Welcome to the MBIA, Inc. First Quarter 2018 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.

Thank you, Mariah. Welcome to MBIA's conference call for our first quarter 2018 financial results. After the market closed yesterday, we issued and posted several items on our Web sites, including our financial results press release, 10-Q, quarterly operating supplements, and statutory financial statements for both MBIA Insurance Corporation and National Public Finance Guarantee Corporation. We also posted updates to the listings of our 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, 10-Q 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 they contains our most current disclosures about the Company and its financial and operating results. Those documents also contain information that may 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 press release and our quarterly operating supplements. The recorded replay of today's call will become available approximately two hours after the end of the call, and the information for accessing it was included in yesterday's financial results press release. Now, I will read 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 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 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, Bill Fallon and Anthony McKiernan, will provide some introductory comments. Then a question-and-answer session will follow. Now, here is Bill Fallon.

Thanks, Greg. Good morning, everyone. Thanks for joining us today. During the first quarter, we continue to focus on our priorities of remediating our Puerto Rico credits and managing liquidity and capital. While there has been considerable news coverage on various topics related to Puerto Rico over the last two months, in our view, there have not been many concrete developments. For the quarter, we increased the probability weighting of certain loss scenarios to reflect the court ruling with respect to the payment of special revenue bonds during the pendency of bankruptcy, as well as continued uncertainty regarding the scope and timing of federal aid Puerto Rico can access to rebuild in the aftermath of hurricane Maria. These were the primary reasons for the increases to National's loss reserves for the quarter. In April, the oversight board rejected the government's fiscal plans and certified their own fiscal plans for the Commonwealth, PREPA, and the Highway and Transportation Authority among others. We believe that the new certified fiscal plans still fail to properly comply with PROMESA's requirements to respect lawful liens and structures as specified in the Puerto Rico debt indentures into appropriately incorporate a right sizing of the government. We remain committed to working constructively and collaboratively with Puerto Rico and the oversight board, but simultaneously we intend to vigorously pursue, as necessary, our rights and remedies as an insurer of those bonds. Last month the Department of Housing and Urban Development approved $18. 5 billion in aid for Puerto Rico, largely for rebuilding housing and infrastructure on the Island. Reports have stated that the HUD funds can be used for housing, economic development and infrastructure, which may include repairs to the Island's power grid. The other credits in our insurance portfolios continue to perform in line with our expectations.…

Thanks, Bill, and good morning, everyone. I will summarize our first quarter GAAP and non-GAAP results, the holding company's liquidity position, and then finish with key financial statutory metrics for National and MBIA Corp. The company reported a consolidated GAAP net loss of $98 million or negative $1.12 per share for the first quarter ended March 31, 2018 compared to a consolidated GAAP net loss of $72 million or negative $0.55 per share for the quarter ended March 31, 2017. Losses before income taxes for the first quarter of 2018 declined to $96 million versus losses of $120 million for the first quarter of 2017. Lower loss in LAE expense at MBIA Insurance Corp. and favorable mark-to-market changes were partially offset by lower investment income and premium earnings, as well as higher loss in LAE expense at National. The adverse after quarter -- the adverse after tax quarter-after-quarter result was primarily due to an increase in our deferred tax valuation allowance this quarter, which offsets the tax benefit of our pre-tax loss. As a reminder, we began recording a full valuation allowance on the DTA in the second quarter of 2017. Adjusted net loss or non-GAAP measure for income was $61 million or negative $0.69 per diluted share for the first quarter of 2018 compared with adjusted net income of $9 million or $0.07 per diluted share for the first quarter of 2017. The unfavorable change was primarily due to higher loss and loss adjustment expenses at National related to its insured Puerto Rico exposures and lower premium earnings. Book value per share was $13.97 as of March 31, 2018 versus $15.44 as of December 31, 2017. Our adjusted book value, a non-GAAP measure that management believes provides a better representation of the fundamental value of the company was $28.60…

Thank you. [Operator Instructions] Our first question comes from the line of Bose George of KBW.

Yes, good morning. First just on the realized losses this quarter, actually what was driving that and how much of that was at Corp. versus National?

The majority of it was at National and it was just sale of securities at a loss.

Okay.

As we mentioned in [indiscernible].

Okay. It makes sense. Thanks. And then, in terms of the Zohar benefit that you discussed, is that fair to say that the upside there's really to Corp. and to MZ Funding, and so from -- in terms of the OpCo, we shouldn’t really worry about that?

That’s correct. It's for the benefit of MBIA Insurance Corp.

Okay. And then just switching to Puerto Rico, the -- what Puerto Rico related events are you guys focused on over the next couple of quarters in terms of things that could drive the reserve in either direction?

Obviously, we would hope that there would be a series meetings, negotiations, mediation with regard to restructuring all the debts in Puerto Rico. On the absence of that, it really is some of the hearings in the court in front of judge Swain that we will be looking at, but those are pretty well spaced out over the next several months.

Okay. Thanks. And then -- actually just one on your reserve. Your reserve relative to your notional risk remains lower than some peers like AGO. Can you just talk about some of the qualitative differences that could drive some of that?

Yes. First of all, I think it's hard to know exactly what AGO's total reserves are or what our total reserves are. As we stated in the past, we don't specify relating to any specific credit what the reserve is for various reasons. I think there are some differences in terms of the credits. I think generally speaking, Assured and MBIA to the best of my knowledge have a significant amount to similar credits, for example HTA, PREPA, but different amounts, we have more, I believe in the PREPA, they have more in HTA. We have more senior COFINAs. I don’t think they have any senior COFINAs. We both have GO. They have PRASA, we don’t. So there are some differences, but I think as you know we go through under GAAP, the requirement for these scenarios and the probability weighting and come up with the reserves each quarter for each of the credits.

Okay, great. Thanks.

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

Good morning. Can I ask what drove the increased loss reserves at National this quarter? Bond prices were generally higher. So I’m just wondering what you were looking at that drove those higher reserves?

Yes, there's probably several small things that aren't necessarily significant in themselves. The one, though that we do point to is in the HTA case there was a ruling that we have appealed with regard to special revenues. And in the past, in other municipal bankruptcies, those revenues have gone to pay debt during the pendency of the bankruptcy. And Judge Swain ruled that would not be the case here regarding HTA. Again, we disagree and we will appeal that and have appealed. But the fact of the matter that means that we will be paying claims as long as the bankruptcy continues on that credit.

And then, can you disclose what your aggregate Puerto Rico loss reserves are? Obviously, you want to buy credit, but can you say what it is in the aggregate?

Yes. We, as you know, reserve every quarter and go through the Puerto Rico credits, but we do not give the aggregate amount at any point in time even for all the credits.

Okay. And then, couple of smaller questions. The share buyback program was not used to the same extent it has been recently. Can you talk about that decision?

Yes, we continue to look at the stock we have as we’ve mentioned, considerable authorization remaining to repurchase shares. I think when we bought a significant amount in the fourth quarter of last year, we bought a price -- an average price that was under $7.50. The stock has been meaningful -- meaningfully above that since then, while we don’t have any set price. Obviously, we would prefer to buy at lower prices than higher prices. So we continue to evaluate it. We view it as very dynamic situation. And again, we do believe that repurchasing shares at attractive prices is a good lever for our long-term shareholders.

Great. And then on Corp., Anthony, you mentioned have $130 million of liquidity. I see that in the operating supplement, but I also see in a different page about $150 million of cash and short-term investments. What's the difference there?

There are some requirements we have from Capital Holding standpoint related to some -- to our foreign operations, so there's a little bit of required capital there. So we try to strip that out for pure liquidity.

Got it. And then, the balance of medium-term notes increased by about $25 million quarter-over-quarter from $765 million to $790 million, despite the fact that you bought in $20 million of MTN. What’s going on there?

We had FX changes and some CDS on Inc. as well, but primarily it was FX.

Okay. All right. Thank you very much.

Our next question comes from the line of John Staley of Staley Capital Advisers.

Do you have any update on the litigation with Credit Suisse?

The only update we have is that Justice Kornreich, who was overseeing the case for the years that this case is going on, has announced retirement. So at this point, we are waiting for a new judge to take the case. That’s the only update we have at this point.

Do you think the settlement announced this morning by RBS with the government has any impact one way or another on yours?

We don’t really have a comment on that, hard to know.

Okay. Thank you.

[Operator Instructions] Our next question comes from the line of Geoffrey Dunn of Dowling & Partners.

Thank you. Good morning. You’ve addressed my question on the loss side. Can you just -- I want to back check my math on National's capacity for continuing to buy stock. What is your estimate of the remaining ability from first quarter financials?

Well, first of all, just from an authorization standpoint, we have $236 million, and that’s what we’re authorized to repurchase of this time. Beyond that, there is an ample amount of capacity related to our surplus that we can purchase if we chose to do so.

I believe it's just a financial equation, right? So do you have that math available or not?

It's 35% of surplus, Geoff.

Okay. Thank you.

[Operator Instructions] I'm showing no further questions at this time. I will turn the floor back over to management for any additional or closing remarks.

Thank you, Mariah. And thanks to those of you for listening to our call today. Please contact us directly if you have any questions. We also recommend that you visit our Web site at MBIA.com for additional information on the company. Thank you for your interest in MBIA. Good day and good bye.

Thank you ladies and gentlemen. This does conclude today's conference call. You may now disconnect and have a wonderful day.