Ambac Financial Group Inc (AMBC) 2013 Q4 法說會逐字稿

Good day ladies and gentlemen. Thank you for standing by. And welcome to the Ambac Financial Group fourth quarter 2013 earnings conference call.

(Operator Instructions)

As a reminder today's call may be recorded. It is now my pleasure to turn the floor over to Abbe Goldstein, Head of Investor Relations, Corporate Communications. Ma'am, the floor is yours.

Thank you, Huey. Good morning and thank you all for joining us today's conference call to discuss Ambac Financial Group's fourth quarter 2013 financial results.

Before we get started I'd like to remind you that today's presentation may contain forward-looking statements which are based on Management's current expectations and are subject to uncertainty and changes in circumstances. Any forward-looking statements are not guarantees of future performance or events.

Actual performance and events may differ, possibly materially, from such forward-looking statements. Factors that could cause this include the factors described in our 2013 Form 10-K under Risk Factors. Ambac is not under any obligation and expressly disclaims any obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise.

Today's presentation contains non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in our earnings press release which is available on our website at Ambac.com.

Our speakers today are Diana Adams, Ambac's President and Chief Executive Officer; and David Trick, Ambac's Senior Managing Director, Chief Financial Officer, and Treasurer. At the conclusion of their prepared remarks we will open the call to your questions.

Please note we have posted slides on our website to accompany this call. It is now my pleasure to turn the call over to Diana.

Thank you, Abbe. Good morning, everyone and thank you for joining today's call. We were please to report that the fourth quarter of 2013 marked another quarter during which we successfully executed Ambac 's value creation strategy.

We generated solid financial results and made further tangible progress on our loss mitigation initiatives. Nevertheless, we continue to confront challenging market conditions as we seek to effectively de-risk our insured portfolio and maximize returns on our investment portfolio.

My remarks today will focus on our parallel strategic priorities which are, first, value creation initiatives related to de-risking the insured portfolio at Ambac Assurance. And second, our pursuit of growth and diversification opportunities at the Holding Company, primarily through the anticipated acquisition of new financial services businesses.

We are pursuing several value creation initiatives that we believe with disciplined execution will reduce losses at Ambac Assurance and improve returns. It's important to note that our ability to deliver results often involves confidential negotiations with our counterparties. As such we will provide you as much information as is appropriate regarding our strategy and assumptions without compromising our ability to maximize outcomes.

I will now highlight four of our key initiatives. First, we are actively pursuing recoveries from counterparties that breached their representations and warranties in residential mortgage-backed securities wrapped by Ambac. We continue to spare no effort to enforce the contractual obligations of our RMBS counterparties and to hold them accountable for their actions.

We have six ongoing lawsuits with major counterparties and are in direct negotiations with others. In all of our cases we are seeking to recover actual and expected claim payments on the transactions involved, as well as interest and our expenses in pursuing these recoveries.

We have very strong rep and warranty cases. We closely monitor all RMBS related litigation, not just our own cases, and while a variety of decisions have been made by several courts, few of these cases have gone to trial. Still, in our view, the overall trend of decisions in litigation against our counterparties and other RMBS sponsors has been positive for our cases and reaffirms the logic of pursuing these cases aggressively.

We remain disciplined and will not settle these cases simply to put them behind us. However, we will consider settlements when we believe we can achieve a better risk-adjusted resolution than through continued litigation.

During the fourth quarter our efforts resulted in actual recoveries of $74 million including recoveries as a result of our participation as a creditor in the ResCap bankruptcy. At the end of December 2013 we estimated $2.2 billion of future rep and warranty RMBS recoveries.

Turning now to policy commutations. Commutations are a key loss mitigation tool and an important element of our value creation initiatives. We have stringent economic hurdles and are disciplined with respect to our approach. Our focus is on transactions that have a positive risk-adjusted, long-term economic impact, while considering other factors such as liquidity and execution risk.

In the fourth quarter we acquired and effectively commuted approximately 52% of our most distressed general accounts insured transaction and we made material progress towards selling the underlying business assets of this whole business securitization. That sell closed last weak.

Executing commutations tends to be lumpy. It takes time to negotiate and execute an agreement and typically involves a sizable amount of exposure. We will continue to pursue commutations of policies on student loan bonds, RMBS, and other distressed policies where it makes sense for us to do so from a return, risk management, and liquidity standpoint.

A third value creation initiative that we have been pursuing involves the purchase of distressed Ambac wrapped securities. We acquired $58.5 million of RMBS securities in the fourth quarter and in doing so we made an investment that generates attractive returns and economically diffuses future claims.

The last specific value creation initiative that I will highlight today relates to our RMBS servicer intervention efforts. By exercising our contractual rights, during the fourth quarter, Ambac transferred mortgage servicing responsibilities to special servicers on 26 deals, including 24 related to the ResCap settlement.

Special servicers are those that specialize in improving portfolio performance, mitigating losses, and increasing recoveries. These special services our hands on, employ individualized attention with direct lines of communication with the borrower, and they use customized strategies to improve performance of the underlying mortgage collateral. We have found that they are more successful than other servicers in working with borrowers to get them current again.

Special servicing has achieved a significant improvement in delinquency status and reduction and loss severity across our specialty service portfolio. This improved collateral performance translates into lower policy claims to Ambac.

We currently use special servicers on the mortgage collateral backing $4.5 billion of insured PAR which represents approximately 29% of our insured RMBS portfolio compared with $3.6 billion or 22% at the end of the third quarter. Much of the shift during the fourth quarter was related to the ResCap transfers. We will continue to work on servicing transfers and improvements although we have no expectations of making bulk transfers in the future of the magnitude of the ResCap transfers achieved in the fourth quarter.

Now I would like to provide you with an update on the status of the segregated account rehabilitation plan. As a reminder, the Wisconsin Insurance Commissioner is the rehabilitator of Ambac Assurance's segregated account, and as such, has significant authority over the asset liability management activities of the company. We maintain a constructive relationship with the rehabilitator and work together to achieve positive results.

Currently, we are paying 25% of permitted segregated account policy claims, and with respect to certain policies, we are making supplemental payments in order to maximize recoveries to the segregated accounts. The rehabilitator is currently seeking a private letter ruling from the IRS in connection with a number of tax issues which, if received, will likely result in amendments to the rehabilitation plan.

Under these amendments the segregated account would not issue surplus notes with respect to the unpaid balance of permitted policy claims. But would instead record such balances as ongoing policy obligations which would likely accrue an interest rate of 5.1% compounded annually.

Based on that assumed 5.1% interest rate on the unpaid portion of permitted policy claims, the segregated account would have accrued interest of approximately $225 million on such amounts through December 31, 2013, under the amended plan. This accrued interest amount is not currently reflected in the company's financial results. No final decisions on these points have been made by the rehabilitator, nor has any decision been made about the timeframe for proceeding with any potential amendments to the present terms of the confirmed plan.

With respect to new business initiatives at Ambac Financial Group, we are focused on ways to diversify and grow our business and broaden our revenue base. The company is exploring opportunities to acquire, but may also build lines of business in the financial services sector.

We are considering opportunities that leverage core competencies in credit risk and long-term asset liability management. Specifically in the sectors where we have expertise, such as public finance, mortgage, and student loan finance, and structured finance.

We want to be deliberate and thoughtful as we pursue new business initiatives. The primary challenges are identifying opportunities having the best fit in terms of strategic match, and those that are executable. We will focus on executing what we believe to be the most accretive and value added of these opportunities.

I'd now like to turn the call over to David Trick, for a financial review.

Thank you, Diana. Before I begin it is important to note that due to the adoption of Fresh Start reporting upon our emergence from bankruptcy, the financial results of the company relating to periods for May 1, 2013 are referred to as Successor and the financial results relating to the periods through April 30, 2013 are referred to as Predecessor. Financial results of Predecessor Ambac and Successor Ambac are not fully comparable.

During the fourth quarter of 2013 Ambac generated net income of $68.6 million or $1.49 per diluted share. Versus fourth quarter 2012 net income of $143.6 million or $0.47 per diluted share.

Operating earnings for the fourth quarter 2013 were $292 million, or $6.34 diluted share compared with fourth quarter 2012 operating earnings of $218.2 million or $0.72 per diluted share. The increase in operating earnings was driven by positive loss development in the insured book, partially offset by lower premium earnings and investment income.

Net income for Successor Ambac for the eight months ended December 31, 2013 was $505.2 million or $10.91 per diluted share. Operating earnings for the same period were $688.5 million or $14.87 per diluted share.

Premiums earned of $84.5 million were down 18.4% from fourth quarter 2012. The decrease in net premiums earned was driven primarily by a decrease in accelerated premiums earned resulting from lower public finance and international refunding activity.

International refunding activity primarily related to the successful negotiated early termination of a stressed UK-based healthcare transaction. In addition, run-off of the insured portfolio, the impact of which was mostly offset by changes in the collectibility of certain structured finance premium receivables, contributed to a decline in normal earned premiums.

During the fourth quarter 2013 the change in fair value of credit derivatives was a gain of $110.5 million, up $132.5 million compared with the fourth quarter 2012. The gain in the fourth quarter 2013 reflects the reversal of unrealized losses on terminated credit derivatives.

During the quarter, $2.4 billion of CBS terminated, including $1.5 billion related to CDOs, $200 million related to CLOs, and $700 million related to structured finance transactions. A large portion of which related to the previously mentioned stressed UK-based healthcare transaction.

Derivative products revenue for the fourth quarter 2013 was $18.7 million as compared to a loss of $11.9 million for the same period in the prior year. Derivative products revenue during both periods was driven by mark-to-market gains caused by rising interest rates offset by the impact of the Ambac credit valuation allowance.

The reduction in the CVA resulted in losses of $15.1 million for the fourth quarter compared to losses of $33.3 million for the fourth quarter 2012. The derivative product portfolio has been positioned to generate gains in a rising interest rate environment in order to provide an economic hedge against the impact of rising rates on certain exposures within the financial guarantee insurance portfolio.

Bearable interest entity losses were $108.3 million for the fourth quarter 2013. Compared with a gain of $0.9 million in the fourth quarter 2012. Losses on BIEs for the fourth quarter of 2013 primarily reflect the write-down of intangible assets related to the expected sale of the assets underlying the whole business securitization which closed in February of 2014.

Interest expense was $32 million for the fourth quarter of 2013 as compared to $23.4 million for the same period last year. The increase in interest expense was due to the impact of Fresh Start reporting.

Loss and loss expenses were a net benefit of $4.7 million, including a $6.9 million gain associated with the ResCap settlement compared with a net benefit of $36.7 million in the fourth quarter of 2012. Fourth-quarter 2013 results were driven by lower estimated losses in RMBS, partially offset by higher estimated losses in student loans and public finance. The fourth quarter 2012 was impacted by lower estimated losses in RMBS, student loans, and public finance.

Loss and loss expense reserves, gross of reinsurance and net of estimated subrogation recoveries increased to $5.47 billion at December 31, 2013 compared with $5.4 billion at September 30, 2013. Excluding loss expense reserves RMBS reserves fell by $35 million to $3.3 billion. Student loan reserves increased by $38 million to $982 million.

Domestic public finance reserves increased by $63 million to $338 million. And UK reserves increased by $19 million to $633 million. Fourth quarter loss reserves include $3.9 billion of unpaid segregated account policy claims.

As Diana mentioned, estimated RMBS rep and warrant discounted subrogation recoveries were $2.2 billion as of December 31, 2013. These are down from $2.4 billion at September 30, 2013. The decline in estimated subrogation recoveries was a function of several factors, including lower modeled RMBS losses driven by improved collateral performance in the modeled impact of trustee settlements, which we expect to affect certain and short transactions.

Lower expected RMBS losses are being driven in part by improvements in the housing and economic environments compared with what we had previously assumed in our models. As well as the seasoning of the remaining collateral in our insured transactions.

The provision for income taxes of $6.4 million for the fourth quarter increased by $4.3 million compared to the provision for income taxes reported for the fourth quarter of 2012 of $2.1 million. The increase in income tax expense was primarily due to US federal alternative minimum taxes of $4.3 million. Both periods included income tax expense as a result of pretax profits in Ambac's UK Italian branch, which cannot be offset by losses in other jurisdictions.

At the end of 2013 the company had $5.3 billion of US federal NOLs, including $1.4 billion at Ambac Financial Group and $3.9 billion at Ambac Assurance. The financial guarantee insurance portfolio net PAR amount outstanding declined by $45 billion, or by 20% to $179 billion at December 31, 2013 from $224 billion at December 31, 2012. Much of this is attributable to the run-off of $27 billion of public finance net par as a result of scheduled maturities, refinancings, and refundings of underlying insured transactions.

The net par as a segregated account and financial guarantee portfolio fell by $5 billion or about 19% to $22 billion at December 31, 2013 from $27 billion at December 31, 2012. Primarily due to the pay down of RMBS exposures, the termination of CDS, and the pay down and commutation of student loan transactions. The net par amount and adversely classified credits decreased $2 billion or about 6% to $33 billion at December 31, 2013 from $35 billion at December 31, 2012.

We remain focused on our exposures to Detroit and Puerto Rico. Regarding Detroit, Ambac has exposure of approximately $170 million of gross par, consisting of $92 million of limited tax GO exposure, and $78 million of unlimited tax GO exposure. The GOs are a very small portion of the cities' liabilities.

Given the recent release of the proposed plan of adjustment, market attention to the proposed treatment of GO bonds in this case has increased, and many market participants have commented on the potential negative consequences for GO bonds in Michigan and nationally. We're actively engaged this complex situation. Through various means including mediation and litigation we are seeking to maximize our economic outcome in Detroit.

Regarding Puerto Rico, we have approximately $2.5 billion of net par exposure, consisting of approximately 90% revenue backed debt and 10% GO exposure, and we continue to actively monitor the situation there. Following an analysis of the credits in the fourth quarter 2013 we downgraded our non-COFINA revenue bond exposures to below investment grade to distinguish them from the Commonwealth GO which benefits from a constitutional revenue call back.

We believe that the Commonwealth is taking serious and aggressive steps to reform its fiscal situation towards a more sustainable path and continues to increase its disclosures and transparency. Still, more progress is needed.

With respect to our investment portfolio, our goal is to prudently maximize risk-adjusted investment returns subject to maintaining the quality and diversification of the book and assuring that we have sufficient liquidity to honor our payment obligations as they arise. We are continuing to shift the asset mix away from tax exempt municipal securities and into other investments, including Ambac insured bonds. In so doing we are facing the same challenges as other insurers in this environment of low but generally rising interest rates.

In the fourth quarter of 2013 net investment income was $68.1 million, down 26.7% from $92.9 million in the fourth quarter of 2012 primarily due to Fresh Start adjustments that increased the overall amortized cost basis and decreased the effective yield of the portfolio for Successor Ambac. The fair value of the consolidated investment portfolio as of December 31, 2013 was $6.5 billion. The largest asset classes in the portfolio were asset backed securities, including Ambac insured securities of $2.6 billion, corporate obligations of $1.5 billion, and municipal bonds of $1.4 billion, of which $912 million were tax-exempt.

On a fair value basis, Ambac wrapped RMBS represent approximately 20% of the consolidated and 24% of Ambac Assurance's investment portfolio respectively. As of December 31, 2013 we owned approximately $1.3 billion in fair value of Ambac wrapped RMBS. Of the $3.9 billion of deferred obligations related to the segregated account as of year-end we own approximately $560 million or 14%.

In 2013, we paid $346.4 million to purchase Ambac wrapped RMBS, including $58.5 million in the fourth quarter. To the extent the economics of these transactions continue to meet our return targets it will remain a key part of our asset liability management strategy.

Before we open the call for your questions, we wanted to remind participants that as a matter of policy we do not comment on reserves or recoveries at a transaction level. In addition, in preparing our financial results we use what we believe to be reasonable assumptions to generate our best estimates for loss reserves and expected recoveries. These estimates involve extensive modeling and judgments regarding rep and warranty claim recoveries as well as projected claims under all of our policies.

We are required to incorporate forecasted housing prices, student loan delinquencies, unemployment rates, interest rates, whether municipalities will raise taxes in order to meet their obligations, litigation outcomes, as well as other factors that are outside of our control. There is a wide array of possible outcomes due to these factors and others, and we adjust our estimates based on changes in facts and circumstances over time.

That concludes our prepared remarks. Now we will open the call to Q&A.

(Operator Instructions)

Andrew Gadlin, Odeon Capital.

I was wondering if you could update us on the amount of repurchased losses for the portfolio on the liability side?

In terms of RMBS purchases and deferred claims? I believe that number as I said in the prepared remarks, about $560 million, about 14% of the deferred and unpaid claims.

And you're still not sharing what that is of the projected future claims, correct?

That's correct.

Okay. In terms of the RMBS that you bought this quarter, you mentioned that you bought $58 million. In previous quarters you had purchased more. I'm curious why that number was lower?

Sure. That number tends to ebb and flow from quarter to quarter, I think it was back in the second quarter when we spent or purchased over $200 million. It all depends on a whole host of factors, but the largest one is probably market conditions and our view of what fair value is for those securities, as well as liquidity in the marketplace during any particular quarter, which in the fourth quarter was a little less than we would have liked to have seen.

And, just curious on the refinancing and refunding of public finance exposure. Can you comment on how it started the year through the first two months of 2014?

I don't really have that available to me right now but I don't think there is any material change to refunding, refinancing activity. I don't know if there is any real trends that I can say is developing in terms of that market at this point.

Okay, thank you very much.

You're welcome.

(Operator Instructions)

Sean Huang, Credit Suisse.

David, you had mentioned that you had downgraded the non-COFINA portion of the Puerto Rico portfolio to non-investment grade, I was just wondering if you could talk a little bit more about the process -- your thought process behind how much capital must be taken against Puerto Rico in light of the timely possible refinancing later this year?

Yes, sure. Let me start by saying that we are very pleased with the difficult steps that the government of the Commonwealth has taken to improve their fiscal condition and also with the improved communications and we are following their plans to issue new debt which will eliminate liquidity issues for them in the short to medium-term. So we think there's been some good progress on their front.

During the fourth quarter we analyzed the strength of the GO, as David said, and the claw-back, and we determined that we thought it made the GO bonds a better credit than the revenue bonds that are subject to claw-backs, that is non-COFINA revenue bonds that we've wrapped, and this is not withstanding the fact that those funds have very robust coverage ratios. We did lower our ratings on the non-COFINA revenue bonds to below investment grade and that does attract additional reserves.

However, there is no expectations of paying claims, especially not with this new financing coming up, but no expectations of paying claims in the future and no expectations of actually incurring any losses. It's just by moving it to the category where it is now it indicates that the conditions might deteriorate. And depending on what happens in the future we need to be sort of on our toes about expecting future claims.

Okay, that's fair. Thank you.

(Operator Instructions)

Ben Clifford, Nomura.

How did the excess federal recovery expectations changed during the quarter?

I don't think we necessarily had any material change in excess spread recoveries. We -- that is, forecasting that amount is an intimate part of our loss reserving process, it is integrated into that process. We are seeing higher levels of spread recoveries, but that's consistent with what we've been forecasting.

Is that a function of moving some of the policies towards special servicers?

I guess that could be a component of it. I also think the majority of that movement of those recoveries is really just the nature of the cash flows of the particular RMBS securities as well as the point at which they are in their lifecycle.

Got you. Second question, do you have the corresponding amount you paid to own the $560 million in deferred claims?

That's not a number we've disclosed and we've not purchased, although I should say those purchases are part of a more comprehensive program in which the way -- by which we come into ownership of those deferred claims through the purchase of the RMBS. And those deferred claims are embedded within the RMBS. So our valuation of those positions evolve certainly over time, a lot of those positions we've owned for many years at this point. So it's a component of our valuation analysis and it's not necessarily very easy to break out that component of the value for all intents and purposes.

Okay. Understood. And finally the GAAP RMBS subrogation recoveries is about $2.2 billion now, but in the statutory filing it was still about $2.4 billion. Can you explain the cause of the difference there?

Ultimately it gets back to the differences between STAT and GAAP accounting, and there is different caps in terms of how we calculate loss reserves. The GAAP basis uses a different metric in terms of probability weighted reserves and the STAT basis uses a expected or base case approach. So when you run through those two different methods and apply the various caps on rep and warranties you ultimately result in two different answers. But generally consistent in terms of their size.

Understood. Thanks, that helps.

Alex Clipper, Bank of America, Merrill Lynch.

Just following up on the excess spread question, on the gross other subrogation line item in the 10-K, and that number 's held steady over the last couple quarters but you continue to recover on subrogated receivables and excess spread. I'm wondering, if you could just provide a little bit more color on how you're thinking about that line item?

Am I looking at it right that your sort of estimates haven't really changed, but you continue to recover on a quarterly basis. So that would imply that you were maybe overly conservative earlier in the year? Is that a function of RMBS recoveries getting better or projections changing?

Sure, it's a function of a few things. One, I don't think we're overly conservative, stated earlier in the call in response to a prior question, we have a process with regards to modeling our RMBS and the subrogation recoveries are sort of an intimate part of that process. So we have a lot of input into our model, interest rates, HPA, and those all will drive particular outcomes. So it's not a matter of being conservative or aggressive in terms of our accounting approach, it's part of our -- just part of our process.

There's a few things going on. One, we've seen RMBS performance improve, as you've noticed if you've been following our results quarter-over-quarter for the last few quarters, so part of that does translate to overall, a component of that has better subrogation recoveries.

The other component of the increase in subrogation recoveries as you see it, I guess you're looking at the asset side of the balance sheet, is that ultimately just the transfer of subrogation recoveries from essentially contra-liability on the balance sheet to an asset. And that happens as ultimately the subrogation recoveries exceed the expected future losses on the RMBS transactions. So, there's a little bit of a performance factor and there's a little bit of an accounting factor going on.

Got it and just to clarify, when you project your RMBS losses and/or the potential claims, that does not include the paper that you own. So that's sort of pre-owning the paper and then we would take theoretically 14% if all you owned was RMBS, is that the way to look at it?

Right. Said another way, we look at our loss reserves as if we didn't own any paper and we treat the paper we own as pure investments.

Thank you.

Both independently.

All right. Thanks.

You're welcome.

Greg Silverstein with Grant Equity.

On behalf of existing shareholders I would like to thank you very much for the excellent performance and good morning to you all. In the prepared remarks I believe Diana I mentioned the search for a financial services industry acquisition. Can you give us some examples of the universe of businesses you are seeking to acquire?

Yes, sure. We're looking for opportunities that leverage our core competencies and those are in credit risk and long-term assets liability management. And specifically in sectors where we do have expertise, such as I mentioned, public finance, mortgage and student loan finance, and structured finance.

Our goal is to create value for AFG, but at the same time, ideally, create synergies at AAC by being able to utilize the new acquisition to help improve outcomes at AAC and vice versa. So, we are evaluating opportunities on an individual basis, we are looking for a good strategic fit. We do hope to move quickly, but we will be patient and not take any steps until we have identified the right opportunity.

And as a follow-up, if there aren't any opportunities that are presented that you find attractive, what do you intend to do with let's say proceeds you receive from settlements and cash that you've built up from operations and run-off?

Actually, I think there's a little confusion about this. The cash that's being generated in the AAC, Ambac Assurance Corporation unit, the insurance company is being used to meet our obligations at AAC.

Any acquisition would be done out of the Holding Company, AFG, and in order to complete an acquisition we are going to need to raise financing, probably externally. So a new equity operating for example out of AFG, debt financing, seller financing. We will not be able to use any of the cash that's being generated out of AAC because there are dividend restrictions in place right now and there is very limited money flowing from AAC up to AFG.

Okay, thank you very much.

Thank you.

(Operator Instructions)

[Sergei Komsky], Cannon.

A couple of questions. Just following up on the excess spread question from Alex, for 2013 it seems like you've collected over $450 million of what you consider to be subrogations. How much of that is non -- is things other than collecting excess spread from trusts month-to-month and things like ResCap settlement, et cetera?

The majority of the amount that we've collected relate to the excess spread collections, as you put it, month-over-month as well as ResCap outside of that is minimal amounts.

Let's say that $75 million of ResCap you've received in the quarter, that would be part of the $450 million?

That would be part of it, and the ResCap settlement amount was about $63 million.

Okay, got it. And also, thank you, and unrelated to this, in the prior quarters you have shown in your risk section that you may have some additional accrued interest on your unpaid claims depending on how the plan is ultimately confirmed. And that number previously was $600 million, it seems like that's changed to $225 million. Could you comment on sort of what the thinking that went into this, or any other drivers?

Sure. Those are actually two very different numbers, the $225 million that Diana disclosed today relates to the amount of interest that would have been accrued on our deferred obligations through the end of the year. The $600 million that you're referring to was disclosed previously in our Risk Factors, and that amount related to a structural feature of certain RMBS securities that, if not addressed in the rehabilitation plan, could result in us, in effect paying double interest on deferred claims. So that $600 million number was an estimate of what that double interest would cost us, our expectations are that the new form of the rehabilitation plan, once it's finalized and confirmed, will address that double interest issue.

Meaning that it would no longer be there?

Correct.

Okay. Got it. And finally, could you just comment a little bit on the trend of claims received, mainly RMBS?

The general trend is for claims received to be going down and I can say basically quarter-over-quarter for the four quarters of the year we've seen a decline in each quarter on a sequential basis.

Okay. Thank you.

Thank you.

Thank you, sir. Presenters, at this time I'm currently showing no additional phone questioners in the queue. I'd like to turn the program back over to Diana Adams for any additional or closing remarks.

I just want to thank everyone for joining us today. We are looking forward to our Investor Day on March 27, and we invite you all to listen in on the webcast. The details on the webcast are on our website. Thank you.

Thank you, presenters, and thank you, ladies and gentlemen. This does conclude today's call. Thank you for your participation and have a wonderful day. Attendees, you may log off at this time.