Believe it or not, it looks like we were right about something: both sides of commutations are gaining from unwinding those contracts.
RBC today reported a gain of $102M on its commutation settlement with MBIA. While this may indicate that MBIA could have bargained for a better deal, it should help attract other banks to the settlement table.
MBIA CFO Chuck Chaplin said on the Q4 conference call that "the cost to commute these deals was somewhat below our loss reserves, contributing to a net reduction in economic losses of $182 million" on $15.7B of notional commutated policies.
We are happy with what Chuck also said regarding commutations: "We acknowledge that we've got a ways to go in this regard, but we're satisfied and believe that we have a positive trend at this point." As we said previously, we think commutations were a clear but below-potential positive in the quarter. While MBIA cannot force banks into mutually beneficial agreements, at least they appear to be trying.