MBIA Inc (MBI) 2011 Q3 法說會逐字稿

Good morning, and welcome to MBIA Incorporated's third-quarter 2011 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, Managing Director of Investor Relations at MBIA. Please go ahead.

Thank you, Jackie. Welcome to MBIA's conference call for our third-quarter 2011 financial results. We're going to follow the same format as last quarter's call, with Jay Brown and Chuck Chaplin, who will provide some brief comments, and then we will open the call for a question-and-answer session. Yesterday afternoon we posted several items to our website, including our 10-Q and our quarterly operating supplement for the quarter. The information for accessing the recorded replay of today's call is included in the financial results press release that we issued a couple days ago and there are also information about the replay available on our website.

Our Company's definitive disclosures are incorporated in our SEC filings. The purpose of our call today is to discuss some of the disclosures in our most recent 10-Q, to facilitate a greater understanding for our investors. The 10-Q also contains information that may not be addressed on today's call. Please note that anything said on today's call is qualified by the information provided in the Company's 10-Q and other SEC filings. Please read our Form 10-Q, as it contains our most current and comprehensive disclosures about the Company and its financial and operating results. Today's Q&A session will be handled by Jay Brown, CEO and Chuck Chaplin, Co-President, CFO, and Chief Administrative Officer.

Now for our Safe Harbor disclosure statement. Our remarks on this conference call may contain forward-looking statements. Important factors such as the 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 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 not likely to be achieved.

Also, the definitions of the non-GAAP terms that are included in our remarks today may also be found on our website. Now, Jay will provide some introductory comments. Jay?

Thanks, Greg and good morning everyone. It's been a very busy three months. Since we reported to you last quarter, we have continued to reduce the potential volatility in MBIA Insurance Corp's insured book of business, primarily through the execution of additional insurance commutations. In addition to the early third-quarter commutations we discussed on our last call, we commuted another ABS CDO before the quarter ended, and then after September 30, we settled an additional $10.6 billion of exposure, primarily in the commercial real estate sector. We now have substantial experience with commuting our commercial real estate exposures and we're incorporated that experience to a greater extent in our statutory loss reserves. This contributed to the significant increase in loss reserves for the third quarter, and Chuck will take you through that in greater detail in a few minutes.

In an effort to continue commuting potentially volatile exposures, we are having ongoing discussions with other holders of our insured credit default swaps, who may also be interested in achieving negotiated settlements before the end of this year. This would be consistent with our experience in prior years. So far this year, we have resolved $23 billion of exposure early, more than in all of 2010. Five plaintiffs, three banks and two other parties, have dropped out of the transformation litigation since the end of the second quarter and additional plaintiffs could drop out before the end of the year. Currently, only eight of the original 18 plaintiffs remain. Regardless of the number of plaintiffs, the Article 78 process is nearing a conclusion, with a trial, if one is even necessary, expected in late February or early March. Of course, with each passing quarter, it becomes ever clearer that the allegations of insolvency made by the plaintiffs in the transformation-related lawsuits have no merit, as MBI Corp continues to meet all of its obligations, while maintaining a healthy capital base.

At the same time, our affirmative lawsuits continue against a number of mortgage originators that defrauded us and who have not honored their contractual obligations to repurchase ineligible loans from securitizations that we insured. In early October, the New York State Supreme Court heard oral argument on key issues in our suit against Bank of America and its subsidiaries. As has been widely covered by the press, the court's decision will have an important effect on how we prepare and present our case from the information we have gathered through sampling, deposition and discovery, both in this case and in others that we have filed against Allied Bank, Credit Suisse and Morgan Stanley. The decisions are also likely to have an effect on how our counter parties assess their mortgage put-back exposure.

Regardless of how the court rules, however, we remain highly confident based on the overwhelming evidence of fraud and breach of contract, that we will ultimately prevail. And while we have recorded $2.8 billion in recoveries from these originators on our balance sheet, we have made well over $5 billion in loss payments on the related transactions. When the cases are finally resolved, we expect to recover the vast majority of our losses, not just those for which we have already recorded a recovery. Meanwhile, the municipal finance market continues to operate without competition among bond insurers, primarily as a result of the transformation litigation, which is effectively impeding National's ability to write new business.

During the third quarter, S&P published its final rating criteria for bond insurers. In general, we don't disagree with the directional approach that S&P is taking, but some aspects of the model appear to have more negative impacts than we think are warranted based on other experience. We do not know whether S&P is inclined to make further adjustments, but we will continue to work with them. Actions we may eventually take to achieve a high rating on a cost of capital effective basis will be delayed until the transformation-related issues are behind us. National's current rating is impacted more by the overhang of the transformation litigation than by our existing business fundamentals. We believe that there is an ongoing demand for insurance from financially-stable municipal-only bond insurers, and we continue to look forward to reentering the market after the transformation litigation is favorably resolved.

Aside from our insurance businesses, we continue the build-out of our marketing infrastructure and cut water asset management. Our investment performance continues to be among the best in the fixed income space, and we now have a sales and marketing effort commensurate with our investment track record and expertise. Lastly, we continue to maintain an active and open dialogue with our insurance regulators, both here in the States and abroad, in order to ensure they remain fully aware of developments in our business and in our litigation. Chuck will provide a summary of two recent conversations we had with them in his remarks. Now I'll l turn it over to Chuck, for a brief run-down on our financial performance and balance sheet positions.

Thanks, Jay and welcome, everybody. Jay made the point that we have made a lot of progress in the third quarter in reducing our exposure to potentially volatile liabilities. In our third-quarter financial reporting, you can see the impact of the cash payments we made for commutations that we announced on the second-quarter call, and you can observe that we've increased reserves for CMBS, in part reflecting higher estimated costs to commute and higher probabilities of commutation. But you won't see the full impact on PAR outstanding of agreements reached in the quarter, and more importantly, you won't ever see the potential future volatility associated with the deals that we've commuted, which we believe is the most significant outcome. This is the reason that we feel pretty good about our results in the third quarter.

I'll now walk through those results on a GAAP basis and then discuss in more detail our adjusted pretax income results, and then touch on statutory accounting. I'll finish up discussing our liquidity and capital positions, and then Jay and I will attempt to answer your questions. GAAP net income for the quarter was $444 million, compared to a loss of $213 million in the third quarter of 2010. As it has for most of the part four years, the mark-to-market on insured credit derivatives drove the quarterly GAAP result.

Swap spreads on MBIA Corp increased considerably, and ended the third quarter at levels near those of year-end 2010. The paradoxical result of this was a $776 million positive change in the mark-to-market on our derivative liability. In the third quarter last year, swap spreads narrowed and the mark-to-market was therefore more than $1 billion to the negative. This volatility is a primary reason why we believe our GAAP net income doesn't properly reflect the economics of this business. We think that adjusted pretax income, a non-GAAP measure, presents a clearer picture of our results of operations. It reflects a loss of $430 million in the third quarter of 2011, compared to a loss of $24 million in the third quarter of 2010. For the nine months of 2011, adjusted pretax loss was $244 million, versus an adjusted pretax loss of $66 million in the first nine months of 2010. The losses in this year's third quarter and the year-to-date period are driven by the results in our structured finance and international segment, primarily in our MBIA Insurance Corp subsidiary.

Now, I'll go through the segments in more detail. The public finance insurance segment had adjusted pretax income of $157 million in the quarter, compared to $167 million in the third quarter last year. Both of these periods had one-time items that boost their pretax income over run rate. Last year, the segment benefited from $45 million of realized capital gains from investment sales, compared to only $5 million this year. And then this year's third quarter, the segment had $78 million of refunded premium, compared to only $18 million in last year's third quarter. This is primarily due to a refinement of our process for identifying refunded transactions. Net of accelerated DAC amortization on the refunded policies, this activity added $67 million to the segment's pretax income.

In addition to identifying policies that had been refunded but had not been reported to us as such, we also corrected the allocation of refunded premiums between our insurance subsidiaries, MBIA Corp and National. Where we identified insured bonds that had been refinanced or defeased prior to the effective date of transformation, January 1, 2009, we've now transferred the premium income and the cash back to MBIA Insurance Corp where it belongs.

Because all of these policies are on municipal bonds, there's no transfer between the public and structured reporting segments, but when you look at our legal entity financials, you'll see the reallocation of premium and its effect on earnings. For example, National's pretax income this quarter on a legal entity basis is $132 million, versus the $157 million of earnings for the US public finance insurance segment. Other than this effect, National public finance and the public finance segment performed in line with expectations for the quarter, and continue to generate substantial capital from operations.

The structured finance and international segment, primarily conducted in MBIA Insurance Corp, had an adjusted pretax loss of $556 million in the third quarter, compared to a loss of $6 million in 2010's third quarter. The driver is insured loss activity, and that is heavily impacted by our substantial commutation experience. Specifically, we increased our loss estimates for CMBS by $497 million in the quarter. We estimate reserves for our commercial real estate exposures by assigning probabilities across scenarios using four approaches.

Three approaches are driven by loan level performance, delinquency status or default studies. The fourth approach involves estimating the cost to commute the transactions. Most of the increase in incurred loss this quarter is due to higher estimated costs embedded in this fourth approach, and higher probabilities assigned to the commutation scenarios. A small part of the increase in reserves is due to actual deterioration in a handful of transactions and increasing the probability of a double dip recession in our loan level performance-driven scenarios. CMBS continues to be the most potentially volatile part of our portfolio, and the cumulative incurred loss to date in this sector is $2 billion.

We've reduced loss estimates for ABS CDOs by $22 million this quarter, reflecting the impact of expected prolonged low short-term interest rates. The cumulative incurred loss in this book for both CDS and policies written as financial guarantees is $2.7 billion. On second lien RMBS, we had an increase of $44 million, a small adjustment on the cumulative incurred loss of $2.5 billion. In this quarter, second lien delinquencies did not decline as much as we had previously projected. Now, most of the cash payments that we have made have been associated with ineligible loans in the second lien portfolio. Such payments, net of recoveries in the quarter, were $195 million, compared to $226 million in the second quarter, and compared to $330 million in the third quarter last year. Payments for second lien transactions continued to trend lower and continued to be somewhat below the model payments in our loss reserve calculation.

We also had an increase in estimated losses of $109 million in our first lien RMBS book. The increase is primarily associated with the 2004 to 2007 vintage transactions and is concentrated in a half dozen domestic Alt-A deals that are in these vintages. We're seeing higher loss severities here, compared to our previous estimates, and this may be related to servicer advances while the foreclosure pipeline was back logged. Our total first lien portfolio is approximately $7.3 billion in outstanding PAR, and includes $2.7 billion of the 2004 to 2007 domestic Alt-A deals, and $3.3 billion of sub-prime backed deals and then $1.3 billion, which is primarily non-US first lien. The Alt-A part of the portfolio has had, by far, the highest volatility.

Our advisory services segment had a $1 million pretax loss in the quarter. While our investment performance continues to be strong as Jay has noted, we did incur additional expenses to strengthen our marketing and distribution. At the same time, proprietary assets under management fell, due to commutations and claims payments in MBIA and the run-off of our wind-down portfolios. The corporate segment had adjusted pretax loss of $21 million in the quarter, which is pretty close to its run rate. Our wind-down operations had a pretax loss of $9 million in the third quarter, substantially lower than in the last two quarters. The driver here was a mark-to-market gain on Euro-denominated liabilities, which basically reversed the losses that we observed in the first and second quarters of 2011.

Moving on to the balance sheet, National's statutory capital grew to $2.6 billion in the quarter, and its liquidity continues to be adequate against all expected claims with a substantial cushion for adverse experience. MBIA Corp's balance sheet at September 30 showed $2.6 billion of statutory capital, comprising $1.29 billion of surplus and $1.36 billion of contingency reserves. We requested, and the New York State Department of Financial Services approved, a release of contingency reserves equal to $318 million in the quarter. On the statutory balance sheet, the put-back receivable at 9/30 was $2.8 billion, which reflects the application of a variety of discount factors to our incurred loss. The volume of ineligible loans in this securitization should allow us to recapture all of our incurred losses as contract claims, and as Jay said earlier, we've paid out over $5 billion in claims on these transactions so far.

The balance of cash, short-term and highly liquid assets within MBIA Corp was $824 million at September 30, compared to $1.1 billion at mid-year. The reduction reflects both regular loss payments and commutations, including some of those which we discussed in our second-quarter call. The balance at 9/30 does not include the costs of commutations agreed in the third quarter but closed after September 30. No payments were made on the secured loan to the ALM business at the holding company in the third quarter and, thus, the balance remained at $600 million at 9/30. We continue to believe that expected cash flows from premiums and investment income, the repayment of the balance of the secured loans, and the asset portfolio provide adequate liquidity to MBIA Corp's expected cash payments with an acceptable cushion. While we expect to continue to engage in commutations of potentially volatile liabilities that do not have current claims, our first priority remains to meet all current claims in the ordinary course and to maintain a cushion. When the mortgage originators honor their contractual obligations to repurchase ineligible loans from the second lien securitizations, or we are awarded damages in court, the Company's long-term liquidity position will be significantly enhanced.

The liquidity position of the ALM segment tightened in the quarter. The ALM business has $3.7 billion of assets at September 30, and essentially that entire asset pool was pledged as collateral against GICs, borrowing arrangements or hedging derivatives. When spreads widen, as they did in the third quarter, as a result of the US downgrade and debt problems in the US and Europe, asset values fall. When that happens, the collateral arrangements consume some of the ALM business's free cash. In the third quarter, that is exactly what happened.

As a result, we requested and the New York Department of Financial Services approved an extension of the secured loan between the ALM segment and MBIA Corp. This facility, you'll recall, originally had $2 billion outstanding in 2008 and 2009. It was at $600 million at September 30 and has at this time been paid down to $300 million. Under the six month extension, the facility can be drawn up to a maximum of $450 million. In addition to this, this facility, the corporate segment within MBIA Inc will make advances to ALM if needed for liquidity management purposes.

So, while our GAAP income statement is positive, adjusted pretax income was negative in the third quarter of 2011. Overall, though, we're satisfied with the strategic progress that has been made. Since 2008, we have commuted $47 billion of exposure, for approximately $2.7 billion. We are confident that this strategy will put the Company in a position to generate solid income and returns in the future, and we'll now be happy to respond to any questions that you may have.

Jackie?

(Operator Instructions). Your first question comes from the line of Arun Kumar with JPMorgan.

Couple of questions for you. One is on the CMBS commutations, could you comment on the quality of the tranches that you commuted? Are these the below-investment grade tranches or are they just the higher-quality ones?

We're commuting across the spectrum.

Okay. Any probability that you could tell us what percentage is below investment grade? I know you listed out the tranches that are below investment grade on the CMBS. Would it be fair to assume that at least a substantial portion of those have been commuted?

Our approach on this is to tell you about commutations as they occur between the end of the quarter and this conference call, to give you some update, up-to-date information. We think it's once a quarter to report the actual breakdown of the remaining exposures, and let you see the differences, the appropriate timeliness. At the end of this quarter, you'll see how much went out of each tranche, each level of tranche, and we do expect that there could be some additional commutations. I should say we do expect additional commutations by the year-end and so you'll see the full picture at that point.

Okay. The other question is related to holding Company cash. I know that the numbers have changed a bit on a quarter-over-quarter comparison and one of the items I noticed was a trade receivable I believe for, what, $45 million or so is no longer in the mix. Chuck, could you comment a bit on that, on the status of the hold-co cash?

It's a trade receivable. Arun, we have an investment strategy at the holding Company that's been managed by Cutwater for us that had about $45 million in it at second quarter. Since then, we've done two things. One is, we've taken that portfolio down by about half. The other thing that we've done is to take it out of our definition of liquid assets. It still exists. But we've sort of defined it out of liquid assets, and at the same time we've been taking it down as there are market opportunities. So liquid assets at the holding company level at 9/30 are right around $200 million.

Okay. I just wanted to jump to the ALM business. You had to post collateral. You delayed the repayment, not delayed, you renegotiated the payment of the inter-company loan to sometime the middle of 2012. Given the state of the markets, based on RMBS, CMBS and the other markets that the holdings of the ALM business represent, when do you expect the turnaround in that asset pool in terms of the maturities and also in terms of the quality?

Well, again, what we've done is to extend the maturity of the secured loan for six months, which would take it out to May 2012. Now, between now and May 2012, a lot of things are likely to happen. We don't know what the combination will be. The Article 78 may be concluded. MBIA and National may both have positive cash flows that give us capital markets access. We could have collected put-back receivables. Asset values of course may rise, facilitating sales in the ALM portfolio that would both add liquidity and remove spread volatility. If none of those things happen, of course ALM will need continued support and we would expect either the holding Company or other affiliates will support and/or we'll request an additional extension of the secured loan.

Thank you. Turning to the discount rate, I note that the discount rate that is used for National and the discount rate that is used for MBIA Insurance Corp. is somewhat different. Could you comment on some of the thought processes that go into that? One was 4.9, versus 5 point something.

In our GAAP reporting, we're using the risk-free rates that are applicable to the terms of the insured transactions that are being discounted. For statutory purposes, it's based on the yield on the investment portfolio in the two books. So the yield investment portfolios are different.

Okay. The last question from my end. In terms of holding Company cash, in terms of getting additional resources or proceeds from any of the operating subs, or from any other source, is there any possibility that $200 million, as it gets depleted over time in debt service and so on, that you will be able to get some dividends up from National or from some other source?

Again, it's our expectation that in the long run, National is the dividend payer. At some point, MBIA Insurance Corp will become a dividend payer, although it has a substantial negative earned surplus at this time. We expect the other businesses to be able to generate dividends. The holding company actually has received dividends from some of the smaller service-oriented subsidiaries over the past couple of years totaling maybe $20 million and we would expect that trend to -- I take that back. Totaling about $70 million or $80 million. And we would expect that trend to continue in the future.

The biggest single potential source of dividends is from National. After the article 78 process is completed, we'll start to think about that. The thing that has to be balanced is the desire to maintain a very strong capital base within National. And I should point out, Arun, that a holding Company also holds a tax escrow account, that holds at this point about $190 million of assets that start to be freed up to the holding Company, starting in 2013, assuming that we don't have catastrophic insurance losses within National.

Okay. Just the last question. I think Jay commented on this earlier. You talked about Article 78 may be coming to trial either in February or March, if it does go to trial. Reading between the lines, you seem to be fairly at least -- expectation is that you will not go to trial and you'll reach a full settlement or some kind of resolution prior to that. I know this is somewhat speculative on my part but if you care to comment on that.

I think it is somewhat speculative. I remain optimistic that we're going to resolve all the issues, either before trial or at trial. If you look at our track record, we've managed to work with 10 of the 18 original bank plaintiffs and work out a reasonable settlement. As I noted, we're having discussion with most, and I repeat most, but not all, but it's a significant number of the remaining parties. We believe it's within our ability based on prior experience to settle all of the issues before we get to trial. Whether we actually achieve that, as you say, is speculation but we've had good progress this quarter and we expect to have some more progress before the fourth quarter is over.

Okay. Thank you. Go ahead.

Arun and Jay, is that even if there aren't settlements with all the plaintiffs, a trial is not required in the Article 78 process. So the judge could actually rule on the papers that will be submitted over the next several weeks.

Just a last thing. Again, you mentioned in terms of the claims that you paid out of the recoveries that you booked, I think it was $2.8 billion of the recovery and over $5 billion of payouts, that you expect to receive a substantial amount of the recoveries over and above -- even over and above the $2.8 billion. That being said, could you be booking additional reserves based on a review of those outstanding issues with the counterparties? And lastly, based on the claims payment that you're making on a quarterly basis, at what point do -- you would feel the need to settle some of the recoveries or to slow down the payments that you're making to the various parties involved?

You've got a couple questions there. In terms of the -- what we've booked every quarter, we reassess that. We want to continue to make sure that the amount that's on the balance sheet represents the minimum amount that we expect to recover. Obviously, we could use different scenarios or probabilities and raise those numbers. We don't think that's appropriate at this time. We've only had one party settle early on, before we got into a lawsuit. We are, and have had discussions with some of the other parties. Obviously, litigation has some risks and if somebody were to meet with us at a number that made sense to us, that would assist us in our liquidity and allow us to deal with the remaining commutations, that's certainly something we would entertain, and have entertained in terms of discussions. At this point in time, obviously nothing significant has happened on that front, and when it does, you'll hear about it in our next quarterly call.

Okay. Fair enough. Thank you.

Your next question comes from the line of Mike Johnson with Dupree Financial.

Good morning, guys. Had a question on the CMBS. What are you seeing as the current situation and what's your view in the CMBS market currently?

I think at this point -- first of all, I'm Anthony McKiernan. I'm the Chief Portfolio Officer for MBIA. At this point, given by the reserve increases we've had this quarter, which primarily was driven by our increased views of commutations and prices, we do feel that we're going to have an opportunity to exit these exposures and eliminate the future volatility.

That case -- that being the case, based on market conditions today what we're seeing is a substantial amount of modification activity in the marketplace at this point, especially on what I'll call trophy or very high loan amount properties. We're encouraged by that. That obviously is to some degree offset by the continuing delinquency trends in the marketplace.

The liquidation time lines have certainly been drawn out in commercial real estate, so at this point we think that the market is positioning itself for a time when liquidity will start returning in a better way to the market. We think there's a lot of liquidity potential out there, but we remain concerned about the exposures that are primarily original BBB-rated CMBS. That's our primary concern, and that's where we're looking to reduce our exposures where we can.

Okay. And on the $497 million that you increased the estimated economic losses on the CMBS, how much of that was due to the deterioration in the market?

I would say that only a small portion is really attributable to deterioration in the market. Most of our increase in reserves is related to commutation pricing expectation and increasing the probability of commutation.

Okay. All right.

One other question. This is Logan foster with Dupree Financial. I would just like to get any comments that you've got pertaining to your bonds. Specifically, the bonds at 2022, 2025, any issues concerns that we should know about as far as interest payments and/or principal payments on those? Just makes me feel better to ask it.

Those are bonds issued by the holding company. We believe that the holding company has adequate liquidity against all the upcoming interest payments on those bonds. As you point out, the next principal payments are in 2022 and beyond, and the holding Company has more than enough assets to ensure that it can retire those bonds when the time comes.

Specifically on the day of Birmingham's announcement, that would be a good answer. Thank you very much. You all didn't have any problems with those, did you?

We do have some exposure to the county, both at the GL level, about $90 million-something, and less than $1 million of exposure to the sewer district. We had taken into consideration the probability of the events that we're now seeing unfold when we set reserves in the third quarter. So we don't expect that there are any surprises there.

Thank you very much.

(Operator Instructions). Your next question comes from the line of Phil Giordano with Deutsche Bank.

Good morning. Thank you for taking my question. Most have been answered. Just had a quick question with regard to the rep and warranty lawsuit. Obviously, October 5th was pretty important and favorable, the ruling there. Just curious as to what kind of the next milestones in that case are and to the extent that there is no settlement ultimately with Bank of America-Countrywide, when do you expect that to get wrapped up and go to court?

Where we are right now, the oral arguments that were heard on October 5th, one was decided, which had to do with the consolidation of success reliability issues between Bank of America and Countrywide. That was decided in our favor. We're still waiting on the loss causation ruling in terms of how the judge determines that. To a certain extent, that will dictate how we approach the trial in terms of how we would put the different evidence together and how we would put our case before the judge. The judge has indicated that she would like to have certain rulings decided by the appeal court before we go to trial, so it's a little bit uncertain. If that process were to go smoothly, and on an expedited basis and we'd seen the Court of Appeals handle some of these issues on an expedited basis, we still could see ourselves in a trial by the end of next year.

Okay. That's very helpful. And on the fraudulent conveyance lawsuit, obviously you gave an update. There's been a significant amount of banks drop out at this point in time, eight. And I'm sorry, eight remaining. Where is that? Because there was a bit of a setback I believe over the summer.

There's been several different delays. This thing has worked through its process. Where we are right now with the Article 78 case, it is currently scheduled for late February, early March. We will be filing our papers in approximately a week, if I remember right. The banks will then file papers. The judge will then evaluate those papers and decide whether the trial date will hold. We're still anticipating that's a reasonable date. It might slip a little bit. But there's no particular outstanding issues at this point that would cause it to slip -- that I'm aware of, that would call it to slip by a major amount. The other case which is the preliminary action filed by the same eight banks is currently starting through the discovery and deposition phase. That will go on throughout all of next year. At the earliest, that trial would be at the end of the year, perhaps in early 2013. We don't know if that trial will actually if we can settle the Article 78 favorably, then we'll have to see how that trial will actually proceed.

Okay. Great. That's very helpful. And I guess just one more question. And you've mostly answered it before. On the commutations that happened after quarter-end, you commented that it was across the spectrum in terms of credit rating. Can you comment as to whether those were all domestic CMBS or are there some foreign there as well?

Vast majority was --

Vast majority was domestic.

Was domestic, but there was a couple international transactions in the mix.

Okay. Great. That's all I have. Thank you very much.

Your next question comes from the line of Jonathan Carmel with Carmel Asset Management.

Hi. Sorry about that. Let's see. I believe you answered most of my questions. One, I do have for you. Are you actually seeing claims on your CMBS portfolio?

No.

No. At this point we've only paid basically commutation payments.

Okay. So no claims have come through yet?

To be 100% accurate, we've had I believe less than $1 million in claims, which were subsequently repaid in the following month.

Okay. That was my question. Thank you.

Thank you. This concludes the formal Q&A session of today's call. At this time I would like to turn the floor back over to Mr. Greg Diamond for any additional or closing remarks.

Thank you, Jackie and thanks to all of you who have joined us for today's call. Please contact me directly if you have any additional questions, I can be reached and 914-765-3190. We also recommend that you visit our website for additional information. The address for our website is MBIA.com. Thank you for your interest in MBIA. Good day and good-bye.

Thank you. This concludes today's conference call. You may now disconnect.