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AMBAC Financial (AMBC)

Participants
Lisa Kampf IR
Claude LeBlanc CEO
David Trick CFO
Andrew Gadlin Odeon Capital Group
Mark Palmer BTIG
Andrew Hain Stifel
Ben Clifford Nomura Securities
Charles Post Sterling Grace Municipal Securities
Call transcript
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Operator

Greetings and welcome to the Ambac Financial Inc. Fourth Quarter 2017 Earnings Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your hosts Ms. Investor Chief LeBlanc, Financial of and Executive Head Trick, David Officer. Kampf, Relations; Chief Claude Officer; Lisa I will now turn the call over to Lisa.

Lisa Kampf

most of of Factors. forward-looking Condition events, information, any to obligation to would Operation turn not included call posted earnings under thank Ambac and to in disclaims quarter on Risk is which over website Mr. are release, which and such call are today's presentation to subject morning, we of you on forward-looking joining result that call. and any this or to measures. for circumstances. Good statements, contain today's remind to you website Today's discuss changes results. update management's contains in and measures Financial uncertainty financial a fourth is based new and may Group's We'd performance under future forward-looking obligation, on as non-GAAP that may and Ambac like expressly and or all to conference are financial Discussion the current Analysis Management's Please Actual slides guarantees any our GAAP presentation are of our the Any The quarterly such could future Factors press recent Reports in most reconciliations otherwise. available have at include LeBlanc. events Claude our our now of possibly ambac.com. figures like I statements. accompany performance comparable whether note and of from statements this materially statement factors Financial differ, described to Results under Annual SEC-filed events. not expectations forward-looking the cause

Claude LeBlanc

joining year Ambac. for XXXX a you, was and call. Thank today's welcome everyone Lisa, to transformational

priorities for many creation others, of value. shareholder successful key advancement XXXX is Ambac long-term and the of With the well-positioned entering into of material achievement believe we strategic

value increase estimated of quarter from once per book increase of share account, our our XX% value priority strategic share or reflected first, create Our will an exit XXXX accomplishments XX per February pro in AAC’s a that results. include rehabilitation segregated on the book financial forma transformational a QX $X.XX first

of as is that risk language XX-k, This strength express knowledge of AAC to we brings exit date. a time the AFG and concern] expand perspective appointment removal from and at since board’s the industry from night. and skills which in the risks, Joan’s move Ambac audit Group’s improvement forward we Joan new both announced appointment Lamm-Tennant also first a experience boards. and welcome filed concern financial we the opinion is did to last Ambac’s which of the XXXX Next the Financial wealth such will as AFG’s about reflects rehabilitation. bring achieved a new Last her night not Ms. material the board. addition of [growing Joan director post with our

of boards our to Lamm-Tennant member now With US. board we the addition Ms. in seven the have interlocking

during effectiveness of the December $XX.X exposures portfolio risk We XX.X XX% also the to stabilization billion reducing we Notably insurance insured our and the net the to changes of accelerating management past outstanding par by at XXXX implemented in to its as improve XX, risk platforms. billion group year, reduced XXXX. significant from

$XX settlements Classified the million. of the year-end at Credits $XX X first, Major included termination gain billion the of same we a reduced XXXX. Funding, Adversely million Credit $XXX resulting also period, Adversely during in billion to $XX Augusta Over and from XX% billion a year Classified or commutation

[spirit], securitization of Second, Sterling XXX million the transaction. de-risking a UK

for Fifth, par contributed reduction million XX.X exposure commutation the confidential, Fourth, of and fourth municipality. helped of of with quarter XX.X benefit approximately the million two the we few I trustee transactions to $XX achieved Third, in million as mortgage a a of respect Morgan are material with and the during reimbursements the [litigation], from reserves. minutes. highlight derisking facilitate others to distressed paid. settlement resulted loss transactions which settlement a JP which loss that net key terms a of benefit claims of amongst the expense insurer of but will in a a additional

joined transparency. pursue year, for in actions the of Puerto also fiscal all plan the oversight Most During we to our recently, creditors Puerto in seeking continued Rico. more legal challenging to protect appropriate draft rights and group Ambac Rico a

of December in owned XXX At We of the [Ambac investments during Puerto purchasing year we Rico RMBS also our and distressed portfolio held remind XX% and million factor our in into insured] securities insured purchases. and we Ambac are any XX% ownership instruments bond not these including insured everyone, of significantly do for increased over XX, investment To COFINA PRIFA Ambac our securities. our bonds. reserves securities, such insured our

principal The account successful the transaction tender and consent held received account parties progress surplus million more beginning our and I cost of our of expenses compensation detail. XXXX, the BoA continued annual work. which trial to to to of and offers and other Countrywide of approximate into than litigation overwhelming reflects in general annual notes outstanding of conclusion interest costs. translate are AFG. these marked the on steps accrued who from AAC’s following of AAC’s accomplishments of surplus XX would like on headcount to hard now an some culmination few strength the that of the approximately will spend our which by decrease significant segregated in participated took exit finally, closing transaction, AAC And of reduce XX% on a address the February rehabilitation support X.X to transaction solicitation, savings, the announced minutes We unpaid in claims. closed XX% we also we take in from through of by years the the firmly The was XX.X% case, operating reducing noteholders representing and which prepared from

of book impact ago, of detail which mentioned first the an David results. share momentarily. in basis, resulted the forma be a transaction $X.XX transaction of reflected pro in on the a I As moment will financial will increase greater XXXX the provide per estimated quarter value in

a of highly exchange will interest million discharge and following; of cash, first, this significant an consideration general and notes, In surplus all for of the notes to AAC’s benefits XX% outstanding As satisfaction billion X.X accounts, principal effective secured accrued account DPOs transaction approximately and general cancellation result of including account received XX% notes. XX.X% complex plus of in stakeholders. second, surplus unpaid Ambac package totaling X.X% accretion; closing the AAC of segregated XXX.X accrue

the amount of of unpaid and the general new fourth, the and outstanding on notes. on accrued RMBS DPOs tier And issuance Third, XXX and and of an by notes backed principal effective discount capital value representation warranty recoveries. of X.X% interest tendered X in certain surplus accretive litigation million from account

the general of with account conclusion following segregated rehabilitation, the segregated of paid account the addition, being merger into claims account cash. the now in are AAC’s In XXX%

exit oversight, Additional benefits to and regulatory related improved include the expenses the strategic governance the process, cost and from financial structure. rehabilitation reduced unified and reduced corporate flexibility

for our are this shareholders. the position I of to transaction, deliver will value commitment and on create affords to pleased that long-term transaction this We with our us significant outcome us flexibility believe further that extremely the

ongoing activities, de-risking our to priority. strategic an which is now Turning key

development a overall fourth management watchlist and remediation factors, quantitative risk quality risk derisking insured our of our added expand overall certain reducing improve the group, portfolio. heightened its focus activities the will volatility for future those for potential on based improving We our qualitative adjusted sharpen in adverse to which on insured have and derisking there we and credits portfolio, credits to long-term also of focus and which activities. our actively During these believe will quarter, that the quality target now AAC’s known took efforts and targeted Watchlist book on credits steps steps group reorganize value. significant maybe the as of to we the enhance are

with Turning in highlights related X% par to our million resulted remediations Chicago Schools. key Active number the of fourth adversely a in of credits in bonds decrease achieved refinancing to adversely negotiated book and the quarter. some decrease to classified normal X% We XXX XX. now Public including adversely the during a successes September of of classified classified transaction quarter, exposure respect for net credits since runoff and fourth

Next of the security of transactions, and the third, further only of reduced reducing by million, XXX residential by number mortgage-backed grade a refinancing credits termination CDS adversely credits which XX non-investment our adversely the portfolio classified million. classified in left

Turning litigation. now to

this PL primary be case, the on court. Countrywide to believe RMBS our New a Appellate half of in heard will she the of that and us that in briefing until could of we been what a date the completed trial know a has the litigation we the The issues earliest advised arguments date the during York set Our of for a has highest judge awaiting to we Based Appeals the we schedule, oral are year. Court latter was is trial fourth to expect court In overseeing quarter, progress. to occur case reasonably by not the the decision. court continues

against case York First progressing against second New the our of expected is Franklin Nomura Our and of the other are quarter. that Countrywide as conclusion by and discovery in well end fact as is cases pending

is and lead a to battles court assumptions had Unfortunately see use with requires for maybe the capital Congress. also for other in on to which before the to Turning any development for oversight we held and legal allows that in the Act not the Puerto economy. pleased fails costs ability capital weaknesses, many ultimate account financial resources debt residents. outlined issued not stop in sales migration accounts the plan. public accomplished disagree market PROMESA. fiscal accomplish is cash Rico. Among needs board oversight failing access, Bipartisan the be Puerto as to [extraneously] can to tax start law to importantly the board be that to to and a billions and property that fiscal provides the Congress towards creditors that goal, ways decisions in basic plan to make the restructuring to Rico this be on expect Puerto oversight so and plan believe reports are path process, of engaging The pleased goals. and in for now at starting calling in and and with considered accountability is uses and market to absent that only these filing which is the under foundational a restructuring PROMESA. Puerto the creditors and rule recent make Ambac to process. holistic growth. and may for and recognize legal essential forth point government’s recent development litigated. Rico’s the and In to requirements issue with should to The view developing Puerto economic that provide rights basic own plan potential forecast, outlined profile, board board oversight realistic in healthcare need will politicians to local is many of to This PROMESA. PROMESA Such reluctant and oversight review plan rights the same not that cooperate investors. not aid that group transparency be available and In restructuring further suggestion the the in XX commonwealth of fully private to disaster Ambac’s progress the transferred creditors to fiscal revitalize continues do days a on plan the will Puerto and Governor review in a that for court’s the oversight funds subject Budget just commonwealth. fails the ignore renewed identified the Rico connection requirements vehemently of more yet in meet available various and fiscal law compliance to board's XX-month put implementing and contradict plan, revised comply this increased consultation was short, deficiencies revised be that these the oversight and economic set COFINA of to broad to The can which board its and goal created in recovery and periodically continues with tough creditors also in Ambac and spending statement upholding We develop coordination in Ambac it ignored Rico, government it the needs plan we solutions, transparency board for focus holding to dedicated protracted were Rosselló willingness PROMESA regard, with XXXX plan. ruling Rico's do access to other with of federal additional provide to the Respect in the steps the stabilizing its the of its fiscal the complaint be limit the is [HTA]

While customs this failed with municipal achieved to the Swain’s are rulings continued These and litigations, unfortunate long-term bond bonds. significantly rulings expectations, decided decision Judge and to particularly and with of wrongly consider revenue our rulings recent related being opinion where resulting practices precedent, existing in from misapplied is that appealed. market, in municipal payment believe respect deviate we consistent on and similarly market

mission at of the to lengthy the unnecessary continues the significant respect lead and losses to an burden. stated including to plan actively efficient law lawyers legal expense to We further dialog progress will to in of only officials of manner and Continued and protracted reflect oversight with in board, aspects continue in increased matters as of the oversight to Puerto battles cost pursue Failure advisors to board, in Puerto Rico. Puerto which well as failure of mitigating in Rico. result strategy with the local uncertainty lack resolution to creditors, The of could and timelines material uncertainty, persisting losses stand Rico situation people Ambac. all benefit progress result and litigation our will federal PROMESA in the and progress,

to like to results the over David? financial greater Trick call would Now David detail. the discuss turn to I in

David Trick

and Claude, you, loss all interest-rate and fourth gains and our good to higher third by derivatives, earned. morning. quarter, Thank Relative premiums returns from lower offset partially reflect higher results the loss quarter investment expenses, lower

per fourth loss quarter quarter or compared million Adjusted XXXX, or XXX.X per of $X.XX XXX.X XXXX. a million XX.X Ambac $X.XX $X.XX loss of to of the share net the share, million the adjusted diluted fourth in diluted the third net earnings of per per diluted to of reported quarter. diluted quarter share compared in loss were $X.XX for third or or For X.X an million a share

to and the international of insured in the which of during material due million in two investment the our the by results, transactions premium of premiums the par Turning during earned versus and respectively. third runoff insured for to were third Accelerated primarily to reduction quarter, specifics to million portfolio. the XX.X financial decreased quarter a more some quarter. of on earned the third during XX.X finance quarter driven Normal net quarter $XX.X fourth XX premium million XX% due due million the continued Accelerated X.X million income de-risking was from callable by public XX.X $XX exposure. resulted million, about declined Net million fourth quarter $XXX.X million, to million to calls XXXX or XX% the proactive mainly XX.X insured of to premium. run-off the premium about during acceleration declined also

incurred XXXX exit in quarter accelerated was duration impacted from fourth cash resulting rehabilitation. As were liquidity assets and $X.X income offset the completed the accretion consequently driven tempered XX.X of were of XXX.X trading loss Rico, incorporating as offset increase increase of cash credit strong by of XXXX, of first public produced particularly the improved invested the insured and net The the classified quarters quarter. third portfolio. and account Puerto losses compression, mostly a portfolio investment of the million in securities losses fourth in loss of reduction income the the third account spread The RMBS $XX.X as us public from and short-term an for expenses flow down items in in quarter expected from was X.X investment were the of reduction the These million in reflective XXXX in in adverse for benefit credit. The our the we regards quarter was produced finance investments, in from expenses build-up by More incurred XX.X quarter specifically, development a and by the duration close from fourth-quarter million RMBS benefit XXX.X gains segregated modest to portfolios, quarter. incurred quarter few to quarter. notes. quarter in provided quarter, on noted discount performance RMBS losses the updated of Losses versus a to third during fourth the AAC rep projections million by in transactions income and development Corolla partially to the of investments fourth The by the the required XX warranty finance previously, termination well third decline quarter on of holdings XXX.X incurred a rehabilitation due were rising XXXX. fourth for million face over compared million the trading Mark-to-market adverse transactions. seg shortening international exit million, incurred to million RMBS rates. in positioning added impact excess last by driven with

third-quarter derivative from due produced in the pound, strengthened Ambac benefit million the mainly down included the to an that during modestly gains The UK fourth in UK's insurer, XX and compared of improved pooled in a quarter were Ambac and foreign-exchange the dollar settlement gains fourth from fourth quarter. the between mortgage million incurred of to received Interest-rate the million in recovery from currency, credit the third quarter. trustee $XX.X functional insurance benefit to relative million third quarter performance the Europe. X the were a X.X policy which proceeds the mortgage quarter, resulting

corporate rising hedge impact of for XXX,XXX portfolios. quarter rates mainly a maintains and million company continued on to effective investment insured The for Fourth sensitivity portfolio serve expenses position if third due X.X the additional as also to a by a near the million, restructuring of to increase expenses against to X decreased partial quarter about firm-wide decrease the rising other partially expenses. million. severance performance million and XX.X compensation. about during the offset million decrease to is X well-positioned salary The third from resulting advisory in an operating based derivatives in rates. our of by reduction point in to fourth by rates and X reorganization, reductions, costs in quarter consists related close $X costs each approximately was partially derivative interest-rate million Our of Non-compensation by the incentive led increase a million interest cost basis to quarter expense, offset declined reduction OCI $X.X an

the These and focused with costs XX.X reducing equated segregated we quarter, in beginning with million restructuring As course will other third fees events. of OCI of materially. the That of additional of account various third we related operations the quarters associated but the and and experience the costs amounts for just and XXXX, core XX% the total will fourth of on non-compensation remain expenses million X.X reduced respectively. a rehabilitation said, restructuring volatility in XXXX, we quarter. approximately operating incur expenses of noted be conclusion successful our over and quarter-to-quarter anticipate that XX% previously, to After also will accounted during approximately not second quarter compared and to normal OCI the

Act includes $X.X estimated the of the X.X taxes of of to provision related time with million over new the net Ambac of million which The the corporate $XX million of offset and Cuts million X.X taxes. deferred fourth-quarter associated million reverse current a related subsidiaries, an to along by our X million law partially taxes Tax taxes, net state passage impact the and with million foreign benefit AMT. Jobs XX from of reflects UK Regarding repeal tax of XX.X cost the implementation will

XXXX. the AMT expect will benefit AAC in which We will credit, installments through be refunded

of For amount for accrual the has of utilized NOLs XXXX in resulted the payments tax XX.X tolling year, AFG. million AAC that has in an

We expect this May receive XXXX. in AFG to amount

approximately total to AAC. to including and X.X allocated now allocated NOLs AFG Our billion billion billion, X.X X.X

A were rehabilitation impact respectively. reflecting share impact first be XXst, will was assets of basis A quarter at held and disclosures. pro included forma issued of billion, $XX.XX public million balance per per the pro of portfolio. of receivables and $XX.XX due of was increase the per or decrease book book I or X.X Adjusted sheet XXXX or securities. loss Our estimated loss to the share XXX.X Notably, share. year-end total The XXXX, fourth a of December quarter losses AAC at compared restructuring remarks. per the net estimated approximately comprehensive at September remarks. XX, X.X December in billion total X.X XXX loss from XXX to after on to and book $X.XX and bringing led value, brief and AFG is XX, transaction per an XXXX. on stockholders related share XX, for book estimated and value transaction, including That some approximately transaction investments $XX.XX exit our December billion additional unrealized $XX.XX concludes The certain account of forma to these equity in increase the at standalone to cash majority XXXX. for and adjusted comprehensive the of to XXXX $XX.XX held $XX.XX On the as the will XX. or the September invested billion X.X $X.XX of segregated XXX and the share, Ambac-insured in back recognized share an $X.XX was fourth closing mark-to-market turn XXXX net value pick million Claude investment million securities per million per call quarter share now per to of formal adjusted or bonds in up share my a value book as value

Claude LeBlanc

David. Thanks,

expiration of legal of rights, priorities the litigation runoff number efficiency exit liability Loss cost AAC of selective Ambac's to rationalization simplified laid recovery and and active operating and from risk enable contractual governance capital we and and its returns including successful and out account adjusted attractive transactions to subsidiaries. operating effectiveness of XXXX, the improved and the corporate platforms, the of of the net of strategic business losses. a the would For rehabilitation Ambac's structure of that and a leading segregated offer structures exercise utilization

have are advance pleased stated objectives are our made against to and significant progress to continuing report each. with to We of that respect we all

ahead XXXX, Looking we of priority our are the through improve to from building overall on board capital for leverage restructuring strategic allocation from achieved financial on exit focused is momentum transaction, of value and completed book rehabilitation quality the the and the key upon in flexibility the the the and to XXXX segregated account. management XXXX Having holding a at company.

to our AAC creation the needs a AAC direct repurchases. uses of to on securities, material XXX value strategic million capital business in support to AFG about deliver its opportunities may additional our security strategically investment presently facilitate and of and restructuring tax and its basis support and risk and to well its will from the liquidity AFG AAC. To which capital stock at AFG maintains and We as an investment to used synthetic capital has and notes. evaluate adjusted new value a of put work or notes to include continue considering date, the surplus shareholders Recently, and investments best as

we for In support for XXXX. shareholders. like better now AAC ongoing thank capital I put securities, to would materially conclusion, shareholders term positioned and its as value their alternatives upon navigated consider a invested is create AFG to act our still in to long successful of close to to While work

delivering call As executing on shareholder forward Thank we long XXXX, Operator, remain and you. to for look questions. we term priorities open our value. the strategic focused please

Operator

Capital line with question Group. Andrew from Our Gadlin of your Instructions] question. comes proceed [Operator with the Please Odeon first

Andrew Gadlin

Thanks give for a your comments notes Could and and quote morning. between holding forma litigation the company. pro surplus this that breakout notes statement notes? us the XXX and the million breakout you the Good of of

David Trick

a is breakout note surplus The the value notes a about million about is remaining fair David. on notes XXX basis and XX of a million. between secured secured

Andrew Gadlin

it fair XXX says That's mean, million, right, value, plus notes? surplus I a

David Trick

about of It's P&I. million a XXX accrued

Andrew Gadlin

what's cash balance transaction? then, And the okay. it, forma Got pro the from

David Trick

million. and over is just term Cash short a investments XXX

Andrew Gadlin

Got it.

David Trick

a talk on about that a totaling this payment Total will company. value XXX bring you at on basis and million about if million. A XXX transaction the the it million assets fair basis after are include we forma XXX up pro holding to

Operator

Thank you.

of Please proceed next with comes Our from BTIG. the question. with question line your Palmer Mark

Mark Palmer

Good morning.

best about use your you think COFINA mitigation, bonds up senior As continued other you of resources for put underlined or additional ensured do loss how exposures purchases of options? the the the against

Claude LeBlanc

Mark. Good morning,

I mitigation the in key talk to about our So, active we through the our risk of we from efforts litigation engagement our is we think as being working both negotiation various and driver and our as mediation purchases in really both most of well the state process becomes hope with the more think think officials Rico, with really upon negotiations litigation, separate stakeholders. in Puerto Rico as we activity remediation But our risk as strategies the way are Puerto we I at until looking this at think active. stage, federal

of not do they're with we attractive. and them Rico bonds those also where made bonds to considered, activities we as of do consider bond not the side, for sale consider calculation. modeling our for some our at hold we them respect be to Puerto not bonds part and pricing the see We for reserving available purchases purchase significant On have risk remediation those we

to extent insurance extinct for So, of bond they of and for really that from think bonds the view under still boarding they adjustment rights in time. case policy the at are will to as that plan we that that element appropriate purposes I at the believe the addition our activity. purchase time, purposes will remediation, vote our the that that the independently. the we But we hold of our the do held that in bonds We be

Mark Palmer

you. Thank

Operator

you. Thank

comes the from question Stifel. with Hain Please line next question. proceed of your Our Andrew with

Andrew Hain

Yes, hi. segregation little detail. understand bit to Good your morning. I just in just want more to right a quickly

to Rico and Puerto My you the if on and any of mature is against you light in Puerto way potentially of by differently? that filing talking I treated will want holders bond your Rico. risk matures the is that example, say segregate to or a there that to the right holders. how I'm you like how were you that bond understand relative Just pursue understanding have to situation example you that let's wrap tomorrow. the a about you bond in And are claims you with bond are view situated

Claude LeBlanc

as it we I that would think relates or? asking the way specifically that view things to obviously you're Rico we Puerto

Andrew Hain

the focused because most just, on. Well, just everybody's there recent example what I it's out

yes, So, but.

Claude LeBlanc

Yes.

So, way we and correct I holders rights again have do not a bond have the is I and ensure unique described think you've we that segregation rights as have. think

think high correct. number also a is So, described bonds so. way a the We of I own obviously or that level you

think holder when think I at right the of in historically at one exit in our I be these we significant plans. insurance policies. it I'll exporters. and these plans situations. we holders we So, Monolines I participants given the negotiation exits exit And also, through lens around holders, have at will looking been both bond bankruptcy Rick in our the been as now Puerto But think bond the of look look are on the other larger are have

insurance the plans. an that we think bond given direct these of of I part that obviously size perspective as there But the broader process. their as insure believe will or of So, exit will also per that will be we I holdings have also think that overlay our potentially rights dominate our

Andrew Hain

where same or that any Yes, precedent been have And you okay, other or provide that where great. just anybody might involved it can is there, Detroit then was you there --? else situation notion, on a

Claude LeBlanc

and and probably again, monolines would And segregation best pick just monolines all bonds ensuring but and in most were maybe seen the also different to. meaningful their I in that think I'd you we're the rights. were rights relevant certain holdings more Again different point insure -- had Jefferson best res relatively also addressed example think I point appropriately the probably that certain situation. their that's litigation there you've leveraging County, saw it's I think their also directions and which of I example. interest

Andrew Hain

Great. congratulations the the and I color from exit on appreciate rehabilitation.

Claude LeBlanc

you. Thank

Operator

Thank your Securities. check your next of Clifford, you. mute? Nomura you is proceed can line Clifford Ben question the if comes from on Please [Operator Mr. Instructions] with line question. that with Our

Ben Clifford

I to is earlier your you on the my one on you question. the book sorry. X-K of XXX XX adjust was includes top was differed in was the the guess amounts. that mute. of There that or on Oh settlement for $X.XX from gain from Thanks that book wondering of if -- value million whether month, about million $X.XX morning I value. I clarify to this first talked my claims, in take you of not? gave amount gain just just from settlement taking that pre-disclosed gains

David Trick

of passage of we $XXX pro Yes. at if and value forma provided, a and value described same a the December forma some the it's book with to effectively basis course gain pro adjusted That you book you that amounts the of XXX is are XXst. that that time. look million on the as effect amounts

Ben Clifford

disclosed. top you So, gains break, on we expect of shouldn’t what any you incremental --? When

David Trick

a XXst February few of XXth we million and shore transactions. dollars close December accretion because interest of the between the when Just ex

So, up that of be extra accretion dollars pick a that discount million account. on few of

Ben Clifford

that if disclosed the to question. option had in option purchase more ability whether Corolla July And last still or notes. then purchase outstanding to The your I was an notes. those you've exercised you my that of you wondering is

David Trick

face, did, did that the quarter. I purchased We of we option. the We third XX in believe exercise million original

Ben Clifford

me. from all That's Thank you.

David Trick

you. Thank

Operator

Thank you.

Hain of Please the Stifel. from your line question comes question. Our proceed next with Andrew with

Andrew Hain

guys a a you're Is to the X.X but payments surplus you I do you if coupon allowed on pay on notes. Maybe on financing comment Thanks did it those a I that coupon, Tier if Tier, the coupon And on guys, cash read new notes, your pay correct? that intentions pay. goes just follow-up. also missed X the

David Trick

of Xst, aware which six a approval pay and those days request to be under represent are the notes, million payment But date from interest as required all will under notes. of that think March accrued get OCI payment pay correct. months which that's paid notes, the on interest -- these permission surplus we of first interest I the principle accrued transaction. That's and on did to their surplus the But within X.X% on $XX.X closing the of you're to interest outstanding we interest XX

solely touch. of interest solely of Tier So, we trigger request But are every with decision pro it does if payment that OCI. X on sort And to and to correct, are our a you pay the total of on note rata it is make we the ability required make payment a is to year. were surplus the notes,

Andrew Hain

Great. so it's payable coupon the interest That and on will the on basis? on And retroactive, the amount just, go clear you for be a OCI to the were pay be that it'll accreted out just dollars right, forward I'm payment, that. able if then not the

David Trick

they are Well, notes. picked

have amounts not in the to So, notes. would for we But those cash. have aside be to paid put would

Andrew Hain

Thank Okay. you.

Operator

Thank you.

Grace the of proceed with Our comes Securities. line Sterling with next question. Municipal your question from Post Please Charles

Charles Post

mitigation that PRIFA and bonds bonds, you correct? When you for COFINA do acquired the is I purposes, assume loss the not

Claude LeBlanc

We do not acquire bonds for loss mitigation.

we them ALM when bonds to bonds of those are at at able We acquire we attractive as We our look are part focus. acquiring prices. strategy

matching our of that COFINA broad have holdings securities. think liabilities, out but perspective From our paper those equate to our in our an wrapped allocation program acquire profile we liability into the duration we extent there the maintain attractive risk asset can asset the tie a saw to were obviously prices management own we to the the I securities you at bonds. look do We and is liabilities and acquiring management, that

held to it we commitment not those is good strategy have a ALM maintain think some future. ownership of when liabilities. and in for the sale assets securities these of we So, for are those But

or risk think is on a management liability I risk not asset mitigation strategy a strategy our So, management. that but it's focused a

Charles Post

reserves But reduce be to reserve we on credits? from on reserves have benefit clear, we, no COFINA -- the perhaps some those know just and believe as have you have we Okay. I to the we and PRIFA now, so

Claude LeBlanc

That is correct.

is and we what that's said correct. that So,

our any we of adjust gross, do not wrapped are our reserves the bonds. So, reserves selling because of buying or

Charles Post

Okay. the side thing on too? that RMBS same Is the

Claude LeBlanc

Yes, it is.

Charles Post

Okay.

got no gross we've our reserves. way So, underlined the ownership in securities. benefit to any those of from reserves got We

could of be with the offset these those to and maybe transactions value occur own the of book that notes we extent understood some our bonds. effect when theory losses we in some we own So,

David Trick

at guess looking Puerto Rico that that. RMBS as Yes. Yes that the a at way phase I they attractive better bonds, Charles, result it you we way. whether it look their could But bought of and bonds yields have discounts the these

them, sort we far there of of terms significant the so, value too the that the in discount discount of you is and those look which bonds And captured. and if from value purchased at capture yield face we

Charles Post

in was that the It anywhere being, guess we're value. value you And know. book not one seeing

David Trick

You the see accrete up earn those over bonds time. over time it as yield we as

Charles Post

Okay.

David Trick

if book book that adjusted value market to on at subject portfolio. And value mark you're the book, to is to versus looking the

Charles Post

guess time. around be? take I COFINA XXX.XX, or on is that to might some going be might not Because

David Trick

Copy work.

Charles Post

or out what get for on I when And continues that and of settlement the that be timing it just be. says that trying Citigroup on dollar significance to or amount. could know that and there. to be sense Any could sense it

David Trick

distribution level too this that that you appoint be would it's in in with those some come agent; what did but a point positive at I'll specific still date. XXXX to say in. will a of but say We I a And fold that's progress along time in SEC the both the accuracy give money's sign. can't any have made early when is process

Charles Post

of which efforts. on size the Okay. one anymore pursuing RNW comment other pursuing to presentation, were recovery that? we Are been anything could guys Then you have and on that you the that the it continued Can significant. have

Claude LeBlanc

is was line relation with in So, to which or? this RMBS

Charles Post

a pursuing for that the it about recoveries opportunities you're section in it's No. also other the talks RMBS recoveries? where and comment then there's

Claude LeBlanc

Yes.

mean recoveries. engaging we I for enhancing our are activities in think, I always

number a increase and do in other participants there's with servicers of recoveries. So, And in with trustees have are things our other pursuing we litigations we we securitizations. other to that may also parties and that of number relation a our

Charles Post

last And you timing that probably you you're I part thing, I to mentioned when there or end direct some right. your the got it sense is take that All or a and haven’t of presentation, could year of it's do before, open stock could suppose do but say or this time? for, synthetic that you a very is later repurchases.

Claude LeBlanc

why surplus active we program shareholder could allocations have near are much It along And now something we're than at is we more that not capital is we fairly tolerance or for. the will committed that holding that which that control, new AAC senior in still particular now that that amongst for that's this term we is the maybe we've may and as considered any of on on exiting term repurchase which to including others. We options the that at change deployment other are in one more risk But think of mentioned, valuing us surrounding been which limit host believe between previously. highlighted create a a notes. a mitigating we have and as ways AFG on I our past. we with the notes that other look the increased the NOLs challenge roles our we've the be of one [indiscernible] of be businesses capital that the effect issues mention flexibility company, issue But I past at issues to looking think synthetic potential for long issue we with in buyback a something rehabilitation. value. have But considered

that something board appropriate. and back is is decision that timing continue and decides it and the to consider we we'll our consider markets -- So, report when the to will if appropriate once

Charles Post

you. Okay, great. Thank

Claude LeBlanc

you. Thank

Operator

Thank you.

question. Group. is question line Mr. check on a Andrew to with with next Capital you proceed your Gadlin, your mute? Gadlin see if follow-up Our is Please can Odeon from

Andrew Gadlin

better it -- hello? Is

Claude LeBlanc

That's better.

David Trick

We got Andrew. you, Welcome back.

Andrew Gadlin

Thanks, thank you.

of that done part portfolio supports know on I the de-risking rehab. the Ambac regulator new Following-up held question. the that to the from insured as previous pointed exits lead that Is the

limitations any out, sell your any you're to that there is of ability that? Now on

Claude LeBlanc

don’t I at all. limitations think we No, any have

our long committed clearly mentioned shareholders. remarks So, I think as on in as for well we have I in strategy de-risking a are returns term creation my value as prepared of earlier maximizing

out number a options are increased positions not and certainly I on both with And think will continued activity. rehab either of I on one our again of enhancements committed than our committed flexibility of be around we've of the that's we our de-risking on but ALM think exploring other holding being we So, focus way de-risking.

Andrew Gadlin

you. thank Okay,

Operator

questions Thank you. this time. no at are further There

Operator

you teleconference. today's We conclude thank does for your This participation.

for your You And disconnect you may at your time. thank this lines participation.