MBI - Earnings call transcript Q3 2017

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Operator

Welcome to the MBIA, Inc.

Third Quarter 2017 Financial Results Conference Call. I would now like to turn the call over to Mr. Greg Diamond, Managing Director of Investor and Media Relations at MBIA. Please go ahead.

Greg Diamond

Mariah. you, Thank conference results. MBIA's our quarter third Welcome call financial XXXX to for After and Guarantee release, we on yesterday, and results the closed market Insurance MBIA issued supplements, statutory including Corp., financial for both operating Public our our posted results quarterly press Finance XX-Q, National and financial Corporation. websites, items several

portfolios. We updates the to also listings posted of our insurance

yesterday's to our other by operating be company's definitions c our our in company are investors remarks today included call. and that two of results replay Regarding XX-Qs, urge accessing recorded quarterly today's information Those said on XX-Q approximately in and We the well terms most addressed qualified on please and XX-K, in financial is become it contain available read information of after included the in and note The and the the release, non-GAAP not call incorporated anything end filings, results. is as our company's in the they call, will may our provided contain today's call its and information about documents are The as our results definitive XX-K and press of the disclosures current release. also SEC XX-K as for today's included press call, supplements. and also hours the financial that operating XX-Q the reconciliations disclosures our documents. those financial as

statement. Harbor Safe disclosure the for Now

could our obligation the factors forward-looking becomes referenced that place which actual to XX-Qs, Risk Our our are are Important competitive no market forward-looking is and at forward-looking such it company later no factors and update longer our statements. statement statements. not website remarks statements. The detailed such our The results may reliance environment aware general accurate. today's also to MBIA.com. from conditions in projected in contain undertakes publicly any materially available forward-looking on to correct if as XX-K the differ any results call conference cautions on undue such or company on cause statement

McKiernan, will our Bill then session For today, make follow. question-and-answer we and some statements, have will will a Fallon, introductory call Anthony

Bill. Now, here is

Bill Fallon

million Good A last National, turn. our new Greg. of XXXX call. share transaction. happened Puerto morning, humanitarian that authorization, Mariah $XXX National causing inter-company loss our $XXX and and $XXX of has million right these address Board arms-length stock Puerto reserves lot on on a Rico primarily its damage Thanks, sold developments to everyone. the significant approved since in million due significantly and dividend $XXX Rico Inc. repurchase hit an Hurricane crisis National increased in a mature insurance as We credits. Inc. will million of to on received MBIA repurchased I notes island, its

foremost and devastation and of the services. and other Puerto hurricane September bridges many Rico, power disrupting roads, island First on to out water systems, XX, Mariah communications, caused knocking widespread

efforts, we are is the Rico. additionally of to of recovery $X.X In lawsuits dollars in billion recovery insured liquidity. billions debt. withdrawn recovery, should people have in the Since thoughts providing Puerto with aid the of we and government be Federal our loan believe prayers fight and Our form islands two focus to the the related on the of support storm

we continues, As expect assistance to additional be provided. the assessment of the devastation

significant given we mediations infrastructure needed the title-free re-writing restructuring the debt to rushed, on for proceedings, the attention plan of and discussions, the particularly the that the fiscal of believe restoration is that should not the vital terms of In the island.

possible once aid. federal more eliminating recorded with working budgetary that results Puerto adjustment was right-sizing substantial the stock. and expense. and should the perspective, We in third respecting expenditures, the debt From National the accurately market a information fiscal prepared incorporating should Rico we cushions, is essential million Puerto look in exposure collaboratively on in time, appropriate constructively to the believe our plan at plan of new million including financial Oversight lawful uninsured impairment be National’s and by loss standing identifying means in are Puerto Furthermore, and a and nature government. National’s Rico as Events We also forward have for a largest investment $XXX $XX in its structures bonds GAAP volatility created comply available, indentures, in and loss especially regarding revenues specified PROMESA quarter. as the by with volatility extent the portfolio PREPA Board. increase Rico factor

authorization stock we price share are lower million repurchases. for of the that approved weeks, share higher the exhaust volumes MBIA’s six June. of repurchase the prices over able National average of trading authorization last was and million approved XX million shares an Board new shares With fully X, in $XXX On $XXX our purchased November at to common $X.XX.

to continue to at term repurchasing believe that effective way prices shares is long shareholders. We our attractive an increase for value our

occurred two after third of quarter. holding the the significant developments end a As company,

million First right October, as in Inc. from National. received of dividend a $XXX

XX at will statutory foreseeable estimated meet a of payment. and sale sold at to least in yield more Inc. liquidity have and to sufficient in the a of of that a tax believe at Inc., resources the scheduled. XX% reduced portfolio gross Inc. was policy $XX claims payments position. had to its year their by insured interest cause ensure quarter of billion statutory provide that XX, full another National’s all lead details future and $XX of paying of refund obligations $X.X of year the X single end, which of capital better insured basis. more benefit held or that of par remains XXXX tax bonds increasing the XXXX its are its and to the and MBIA XX% At of X.X% declined National’s receive September sufficient in on risk. worst it Credit cash billion within down it years par par about last over payment National’s believe principal from National’s million holders year, by approximately future. National’s billion, on XXXX. XX claims rated will remains portfolio refunding this XXXX liquidity portion We insured and National’s loss all decreased is which and resulted National’s as have resources. of will $X.X a the A third unretired capital insured its refund perform losses continues treasury tax escrow Anthony of than paying quarter S&P billion National’s $XXX by to several year-to-date. XXXX, National. to to dual insured heightened with priority to Puerto note approximately has portfolio gross to over Rico leverage X liquidity sector the to increasing as account ratio high Second, expectations. at Inc. notes, credits investment National’s quality Despite end The will its our We outside portfolio the an

remarks, of I as crisis return by with navigate many Board benefitted to is company. of was CEO all by thank down the total appreciated Before the a I for as him financial from survival for company decision to the of and obstacles his expertise he has the Jay’s critical all to done us mentorship created personally for and and stepped that us. for on Jay leadership of a MBIA Brown, been years. September. XX Jay and XX who Inc. contributions my concluding served in years His recognize twice the the has CEO the for want

Now Anthony will cover the financial results.

Anthony McKiernan

walk through Bill and Thanks third the Bill good finish position, our morning and statutory and described, taking holding non-GAAP the for that company’s key liquidity I the financial in with account will transactions to occurred summarize after quarter metrics MBIA everyone. National quarterly Corp. the and of the that results, end GAAP

quarter $X.XX First, National’s repurchase just an $X.XX or year-over-year of approximately million to XXXX. quarter for and compared consolidated XXXX, outstanding loss In company reduced degree XX we year-to-date including our million in share $X.XX MBIA repurchased share. income due at increase summarize have reported GAAP greater Rico to expenses $XXX to after million expenses loss million XX third GAAP share third of a count shares. consolidated share exposures and activity quarter net shares loss of per price average primarily loss adjustment Puerto or per $XX XXXX, related at National, This was end. The of average the to loss the of share The lesser result and a to our per adjustment net for to repurchases Corp.

Mariah. of and in addition, In additional by National. owned uninsured recoveries on and the losses from timing investment primarily loss the impairment Puerto the National, Rico an recoveries amount of hurricane ultimate resulted of Increase aftermath bonds those uncertainty at we recorded

of result market of owned December of share loss National XXXX. by the XXXX the XXXX. resulting partially September The on the years. per tax third and Combined XX, assume compared with paying quarter $XX.X were diluted compared compared share write next December with of Adjusted XX, company’s $XX.XX of The taken in year-end bonds repurchase quarter book primarily the the valuation the Puerto and share uninsured of scenarios greater share reduction National. $XX.XX MBIA or of of expenses value million diluted the as shares purchased as offset reflect that value. operating full XXXX with per Rico flow common of down cash Our and as share during per million be bonds to approximately losses of value Book was with million the the loss was XXXX. in value the September quarter outstanding book for face National million The National, $XXX claims $XXX adjusted the value increased in several decreases could as we third the due negative quarter or per in both per $XX.XX operating share combined deferred the XXXX. three of to asset XXXX, was for for $X of value $X.XX book was quarters the adjustment third income of since due at for first from $X.XX per XXXX XX, XXXX XXXX, primarily to of the loss adjustments $XX.XX XX, second shares allowance

Given our shares per equal. now share ABV end quarter, have repurchased being of the things amount other clearly is the assuming the all the we of after different that

to liquidity company. walk minutes would through few I at take holding the a Now

escrow relies value dividends well and market XX, of the MBIA million in as fund September from of September as and XX, on primarily of National assets to tax XXXX cash as the Inc. tax and totaling combined. deposits as pledged held account $XXX interest of XXXX million escrow rate As were assets million. its liquid There $XXX GICs $XXX swaps approximately releases in MBIA right for annual operations.

as surplus annual right the previously right $XXX sized of As received The of of of investment October MBIA mentioned, as as this year, the or National. dividend of and first of XX% net XX policy from dividend holders’ National’s in prior are is income governed we currently by lesser of Inc. million months test. the

million In This $XXX no Bill coupon XXXX, addition early to noted, National Inc. dividend, debt or XXXX, MBIA Inc. right on from did approximately of these MBIA them. purchased MBIA in consolidated in Inc. as outstanding notes retire obligations. effect November. Inc. MBIA transaction as had the repurchased but debt not X.X%

increased of maturities significant end respectively. MTN dividend debt resources This right holding date. to about for releases from to sharing and company sale, its the debt next company’s position to are holding and MBIA cash additional and the to tax service as the our escrow quarter in subject XXXX company million debt $XXX at agreement. with Tax and million occurring $XXX provides expenses Inc. With the XXXX

of National to and taxable tax As carryback carryback our part from the benefits provision. enterprise is subject to as of that paid tax to consolidated cash generate escrow is a tax The these during company position. its regular for in two tax the taxes loss it crawl window, account two degree back holding two are releases holding eligible years all year a to taxes the the the release of generates company or payments. income, the year loss payer agreement to entitled some NOL not later, given Should loss are National

escrow $XXX the tax depend That As for last X. the will be much on of the to related tax XXXX was XXXX year we financial year. $XX in How will quarter, of to to to payment XXXX. that Nationals’ XXXX tax November National National’s stated National paid National million returned full of in million deposit returned on account results

the As recorded the National a of regarding tax refund. $XX that of end receivable quarter, has of million

obligations company payment benefit company We profitable going be managed releases. its to facility. in And as making a will MBIA resume as disruptions as the holding there and we as to NOLs, dividend forward a potential liquidity of taking Inc. inflow it to National holding from cushions the would tax expect of releases, and company. available for with the the escrow the assumption that where We in tax escrow escrow set tax long to be to account tax years be primary liquidity couple right could

advances at National of to or holding X% agreement million also XX, between of September assets and company We access the of sized an approximately have admitted $XXX as XXXX. National

in X loss for $XXX Turning billion investments of the had and LAE market write-down of a in Puerto of $XXX of portfolio had $X.X in of statutory $XXX National paid with third September primarily and claims the and quarter of had quality totaling its income investments owned and XXXX, for third a National claims investment resources National National of The a insurance XXXX net are of statutory ended its XXXX. loss profit from company’s its uninsured billion operating Puerto value July due payments. XXXX. quarter value to the approximated loss fixed $XX bond billion Rico its million statutory million quarter summarized. bond XX. results, the investments the compared XX, for payment September to $X book as the of million was portfolio Rico million $X.X till previously statutory the net capital high I September of investment XX,

to was $XX third of MBIA liquidity the of for as a Corp. of The $XX quarter statutory to loss its XXXX. statutory of XXXX for Corp. a the of net million had MBIA million loss third quarter $XX expected had net X/XX/XX. million variance Turning and and settlement unfavorable related portfolio we mortgage due Zohar related with lien RMBS from loan being our expense facility. than a to previously was in primarily second loss associated proceeds the capitalized LAE interest less the on projected insurance

of call statutory September to to And approximately $X.X now will over and gross billion. with XX, and totaled $XX capital we of billion $XXX claims of turn XXXX, as million As session. operator resources to the begin reduce continues outstanding the Corp. MBIA paying Corp’s was the was question-and-answer X/XX/XX. par the

Operator

[Operator question from Instructions] Odeon line Andrew Capital Market. the our of first comes Gadlin of

Andrew Gadlin

MBIA’s wondering the holding from holders XX, NOLs you repurchases. MBIA June discuss place. the of if number like This could as owners share there’s MBIA, wondering implications was I [chance] a for there that’s reported taken looks of a was to would X% Inc. control a and at that if the was I’m of now be risk

Bill Fallon

regard control the XX June repurchases you in no the change of holding to share there factor with Andrew when that occurred. is

Andrew Gadlin

you there that you I is continue that without And shares to it’s there test off mean believe that? based X% a have? buy why big running to limit? of holders. Could Is in holders this you the limit generally of out a

Bill Fallon

in Not change investor, It’s investor off calculation the X% change to of detailed line. counts every a as with control. aware. a rather of is I’ll you the as probably discussion of over the are regard control, a qualified best who Probably handle calculation

So complicated the that what knowing each without maybe see to investors? becomes of more

Andrew Gadlin

Okay, thanks. we’ll follow-up,

question, at now probably Another capital shares statutory million count purpose? there’ll year-to-date. XX How National do held shares for those about be

Bill Fallon

shares non-admitted For that are statutory owns asset. the of National capital,

Andrew Gadlin

market? the to stock that resell National Can

Bill Fallon

Yes.

Andrew Gadlin

just sell National? Inc. MBIA Can stock to directly

Bill Fallon

to first the answer market. sell question; We’ll National those the could shares

National. second shares The could whether issue question, Inc. shares new treasury or you’re asking to

Andrew Gadlin

plus a also Yes, a be shares exactly. future could sale? holding Inc. in treasury, million is XXX those

Bill Fallon

the do that but it. shares repurchasing but given we could, would open in been why this could issue time, it I’m in market, they point not we’ve at Technically sure shares

Andrew Gadlin

lot as then that and just National XXXX of resell the uncertainty of And what million it. Rico. flexibility happen. through there’s that understand free – money securities, permutations has MBIA the are of in in future. lot you plus Inc. thought MBIA holds a a National I’m Inc. to could it XXX Obviously notes, as the Got those of trying putting to National can I’m well wondering, Puerto is in

Bill Fallon

about National’s $X Keep investment billion. in is portfolio mind,

you the sell to place, instrument the marketable XXX Inc. XXX that a National small of It as back (inaudible) could trade and the investment National Inc. of million a market you is of example, a in for when portfolio. market right. we of portion to National’s very could it’s sell referenced, that part approximately So debt even stock and does very, of regard and that, recently purchased, that yes a has take in it it some million place. debt With

Andrew Gadlin

a wholesale to would be conversions National Would for also of you other look purchase? debt candidate like at that MTN,

Bill Fallon

Technically could MTN National debt. we do it, buying considered something not but it’s haven’t

Andrew Gadlin

question in And was RMBS I for Corp counter your last expected comments previously a with? heard to there party that Anthony, I then than which is at think less that settlement

Anthony McKiernan

insurance mortgage to. our second portfolio. of not settlement party were that a we part was lien This a direct RMBS That was

pretty We strict related confidentiality to are under it. provisions

again weren’t our trusts by it, were it. party but So, a impacted we direct to

of a recovery. expected certain amount We

We on year it’s a recovery about we I say it. expect a but can That’s we’re positive than sooner, recovery less now, expected. that as about that much about from so getting side as

Andrew Gadlin

where process you on remind can are in And the there? then Credit me Suisse, just we

Anthony McKiernan

At trial and at we a next on at over the this so of all point different we’re with just believe forth XXXX. pace this the are are point, hearings trial that year in underway. looking really targeting the We

Andrew Gadlin

think? Mid-XXXX you

Anthony McKiernan

it the occur. underway. motion going will and date trial, argued, forth will come get to It’s really given hearings to some we’re when to so that just an gauge its think of and resolution so hard those all trial The need judgement then are were to summary exact judgement, the date I clear items summary

Operator

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

Brett Gibson

from National holdco the the stock bonds. I’d like and repurchase follow-up to of briefly on

any in running of concentration issues a bonds? kind and statutory to you from of from the perspective combined ownership are So stock

Bill Fallon

might no, statutory on The particular, regulations. in in of terms might for aware the example, limit under we that any against answer are stock But is, any of limits that plenty exist limit no is there’s room - any of exist. there

Brett Gibson

what more, those are it understand X% And limits, us the or it that? of help is can you is portfolios investment

Bill Fallon

a insurance of statutory equity its been of with capital, capital the regard the to statutory under percent that we’ve is one law XX% but purchasing. limits Well of

Anthony McKiernan

related XX% there then equity. It’s of excuse individual sorry, me counter assets. admitted of the actually that’s an test XX% party I’m surplus. debt And a is for of to

insurance you But separate measurement if look in for XX% assets. and his which equity of section XXXX. XX% under at law debt a particular, generally it’s newer to were So its Bill it, under surplus it’s for and XXXX holder policy said, as of admitted

Brett Gibson

one New positive these have the the next approve was discussion The about regulator to Insurance York is, transactions, the affirmation? did both of

Anthony McKiernan

just did anything approval always the keep your a York based all, are nature. all of material Insurance of need last question these we law to not informed We limit regulator that anything First especially transactions. doing on we we’re again, so New within seek for of

Brett Gibson

And a retired be hasn’t lastly then own candidate potential that bond future? could the other in this, that hold-co does just on any for the this

Bill Fallon

million of and XXXX that not in XXXX a owns $XX about total and has maturity smaller of to our amount There’s It’s debt. related $XX the it about debt Inc. retired. MBIA additional debt million

Brett Gibson

of relative timeline, one looking? expectations the progress related else possible you is you bigger do or the everything the that anything how could been, have For kind and Can any for discuss me last a any to Zohar liquidations to from just has how liquidation. there, be is ongoing sense

Bill Fallon

are the companies. related waiting on and Delaware been the can’t equity in most different are courts. this control for a to, by is Zohar’s we’d At really that that’s actually the there. we decision number for are of of that certain point different action that, filed than ownership item Sure. was where Well Other court pending in a comment several The probably term speaking, this at point, are near-term collateral generally litigated manager that decision is the cases that portfolio expect. there again we and nearest in

Brett Gibson

that, to of asset to (inaudible)? nothing and liquidation comment sales related But

Bill Fallon

comment I have on no that.

Operator

line the of Dunn Partners. Our Geoffrey next question comes of & Dowling from

Geoffrey Dunn

to just I escrow Anthony mechanics I want make have correct. the sure

on an And year, additional the correct an be any does we by impaired for Given release this XXXX. understanding? year. kind XQ ’XX tax expecting expectation Is release for unknown affect the a refund losses yet then were will as of that that this in that amount, eliminates – that based

Anthony McKiernan

no which part, That’s here, correct. XXXX year, your will expect no contributions for be loss be that releases first given the In we in the there there XXXX. means for will tax

released the quarter to But of your National million. the how expectations actually be $XXX will January, XX would National For fourth this a more the refunded for at that point the National. end full year of in of much original has that question, part based receivable third second as of the is or it’s of results quarter and less whether be million on

it got right. you’ve So

Geoffrey Dunn

And receivable the ’XX it would to hypothetically, the release. now this in if eat escrow year, just then exceeded the XXX

Anthony McKiernan

Yes.

Geoffrey Dunn

you. Thank great. Okay,

Operator

[Operator Instructions] Our next Peter Barclays. Troisi from line question comes of of the

Peter Troisi

bought from to the included of XXXX Just that the sheet million of National XXX balance corporate segment that quarter the assets September? the was end, billion on the hold-co in as on X.X subsequent

Anthony McKiernan

by it’s Inc.’s Because No. sheet. owned so it’s not balance Inc. on again

Peter Troisi

Okay.

disclosed the XXX operating supplement in really that in contemplated then? a anywhere So wasn’t particulars

Anthony McKiernan

correct. That’s

Operator

back the further any no closing Diamond additional are there time, to this questions. call I for or remarks. turn will over At Mr.

Greg Diamond

thanks you directly for those contact to Mariah, questions. today. of have listening us to if our and Thank you Please call all additional

additional you Thank our website information your for MBIA. We on interest and the bye. also that recommend day at for Good MBIA.com in you good visit company.

Operator

Thank and call. does conclude today’s this you conference gentlemen; ladies

You may now disconnect.

MBIA (MBI) 8 Nov 172017 Q3 Earnings call transcript