Good morning and welcome to the MBIA Inc. Fourth Quarter and Full Year 2021 Financial Results Conference Call. I would now like to turn the call over to Greg Diamond, Managing Director of Investor and Media Relations at MBIA. Please go ahead, sir.

Thank you, Ashley. Welcome to MBIA's conference call for a full year and fourth quarter 2021 financial results. After the market closed yesterday, we issued and posted several items on our websites, including our financial results, 10-K, quarterly operating supplement and statutory financial statements for both MBIA Insurance Corporation and National Public Finance Guarantee Corporation. We also posted updates to the listings of our insurance company's insurance portfolios. Regarding today's call, please note that anything said on the call is qualified by the information provided in the company's 10-K and other SEC filings as our company's definitive disclosures are incorporated in those documents. We urge investors to read our 10-K as it contains our most current disclosures about the company and its financial and operating results. The 10-K also contains information that may not be addressed on today's call. The definitions and reconciliations of the non-GAAP items -- terms -- excuse me, included in our remarks today are also included in our 10-K as well as our financial results report and our quarterly operating supplement. The recorded replay of today's call will become available approximately 2 hours after the end of the call, and the information for accessing it was included in last week's press announcement and in the financial results report posted yesterday on the MBIA website. Now I'll read our safe harbor disclosure statement. Our remarks on today's conference call may contain forward-looking statements. Important factors such as general market conditions and the competitive environment could cause our actual results to differ materially from the projected results referenced in our forward-looking statements. Risk factors are detailed in our 10-K, 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. For our call today, Bill Fallon and Anthony McKiernan will provide introductory comments and then a question-and-answer session will follow. Now here is Bill Fallon.

Thanks, Greg. Good morning, everyone. Thank you for being with us today. As previously stated, the resolution of our Puerto Rico exposures remains our primary focus. The Puerto Rico general obligation and Public Building Authority plan of adjustment was confirmed by the Title III Court in January, and the Oversight Board has indicated the plan will be effective by March 15. However, certain parties have requested to stay, and we anticipate that Judge Swain will address that request shortly. Meanwhile, the Oversight Board has also made progress regarding the restructuring of the Highway and Transportation Authority debt. Recently certifying a fiscal plan for the HTA, which is a prerequisite to filing a plan of adjustment for HTA. Concerning our PREPA exposure, the Oversight Board previously stated its intent to file a plan of adjustment consistent with the long-standing RSA for PREPA. In an effort to reduce further delay in resolving PREPA, National recently submitted to the Title III Court adjoined to the urgent motion of the ad hoc group of PREPA bondholders seeking mediation of the PREPA RSA. During the first quarter of 2022, National sold another $231 million of its bankruptcy claims associated with PREPA, which essentially exhaust the PREPA claims that could currently be sold by National. Combined with the fourth quarter 2021 sale of PREPA bankruptcy claims, National has sold approximately 35% of its par claims and monetized a significant portion of its previously reported salvage recovery asset that was associated with PREPA. The sales not only reduce the potential volatility of ongoing remediation risk regarding National's PREPA exposure, but also generated additional investable assets which will provide National with additional investment income and greater as-of-right dividend capacity. At year-end, National had remaining PREPA exposure of $809 million of gross par. As we've stated on previous calls, substantial progress restructuring our Puerto Rico credits will better position us to pursue our strategic objectives, which may include a potential sale of the company and/or request for special distributions from National to MBIA Inc. Turning to National's other insured credits. The insured portfolio has continued to perform consistent with our expectations. The outstanding gross par of National's insured portfolio has further reduced, declining to $36.5 billion at December 31, 2021, down $5.4 billion from year-end 2020. At December 31, 2021, National's leverage ratio of gross par to statutory capital was 18:1. Now Anthony will provide additional comments about our financial results.

Thanks, Bill, and good morning. I will begin with a review of our fourth quarter and fiscal year 2021 GAAP and non-GAAP results. The company reported a consolidated GAAP net loss of $155 million or a negative $3.21 per share for the fourth quarter of 2021 compared to a consolidated GAAP net loss of $80 million or negative $1.64 per share for the fourth quarter ended December 31, 2020. The higher net loss this quarter was largely driven by lower VIE revenues as Q4 2020 revenues were positively impacted by the Credit Suisse RMBS litigation court verdict and higher Puerto Rico losses related primarily to HTA and PREPA, which I will spend a minute on now. Regarding PREPA, in the fourth quarter, National agreed to a second sale of certain bankruptcy claims in a private transaction through the transfer of ownership of $231 million face amount of bonds representing approximately 22% of the principal amount of the current bond claims in the PREPA Title III case. The CUSIPs included in the transaction had been fully satisfied by National insurance claim payments. The transaction, which was executed at essentially the same modest discount as our first transaction monetized a portion of National's insurance loss recoverable on paid claims into investable cash, reducing National's exposure to PREPA and furthering our goal of derisking National's balance sheet as part of our corporate strategy. While we reflected the loss reserve activity in Q4, the transaction actually closed in the first quarter of 2022. So you will see an increase in cash received and a reduction in Puerto Rico salvage when we report first quarter earnings in May. The 2 sales exhausted approximately $430 million of National's fully paid PREPA claims. For HTA, we revised reserves to reflect greater certainty on the timing of the…

[Operator Instructions]. And we'll take our first question from Tommy McJoynt with KBW.

Thanks for taking that question here this morning. So there have been some recent headlines about the PREPA deal trying to be renegotiated. Can you remind us where we stand on the 2019 agreement? And kind of what are the scenarios where the Puerto Rican legislation does not approve that deal?

Yes. So Tommy, obviously, what you're referring to, and I know you're quite aware of this. So we've had an RSA in place for quite a while between the Oversight Board and the creditors. It requires the legislature to approve certain pieces of it, which the news seems to be that they are not inclined to do that. And so what you've seen recently is the ad hoc group of creditors file a motion with the court last week, for mediation, we joined that. And then other creditors have subsequently joined it as well. And the court that is Judge Swain asked for briefings from both sides, meaning the Oversight Board. They put theirs in saying that they would agree to mediation, but they wanted it done differently, meaning not just with the ad hocs but with a larger group of creditors and not on the time schedule that had been put forth. So Judge Swain will rule on that, waiting for some more papers today and show rule on meet whether or not shall move this to mediation. And from there, we'll see what happens.

Okay. And then switching over, the cash proceeds received by National from the monetization of those PREPA claims, that were sold in January was noted to be available for investment. So what are the plans and the flexibility with that cash? It seems like National's kind of pro forma cash balance should be around $300 million all else equal?

Well, yes, in terms of National, it clearly adds to the investable assets. And while we report certain pieces of the invested assets as liquid. As you know, National in general is very liquid and has substantial assets. So this just adds to the amount that we have there. And as we indicated, we'll generate additional investment income off that, which will increase the as of right dividend on a pro forma basis. So it's all sort of positive from that perspective.

Okay. And then just last one from me. Is there a way for us to think about the amount of excess capital when we think about the potential for a special dividend from National kind of assuming Puerto Rico gets resolved? Is it appropriate to look at potentially leverage ratios that kind of were around before Puerto Rico and kind of use that as a proxy for calculating how much excess capital there could be today given the shrinkage in the portfolio?

Yes. So when you think back to the way the model lines used to look at this, and obviously, those who are still writing business, there was always a rating agency excess capital calculation that was looked at. In our situation, given the runoff that we're going through, we don't tend to look at it that way anymore. And I think in terms of what you're getting at, it becomes much more of a case-by-case analysis. And those would be discussions that we would have with the New York Department of Financial Services. So you can use certain ratios to give you a sense in terms of the direction that things are going. But I think in terms of calculating any specific amount of special distribution out of National, you have to drill down and go much more on a credit-by-credit basis.

Okay. I appreciate you clarifying that.

[Operator Instructions]. And we will take our next question from John Staley with Staley Capital.

Bill, I have a question related to MBIA Insurance Corp. And I preface it by saying I'm not an insurance expert in any way, shape or form. But it seems to me that even with the delays from too many bureaucrats and lawyers involved, that Puerto Rico seems to be on track of being resolved. Timing is an issue, but the blueprint is there. So the remaining overhang within MBIA is getting rid of MBIA Insurance. I have 2 questions there. One, if you have no financial -- residual financial responsibility for MBIA Insurance Corp, what is holding you up in putting that back to the appropriate regulator? And related to that, if you don't put it back and you have an opportunity to combine MBIA with another strategic player in the industry, does that ability to put it back to the regulator go with a transaction? Or is it in any way negatively impacted by the fact that MBIA did a transaction?

I'm going to have Anthony at least start to answer that one.

John, it's Anthony. Let me just start with the first premise, which is the concept of putting the company to the regulator is not really an option here. Number one, we have fiduciary responsibilities as officers of the company to our policyholders of MBIA Corp., no different than we do to National. So it is our responsibility to ensure that policyholders are protected. So our goal at MBIA Corp., is not to wind up in a regulatory rehabilitation scenario, but to continue the work we've done really for the last 10 years, which is to reduce the risk in the portfolio to a point where it's in a normal runoff mode just the way National is at this particular point. So again, the portfolio of Corp has gone from about $190 billion at its peak to about $5 billion today, and it should go down to a little under $3.5 billion at the end of this year. In the meantime, we've positioned Corp in a way that its liquidity position is better than it's been in probably 7 or 8 years, given the Credit Suisse outcome. And now our goal is to reduce the risk associated with 2 items. One is our existing loss reserve credits, is there a way to derisk the book in a surplus accretive way that's beneficial to policyholders and other stakeholders. And number two, we need to bring the Zohar -- the Zohar situation to an end, which we will try to do over this year from a credit perspective. And once we do that, the company will look certainly cleaner when it comes to any potential ultimate transaction that we would enter. That said, we are always looking at potential options for MBIA Corp., no different than we are for the remainder of the company. So we will continue to look at that. But at this point, that's our strategy regarding Corp.

And John, let me just add because you started off with sort of the fact that MBIA Inc., shareholders don't have necessary economic interest. But there is positive surplus in capital in Corp. And so really what we have is we're running this for the benefit of the surplus noteholders, who do have an economic interest. So it's not a question of it's either the shareholders or goes to the department because now it's just about the policyholders. The capital structure is just a little bit different. And everything we do is to make sure that the surplus noteholders, maximize their value in this, which again, there's a substantial amount of positive capital in Corp.

So I guess the question I have then if it's not resolved through a regulator, if a strategic player with looking -- I mean clearly, you're an obvious tuck-in to a strategic player, I mean, it can marginalize National get rid of a lot of overhead, et cetera. Does this MBIA Insurance, would they look at it the same way and say, okay, we can calculate a value here, and we'll manage it with the same fiduciary approach and try to get as much recovery for the noteholders as possible? Or is it a barrier? Is somebody going to look at this and say, okay, you guys were cleaned up Puerto Rico, but you got this other mess over here called MBIA Insurance. I'm trying to think about, is it a barrier? Is it something that keeps a strategic player from looking at you and saying, "Man, I would love to put this on my books pick up $36 billion of additional credits. I suspect would have to have quite the reserves you have and I say, but we're not going to screw around with MBIA insurance? Or is it all just part of the industry and they think can do the same thing you're doing.

Yes. I think the answer is that they will be able to add value, just as you indicated, even at Corp, you continue to reduce the expenses. And as Anthony indicated, there's only about $5 billion of par left. So this is getting very close to the end. And there probably are some things that can be done in the near future to accelerate the runoff of this company.

[Operator Instructions]. And we will take our next question from William Adelberger, a Private Investor.

Thank you for taking my question, which pertains to timing. We're seeing the resolution of the general obligation bonds as of March 15. Is it your understanding based on discussions you've had or your beliefs or prior experience that a strategic acquirer would require the resolution of the remaining obligations of National in the same way that the general obligation bonds are being resolved circa 315 in order to pursue National directly and make a bid? Or is there some intermediate level of reorganization of the remaining obligations that a strategic acquirer would feel comfortable with bidding on National?

Yes. Thank you for the question. The answer is that we do not believe that we need to resolve all of the Puerto Rico credits in some final sense to sell the company, which I think is what you're getting at. And I can't speak for every potential buyer out there. But no, we do not need to resolve in the same way, for example, that COFINA is now absolutely off our books. To your point, GO, it looks like it's getting pretty close to having the exchange go effective. We do not believe that we have to wait for the HTA and PREPA to reach that same level of finality.

And do you have any other comments -- thank you for that. Do you have any other comments as to what might be an appropriate point for you to aggressively sell the company? Or is it really you're waiting for and someone to make a bid?

No, we're not waiting. We continue to analyze that. And at this point, there's nothing additional at this point to add, but we're looking at that continuously and quite actively.

And there are no further questions at this time. I will now turn the call back over to Greg Diamond for any closing remarks.

Thank you, Ashley. And thanks to those of you listening to our call today. Please contact us directly if you have any additional questions. We also recommend that you visit our website at mbia.com for additional information about the company. Thank you for your interest in MBIA. Good day, and goodbye.

Thank you, ladies and gentlemen, and this does conclude today's fourth quarter and full year 2021 Financial Results Conference Call. You may now disconnect, and have a wonderful day.