Good day, ladies and gentlemen, and welcome to the Ambac Financial Group second quarter 2016 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to Abbe Goldstein, Head of Investor Relations and Corporate Communications. Please begin.

Thank you. Good morning and thank you all for joining for today’s conference call to discuss Ambac Financial Group’s second quarter 2016 financial results. We’d like to remind you that today’s presentation may contain forward-looking statements which are based on management’s current expectations and are subject to uncertainties and changes in circumstances. Any forward-looking statements are not guarantees of future performance or events. Actual performance and events may differ, possibly materially from such forward-looking statements. Factors that could cause this include the factors described in our most recent SEC-filed quarterly or annual reports under Management’s Discussion and Analysis of Financial Condition and Results of Operation and under Risk Factors. Ambac is not under any obligation and expressly disclaims any obligation to update any forward-looking statement whether as a result of new information, future events or otherwise. Today’s presentation contains non-GAAP financial measures. The reconciliations of such measures to the most comparable GAAP figures are included in our earnings press release, which is available on our Web site at ambac.com. Please note we have posted slides on our Web site to accompany this call. Our speakers today are Nader Tavakoli, President and CEO, and David Trick, our CFO. At the conclusion of their prepared remarks, I will open the call for your questions. I would now like to turn the call over to Mr. Tavakoli.

Good morning. Thank you, Abbe, and thank you all for joining us for today's call. As we announced last evening, our financial results for the second quarter were excellent and we executed well against our strategic priorities. David will review our financial performance in detail, but I want to highlight that our book value and adjusted book value now stands $39.80 and $29.94 per share respectively. To put that in perspective, we’ve now generated $1.5 billion of book value and nearly $1.7 billion of adjusted book value since shortly after our emergence from bankruptcy in 2013. Our continued success in preserving and enhancing the value of AAC despite the highly publicized developments in Puerto Rico against which we have taken substantial reserves reinforces our view that job one at Ambac today is the continued efficient and accretive management of AAC. The vigilant pursuit of our contractual and legal rights to protect the interests of our stockholders has been and remains one of our key priorities. As many of you know, in connection with our RMBS case against Countrywide, Judge Branston issued summary judgment decisions on primary and secondary liability in the fall of 2015 and we await the First Department’s review of her decisions. While predictions as to the timing of legal proceedings are more often wrong than right, our present expectation is that the appeal will be heard before the end of this year with a trial by the middle of 2017. As we’ve discussed previously, however, we have a strong legal entitlement to prejudgment interest in our primary case against Countrywide and further delays will come at a significant cost to the defendant. Moreover, if we’re forced to try these cases, we intend to receive punitive damages as well as all other available remedies. We also continue to…

Thank you, Nader. And good morning. Overall, our second quarter 2016 performance was driven by our proactive remediation of loss recovery efforts, investment management activity, the impact of interest rates, and the effects of Brexit. Specifically, the second quarter of 2016 saw us generate net income of $58.6 million or $1.29 per diluted share compared to $9.4 million or $0.21 per diluted share for the first quarter and operating earnings of $115 million or $2.54 per diluted share compared to $218.1 million or $4.82 per diluted share in the first quarter. Trailing down a bit more, net income and operating earnings in the second quarter included the favorable impact of a non-rep and warranty RMBS settlement, improved investment results driven by a greater allocation to and improved cash flows associated with our insured RMBS, gains in Ambac UK’s pools and fund investments and RMBS and student loan loss and losses incurred benefit, and gains on extinguishment of debt arising from the repurchase of a portion of the stub interest associated with previously called surplus notes. These items were partially offset by mark-to-market losses on the interest rate derivatives, losses incurred at Ambac UK primarily due to foreign exchange losses related to loss reserves denominated in currencies other than the British pound, Ambac UK functional currency, and expenses associated with another reduction in force and activism defense. Operating earnings in the second quarter declined sequentially primarily as a result of the positive first quarter impact associated with the successful Local Insight Media or LIM bond commutations. LIM is accounted for as a consolidated VIE. As a result of our positive operating results, stockholders’ equity was up 3% from March 31 to $1.8 billion or $39.80 per share at June 30, 2016. Similarly, adjusted book value increased 3% to almost $1.4 billion…

Thank you. [Operator Instructions] The first question is from Andrew Gadlin of Odeon Capital Group. Sir, your line is open.

Good morning, Andrew.

Good morning. I wanted to follow up on the conversation about the recap or the exit from rehabilitation. What role will management play and the regulator and his advisers, who’s kind of leading the charge here?

Andrew, thanks for the question. As we’ve said, I think, repeatedly over time, the ultimate disposition of Segregated Account liabilities rest solely in the discretion of the rehabilitator and Special Deputy Commissioner. We will, obviously, be involved. We’ve developed a constructive and productive relationship with the rehabilitator and the Special Deputy Commissioner and are in communication with them. But it’s really their ultimate decision at the end of the day and we will take our guidance accordingly and will not get ahead of them.

Got it, thanks. Shifting to Puerto Rico, there was a report yesterday that President Obama could be denying all the Republican proposals for the fiscal control board. And touching on some of the comments you had earlier about how the board comes together, do you see that happening? And if so, how would the Republicans respond?

Yeah. We’re very close to the process, as you know, and monitoring the situation carefully. There’s a lot of planted stories by all kinds of parties, including, in some cases, people who are applying for a job on the control board. And while, obviously, we’re cautious and there is politics involved in this, we’re still relatively constructive on the process and believe that it’s going to be more in the nature of technical experts that are selected for this board than politicians – pure politicians driven by politics. So our understanding is it’s still a relatively collaborative process. But no doubt that treasury and others are involved on behalf of the administration and that it is the administration’s final say, picking from lists provided to them. But, again, bear in mind that pursuant to the rules, four candidates have to be selected from the list submitted by leaders of the Senate and the House – Republican leaders of the Senate and the House. And if that’s not done by September 15, the process reverts back to Congress’ control, Congress still being Republican-controlled, obviously. And it is our understanding that the parties are acting in good faith and that the selections are going to be timely made.

Got it. Okay. And then regarding the $60 million settlement, first, can you say whether those monies were collected as of June 30? And then, are there other of these sorts of disputes out there that could provide upside or are there any against Ambac that could be a risk that aren’t reserved for?

Andrew, thanks. No, the money has not been collected. The amount that we booked is a subrogation receivable and will – the monies will be received over time as it works its way through the waterfall of the transaction. And based on terms of our settlement, no, I don’t believe there’s anything that would materially change that outcome. The most influential factor on ultimate recoveries of that amount will be interest rates as the recovery itself is sensitive as other subrogation recoveries are to fluctuations in interest rates.

The $60 million is still subject to interest rate risk?

Yes.

So the money has not yet been collected and will be paid out over some period of time?

That’s correct.

Got it. What kind of period of time? Years?

Several years. That’s correct.

Okay. And are there other types of these disputes outstanding?

We’re looking throughout the portfolio for recovery of past losses. And without giving additional public comment that we’ve not previously made, you can assume that given what this company went through, there are other places where we’re actively looking.

So on that front, there was a disclosure, I think, in the last Q as well that there is a $285 million SEC decision or settlement against Citigroup relating to a CDO for which Ambac hopes to get significant recoveries, is the line. First of all, do you have any idea on the timing? And what does significant mean? Are we talking 20%, 50%? 20% of $285 million is over $1 per share.

Yeah. Unfortunately, I can’t give you a lot of clarification on that right now, Andrew, beyond what we have said. Substantial means substantial. We expect it to be substantial. I can’t really define substantial for you at this time. And it’s a relatively complicated procedure involving government agencies and courts. And so, we really can’t put a lot of timeframe on it. We’re pressing as hard as we can, obviously, to accelerate it and maximize it. And we hope we’ll have more developments on that soon.

Okay. Thank you very much.

Thank you.

Thank you. [Operator Instructions] And at this time, I’d like to turn the call back over to management for any closing remarks.

Thank you, operator. I want to, again, thank you, all of our shareholders, for your support and confidence throughout the year as we’ve gone through some challenging times. We will work hard to reward your trust and look forward to future communications. Thank you, again, for making the time to join us today.

Thank you. Ladies and gentlemen, this concludes today’s conference. You may now disconnect. Good day, everyone.