MBIA Inc. (MBI) Q4 2012 Earnings Report, Transcript and Summary

Good morning, and welcome to MBIA Inc.'s Fourth Quarter 2012 Financial Results Conference Call. [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 the release of our financial results for the fourth quarter and full year of 2012. For today's call, Jay Brown and Chuck Chaplin will provide some brief comments, and then we'll hold a question-and-answer session. Yesterday afternoon, after the market closed, we posted several items on our website, including our 2012 10-K and fourth quarter 2012 operating supplement. The information for accessing the recorded replay of today's call is available in the financial results press release that we issued yesterday, which is also posted on our website. Our company's definitive disclosures are incorporated in our SEC filings. Please note that anything said on today's call is qualified by the information provided in the company's 10-K and other SEC filings. The 10-K we filed yesterday also contains information that will not be addressed on today's call. Please read our latest 10-K for our most current and most comprehensive disclosures about the company and our latest financial results and operating results. Also, please refer to our financial results press release that is available on the website for the definitions and reconciliations of the non-GAAP terms that are included in our remarks today. Lastly, here's our Safe Harbor disclosure statement. Our remarks on today's conference call may contain forward-looking statements. Important factors, such as general market conditions and the competitive environment, could cause 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 no longer accurate. And now Jay will make some introductory comments. Jay?

Thanks, Greg, and good morning, everyone. 2012 was a year of slow but steady progress in our efforts to resolve the issues of the past and position your company for the future. Strategically, we are still waiting for a decision in the 4-year-old Article 78 proceeding challenging the New York State Department of Financial Services approval of the creation of National Public Finance Guarantee. I remain confident of the outcome, but will continue to steer clear of predicting the timing. Our effort to position National in the bond insurance marketplace has to get over 3 hurdles: the transformation litigation, the reduction or retirement of the intercompany facilities, and the achievement of high, stable ratings. I believe that the Article 78 decision, when it comes, will go a long way towards meeting that first objective. The transformation litigation originally a challenge by a group of 18 banks against our 2009 restructuring has now largely been reduced to a lever in our ongoing dispute with Bank of America in its countrywide subsidiary over their mortgage putback obligations. We believe this will come to a head in the near future as well since our litigation against them is well advanced. Summary judgment motion hearings on primary and successor liability issues took place in December and in January, and we expect the decisions within the next few months. Our already high degree of confidence in the eventual or the ultimate outcome of this litigation was bolstered by the recent ruling by the U.S. District Judge, Jed Rakoff, that Flagstar Bank had materially breached contracts, specifying the quality and characteristic of loans to be packaged into securities insured by Assured Guaranty. Flagstar was ordered to reimburse Assured Guaranty for virtually 100% of their incurred losses plus interest and expenses. We continue to expect rulings in our recovery litigations will substantially reimburse our damages, which in the case of Bank of America run to nearly $5 billion. On the other hand, there will be pressure on us too. Bank of America is a policyholder on substantial CMBS exposures. Although these transactions were structured with deductibles, those deductibles continue to be eroded, resulting in increasing probability of potential claims being presented to MBIA Corp. in the near future. We will continue to be motivated to reach a negotiated settlement because of the potential disruption and loss of value that would be triggered by a regulatory proceeding against MBIA Corp. In addition, I believe that Bank of America will also be motivated to achieve a settlement in order to avoid having their CMBS claims substantially diluted and delayed. Settlements occur when the perceived economic values converge. And there are substantial drivers that we think should suggest such a convergence. However, if that is wrong, both companies will be damaged as a consequence. Moreover, as I've said in the past, we will not accept a noneconomic settlement. Over the course of 2012, we have also taken steps to stabilize and strengthen MBIA Inc. In the first 3 quarters of the year, we sold nearly $1 billion of spread-sensitive assets into favorable markets and unwound their related derivatives. That produced a more solid holding company and liquidity position. During the fourth quarter, we successfully amended our holding company debt indentures so that any regulatory action against MBIA Corp. would not create an acceleration of debt at the holding company. These amendments are positive for bondholders and had no cost to policyholders. Also in the fourth quarter, we agreed on a commutation with one of our CDS counterparties, where ultimately, we were unable to get regulatory approval for the deal or for a financing mechanism. We will continue to work with this counterparty and other counterparties to remove potentially volatile CDS-type contracts from our book of business. And as we stated 5 years ago, we will not write such business in the future. I would also like to address 2 questions we received from several investors last night. First, due to confidentiality agreements, we cannot disclose which counterparty we had negotiated a commutation with late last year. We have significant volatility associated with derivative contracts with 3 or 4 counterparties which we are focused in trying to reach mutual agreement settlement terms. Bank of America and Soc Gen are 2 of the 4 counterparties. Second, because the discussions between these different counterparties are ongoing, we will not comment or speculate on why the New York Department of Financial Services has not approved the commutation I mentioned earlier. Therefore, to conclude in 2012, we substantially reduced risk at the holding company level and made meaningful progress in stabilizing MBIA Corp. through additional commutation of insured exposures. But there is no doubt that we are faced with a number of uncertainties in the near term in our various litigation matters, as well as with regard to the significant risk of an MBIA Corp. regulatory proceeding. I am confident that while justice has been delayed, it will not ultimately be denied. Therefore, we have our vision fixed on a future where MBIA Corp. exhibits significantly less volatility, and National can reenter the municipal bond insurance marketplace. We will, finally after many years, be able to stop the decline in our Adjusted Book Value and begin to grow the company again for the benefit of our owners. The path forward is very likely to become much clearer over the next few months. Now Chuck will take you through our financial results.

Thank you, Jay. I'll now take a minute or so on our full year results and then focus in more specifically on the fourth quarter. For the full year 2012, our net income was $1.2 billion, driven by a $1.5 billion pretax decrease in the fair value of insured credit derivatives. For a comparison, 2011 net loss was $1.3 billion, driven by $2.8 billion of pretax increase in derivative values. The swing is due to the changing perspectives on MBIA Corp.'s credit quality, as reflected in the cost of protection on the company and the impact of commutations. We consider these swings and derivative values that drive this volatility to be largely noneconomic. We also report on certain non-GAAP measures of performance and value creation: adjusted pretax income and Adjusted Book Value. These are the measures used by management in making strategic and tactical decisions about the company. For the full year 2012, we had an adjusted pretax loss of $708 million versus a loss of $497 million in 2011. By way of attribution, in 2012, our consolidated revenues were about $80 million lower than last year's, and insurance incurred losses and operating expenses were each about $80 million higher. Adjusted Book Value was $30.68 per share at year-end 2012 versus $34.50 per year at year-end 2011, reflecting the same impact. Despite this disappointing financial performance, we believe we've made meaningful strides in our risk reduction efforts, as Jay has mentioned. We eliminated $13.4 billion of potentially volatile exposures in MBIA Corp.'s insured portfolio for approximately $470 million in commutation payments. And we improved the stability at our holding company due to the sale of spread-sensitive assets and the amendment of the holding company debt indentures. Looking at the fourth quarter at the consolidated level, we had GAAP net income of $636 million compared to a net loss of $626 million in the fourth quarter of 2011. Again, that swing was driven by changes in the mark-to-market on insured credit derivatives. Adjusted pretax income in the fourth quarter of 2012 was $110 million compared to an adjusted pretax loss of $252 million last year. The Q4 result was the first positive earnings quarter since the second quarter of 2011. Adjusted Book Value also improved $0.04 per share from its September 30 level to $30.68 a share. Now I'll go through the businesses and discuss their results for the fourth quarter in terms of adjusted pretax income and also make some comments about their balance sheets where it is relevant. The public finance segment's pretax income was $202 million in the fourth quarter compared to $163 million in 2011. Premium was $122 million compared to $113 million last year as a result of substantial refunded premium. This accelerated premium recognition was at a high level all year, accounting for more than half of our premium revenue. The elevated refunding level continued into the first couple of months of 2013 as well. Incurred losses on insured exposures totaled $6 million in the quarter primarily due to loss adjustment expenses. We continue to expect that state and municipal credits will experience heightened stress over the next couple of years as local governments work to balance their budgets and deal with postretirement employee benefit obligations. National's operating expenses were $23 million lower in the fourth quarter of 2012 compared to the fourth quarter of 2011, driven by lower compensation expense. National's statutory capital grew to $3.2 billion, and its claims-paying resources stood at $5.7 billion at year-end 2012. Most of the difference between stat capital and claims-paying resources here is made up of premium resources. Also, the company made a total of $170 million of payments of estimated 2012 income tax under our tax sharing agreement. Those payments will remain at an escrow account at MBIA Inc. until the expiration of National's 2-year carryback period. If, as we expect, National does not have catastrophic losses during that time, the funds are expected to be released to the holding company. In addition, National has capacity under regulatory formulae to pay dividends to the holding company, and we expect National to start paying dividends in 2013. The structured finance and international segment, largely comprising MBIA Insurance Corp., had an adjusted pretax loss of $13 million in the fourth quarter of 2012 compared to a loss of $300 million in the fourth quarter of 2011. The most significant change is in insured incurred losses. They were $38 million in the fourth quarter this year versus $309 million in last year's fourth quarter. The expected recoveries on putback collection actions increased by $335 million to a total balance of $3.6 billion at year-end 2012. The increase primarily represents our estimate of improved collectibility as a result of the progress of our litigations and other factors. Our incurred losses on these policies are approximately $5.3 billion. On the other hand, we increased the estimated losses on CMBS pools by $309 million, reflecting adjustments in estimated commutation prices. We reduced reserves for ABS CDOs in the fourth quarter by $64 million, driven primarily by a lower forward LIBOR curve. And our first-lien RMBS portfolio had a $42 million increase in incurred loss, resulting from higher severities upon property liquidation. Most of our exposure to second-lien RMBS and the majority of the most volatile CMBS pools are associated with Bank of America and its subsidiaries. As Jay has mentioned, we believe that a comprehensive settlement of these exposures is the most likely outcome. So we do take settlement into account in setting reserves for these exposures. MBIA Corp.'s statutory capital stood at $1.5 billion at year-end 2012 and claims-paying resources were $5.3 billion. The difference between these 2 measures is split pretty evenly between premium resources and its net salvage reserve, which is largely driven by expected collections of putback. MBIA Corp.'s liquidity position poses a significant risk to the company given the increased likelihood of significant CMBS claims in the near term. We ended the year with $345 million in liquid assets in MBIA Corp. Now while we expect that, that position plus premiums and investment income expected in 2013 would leave the company with a liquidity cushion at year-end 2013, that expectation depends upon a timely comprehensive settlement of our putback claims and commutation of CMBS policies with Bank of America. There are no claims on those CMBS policies at this time, and there have been no claims, but given the pace of erosion of their deductibles, we believe that BofA will be able to assert claims in the near future. In addition, the total amount of such claims could, in time, exhaust the company's liquid assets in the absence of putback collections. As Jay has said, if the regulator intervenes, the result is likely to be adverse to both MBIA and Bank of America. And given the negative consequences for both parties, we believe that the most likely outcome is a settlement ahead of regulatory intervention. Obviously, we have not come to agreement at this time and we do not alone control the timing of any settlement. As a result, there is substantial doubt about MBIA Corp.'s ability to continue as a going concern. While we believe that the risk of a regulatory proceeding is significant, we do not believe that it is probable. It is important to note that we also do not believe that a regulatory proceeding against MBIA Corp. would impair the going concern status of MBIA Inc., National or Cutwater. These views are also reflected in our auditor's opinion. The potential impact on the consolidated group of any MBIA Corp. proceeding are summarized and summarized in great detail in Footnote 1 to the MBIA Inc. financial statement. Finally, with respect to MBIA Corp., our request to pay interest on the Surplus Notes was denied in January. Moving on now to our noninsurance activities. The advisory segment which contains Cutwater Asset Management had $1 million of pretax income in the quarter, reducing our full year pretax loss to $5 million. Cutwater's assets under management from proprietary accounts and money market products has declined faster than long-term third-party accounts have grown, but we did have some meaningful wins in 2012 with both new and existing third-party accounts. The wind-down portfolio had a pretax loss in the quarter of $51 million compared to a loss of $161 million in Q4 2011. The change in the mark-to-market on hybrid liabilities and lower intercompany fees paid were the drivers of this improvement. The fourth quarter of 2012 included $25 million of intercompany fees paid, which we do not expect to be recurring, while last year's included $65 million of such expense. Excluding these expenses in Q4, wind-down performed basically in line with expectation. The Corporate segment had a pretax loss of $13 million compared to a gain of $41 million in last year's fourth quarter. The swing is due largely to the difference in those intercompany fees received from the wind-down portfolio. Otherwise, it, too, basically performed in line with expectations. Most of the wind-down operations and the Corporate segment's operations are conducted in our holding company, MBIA Inc. At December 31, 2012, the legal entity, MBIA Inc., cut $239 million of liquid assets compared to $432 million at September 30. The decline was largely due to repurchases of the holding company's senior debt on a reverse inquiry basis of approximately $172 million. In January of 2013, $125 million was released from the tax escrow account called for in the MBIA group tax sharing agreement, which increases the holding company liquidity. Perhaps the most significant events in the fourth quarter for MBIA Inc. was the successful consent solicitation to amend the terms of the senior debt indentures in order to, among other things, help ensure the stability of the holding company and the rest of the company structure in the event of a regulatory proceeding affecting MBIA Corp. As I'm sure you're all aware, in addition to a lawsuit alleging our interference with -- their interference with the consent solicitation, Bank of America has issued a notice of an event of default which we view as invalid. We expect that the lawsuit and the notice of default will be dismissed or found to be without merit or resolve along with all other disputes with BofA. All in all, the fourth quarter of 2012 featured a modest pretax gain and a reduction in risk at the holding company level. We believe that the next few quarters will provide the answers to the strategic questions that we're all asking. Now, with apologies for any questions you may ask that we cannot answer as a result of litigation, we would happy to respond to any questions that you may have.

[Operator Instructions] Your first question comes from the line of Arun Kumar with JPMorgan. Brett G. Gibson - JP Morgan Chase & Co, Research Division: This is Brett Gibson in for Arun. Just a couple of questions for you. So you mentioned that there was an increased likelihood of CMBS claim payments in the near future. Can you quantify the timing of this for us in anyway?

It's virtually impossible for us to make projections on the timing of CMBS payments. So no, I can't be any more specific than that. Brett G. Gibson - JP Morgan Chase & Co, Research Division: Okay. And as another way to think about it, in your 10-Q -- 10-K, you talked about the low end of the deductible range for the BBB and below transactions being at 10.5% versus 14.8% last quarter. Is kind of a 4% to 5% run rate a good way to think about that, implying kind of third quarter? Or is there something that we should be thinking about that would cause that to be nonlinear?

The range of deductible erosions that we've observed quarter-over-quarter and month-over-month is very, very wide. And thus, Brett, we're just so reluctant to make any kind of a projection. We don't think that looking at the third quarter or looking at the fourth quarter or looking at the second quarter really provides any guidepost for what to think about the first quarter. Brett G. Gibson - JP Morgan Chase & Co, Research Division: Okay, fair enough. Then, there's been a number of comments, I think, from you on the increased involvement from the regulator. One of the comments, I think, that was interesting from your prepared remarks was that you said that a regulatory proceeding, in your view, was not probable. Can you comment on whether that view of yours includes only a view of the rehabilitation or liquidation proceeding or if it also include the stop payment order?

Our view is that the -- that both MBIA and Bank of America are both advantaged by entering into a comprehensive settlement in advance of any regulatory intervention. So we're not differentiating. Brett G. Gibson - JP Morgan Chase & Co, Research Division: Okay. So just to be clear, that does -- that includes a stop payment order in -- your comment refers to a stop payment order as well?

Yes, correct. Brett G. Gibson - JP Morgan Chase & Co, Research Division: Okay, very good. And then if something were to happen, whether it's a rehabilitation order or a stop payment order, can you comment on the status of the secured loan? How would that be treated if there were something to happen?

I guess, I would direct you on that to the -- to Footnote 1 in the financial statements, where we comment specifically about all the potential impacts. Brett G. Gibson - JP Morgan Chase & Co, Research Division: Okay. And then I guess, just maybe one question to round out or -- excuse me, sorry, one more on the regulatory involvement. Can you comment on your willingness or the potential likelihood of you potentially downstreaming capital into the operating company, the Corp. entity, as a way to facilitate a commutation agreement? For example, the $115 -- I was just going to say the $115 million tax escrow payment that you received in the first quarter, has there been any discussion or thought around downstreaming that to the operating entity as a way to facilitate these commutation agreements?

If you look at all the resources of MBIA Inc. and its subsidiaries as we're evaluating the strategic decisions we're making and we view commutations as strategic decisions, we believe that our shareholders are best served by maintaining flexibility. For that reason, it is better to have excess funds sitting at the holding company so they could be used in the most advantageous way. That said, we discuss a variety of different approaches with each of the 3 or 4 counterparties that remain as we're trying to resolve these issues. And that's as far as I can go in terms of making any comments at this time. Brett G. Gibson - JP Morgan Chase & Co, Research Division: Okay. And then my last question, it seems that there's been a pretty substantial change around the disclosures of the ALM and the wind-down business. Can you just square a few numbers for us in terms of -- maybe can you let us know what the ALM Adjusted Book Value deficit was at the asset liability business at the end of the year and how much of that related to unrealized losses?

Sure, a couple of comments. We have changed the way that we're presenting the activities of the holding company. Over the past, I guess, few quarters, we've been sort of in an evolution. The -- you know, Brett, that the ALM portfolio conducted at the holding company level and that there isn't -- there is no legal distinction between the Corporate activities and the ALM activities. For a long time, we maintained separate metrics on the ALM activities because it was our objective to manage them separately as a stand-alone business. After the events of the financial crisis and recession, where we were required to liquidate a substantial amount of the assets of ALM in order to meet the liabilities that were put to us or had to be collateralized, and that portfolio went from being a matched book to a very unmatched book. It became clear that it's not a stand-alone entity anymore. It's a part of our holding company activities. And therefore, we need to start to think about and to portray to investors what the holding company overall looks like. So that's kind of the backdrop behind what we had -- the changes that we've made to the disclosure. The book value deficit -- the so-called book value deficit that we'd provided for ALM in the past did increase in the fourth quarter. I don't have the exact number, but you can look at the after-tax income -- the after-tax loss of the entity as a component of that. There's an unrealized loss embedded in that. It's small. I want to say $10 million. It is a loss on the hybrid liabilities that were issued as part of the ALM business. So we're marking those liabilities based on the credit default swap -- among other things, the credit default swap of MBIA Inc., which tightened in the quarter. So we did have some unrealized loss associated with that. With respect to invested assets, again, we don't break them out, holding company versus ALM, any longer. But in general, the trend has been toward lower and lower unrealized loss over the course of 2012. Brett G. Gibson - JP Morgan Chase & Co, Research Division: Okay. And just one very quick follow-up on this, if you look at Page 12 of the supplement, where you discussed Adjusted Book Value on a per-share basis, it looks like for the wind-down operations, there is a pretty significant reduction there now, $3.43 per share versus kind of $2.07 last quarter. It seems like that's a much larger difference than the adjusted pretax loss. Can you comment on the disparity between those 2?

I'm just looking for it. It's on Page 12? Brett G. Gibson - JP Morgan Chase & Co, Research Division: Yes.

Of the supplement -- why don't we go to another question and we'll get back to you in a moment on that?

Your next question comes from the line of Max Scherr of Panning Capital.

It's actually Sean Murdock at Panning Capital. My question relates to the risk factor you detail on Page 36 and the further risk of a MBIA Corp. rehabilitation or a stop payment, generating the acceleration of liabilities at MBIA Inc. In particular, I'm curious as to the quantity of liabilities you referenced there on Page 36 that potentially accelerate, similar to the provisions you amended in the holding company bonds. How many of the investment agreements accelerate, should MBIA Crop. be subject to a rehab proceeding? And similar question on the MTNs issued by GFL and Meridian.

Sure. I would -- I know that there's a general description of this in the risk factors in the first part of the 10-K. For a more specific discussion of it, I would direct you to Footnote 1, which -- this comes up on Page 127. But to answer your question, the guaranteed investment contracts at the holding company, which are about $1 billion at this point, would all be -- they could all be put to us in the event of a proceeding. Now all of those guaranteed investment contracts are currently collateralized with high-quality and highly liquid assets. So we -- there is some exposure there to be sure, but we think that it's relatively small. The holding company unsecured debt is not accelerate-able as a result of an MBIA Corp. proceeding. And that was the subject of the amendment that we made to the indentures back in November. The amount that's outstanding is over $700 million.

Yes, but the MTNs?

Yes. The MTNs issued by Global Funding are about $1.5 billion outstanding at this point. They can be accelerated, and this is described on Page 127. They can be accelerated upon a proceeding. They accelerate against MBIA Global Funding. So to the extent that Global Funding does not pay the accelerated amount, the MTN holders would have a claim against MBIA Corp., the entity which would -- in your scenario, would be in a proceeding. So they would be added to the group of claimants against Corp.

And should Corp. fail to make that accelerated payment, I believe that there's an intercompany loan where Inc. is the obligor that sort of doesn't directly collateralize that obligation but serves as your secondary source of repayment beyond the insurance policy. If that insurance policy were -- payment were not made, would the loan accelerate?

No.

It would not?

No.

So as a creditor of -- a holder of those bonds, how do I access the value from the intercompany loan?

Well, the intercompany loan pays for -- calls for periodic payments of P&I, and they would continue to be made.

Okay. So I wouldn't have a claim on it for the accelerated principal, but I would be looking for them to make interest payments and then should those not be made...?

Yes.

I would then maybe have the rally [ph]. And then the next question is around the tax sharing escrow, $445 million, where would one find that on Inc.'s separate balance sheet -- this is Page 243 of the K? What line item in the assets would include that $445 million?

It's going to be in fixed maturity, securities held as available for sale, as well as cash and cash equivalents. And there is some in short-term investments held as available for sale as well. So it's -- there's kind of a portfolio of assets within the tax escrow. So it's spread across those accounts there.

Okay. And does your tax sharing agreement give rise to payments from the holding company to MBIA Corp. as Corp. generates losses that shield the taxable income National is generating?

Over time, as Corp. has income, it will benefit from its current net operating loss carryforward.

But the extent losses at Corp. shield taxable income at National and it's sort of -- for illustrative purposes, a wash at Inc. Does Corp. make payments to Inc.? And has it -- under the tax sharing agreement, is it a 2-way payment stream?

I'll give you an example. In 2010, we had the ability to carry back losses to prior periods where taxes had been paid. This was in connection with the stimulus bill. And we did. And the company got a consolidated benefit from that of between $400 million and $500 million. About half of that was paid back to Corp. to reimburse it for taxes that it had paid in kind of the 2007 and '08 -- or '06 and '07 period. So whatever the first 2 years were of the carryback period. Corp. had paid taxes in that period and got a reimbursement of them. So yes, it is 2-way.

But specifically, if they generate losses that shield income for other income-generating members of your Corporate family and parties to the tax sharing agreement, are they paid for those as they generate them?

No, no. They're not.

Your next question comes from the line of Andrew Thau with GMP Securities.

I had another question about the intercompany loan between Global Funding and holdco. You mentioned principal and interest being due periodically. Are the -- what's the schedule for the principal payments? Is it due -- is it tied to the original expected maturity of the medium-term notes?

They are, yes.

Okay. And then also, I was wondering if you could speak to some of the exposure on the modeling -- on the municipal bond side to places like Detroit, which may be headed for a Chapter 9?

Sure. Is there any specific...

Well, how do you think about how some of those issues are going to be resolved if you -- I mean, if you think it's headed for a Chapter 9 or what sort of time frame?

I mean, we don't have a specific comment about where Detroit is. Obviously, we're in communication with them. And I think beyond that, I can't -- I couldn't comment.

Your next question comes from the line of John McGreevy with Prosiris Capital.

Most of my questions have been answered, but let me ask a few quick follow-ups. I think when you talk about the liquidity for the year and that being adequate subject to a settlement, you're implying that absent a settlement, you do not expect liquidity to be adequate this year largely due to CMBS claims. Is that correct?

If there were no settlement and CMBS claims were presented on the BofA-related CMBS policies that we have in the volume that we would sort of expect, it would, in time, exhaust Corp.'s liquidity.

But is -- does "in time" mean 2013 since that's what you're talking about when you're talking about the going concern?

I think the difficulty here is, it goes back to the question of timing of CMBS claims and whether, in fact, all of those claims we view as valid under the contracts. So first, we have to look through that process. The second part of it is -- I think the important statement is the claims -- we recognize that their potential claims, it would exceed all of the available liquidity of MBIA Corp. I can't determine if that would happen in 2013, but it certainly would happen in 2014. So it's -- what we've tried to do is identify that risk, make it clear to investors that absent a settlement and assuming there are claims of the volume that we foresee and those claims are valid, that it would exhaust the resources of MBIA Corp. Ergo, that is why we believe if that were to continue down that particular train, that the regulator would interfere on behalf of other policyholders to determine what's the best way to handle any and all claims that MBIA Corp. might have, including pursuing any of the assets that MBIA Corp. has, and which, obviously, the biggest asset that MBIA Corp. has at this time is its various putback claims. And so it's not that we're trying to say it's an event that will necessarily happen in 2013, but it's an event that we think is certain will happen absent a settlement.

Okay. And one other question about the consent-solicitation-related litigation, what's your view on the timing to resolve or dispose of those matters?

I think Jay said it best at the very beginning of his prepared remarks. The litigation timetables are frankly less predictable than CMBS deductible erosions.

Right. But to the extent that those litigations bear on the effectiveness of the consent solicitation, doesn't that leave significant risk for MBIA Inc. should some sort of regulatory action be taken?

Say it again because I'm not sure what the regulatory action...

Well, regulatory intervention at rehab or a stop payment order, right, to the extent that, that under the old...

Yes, I understand. We believe the consent -- strongly believe the consent was successfully accomplished and the change was made. We believe that the 2 different actions that have been filed, one by BofA and one by ourselves, are relatively simple questions for the court to answer. And so we believe it would be a quick amount of litigation. It's not a complicated issue. The issue bears -- is very simple in terms of what we did, what they did and then what we did. And I think the court will be able to resolve that very quickly. And so it's just not going to be drawn out for a long time. So I think we would expect that, that the answers to those questions would happen very quickly here in the next few months.

Your next question -- I apologize. The question has been removed. I would now like to turn the floor back over to Mr. Diamond for any additional or closing remarks.

Thank you, Jackie. And thanks to all of you who joined us for today's call. All of the parties that entered the phone question in queue today were -- and stayed in the queue were able to ask questions. If you have any additional questions, please contact me directly. I can be reached at (914) 765-3190. We also recommend that you visit our website at mbia.com for additional information. Thank you for your interest in MBIA. Good day, and goodbye.

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