know what the mark-to-market is on those $2.9 billion policies right now?.

The mark-to-market is disclosed, it is -- again it’s small at this point. There are very few policies that have material marks on them..

Okay. And then the very last one is, do you -- would you -- do you believe that a rehabilitation of stock payment order Corp would affect your ability to write new business at National? Or would that delay your business recovery strategy in any way? Thank you..

Again we don’t think that there’s any material impact of say outcome with respect to Corp on National as a holding company..

Okay. Thank you very much gentlemen..

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

Good morning. I just have a couple of other follow-up questions about some of the numbers I’ve seen in your supplement and how that’s changing, do you expect to recovery at Corp.

It looks here like you do have on page 28 of the supplement a recovery in the CDO category of $141 million, and I think that’s the recovery that you would be expecting from Zohar 1. And away from that, it looks as if your case losses in CDOs declined to $360 million at year end versus about $391 million at September 30.

And I’m wondering if that is a reduction in previous reserves you had with Zohar or if that reflects maybe continued paydowns of losses on triple-B CMBS policies? Can you give ….

No, I don’t want to comment on individual loss reserve positions..

Okay. Can you talk about what your triple-B CMBS exposure is at year end? I think you had one pool generating losses at September, exactly what the par outstanding was there.

Can you give me an update on that?.

Good morning, Brian, its Anthony McKiernan. We have one transaction that has par remaining of about $230 million, and that’s the deal that we have been paying claims on at this point. The remaining triple-B exposure is paying down, substantially we expect no issues other than that..

Okay. So the $230 million that was -- for the one pool that’s outstanding at year end.

Can you remind me what was at September 30, it’s about $240 million?.

I would have to get you an exact amount, but I think between $240 million and $250 million..

Okay. Thanks. Okay, and then it’s -- I’ll just go into a couple of other numbers here. I see that your -- the present value or at least your installment payment schedule that, I think you provided on page 25 away from subsidiaries. That seems to have come down as your expected installments from 2016 through 2030 and after.

It seems to have come down about $50 million from what the expected payments were at September 30.

Now is that commutation of policies? Does it have anything to do with Zohar? Or is that just other policy just being prepared?.

Just policies maturing and being prepaid..

Okay. And then, when thinking about excess spread, your trick to recovery is there in your expected payouts. Do you have any guidance on, like what the timeframe over the expected remaining expected payouts might be versus the remaining expected recoveries? I know the payouts are probably -- are decelerating.

So those will probably stop sooner – certainly sooner than the expected recoveries on those -- on essentially other polices second lien.

Do you have any timeframe over which that -- any guidance over with the timeframe you expect that to occur?.

The recovery is coming over a long period of time. The average lives of the second lien deals could be five to seven years. So they do come in over a long period of time. But we are in the net -- just to be clear, we’ve been in the net receiver position of cash for some time. The recoveries are exceeding any payments we’re making now..

Right. Okay. But I guess that maybe a couple of years ago, when I was discussing this with you all. I got the same -- you gave -- you had the same guidance about five to seven years. I’m wondering is that still your guidance for like, what is the remaining -- if I’m thinking about $414 million of expected recoveries away from put back recoveries.

Are you still thinking that come -- still comes over to a five to seven year or is that maybe three to five years at this point?.

No, it’s longer -- it’s longer. When Anthony says the expected average light is five to seven years, it means some of the deals will run out 10 to 15 years. So you can expect that we’ll -- if things play out according to how they’ve been playing out, we’ll be seeing cash in flows for another decade or more.

And so, whereas the substantial amount will probably come in over the next five years, there will be additional payments literally for quite a while. We have had outstanding mortgage deals that last the full 25 to 30 years. So there is no specific end date that can be calculated until they occur..

Yes, okay. That’s fair enough. But I guess if you’ve got a few deals that you’re expecting cash flows way down the future to offset that to get to a five to seven year average life. One could estimate that you’ll have substantial cash flows in earlier years..

There is a -- there is some front loading in terms of cash coming in. But it’s not just a few deals. Its right across approximately the majority of them will come from about 30 odd deals, and they’re all spread out over time. So it’s just not something that you’re going to see happen that quickly..

Yes. That’s fair enough. Okay, thanks. And then finally ….

There is a table on that in the supplement, its on page 31. I mean it just provides the history where you can see the collections that we’ve received over the past several quarters and they’ve been net collections for some time now..

Right. Okay, thanks. And then finally, I know you can't discuss Zohar, and you’re not -- you can't really talk about liquidity measures. But I guess I want to have one follow-up question on, I know if you come up with a liquidity solution to this, and if each subsidiary National and MBIA Corp is able to service their policy claims.

The spirit of the 2009 transformation will have been satisfied and that Corp will continue to maintain policy payments without any outside I guess capital support that you’ve said in the past would not be coming from National or from Inc. But I’m wondering if you’re unable to get some sort of liquidity solution just from Cops own resources.

Have you had any conversations with your regulator about what alternatives might be to minimize the involvement that the regulator would have to accept in any kind of a rehabilitation of MBIA Corp? And if so, if any of those conversations talked about the tax escrow payments that you’ve been able to get at Inc which I guess I’m calculating now after $105 million in the first quarter 2016 might be about $665 million, $670 million you’ve gotten from tax escrow payments going to Corp for the last several years and essentially been cash flows that have been devoted to share buybacks.

Anything -- have you gotten any indication from the regulator that there might be a suggestion that you divert some of those cash flows back to support Corp to minimize the impact that a rehabilitation or involvement from the regulator might have?.

We do not expect to have a rehabilitation for Corp.

We fully expect that we’re going to come up with the plan that will meet the current liquidity shortfall, and I think that’s as far as I want to go in terms of answering what the pretty speculative type question that is actually I think well beyond something that we would want to talk about at this time..

That’s fair enough. But I got to admit there’s a lot of speculation one has to make right now..

You’re free to speculate, but we have a plan that we’re trying to execute which we hope to be successful on in the next 12 months. So we don’t have to worry about speculation..

Okay. Thank you..

Our next question comes from the line of Peter Troisi of Barclays..

Thanks. Just a question on the advances agreement that was established subsequent to yearend.

Does that allow National and the holding company to make advances to Corp, and if so are there limitations on that from either a regulatory or rating agency perspective?.

No, there aren’t any regulatory or rating agency constraints. The advances can be made whenever the advancing entity believes it’s appropriate in their business interest to do so..

Okay, great.

And I mean, is there anything different about the agreement that we have now versus the agreement that was in place in the past?.

No, it’s only that -- when it was originally put in place MBIA Corp was the center of capital adequacy and liquidity in the company and therefore it was kind of the banker that is no longer the case and so we’re substituting National for Corp in that agreement..

Okay.

So, theoretically that could be used within the company really at any time?.

Yes, it’s a cash management tool..

Okay, great.

And then, just a question -- it looks like incurred losses on the first lien RMBS portfolio picked up in the fourth quarter, is there anything specific to call out there?.

Generally speaking we had a couple of transactions that we had already assumed full principle losses on and we increased our assumption on some of the interest short falls we would experience over time. That was the main driver..

Okay, great. Thank you..

[Operator Instructions] Our next question comes from the line of Seth Glasser of Decade Capital..

Hi, guys, good morning. Thanks for taking the call. A question with regard to the potential option of finding liquidity in some of the subsidiary investments that are owned by Corp. Obviously the UK sub is the largest potential source of that liquidity, it’s on the statutory book at $389 million.

We learned, I guess on Friday that AGO now controls $375 million of the Zohar 2 notes, given the transaction that they did during the quarter. And so, I guess my question to you is, we know that AGO has been a consolidator and we know that they now own $375 million of the notes.

Is it possible at all that the UK sub could be sold to AGO in exchange for extinguishment of the notes that they hold. Is that one way that you could possibly raise liquidity..

Everything is possible..

I think that obviously everybody can look at that Corp’s balance sheet and see, that the subs are the largest potential source of liquidity. So I think any clarity and I think people are having a hard time figuring out what the mechanism would be to actually raise that liquidity.

So I think any additional color that the market can have, I think could be very helpful in that regard..

Not at this time..

That’s all..

Thanks, Seth..

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

Sorry. It was one follow-up just to kind of clarify one point, I was trying to make earlier. Have any conversations you’ve had with regulators or can you give us any assurance that the regulators themselves are comfortable with your use of cash that you’re getting from the escrow payment which are going towards share buybacks.

Have you had any overtures from the regulators that they might be concerned about what that does for your policy claim paying resources or abilities I should say?.

The regulators are aware of what we do at the holding company level, but obviously its not a regulate -- it itself is not a regulated entity..

So you have not had any overtures from them saying that they’re concerned about what you doing with the cash flow?.

Brian, I think you should reread the tax agreement which we furnished in the past and make sure you understand it. We think we have a clear understanding which doesn’t seem to match up with yours. And I know you’ve asked the question repeatedly on past conference calls and we’re not going to make any additional comments on that..

Okay. No, I understand the plan. But I’m speculating as to whether or not there, you still have a regulator overlooking the overall company. And I’m just trying to clarify that they haven’t given you any overtures that they might be concerned especially with Zohar 2 coming up.

If you’re able to get a liquidity agreement in place that’s grace, but if you’re not, there’s a good chance the rehabilitators or regulators are going to have to get involved.

Have you given them any kind of contingency plan as to how you mange your liquidity if you’re not able to come up with compromise before January 2017? Have they demanded any time of plan? Or have you been contact with them I guess.

I guess, really all I’m trying to make sure I’m comfortable with is that, are you in contact with the regulators and also that if you’re unable to get to liquidity point in place before January 2017 a resolution after that might be relatively smooth..

I think the issue, if you stand back and you’re down in the weeds a bit on this one. MBIA Corp has adequate capital adequacy based on our current estimated claim payments, both short-term and long-term. We do have a liquidity issue and if there is not sufficient liquidity in the event that Zohar 2 is not paid down before February.

We’ve had discussions, ongoing discussions about liquidity at Corp with our regulator every quarter, many times every month, sometimes every week in terms of how we’re managing that liquidity and what our intentions are. There is no action that has been proposed by the regulator at this point in time.

They’re waiting to see how successful we are in executing on our liquidity plan. And then they will, at that point in time we’ll have discussions if necessary as to what steps will be taken. There is not -- it’s very hard to talk about something that we’re working very hard not to have happen. We believe we’ve got a good plan.

We think we have several different steps to take, and we believe those steps will be properly executed in the next 12 months. And let’s wait and see how it plays out versus trying to speculate in advance as to what could happen..

Okay, fair enough. Thank you..

Our next question comes from the line of Jordan Dinwith of Philadelphia..

Hi, guys. I’m reasonably new to the story, but we’re shareholders. And I’ve just been on four, five of these calls and the book value keeps going up and new business continues to be written, a new industry continues to take back share.

I was just wondering have you talked to anyone else in the specialty finance side, on the sell side, or any other growth analysts that may not be looking at what could have happened to you five years ago, what the worst case scenario could be if the world comes to an end, and started to look at you guys more of an emerging growth story in an industry that’s kind of been through the worst and is now coming back?.

Yes, I think you’ve sort of describe where we think we are at this point in time, as I think some of our comments is -- or comment this morning touch on, we’re over the financial crisis. We’ve been through a lot. We are starting to see some signs of growth albeit relatively small compared to historical standards.

But as we mentioned, we think we’ve build up a lot of momentum last year. We feel good about the start of this year. There are some things that would help the industry in terms of rising interest rates and perhaps even spreads widening a little bit, but I think it’s really the interest rates.

So I think you’ve described sort of the positive side of things and we’ll wait and see how the rest of this year and beyond. But I think it really is a long-term proposition, and so while we expect to see some further good signs this year we’re looking out three and five years to the return in growth of the industry..

But the fact that you guys reauthorized the share repurchase is very positive because six months ago, basically if there was no resolution with Puerto Rico that wouldn’t have been possible and the fact that we got the PREPA deals done, it means you can buyback more stock and all of a sudden everybody thought that your reserves are completely inadequate and they may end up being completely inadequate.

But it’s another longer debt and it’s another thing that’s gone in your favor..

Yes, I think couple of things. As we’ve mentioned the PREPA deal was very important. Two the run off in the portfolio continues to be very fast. So back in 2009 we had a portfolio of $550 billion approximately slightly above that.

As I mentioned at the end of 2015 it’s down to $161 billion and we know even just scheduled run off this year will continue to reduce that.

So, again while we see some growth, the portfolio is generating all this excess capital that we’ve talked about which ultimately leads to greater confidence that we can get the money up to the holding company which supports the stock repurchases. At this point in time we’ve been able to use cash that has gone to the holding company.

So again I think you’ve described it correctly..

Thank you..

Thank you..

At this time there are no further questions. I’d like to turn the floor back over to Mr. Diamond for any additional or closing remarks..

Thank you, Maria. And thanks to all of you who listened to the call. Please contact me directly 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 good bye..

Thank you. This concludes today's call. You may now disconnect..