MBIA Inc (MBI) 2009 Q1 法說會逐字稿

Good morning, and welcome to the MBIA Incorporated first quarter 2009 financial results conference call. At this time, all lines are in a listen-only mode to prevent any background noise. After the prepared remarks from the Company, there will be a question-and-answer session. (Operator Instructions)

I would now like to turn the call over to Greg Diamond, Director of Investor Relations at MBIA. Please go ahead.

Thank you. Welcome to MBIA's conference call for our first quarter 2009 financial results. We're going to go back to a somewhat more historically traditional format for today's call. We will not deliver a presentation and the call will consist primarily of a question-and-answer session. We have posted several items on our website including the Form 10-Q that we filed yesterday, our quarterly operating supplement and additional materials and information related to our first quarter results and conditions. We've also posted information on our website regarding access to the recorded replay of today's call which will be available later.

Our Company's definitive disclosures are incorporated in our SEC filings including the Form 10-Q that we filed yesterday which includes comprehensive disclosures regarding our first quarter results. The purpose of our call today is to discuss some of these points raised in our most recent 10-Q to facilitate a greater understanding for our investors. The 10-Q also contains information that will not be addressed on this call. Please note that anything we say on this call is qualified by the fuller information provided in the 10-Q and our SEC filings. You should read the Form 10-Q as it contains our most comprehensive disclosures as of the end of the first quarter about the Company, and our financial and operating performance for the quarter.

For the Q&A session of today's call we have several members of MBIA's management team. Here today are Jay Brown, CEO; Chuck Chaplin, President, CFO and Chief Administrative Officer; Mitch Sonkin, Chief Portfolio Officer; Cliff Corso, Chief Investment Officer; Anthony McKiernan, Head of Structured Finance Insured Portfolio Management; and Tom McLaughlin, Chief Executive Officer of National Public Finance Guarantee Corporation. Now for our Safe Harbor disclosure statement.

Our remarks on this conference call may contain forward-looking statements. Important factors such as general market conditions and the competitive environment could cause actual results to differ materially from those projected in our forward-looking statements. Risk factors are detailed in our 10-K which is available on our website at www.MBIA.com. The Company undertakes no obligation to revise or update any forward-looking statements to reflect changes in events or expectations. In addition, the definitions of the non-GAAP terms that are included in our remarks today may also be found on our website. Before we begin the Q&A session, Chuck Chaplin will provide a few introductory comments. Chuck?

Thanks, Greg. I will provide -- good morning, everyone. I'll provide you with a brief overview of our quarter, then as Greg said we'll throw the line open for your questions. Our financial performance in the quarter was poor, just as you would expect, given credit market conditions. The quarter began with the delinquency pipeline in our second lean RMBS that exceeded our previous expectations. By quarter's end we concluded that we needed to strengthen reserves for these cases, both to reflect the longer period of elevated loss rates but some of higher severity as well. Total additions to reserves were $636 million on a pretax basis. Subprime and CDO collateral in our insured CDOs more closely tracked the expectations we used in our analysis as of fourth quarter 2008. Even so, we increased our estimates of impairments of insured multi-sector CDOs by $97 million. We have learned that much of the losses taken in these two areas are attributable to ineligible collateral being in the deals and we've commenced legal actions against three seller servicers and one CDO arranger. In addition, we hold some bank hybrid and mortgage related securities in our asset liability management investment portfolio in which $169 million in other than temporary impairments were taken in the quarter.

So, the credit crisis continued to affect our financial results and force us to fundamentally rethink our business model and the legal entity organization of our Company. On the other hand, we believe that we have adequate financial resources to manage through this trough in the credit cycle in each of our businesses.

In MBIA Corp. our structured finance and international insurance business, we have liabilities that are in current payment mode. We paid over $600 million in cash payments in the quarter, reflecting a catch-up on the part of some servicers of payments due on mortgages that were charged off in the fourth quarter. We don't expect that run rate to continue, but our total gross loss payments in 2009 are expected to top $1.8 billion. We have $1.5 billion in cash and highly liquid assets at MBIA Corp. and expect to end the year with roughly $1 billion in cash and liquid assets, assuming no elective uses of that liquidity.

In the ALM portfolio, we had cash collateral against $1.7 billion of termable liabilities as of March 31. So we don't believe there's any risk associated with those potential withdrawals. We simply have a negative earnings drag. However, we do still have risk from other positions in this book, where we have non-cash collateral against GICs or hedging contracts. We maintain a free cash buffer against those risks.

In our corporate operations, we had about $430 million of liquid assets at March 31, enough to cover all of our expected cash outflows well into 2011, including debt maturities. The newly created National Public Finance Guarantee Corp. had a $500 million liquidity position as of March 31, which we expect to be more than adequate.

We have substantially reduced the notional exposure to more volatile activities. The ALM portfolio has been reduced by $16 billion the structural finance and international insurance portfolios are down $34 billion, both versus last year's first quarter. And this process continued into Q2. So far this quarter, we've had four ABS CDOs terminate in accordance with their terms and a significant UK housing deal also.

We started to make some moves that will put us in a position to grow in the future. Obviously, we've created National Public Finance Guarantee Corp. which we expect will be a strong competitor in that space. We still have work to do there in terms of our redomestication and our ratings position. Some litigation has been filed as well and while it appears to be completely without merit it will likely also have some impact on our marketing in the short run.

Our asset management business, apart from the ALM portfolio, continues to post solid investment performance statistics and as a result has added mandates in the core fixed income area. Year-to-date we've brought on seven new portfolios and third party assets under management in total grew by bout $1.7 billion between year end and Q1. But the big story continues to be the impact of the economic downturn and credit crisis and it is reflected in our financial reporting. On a GAAP side, we had $1 billion of pretax income, more than all of it coming from a deteriorating market view of MBIA Corp.'s credit worthiness and the application of Fair Value Accounting Rules. This income from fair valuing our contingent liabilities is no more economic than the loss that we've had from adverse changes in these fair values in the past. So to headline GAAP numbers may not be all that meaningful.

So we also discuss our performance in terms of adjusted book value. ABV is a non-GAAP concept that removes the effects of unrealized gains and losses that should be expected to net to zero over time. ABV does, however, include the impact of any expected cash losses on insured credit derivatives and invested assets. Our ABV fell in the quarter by $2.45 to $37.61, with the contributions from the businesses as follows. National's ABV contribution grew by $0.67 per share due to its operating income. MBIA Corp.'s contribution fell by $2.51 per share, mostly due to insured losses on RMBS and CDOs.

The asset management business contribution declined by $0.66 per share, as it had realized investment losses due to asset impairments and had a negative spread on the ALM portfolio. The corporate segment contribution to ABV was a loss of $0.05 in the quarter. With that I'd like to throw it open for your questions.

Now we'll begin our Q&A session. We're going to start with the questions that have been submitted to us in writing and then we'll open up the phone lines to take your questions. Our first question comes from [Chris Valley]. What was the fair value an the good value of the medium term notes issued by GFL at the end of March 2009?

Thanks, this is Cliff Corso. We don't break out the fair value of the MTNs specifically on a quarterly basis. However, I would point you to slide 49 on the deck. That's the slide where we're showing the assets and the liabilities of the ALM business. And what you'll see when you look at that slide is you'll see the book values of the MTNs at $3.0 billion. You'll see all the book value of the liabilities adding up to $9.7 million then you'll see a number at the bottom which is the combined estimated market value of the liabilities at $8.5 billion. What I would note or just point out is that the lion's share of the market value differential between book and market is related to the MTNs and you can also look at slide seven on the deck and can you see that we did purchase or repurchase some MTNs on that slide, about $237 million, for a net gain of $77 million, so that should give you a pretty good sense in terms of what the fair value of the MTNs might look like.

Chris Valley has another question. According to your presentation, MBIA has sufficient liquidity in its ALM portfolio to fund all potential remaining GIC termination payments. Is this true for the whole ALM business as total assets were $9.2 billion US and total liabilities $9.7 billion US? Taking the market value, the shortfall was about $2 billion. Do you intend to offer exchange deals or similar deals to holders of MTNs?

All right. Cliff Corso again. If you look at the slide on 49, what you look -- what you see is that we actually do have sufficient resources overall to handle all the liabilities as they come due and sufficient resources to handle we believe any kind of collateral draws. One of the items to point out is $600 million interCompany amount at the Holdco. Those numbers that you site are accurate. In response to the back half of your question, we would continue to seek out on reverse inquiry basis any kind of debt repurchases that make sense for us. We also would consider tenders across the capital structure, across the whole capital structure of MBIA and again, I would just point you to slide seven, to give you an indication as to some of the activities that we pursued in the first quarter.

Okay. Next question was submitted by [Andrew Oliver], Transatlantic Capital. Has MBIA booked any recoveries yet? If not, do you have a best guess as to when you will start to book recoveries?

This is Mitch Sonkin. I'll take that question. The answer is we have not booked any recoveries yet. Consistent with how we have treated this throughout the cycle, we continue to give zero credit towards the recoveries associated with the litigation and the claims that we have commenced against Countrywide, ResCap and IndyMac. We feel strongly about the cases and believe that if we had embedded recoveries in our loss estimates, our projected losses would in fact be materially lower than we're projecting at this time. Those cases proceed and we continue to not book any recoveries whatsoever until we have a better understanding of what recoveries in the litigation will be.

The last question that was submitted in advance in writing is from [David Risguard] from North Star Asset Management. If if you exclude the ineligible loans under litigation, how has the core structured finance business performed versus your expectations, given this stressful environment? In other words, to what extent have the problems been a poor underwriting or business decision versus how much of the problems are from ineligible loans being fraudulently inserted into pools?

One of these questions are always complicated. This is Jay Brown. When we look across the losses that we've estimated over the last two years, both the ones we've paid, plus what we expect to pay through the duration of our portfolio, as you know from all of our disclosures, the concentration is primarily second liens and secondarily in the multi-sector CDOs space. If we look at the particular losses in those two spaces, somewhere between two-thirds to 80% of the losses we've incurred to date are direct reflection, we believe, of loans and different types of assets that were put into the securitizations on the CDO side which were not eligible for our contract terms. If we look across all the rest of the book of structured finance, and considering that we're looking at the worst stress we've seen in many, many years, the book is actually performing quite well.

As we've noted in past presentations and as comments have come in over the last two or three conference calls, the rest of the book is actually performing quite well. The consumer area, the small business loan area, most of our international deals are all pretty much performing where we would expect them to be performing at this point and we have very few recognized losses, nor do we expect many losses in any of those areas. We're in the middle of the credit storm still. We're kind of halfway through this cycle. That's not to say that we couldn't have losses on individual transactions. But I would say to a large extent when we look back at our performance over the last two years, it has been primarily driven by those two areas where we have a large amount of ineligible collateral that has dominated the losses that we've seen so far.

Okay. Now we'll open up the phone lines to take more questions. At this point, we only have two callers in the queue so would you please introduce our first questioner.

Thank you. (Operator Instructions) Your first question comes from the line of Darin Arita of Deutsche Bank.

Hi, good morning. Was wondering if I could ask about the second lien loss reserves that were put up this quarter. And wanted to just get a better sense on what the change in assumptions were. I know you gave a little bit of color in the prepared remarks and the press release, but just wondering if you could go into further detail?

Dan, Mitch Sonkin. Good morning. As you know, you saw the amount of the increase in reserves. What we're looking at primarily against the reserves that were taken in the third quarter is the increase in the early stage delinquencies that occurred in the fourth quarter and into early '09, combined with what we saw in the pipeline in terms of later stage delinquencies. In addition, we haven't seen that leveling off in the housing market distress. Though we have seen some recent anecdotal evidence of decreases in early stage delinquencies, not enough that we're going to get too excited about it but we have seen some recent experience there. So while we had been looking originally for some additional leveling off by the middle of this year, starting about now, what we've done is because of the extended stress in the markets, we've extended that out until probably looking for at the end of the year, and consequently we moved our reserves up accordingly, and we would expect that we would see a -- that leveling off that we're looking for more likely toward the end of the year, given what we've seen generally in the market.

And was that extension the majority of the reserve change -- I know there's a mention on severity changes also, was wondering if you could--?

Not related to severity changes.

Okay. And then with respect to the remediation efforts, how is MBIA coming up with that number of two-thirds to 80% of the losses seem to be from ineligible collateral? What information are you gathering?

We've done extensive statistical analysis of individual loan files across very, very large amounts of collateral in both the second lien portfolios by the three major issuers where we have exposure and also in the CDOs in the multi-sector area, where we've gone back and looked at that collateral at the time those CDOs were issued and what the characteristics of that collateral were versus what was represented in the documents. So it's a ground-up level analysis of thousands of individual pieces of collateral and the rough numbers that we've come up with are somewhere in the two-thirds to 80%.

And can you discuss with respect to the litigation process with the three servicers how are you getting additional information as you work through that?

No comments on litigation.

All right. Thank you.

Your next question comes from the line of [Adam Sklar] of Monarch.

Hi, thank you. I'm just looking on -- it's kind of a follow-up to the first question. I'm looking at slide 44 of the presentation and I'm just wondering if you could explain your assumptions in terms of loss estimates on your second lien bonds as to how the loss curve is projected. So if you paid out $600 million this quarter, you mentioned it's approximately $1.8 billion for the year. How, then, that really ramps down to what looks like $100 million for all of 2010?

Sure. This is Chuck. I'll start. I'll ask Mitch to add to it. What you're seeing on page 44 is the expected loss payout schedule. It is a net schedule. In the securitizations that we're making payments on currently, we do anticipate that the lion's share of all payments out, go out in the calendar year 2009 and they account for most of that over $1.8 billion number that I cited earlier. Once the payments out are made on these RMBS securitizations, essentially what's left in them are the performing -- the remaining performing assets. The remaining performing assets have cash flows that are captured within the securitization and then those net against any further payment outflows in our analysis and that's sort of what you're seeing here on the slide.

I guess -- I understand that. I guess I'm asking a slightly different question which are what are your assumptions and what are those assumptions based on that get you to cash flows where your claims payments go from $100 million a month to $100 million per year?

Yes, the assumptions -- and this is discussed in the 10-Q -- for RMBS we're anticipating that the period of elevated rolls to loss that we've been experiencing over the past few quarters continues basically through year end 2009 and then reduces to a more normalized level over the ensuing 12 months and those time frames are kind of an average across all of the securitizations that we wrapped.

Okay. Thank you.

Your next question comes from the line of Arun Kumar of JPMorgan.

Couple of questions for you. The first one relates to National. Do you believe that you have adequate capital to continue to grow the business there? I know in the last call or one of your earlier presentations you mentioned that the Company is potentially interested in raising additional capital from either third parties or from the public markets. That's the first question.

And the second question relates to if you turn to slide 49 on the asset liability management business and you have the assets and liabilities laid out there, if I look at the assets you have $9.2 billion, a market value of 6.5. 2.4 of which is cash and Treasuries and on the other side you have terminable GICs of 1.7. If you use a lot of the cash to pay off terminable GIC, obviously your asset balances would be substantially lower and the question is the market value adjustment between 9.2 and 6.5, if that is applied to the remaining assets and then you compare that to the $9.7 billion of liabilities, which is then going to be reduced by the GICs, it's almost like a 50% mismatch. You can just point me if I'm wrong on that analysis or we can take this offline later on.

Sure, let's -- thank you. Good questions. Tom McLaughlin, the CEO of National is here so I would like to ask Tom then to address the questions with respect to capital raise in National and Cliff Corso can talk about the ALM assets and liabilities.

Thanks, Chuck. National is already capitalized to a very high level under the existing capital adequacy models used by both S&P and by Moody's. We're still in the midst of discussions with both agencies so I'm reluctant to get very specific to what they want to see in detail at least until they've completed their review. We have said in the past that we intend to explore further capital raise on redomestication at levels consistent to high developer ratings that are available from the agencies at the time. I'll turn it over to Cliff.

I'll just refer you back to slide 49. I think one thing to point out, again, as I mentioned earlier on slide 49, is if you look at the intersegment loan of $600 million, that's an interCompany loan at the ink level which is where the asset liability business sits. But your math is correct. I guess what I would say is it's key to remember as we stated that we have sufficient cash and cash flow to pay off the liabilities as they come due. So we're not a forced seller of assets. Which is very important to point out. Because the OCI or the gap between the market value and the put value of the assets is only an issue if we have to sell early, which is not the position that we're in. Just to point out as well, that we estimate about 40% I believe of our asset cash flow comes due in the next couple three years. Barring any further impairments, in essence you'd see a big chunk of that OCI on that particular time level, years one through three, just come back due to maturities of the assets. Again, I think the key take-away here is recognize that we're not a forced seller of the assets and assets will mature at par and will redeem that book value over time.

Just a follow-up on that, in terms of terminable GICs, is there any particular reason why those counterparties have not terminated the GICs, since they have the rights to do that? And the related question is on the MTNs I know the Company, the previous comments you made is that you made a reasonable amount of progress in buying back or you have an interest in buying back some of the securities. Have you done much of that in this quarter or?

In terms of the first question, the terminable GICs are spread across thousands of individual GIC holders. Each one of them is making a decision based on their own alternative uses of cash. Many of them are very happy to remain in MBIA and earning what they perceive to be an above market rate that's fully collateralized. So it hasn't surprised us that a number of the GIC holders had chosen not to terminate. We don't expect there will be much additional termination of natural maturities from this point forward. The bulk of the holders have made those decisions over the past six months. We're not going to comment on security buyback activity after the end of the quarter. We'll talk about that next quarter.

Lastly, Chuck, this one's for you. In terms of computations, what kind of progress have you made in the past few months on that front? I know that you've been fairly -- the Company has been fairly interested in doing the computation. Has that level of interest from the counterparties waned a little bit or are you still active on that front?

I think, Arun, the best thing to look at is the fact that we accomplished four commutation or partial commutations in the fourth quarter of 2008. And as reported, we did not engage in any commutations in the first quarter. Doesn't mean that we're not available to have discussions with counterparts about commutations but nothing to report in the the quarter.

Okay. Thank you.

Your next question comes from the line of [Brian Monteleone] of Barclays Capital.

Thanks. Chuck, I think last quarter you said your expectations for delinquencies within CMBS pools were between 2.5 and 3% by the end of this year. I think based on the April remit reports we're already at 2.5%. I was wondering if you could update us on your most recent thinking about where delinquencies and potentially losses could go on the $45 billion CMBS and CRE CDO book?

Sure, Anthony, you want to--?

Sure, this is Anthony McKiernan. Good morning. Obviously over the last quarter you've had a substantial increase in delinquencies in the commercial real estate market and I think that given the events of the last few weeks with the general growth, bankruptcy and so forth you're going to see a lot more loans in the special servicing and so forth. Based on where we are today, you certainly could see delinquencies that pierce the 4% level. It's very hard at this point to make a firm projection on where things are going to be at the end of the year. I think the other factor here is that there's a lot of activity in the quarter where this month you'll see a lot more loans in special servicing for instance because of the general growth property bankruptcy but a lot of those properties are actually decently performing properties. There's also been very few liquidation examples out there to really get an understanding of where severities could go at this point. We looked at the John Hancock example this quarter where the CMBS was ultimately protected so I think we're going to see a lot more activity over the year. Delinquencies certainly at the pace that they are could pierce the 4% level easily at this point but that's about as far as I think we can project at this point.

Just a quick question on National. I think surplus there went to $250 million from 416 pro forma at the end of the year and I know there was that $60 million loss on Texas affordable housing deal but that should have been offset by revenue. I was wondering what caused the $166 million decline in surplus there?

This is Tom again. National has a deferred tax asset which is recognized over time as an admitted assets in accordance with statutory accounting principles. The adjustment in surplus and corresponding change in CPR is a result of this recognition schedule. And I would note actually that upwards of 65% of the $250 million deferred tax asset will be admissible and included in the balance sheet within the next 18 months.

Okay. Then just one last -- go ahead.

Go ahead. I'm sorry. You asked about the affordable housing loss too I think. National -- you noticed that there was a loss reserve of $54 million. We established a $54 million loss reserve related to that transaction. The cash flow generating from the underlying assets was insufficient to cover the required debt service payment in its entirety but the portfolio surveillance group is involved in remediation in this particular credit.

One question on the ALM business. The $6.1 billion of collateralized and secured liabilities, are those all market value basis or mark-to-market collateral posted?

Yes.

Okay. So just a quick question. If you look at $6.1 billion of collateralized liabilities and $6.5 billion of market value assets, it implies there's only $400 million of free, unencumbered assets and I think there's $325 million of MTN maturities in the second quarter of this year which would imply $75 million of unencumbered assets pro forma for those maturities. Does that sound right?

No.

No?

I'm sorry, this is Cliff Corso. No, we -- I think you're accurate on your excess cash but that excess cash is assuming that we paid off all the liabilities including the ones that are coming due forward and just to give you a sense, we're projecting now that for the foreseeable future, for quite a long length of time, years, actually, we have more asset cash flow coming due than liability cash flows on the outflow side.

Okay. Thanks.

Your next question comes from the line of [Mike Vallure] of Stone Hill Capital.

Hi. What is the market value of the collateral securing the $2 billion interCompany note from MBIA Corp. to ALM?

We have not disclosed the market value of that collateral this quarter. It is -- the nature of the agreement between MBIA Corp. and the holding Company is that a pool of assets was posted as collateral for the loan at the outset and that loan is not trued-up. The book value of the asset is greater than the $2 billion loan. The market value is somewhat less.

Is it more or less less than last quarter? I think you said 10%. Can you at least answer that?

It's more this quarter and it's reflected in the change in OCI that you see in the ALM portfolio which increased this quarter, a portion of those assets are the assets that have been dedicated to that particular loan facility.

Okay. Great. And then can you reconcile for me on page 25 of your presentation, you mentioned net total payments in MBIA Corp. of 455 and then on page 30 it seems to suggest gross loss and loss adjusted payments of 750. What's the difference between the 455 and 750?

Sure. If you just go to page -- to slide 25, the gross payments on RMBS, about $617 million, there's about $10 million of cash flow received, salvage realized, collected, about $157 million in increased recognition of salvage, which gets you down to the 450 in payments on RMBS. So that's page 25, which is a GAAP presentation. So for GAAP payments on these cases, you reflect the cash outflows, net of any salvage received. So the salvage that we're recognizing in the quarter offsets the 617 of gross payments.

Right.

Okay. Then if you go to page -- slide 30, to get to the 750 of gross payments, that's on all cases, not just RMBS, you have $617 million paid on RMBS. You have $145 million of payments on other cases. Including one payment which was recognized for accounting purposes in the fourth quarter but actually was made in the first quarter which was about $60 million. So when you take the sum of those and net down actual cash collections, which totals about $25 million, you get the 750.

And I guess I'm sorry, what is the -- the 157 on page 25, is that an actual cash inflow or is that just an accounting adjustment?

It is not actual cash inflow. It is the recognition of salvage. I touched on this earlier, that on these RMBS cases, after you make the payments out on the mortgages that default, what remains in the securitizations are the mortgages that didn't default. We recognize the expected cash flow on those performing loans as we make the payments.

Okay. And then just switching topics briefly, what is the expected collateral loss on your assumptions for second liens? So if you look at those deals, the way that you model them, what is the implied loss on the underlying collateral for those bonds?

Sure. This is Anthony. The expected losses, they range widely because of the type of transaction and the vintage and the issuer. The ranges can be anywhere from 5 to 10% at the low end to 60 to 80% on the high end. So it's really wide range, depending on the issuer, the type of transaction and the vintage.

And is there any sort of midpoint? I mean, I know there's dispersion there, but just order of magnitude what is sort of the average process?

It's not a meaningful number to use the midpoint. We have the data at individual transaction level. I know from the outside that sometimes you have to model at a macro level but all of our modeling is done at the transaction level because the transaction has substantially different performance. We think that's a more accurate way to get an assumption.

My final question is I think you mentioned earlier that you got a benefit to your earnings from the change in your credit spread. Can you just quantify what that actual number is?

This is laid out in one of the slides. It's actually in the press release itself. So if I could direct you to the press release, there's a table that shows the attribution of the change in fair value of insured credit derivatives, that shows the two biggest impacts being the change in non-performance risk which is assessed against the entire balance sheet mark-to-market which was $4.2 billion in the quarter, and then the biggest change going the other way is the increase in spreads on CMBS collateral in the securitizations. So you'll just look at the table, there's quite a bit of detail about that.

So is the non-performance risk then the change in your credit spread?

Yes. The change in our credit spread, that $4.2 billion number also includes the impact of changes in the perceived credit performance of our reinsurers as well. But because we reinsure relatively little, almost all of the change is due to the widening in CDS spreads on MBIA insurance Corp.

Great. Thank you very much.

Sure.

Your next question comes from the line of David Williams of CQS.

Good morning, gentlemen. Quick question. On page 31 of your operating supplement, I noticed there's say $5 billion or so of structured insurance securitizations. Can you tell us what percentage of those are Reg XXX transactions and of those, have you made any provisions for reserving on those transactions, given that the invested collateral on those transactions most probably is insured HELOCs, et cetera? Thanks.

The vast majority, almost 100% is in fact XXX insured securitizations. We don't believe that your second statement is accurate. The vast majority of collateral is not in fact second liens and HELOCs and that we constantly evaluate the portfolio of each individual transaction and we don't see any current problems in those portfolios.

Okay.

Your next question comes from the line of Scott Frost of HSBC.

Yes, could you remind us which outstanding cash issues at the Holding Company have cross default provisions with MBIA insurance Corp.?

Most of them have provisions that would permit them to accelerate upon certain events that affect MBIA insurance Corp.

So the $1.25 billion of debt at the Holding Company pretty much all of it you say has the cross default provisions in some manner?

There's two different indentures. You should read the indentures to understand exactly how they work.

I understand. I just maybe thought you could remind us. That's all. Thanks.

Your next question comes from the line of [Aaron Mallick] of CQS.

Hi, guys. On page 37 of the presentation, you list $3.4 billion of Alt-A first liens and then on 38 you kind of give a chart of performance. And it seems that the foreclosure alone is kind of now at an even level with credit support, with other delinquencies in there also. Are you currently holding anything, reserved against these Alt-A first liens for losses?

No. At this point we don't have any reserves against the Alt-A portfolio.

Okay. At what point in the future or what trigger would there be to start reserving against it? Is it some sort of mechanical percent of foreclosure over credit support or foreclosure plus REO over credit support or is there really no formula, really.

There is a formula. We look each transaction based on the same characteristics that we've described further in RMBS. I'll let Anthony McKiernan tell you what we're currently seeing in the Alt-A performance. In terms of the question about when we reserve, we reserve as soon as we believe that we have an accurate estimate of ultimate losses. In this case we don't believe there's any outlosses currently resident based on current assumptions in the Alt-A portfolio. Anthony?

Sure. We're looking at what our -- first of all, it's about $3.5 billion, about 75% of the collateral in those deals are fixed rate loans, so it's not your typical affordability product and IM type portfolio, the vintage concentration is diverse. About 50% is 2005 and prior. So when you think about the composition of the book, it's not heavily weighted or not overweighed towards the more recent vintages but what we're looking at is the delinquency pipelines, the roll rates, severities that the portfolios experiencing, to this point you've got very low realized losses. Severities in the book are relatively consistent, around 40%. Obviously, when you're looking at some of the Alt-A statistics in the market and you look at the affordability product, those statistics are worse. We do have one transaction that if you look at our 10-Q, it's about $560 million of par. Deutsche Bank transaction that is under underperforming list, so it's the largest transaction in the Alt-A portfolio. The rest of the portfolio is essentially enhanced at the top of the capital structure of all these transactions, either the top of mez AAA realm at this point.

Just kind of a follow-up to a couple previous questions, if I can. A previous caller asked about total loss assumptions on second lien transactions and the answer is that each transaction is kind of unique. What's the high water mark for the second lien transactions, as far as what is -- in the worst deal, what's the estimate for loss?

From a collateral loss standpoint.

Collateral loss, the worst deal?

Could be 60 to 80% of the actual collateral in the worst transaction.

60 to 80 in your worst. Okay. And then another caller called about Reg XXX deals. What is the collateral in those deals? I think they assumed it was HELOC second lien and you said that's not true. What is the collateral underlying?

Each transaction is a very specific investment criteria that it has to adhere to. So when these transactions are done there's limitations on different types of securities, by vintage, by rating, issuer and so forth that need to be adhered to in the transaction. Certain limited RMBS, certain other types of ABS and the ratings requirements when these deals were done were quite high.

Okay. Are aware of -- are there any ABS or multi sector CDOs included in those deals?

There's certainly ABS securities in the transactions. As far as the CDO buckets, I honestly don't know if they are, if they were, I'm sure they were small. We'll get back to you on that question.

Okay. Thanks, guys.

Your final question comes from the line of Patrick Dennis of [Day Key Partners].

Hi, guys. Quick question related to the MBIA National capitalization. Directly out to the MBIA National capitalization, the New York Insurance Regulator stated that National was above the single risk limit for 55 issuers and above the aggregate risk limit for insurance companies domiciled in New York. Can you give an update on where National is at? I believe you have until the end of 2009 to cure these breaches. Can you give an update on where National is at and getting to a compliant level? Thanks.

We anticipate that amortization of the book at National will actually cure a large number of those individual breaches for which we received a waiver from both the state of Illinois and the state of New York.

Okay.

Your last question comes from the line of [Manuel Jacera] of JPMorgan.

Hello, good morning. I have a question with respect to page 48 of the presentation, is the second to last bullet point. It is just for clarification. Should I understand that the MTNs were bought back at around an average price of $0.52 on the dollar defined as--?

Yes.

Okay. And then a follow-up question is were these purchases happen mostly on the first half of the quarter or the second half of the quarter? And the background is first half of the quarter is when MBIA spread was tighter with respect to the second part of the quarter.

We don't comment on when the individual transactions take place during the quarter.

Okay. Thanks.

This concludes the Q&A session. Greg, your closing remarks?

Thank you. We note that we have not accepted calls from the press and parties that have taken legal action against the Company. We will provide responses to the press via our public relations, media relations department and we'll respond to counterparties on legal actions in an alternative forum. Thanks to all of you who have joined us for today's call. I encourage those of you with additional questions to contact me directly at 914-765-3190. We also recommend that you visit our website at www.MBIA.com for additional information. Thank you for your interest in MBIA. Good day and good-bye.

Thank you. That does conclude today's MBIA Inc. first quarter 2009 financial results conference call. You may now disconnect.