Bill Fallon - Chief Executive Office Anthony McKiernan - Executive Vice President & Chief Financial Officer Greg Diamond - Managing Director, Investor & Media Relations.

Welcome to the MBIA Inc. Second Quarter 2021 Financial Results Conference Call. I would now like to turn the call over to Greg Diamond, Managing Director of Investor and Media Relations at MBIA. Please go ahead sir..

Thank you, Tanika. Welcome to MBIA's conference call for our second quarter 2021 financial results.

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

We also posted updates to the listings with our insurance company’s insurance portfolios. 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 10-Q’s and other SEC filings, as our company's definitive disclosures are incorporated in those documents.

We urge investors to read our 10-K and 10-Q as it contains our most current disclosures about the company and its financial and operating results. Those documents also contain information that will not be addressed on today's call.

The definitions and reconciliations of the non-GAAP terms included in our remarks today are also included in our 10-K and 10-Q, as well as our financial results report and our quarterly operating supplement.

The recorded replay for today's call will become available approximately two hours after the end of the call, and the information for accessing it is included in last weeks press announcement and in the financial results report we posted on MBIA’s website yesterday. Now, I'll read the 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 differ materially from the projected results referenced in our forward-looking statements.

Risk factors are detailed in our 10-K and 10-Q, which are 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, Bill Fallon and Anthony McKiernan will provide introductory comments and then a question-and-answer session will follow. Now, here is Bill Fallon..

Thanks Greg. Good morning, everyone. Thank you for being with us today. Earlier this year we announced that National signed on as a party to the Puerto Rico GO / PBA and HK agreements. The schedule to incorporate those agreements into confirmed plans of reorganization has remained on track.

Last week Judge Swain approved the disclosure statement for the GO plan. The GO plan is expected be confirmed in November of this year and the HK plan is expected to be filed by January 31, 2022. In addition, Ambac recently joined the GO and HTA agreements.

This brings the HTA creditor support level above 67%, which is the threshold for conformability of the HTA plan under PROMESA and an important pre-condition to receiving some of the HTA planned distributions on the GO plan effective date expected early 2022.

Though there are schedules in place to consummate these agreements, there can be no assurance of this or that they will become effective on the currently expected timelines. Once these debt restructuring plans are confirmed at effective, we will be in better position to implement our longer term strategic plans for the company.

National also has made important progress in its litigation against certain underwriters of some of its insured Puerto Rico’s debt. In June of this year the Commonwealth court denied the defendants motion to dismiss the case and the discovery process has begun. Defendants have filed an appeal of the motion to dismiss ruling.

Turning to other credits in Nationals Insured Portfolio, most of these credits have continued to performed consistent with our expectations. The outstanding gross par of Nationals Insured Portfolio has further reduced, declining to $39.5 billion June 30, 2021 down $2.3 billion from year end 2020.

At June 30, 2021 Nationals leverage ratio of gross par to statutory capital was 20:1. Now Anthony will provide additional comments about our second quarter financial results. .

During the first half of 2021, National paid $51 million of gross claims. In July National paid $226 million of gross claims and inception to-date gross claims paid on insured Puerto Rico exposure totaled $1.8 billion.

As of June 30, 2021 Nationals total fixed income investment portfolio, including cash and cash equivalents had a book adjusted carrying value of $2 billion. Statutory capital was approximately $2 billion and claims paying resources totaled $3.1 billion.

Insured gross par outstanding reduced by almost $1 billion during the quarter and was $39.5 billion as of June 30, 2021. Turning to MBIA Insurance Corp, its statutory net loss was $37 million for the second quarter of 2021 compared to a statutory net loss of $23 million for the second quarter of 2020.

The second quarter 2021 loss in LAE was attributable to lower negative incurred losses in the insured second-lien RMBS book, partially offset by lower losses on projected recoveries related to the Zohar CLO claim payments in the second quarter of 2021 compared to the second quarter of 2020.

As of June 30, 2021 the statutory capital of MBIA Insurance Corp was $160 million. MBIA Corp. received non-disapproval from the New York department of financial services for $125 million of contingency reserve release into its statutory surplus during the quarter. Claims paying resources totaled $786 million.

MBIA Corps insured gross par outstanding reduced by almost $1 billion during the quarter and was $6.3 billion as of June 30, 2021. MBIA Corps largest remaining legacy remediation and projected recoveries are related to the Zohar CLOs. And now we will turn the call over to the operator to begin the question-and-answer session. .

Thank you. [Operator Instructions] Your first question is from the line of Tommy McJoynt with KBW..

Hey! Good morning guys, thanks for taking my question. So the PAN company repurchased those medium term notes of 78% of par.

Can you add any other details on the optionality or capacity or appetite to buy back or settle? Any other liabilities there to the extent they are available below par?.

Sure. Good morning. We said that our liquidity window, which we call it now, really looks to 2025 Tom. So to the degree we find opportunities primarily within that zone that are attractive to us, we will seriously explore those.

Outside of 225 probably less attractive at this point, but we continue to look at every opportunity, but within that 2025 time frame is the target. .

Okay, okay, that makes sense. And then switching over to the Puerto Rico side, you touched on the GO and HTA.

Can you give a quick summary of where we stand in terms of the support levels and in terms of timeline for the proper restructuring plan?.

As you know Tom, there's an agreement in place, but the tension really has been on the GO and HTA deals for the first half of this year. So we would expect there’ll be more tension with regard to moving the PREPA deal forward, but at this point in time that's really been the summary view of what's happened this year. .

Okay, it makes sense. And then last one, so with the CVI, the contingent value instrument is expected to be a big part of the recovery here.

Will you have to make mark-to-market estimates of that CVI value in anticipation of its issuance to the sense its included in the restructuring deal or is it more so that you have to wait until the restructuring deal is actually finalized in the quarter, since the CVIs are actually issued before you would book any mark-to-markets here recovery. .

Yeah, at this point we don't have the CVIs. So what you're seeing is that play out through the loss reserving process, right. So we go through the scenarios still in terms of setting reserves, but since we don't have the CVI right, there's nothing we account for other than the loss reserves.

And Anthony, I don’t know if you want to add anything at this point?.

No, I think that you know right now in our loss reserves as Bill said, we're looking forward at the proposed compensation and exchanges related to the Puerto Rico transactions.

We’re making certain assumptions at that point related to all the compensation, including the CVI, but at this point until things are more formalized, until those securities are issued, that's really where you see any analysis of that and any movement. .

Okay, so if we just step back over kind of the course of the year until we get to you know these timelines in November and January, the majority of any marks – adjustments to the loss and loss recovery would just be driven by discount rates and risk periods than changing assumptions?.

Yeah, as long as we continue to be on schedule and there are no material changes to the actual underlying agreements, your assumption would be correct. We would expect that changes would be far more driven by discount rate movements as we move closer to completion. .

Okay, it all makes sense. Thank you..

[Operator Instructions] Your next question is from the line of John Staley of Staley Capital Advisers..

Bill, good morning. I have two questions. At some point in time, through the early stages and even later stages of the Puerto Rican discussions, you were not – MBIA was not totally consistent with their objectives with assured guarantee with AGO. They are – not only different than in showing different sections of the bonds, types of bonds.

Are you guys still on that way or are you all consistent now, that you're both on the same page in terms of the restructuring and the compensation related to it and everything else related to it, that's my first question. .

Yeah John, again thanks for the question. At [inaudible] the answer is yes, right. We're now part of the same agreements. So in that sense I think we’re aligned and consistent as you say. .

Good. And secondly, the market is beginning to validate your strategy for capital allocation where you bought back so much stock recognizing there are a lot of other issues today like liquidity.

But would you still look at your stock buy back as attractively adding to intrinsic value at these levels if you were able to buy it back?.

Yeah, if you go there as you know right, the big part with the last part of your question which is if we could buy it back, and as you know we’re not done, almost all that through National. We've never said what the exact dollar amount is. We should have let our actions speak for itself. So at this point we don't have the ability to National.

It's possible that could change in the future, it's possible at some point there’d be enough liquidity at the holding company that we could you know repurchase shares there and so that's how we'll address that situation, but to your point, we I think have been very consistent over time, where we have repurchased shares indicating that we do think it is enhancing long term shareholder value.

.

Thank you. I'm glad to see the market beginning to agree with you. .

Thank you, John..

At this time I am showing no further questions. I’ll like to turn the floor back over to management for any additional or closing remarks. .

Thank you, Tanika, and thanks to those of you listening to the call. Please contact us directly if you have any additional questions. We also recommend that you visit our website at MBIA.com for additional information about our company. Thank you for your interest in MBIA.

Good day and Good bye!.

Thank you, ladies and gentlemen. This does conclude today's second quarter 2021 financial results conference call. You may now disconnect..