UNITED STATES
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
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| Assured Guaranty Ltd. | |||||
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| March 20, 2015 Hamilton, Bermuda | ||
| DEAR SHAREHOLDERS: |
It is with great pleasure that we invite you to our 20142015 Annual General Meeting of shareholders. The meeting will be held on Wednesday, May 7, 2014,6, 2015, at our offices at 1 Finsbury Square, London, EC2A 1AE, United Kingdom at 8:00 a.m. London Time.
Our formal agenda for this year's meeting is to vote on the election of directors, to vote on an advisory basis on executive compensation, to vote on an amendment to our long-term incentive plan, to ratify the selection of the independent auditorsauditor for 2014,2015, and to direct us to vote on directors and the independent auditorsauditor for one of our subsidiaries. In addition, we will report to you the highlights of 20132014 and discuss the development of our business in 2014. We will also answer any questions you may have.2015. Representatives of our independent accountantsauditor will be in attendance at the meeting and will be available to answer questions as well.
We are taking advantage of the Securities and Exchange Commission rules that allow companies to furnish proxy materials to shareholders via the Internet again this year.Internet. This electronic process gives you fast, convenient access to the materials, reduces the impact on the environment and reduces our printing and mailing costs. If you received a Notice Regarding the Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials, unless you specifically request one. If you would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting these materials which are included in such notice and in the proxy statement.
Whether or not you plan to attend the meeting, your vote on these matters is important to us. Shareholders of record can vote their shares via the Internet or by using a toll-free telephone number or by requesting and completing a proxy card and mailing it in the return envelope provided. Instructions for accessing the proxy materials appear in the Notice Regarding the Availability of Proxy Materials mailed to you on or around March 28, 2014.27, 2015. If you hold shares through your broker or other intermediary, that person or institution will provide you with instructions on how to vote your shares.
If you are a beneficial owner of our shares, we urge you to give voting instructions to your broker so that your vote can be counted. This is especially important since the New York Stock Exchange does not allow brokers to cast votes with respect to many matters, such as the election of directors and executive compensation, and equity incentive plans, unless they have received instructions from the beneficial owner of shares.
We look forward to seeing you at the meeting.
Sincerely,
  |  |  |
Robin Monro-Davies | Dominic J. Frederico | |
| Chairman of the Board | President and Chief Executive Officer | |
| NOTICE OF ANNUAL GENERAL MEETING | March 20, 2015 Hamilton, Bermuda |
TO THE SHAREHOLDERS OF ASSURED GUARANTY LTD.:
The Annual General Meeting of Assured Guaranty Ltd., which we refer to as AGL, will be held on Wednesday, May 7, 2014,6, 2015, at 8:00 a.m. London Time at the offices of AGL at 1 Finsbury Square, London, EC2A 1AE, United Kingdom, for the following purposes:
Shareholders of record are being mailed a Notice Regarding the Availability of Proxy Materials on or around March 28, 2014,27, 2015, which provides shareholders with instructions on how to access the proxy materials and our 20132014 annual report on the Internet, and if they prefer, how to request paper copies of these materials.
Only shareholders of record, as shown by the transfer books of AGL, at the close of business on March 10, 2014,9, 2015, are entitled to notice of, and to vote at, the Annual General Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL GENERAL MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE VOTE AS PROMPTLY AS POSSIBLE VIA THE INTERNET OR BY TELEPHONE. ALTERNATIVELY, IF YOU HAVE REQUESTED WRITTEN PROXY MATERIALS, PLEASE SIGN, DATE AND RETURN THE PROXY CARD IN THE RETURN ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. FOR FURTHER INFORMATION CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ATTACHED PROXY STATEMENT.
By Order of the Board of Directors,
James M. Michener
Secretary
TABLE OF CONTENTS
| PAGE 2 | | ASSURED GUARANTY |
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88 | SHAREHOLDER PROPOSALS FOR | ||||||
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OTHER MATTERS | |||||||
| 2015 PROXY STATEMENT | | PAGE 3 |
PROXY STATEMENT
| Assured Guaranty Ltd. | 1 Finsbury Square London, EC2A 1AE United Kingdom | March 20, 2015 | ||
| | | | | |
SUMMARY
| Time and Date | 8:00 a.m. London time, May | ||
| Place | 1 Finsbury Square London, EC2A 1AE United Kingdom | ||
| Record Date | March | ||
| Voting | Shareholders as of the record date are entitled to vote. Each Common Share is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on. | ||
| BOARD VOTE RECOMMENDATION | PAGE REFERENCE ( | ||||
| Election of directors | For each director nominee | Page | |||
| | | | | | |
| Advisory vote on executive compensation | For | Page | |||
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| Ratification of PricewaterhouseCoopers as AGL's independent auditor for | For | Page | |||
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| Direction of AGL to vote for directors of, and the ratification of the independent auditor of, AGL's subsidiary, Assured Guaranty Re Ltd. | For each director nominee and for the independent auditor | Page |
We will also transact any other business that may properly come before the meeting.
| PAGE 4 | | ASSURED GUARANTY |
The following table provides summary information about each director nominee. Each director nominee will be elected for a one-year term by a majority of votes cast.
Based on conversations with Robin Monro-Davies, the current Chairman of our Board of Directors, the Board did not renominate him for re-election at the 2015 Annual General Meeting, and he will therefore be retiring from the Board in May 2015. At the February 2015 meeting of the Nominating and Governance Committee, the committee recommended that the Board designate Francisco Borges to succeed Mr. Monro-Davies as Chairman of the Board of Directors and at its February 2015 meeting, the Board approved the recommendation and made such designation.
| DIRECTOR | COMMITTEES | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NOMINEE | AGE | SINCE | PRINCIPAL OCCUPATION | | A | | C | | F | | NG | | RO | | E | ||||||||||||||||||
 | Francisco L. Borges | 63 | 2007 | Chairman, Landmark Partners, LLC | | | |  | | | | X | | X | | X | |||||||||||||||||
 | G. Lawrence Buhl | 68 | 2004 | Former Regional Director for Insurance Services, Ernst & Young LLP | | | | X | | | | | | | | | |||||||||||||||||
 | Stephen A. Cozen | 75 | 2004 | Chairman, Cozen O'Connor | | | | X | | | | | | | | | |||||||||||||||||
 | Dominic J. Frederico | 62 | 2004 | President and Chief Executive Officer, Assured Guaranty Ltd. | | | | | | | | | | | | X | |||||||||||||||||
 | Bonnie L. Howard | 61 | 2012 | Former Chief Auditor and Global Head of Control and Emerging Risk, Citigroup | | X | | | | X | | | | | | | |||||||||||||||||
 | Patrick W. Kenny | 72 | 2004 | Former President and Chief Executive Officer, International Insurance Society | | | | | | | | X | | | | X | |||||||||||||||||
 | Simon W. Leathes | 67 | 2013 | Non-executive director of HSB-Engineering Insurance Ltd., a UK subsidiary of Munich Re | | X | | | | X | | | | | | X | |||||||||||||||||
 | Michael T. O'Kane | 69 | 2005 | Former Senior Managing Director, Securities Division, TIAA-CREF | | X | | | | | | | | | |||||||||||||||||||
 | Yukiko Omura | 59 | 2014 | Former Vice President, International Fund for Agricultural Development | | | | | | X | | | | X | | ||||||||||||||||||
| | | | | 2014 Meetings | | 5 | | 5 | | 4 | | 4 | | 4 | | 0 | |||||||||||||||||
| Nominee | Age | Director Since | Principal Occupation | Committees |
| Francisco L. Borges | 62 | 2007 | Chairman, Landmark Partners, LLC | Compensation (Chairman); Executive; Nominating and Governance; Risk Oversight |
| G. Lawrence Buhl | 67 | 2004 | Former Regional Director for Insurance Services, Ernst & Young LLP | Risk Oversight (Chairman); Compensation |
| Stephen A. Cozen | 74 | 2004 | Chairman, Cozen O'Connor | Nominating and Governance (Chairman); Compensation |
| Dominic J. Frederico | 61 | 2004 | President and Chief Executive Officer, Assured Guaranty Ltd. | Executive |
| Bonnie L. Howard | 60 | 2012 | Former Chief Auditor and Global Head of Control and Emerging Risk, Citigroup | Audit; Finance |
| Patrick W. Kenny | 71 | 2004 | Former President and Chief Executive Officer, International Insurance Society | Audit (Chairman); Executive; Nominating and Governance |
| Simon W. Leathes | 66 | 2013 | Non-executive director of HSB-Engineering Insurance Ltd., a UK subsidiary of Munich Re | Audit; Executive; Finance |
| Robin Monro-Davies | 73 | 2005 | Former Chief Executive Officer, Fitch Ratings | Executive (Chairman) |
| Michael T. O'Kane | 68 | 2005 | Former Senior Managing Director, Securities Division, TIAA-CREF | Finance (Chairman); Audit |
| Yukiko Omura | 58 | - | Former Vice President, International Fund for Agricultural Development | |
| Wilbur L. Ross, Jr. | 76 | 2008 | Chairman and Chief Executive Officer, WL Ross & Co. LLC | |
A: Audit; C: Compensation; F: Finance; NG: Nominating & Governance; RO: Risk Oversight; E: Executive; 
: Chair
| 2015 PROXY STATEMENT | | PAGE 5 |
INFORMATION ABOUT THE ANNUAL GENERAL
MEETING AND VOTING
WHY DID I RECEIVE A NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS IN THE MAIL INSTEAD OF A FULL SET OF PROXY MATERIALS?
In accordance with the rules of the Securities and Exchange Commission (SEC), instead of mailing a printed copy of the proxy statement, annual report and other materials (which we refer to as proxy materials) for the Annual General Meeting of Shareholders (which we refer to as the Annual General Meeting) of Assured Guaranty Ltd. (which we refer to as AGL, we, us or our; we use Assured Guaranty, our Company or the Company to refer to AGL and its subsidiaries), we are furnishing proxy materials to shareholders on the Internet by providing a Notice Regarding the Availability of Proxy Materials (which we refer to as a Notice) to inform shareholders when the materials are available on the Internet.
If you receive the Notice by mail, you will not receive a printed copy of the proxy materials unless you specifically request one. Instead, the Notice instructs you on how you may access and review all of our proxy materials, as well as how to submit your proxy, over the Internet.
We will first make available the proxy statement, form of proxy card and 20132014 annual report to shareholders atwww.assuredguaranty.com/annualmeeting. The proxy materials will also be available atwww.proxyvote.com on or about March 28, 201427, 2015 to all shareholders entitled to vote at the Annual General Meeting. You may also request a printed copy of the proxy solicitation materials by any of the following methods: via Internet atwww.proxyvote.com; by telephone at 1-800-579-1639; or by sending an e-mail tosendmaterial@proxyvote.com. Our 20132014 annual report to shareholders will be made available at the same time and by the same methods.
We elected to use electronic notice and access for our proxy materials because we believe it will reduce our printing and mailing costs related to our Annual General Meeting.
WHY HAS THIS PROXY STATEMENT BEEN MADE AVAILABLE?
Our Board of Directors is soliciting proxies for use at our Annual General Meeting to be held on May 7, 2014,6, 2015, and any adjournments or postponements of the meeting. The meeting will be held at 8:00 a.m. London Time at our offices at 1 Finsbury Square, London, EC2A 1AE, United Kingdom.
This proxy statement summarizes the information you need to vote at the Annual General Meeting. You do not need to attend the Annual General Meeting to vote your shares.
WHAT PROPOSALS WILL BE VOTED ON AT THE ANNUAL GENERAL MEETING? The following proposals are scheduled to be voted on at the Annual General Meeting: Our Board of Directors recommends that you vote your shares "FOR" each of the nominees and each of the foregoing proposals. ARE PROXY MATERIALS AVAILABLE ON THE INTERNET? Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting to be Held on Wednesday, May Yes. Our proxy statement for the You can obtain directions to attend the WHO IS ENTITLED TO VOTE? March HOW MANY VOTES DO I HAVE? You have one vote for each of our Common Shares that you owned at the close of business on March However, if your shares are considered "controlled shares," which our Bye-Laws define generally to include all of our Common Shares directly, indirectly or constructively owned or beneficially owned by any person or group of persons, or owned by any "United States person," as defined in the U.S. Internal Revenue Code of 1986, as amended, which we refer to in this proxy statement as the Internal Revenue Code or the IRC, and such shares constitute 9.5% or more of our issued Common Shares, the voting rights with respect to your controlled shares will be limited, in the aggregate, to a voting power of approximately 9.5%, pursuant to a formula specified in our Bye-Laws. The Notice indicates the number of Common Shares you are entitled to vote, without giving effect to the controlled share rule described above.Contentsauditorsauditor for 20142015auditorsauditor for, our subsidiary Assured Guaranty Re Ltd. (which we refer to as AG Re)37, 20146, 201520142015 Annual General Meeting, form of proxy card and 20132014 annual report to shareholders are available atwww.assuredguaranty.com/annualmeeting. The proxy materials will also be available atwww.proxyvote.comon or about March 28, 201427, 2015 to all shareholders entitled to vote at the Annual General Meeting.20142015 Annual General Meeting by contacting Virginia Reynolds at + 44 020 7562 1920 or atvreynolds@assuredguaranty.com.$26.06.10, 20149, 2015 is the record date for the Annual General Meeting. If you owned our Common Shares at the close of business on March 10, 2014,9, 2015, you are entitled to vote. On that date, 182,436,254154,413,414 of our Common Shares were outstanding and entitled to vote at the Annual General Meeting, including 48,27343,577 unvested restricted Common Shares. Our Common Shares are our only class of voting stock. The closing price of our Common Shares on March 10, 20149, 2015 was $26.02.10, 2014.9, 2015.
WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER OF RECORD AND AS A BENEFICIAL OWNER? Many of our shareholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially. HOW DO I VOTE BY PROXY IF I AM A SHAREHOLDER OF RECORD? If you are a shareholder of record and you properly submit your proxy card (by telephone, via the Internet or by mail) so that it is received by us in time to vote, your "proxy" (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card (including electronic signatures in the case of Internet or telephonic voting) but do not make specific choices, your proxy will vote your shares as recommended by our Board of Directors (also referred to as our Board or the Board): If any other matter is presented, your proxy will vote in accordance with the best judgment of the individuals named on the proxy card. As of the date of printing this proxy statement, we knew of no matters that needed to be acted on at the Annual General Meeting other than those discussed in this proxy statement. HOW DO I GIVE VOTING INSTRUCTIONS IF I AM A BENEFICIAL OWNER? If you are a beneficial owner of shares, the broker will ask you how you want your shares to be voted. If you give the broker instructions, the broker will vote your shares as you direct. If your broker does not receive instructions from you about how your shares are to be voted, one of two things can happen, depending on the type of proposal. According to rules of the New York Stock Exchange, which we refer to as the NYSE: MAY I VOTE BY TELEPHONE OR VIA THE INTERNET? Yes. If you are a shareholder of record, you have a choice of voting over the Internet, voting by telephone using a toll-free telephone number or voting by requesting and completing a proxy card and mailing it in the return envelope provided. We encourage you to vote by telephone or over the Internet because your vote is then tabulated faster than if you mailed it. There are separate telephone and Internet arrangements depending on whether you are a shareholder of record (that is, if you hold your stock in your own name), or whether you are a beneficial owner and hold your shares in "street name" (that is, if your stock is held in the name of your broker or bank). The telephone and Internet voting procedures are designed to authenticate shareholders' identities, to allow shareholders to give their voting instructions and to confirm that shareholders' instructions have been recorded properly. If you vote via the Internet, you may incur costs, such as usage charges from Internet access providers and telephone companies. You will be responsible for those costs. Whether or not you plan to attend the Annual General Meeting, we urge you to vote. Voting by telephone or over the Internet or by returning your proxy card by mail will not affect your right to attend the Annual General Meeting and vote. MAY I REVOKE MY PROXY? Yes. If you change your mind after you vote, you may revoke your proxy by following any of the procedures described below. If you are a shareholder of record, to revoke your proxy: Beneficial owners who wish to change the votes submitted on their voting instruction cards should contact their respective broker, bank or other nominee to determine how and when changes must be submitted so that the nominee can revoke and change their votes on their behalf. If you wish to revoke your proxy or make changes to your voting instruction card, as applicable, you must do so in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the vote is taken. HOW DO I VOTE IN PERSON AT THE ANNUAL GENERAL MEETING? You may vote shares held directly in your name as the shareholder of record in person at the Annual General Meeting. If you choose to vote your shares in person at the Annual General Meeting, please bring the Notice Regarding the Availability of Proxy Materials containing your control number or proof of identification. Shares held in "street name" through your broker, bank or other nominee, may be voted in person by you only if you obtain a signed proxy from the shareholder of record giving you the right to vote the shares. You must bring such signed proxy to the Annual General Meeting, along with an account statement or letter from the broker, bank or other nominee indicating that you are the beneficial owner of the shares and that you were the beneficial owner of the shares on March Even if you plan to attend the Annual General Meeting, we recommend that you vote your shares in advance as described above so that your vote will be counted if you later decide not to attend the Annual General Meeting. WHAT VOTES NEED TO BE PRESENT TO HOLD THE ANNUAL GENERAL MEETING? To have a quorum for our Annual General Meeting, two or more persons must be present, in person or by proxy, representing more than 50% of the Common Shares that were outstanding on March WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL? The affirmative vote of a majority of the votes cast on such proposal at the Annual General Meeting is required for each of: The vote on executive compensation is advisory in nature so there is no specified requirement for approval. HOW ARE VOTES COUNTED? If you sign (including electronic signatures in the case of Internet or telephonic voting) your proxy card with no further instructions, your shares will be voted in accordance with the recommendations of the Board. If you sign (including electronic signatures in the case of Internet or telephonic voting) your broker voting instruction card with no further instructions, your shares will be voted in the broker's discretion with respect to routine matters but will not be voted with respect to non-routine matters. As described in "How do I Give Voting Instructions if I am a Beneficial Owner?", elections of directors and the advisory vote on executive compensation WHAT IS THE EFFECT OF BROKER NON-VOTES AND ABSTENTIONS? A broker "non-vote" occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. Common Shares that are beneficially owned and are voted by the beneficiary through a broker will be counted towards the presence of a quorum, even if there are broker non-votes with respect to some proposals, as long as the broker votes on at least one proposal. Common Shares owned by shareholders electing to abstain from voting with respect to any proposal will be counted towards the presence of a quorum. Although broker non-votes will be counted towards the presence of a quorum, broker non-votes will not be included in the tabulation of the shares voting with respect to elections of directors or other matters to be voted upon at the Annual General Meeting. Therefore, "broker non-votes" will have no direct effect on the outcome of any proposal to be voted upon at the Annual General Meeting. While abstentions will be counted towards the presence of a quorum, abstentions will not be included in the tabulation of the shares voting with respect to elections of directors or WHAT ARE THE COSTS OF SOLICITING THESE PROXIES AND WHO WILL PAY THEM? We will pay all the costs of soliciting these proxies. Our directors and employees may also solicit proxies by telephone, by fax or other electronic means of communication, or in person. We will reimburse banks, brokers, nominees and other fiduciaries for the expenses they incur in forwarding the proxy materials to you. Morrow & Co., LLC, 470 West Avenue, Stamford, CT 06902, is assisting us with the solicitation of proxies for a fee of WHERE CAN I FIND THE VOTING RESULTS? We will publish the voting results in a Form 8-K that we will file with the SEC by May WILL AGL'S INDEPENDENT PwC will attend the Annual General Meeting and will have an opportunity to make a statement if they wish. They will also be available to answer questions at the meeting. DO DIRECTORS ATTEND THE ANNUAL GENERAL MEETING? Our Corporate Governance Guidelines provide that directors are expected to attend our Annual General Meeting and any special meeting of shareholders we call to consider extraordinary business transactions, unless they are unable to do so as a result of special circumstances. CAN A SHAREHOLDER, EMPLOYEE OR OTHER INTERESTED PARTY COMMUNICATE DIRECTLY WITH OUR BOARD? IF SO, HOW? Our Board provides a process for shareholders, employees or other interested parties to send communications to our Board. Communication with the Board may be anonymous. The Secretary will forward all communications to the Board to the Chairman of the Audit Committee or the Chairman of the Nominating and Governance Committee, who will determine when it is appropriate to distribute such communications to other members of the Board or to management. WHOM SHOULD I CALL IF I HAVE ANY QUESTIONS? If you have any questions about the Annual General Meeting or voting, please contact James M. Michener, our Secretary, at (441) 279-5702 or atjmichener@assuredguaranty.com. If you have any questions about your ownership of our Common Shares, please contact Robert Tucker, our Managing Director, Investor Relations and Corporate Communications, at (212) 339-0861 or atrtucker@assuredguaranty.com. HOW DOES "HOUSEHOLDING" WORK? Please note we may deliver a single copy of the Notice and, if applicable, a single set of our CORPORATE GOVERNANCE2015 PROXY STATEMENT PAGE 7 "Information About the Annual General Meeting and Voting—How"How do I Vote in Person at the Annual General Meeting?" Your broker or nominee has provided a voting instruction cardform for you to use in directing your broker or nominee as to how to vote your shares. You may also vote by telephone or on the Internet as described below under the heading "Information About the Annual General Meeting and Voting—May"May I Vote by Telephone or via the Internet?"4FOR approval of an amendment to our long-term incentive planauditorsauditor for 20142015auditorsauditor for, our subsidiary, AG ReNYSE.compensation or the vote on our incentive plan)compensation) unless they have received instructions from the beneficial owner of the shares52015 PROXY STATEMENT PAGE 9 10, 2014.9, 2015.9, 2015.10, 2014.auditorsauditor for 20142015auditorsauditor for, our subsidiary, AG ReUnder NYSE rules, the approval of the amendment of our long-term incentive plan requires approval by a majority of votes cast (such that the number of votes cast in favor of the proposal exceeds the aggregate of votes cast against the proposal plus abstentions).It will be up toHowever, the Board of Directors and the Compensation Committee value the opinions of our shareholders and will review the voting results carefully. To the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider our shareholders' concerns and the BoardCompensation Committee will evaluate whether any actions are necessary to determine how such vote will impact compensation decisions.6
address those concerns.auditors,auditor, and (iii) the amendment to the long-term incentive plan, and (iv) directing AGL to vote for the ratification of the appointment of AG Re's independent auditorsauditor and the vote on our long-term incentive plan are considered non-routine matters. We will appoint one or more inspectors of election to count votes cast in person or by proxy.PAGE 10 ASSURED GUARANTY except in the case of the amendment of the long-term incentive plan, other matters to be voted upon at the Annual General Meeting. Therefore, abstentions will have no direct effect on the outcome of theany proposal to elect directors, the advisory vote on executive compensation, or the proposals to ratify the appointment of AGL's independent auditors or to approve the subsidiary matters. However, because of NYSE rules, abstentions will have the same effect as a vote against the amendment of the long-term incentive plan.ARE THERE ANY VOTING AGREEMENTS WITH RESPECT TO OUR COMMON SHARES?The funds affiliated with Wilbur L. Ross, Jr., one of our directors, have each agreed that they will vote all of our Common Shares that they own solely in proportion with the votes cast by holders of our Common Shares on any matter put before them.In addition, the funds affiliated with Mr. Ross have each agreed to be subject to the 9.5% voting limitation described in "How many votes do I have?" In the past, the voting rights of the funds were limited by this voting agreement. Currently, the funds own less than 9.5% of our issued Common Shares and the voting agreement will not have any impact on the funds' voting powervoted upon at the Annual General Meeting.7$10,000$11,000 plus out-of-pocket expenses. by May 12, 2015.13, 2014.12, 2015. You canwill also be able to find thethis Form 8‑K8-K on our website atassuredguaranty.com/sec-filings.ACCOUNTANTSAUDITOR ATTEND THE ANNUAL GENERAL MEETING?7, 2014.All but oneEight out of eleven of our directors then in office attended the Annual General Meeting that was held on May 8, 2013.2015 PROXY STATEMENT PAGE 11 820132014 annual report to shareholders and our proxy statement, to households at which two or more shareholders reside, unless an affected shareholder has provided contrary instructions. Individual proxy cards or voting instruction forms (or electronic voting facilities), as applicable, will, however, continue to be provided for each shareholder account. This procedure, referred to as “householding,”"householding," reduces the volume of duplicate information received by shareholders, as well as our expenses. Upon written or oral request, we will promptly deliver, or arrange for delivery, of a separate copy of the Notice and, if applicable, a separate set of our annual report and other proxy materials to any shareholder at a shared address to which a single copy of any of those documents was delivered. To receive a separate copy of the Notice and, if applicable, a separate set of our annual report and proxy materials, you may write or call Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, New York 11717, Attention: Householding Department, telephone (800) 542-1061. Shareholders currently sharing an address with another shareholder who wish to have only one copy of our Notice or annual report and other proxy materials delivered to the household in the future should also contact Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, New York 11717, Attention: Householding Department, telephone (800) 542-1061.9PAGE 12 ASSURED GUARANTY 
OVERVIEW
Our Board of Directors maintains strong corporate governance policies.
The full text of our Corporate Governance Guidelines (which contain our Categorical Standards for Director Independence), our Code of Conduct and each committee charter, are available on our website atassuredguaranty.com/governance. In addition, you may request copies of the Corporate Governance Guidelines, the Code of Conduct and the committee charters by contacting our Secretary via:
| Facsimile | (441) 279-5701 | ||||||
The independent directors meet at regularly scheduled executive sessions without the participation of management or any director who is not independent and our non-management directors meet periodically at executive sessions without the participation of management. The Chairman of the Board is the presiding director for executive sessions of independent directors and non-management directors. Other Corporate Governance Highlights evaluation. Cook has also assisted us in designing our executive compensation program. The Compensation Committee has conducted an assessment of Cook's independence and has determined that Cook does not have any conflict of interest. THE BOARD OF DIRECTORS Our Board oversees our business and monitors the performance of management. The directors keep themselves up-to-date on our Company by discussing matters with our The Board usually meets four times per year in regularly scheduled meetings, but will meet more often if necessary. The Board met DIRECTOR INDEPENDENCE In February As part of its independence determinations, the Board considered the other directorships held by the independent directors and determined that none of these directorships constituted a material relationship with our Company. Director Executive Sessions2015 PROXY STATEMENT PAGE 13 Chief Executive Officer, whom we refer to as the CEO, other key executives and our principal external advisors, such as outside legal counsel, outside auditors, investment bankers and other consultants, by reading the reports and other materials that we send them regularly and by participating in Board and committee meetings.2014, except for Mr. Cozen, who attended 71% of such meetings. Since Mr. Cozen became a member of our Board of Directors more than 10 years ago in 2004, he has attended more than 75% of such meetings in every year except 2014, when he missed one set of Board and committee meetings only because of an unexpected need, as a practicing attorney, to appear before the Supreme Court of Pennsylvania. Mr. Cozen has made significant contributions to our governance outside of formal Board and committee meetings for over a decade, including in 2014.fourfive times during 2013 in addition to our annual business review meeting.2014. All of our directors attended at least 75% of the aggregate number of meetings of the Board of Directors and committees of the Board of which they were a member held while they were in office during the year ended December 31, 2013.2014,2015, our Board determined that, 9 out of 11other than Mr. Frederico, our CEO, all of our directors as well as our new nominee, are independent under the listing standards of the NYSE:Neil BaronBonnie L. HowardMichael T. O'KaneFrancisco L. BorgesPatrick W. KennyYukiko OmuraG. Lawrence BuhlSimon W. LeathesStephen A. CozenRobin Monro-DaviesNYSE. These independent directors constitute substantially more than a majority of our Board of Directors. In making its determination of independence, the Board applied its Categorical Standards for Director Independence and determined that no other material relationships existed between our Company and these directors. A copy of our Categorical11Standards for Director Independence is available as part of our Corporate Governance Guidelines, which are available on our website atassuredguaranty.com/governance.
| PAGE 14 | | ASSURED GUARANTY |
The Board of Directors has established an Audit Committee, a Compensation Committee, a Finance Committee, a Nominating and Governance Committee, a Finance Committee, a Risk Oversight Committee and an Executive Committee.
The Audit Committee | |||||||
Chairman: Patrick W. Kenny | |||||||
Other Audit Committee members:Bonnie L. Howard, Simon W. Leathes, Michael T. O'Kane
The Audit Committee provides oversight of the integrity of our Company's financial statements and financial reporting process, our compliance with legal and regulatory requirements, the system of internal controls, the audit process, the performance of our internal audit program and the performance, qualification and independence of the independent auditor.
The Audit Committee is composed entirely of directors who are independent of our Company and management, as defined by the NYSE listing standards.
The Board has determined that each member of the Audit Committee satisfies the financial literacy requirements of the NYSE and is an audit committee financial expert, as that term is defined under Item 407(d) of the SEC's Regulation S-K. For additional information about the qualifications of the Audit Committee members, see their respective biographies set forth in "Proposal No. 1: Election of Directors."
The Compensation Committee | Chairman: Francisco L. Borges / 5 meetings during 2014 |
Other Compensation Committee members:G. Lawrence Buhl, Stephen A. Cozen
The Compensation Committee has responsibility for evaluating the performance of the CEO and senior management and determining executive compensation in conjunction with the independent directors. The Compensation Committee also works with the Nominating and Governance Committee and the CEO on succession planning.
The Compensation Committee is composed entirely of directors who are independent of our Company and management, as defined by the NYSE listing standards.
The Compensation Committee held five meetings during 2014, including discussions with Cook to review executive compensation trends and peer group compensation data.
The Finance Committee | Chairman: Michael T. O'Kane / 4 meetings during 2014 |
Other Finance Committee members:Bonnie L. Howard, Simon W. Leathes, Yukiko Omura
The Finance Committee of the Board of Directors oversees management's investment of our Company's investment portfolio. The Finance Committee also oversees, and makes recommendations to the Board with respect to, our capital structure, financing arrangements, investment guidelines and any corporate development activities.
| 2015 PROXY STATEMENT | | PAGE 15 |
The Nominating and Governance Committee | |||||||
Chairman: Stephen A. Cozen / 4 meetings during 2014 | |||||||
Other Nominating and Governance Committee members:Francisco L. Borges, Patrick W. Kenny
The responsibilities of the Nominating and Governance Committee include identifying individuals qualified to become Board members, recommending director nominees to the Board and developing and recommending corporate governance guidelines. The Nominating and Governance Committee also has responsibility to review and make recommendations to the full Board regarding director compensation. In addition to general corporate governance matters, the Nominating and Governance Committee assists the Board and the Board committees in their self-evaluations.
The Nominating and Governance Committee is composed entirely of directors who are independent of our Company and management, as defined by the NYSE listing standards.
| The Risk Oversight Committee | |||||||
Chairman: G. Lawrence Buhl | |||||||
Other Risk Oversight Committee members:Francisco L. Borges, Yukiko Omura
The Risk Oversight Committee oversees management's establishment and implementation of standards, controls, limits, guidelines and policies relating to risk assessment and risk management. The Risk Oversight Committee focuses on both the underwriting and surveillance of credit risks and the assessment and management of other risks, including, but not limited to, financial, legal, operational and other risks concerning our Company's reputation and ethical standards.
The Executive Committee | |||||||
Chairman: Robin Monro-Davies | |||||||
Other Executive Committee members:Francisco L. Borges, Dominic J. Frederico, Patrick W. Kenny, Simon W. Leathes
The Executive Committee was established in 2013 to have, and to exercise, all of the powers and authority of the Board in the management of the business and affairs of our Company between regularly scheduled meetings of the Board when, in the opinion of a quorum of the Executive Committee, a matter should not be postponed to the next scheduled meeting of the Board. The Executive Committee's authority to act is limited by our Company's Bye-Laws, rules of the NYSE or applicable law or regulation and the Committee's charter.
As noted above, Mr. Monro-Davies will be retiring from the Board in May 2015. HOW ARE DIRECTORS COMPENSATED? We currently pay our non-management directors an annual retainer of $215,000 per year. We pay $115,000 of the retainer in cash and $100,000 of the retainer in restricted stock. A director may elect to receive his or her entire annual retainer in restricted stock. The restricted stock Table of Our share ownership guidelines require that each director own the greater of (i) at least 25,000 Common Shares or (ii) Common Shares with a market value of at least three times the maximum cash portion of the annual director retainer, before being permitted to dispose of any shares acquired as compensation from our Company. Once a director has reached the share ownership guideline, for so long as he or she serves on the Board, such director may not dispose of any Common Shares if such disposition would cause the director to be below the share ownership guideline. Vested restricted stock, vested restricted share units, which we refer to as RSUs (i.e., units for which Common Shares generally will be received by a director six months after termination of such director's service on the Board), and purchased shares will all count toward the share ownership guideline. All of our directors, other than Ms. Howard, In addition to the annual retainer described above, in general: The Company generally will not pay a fee for attendance at board or committee meetings, although the Chairman of the Board has the discretion to pay attendance fees of $2,000 for extraordinary or special meetings; no such meetings took place in The following table sets forth our The following table shows information related to director awards outstanding on December 31, Our current Chairman is Robin Monro-Davies. Mr. Monro-Davies is retiring from our Board in May 2015 and Francisco L. Borges has been elected Chairman, effective upon Mr. Monro-Davies' retirement. The position of CEO is held by Dominic Frederico. While the Board has no fixed policy with respect to combining or separating the offices of Chairman of the Board and CEO, those two positions have been held by separate individuals since our HOW DOES THE BOARD OVERSEE RISK? The Board's role in risk oversight is consistent with our leadership structure, with the CEO and other members of senior management having responsibility for assessing and managing risk exposure and the Board and its committees providing oversight in connection with these activities. Our Company's policies and procedures relating to risk assessment and risk management are overseen by our Board of Directors. The Board takes an enterprise-wide approach to risk management that is designed to support our business plans at a reasonable level of risk. A fundamental part of risk assessment and risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for us. The Board of Directors annually approves our business plan, factoring risk management into account. The involvement of the Board in setting our business strategy is a key part of its assessment of management's risk tolerance and also a determination of what constitutes an appropriate level of risk for us. While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk assessment and risk management. As discussed under "Committees of the Board," the Board has created a Risk Oversight Committee that oversees the standards, controls, limits, guidelines and policies that our Company establishes and implements in respect of credit underwriting and risk management. It focuses on management's assessment and management of both (i) credit risks and (ii) other risks, including, but not limited to, financial, legal and operational risks, and risks relating to our reputation and ethical standards. Our Risk Oversight Committee and Board pay particular attention to credit risks we assume when we issue financial guaranties. In addition, the Audit Committee of the Board of Directors is responsible for reviewing policies and processes related to the evaluation of risk assessment and risk management, including our major financial risk exposures and the steps management has taken to monitor and control such exposures. It also reviews compliance with legal and regulatory requirements. The Finance Committee of the Board of Directors oversees the investment of the Company's investment portfolio and the Company's capital structure, financing arrangements and any corporate development activities in support of the Company's financial plan. The Nominating and Governance Committee of the Board of Directors oversees risk at the Company by developing appropriate corporate governance guidelines and identifying qualified individuals to become board members. As part of its oversight of executive compensation, the Compensation Committee reviews compensation risk. The Compensation Committee, the Chairman of which is a member of our Risk Oversight Committee, oversaw the performance of a risk assessment of our employee compensation programs to determine whether any of the risks arising from our compensation programs are reasonably likely to have a material adverse effect on us. In January 2011, the Compensation Committee retained Cook to review each of our compensation plans and identify areas of risk and the extent of such risk. The Compensation Committee directed that our Chief Risk Officer work with Cook to perform such risk assessment and to be sure that compensation risk is included in our enterprise risk management system. In conducting this assessment, Cook and our Chief Risk Officer focused on our incentive compensation programs in order to identify any general areas of risk or potential for unintended consequences that exist in the design of our compensation programs and to evaluate our incentive plans relative to our enterprise risks to identify potential areas of concern, if any. The Compensation Committee considered the findings of this assessment of compensation policies and practices and concluded, both after the initial assessment and annually thereafter, that our compensation programs are designed and administered with the appropriate balance of risk and reward in relation to our overall business strategy and do not encourage executives to take unnecessary or excessive risks that could have a material adverse effect on us. In reaching this conclusion, the Compensation Committee considered the following attributes of our compensation program: The Compensation Committee also reviewed our In connection with our 2013 and 2014 compensation, our Chief Risk Officer and Cook reviewed the enterprise risks that we faced as well as our compensation programs and determined that our incentive plans continue to be aligned with sound compensation design principles and do not encourage behaviors that would create material risk for us. Based on this update, and the performance-based nature of a large portion of the equity awards that were granted to our senior executives for 2013 and 2014 compensation, the Compensation Committee continued to find that there is an appropriate balance between the risks inherent in our business and our compensation program. HOW ARE DIRECTORS NOMINATED? In accordance with its charter, the Nominating and Governance Committee identifies potential nominees for directors from various sources. The Nominating and Governance Committee: Although we do not have a formal Board diversity policy, we do believe that diversity among members of the Board is an important consideration and is critical to the Board's ability to perform its duties and various roles. Accordingly, in recommending nominees, the Board considers a wide range of individual perspectives and backgrounds in addition to diversity in professional experience and training. Our Board is currently composed of individuals from different Our Corporate Governance Guidelines additionally specify that directors should be able and prepared to provide wise and thoughtful counsel to top management on the full range of potential issues facing us. Directors must possess the highest personal and professional integrity. Directors must have the time necessary to fully meet their duty of due care to the shareholders and be willing to commit to service over the long term, if called upon. The Nominating and Governance Committee will consider a shareholder's recommendation for director but has no obligation to recommend such candidates for nomination by the Board of Directors. Assuming that appropriate biographical and background material is provided for candidates recommended by shareholders, the Nominating and Governance Committee will evaluate those candidates by following substantially the same process and applying substantially the same criteria as for candidates recommended by other sources. If a shareholder has a suggestion for candidates for election, the shareholder should send it to: Secretary, Assured Guaranty Ltd., 30 Woodbourne Avenue, Hamilton HM 08, Bermuda. No person recommended by a shareholder will become a nominee for director and be included in a proxy statement unless the Nominating and Governance Committee recommends, and the Board approves, such person. If a shareholder desires to nominate a person for election as director at a shareholders meeting, that shareholder must comply with Article 14 of AGL's Bye-Laws, which requires notice no later than 90 days prior to the anniversary date of the immediately preceding Annual General Meeting. This time period has passed with respect to the COMPENSATION COMMITTEE INTERLOCKING AND INSIDER PARTICIPATION The Compensation Committee of our Board of Directors has responsibility for determining the compensation of our executive officers. None of the members of the Compensation Committee is a current or former officer or employee of our Company. No executive officer of our Company serves on the compensation committee of any company that employs any member of the Compensation Committee. WHAT IS OUR RELATED PERSON TRANSACTIONS APPROVAL POLICY AND WHAT PROCEDURES DO WE USE TO IMPLEMENT IT? Through our committee charters, we have established review and approval policies for transactions involving our Company and related persons, with the Nominating and Governance Committee taking the primary approval responsibility for transactions with our executive officers and directors and the Audit Committee taking the primary approval responsibility for transactions with 5% shareholders. No member of these committees who has an interest in a transaction being reviewed is allowed to participate in any decision regarding any such transaction. Our Nominating and Governance Committee charter requires the Nominating and Governance Committee to review and approve or disapprove of all proposed transactions with executive officers and directors that, if entered into, would be required to be disclosed pursuant to Item 404 of Regulation S-K, the SEC provision which requires disclosure of any related person transaction with our Company that exceeds $120,000 per fiscal year. The Nominating and Governance Committee must also review reports, which our General Counsel provides periodically, and not less often than annually, regarding transactions with executive officers and directors (other than compensation) that have resulted, or could result, in expenditures that are not required to be disclosed pursuant to Item 404 of Regulation S-K. Our Audit Committee charter requires our Audit Committee to review and approve or disapprove all proposed transactions with any person owning more than 5% of any class of our voting securities that, if entered into, would be required to be disclosed pursuant to Item 404 of Regulation S-K. In addition, our Audit Committee charter requires the Audit Committee to review reports regarding such transactions, which our General Counsel provides to the Audit Committee periodically, and not less often than annually, regarding transactions with any persons owning more than 5% of any class of the voting securities of AGL that have resulted, or could result, in expenditures that are not required to be disclosed pursuant to Item 404 of Regulation S-K. Our Audit Committee charter also requires the Audit Committee to review other reports and disclosures of insider and affiliated party transactions which our General Counsel provides periodically, and not less often than annually. Our General Counsel identifies related party transactions requiring committee review pursuant to our committee charters from transactions that are: If we have a related person transaction that requires committee approval in accordance with the policies set forth in our committee charters, we either seek that approval before we enter into the transaction or, if that timing is not practical, we ask the appropriate committee to ratify the transaction. WHAT RELATED PERSON TRANSACTIONS DO WE HAVE? From time to time, institutional investors, such as large investment management firms, mutual fund management organizations and other financial organizations become beneficial owners (through aggregation of holdings of their affiliates) of 5% or more of a class of our voting securities and, as a result, are considered "related persons" under the SEC's rules. These organizations may provide services to us. In 2014, the following transactions occurred with As indicated in "Which Shareholders Own More Than 5% of Our Common Shares," Wellington Management Group LLP (formerly Wellington Management Company, LLP) owns approximately 9.54% of AGL's Common Shares outstanding as of DID OUR INSIDERS COMPLY WITH SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING IN Our executive officers and directors are subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. We believe that all of our executive officers and directors complied with all filing requirements imposed by Section 16(a) of the Exchange Act on a timely basis during fiscal year Table of Restrictedand options vest (and, in the case of stock options, are exercisable)vests on the day immediately prior to the firstnext Annual General Meeting at which directors are elected following the grant of the stock or options.stock. However, if, prior to such vesting date, either (i) a change in control (as defined in the Assured Guaranty Ltd. 2004 Long-Term Incentive Plan, as amended) of Assured Guaranty Ltd. occurs before the director terminates service on the Board or (ii) the director terminates service on the Board as a result of such director's death or disability, then the restricted stock and options will vest (and, in the case of stock options, be exercisable) on the date of such change in control or the date of the director's termination of service, whichever is applicable. Grants of restricted stock receive cash dividends and have voting rights; the cash dividends accrue during the vesting period and are paid upon vesting. GrantsPAGE 16 ASSURED GUARANTY stock options may not be sold or otherwise transferred.Contentsand Mr. Leathes and Ms. Omura, who joined the Board in August 2012, May 2013 and May 2013,2014, respectively, meet these share ownership guidelines.chairmen,chairman, of each of the Compensation Committee, the Nominating and Governance Committee, the Finance Committee and the Risk Oversight Committee receive an additional $10,000 annual retainer.2013.2014. We do not pay a fee for being a member, or attending meetings, of the Executive Committee.2015 PROXY STATEMENT PAGE 17 20132014 non-management director compensation, which was paid in May 20132014 for the directors' committee assignments as of such date.Name Fees Earned or
Paid in Cash Stock
Awards(1) All Other
Compensation(2)
Total Neil Baron(3) — — — — Francisco L. Borges(4) $150,000 $100,000 $10,000 $260,000 G. Lawrence Buhl $140,000 $100,000 $11,500 $251,500 Stephen A. Cozen $140,000 $100,000 — $240,000 Bonnie L. Howard $140,000 $100,000 $10,500 $250,500 Patrick W. Kenny(5) $155,000 $100,000 $10,000 $265,000 Simon W. Leathes(6) $200,131 $100,000 — $300,131 Robin Monro-Davies(7) $240,054 $100,000 $14,012 $354,066 Michael T. O'Kane $145,000 $100,000 $5,000 $250,000 Yukiko Omura $135,000 $100,000 — $235,000 Wilbur L. Ross Jr.(8) $115,000 $100,000 — $215,000 plus an additional $15,000 increasefair value, rounded to the annual retainernearest $1,000.each2014.to cover expenses related to attending meetingsof our UK insurance subsidiaries, Assured Guaranty (UK) Ltd. and Assured Guaranty (Europe) Ltd.United Kingdom.stock award.14Name Fees Earned orPaid in CashStockAwardsAll OtherCompensation(1)Total Neil Baron $135,000 $100,000 — $235,000 Francisco L. Borges (2) $140,000 $100,000 $10,000 $250,000 G. Lawrence Buhl $140,000 $100,000 $11,500 $251,500 Stephen A. Cozen $140,000 $100,000 — $240,000 Bonnie L. Howard $140,000 $100,000 — $240,000 Patrick W. Kenny (3) $155,000 $100,000 $5,000 $260,000 Simon W. Leathes (4) $222,353 $100,000 — $322,353 Robin Monro-Davies (5) $268,157 $100,000 $9,897 $378,054 Michael T. O'Kane $145,000 $100,000 $5,000 $250,000 Wilbur L. Ross, Jr. $115,000 $100,000 — $215,000 Walter A. Scott (6) — — $10,000 $10,000 (1)Other compensation consists of matching gift donations which were paid to eligible charities in 2013. In the case of Mr. Buhl, $1,500 of the compensation consists of personal use of our corporate apartment.(2)The cash component of Mr. Borges' compensation was $140,000, of which he elected to receive $100,000 in additional restricted stock and the remainder in cash.(3)The cash component of Mr. Kenny's compensation was $155,000, of which he elected to receive $20,000 in additional restricted stock and the remainder in cash.(4)The fees for Mr. Leathes include £49,926 (which is approximately $82,353 as of December 31, 2013) for serving as an independent director of our UK insurance subsidiaries, Assured Guaranty (UK) Ltd. and Assured Guaranty (Europe) Ltd.(5)The fees for Mr. Monro-Davies include £32,226 (which is approximately $53,157 as of December 31, 2013) for serving as an independent director of Assured Guaranty (UK) Ltd. and Assured Guaranty (Europe) Ltd.(6)Mr. Scott retired from our Board in May 2013 and did not receive any fees or stock awards for 2013.2014:2013:Name Unvested RestrictedStock(1)VestedRestricted Share UnitsVestedStock Options Unvested
Restricted
Stock(1) Vested
Restricted Share
Units Vested
Stock Options Neil Baron 4,310 18,908 8,768 — — 8,768 Francisco L. Borges 8,621 6,621 7,658 8,966 6,737 7,658 G. Lawrence Buhl 4,310 14,997 7,026 4,170 15,260 7,026 Stephen A. Cozen 4,310 14,997 — 4,170 15,260 — Bonnie L. Howard 4,310 — — 4,170 — — Patrick W. Kenny 5,172 25,670 13,561 5,421 26,120 13,561 Simon W. Leathes 4,310 — — 4,170 — — Robin Monro-Davies 4,310 15,787 7,026 4,170 16,064 7,026 Michael T. O'Kane 4,310 15,787 7,026 4,170 16,064 7,026 Wilbur L. Ross, Jr. 4,310 — — Yukiko Omura 4,170 — — PAGE 18 (1)Vests one day prior to the 2014 Annual General Meeting.ASSURED GUARANTYIPO.2004 initial public offering. We believe this is the appropriate leadership structure for us at this time. Mr. Monro-Davies and Mr. Frederico have had an excellent working relationship, which has continued to permit Mr. Frederico to focus on running our business and Mr. Monro-Davies to focus on Board matters, including oversight of our management. Mr. Monro-Davies and Mr. Frederico collaborate on setting agendas for Board meetings to be sure that the Board discusses the topics necessary for its oversight of the management and affairs of our Company. As Chairman of the Board, Mr. Monro-Davies sets the final Board agenda and chairs Board meetings, including15executive sessions at which neither the CEO nor any other member of management is present. The Chairman of the Board also chairs shareholder meetings. We expect this arrangement will continue when Mr. Borges becomes the Chairman of the Board.2015 PROXY STATEMENT PAGE 19 16 awards for 2011 and 2012 compensation and determined our compensation program continued to be low risk for the following additional reasons:PAGE 20 ASSURED GUARANTY a good candidatecandidates for membership on the Board of Directorsnominee'snominees' judgment, experience, independence, understanding of our business or other related industries and such other factors as it determines are relevant in light of the needs of the Board of Directors and our Company17disciplines, including lawyers, accountants and individuals who have industry, finance, executive and international experience.experience, and is composed of both men and women and citizens of both the United States and the United Kingdom. Our Corporate Governance Guidelines address diversity of experience, requiring the Nominating and Governance Committee to review annually the skills and attributes of Board members within the context of the current make-up of the full Board. Our Corporate Governance Guidelines also provide that Board members should have individual backgrounds that when combined provide a portfolio of experience and knowledge that will serve our governance and strategic needs. The Nominating and Governance Committee will consider Board candidates on the basis of a range of criteria including broad-based business knowledge and contacts, prominence and sound reputation in their fields as well as having a global business perspective and commitment to good corporate citizenship. Our Corporate Governance Guidelines specify that directors should represent all shareholders and not any special interest group or constituency. The Nominating and Governance Committee annually reviews its own performance. In connection with such evaluation, the Nominating and Governance Committee assesses whether it effectively nominates candidates for director in accordance with the above described standards specified by the Corporate Governance Guidelines. See each nominee's biography appearing later in this proxy statement for a description of the specific experience that each such individual brings to our Board.2015 PROXY STATEMENT PAGE 21 20142015 Annual General Meeting. With respect to the 20152016 Annual General Meeting, AGL must receive such written notice on or prior to February 6, 2015.2016. Such notice must describe the nomination in sufficient detail to be summarized on the agenda for the meeting and must set forth:Pursuant to its investment agreement with our Company, WLR Recovery Fund IV, L.P. has Board representation rights during the term of the investment by funds affiliated with Wilbur L. Ross, Jr. Mr. Ross is currently a director of AGL and is a nominee for re-election as a director at the 2014 Annual General Meeting.18PAGE 22 ASSURED GUARANTY 19RelationshipsWLR FundsInvestment AgreementPursuant to an investment agreement datedinvestors who reported beneficial ownership of 5% or more of our voting securities.February 28, 2008, which we refer to as the Investment Agreement, with funds that are affiliated with Wilbur L. Ross, Jr., a director of AGL, which we refer to as the WLR Funds, the WLR Funds purchased 10,651,896 Common Shares at $23.47 per share on April 8, 2008. As required pursuant to the terms of the Investment Agreement, AGL maintains a shelf registration statement under the Securities Act of 1933 covering the resale of the Common Shares sold to the WLR Funds pursuant to the Investment Agreement.The Investment Agreement contains a standstill provision limiting the ability of the WLR Funds to purchase Common Shares. On September 16, 2008, we waived the standstill provisions of the Investment Agreement to permit the WLR Funds to purchase up to 5,000,000 Common Shares of our Company in open market transactions from time to time. The WLR Funds have acknowledged and agreed that all of such shares purchased by them will be "Controlled Shares" within the meaning of our Company's Bye-Laws and that all such shares will be subject to the voting agreements and transfer restrictions contained in the Investment Agreement. The WLR Funds have purchased our Common Shares in open market transactions from time to time.On June 24,March 9, 2015. In December 2009, the WLR Funds purchased 3,850,000 Common Shares at $11.00 per share in our Common Shares offering. These shares are also "Controlled Shares" and shares that are subject to the voting agreements and transfer restrictions contained in the Investment Agreement.Repurchase of Common SharesIn June 2013, we purchased from the WLR Funds and Mr. Ross 5,000,000 Common Shares for $109.7 million. The purchase price of $21.94 per share represented a 3% discount from the closing pricebefore Wellington Management Group LLP owned more than 5% of our Common Shares, on the New York Stock Exchange on May 31, 2013. The share purchase reduced the WLR Funds' and Mr. Ross' ownership of our Common Shares to approximately 14.9 million Common Shares, or to approximately 8% of our total Common Shares outstanding at such time, from approximately 10.5% of such outstanding Common Shares.Consulting AgreementIn October 2009, AG Analytics Inc., one of our subsidiaries, entered into a consulting agreement with Invesco Advisors, Inc. (Invesco). Invesco's affiliate, Invesco Private Capital, Inc., is the sole member of WL Ross & Co. LLC; each of Invesco, Invesco Private Capital, Inc. and WL Ross & Co. LLC are ultimately owned by the public company Invesco Ltd. (NYSE: IVZ). Invesco and WL Ross & Co. LLC are sponsors of the Invesco Mortgage Recovery Master Fund, L.P. and its associated investment entities (the PPIP Fund), which was established to invest in residential and commercial mortgage backed securities, residential whole loans, commercial real estate loans and other mortgage related assets. Under the agreement, we provided certain consulting services to Invesco in return for a consulting services fee. Since inception, we have received approximately $500,000 under the agreement. We did not provide any services under the agreement in 2013 and did not receive any payment in 2013. Our consulting services are no longer required and in March 2014, we and Invesco mutually agreed to end the consulting arrangement.Relationship with Wellington Management CompanyGroup.Wellington Management Company, LLP owns approximately 6.55% of AGL's Common Shares, according to a Schedule 13G/A filed on February 14, 2014. In December 2009, we appointed Wellington Management CompanyGroup as investment manager to manage certain of our investment accounts. As of December 31, 2013,2014, Wellington Management CompanyGroup managed approximately $2.4$2.5 billion of our investment assets, which is approximately 22% of our total fixed maturity and short-term investment portfolio. In 2013,2014, we incurred expenses of approximately $1.9 million related to investment management agreements with Wellington Management Company.2013?2014?2013. Due to an administrative error, Mr. Albert was late in reporting the sale in 20122014.2015 PROXY STATEMENT PAGE 23 a fraction of one share, which has subsequently been reported.20
Contents
PROPOSAL NO. 1: ELECTION OF DIRECTORS
GENERAL
Our Bye-Laws provide for a maximum of 21 directors and empower our Board of Directors to fix the exact number of directors and appoint persons to fill any vacancies on the Board until the next Annual General Meeting. The Board may appoint any person as a director to fill a vacancy on the Board occurring as the result of any existing director being removed from office pursuant to the Bye-Laws or prohibited from being director by law; being or becoming bankrupt or making any arrangement or composition with his or her creditors generally; being or becoming disqualified, of unsound mind, or dying; or resigning. The Board may also appoint a person as a director to fill a vacancy resulting from an increase in the size of the Board or a vacancy left unfilled at an Annual General Meeting.
Our Board currently consists of 1110 members. Mr. BaronMonro-Davies is retiring from the Board in May 2014.
Assuming election of the nominees listed in Proposal No. 1 below, there will be 119 members of the Board of Directors following this Annual General Meeting. Following the recommendation of the Nominating and Governance Committee, our Board of Directors has nominated Francisco L. Borges, G. Lawrence Buhl, Stephen A. Cozen, Dominic J. Frederico, Bonnie L. Howard, Patrick W. Kenny, Simon W. Leathes, Robin Monro-Davies, Michael T. O'Kane and Yukiko Omura and Wilbur L. Ross, Jr. as directors of AGL. Other than Yukiko Omura, each nominee is currently serving as a director of AGL. Proposal No. 1 is Item 1A on the proxy card.
Our directors are elected annually to serve until their respective successors shall have been elected and shall have qualified.
| | | |
 | The board of directors recommends that you vote "FOR" the election of the nominees as directors of AGL. | |
| | | |
It is the intention of the persons named as proxies, subject to any direction to the contrary, to vote in favor of the candidates nominated by the Board of Directors. We know of no reason why any nominee may be unable to serve as a director. If any nominee is unable to serve, your proxy may vote for another nominee proposed by the Board, or the Board may reduce the number of directors to be elected. If any director resigns, dies or is otherwise unable to serve out his or her term, or the Board increases the number of directors, the Board may fill the vacancy until the next Annual General Meeting.
We have set forth below information with respect to the nominees for election as directors. Except as otherwise described with respect to Mr. Ross in "How are directors nominated?", thereThere are no arrangements or understandings between any director and any other person pursuant to which any director was or is selected as a director or nominee.
| PAGE 24 | | ASSURED GUARANTY |
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| 2015 PROXY STATEMENT | | PAGE 27 |
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INFORMATION ABOUT OUR COMMON SHARE OWNERSHIP
HOW MUCH STOCK IS OWNED BY DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS?
The following table sets forth information, as of March 10, 2014,9, 2015, the record date for our Annual General Meeting, except as otherwise expressly provided, regarding the beneficial ownership of our Common Shares by our directors nominees and executive officers whose compensation is reported in the compensation tables that appear later in this proxy statement, to whom we refer as our named executive officers, and by our directors nominees and executive officers as a group. Unless otherwise indicated, the named individual has sole voting and investment power over the Common Shares under the column "Common Shares Beneficially Owned." The Common Shares listed for each director nominee and executive officer constitute less than 1% of our outstanding Common Shares, except forthat Mr. Ross, who together with affiliates,Frederico beneficially owns approximately 8.15% of our Common Shares. Mr. Frederico owns approximately 0.94%1.17% of our Common Shares. The Common Shares beneficially owned by all directors nominees and executive officers as a group constitute approximately 10.02%2.35% of our outstanding Common Shares.
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name of Beneficial Owner | Common Shares Beneficially Owned | Unvested Restricted Common Shares (1) | Restricted Share Units (2) | Common Shares Subject to Option (3) | | | Common Shares Beneficially Owned | | | Unvested Restricted Common Shares(1) | | | Restricted Share Units(2) | | | Common Shares Subject to Option(3) | ||||||||||||||
| Robert A. Bailenson | 67,519 | — | 96,185 | 78,000 | 81,452 | — | 116,680 | 74,723 | ||||||||||||||||||||||
| Neil Baron | 16,813 | 4,310 | 18,988 | 8,768 | ||||||||||||||||||||||||||
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| Francisco L. Borges | 163,466 | 8,621 | 6,649 | 7,658 | 171,200 | 8,966 | 6,768 | 7,658 | ||||||||||||||||||||||
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| Russell B. Brewer II | 46,820 | — | 69,133 | 10,000 | 63,067 | — | 80,402 | 18,964 | ||||||||||||||||||||||
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| G. Lawrence Buhl | 28,503 | 4,310 | 15,060 | 7,026 | 32,410 | 4,170 | 15,330 | 7,026 | ||||||||||||||||||||||
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| Stephen A. Cozen | 61,938 | (4) | 4,310 | 15,060 | — | 65,846 | (4) | 4,170 | 15,330 | — | ||||||||||||||||||||
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| Dominic J. Frederico | 826,252 | (5) | — | 693,312 | 900,001 | 966,395 | (5) | — | 627,225 | 845,389 | ||||||||||||||||||||
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| Bonnie L. Howard | 8,347 | 4,310 | — | — | 12,255 | 4,170 | — | — | ||||||||||||||||||||||
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| Patrick W. Kenny | 29,059 | 5,172 | 25,778 | 13,561 | 30,000 | 5,421 | 26,240 | 13,561 | ||||||||||||||||||||||
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| Simon W. Leathes | — | 4,310 | — | — | 3,424 | 4,170 | — | — | ||||||||||||||||||||||
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| James M. Michener | 190,991 | — | 92,195 | 240,000 | 216,183 | — | 103,464 | 198,964 | ||||||||||||||||||||||
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| Robert B. Mills | 209,504 | (6) | — | 49,078 | 340,000 | 231,911 | (6) | — | 32,475 | 265,602 | ||||||||||||||||||||
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| Robin Monro-Davies | 44,953 | 4,310 | 15,853 | 7,026 | 48,377 | 4,170 | 16,138 | 7,026 | ||||||||||||||||||||||
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| Michael T. O'Kane | 27,953 | 4,310 | 15,853 | 7,026 | 31,861 | 4,170 | 16,138 | 7,026 | ||||||||||||||||||||||
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| Yukiko Omura | — | — | — | — | — | 4,170 | — | — | ||||||||||||||||||||||
| Wilbur L. Ross, Jr. | 14,859,339 | (7) | 4,310 | — | — | |||||||||||||||||||||||||
| All directors, nominees and executive officers as a group (18 individuals) | 16,700,824 | 48,273 | 1,225,011 | 1,707,066 | ||||||||||||||||||||||||||
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| All directors and executive officers as a group (16 individuals) | 2,095,898 | 43,577 | 1,185,084 | 1,529,023 | ||||||||||||||||||||||||||
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| 2015 PROXY STATEMENT | |
This column includes 297,131, 23,062 and 37,907 share units allocated to Mr. Frederico, Mr. Michener and Mr. Bailenson, respectively, and 28,872 share units allocated to another executive officer, due to their elections to invest a portion of their respective AGL Supplemental Executive Retirement Plan or AGCAssured Guaranty Corp Supplemental Executive Retirement Plan accounts in an employer stock fund.
WHICH SHAREHOLDERS OWN MORE THAN 5% OF OUR COMMON SHARES? The following table shows all persons we know to be direct or indirect owners of more than 5% of our Common Shares as of the close of business on March 10, 2014,9, 2015, the record date for the Annual General Meeting, unless otherwiseexcept to the extent indicated. On March 10, 2014, 182,436,2549, 2015, 154,413,414 Common Shares were outstanding, including 48,27343,577 unvested restricted Common Shares. Our information is based on reports filed with the SEC by each of the firms listed in the table below. You may obtain these reports from the SEC.
| Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Class | |||
WL Ross Group, L.P.(1) 1166 Avenue of the Americas New York, NY 10036 | 14,863,649 | 8.15 | % | ||
Wellington Management Company, LLP(2) 280 Congress Street Boston, MA 02210 | 11,955,248 | 6.55 | % | ||
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| Name and Address of Beneficial Owner | | | Number of Shares Beneficially Owned | | | Percent of Class | |||||
| Wellington Management Group LLP 280 Congress Street Boston, MA 02210 | 14,724,095 | (1) | 9.54% | ||||||||
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| Fine Capital Partners, L.P. 590 Madison Avenue, 27th Floor New York, New York 10022 | 11,276,884 | (2) | 7.30% | ||||||||
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| The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 9,612,551 | (3) | 6.23% | ||||||||
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| PAGE 30 | |
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Our executive compensation program is designed to attract and retain talented and experienced business leaders who drive our corporate strategies and build long-term shareholder value. The guiding principles of our program are: We assess performance using pre-established measures of success that are tied to our key business strategies. We encourage balanced performance, measured relative to financial, non-financial and share price goals, and discourage excessive risk taking or undue leverage by avoiding too much emphasis on any one metric or on short-term results. 2014 Highlights In 2014, we accomplished the following key objectives: We further optimized our capital management, primarily by returning excess capital to our shareholders through repurchases of our Common Shares and our quarterly dividends. We increased new business production, with contributions from our U.S. public finance, international infrastructure and global structured finance business. For the first time since 2009, our present value of new business production (which we refer to as PVP) increased year over year and our U.S. public finance business production exceeded the business plan. We improved our financial We created value from our insured portfolio through loss mitigation and other loss recovery strategies. We achieved these strategic goals despite a persistent challenging business environment. The achievements described in this section were important considerations in determining the compensation of our named executive officers (whom we refer to as our executive For the In November 2013, * Includes $3.4 million of severance accruals. In 2014, we achieved or exceeded all but two of the financial Executive Compensation Program Changes In response to the shareholder advisory vote on the compensation of our executive officers (commonly known as the say-on-pay proposal) at our 2014 Annual General Meeting, at which 61% of the Common Shares voting approved our executive compensation, we engaged in After assessing which compensation and governance practices are priorities for our shareholders, the Compensation Committee modified the executive Table of Key Compensation Improvements Since 2011 We strive to engage in • Adopted a formulaic approach to determine cash incentive compensation for executive officers • Eliminated awards to executive officers under the PRP, our deferred cash-based incentive plan, in order to provide all long-term compensation in the form of equity and enhance the alignment between executive and long-term shareholder interests • Revised the equity component of variable incentive compensation to include performance-based share units, with vesting tied to the achievement of share price hurdles • Simplified the compensation program, including awarding equity to the CEO annually rather than every other year • Eliminated employment agreements • Reduced perquisites previously provided under employment agreements and adopted a minimal perquisite policy • Reduced severance benefits previously provided under employment agreements and adopted an executive severance plan • Eliminated tax gross-ups • Eliminated single-trigger accelerated vesting of stock-based awards upon a change of control • Improved the selection of companies within the comparison group • Adopted an anti-hedging policy that explicitly prohibits employees and directors from hedging the Common Shares • Continued our anti-pledging policy, stock ownership guidelines, executive officer recoupment policy, and annual risk analysis Our Compensation Committee A Snapshot of Our CEO's 2014 Compensation For 2014, Mr. Frederico received a compensation package composed of the following: In contrast, for 2013, Mr. Frederico received the following compensation: Executive Compensation Program Structure and Process Overview of Philosophy and Design Our executive compensation program is designed to recognize and reward We align pay with performance. Our executive officers Executive compensation For the 2014 performance year, the compensation 2013 HighlightsIn 2013, Assured Guaranty achieved significant progress in
2015 PROXY STATEMENT PAGE 31 areas. These accomplishmentsresults by reassuming previously ceded business and making acquisitions.officers' compensationofficers) for the year.We achieved strong financial performance, earning $609 million of operating income, resultingyear, and are discussed in $2.4 billion of operating income generated overmore detail under "2014 Executive Performance."past four years.We increased operating shareholders’ equity tothird year in a record $33.83 per share and adjusted book value per share to $49.58 at year end.Our operating return on equity was strong at 10.2%.After taking into account our growing capital in our U.S. subsidiaries, we developed a plan to manage our group capital efficiently and became tax resident inrow, the United Kingdom.We reduced our insured leverage by 15% during the year (and 45% over the last four years) to increase our financial strength.We terminated or agreed to terminate $7 billion of net par outstanding on policies across which we accelerated the earning of 100% of the expected premium. Total terminations including certain other accelerations contributed $144 million to pre-tax operating earnings for the year.The price of our Common Shares improved significantly in 2013,continued to improve, closing at $23.59$25.99 on December 31, 2013, compared to $14.23 on December 31, 2012. On March 10, 2014, the record date, the price of one of our Common Shares closed at $26.02.2014. The table below compares the total shareholder return (TSR) on our Common Shares against the S&P 500 Financial Index on a one, threeone-, two- and five yearthree-year basis and from January 1, 2014 through March 10, 2014.Total Shareholder Return 1/1/2014 – 3/10/14 1 year(2013) 3 years(2011-2013) 5 years(2009-2013)S&P 500 Financial Index 2.5% 35.6% 44.8% 90.2% Assured Guaranty Ltd. TSR 10.8% 68.8% 41.2% 124.7% We returned $264 million to our shareholders through share repurchases.We raised our quarterly dividend in both 2013 and 2014, increasing it by 22% over the past two years, from $0.09 per Common Share to $0.11 per Common Share.We established Municipal Assurance Corp. (MAC), a company that only insures U.S. public finance obligations, in response to market needs. MAC began issuing policies in August.During a year in which U.S. public finance issuance and interest rates remained generally low, and in which Moody’s downgraded our financial strength rating, we issued financial guaranties on $9.4 billion of obligations in the primary and secondary markets, with a present value of new business production (PVP) of $141 million. These included large, medium and small sized U.S. municipal general obligations and revenue bonds well diversified by geography and bond sector, as well as approximately £240 million of U.K. infrastructure bonds across three transactions that produced $18 million of PVP.29We continued to pursue alternative strategies for creating value, including mitigating our losses by actively participating in restructuring efforts, entering into settlements, pursuing litigation and purchasing obligations we have insured.In 2013, we resolved several troubled U.S. public finance exposures, including our exposure to Jefferson County, Alabama, which had filed for bankruptcy protection under Chapter 9 of the U.S. Bankruptcy Code; Harrisburg, Pennsylvania, which was in receivership; and the Foxwoods Casino run by the Mashantucket Pequot Tribe in Connecticut. We also reached a tentative settlement with Stockton, California, which had filed for bankruptcy protection under Chapter 9.In addition, with respect to our exposure to U.S. residential mortgage-backed securities (RMBS), in 2013 we entered into a number of settlement agreements with providers of representations and warranties (R&W) in transactions we insured that, in the aggregate, resulted in those providers paying or agreeing to pay over $700 million (gross of reinsurance) in respect of their R&W liabilities. As of December 31, 2014.
PAGE 32 ASSURED GUARANTY after taking into account earlier U.S. RMBS settlement agreements that we have entered into and loan repurchases made pursuant to our demands, we have caused such providers to pay or agree to pay approximately $3.6 billion (gross of reinsurance) in respect of their R&W liabilities.We purchased $331 million of bonds that we insure, at 70% of their par value, which mitigated expected losses on those securities and contributed to adjusted book value.Although we were not able to maintain the Moody’s financial strength ratings that had been assigned to our insurance subsidiaries, we did maintain our financial strength ratings from S&P and we maintained financial strength ratings with stable outlooks from all rating agencies through the end of 2013. We obtained financial strength ratings for MAC of AA- from S&P and AA+ from Kroll Bond Rating Agency.The Compensation Committee in making its decisions on 2013 compensationestablished seven financial performance goals for our executive officers determinedfor the 2014 performance year, based on the business plan that despite the difficult economic environmentBoard of Directors reviewed and approved at that time. The table below summarizes our 2014 results against these goals. Further detail regarding the performance of our executive officers against these goals may be found under "2014 Executive Performance—2014 Results Against Targets."
strength rating challengesgoals, and our results were only slightly below target for the goals we faceddid not meet.2013,a multi-faceted review of our executive compensation program in an effort to improve the program. As discussed in more detail under "Executive Compensation Program Structure and Process—Outreach on Our Executive Compensation Program," the effort included:officers had succeededofficer compensation program for 2015 performance, and also decided to apply certain of the changes to the compensation awarded for 2014 performance. We summarize these changes below, and discuss them in taking advantagemore detail under "Executive Compensation Program Structure and Process—Changes to Our Executive Compensation Program."2015 PROXY STATEMENT PAGE 33 other opportunitiesContents
PAGE 34 ASSURED GUARANTY 
the marketbest governance practices. Since 2011, we have made a substantial number of changes to create shareholder value. Theour executive compensation program.also soughthas made efforts to address our shareholders' concerns and improve our executive compensation program in a manner that we believe should receive greater shareholder support. Details about the changes to the program are discussed in "Executive Compensation Program Structure and Process—Changes to Our Executive Compensation Program."2015 PROXY STATEMENT PAGE 35 
PAGE 36 ASSURED GUARANTY theoutstanding achievement and to attract, retain and motivate our executive officers forin a competitive environment. We maintain an ongoing dialog with our shareholders and incorporate their continued efforts despite economic headwinds at a critical juncture infeedback into our Company's history.Compensation Highlightsprogram so that the program is aligned with their interests.Assured Guaranty’s compensation Our program has been designed to rewardrewards performance by having more variable and performance-based compensation at the moremost senior levels of our Company.levels. We use a mix of variable incentiveat-risk compensation with different time horizons and payout forms to provide an incentive for both annual and long-term sustained performance overperformance. The Compensation Committee assesses the longer term. The performance of our executive officers is assessed from both a financial and a non-financial perspective.Most of the pay of ourperspective, using pre-established goals.consists of variable incentive compensation, in the form of an annualcan receive a cash incentive, as well as long-term equity incentives and deferred cash incentives. Thewhich is performance-based. They can also receive a long-term equity incentive, compensation has50% of which is performance-based and vests at the end of a performance-based component in that the vesting is based on the achievement ofthree-year performance period if we achieve an average share price target, and a50% of which is time-based component, in that the vesting occursand vests at the end of a three-year period. For the deferred cash incentives, the amount distributable is contingent on future financial performance.We adopted aThe long-term equity incentive strategyis structured to cover awards for 2011encourage retention and 2012 compensation; our CEO received a two-year award and the other executive officers received annual awards with the same terms and conditions as the CEO's awards. For 2013long-range mindset.we enhanced the performance orientation of the long-term equity incentive strategy, simplified the elements of our executive compensation package, and created a program that is expected to remain in place for several years.For 2013 performance, approximately 55% of the long-term incentive compensation for the CEO is performance-based, meaning that the vesting or the amount distributable depends on the achievement of specified goals or on our financial performance; the comparable percentage for the other named executive officers is approximately 65%.30We have engaged with our investors and improved our executive compensation program based on their feedback.Our shareholders in 2013 approved the compensation of our executive officers with an approval vote of 68%. We believe our shareholders recognize the improvements we made to our executive compensation program for 2011 and 2012 compensation. However, despite the strong support on our say-on-pay resolution, we understand that some shareholders were not satisfied with our executive compensation changes. In 2013, we reached out proactively to the holders of approximately 64% of our outstanding shares, and had meaningful discussions with 17 shareholders who held approximately 59% of such shares, to better understand their concerns. We did not specifically engage with WL Ross Group, L.P., which together with our director Mr. Ross, owned approximately 10.26% of our Common Shares at the time, due to the fact that we have an ongoing dialog with Mr. Ross and because under the voting agreement with WL Ross Group, L.P., the funds affiliated with Mr. Ross vote all of the Common Shares they own in proportion with the votes cast by the other holders of our Common Shares on any matter put before them.We have adjusted our executive compensation program in consideration of our shareholder interactions, including modifications to our long-term incentive awards for 2013 performance to: focus more on equity awards and less on cash; simplify the array of incentive compensation; and award the CEO a one-year equity incentive compensation grant rather than a two-year grant.Over the past few years, we have eliminated pay practices from our executive compensation program that some of our shareholders may have deemed objectionable, resulting in a more shareholder-focused program.None of our executive officers have employment agreements. Employment agreements that had been in place that provided for certain severance benefits and perquisites have been eliminated.We reduced a number of perquisites that had been provided under employment agreements and have adopted a perquisite policy.We reduced the severance benefit that had been provided under employment agreements and have adopted a severance policy.We do not provide any tax gross-ups.There are no "single trigger" accelerated vesting of stock-based awards granted on or after April 2011 upon a change in control.We more closely tied our executive compensation program to our Company's long-term performance.The Compensation Committee of our Board of Directors and management made significant changes to our executive compensation program for 2011 and 2012 compensation in order to strengthen the linkage between pay and long-term Company performance.The compensation program wasis structured with upside potential for superior executive achievements, as well asbut also the possibility of reduced compensation if executives wereare unable to successfully execute ourthe Company's strategies. The structure was intendedBy increasing management's motivation to increase management motivation for longer term increase inenhance shareholder value and thereby align more closelyover the long term, our compensation program aligns executive officer and shareholder interests. The revisedprogram was also structured with a view to retain management.officers contained three principal elements.The performance equity awards that were developed only vest ifpackage for the highest 40-day average price of our Common Shares reaches certain thresholds during a three-year performance period, as described in more detail below, which further aligned executive pay and Company performance. The changes reflected input from our shareholders, proxy advisor groups and Cook.
| Principal Elements of Executive Compensation Package | |||
| Based on responsibilities, skill set and | |||
| Cash Incentive Compensation | |||
| 50% performance share units that may be earned over a 3-year performance period based on share price targets | ||
50% RSUs that vest at the end of | ||
The Compensation Committee conducts in-depth reviews of performance and then applies judgment to make compensation decisions, rather than relying solely on rigid calculations to determine incentive award payouts.decisions. The Compensation Committee believes its process, described below, is an effective way to assess the quality of performance, risk management and leadership demonstrated by Mr. Frederico and histhe senior management team.
| 2015 PROXY STATEMENT | | PAGE 37 |
In making its compensation decisions, the Compensation Committee:
Outreach on Our Executive Compensation Program
Between the full Board the full-year financial and strategic performance at length, seeking to understand what was accomplished relative to established objectives, how it was accomplished, the qualityfiling of the financial results, and strategic positioningproxy statement for future competitive advantage,the 2014 Annual General Meeting and the CEO's and other executive officers' individual performance
At our outreach on our say-on-pay resolution by indicating that they would prefer the long-term incentive awards granted by the Compensation Committee to focus more on equity awards and less on cash and to be more heavily weighted towards equity grants the vesting of which is more performance-based and less time-based.
Informed by this review, we contacted holders of 64% of our Common Shares and invited them to discuss our executive compensation program directly with Mr. Borges, the chairman of the Compensation Committee. Over the course of the fall and winter of 2014, Mr. Borges spoke with investors holding 35% of our Common Shares. The Compensation Committee, senior management and Cook analyzed and discussed what we learned in this engagement process.
After assessing which compensation and governance practices are priorities for our investors, Mr. Borges also spoke to one of the proxy advisory services, which had recommended that our investors vote against the say-on-pay proposal in 2014, to discuss their concerns.
We learned that our shareholders generally support our executive compensation program and were not seeking major changes, but they did offer ideas for improvement. Most shareholders were not prescriptive about plan design, and instead
| PAGE 38 | | ASSURED GUARANTY |
were more interested in seeing that results were aligned appropriately with performance. Some elements preferred by certain shareholders and one of the proxy advisory services include:
Changes to Our Executive Compensation Program
Based on the feedback of our investors, the Compensation Committee modified the executive officer compensation that will be awarded for 2015 performance, and also decided to apply certain of the changes to the compensation awarded for 2014 performance. This section discusses the four significant design changes that emerged from the Compensation Committee's work.
Adopted a Formula-Based Cash Incentive Plan
The Compensation Committee adopted a more formulaic approach to determine the executive officers' cash incentive, thus enhancing the transparency of our process.
The Compensation Committee uses a two-step process for granting and paying annual cash incentive compensation awards to executive officers. For the first step, in order for the payment of annual cash incentive to qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code, the Compensation Committee annually establishes a performance goal based on performance metrics, and awards the annual cash incentive to the executive officers pursuant to the Assured Guaranty Ltd. 2004 Long-Term Incentive Plan, as amended (LTIP), subject to such performance goal being met. If the performance goal is not met, no cash incentive will be awarded to the executive officers for such year. If the performance goal is met, a cash pool is established pursuant to which payments can be made to the executive officers subject to limitations contained in the LTIP and to further limitations established by the Compensation Committee in the grant. For the second step, if the Section 162(m) performance goal has been met for a particular performance year, the Compensation Committee uses discretion to determine the actual amount payable to each executive officer for such performance year based on factors and criteria as determined by the Compensation Committee, provided that such discretion cannot be used to increase the amount that was determined to be payable to each executive officer pursuant to the first step.
The Compensation Committee adopted a more formulaic approach to applying its discretion and determining the amount actually paid to the executive officers. Following certification that our performance goal was met for 2014, the Compensation Committee used the approach set forth below to determine the amount paid as cash incentive compensation for the 2014 performance year for each executive officer. Details about the individual awards are set out in "2014 CEO Performance Review Process and Decisions" and "2014 Other Executive Officer Compensation Decisions" below. If the Company meets our performance goal for the 2015 performance year, the Compensation Committee will use this formula again to determine the amount of cash incentive compensation payable for that year.
For an applicable performance year, the Compensation Committee establishes target financial performance measures for our Company and individual non-financial objectives for our CEO and the other executive officers. The targets are derived from the business plan for the performance year.
| 2015 PROXY STATEMENT | | PAGE 39 |
The Compensation Committee has decided to use the five measures it believes are the most important for assessing Assured Guaranty's performance, and has assigned weightings to the goals, as described below.
The cash incentive compensation is linked to the financial performance goals shown below, each of which has a weighting of 13.4%, for a total of 67%. The remaining 33% of the cash incentive compensation is linked to non-financial performance objectives, which were established taking into account the nature of our business. The Compensation Committee believes qualitative goals are necessary to fully evaluate the annual achievements that benefit our shareholders, and it does not individually weight the non-financial objectives because it believes it is more appropriate to evaluate the level of achievement of all of the objectives in their totality. The non-financial objectives for Mr. Frederico, our CEO, are set out below. For the executive officers other than Mr. Frederico, the Compensation Committee evaluates how much those executives contributed to Mr. Frederico's non-financial objectives and the extent of such executives' personal achievements of their individual non-financial objectives, which are discussed under "2014 Other Executive Officer Compensation Decisions."
Based on the executive officer's achievements of these priorities, the individual payouts of the cash incentive are calculated as follows:
The Compensation Committee assigns each executive an Individual Target Cash Incentive Amount, which is calculated as a multiple (we call this the Individual Target Cash Incentive Multiple) of the executive officer's base salary. The amounts of the base salary and Individual Target Cash Incentive Multiples vary by individual based on the executive officer's position and
| PAGE 40 | | ASSURED GUARANTY |
level of responsibility, historic pay level and Cook's advice about the compensation practices of companies in our comparison group. The current share priceIndividual Target Cash Incentive Multiples for the executive officers are:
| Executive Officer | | | 2014 Individual Target Cash Incentive Multiple (of Base Salary) | |||
| Dominic Frederico, Chief Executive Officer | 2.50x | |||||
| | | | | | | |
| James M. Michener, General Counsel | 2.00x | |||||
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| Robert B. Mills, Chief Operating Officer | 2.50x | |||||
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| Robert A. Bailenson, Chief Financial Officer | 1.65x | |||||
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| Russell B. Brewer II, Chief Surveillance Officer | 1.65x | |||||
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Then, for each executive, the Compensation Committee calculates and aggregates the weighted achievement scores for the financial performance goals and the individual non-financial objectives. When assessing the level of achievement and assigning scores for the year, the Compensation Committee takes into account the difficulty of achieving particular goals or objectives. The Compensation Committee has discretion to assign achievement scores of up to 200% for outstanding performance and achievement scores of down to 0% for performance below target.
Illustration:
In the case of Mr. Frederico, for the 2014 performance year the Compensation Committee calculated and aggregated the weighted achievement scores for the financial performance goals and his individual non-financial objectives, taking into account the level of difficulty of achieving particular goals or objectives, and determined that his aggregate achievement score was 152.8%. The level of achievement for each performance goal and each non-financial objective is discussed in detail under "2014 CEO Performance Review Process and Decisions."
| | | Weighting | | | Weighted Achievement Score | ||||||
| Financial Performance Goals | 67% | 86.8% | |||||||||
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| Individual Non-Financial Objectives | 33% | 66.0% | |||||||||
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| TOTAL | 100% | 152.8% | |||||||||
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Based on Mr. Frederico's achievements, after applying the formula, the Compensation Committee awarded him a cash incentive equal to 152.8% of his Individual Target Cash Incentive Amount.
(2.50 × $950,000) × (86.8% + 66.0%) = $3,629,000
For the 2014 and the 2015 performance years, the Compensation Committee used and will use five financial goals rather than the seven performance measures it previously considered, in order to simplify the compensation program and focus on the key metrics that are most critical to our Company’s book value, operating shareholders’ equity and adjusted book value. business.
| 2015 PROXY STATEMENT | | PAGE 41 |
Changed the Mix of Long-Term Incentive Compensation to Emphasize Equity Compensation Rather Than Cash
The Compensation Committee determined to establish thresholds that would motivateprovide less cash-based compensation and more equity-based awards. Accordingly, for the executive officers2014 performance year, the Compensation Committee determined to closeaward long-term incentive compensation only in the gap between the priceform of our Common Shares. Half of the Common Shares atnominal value of the timeaward was in the form of grant and these performance measures.
For the executive officers, the Compensation Committee determined specific grantshad already significantly reduced awards under our PRP as a component of long-term incentive compensation granted for the 2013 performance year compared with awards for the previous year. After learning that shareholders think the PRP is complex and prefer the executive officers to receive less cash in their long-term incentive compensation mix, the Compensation Committee decided to eliminate altogether PRP awards to the executive officers based on a calculation using a methodology recommended by Cook.
The Compensation Committee intends that these changes will be continued in the compensation it awards the executive officers for the 2015 performance year.
| PAGE 42 | | ASSURED GUARANTY |
Modified the New Performance Share Unit Awards in Order to Reward Sustained Growth
General
The Compensation Committee reviewed the structure of the performance share units to determine whether they were providing the executive officers with the intended performance incentive. Each performance share unit represents a contingent right to receive up to two of our Common Shares. The Compensation Committee divided a target nominal valueawards performance share units with the intent of aligning executive pay with our Company's performance, as measured by the price of our Common Shares.
The percentage of performance share unit grants by $26.21, which representsunits an executive can earn is based on the price of our Common Shares over a Monte Carlo simulation model value for3-year performance period. For each 40 consecutive trading day sequence that occurs during a performance period, we calculate the average price of a Common Share as traded on the New York Stock Exchange during that time. The highest average is used to determine whether a share price hurdle has been reached, and consequently, the percentage of the performance share units that has been adjustedearned. For the performance share unit awards granted for the 2011, 2012 and 2013 performance years, any 40 consecutive trading day sequence occurring during the relevant 3-year performance period could generate the highest average share price.
Although performance share units may be earned at any time during the performance period, they generally do not vest until the performance period ends. This gives the executive officers an incentive to sustain the price of the Common Shares.
Results of Grant for the 2011 Performance Year (2012-2014 Performance Period)
The Compensation Committee evaluated the results of the grant of performance share units for the 2011 performance year at the conclusion of the 3-year performance period (2012-2014) for that grant. The Compensation Committee also reviewed the results of a grant of performance stock options made in that year. (In response to shareholder concerns about the complexity of the compensation mix, the Compensation Committee has not granted performance stock options for the most recent two performance years.)
The following table shows the percentage of performance share units and performance stock options granted for the 2011 performance year that could be earned if the highest average share price over 40 consecutive trading days occurring in the 2012-2014 performance period reached the stated share price hurdles. Straight line interpolation is used to calculate percentages between prices.
| Highest 40 consecutive trading day average share price hurdle | | Performance Share Units Earned | | Performance Stock Options Earned | ||||
$18 | 35% | 35% | ||||||
| | | | | | | | | |
| $24 | 100% | 50% | ||||||
| | | | | | | | | |
| $30 | 200% | 100% | ||||||
| | | | | | | | | |
| 2015 PROXY STATEMENT | | PAGE 43 |
In the 2012-2014 performance period, the highest average share price over any 40 consecutive trading days was $25.27. As a result, 121% of the performance share units and 60% of the performance stock options were earned and vested at the end of the performance period. For example, Mr. Frederico's performance-based equity compensation has the following value, when calculated based on the $25.99 closing price of one of our Common Shares on December 31, 2014:
| Compensation Committee Target Value | | Equity Granted | | Percentage Earned | | Value of Equity | ||||||||
Performance share units | $2,500,000 | 112,923 | 121% | $3,551,191 | ||||||||||
| | | | | | | | | | | | | | | |
| Performance stock options | $1,250,000 | 184,910 | 60% | $948,588 | ||||||||||
| | | | | | | | | | | | | | | |
| TOTAL | $3,750,000 | $4,499,779 | ||||||||||||
| | | | | | | | | | | | | | | |
In granting the performance-based equity, the Compensation Committee wanted to motivate the executive officers to work diligently to increase the share price by $22.69 (the 40-day averageproviding upside potential if the share price did rise, while providing no benefit if the share price did not improve or if the executive officer ceased to be employed by us at the end of the performance period.
The Compensation Committee noted that, although the price of our Common Shares)Shares had improved significantly over the performance period, increasing almost 98% from $13.14 per share on December 30, 2011, to $25.99 per share on December 31, 2014, the value of the performance share units to be received by Mr. Frederico increased only 42% above the Compensation Committee's target value at the time of the grant, and the number of additional shares he would receive upon vesting increased only 21% above the number he was granted. To better align the reward with the achievement, the Compensation Committee increased the vesting percentage at the first share price hurdle, as discussed in greater detail below.
Modifications to the new performance share unit awards
The Compensation Committee and Cook considered the elements of the performance share units that determine their value:
Ultimately, the Compensation Committee decided to adjust the time period for calculating whether a share price hurdle has been reached, to change the vesting percentage at the first share price hurdle, and to change the methodology for determining the number of performance share units to grant.
Calculation methodology. In response to shareholder feedback that the executive officers do not have an incentive to maintain the price of the Common Shares when amounts can be earned at any point during the performance period, and that the share price at the end of the performance period may be lower than the price at which the performance share units were earned, the Compensation Committee considered whether to continue to use an average price model over sequences of 40 consecutive trading days, or to develop a different methodology, such as a consecutive day model, where the share price would need to remain above a certain price over a number of days.
After consideration, the Compensation Committee decided it is appropriate to continue to use an average price model over sequences of 40 consecutive trading days to calculate whether a share price hurdle has been attained. An average price model minimizes the effect of short-term volatility in the share price by $21.15 (the closingmaking the share price for each day equally
| PAGE 44 | | ASSURED GUARANTY |
relevant. In contrast, a consecutive day model would permit a single errant drop in the share price to be the relevant value for the sequence.
Although the Compensation Committee chose to maintain the calculation methodology, it did strengthen the alignment between executive pay and our Company's performance by providing that, for the performance share units granted for the 2014 performance year, only sequences occurring in the second half of the 3-year performance period can be considered when the Compensation Committee determines the highest average share price over 40 consecutive trading days. Allowing performance share units to be earned only in the last half of the performance period mitigates concerns that short-term gains may yield payouts even if long-term performance lags.
Share price hurdles. The Compensation Committee also reviewed the rigor of the share price hurdles and the vesting percentage at each hurdle. The Compensation Committee reviewed the extent of the share price increase from the February 9, 2012 first grant of performance equity through December 31, 2014 (32.9%), and also noted that the existing hurdles represent significant percentages of operating shareholders' equity per share as of December 31, 2014:
| Share price hurdle | | Share price hurdle as % of operating shareholders' equity per share as of December 31, 2014 | ||
| $28 | 75% | |||
| | | | | |
| $32 | 85% | |||
| | | | | |
| $36 | 96% | |||
| | | | | |
The Compensation Committee believes moving the price of our Common Shares), in each case,Shares ($25.00 as of JanuaryDecember 31, 2014. January2014) towards operating shareholders' equity per share ($37.48 as of December 31, 2014) would be a significant measure of success. After discussing these and other statistics, the Compensation Committee determined the existing share price hurdles were sufficiently rigorous, such that it would be appropriate to maintain them for the grant for the 2014 performance year. The Compensation Committee also increased the vesting percentage at the first hurdle in order to further align the executive officers' compensation and performance.
Accordingly, for the performance share units granted for the 2014 performance year, the table shows the percentage that could be earned if the highest average share price over 40 consecutive trading days reaches the stated share price hurdles. As a result of a change in the calculation methodology for these awards, discussed above, the applicable average share price must occur in the second half of the 2015-2017 performance period.
| Highest 40 consecutive trading day average share price hurdle | | % Earned | ||
| $28 | 50% | |||
| | | | | |
| $32 | 100% | |||
| | | | | |
| $36 | 200% | |||
| | | | | |
Methodology to convert the target value of the award to a specific number of performance share units. The Compensation Committee decided to simplify the method for determining the number of performance share units to grant. In the past, a Monte-Carlo simulation model generated a value for a performance share unit that was then adjusted by a ratio, the numerator of which was the average share price over a 40 consecutive trading day period ending on a day close to the grant date and the denominator of which was the closing share price as of the day close to the grant date. After consideration and discussions with Cook, for the performance share unit awards for the 2014 performance year, the Compensation Committee determined to eliminate the complexity of the Monte-Carlo process and to use the average share
| 2015 PROXY STATEMENT | | PAGE 45 |
price over the 40 consecutive trading days ending on the grant date. The Compensation Committee believes this simplification enables the shareholders and executives to more easily appreciate the incentive nature of the grant.
Revised the Composition of the Executive Compensation Comparison Group
The Compensation Committee examines pay data for the following 14 companies to review pay practices, identify compensation trends, and benchmark its executive compensation decisions:
| Allied World Assurance Company | | Endurance Specialty | | Radian Group | ||||
| Arch Capital Group | | Everest Re Group | | RenaissanceRe Holdings | ||||
| Aspen Insurance Holdings | | MBIA | | Validus | ||||
| Axis Capital Holdings | | MGIC Investment | | White Mountains Insurance Group | ||||
| Eaton Vance | | PartnerRe | |
The Compensation Committee recognizes that the comparison group has limitations. Notably, Assured Guaranty is the only public financial guaranty insurance company originating material amounts of new business today, while the comparison group consists primarily of mortgage finance and casualty insurance and reinsurance companies. Despite the specialized nature of our business, our Compensation Committee looks for companies domiciled in Bermuda or with a similar size, business model and compensation mix to ours. Although the factors the Compensation Committee considers for its compensation decisions and the level of compensation may differ from those for the comparison group, the Compensation Committee finds it useful to consider the pay practices at these companies.
In November 2014 and February 2015, Cook met with members of the Compensation Committee to review the comparison group from the prior year, and to identify other companies that could be considered for inclusion in the group. Based on Cook's recommendation, the Compensation Committee modified the comparison group as described below:
Change | | Company | | Rationale | ||||
Remove | W. R. Berkley | Significantly larger than Assured Guaranty in terms of revenue and number of employees, has a different business focus, and is an infrequent comparison company of our other comparison companies. | ||||||
| | | | | | | | | |
Remove | Platinum Underwriters | Announced that it intended to merge into RenaissanceRe Holdings, another company in our comparison group. | ||||||
| | | | | | | | | |
Add | Eaton Vance | Skills necessary at Eaton Vance—ability to analyze credit exposure and to manage a large investment portfolio—are also necessary for our management in light of our business of insuring financial obligations and internally managing a large portfolio of debt securities. | ||||||
| | | | | | | | | |
As a result of these changes to the comparison group, the selection of companies is more useful in assessing our current business. According to Cook, our market capitalization as of December 31, 2014 is a datewas in close proximitythe 65th percentile of our comparison group and our total assets as of September 30, 2014 were in the 67th percentile of our comparison group.
Based on the most recent data available, the Compensation Committee and Cook believe that our compensation decisions and practices are generally consistent with those of the comparison group. Mr. Frederico's total direct compensation for the 2013 performance year was between the 50th and the 75th percentile, and for the 2014 performance year was slightly above the 75th percentile, when compared to the average 2013 compensation (the most recent year in which compensation data for the other comparison companies is available) of a chief executive officer within the comparison group.
| PAGE 46 | | ASSURED GUARANTY |
In approving the level of Mr. Frederico's compensation, the Compensation Committee considered our strong performance compared to that of the comparison group. On a one-year basis, our TSR was in the 93rd percentile, and on a three-year basis, our TSR was in the 83rd percentile.
The details of Mr. Frederico's total direct compensation for the 2014 performance year compared to 2013 are set out under "2014 CEO Performance Review Process and Decisions."
Accomplishments
In 2014, our executive officers accomplished their key strategic objectives. These achievements were important considerations in determining our executive officers' compensation for the year.
We further optimized our capital management, primarily by returning excess capital to our shareholders through repurchases of our Common Shares and our quarterly dividends. Our long-term goal is to increase new business production to a level that utilizes all of the capital being released by the run-off of our current book of business. This has been difficult in the current market environment, with its sustained period of low interest rates and low volume of new issuances in the public finance market. In response, we have engaged in a multi-year effort to return a portion of excess capital to our shareholders. In 2014, we repurchased 24.4 million Common Shares for $590 million, at an average price of $24.17 per share, representing a substantial discount to both operating shareholders' equity per share and adjusted book value per share. We increased our quarterly dividend by 10% in February 5, 2014, grant date.and by an additional 9% in February 2015. Over the two-year period ended December 31, 2014, we returned $1 billion of excess capital by repurchasing 37 million Common Shares, or 19% of our January 1, 2013 share count, and through our quarterly dividends.
We also improved our capital flexibility and optimized our capital structure to facilitate continued share repurchases as authorized by our Board of Directors. Our subsidiary Assured Guaranty Re Ltd. (AG Re) increased unencumbered assets by $275 million after we obtained regulatory approval for our subsidiaries Assured Guaranty Municipal Corp. (AGM), Assured Guaranty (Europe) Ltd. and Assured Guaranty Corp. (AGC) to reassume certain of AG Re's contingency reserves, which AG Re previously had to collateralize. In addition, AG Re increased unencumbered assets by more than $100 million after it reached agreement with a ceding company for that company to commute all the reinsurance we were providing on certain distressed City of Detroit obligations. AGM and AGC obtained regulatory approval to release more than $1.1 billion from contingency reserves into policyholders' surplus, which increased the dividend capacity of these two subsidiaries. We also issued $500 million of 5% senior notes. All these measures enabled us to increase liquidity at AGL, our parent holding company.
| 2015 PROXY STATEMENT | | PAGE 47 |
We increased new business production, with contributions from our U.S. public finance, international infrastructure and global structured finance businesses. In 2014, we recorded a present value of new business production, or PVP, of $168 million—19% more than in 2013. This represents the first time that PVP increased year over year and our U.S. public finance business production exceeded the business plan since our combination with Financial Security Assurance Inc. in 2009. In the U.S. public finance market, of new issuances sold, we insured 43% more par than in 2013 and continued to lead the market with a 58% share. In the international infrastructure market, we guaranteed a United Kingdom social housing project. Our 2014 structured finance PVP of $33 million was more than four times that of 2013.
We improved our financial results by reassuming previously ceded business and making acquisitions. We reassumed previously ceded business totaling $1.2 billion of par, which enabled us to receive the statutory unearned premium outstanding as of the commutation dates and, in one case, a commutation premium. We also reached an agreement for AGC to acquire a legacy insurer, Radian Asset Assurance Inc. We expect the acquisition to increase our unearned premium reserve, be accretive to operating shareholders' equity and adjusted book value, and increase AGC's qualified statutory capital, further improving our capital flexibility.
We created value from our insured portfolio through loss mitigation and other loss recovery strategies. We recorded a $30 million benefit in our total net economic loss development and reduced our below-investment-grade exposure to RMBS by $2 billion, or 27%. These positive results were largely due to a number of agreements we reached during the year with providers of representations and warranties on RMBS we insured. Through these agreements, during 2014 we caused the providers and other responsible parties to make or agree to make payments, or to terminate certain insured transactions that had projected future losses, for a total projected benefit of $581 million (gross of reinsurance). We also purchased $355 million of our insured bonds for $309 million, mitigating expected losses and contributing to ABV. We terminated over $4 billion of net par outstanding, including transactions terminated under agreements with providers of representations and warranties, thereby reducing rating agency capital charges and accelerating premiums earned. We have successfully resolved a number of troubled exposures in our public finance insured portfolio, including our exposures to the cities of Detroit and Stockton, both of which had filed for bankruptcy protection.
Challenges
Our executive officers achieved these strategic goals despite a persistent challenging business environment.
Sustained low interest rate environment in the United States. Over the last five years, municipal bond yields in the U.S. have been at historically low levels. In fact, the interest rate for the widely followed 30-year Municipal Market Data index published by Thomson Reuters was 133 basis points lower at the end of 2014 than it was at the beginning of the year. In this environment, investors have been more willing to purchase riskier municipal bonds at tighter credit spreads (that is, the difference in yield between a municipal bond with a rating of less than triple-A and that of an index of triple-A
| PAGE 48 | | ASSURED GUARANTY |
municipal bonds of similar maturity) than was typical in other environments, driving down credit spreads. Our financial guaranty insurance reduces the cost of issuance for an issuer by reducing the credit spread an investor demands to buy the insured bond rather than a comparable uninsured bond. With absolute interest rates so low and credit spreads so tight, some issuers are less willing to pay a premium for us to insure their bonds because the insurance may not substantially reduce their cost of issuance.
Continued low volume of issuance in the U.S. public finance market. According to industry compilations, U.S. municipalities issued $314.9 billion of bonds in 2014, up only 1% from 2013. The 2014 volume of issuance in the U.S. public finance market was the third lowest experienced over the last thirteen years, since 2001.
Increased competition. Based on third-party compilations, we estimate that we insured approximately 57.9% of the insured U.S. public finance bonds issued in the primary market in 2014. In comparison, a second financial guaranty insurer that focuses on a smaller portion of the market than we do provided price competition in those markets where we overlap, and insured 40.3% of the par. A third financial guaranty insurer obtained upgraded financial strength ratings from rating agencies in 2014 and insured the remaining 1.8% balance. We expect the continued presence of these competitors in the market will affect our insured volume as well as the amount of premium we are able to charge, especially in the current environment of low interest rates, tight credit spreads and low U.S. public finance issuance.
2014 Results Against Targets
In November 2013, the Compensation Committee established seven financial performance goals for our executive officers for the 2014 performance year, based on a business plan that the Board of Directors reviewed and approved at that time.
Three of the 2014 targets—operating income, operating income per diluted share and operating ROE—were set below the 2013 results, because of the decline of earned premium resulting from the projected amortization of our insured portfolio—especially the structured finance portfolio, which generally earns premium at higher rates than the public finance portfolio. The lower levels of earned premium were expected to affect all three of these performance measures.
The 2014 targets were viewed as challenging in light of the structural changes to the financial guaranty industry over the past several years and the current interest rate and economic environments.
* Includes $3.4 million of severance accruals.
| 2015 PROXY STATEMENT | | PAGE 49 |
In 2014, we achieved or exceeded all but two of the financial goals, and our results were only slightly below target for the goals we did not meet.
The Compensation Committee determined that, despite the difficult economic environment we faced in 2014, the executive officers succeeded in creating shareholder value, as reflected in our approximately 12% total shareholder return. In particular, the Compensation Committee valued our executives' success in increasing AGL's liquidity, which enables us to manage our capital, in reaching settlements on our insured RMBS transactions, and in reaching an agreement to acquire Radian Asset Assurance. Therefore, cash incentives for 2014 were paid at above-target levels.
2014 CEO Performance Review Process and Decisions
Overview
In light of Mr. Frederico's achievements in the 2014 performance year, as detailed below, the Compensation Committee awarded him total compensation of $9,079,000, a 5% increase over his total compensation for the 2013 performance year, composed of the following:
| | | 2014 Performance Year Compensation | | | 2013 Performance Year Compensation | ||||||
Fixed Compensation—Base Salary(1) | $950,000 | $950,000 | |||||||||
| | | | | | | | | | | | |
Incentive Compensation | |||||||||||
| | | | | | | | | | | | |
Discretionary Bonus | $0 | $3,500,000 | |||||||||
| | | | | | | | | | | | |
Deferred Cash Incentive Compensation (PRP) | $0 | $450,000 | |||||||||
| | | | | | | | | | | | |
Cash Incentive Compensation | $3,629,000 | $0 | |||||||||
| | | | | | | | | | | | |
Long-Term Performance-Based Equity | $2,250,000 | (2) | $1,875,000 | (2) | |||||||
| | | | | | | | | | | | |
Long-Term Time-Based Equity | $2,250,000 | (2) | $1,875,000 | (2) | |||||||
| | | | | | | | | | | | |
Total Direct Compensation | $9,079,000 | $8,650,000 | |||||||||
| | | | | | | | | | | | |
| PAGE 50 | | ASSURED GUARANTY |
The compensation package presented in the table above is different from the SEC-required disclosure in the Summary Compensation Table on page 65 and is not a substitute for the information in that table. Rather, it is intended to show how the Compensation Committee linked Mr. Frederico's compensation and its components to our performance results and his achievements for the prior year.
Cash Incentive
To determine Mr. Frederico's cash incentive, as discussed above under "Executive Compensation Program Structure and Process—Changes to Our Executive Compensation Program," the Compensation Committee used a formula that involved aggregating the weighted achievement scores for certain financial performance goals and individual non-financial objectives, and multiplying the result by his Individual Target Cash Incentive Amount. The financial performance measures were based on the business plan for the upcoming year that the Board of Directors reviewed and approved in November 2013. The non-financial objectives were established taking into account the nature of our business, which requires qualitative goals to fully evaluate the annual achievements that benefit our shareholders. For example, the Compensation Committee determinedbelieved it was important that we increase liquidity in order to grantbe able to manage our capital efficiently; acquire available insurance portfolios, like the one from Radian Asset Assurance, in order to increase our unearned premium reserve; and reach settlements with respect to our distressed insured exposure.
Applying the cash incentive formula resulted in the following achievement score for Mr. Frederico $1,875,000Frederico:
| 2015 PROXY STATEMENT | | PAGE 51 |
| Non-Financial Objectives | 2014 Results | |
| Strategy and Leadership—Articulate a clear strategy and lead effective implementation of business plan to grow direct business and take advantage of reinsurance opportunities. • Leverage our rating and financial strength to maintain viable public finance bond insurance market; implement a long-term program to market the value of bond insurance to existing and new distribution channels; write budgeted PVP in U.S. and U.K. • Attempt to purchase available bond insurance portfolios; reassume previously ceded portfolios. • Maintain regulatory authority to insure infrastructure and structured finance obligations in U.S. and internationally. • Maintain liquidity at AGL for corporate purposes. • Execute $400 million of Common Share repurchases. • Fully implement AGL's U.K. tax domicile. | • Wrote $128 million of U.S. public finance PVP, $33 million of structured finance PVP, and $7 million of international infrastructure PVP. • Structured finance transactions closed include a $400 million insurance reserve financing transaction for a U.S.-based life insurance group. • Completed licensing of Municipal Assurance Corp. to write financial guaranty insurance in all 50 U.S. states and the District of Columbia. • Signed purchase agreement to acquire Radian Asset Assurance for $810 million (subject to adjustment); closing anticipated in first half of 2015. • Entered into commutation agreements to reassume ceded business consisting of approximately $1.2 billion par. Received the statutory unearned premium outstanding as of the commutation dates plus, in one case, a commutation premium. • Obtained regulatory approval for AGM and AGC to reassume second tranche of contingency reserves, which increased unencumbered assets at AG Re by $275 million. • Obtained regulatory approval for AGM to release $588 million of contingency reserves. • Obtained regulatory approval for AGC to release $540 million of contingency reserves. • Completed $500 million 5% senior note offering. • Completed $590 million of Common Share repurchases (excluding commissions), consisting of 24.4 million shares at average price of $24.17. • Completed process for AGL to become U.K. tax resident, enabling us to manage our capital more efficiently. • Closing share price of $25.99 represents a 12.19% total return for 2014 and a 110.59% total return on a 3-year basis. |
| PAGE 52 | | ASSURED GUARANTY |
| Non-Financial Objectives | 2014 Results | |
Active management of all potential loss transactions, including pursuit of RMBS representation and warranty collections and servicing transfers; minimize losses from Detroit bankruptcy. | • Reached agreements with providers of representations and warranties on RMBS and other responsible parties causing them to make or agree to make payments, or terminate certain insured transactions that had projected future losses, for a total projected benefit of $581 million (gross of reinsurance). • In order to reduce leverage, and possibly rating agency capital charges, and for loss mitigation purposes, reached agreement with beneficiaries to terminate $4.0 billion in net par. • Amended ISDA master agreement with counterparty to eliminate rating-based Additional Termination Event so we are no longer subject to potential termination payments based on rating triggers. • Completed servicing transfers on RMBS transactions. As of December 31, 2014, our net insured par of transactions subject to a servicing transfer was $1.8 billion. • Negotiated favorable 74% recovery on Detroit general obligation bonds. • Resolved $2.1 billion net par exposure to the City of Detroit as of December 31, 2013 on favorable terms; received premium from insurance of $841 million gross par of new sewer and water revenue bonds; executed agreement for ceding company to commute our reinsurance on Detroit certificates of participation. • Purchased bonds for loss mitigation purposes. As of December 31, 2014, we held $1.3 billion par of loss mitigation securities. • Settled California municipal bond litigation on favorable terms. • Reduced commitment amount, fee and maturity of liquidity facility for leveraged lease business, resulting in savings. • Renewed excess of loss reinsurance facility at a reduced price. | |
Financial Strength Ratings—Maintain current ratings for subsidiaries AGC, AGM, Municipal Assurance Corp. and AG Re. | • S&P upgraded Assured Guaranty group to AA (stable). • Obtained Kroll Bond Rating Agency rating of AA+ (stable) for AGM. • Maintained Moody's ratings despite a revision to their methodology; AGC and AG Re ratings placed on negative outlook. |
| 2015 PROXY STATEMENT | | PAGE 53 |
| Non-Financial Objectives | 2014 Results | |
| Strive for AGL to have comprehensive, best-practice risk management with respect to all of its activities, emphasizing the credit quality of risks insured, enterprise risk management and compliance. All credit underwriting consistent with risk/appetite statement. | • No significant compliance issues. • No unanticipated risk issues. • All new business within risk limits and risk appetite statement. • Refined U.S. public finance underwriting criteria. • Continued average rating of new business in A category. | |
Management development and succession planning—Attract and retain top quality senior management; succession plan for critical positions. Assist the Board in further development of a CEO succession plan. | • No senior management turnover. On February 4, 2015, we agreed with Robert B. Mills, our current Chief Operating Officer, that the position of Chief Operating Officer would be eliminated, and as a result, Mr. Mills would separate from our Company effective March 31, 2015. • Reviewed succession plan with Board of Directors. |
Application of the results of Mr. Frederico's financial and non-financial achievements derived the following cash incentive for his 2014 performance:
(2.50% × $950,000) × (86.8% + 66%) = $3,629,000
Equity Compensation
The Compensation Committee awarded all of Mr. Frederico's long-term incentive compensation in the form of performance share units;units and RSUs. The target nominal amount of long-term equity reflected the Compensation Committee's desire that Mr. Frederico have a strong incentive to generate long-term, sustained growth at our Company that will enhance shareholder value and its consideration of an appropriate level of total compensation for Mr. Frederico.
The following sets forth the February 4, 2015 grant day value of Mr. Frederico's equity based on $26.21, he received 71,541the Compensation Committee's target nominal amount. The Compensation Committee determined the number of performance share units.
When we prepare the Summary Compensation Table, we report the value of the grants using U.S. GAAP., in accordance with the SEC's rules. In the "Individual Compensation Analysis" later in this proxy statement, we present the difference in the value of the equity incentive compensation under the methodology recommended by Cook and under U.S. GAAP.
| Performance Measures | 2011 | 2012 | 2013 |
| Operating income | $604.4 million | $535.5 million | $609 million |
| Operating income per diluted share | $3.26 | $2.81 | $3.25 |
| Operating shareholders' equity per share | $28.91 | $30.05 | $33.83 |
| Adjusted book value per share | $49.32 | $47.17 | $49.58 |
| Operating return on equity | 12.1% | 9.7% | 10.2% |
| PVP | $242.7 million | $210.0 million | $141 million |
| Operating expenses(1) | $231.4 million | $230.6 million | $235.3 million |
| Performance Measures | 2013 Goals | 2013 Results | Performance vs. Goal |
| Operating income | $522.8 million | $609 million | Exceeds |
| Operating income per diluted share | $2.70 | $3.25 | Exceeds |
| Operating shareholders' equity per share | $32.27 | $33.83 | Exceeds |
| Adjusted book value per share | $47.62 | $49.58 | Exceeds |
| Operating return on equity | 8.7% | 10.2% | Exceeds |
| PVP | $228.7 million | $141 million | Below Target |
| Operating expenses(1) | $239.0 million | $235.3 million | Exceeds |
| 1/1/2014 – 3/10/14 | 1 year (2013) | 3 years (2011-2013) | 5 years (2009-2013) | ||||
| S&P 500 Financial Index | 2.5% | 35.6% | 44.8% | 90.2% | |||
| Assured Guaranty Ltd. | 10.8% | 68.8% | 41.2% | 124.7% | |||
| Assured Guaranty | S&P 500 Index | S&P 500 Financial Index | |||
| December 31, 2008 | 100.00 | 100.00 | 100.00 | ||
| December 31, 2009 | 193.65 | 126.44 | 117.15 | ||
| December 31, 2010 | 159.13 | 145.47 | 131.36 | ||
| December 31, 2011 | 119.69 | 148.52 | 108.95 | ||
| December 31, 2012 | 133.07 | 172.26 | 140.26 | ||
| December 31, 2013 | 224.67 | 228.03 | 190.18 | ||
| March 10, 2014 | 248.98 | 232.54 | 194.93 | ||
| Source: Bloomberg | |||||
| 2013 Compensation | 2012 Compensation | % Change | |||||
| Fixed Compensation - Base Salary | $950,000 | $900,000 | 6 | % | |||
| Incentive Compensation | |||||||
| Annual Cash Incentive | $3,500,000 | $3,300,000 | 6 | % | |||
| Deferred Cash Incentive (PRP) | $450,000 | $1,500,000 | -70 | % | |||
| Performance-Based Equity | $1,875,000 | (1) | $1,875,000 | (2) | 0 | % | |
| Time-Based Equity | $1,875,000 | (1) | $625,000 | (2) | 200 | % | |
| Total Incentive Compensation | $7,700,000 | (1) | $7,300,000 | (2) | 5 | % | |
| Total Direct Compensation | $8,650,000 | $8,200,000 | 5 | % | |||
| Equity Granted (Shares) | U.S. GAAP Value per Share | U.S. GAAP Value | Compensation Committee Target Nominal Value | % Difference | | | Compensation Committee Target Nominal Value | | | Equity Granted (Shares) | | | U.S. GAAP Value | |||||||||||
| Performance share units | 71,541 | $25.17 | $1,800,687 | $1,875,000 | -4 | % | $2,250,000 | 87,959 | $2,490,119 | |||||||||||||||
| | | | | | | | | | | | | | | | | | ||||||||
| RSUs | 82,635 | $21.86 | $1,806,401 | $1,875,000 | -4 | % | $2,250,000 | 87,959 | $2,218,326 | |||||||||||||||
| Total | $3,607,088 | $3,750,000 | -4 | % | ||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||
TOTAL | $4,500,000 | $4,708,445 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | ||||||||
| PAGE 54 | | ASSURED GUARANTY |
To supplement the disclosure in the Summary Compensation Table on page 56,65, which is determined under SEC rules, we have included the additional tablestable below, which showshows the difference between our CEO'sMr. Frederico's compensation as reported in the Summary Compensation Table versusand the compensation he actually received over the relevant period.
The primary source of the difference between the Summary Compensation Table Reported Value and the Actual Realized Value is due towas Mr. Frederico's equity grants. Under the SEC's rules, the Summary Compensation Table for a given year must disclose the grant date value of an executive officer's long-term equity long-term incentive compensation granted in that year, even though suchyear. However, equity grants constitute an incentive for future performance, not current cash compensation, and will not actually be received by the executive officer until a future year, if at all, andall. Moreover, the value of this pay when realized may differ significantly from the grant date value shown in the Summary Compensation Table.
| CEO Total Compensation | CEO Total Compensation | CEO Total Compensation | |||||||||||||||||||
| Year | Summary Compensation Table Reported Value(1) | Actual Realized Value(2) | Variation Between Actual Realized Value versus Summary Compensation Table Reported Value | % Difference | | Summary Compensation Table Reported Value(1) | | Actual Realized Value(2) | | Variation Between Actual Realized Value versus Summary Compensation Table Reported Value | | % Difference | |||||||||
| 2014 | $10,774,791 | $8,749,276 | –$2,025,515 | –19% | |||||||||||||||||
| | | | | | | | | | | | | | | | |||||||
| 2013 | $7,493,037 | $12,819,959 | $5,326,922 | 71 | % | $7,493,037 | $12,819,959 | $5,326,922 | 71% | ||||||||||||
| | | | | | | | | | | | | | | | |||||||
| 2012 | $13,363,715 | $9,351,059 | -$4,012,656 | -30 | % | $13,363,715 | $9,351,059 | –$4,012,656 | –30% | ||||||||||||
| 2011 | $9,583,509 | $8,694,101 | -$889,408 | -9 | % | ||||||||||||||||
| | | | | | | | | | | | | | | | |||||||
2014 Other Executive Officer Compensation Decisions
Non-Financial Objectives and Achievements of the Other Executive Officers
The tables below illustrate furtherCompensation Committee made compensation awards to the difference betweenother executive officers for the reported value2014 performance year based on its assessment of their achievements and Mr. Frederico's review of their performance. The other executive officers' achievements were evaluated based on their contributions to our achievement of our financial goals, their contributions to the achievement of Mr. Frederico's equity in a given year,non-financial objectives, and his actual realized value in that time.
| CEO Restricted Stock Units | ||||||
| Year | Summary Compensation Table Reported Value(1) | Vesting Shares(2) | Actual Realized Value of Vesting Shares(2) | Variation Between Actual Realized Value versus Summary Compensation Table Reported Value | ||
| 2013 | — | 108,294 | $2,001,922 | $2,001,922 | ||
| 2012 | $4,600,440 | 118,699 | $2,037,478 | -$2,562,962 | ||
| 2011 | $2,364,800 | 97,881 | $1,475,392 | -$889,408 | ||
| CEO Stock Options | ||||||
| Year | Summary Compensation Table Reported Value(1) | Actual Realized Value of Vested Options (2) | Variation Between Actual Realized Value versus Summary Compensation Table Reported Value | |||
| 2013 | — | $3,325,000 | $3,325,000 | |||
| 2012 | $1,449,694 | — | -$1,449,694 | |||
| 2011 | — | — | — | |||
James M. Michener, General Counsel
Mr. Michener was responsible in 2013:
| 2015 PROXY STATEMENT | | PAGE 55 |
approval of several significant matters that enabled us to manage our capital more efficiently and write business in new jurisdictions.
Robert B. Mills, Chief Operating Officer
Mr. Mills was responsible in 2013:
As a result of Mr. Mills' efforts, as of December 31, 2013, $2.3 billion net insured parsuccess in resolving a substantial number of our transactions had mortgage loans that had been transferred to another servicertroubled RMBS credits, we and $843 million net insured par of our transactions was subject to special servicing arrangements.
Robert A. Bailenson, Chief Financial Officer
Mr. Bailenson was responsible in the 2014 performance year for meeting all internal and external financial requirements, managing our capital efficiently, meetings with investors, and participating on earnings calls.
| PAGE 56 | | ASSURED GUARANTY |
Russell B. Brewer II, Chief Surveillance Officer
Mr. Brewer was responsible in 2013:
Compensation Decisions for the Other Executive Officers
In the case of the other executive officers, for the 2014 performance year the Compensation Committee calculated and aggregated the weighted achievement scores for the financial performance goals (which were the same as Mr. Frederico's) and their non-financial objectives (which were a combination of their contribution to Mr. Frederico's non-financial objectives and their achievement of their own individual non-financial objectives), taking into account the level of difficulty of achieving particular goals or objectives. Based on their achievements, after applying the formula, the Compensation Committee awarded them the cash incentives calculated as shown in the negotiations of settlements with R&W providers in our U.S. RMBS transactions.
The Compensation Committee awarded all credit performance data for our reserve committees.
| 2015 PROXY STATEMENT | | PAGE 57 |
advice about the compensation recommendations.
| | James M. Michener | | Robert B. Mills | | Robert A. Bailenson | | Russell B. Brewer II | ||||||||||||||
James M. Michener | Robert B. Mills | Russell B. Brewer II | Robert A. Bailenson | ||||||||||||||||||
| Fixed Compensation - Base Salary(1) | $475,000 | $520,000 | $370,000 | $450,000 | |||||||||||||||||
| Fixed Compensation—Base Salary(1) | $500,000 | $520,000 | $475,000 | $390,000 | |||||||||||||||||
| | | | | | | | | | | | | | | | |||||||
| Incentive Compensation | Incentive Compensation | ||||||||||||||||||||
| Annual Cash Compensation | $1,100,000 | $750,000 | $800,000 | ||||||||||||||||||
| Deferred Cash Compensation (PRP) | $315,000 | $250,000 | $315,000 | $300,000 | |||||||||||||||||
| Performance-Based Equity and Time-Based Equity Target Values(2) | $735,000 | $580,000 | $735,000 | $700,000 | |||||||||||||||||
| Total Incentive Compensation | $2,150,000 | $1,580,000 | $1,850,000 | $1,800,000 | |||||||||||||||||
| | | | | | | | | | | | | | | | |||||||
Discretionary Bonus | $0 | $0 | $0 | $0 | |||||||||||||||||
| | | | | | | | | | | | | | | | |||||||
Deferred Cash Incentive Compensation (PRP) | $0 | $0 | $0 | $0 | |||||||||||||||||
| | | | | | | | | | | | | | | | |||||||
Cash Incentive Compensation | $1,300,000 | $1,827,800 | $951,472 | $902,830 | |||||||||||||||||
| | | | | | | | | | | | | | | | |||||||
Long-Term Performance-Based Equity and | $900,000 | $0 | $1,000,000 | $900,000 | |||||||||||||||||
| | | | | | | | | | | | | | | | |||||||
| Total Direct Compensation | Total Direct Compensation | $2,625,000 | $2,100,000 | $2,220,000 | $2,250,000 | $2,700,000 | $2,347,800 | $2,426,472 | $2,192,830 | ||||||||||||
| | | | | | | | | | | | | | | | |||||||
|
Executive Compensation Conclusion
We believe that our executive compensation program rewards performance and motivates the officers to increase shareholder value, and that it is determined by multiplying the number of performance share units by $25.17 (a Monte-Carlo simulation model value as of the grant date)therefore appropriate and multiplying the number of RSUs by $21.86 (our Common Share closing price on the grant date, adjusted for the delay in the paymentbest interests of dividends until vesting).
In summary, we have refined our executive compensation program in response to interactions with our shareholders to reduce the Compensation Committee's target nominal value. When we preparediscretion, de-emphasize cash-based compensation, enhance the Summary Compensation Table, we reportlink between pay and performance, and increase executives' incentive to produce long-term results.
Payout Under Performance Retention Plan
Beginning in February 2015, the valueexecutive officers are no longer receiving new grants of the grants using U.S. GAAP., in accordance with the SEC's rules.
| Equity Granted (Shares) | U.S. GAAP Value per Share | U.S. GAAP Value | Compensation Committee Target Nominal Value | % Difference | ||||
| James M. Michener | Performance share units | 14,021 | $25.17 | $352,909 | $367,500 | -4 | % | |
| RSUs | 16,197 | $21.86 | $354,066 | $367,500 | -4 | % | ||
Robert B. Mills | Performance share units | 11,064 | $25.17 | $278,481 | $290,000 | -4 | % | |
| RSUs | 12,781 | $21.86 | $279,393 | $290,000 | -4 | % | ||
| Russell B. Brewer II | Performance share units | 14,021 | $25.17 | $352,909 | $367,500 | -4 | % | |
| RSUs | 16,197 | $21.86 | $354,066 | $367,500 | -4 | % | ||
| Robert A. Bailenson | Performance share units | 13,354 | $25.17 | $336,120 | $350,000 | -4 | % | |
| RSUs | 15,425 | $21.86 | $337,191 | $350,000 | -4 | % | ||
The principal amount grantedof each PRP award is divided into three installments
| PAGE 58 | | ASSURED GUARANTY |
The award payment for each installment is the product of:
For the executive officers, no amount is payable if the growth in our ABV per share has declined for the applicable performance period is negative and if our operating ROE is not at least 3% on average for each year in the applicable performance period. However, if, in a subsequent performance period, there is either positive growth in our ABV per share or our operating ROE is at least 3% on average for each year in the applicable performance period, and theeach executive officer who remains employed at our Company than the executive officer will receive the forfeitedrecalculated payment.
The following table sets forth the calculation of the paymentsreturns on the installments of the PRP awards granted in February 2010, 2011, 2012 and 20122013 that vested on December 31, 2013:
| Grant Date | Performance Period Beginning Date | Performance Period End Date | Portion of Principal Associated with Installment | Percentage Change in ABV per Share | Operating ROE | 50% of Percentage Change in ABV per Share + 50% of Operating ROE | | Performance Period Beginning Date | | Performance Period End Date | | | Portion of Principal Associated with Installment | | | Percentage Change in ABV per Share | | | Operating ROE | | | 50% of Percentage Change in ABV per Share + 50% of Operating ROE | |||||||||||||||||
| February 2010 | January 1, 2010 | December 31, 2013 | 50 | % | 2.8 | % | 46.9 | % | 24.8 | % | |||||||||||||||||||||||||||||
| February 2011 | January 1, 2011 | December 31, 2013 | 25 | % | 1.4 | % | 32.0 | % | 16.7 | % | January 1, 2011 | December 31, 2014 | 50% | 9.7% | 41.9% | 25.8% | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||
| February 2012 | January 1, 2012 | December 31, 2013 | 25 | % | 0.5 | % | 20.0 | % | 10.3 | % | January 1, 2012 | December 31, 2014 | 25% | 8.8% | 29.2% | 19.0% | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||
February 2013 | January 1, 2013 | December 31, 2014 | 25% | 13.8% | 18.7% | 16.2% | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||
The individual PRP payouts for amounts that vested on December 31, 2013:
The Role of the Board's Compensation Committee The Compensation Committee Our Board has adopted a Compensation Committee Charter to govern the Compensation Committee's activities. The charter, which may be found on our website at assuredguaranty.com/governance, is reviewed annually by the Over the past In The Compensation Committee has considered the independence of Cook in light of new SEC rules and NYSE listing standards. It has requested and received a letter from Cook affirming: The Compensation Committee discussed these considerations and concluded that Executive Officer Recoupment Policy Our Board of Directors adopted a recoupment (or clawback) policy in February 2009 pursuant to which Stock Ownership Guidelines To demonstrate our commitment to The chart below shows the guideline for each of our executive officers and comprised solely of independent directors, oversees all aspects of our executive compensation program. The Compensation Committee has responsibility for:50Compensation Committee. Under its charter, the Compensation Committee is authorized to consultants at our expense.obtain assistance by retainingretain compensation, legal, accounting and other expert consultants.The Compensation Committee is authorized under its charter to engage outside advisors at our expense. Consultanteightnine years, including in 2013,2014, the Compensation Committee has engaged Cook as its independent compensation consultant and considered advice and information from thethat firm in determining the amount and form of compensation for the executive officers. As part of its engagement, by the Compensation Committee, in 2011 and 2012, Cook advised the Compensation Committee in 2014 and 2015 about changes to implement to our executive compensation program. Cook has not provided any additional consulting service to us beyond its role as consultant to the Compensation Committee.2013,2014, Cook's work for the Compensation Committee included analyzing our compensation practices in light of best practices, reviewing our comparison group of companies, collecting and providing relevant market data, reviewing data and analyses provided by other consultants, and updating the Compensation Committee with respect to evolving governance trends.usthe Compensation Committee on matters under ourits purview and control and related to ourits charterCooks'Cook's work did not raise any independence or conflict of interest issues.Executive Compensation Comparison GroupThe Compensation Committee examined pay data for the following 15 companies to review pay practices, identify compensation trends and benchmark its executive compensation decisions:Allied World Assurance CompanyEverest Re GroupRadian GroupArch Capital GroupMBIARenaissanceRe HoldingsAspen Insurance HoldingsMGIC InvestmentValidusAxis Capital HoldingsPartnerReWhite Mountains Insurance GroupEndurance SpecialtyPlatinum UnderwritersW. R. BerkleyIn November 2013, Cook met with members of the Compensation Committee and the Chairman of the Board to review the comparison group from the prior year, discuss whether the companies continued to be reasonable in terms of business model and size, and identify other companies that could be considered for inclusion in the group.Cook noted that certain proxy advisor groups criticize companies for including much larger companies within their comparison group and therefore recommended that XL Group and Markel Insurance Company be deleted due to their large size compared to the size of our Company; Alterra Capital Holdings was deleted because it had been acquired by Markel Insurance Company during 2013. Cook recommended that these companies be replaced by Endurance Specialty, Validus and White Mountains Insurance Group, which are more similar to us in size.The Compensation Committee approved these recommendations. However, it noted that because Assured Guaranty is the only active public financial guaranty insurance company in the market today, the comparison group, which consists primarily of mortgage finance and property and casualty insurance and reinsurance companies, has limitations and the Compensation Committee makes only limited use of the group. The Compensation Committee noted that if we were hiring business leaders for our Company, we would not generally recruit from the companies in the comparison group.The Compensation Committee compared our executive compensation to the executive compensation at the comparison group using 2012 data, the most recent data available, to determine if the Company's compensation51decisions are generally consistent with those of the comparison group. Cook has advised the Compensation Committee that our compensation decisions and practices are generally consistent with those of the comparison group.:Ifthe Compensation Committee may rescind or recoup certain of the compensation of an executive officer if such person engages in misconduct related to a restatement of our financial results then the Compensation Committee may rescind the officer's option exercises that occurred within 12 months after the restated period, and also recoup the amount of cash bonus payments to the officer in excess of the amount that would have been paid if the correct financial results had been known to the Compensation Committee at the time of the original bonus award.overstated.If an executive officer receives incentive compensation based on achievement of a levelor of objectively quantifiable performance goals, and the level of achievement of those goals is later determined to have been overstated, the Compensation Committee may recoup the amount of any payment in excess of the amount that would have been paid if the correct level of performance had been known. The PRP is an example of an arrangement that requires achievement of objectively quantifiable performance goals.buildbuilding shareholder value, the Board of Directors adopted management stock ownership guidelines. Our guidelines do not mandate a time frame by which this ownership must be attained, but each executive officer must retain 100% of his after-tax receipt of Company stock until he reaches his ownership goal. Please see "Information About Our Common Share Ownership — Ownership—How Much Stock is Owned by Directors and Executive Officers" for detailed information on the executive officers' stock ownership.hiseach executive's stock ownership as of March 10, 2014,9, 2015, the record date, using $26.02,$26.06, the closing price of one of our Common Shares on the NYSE on such date.
| Named Executive Officer | Guideline | Current Ownership | ||
| Dominic J. Frederico | 7 × Salary | |||
| | | | | |
| James M. Michener | 5 × Salary | |||
| | | | | |
| Robert B. Mills | 5 × Salary | |||
| | | | | |
| Russell B. Brewer II | 5 × Salary | |||
| | | | | |
| Robert A. Bailenson | 5 × Salary | |||
| | | | | |
| PAGE 60 | | ASSURED GUARANTY |
These ownership levels include shares owned and vested share units credited to Mr. Frederico's, Mr. Bailenson's and Mr. Michener's non-qualified retirement plans. Unvested RSUs, unvested performance share units and unexercised options do not count towards the guidelines.
Anti-Hedging Policy
We adopted an anti-hedging policy in 2013 that explicitly prohibits employees and directors from hedging our Common Shares.
Anti-Pledging Policy
Our stock trading policy continues to generally prohibitprohibits employees and directors from pledging our Common Shares. Pledging of our Common Shares would requirewithout approval of both our General Counsel and the Nominating and Governance Committee. Although they may grant such approval in unusual circumstances, thereThere have been no such transactions to date.
Award Timing
The Compensation Committee meets during our February board meeting to make executive compensation decisions with respect to the previous year's performance. The Compensation Committee follows this schedule because the February meeting is the earliest practical opportunityperformance and to review the prior year's financial results and the performance of the executive officers. At the February board meeting, the Compensation Committee discussesmake its compensation recommendations withto the directors who are not on the Compensation Committee.other directors. All independent directors approve executive officer salary increases (if any), cash bonusincentive compensation, PRP awards PRP awards(if any) and equity awards. Payments under existing PRP awards (if any) and cash bonus awardsincentives are not paid until after the filing ofwe file our Annual Report on Form 10-K for the previous year with the SEC.
Retirement Benefits We maintain tax-qualified and non-qualified defined contribution retirement plans for our executive officers and other eligible employees. We do not maintain any defined benefit pension plans. All retirement benefits are more fully described under "Potential Payments Upon Termination or Change in Severance The severance plan we adopted in February On February 4, 2015, we agreed with Mr. Mills that the position of Chief Operating Officer would be eliminated. As a result, Mr. Mills will separate from our Company effective March 31, 2015 (the separation date). Because we decided to eliminate the position of Chief Operating Officer, we have determined to treat the separation of Mr. Mills as a termination without cause for purposes of Under the separation agreement, Mr. Mills will continue to receive his current base salary and benefits due to him under our benefit plans through the separation date. The separation agreement provides certain other benefits to Mr. Mills following his separation date, consistent with a termination without cause pursuant to our Executive Severance Plan and pursuant to the terms of equity awards previously granted under our 2004 Long-Term Incentive Plan. Mr. Mills will be entitled to such benefits (the severance benefits) if he signs and does not revoke a release and complies with applicable provisions protecting our interests, such as non-competition, non-solicitation, confidentiality and non-disparagement obligations. The severance benefits include a lump-sum cash payment of $1,863,267 pursuant to our Executive Severance Plan and certain existing rights that Mr. Mills has to vesting of previously granted equity under the LTIP, which are described in the separation agreement for convenience. Under the terms of existing PRP awards, Mr. Mills forfeits all awards that do not vest prior to the separation date. Any previously granted equity awards that include performance-based vesting conditions (e.g., the achievement of certain pre-established share price targets) remain subject to satisfaction of applicable performance conditions. Mr. Mills' stock options granted prior to 2011 that already have vested will remain exercisable until the last business day prior to March 31, 2017 (the two-year anniversary of the separation date) or, if earlier, the ten-year anniversary of the date of grant, consistent with the terms of such stock option awards for the applicable exercise period following a termination without cause. Mr. Mills will forfeit his right to any unpaid severance benefits and may be required to repay the severance benefits to us in the event he violates the terms of certain covenants, such as his non-competition, non-solicitation, confidentiality and non-disparagement obligations. Change in Control Benefits We provide change in control benefits to encourage executives to consider the best interests of shareholders by Detailed information is provided under "Potential Payments Upon Termination or Change in Internal Revenue Code (IRC) Section 162(m) generally limits the deductibility of compensation paid to our CEO and three other named executive officers other than our Chief Financial Officer to $1 million during any fiscal year unless such compensation is "performance-based" under Section 162(m). Generally, we intend to structure our compensation arrangements in a manner that would comply with Section 162(m). However, the Compensation Committee considers many factors when designing its compensation arrangements in addition to the deductibility of the compensation, and In addition, IRC Section 409A imposes restrictions on nonqualified deferred compensation plans. We maintain deferred compensation plans for the benefit of our employees, including nonqualified deferred compensation plans that provide for employee and employer contributions in excess of the IRS defined contribution plan limits. The deferred compensation plans we maintain are intended to be exempt from the requirements of Section 409A or, if not exempt, to satisfy the requirements of Section 409A, and we have reviewed and, where appropriate, have amended each of our deferred compensation plans to meet the requirements. Finally, IRC Section 457A imposes restrictions on nonqualified deferred compensation plans maintained by a nonqualified entity (which generally includes an entity in a jurisdiction that is not subject to U.S. income tax or a comprehensive foreign income tax). The deferred compensation plans we maintain are intended to be exempt from the requirements of Section 457A for benefits accrued or awards granted on or after January 1, 2009 (the effective date of Section 457A). Also, This proxy statement references the following financial measures that are not determined in accordance with U.S. GAAP: • operating income • adjusted book value (ABV) • operating shareholders' equity • PVP or present value of new business production • operating return on equity (ROE) Although The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management and, based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our Company's Annual Report on Form 10-K for the year ended December 31, The following table provides compensation information for 2014, 2013 Name and Principal Position Dominic J. Frederico, President and Chief Executive Officer James M. Michener, General Counsel Robert B. Mills, Chief Operating Officer Robert A. Bailenson, Chief Financial Officer Russell B. Brewer II, Chief Surveillance Officer Cash Incentive Compensation PRP Total Employer Contribution to Retirement Plans Bermuda Housing Allowance Bermuda Car Allowance Tax Preparation/ Financial Planning Miscellaneous Total EMPLOYMENT AGREEMENTS In February 2012, our Company and the named executive officers who had employment agreements agreed to terminate those employment agreements. This action was in addition to the April 2011 waivers by those named executive officers of rights to certain tax-gross up payments, to single-trigger equity vesting following a change in control, and to severance payable following a change in control in the event of a termination for any reason. None of our named executive officers currently have any employment agreements with the Company. PERQUISITE POLICY In conjunction with the termination of the employment agreements, our Company has established a perquisite policy pursuant to which we provide executive officers certain perquisites that are not available to employees generally. These include tax preparation, financial planning, annual executive medical exams and, for our executive officers located in Bermuda, housing and car allowances, Bermuda club memberships, and family travel stipend. SEVERANCE POLICY Our Company adopted a severance policy to replace termination provisions that previously had been addressed in employment contracts. For further detail, see the discussion in EMPLOYEE STOCK PURCHASE PLAN We maintain a broad based employee stock purchase plan that gives our eligible employees the right to purchase our Common Shares through payroll deductions at a purchase price that reflects a 15% discount to the market price of our Common Shares on the first or last day of the relevant subscription period, whichever is lower. No participant may purchase more than $25,000 worth of Common Shares under this plan in any calendar year. In We enter into indemnification agreements with our directors and executive officers. These agreements are in furtherance of our Bye-Laws which require us to indemnify our directors and officers for acts done, concurred in or omitted in or about the execution of their duties in their respective offices. 2014 GRANTS OF PLAN-BASED AWARDS The following table sets forth information concerning grants of plan-based awards for our named executive officers made during Name Dominic J. Frederico James M. Michener Robert B. Mills Robert A. Bailenson Russell B. Brewer II The following table sets forth the outstanding equity awards held by our named executive officers as of December 31, 2014 The following table provides information concerning option exercises by, and vesting of restricted stock awards of, our named executive officers during Control" on pages 63 to 67.Control."Benefit under defined contribution plans Description Core contribution We contribute 6% of each employee's salary and cash bonus
compensation, which we refer to as eligible compensationCompany match We match 100% of theeach employee's contribution, up to 6%
of eligible compensationUnder the2012:Following the executive officer's2012 provides that following an involuntary termination without cause or voluntary termination for good reason, and subject to the executive signing a release of claims, thean executive will receive a lump-sum payment in an amount equal to one year's salary, plus his average bonus amount over the preceding 3-year period, plus a pro-rata bonus for the year of termination and an amount equal to one year of medical and dental premiums.his compensation rights and the payments described below. In conjunction with such action, we and Mr. Mills have entered into a separation agreement.The executive officer's receipt of In order to receive these severance benefits, is subject to his compliancean executive officer must execute a release of claims and comply with non-competition, non-solicitation, and confidentiality restrictions during his employment and for a period of one year following termination.2015 PROXY STATEMENT PAGE 61 employment.stabilizingmitigating any concerns about their own personal financial well-being in the face of a change in control of our Company. Based on shareholder input and changing market trends, we modified our change in control provisions as follows:All long-termgranted after April 2011 requirewill vest only upon termination of employment termination (double-trigger) following a change in control before these awards will vest(double-trigger)Control" on pages 63 to 67.53
Control."the Compensation Committee maintains the flexibility to grant awards or pay amounts pursuant to the Company's compensation arrangementsamounts that are non-deductible if they believe it is in the best interest of our Company and our shareholders.PAGE 62 ASSURED GUARANTY as noted below, we have amended certain deferred compensation plans in which benefits were accrued or awards granted prior to January 1, 2009 to provide that such benefits shallwill be distributed in a single lump-sum payment on January 1, 2017 (to the extent not previously distributed) to satisfy the requirements of Section 457A. the financial measures identified as non-GAAP should not be considered substitutes for U.S. GAAP measures, Assured Guaranty'sour management and Board consider them keyimportant performance indicators and employhave employed them as well as other factors in determining senior management incentive compensation. Other than operating ROE, the definitions of the non-GAAP financial measures that are used in this proxy statement can be found on pages 9795 to 10199 of our Company's Annual Report on Form 10-K for the year ended December 31, 2013.2014. Operating ROE statement on page 42.represents operating income for a specified period divided by the average of operating shareholders’ equity at the beginning and the end of that period. We believe that operating ROE is a useful measure to evaluate our Company’s return on invested capital. Many investors, analysts and members of the financial news media use operating ROE to evaluate the price of our Common Shares and as the basis of their decision to recommend, buy or sell the Common Shares. We use operating ROEdefined in the calculation of the amount that is distributable under our PRP, as described in greater detail under the "Decisions on 2013 Compensation — PRP Payouts" section of the Compensation Discussion and Analysis section of this proxy statement.2015 PROXY STATEMENT PAGE 63 5420132014 and this proxy statement. The foregoing report has been approved by all members of the Compensation Committee.Francisco L. Borges, Chairman
G. Lawrence Buhl
Stephen A. Cozen55PAGE 64 ASSURED GUARANTY 2012 and 20112012 for our named executive officers.Name andPrincipal PositionYear Salary Bonus (1) StockAwards (2) (3)OptionAwards (2) (4)Non-EquityIncentive PlanCompensation (5)All OtherCompensation (6)Total (2) Dominic J. Frederico, 2013 $950,000 $3,500,000 — — $2,188,800 $854,237 $7,493,037 President and Chief 2012 $900,000 $3,300,000 $4,600,440 $1,449,694 $2,249,075 $864,506 $13,363,715 Executive Officer 2011 $900,000 $3,200,000 $2,364,800 — $2,151,225 $967,484 $9,583,509 James M. Michener, 2013 $475,000 $1,100,000 $370,930 $99,428 $1,292,350 $382,653 $3,720,361 General Counsel 2012 $450,000 $800,000 $367,989 $115,969 $1,297,125 $359,798 $3,390,881 2011 $450,000 $800,000 $443,400 — $1,008,625 $411,081 $3,113,106 Robert B. Mills, 2013 $520,000 $750,000 $212,143 $67,402 $1,022,850 $144,900 $2,717,295 Chief Operating 2012 $520,000 $600,000 $229,993 $72,481 $840,000 $165,515 $2,427,989 Officer 2011 $520,000 $700,000 $369,500 — $972,000 $224,209 $2,785,709 Russell B. Brewer II, 2013 $370,000 $800,000 $370,930 $99,428 $623,325 $155,900 $2,419,583 Chief SurveillanceOfficer 2012 $350,000 $700,000 $367,989 $115,969 $282,500 $140,411 $1,956,869 Robert A. Bailenson, 2013 $450,000 $800,000 $270,436 $65,360 $623,325 $139,250 $2,348,371 Chief Financial 2012 $425,000 $700,000 $275,992 $86,977 $480,200 $142,739 $2,110,908 Officer 2011 $375,000 $700,000 $369,500 — $371,150 $142,305 $1,957,955 Year Salary Bonus(1) Stock
Awards(2)(3) Option
Awards(2)(4) Non-Equity
Incentive
Plan
Compen-
sation(5) All Other
Compen-
sation(6) Total(2) 2014 $ 950,000 — $3,607,088 — $5,580,300 $637,403 $10,774,791 2013 $ 950,000 $3,500,000 — — $2,188,800 $854,237 $7,493,037 2012 $ 900,000 $3,300,000 $4,600,440 $1,449,694 $2,249,075 $864,506 $13,363,715 2014 $ 500,000 — $706,975 — $2,399,400 $401,974 $4,008,349 2013 $ 475,000 $1,100,000 $370,930 $99,428 $1,292,350 $382,653 $3,720,361 2012 $ 450,000 $800,000 $367,989 $115,969 $1,297,125 $359,798 $3,390,881 2014 $ 520,000 — $557,874 — $2,654,750 $166,266 $3,898,890 2013 $ 520,000 $750,000 $212,143 $67,402 $1,022,850 $144,900 $2,717,295 2012 $ 520,000 $600,000 $229,993 $72,481 $840,000 $165,515 $2,427,989 2014 $ 475,000 — $673,311 — $1,618,772 $153,900 $2,920,983 2013 $ 450,000 $800,000 $270,436 $65,360 $623,325 $139,250 $2,348,371 2012 $ 425,000 $700,000 $275,992 $86,977 $480,200 $142,739 $2,110,908 2014 $ 390,000 — $706,975 — $1,570,130 $171,000 $2,838,105 2013 $ 370,000 $800,000 $370,930 $99,428 $623,325 $155,900 $2,419,583 2012 $ 350,000 $700,000 $367,989 $115,969 $282,500 $140,411 $1,956,869 (1)Payment for bonuses for 2013, 2012 and 2011 were made in 2014, 2013 and 2012, respectively.(2)As further discussed in "Executive Compensation—Compensation Discussion and Analysis", equity awards granted to our CEO in 2012 constituted a two-year grant and he did not receive any equity awards in 2013.(3)This column represents the grant date value of restricted stock awards and restricted share unit awards granted in 2013, 2012 and 2011 for 2012, 2011 and 2010 performance, respectively.(4)No options were granted in 2011. This column represents the grant date value of stock option awards granted in 2013 and 2012 for 2012 and 2011 performance, respectively.(5)This column represents the vesting date value of PRP awards granted in 2008, 2009, 2010, 2011 and 2012 that vested on December 31, 2013, December 31, 2012 and December 31, 2011 and were paid in March 2014, 2013 and 2012, respectively.(6)All other compensation consists of the benefits set forth in the table below for 2013. D. Frederico J. Michener R. Mills R. Bailenson R. Brewer $3,629,000 $1,300,000 $1,827,800 $951,472 $902,830 $1,951,300 $1,099,400 $826,950 $667,300 $667,300 $5,580,300 $2,399,400 $2,654,750 $1,618,772 $1,570,130 annual bonus.cash incentive compensation. The Miscellaneous category within All Other Compensation includes business relatedbusiness-related spousal travel, Bermuda travel stipend, personal use of a corporate apartment, non-U.S club fees and matching gift donations.562015 PROXY STATEMENT PAGE 65 D. Frederico J. Michener R. Mills R. Brewer R. Bailenson Employer Contribution to Retirement Plans $510,000 $153,000 $134,400 $128,400 $138,000 Bermuda Housing Allowance $252,000 $144,000 — — — Bermuda Car Allowance $20,000 $15,000 — — — Tax Preparation/ Financial Planning $38,437 $36,853 — $17,500 $1,250 Non-U.S. Club Fees $8,800 $8,800 — — — Miscellaneous $25,000 $25,000 $10,500 $10,000 — Total $854,237 $382,653 $144,900 $155,900 $139,250 D. Frederico J. Michener R. Mills R. Bailenson R. Brewer $534,000 $192,000 $152,400 $153,000 $142,800 $22,043 $144,000 — — — $20,000 $15,000 — — — $28,910 $16,524 $3,866 $900 $18,200 $32,450 $34,450 $10,000 — $10,000 $637,403 $401,974 $166,266 $153,900 $171,000 The executive officersIn light of the challenges of the Bermuda market, including travel to and from the island, and the cost of living and maintaining a residence, these perquisites are no longer reimbursedconsistent with competitive practices in the Bermuda market and have been necessary for U.S. club fees or the executive health plan.recruitment and retention purposes. Because perquisites are no longer governed by employment agreements that require executive officer consent to changes, they may be modified by the Compensation Committee. Accordingly, it is easier for our Company to update and change the perquisites we provide to executive officers as we deem appropriate through amendments to the perquisite policy than it was previously with the employment agreements.. A severance policy enables us to attract and retain top candidates for our executive positions and enables us to have good relations with those executives."Executive Compensation—Compensation"Compensation Discussion and Analysis" on page 29Analysis—Post-Employment Compensation—Severance" and "Executive Compensation—Potential"Potential Payments Upon Termination or Change of Control—Severance Policy" on page 67.2013,2014, Mr. Frederico, Mr. Mills and Mr. Sternanother executive officer participated in the employee stock purchase plan to the maximum extent possible.PAGE 66 ASSURED GUARANTY 57officer, employee or agent of another entity at our request or relating to anything done or not done by the indemnitee in such a capacity.20132014.2013.Name Grant Date Estimated Future PayoutsUnder Non-Equity IncentivePlan Awards Target (1)Estimated Future Payouts
Under Equity Incentive
Plan AwardsAll Other Stock Awards:Number of Shares ofStock or UnitsExercise or Base Price of Option Awards (per share) Grant Date FairValue of Stockand Option Awards (5)Threshold Target Maximum Dominic J. Frederico Feb. 7, 2013 $1,500,000 — — — — — — James M. Feb. 7, 2013 $800,000 — — — — — — Michener Feb. 7, 2013 (2 ) — 2,800 8,000 16,000 — — $236,320 Feb. 7, 2013 (3 ) — — — — 7,000 — $134,610 Feb. 7, 2013 (4 ) — 4,260 12,170 — — $19.24 $99,428 Robert B. Feb. 7, 2013 $500,000 — — — — — — Mills Feb. 7, 2013 (2 ) — 1,568 4,480 8,960 — — $132,339 Feb. 7, 2013 (3 ) — — — — 4,150 — $79,804 Feb. 7, 2013 (4 ) — 2,888 8,250 — — $19.24 $67,402 Russell B. Feb. 7, 2013 $600,000 — — — — — — Brewer II Feb. 7, 2013 (2 ) — 2,800 8,000 16,000 — — $236,320 Feb. 7, 2013 (3 ) — — — — 7,000 — $134,610 Feb. 7, 2013 (4 ) — 4,260 12,170 — — $19.24 $99,428 Robert A. Feb. 7, 2013 $600,000 — — — — — — Bailenson Feb. 7, 2013 (2 ) — 2,065 5,900 11,800 — — $174,286 Feb. 7, 2013 (3 ) — — — — 5,000 — $96,150 Feb. 7, 2013 (4 ) — 2,800 8,000 — — $19.24 $65,360 Estimated Future
Payouts Under
Non-Equity Incentive
Plan Awards Estimated
Future Payouts
Under Equity Incentive
Plan Awards
Grant Date
Target
Maximum
Threshold
Target
Maximum
All Other
Stock Awards:
Number of
Shares of
Stock or Units
Grant
Date Fair
Value of
Stock and
Option
Awards(5) Feb. 5, 2014(1) $2,375,000 $4,750,000 — — — — — Feb. 5, 2014(2) $450,000 — — — — — — Feb. 5, 2014(3) — — 25,039 71,541 143,082 — $1,800,687 Feb. 5, 2014(4) — — — — — 82,635 $1,806,401 Feb. 5, 2014(1) $1,000,000 $2,000,000 — — — — — Feb. 5, 2014(2) $315,000 — — — — — — Feb. 5, 2014(3) — — 4,907 14,021 28,042 — $352,909 Feb. 5, 2014(4) — — — — — 16,197 $354,066 Feb. 5, 2014(1) $1,300,000 $2,600,000 — — — — — Feb. 5, 2014(2) $250,000 — — — — — — Feb. 5, 2014(3) — — 3,872 11,064 22,128 — $278,481 Feb. 5, 2014(4) — — — — — 12,781 $279,393 Feb. 5, 2014(1) $783,750 $1,567,500 — — — — — Feb. 5, 2014(2) $300,000 — — — — — — Feb. 5, 2014(3) — — 4,674 13,354 26,708 — $336,120 Feb. 5, 2014(4) — — — — — 15,425 $337,191 Feb. 5, 2014(1) $643,500 $1,287,000 — — — — — Feb. 5, 2014(2) $315,000 — — — — — — Feb. 5, 2014(3) — — 4,907 14,021 28,042 — $352,909 Feb. 5, 2014(4) — — — — — 16,197 $354,066 2015 PROXY STATEMENT (1)This column represents a PRP award that vests 25% after a two year performance period; 25% after a three year performance period and 50% after a four year performance period. Awards will increase or decrease in value based 50% on the change in our ABV per share, as defined, and 50% on our operating ROE, over each performance period. For the executive officers, no amount is payable if the growth in our ABV per share for the applicable performance period is negative and if our operating ROE is not at least 3% on average for each year in the applicable performance period. However, if, in a subsequent performance period, there is either positive growth in our ABV per share or our operating ROE is at least 3% on average for each year in the applicable performance period, and the executive officer remains employed at our Company, then the executive officer will receive the forfeited payment.PAGE 6758(2)Represents a performance share unit award. The performance share units will vest at the end of a three-year vesting period based on performance during such period based on the highest 40-day average share price during such period as described above and continued employment through the end of the applicable three-year period, with limited exceptions. The number of performance share units listed in the Threshold column represents the number of performance share units which shall become vested based on achievement of 35% of the performance target (a 40-day average share price of $18 during the performance period); the number of performance share units listed in the Target column represents the number of performance share units which shall become vested based on achievement of 100% of the performance target (a 40-day average share price of $24 during the performance period); and the number of performance share units listed in the Maximum column represents the number of performance share units which shall become vested based on achievement of 200% of the performance target (a 40-day average share price of $30PAGE 68 (3)Represents a time-based RSU award. Restrictions lapse on the third anniversary of the grant date of the award, subject to continued employment.ASSURED GUARANTY(4)Represents a performance stock option award. The option will vest at the end of a three-year vesting period based on performance during such period based on the highest 40-day average share price during such period as described above and continued employment through the end of the applicable three-year period, with limited exceptions. The number of shares listed in the Threshold column represents the right to purchase the number of shares subject to the option which shall become vested based on achievement of 35% of the performance target (a 40-day average share price of $18 during the performance period); and the number of shares listed in the Target column represent right to purchase the number of shares subject to the option which shall become vested based on achievement of 100% of the performance target (a 40-day average share price of $30 during the performance period). Because vesting for the option cannot exceed 100%, no shares are listed in the Maximum column. If at least 35% of the performance target is not achieved during the performance period, the right to purchase all of the shares subject to the option shall be forfeited.(5)This column discloses the aggregate grant date fair market value computed in accordance with U.S. GAAP, which is $29.54 per target share for performance share units, $19.23 per share for RSUs, and $8.17 per target share for performance stock options. For all assumptions used in the valuation, see note 20 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013.20142014.2013. Option Awards Stock Awards Option Awards Stock Awards Name Number ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable Equity Incentive Plan Awards: Number ofSecuritiesUnderlyingUnexercised UnearnedOptions OptionExercisePrice (per share)OptionExpirationDateNumber ofShares orUnits of StockThat HaveNot Vested Market Valueof Shares orUnits of StockThat HaveNot VestedEquity Incentive Plan Awards: Number ofUnearned Shares, Units orOther RightsThat HaveNot Vested Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units orOther RightsThat HaveNot Vested Number of
Securities
Underlying
Unexercised
Options
Exercisable Number of
Securities
Underlying
Unexercised
Options
Unexercisable Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options Option
Exercise
Price
(per
share) Option
Expiration
Date Number
of
Shares
or
Units of
Stock
That
Have
Not
Vested Market Value
of Shares or
Units of
Stock
That Have
Not Vested
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested Dominic J. 166,667 — — $18.03 2/10/2015 — — — —
166,667
—
—
$18.03
2/10/2015
—
—
—
—
Frederico 166,667 — — $25.50 2/2/2016 — — — — 166,667 — — $25.50 2/2/2016 — — — — 166,667 — — $26.70 2/8/2017 — — — — 166,667 — — $26.70 2/8/2017 — — — — 200,000 — — $23.27 2/14/2018 — — — — 200,000 — — $23.27 2/14/2018 — — — — 100,000 — — $7.44 2/5/2019 — — — — 100,000 — — $7.44 2/5/2019 — — — — 100,000 — — $19.79 2/24/2020 — — — — 100,000 — — $19.79 2/24/2020 — — — — — 87,925 (1 ) 96,985 (1 ) $17.44 2/9/2019 — — — — — 112,055 (1) — $17.44 2/9/2019 — — — — — — — — — 25,000 (3 ) $589,750 — — — — — — — 40,000 (3) $1,039,600 — — — — — — — 80,000 (4 ) $1,887,200 — — — — — — — 86,697 (3) $2,253,255 — — — — — — — 136,862 (4) $3,557,043 — — — — — — — 82,635 (7) $2,147,684 — — — — — — — — — 71,541 (8) $1,859,351 James M. 50,000 — — $25.50 2/2/2016 — — — — Michener 50,000 — — $26.70 2/8/2017 — — — — 30,000 — — $23.27 2/14/2018 — — — — 20,000 — — $7.44 2/5/2019 — — — — 40,000 — — $19.79 2/24/2020 — — — — — 8,963 (1) — $17.44 2/9/2019 — — — — — 7,375 (2) 4,795 (2) $19.24 2/7/2020 — — — — — — — — — 7,500 (3) $194,925 — — — — — — — 6,936 (3) $180,267 — — — — — — — 10,946 (4) $284,487 — — — — — — — 7,000 (5) $181,930 — — — — — — — 9,696 (6) $251,999 6,304 (6) $163,841 — — — — — 16,197 (7) $420,960 — — — — — — — — — 14,021 (8) $364,406 Robert B. 80,000 — — $25.50 2/2/2016 — — — — Mills 80,000 — — $26.70 2/8/2017 — — — — 40,000 — — $23.27 2/14/2018 — — — — 20,000 — — $7.44 2/5/2019 — — — — 40,000 — — $19.79 2/24/2020 — — — — — 5,602 (1) — $17.44 2/9/2019 — — — — — 5,000 (2) 3,251 (2) $19.24 2/7/2020 — — — — — — — — — 6,250 (3) $162,438 — — — — — — — 4,335 (3) $112,667 — — — — — — — 6,841 (4) $177,798 — — — — — — — 4,150 (5) $107,859 — — — — — — — 5,430 (6) $141,126 3,530 (6) $91,745 — — — — — 12,781 (7) $332,178 — — — — — — — — — 11,064 (8) $287,553 2015 PROXY STATEMENT PAGE 69 59 Option Awards Stock Awards Name Number ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable Equity Incentive Plan Awards: Number ofSecuritiesUnderlyingUnexercised UnearnedOptions OptionExercisePrice (per share)OptionExpirationDateNumber ofShares orUnits of StockThat HaveNot Vested Market Valueof Shares orUnits of StockThat HaveNot VestedEquity Incentive Plan Awards: Number ofUnearned Shares, Units orOther RightsThat HaveNot Vested Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units orOther RightsThat HaveNot Vested — — — — — 86,697 (5 ) $2,045,182 — — — — — — — 100,919 (6 ) $2,380,679 12,004 (6 ) $283,174 James M. 50,000 — — $18.03 2/10/2015 — — — — Michener 50,000 — — $25.50 2/2/2016 — — — — 50,000 — — $26.70 2/8/2017 — — — — 30,000 — — $23.27 2/14/2018 — — — — 20,000 — — $7.44 2/5/2019 — — — — 40,000 — — $19.79 2/24/2020 — — — — — 7,034 (1 ) 7,758 (1 ) $17.44 2/9/2019 — — — — — 5,787 (2 ) 6,383 (2 ) $19.24 2/7/2020 — — — — — — — — — 7,500 (3 ) $176,925 — — — — — — — 15,000 (4 ) $353,850 — — — — — — — 6,936 (5 ) $163,620 — — — — — — — 8,072 (6 ) $190,418 960 (6 ) $22,646 — — — — — 7,000 (7 ) $165,130 — — — — — — — 7,150 (8 ) $168,669 850 (8 ) $20,052 Robert B. 80,000 — — $18.03 2/10/2015 — — — — Mills 80,000 — — $25.50 2/2/2016 — — — — 80,000 — — $26.70 2/8/2017 — — — — 40,000 — — $23.27 2/14/2018 — — — — 20,000 — — $7.44 2/5/2019 — — — — 40,000 — — $19.79 2/24/2020 — — — — — 4,396 (1 ) 4,849 (1 ) $17.44 2/9/2019 — — — — — 3,923 (2 ) 4,327 (2 ) $19.24 2/7/2020 — — — — — — — — — 7,500 (3 ) $176,925 — — — — — — — 12,500 (4 ) $294,875 — — — — — — — 4,335 (5 ) $102,263 — — — — — — — 5,045 (6 ) $119,012 600 (6 ) $14,154 — — — — — 4,150 (7 ) $97,899 — — — — — — — 4,004 (8 ) $94,454 476 (8 ) $11,229 Russell B. 10,000 — — $19.79 2/24/2020 — — — — Brewer II — 7,034 (1 ) 7,758 (1 ) $17.44 2/9/2019 — — — — — 5,787 (2 ) 6,383 (2 ) $19.24 2/7/2020 — — — — — — — — — 5,000 (3 ) $117,950 — — — — — — — 15,000 (4 ) $353,850 — — — — — — — 6,936 (5 ) $163,620 — — — — — — — 8,072 (6 ) $190,418 960 (6 ) $22,646 — — — — — 7,000 (7 ) $165,130 — — — — — — — 7,150 (8 ) $168,669 850 (8 ) $20,052 Robert A. 10,000 — — $18.03 2/10/2015 — — — — Bailenson 12,000 — — $25.50 2/2/2016 — — — — 16,000 — — $26.70 2/8/2017 — — — — 60 Option Awards Stock Awards Name Number of
Securities
Underlying
Unexercised
Options
Exercisable Number of
Securities
Underlying
Unexercised
Options
Unexercisable Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options Option
Exercise
Price
(per
share) Option
Expiration
Date Number
of
Shares
or
Units of
Stock
That
Have
Not
Vested Market Value
of Shares or
Units of
Stock
That Have
Not Vested
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
Robert A.
12,000
—
—
$25.50
2/2/2016
—
—
—
—
Bailenson 16,000 — — $26.70 2/8/2017 — — — — 10,000 — — $23.27 2/14/2018 — — — — 10,000 — — $7.44 2/5/2019 — — — — 20,000 — — $19.79 2/24/2020 — — — — — 6,722 (1) — $17.44 2/9/2019 — — — — — 4,848 (2) 3,152 (2) $19.24 2/7/2020 — — — — — — — — — 6,250 (3) $162,438 — — — — — — — 5,202 (3) $135,200 — — — — — — — 8,210 (4) $213,378 — — — — — — — 5,000 (5) $129,950 — — — — — — — 7,151 (6) $185,854 4,649 (6) $120,828 — — — — — 15,425 (7) $400,896 — — — — — — — — — 13,354 (8) $347,070 Russell B. 10,000 — — $19.79 2/24/2020 — — — — Brewer II — 8,963 (1) — $17.44 2/9/2019 — — — — — 7,375 (2) 4,795 (2) $19.24 2/7/2020 — — — — — — — — — 7,500 (3) $194,925 — — — — — — — 6,936 (3) $180,267 — — — — — — — 10,946 (4) $284,487 — — — — — — — 7,000 (5) $181,930 — — — — — — — 9,696 (6) $251,999 6,304 (6) $163,841 — — — — — 16,197 (7) $420,960 — — — — — — — — — 14,021 (8) $364,406 �� Option Awards Stock Awards Name Number ofSecuritiesUnderlyingUnexercisedOptionsExercisableNumber ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable Equity Incentive Plan Awards: Number ofSecuritiesUnderlyingUnexercised UnearnedOptions OptionExercisePrice (per share)OptionExpirationDateNumber ofShares orUnits of StockThat HaveNot Vested Market Valueof Shares orUnits of StockThat HaveNot VestedEquity Incentive Plan Awards: Number ofUnearned Shares, Units orOther RightsThat HaveNot Vested Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units orOther RightsThat HaveNot Vested 10,000 — — $23.27 2/14/2018 — — — — 10,000 — — $7.44 2/5/2019 — — — — 20,000 — — $19.79 2/24/2020 — — — — — 5,275 (1 ) 5,819 (1 ) $17.44 2/9/2019 — — — — — 3,804 (2 ) 4,196 (2 ) $19.24 2/7/2020 — — — — — — — — — 5,000 (3 ) $117,950 — — — — — — — 12,500 (4 ) $294,875 — — — — — — — 5,202 (5 ) $122,715 — — — — — — — 6,054 (6 ) $142,814 720 (6 ) $16,985 — — — — — 5,000 (7 ) $117,950 — — — — — — — 5,273 (8 ) $124,390 627 (8 ) $14,791 PAGE 70 (1)These options will vest on February 9, 2015, subject to continued employment and achievement of performance goals, as defined. As of December 31, 2013, the highest 40-day average price of our Common Shares was $23.02. Accordingly, approximately 47.55% of the options will vest, subject to the other conditions of the performance equity, but not before the end of the three-year performance period.ASSURED GUARANTY(2)These options will vest on February 7, 2016, subject to continued employment or agreement terms relating to retirement and achievement of performance goals, as defined.(3)These units vested on February 24, 2014. As of December 31, 2013, the highest 40-day average price of our Common Shares was $23.02. Accordingly, approximately 47.55% of the options will vest, subject to the other conditions of the performance equity, but not before the end of the three-year performance period.(4)One half of these units vested on February 9, and one half of these units will vest on February 9, 2015, subject to continued employment or agreement terms relating to retirement.(5)These units will vest on February 9, 2015, subject to continued employment.(6)These units will vest on February 9, 2015, subject to continued employment and achievement of performance goals, as defined. As of December 31, 2013, the highest 40-day average price of our Common Shares was $23.02. Accordingly, approximately 89.37% of the units will vest, subject to the other conditions of the performance equity, but not before the end of the three-year performance period.(7)These units will vest on February 7, 2016, subject to continued employment or agreement terms relating to retirement.(8)These units will vest on February 7, 2016, subject to continued employment or agreement terms relating to retirement and achievement of performance goals, as defined. As of December 31, 2013, the highest 40-day average price of our Common Shares was $23.02. Accordingly, approximately 89.37% of the units will vest, subject to the other conditions of the performance equity, but not before the end of the three-year performance period.612013 OPTION EXERCISES AND STOCK VESTED2014.2013.
| Option Awards | Stock Awards | | Option Awards | | | Stock Awards | ||||||||||||||||||||||
| Name | Number of Shares Acquired on Exercise (1) | Value Realized on Exercise (2) | Number of Shares Acquired on Vesting (3) | Value Realized on Vesting (4) | | | Number of Shares Acquired on Exercise(1) | | | Value Realized on Exercise(2) | | | Number of Shares Acquired on Vesting(3) | | | Value Realized on Vesting(4) | ||||||||||||
| Dominic J. Frederico | 500,000 | $3,325,000 | 108,294 | $2,001,922 | — | — | 69,492 | $1,581,571 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |||||||
| James M. Michener | 160,000 | $870,400 | 23,775 | $440,065 | 50,000 | $334,500 | 16,081 | $368,797 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |||||||
| Robert B. Mills | 240,000 | $1,420,800 | 22,476 | $415,384 | 80,000 | $510,400 | 14,755 | $339,399 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |||||||
| Robert A. Bailenson | 10,000 | $68,300 | 12,043 | $275,179 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |||||||
| Russell B. Brewer II | — | — | 13,075 | $247,370 | — | — | 13,368 | $304,554 | ||||||||||||||||||||
| Robert A. Bailenson | 25,000 | $134,000 | 15,807 | $294,239 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |||||||
NONQUALIFIED DEFERRED COMPENSATION The following table sets forth information concerning nonqualified deferred compensation of our executive officers. The amounts set forth in this table include only contributions made and earnings received during 2015.20132014 and do not include contribution and earnings with respect to the 20132014 bonus paid in 2014.
| Name | Executive Contributions in Last FY (1) | Registrant Contributions in Last FY (2) | Aggregate Withdrawals/ Distributions | Aggregate Earnings in Last FY | Aggregate Balance at Last FYE (3) | | | Executive Contributions in Last FY(1) | | | Registrant Contributions in Last FY(2) | | | Aggregate Withdrawals/ Distributions | | | Aggregate Earnings in Last FY | | | Aggregate Balance at Last FYE(3) | |||||||||||||
| Dominic J. Frederico | $239,700 | $479,400 | — | $2,988,144 | $11,597,062 | (4) | $251,400 | $502,800 | — | $857,976 | $13,209,238 | (4) | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
| James M. Michener | $61,200 | $122,400 | — | $547,572 | $2,540,563 | $80,400 | $160,800 | — | $292,724 | $3,074,487 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||
| Robert B. Mills | $51,900 | $103,800 | — | $283,706 | $2,128,673 | $60,600 | $121,200 | — | $141,323 | $2,451,796 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||
| Robert A. Bailenson | $60,900 | $121,800 | — | $231,949 | $2,063,093 | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||
| Russell B. Brewer II | $48,900 | $97,800 | — | $275,076 | $2,246,281 | $55,800 | $111,600 | — | $184,433 | $2,598,114 | |||||||||||||||||||||||
| Robert A. Bailenson | $53,700 | $107,400 | — | $508,746 | $1,648,444 | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||
Name | | 2014 Amount | | 2013 Amount | |||
| | | | | | | | |
Dominic J. Frederico | $47,500 | $48,000 | |||||
| | | | | | | | |
James M. Michener | $25,250 | $24,000 | |||||
| | | | | | | | |
Robert B. Mills | $26,000 | $26,000 | |||||
| | | | | | | | |
Robert A. Bailenson | $23,750 | $22,500 | |||||
| | | | | | | | |
Russell B. Brewer II | $19,500 | $18,500 | |||||
| | | | | | | | |
| 2015 PROXY STATEMENT | |
| Name | 2013 Amount | 2012 Amount |
| Dominic J. Frederico | $48,000 | $45,000 |
| James M. Michener | $24,000 | $22,500 |
| Robert B. Mills | $26,000 | $26,000 |
| Russell B. Brewer II | $18,500 | $17,500 |
| Robert A. Bailenson | $22,500 | $21,250 |
Name | | 2014 Amount | | 2013 Amount | |||
| | | | | | | | |
Dominic J. Frederico | $6,025,640 | $5,306,540 | |||||
| | | | | | | | |
James M. Michener | $1,701,725 | $1,518,125 | |||||
| | | | | | | | |
Robert B. Mills | $1,611,413 | $1,455,713 | |||||
| | | | | | | | |
Robert A. Bailenson | $950,410 | $789,310 | |||||
| | | | | | | | |
Russell B. Brewer II | $290,700 | $144,000 | |||||
| | | | | | | | |
| Name | 2013 Amount | 2012 Amount | |
| Dominic J. Frederico | $5,306,540 | $4,613,540 | |
| James M. Michener | $1,518,125 | $1,338,125 | |
| Robert B. Mills | $1,455,713 | $1,281,113 | |
| Russell B. Brewer II | $144,000 | — | |
| Robert A. Bailenson | $789,310 | $631,810 | |
The following tables quantify the potential payments upon termination or change of control that our named executive officers would receive assuming that the relevant termination event had occurred on December 31, POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL2013.
| Name | Unvested PRP | Unvested Restricted Stock | Unvested Stock Options | Total | | | Unvested PRP | | | Unvested Restricted Stock | | | Unvested Stock Options | | | Total | |||||||||
| Dominic J. Frederico | $3,475,000 | $6,298,035 | $758,131 | $10,531,166 | $2,325,000 | $8,862,018 | $1,537,064 | $12,724,082 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||
| James M. Michener | $1,900,000 | $1,064,475 | $78,294 | $3,042,769 | $1,315,000 | $1,450,487 | $175,442 | $2,940,929 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||
| Robert B. Mills | $1,350,000 | $795,966 | $49,867 | $2,195,833 | $925,000 | $1,020,032 | $112,427 | $2,057,459 | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||
| Robert A. Bailenson | $1,050,000 | $1,203,666 | $126,719 | $2,380,385 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||
| Russell B. Brewer II | $1,300,000 | $1,005,500 | $78,294 | $2,383,794 | $1,065,000 | $1,450,487 | $175,442 | $2,690,929 | |||||||||||||||||
| Robert A. Bailenson | $1,300,000 | $806,416 | $57,085 | $2,163,501 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||
| Name | Unvested PRP (1) | Unvested Restricted Stock | Unvested Stock Options | Total | | | Unvested PRP(1) | | | Unvested Restricted Stock | | | Unvested Stock Options | | | Total | |||||||||||||
| Dominic J. Frederico | $3,475,000 | $2,476,950 | — | $5,951,950 | $2,325,000 | $2,263,972 | — | $4,588,972 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||||||
| James M. Michener | $1,900,000 | $530,775 | — | $2,430,775 | $1,315,000 | $434,898 | — | $1,749,898 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
| Robert B. Mills | $1,350,000 | $471,800 | — | $1,821,800 | $925,000 | $576,094 | $55,688 | $1,556,782 | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
| Robert A. Bailenson(2) | — | — | — | — | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
| Russell B. Brewer II | $1,300,000 | $471,800 | — | $1,771,800 | $1,065,000 | $194,925 | — | $1,259,925 | |||||||||||||||||||||
| Robert A. Bailenson (2) | — | — | — | — | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||
| PAGE 72 | |
| Name | Salary Continuation | Bonus | Benefits | Unvested Restricted Stock | Unvested Stock Options | Total | | Salary Continuation | | Bonus | | Benefits | | Unvested Restricted Stock | | Unvested Stock Options | | Total | ||||||||||||
| Dominic J. Frederico | $950,000 | $3,366,667 | $36,744 | $6,298,035 | $758,131 | $11,409,577 | $950,000 | $3,333,333 | $39,512 | $8,862,018 | $1,537,064 | $14,721,927 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| James M. Michener | $475,000 | $850,000 | $35,948 | $1,064,475 | $78,294 | $2,503,717 | $500,000 | $900,000 | $39,512 | $1,450,487 | $175,442 | $3,065,441 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| Robert B. Mills | $520,000 | $766,667 | $16,698 | $795,966 | $49,867 | $2,149,198 | $520,000 | $683,333 | $20,302 | $1,020,032 | $112,427 | $2,356,094 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| Robert A. Bailenson | $475,000 | $733,333 | $29,676 | $1,203,666 | $126,719 | $2,568,394 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| Russell B. Brewer II | $370,000 | $700,000 | $24,407 | $1,005,500 | $78,294 | $2,178,201 | $390,000 | $750,000 | $29,676 | $1,450,487 | $175,442 | $2,795,605 | ||||||||||||||||||
| Robert A. Bailenson | $450,000 | $666,667 | $24,407 | $806,416 | $57,085 | $2,004,575 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| Name | Salary Continuation | Bonus | Benefits | Unvested Restricted Stock | Unvested Stock Options | Total | | Salary Continuation | | Bonus | | Benefits | | Unvested Restricted Stock | | Unvested Stock Options | | Total | ||||||||||||
| Dominic J. Frederico | $950,000 | $3,366,667 | $36,744 | $6,902,818 | $540,737 | $11,796,966 | $950,000 | $3,333,333 | $39,512 | $8,997,600 | $958,074 | $14,278,519 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| James M. Michener | $475,000 | $850,000 | $35,948 | $1,218,600 | $68,429 | $2,647,977 | $500,000 | $900,000 | $39,512 | $1,514,588 | $126,423 | $3,080,523 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| Robert B. Mills | $520,000 | $766,667 | $16,698 | $885,420 | $44,100 | $2,232,885 | $520,000 | $683,333 | $20,302 | $1,034,077 | $81,648 | $2,339,360 | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| Robert A. Bailenson | $475,000 | $733,333 | $29,676 | $1,227,713 | $90,205 | $2,555,927 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| Russell B. Brewer II | $370,000 | $700,000 | $24,407 | $1,159,625 | $68,429 | $2,322,461 | $390,000 | $750,000 | $29,676 | $1,514,588 | $126,423 | $2,810,687 | ||||||||||||||||||
| Robert A. Bailenson | $450,000 | $666,667 | $24,407 | $920,688 | $48,990 | $2,110,752 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | ||||||||
The salary continuation, bonus and benefits columns in the Termination Without Cause Payments table and the Change-in-Control Severance table represent amounts that would be payable to each executive officer under the terms of the severance policy for executive officers. Under the terms of the policy, each executive officer receives one year of salary, the average of the last three annual bonus amounts, a pro-rata annual bonus payment for the year of termination and one year of benefits which represent medical plan and dental plan premiums paid by our Company at the same level as was paid just prior to termination.
With respect to the termination due to retirement, vesting of PRP, restricted stock and stock options takes place over time. However, we have not discounted these amounts receivable in the future following retirement in the Termination Due to Retirement table. The amount included for the payout of the unvested PRP and vesting of performance share units and performance stock options following retirement was calculated assuming 100% vesting based on assumed performance over the remainder of the applicable performance period. The value of the actual payment amount for PRP and the vesting amount for performance share units and performance stock options may vary from this assumed amount depending on actual performance over the remainder of the performance period following retirement. No amount was included for 2012 performance share units or 2012 performance stock options because such grants would be forfeited by the executive in the event of a retirement prior to vesting.
The aggregate qualified and non-qualified defined contribution retirement account balances as of December 31, 20132014 for Messrs. Frederico, Michener, Mills, BrewerBailenson and BailensonBrewer are as follows, respectively: $12,046,501, $3,295,220, $2,730,511, $4,582,452$13,735,844, $3,974,458, $3,144,987, $3,624,845 and $3,025,381.$5,146,036. Retirement account balances will be paid upon termination in accordance with the terms of the plans, as described below.
| 2015 PROXY STATEMENT | | PAGE 73 |
If an executive officer had been terminated for cause on December 31, 2013,2014, he would not have received any severance payments and would have forfeited all unvested PRP, restricted stock and stock options, receiving only salary payments through the termination date and vested retirement benefits under our Company's retirement plans.
For the purpose of these tables, the value of RSUs has been determined by multiplying the number of shares of unvested RSUs on December 31, 20132014 by the closing price of our Common Shares on December 31, 2013,2014, which was $23.59.$25.99. Similarly, we calculated the value of unvested options by multiplying the number of unvested options by the difference between the closing price of our Common Shares on December 31, 20132014 and the applicable exercise price.
For purposes of the Termination due to Death and Disability and Termination Without Cause tables, the amount included for the pro-rata portion of the performance share units and performance stock options which may become vested following such termination was calculated assuming 100% vesting based on assumed performance over the remainder of the applicable performance period and assuming a value of $23.59$25.99 per share of Common Shares on the date of distribution (the closing price of our Common Shares on December 31, 2013)2014). The percentage of the pro-rata portion of the performance share units and performance stock options which ultimately becomes vested and the value of the actual distribution of the shares with respect to such performance share units and performance stock options may vary from this assumed amount depending on the actual price of our Common Shares through the remainder of the applicable performance period and the value of our Common Shares on the date of distribution.
Severance payments, PRP vesting, restricted stock vesting, stock option vesting and retirement plan contributions assume no subsequent employment after termination. Certain rights to vesting and distributions following retirement or a termination without cause are subject to continued compliance with applicable restrictive covenants and may be forfeited by the executive in the event of a violation of such covenants (and in certain circumstances, the executive may be required to repay certain amounts in the event of a violation of such covenants).
All the executive officers participate in a non-qualified defined contribution retirement plan through an Assured Guaranty employer. These plans generally permit distributions only following a participant's termination of employment, and each of the plans imposes some additional restrictions on distributions as described below. A change in control under the current provisions of these plans does not entitle a participant to payment. Below is an overview of each plan.
Assured Guaranty Ltd. Supplemental Employee Retirement Plan (AGL SERP)
The AGL SERP is a non-qualified retirement plan for higher-paid employees. Internal Revenue Code provisions, such as the annual limit on employee deferrals, limit the amount of contributions that these employees may make or have made on their behalf to the qualified Assured Guaranty Ltd. Employee Retirement Plan. Contributions credited to this supplemental plan mirror the employee contributions, employer matching contributions, and 6% employer contributions that would have been made under the Assured Guaranty Ltd. Employee Retirement Plan had the Internal Revenue Code provisions not limited the contributions. The plan also permits discretionary employer contributions.
| PAGE 74 | | ASSURED GUARANTY |
Additionally, benefits that were accrued prior to January 1, 2009 that would otherwise be subject to IRC Section 457A shall be distributed in a single lump-sum payment on January 1, 2017 (to the extent not previously distributed) to satisfy the requirements of IRC Section 457A.
No new benefits accrued in the AGL SERP after 2012. Accrued benefits of executive officers in the AGL SERP (other than participant account balances invested in the employer stock fund) were transferred from the AGL SERP to the AGC SERP in 2012. Additional benefits for the executive officers accrue in the AGC SERP described below.
Assured Guaranty Corp. Supplemental Executive Retirement Plan (AGC SERP)
The AGC SERP is a non-qualified retirement plan for higher-paid employees. Internal Revenue Code provisions, such as the annual limit on employee deferrals, limit the amount of contributions that these employees may make or have made on their behalf to the qualified Assured Guaranty Corp. Employee Retirement Plan. Contributions credited to this supplemental plan mirror the employee contributions, employer matching contributions, and 6% employer contributions that would have been made under the Assured Guaranty Corp. Employee Retirement Plan had the Internal Revenue Code provisions not limited the contributions. The plan also permits discretionary employer contributions.
All the executive officers have previously received awards pursuant to our Company's long-term equity incentive plan and participate in theprior years received awards under our Company's PRP. For awards granted prior to April 21, 2011 to executive officers, a change in control of our Company accelerates vesting of some equity awards made under the equity incentive plans, and RSUs will be distributed on a "change in control" if it satisfies the definition of change in control under IRC Section 409A of the Internal Revenue Code. For 2015, the executive officers received a grant of performance share units and RSUs as described below, but did not receive a grant of PRP. Below is an overview of the plans.
Assured Guaranty Ltd. 2004 Long-Term Incentive Plan, as amended, in 2009, provides for the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards, which include awards such as restricted shares, RSUs or performance share units, and cash incentive awards to employees selected by the Compensation Committee. The
| 2015 PROXY STATEMENT | | PAGE 75 |
Compensation Committee specifies the terms of the award, including the vesting period applicable to the award, at the time it grants the award to the employee, and includes the terms in an award agreement between the employee and our Company.
Assured Guaranty Ltd. Performance Retention Plan was established in 2006, to permit the grant of cash-based awards to selected employees. PRP awards may be treated as nonqualified deferred compensation subject to the rules of IRC
| PAGE 76 | | ASSURED GUARANTY |
Section 409A. The PRP is a sub-plan under our Company's Long-Term Incentive Plan (enabling awards under the plan to be performance based compensation exempt from the $1 million limit on tax deductible compensation). The revisions also give the Compensation Committee greater flexibility in establishing the terms of performance retention awards, including the ability to establish different performance periods and performance objectives.
Beginning in 2008, our Company integrated PRP awards into its long-term incentive compensation program and substantially increased the number and amount of these awards. Generally, each PRP award is divided into three installments, with 25% of the award allocated to a performance period that includes the year of the award and the next year, 25% of the award allocated to a performance period that includes the year of the award and the next two years, and 50% of the award allocated to a performance period that includes the year of the award and the next three years. Each installment of an award vests if the participant remains employed through the end of the performance period for that installment (or vests on the date of the participant's death, disability, or retirement if that occurs during the performance period). Payment for each performance period is made at the end of that performance period. One half of each installment is increased or decreased in proportion to the increase or decrease of per share adjusted book valueABV during the performance period, and one half of each installment is increased or decreased in proportion to the operating return on equityROE during the performance period. However, if, during the performance period, a participant dies or becomes permanently disabled while employed, the amount for any such incomplete performance period shall equal the portion of the award allocated to such performance period. A limited number of awards have cliff vesting in four or five years. Operating ROE and ABV are defined in each PRP award agreement. For more information on the vesting schedules of recent PRP awards see "Compensation Discussion and Analysis—Variable Compensation."
In the case of the executive officers, for PRP awards granted prior to 2015, if a payment would otherwise be subject to the $1 million limit on tax deductible compensation, no payment will be made unless performance satisfies a minimum threshold—for the applicable performance period, there must be positive growth in our ABV per share and our operating ROE must have been at least 3% on average for each year in the applicable performance period. If a payment is forfeited because the minimum threshold is not satisfied, but in a subsequent performance period, there is either positive growth in our ABV per share or our operating ROE is at least 3% on average for each year in the applicable performance period, and the executive officer remains employed at our Company, then the executive officer will receive the forfeited payment.
As described above, the performance goals used to determine the amounts distributable under the PRP are based on our Company's operating ROE and growth in per share ABV, or in the case of the 2007 awards, growth in ABV, as defined. The Compensation Committee believes that management's focus on achievement of these performance goals will lead to increases in our Company's intrinsic value.
As described above in "Executive Compensation—Employment Agreements," each executive officer had been a party to an employment agreement that provides post employment benefits. However, those agreements were terminated in February 2012 and the Company currently does not have any employment agreements with any executive officer.
We previously provided severance benefits to executive officers pursuant to their employment agreements. Upon the elimination of the employment agreements, and in conjunction with the compensation changes adopted by the Compensation Committee in February 2012, we established the severance policy for executive officers. Under the policy, following the executive's involuntary termination without cause or voluntary termination for good reason and subject to the executive signing a release of claims, the executive will receive a lump-sum payment in an amount equal to one year's
| 2015 PROXY STATEMENT | | PAGE 77 |
salary plus his average bonus amount over the preceding 3-year period, plus a pro-rata annual bonus amount for the year of termination and an amount equal to one year of medical and dental premiums. In addition, the executive's receipt of severance benefits is subject to his compliance with non-competition, non-solicitation, and confidentiality restrictions during his employment and for a period of one year following termination of employment. We, in our discretion, may choose to pay the executive the severance benefits described above to an executive who terminates employment for a reason other than involuntary termination without cause or voluntary termination for good reason, in which case the executive will also be subject to non-competition, non-solicitation, and confidentiality restrictions following his termination of employment.
| PAGE 78 | | ASSURED GUARANTY |
EQUITY COMPENSATION PLANS INFORMATION
The following table summarizes our equity compensation plans as of December 31, 2014:
Plan category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | Weighted average exercise price of outstanding options, warrants and rights (b) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||
Equity compensation plans approved by security holders | 3,049,732 | (1) | $21.17 | 10,913,118 | (2) | ||||||||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | ||||||||||
| | | | | | | | | | | | | | |
TOTAL | 3,049,732 | $21.17 | 10,913,118 | ||||||||||
| | | | | | | | | | | | | | |
| 2015 PROXY STATEMENT | | PAGE 79 |
AUDIT COMMITTEE REPORT
The Audit Committee consists of four members of the Board of Directors. Each Audit Committee member is independent, within the meaning of the NYSE listing standards, of our Company and our management and has been determined by the Board of Directors to be financially literate, as contemplated by the NYSE listing standards. In addition, the Board of Directors has determined that Mr. Kenny, Ms. Howard, Mr. Leathes and Mr. O'Kane are each Audit Committee member is an audit committee financial expertsexpert within the meaning of the rules of the SEC, as that term is defined under Item 407(d) of Regulation S-K.
The Audit Committee operates under a written charter approved by the Board of Directors, a copy of which is available on our website. As more fully described in the charter, the primary purpose of the Audit Committee is to assist the Board of Directors in its oversight of the integrity of our financial statements and financial reporting process, the system of internal controls, the audit process, the performance of our internal audit process and the performance, qualification and independence of our independent auditors,auditor, PwC.
Our Company's management prepares our consolidated financial statements in accordance with U.S. GAAP and is responsible for the financial reporting process that generates these statements. Management is also responsible for establishing and maintaining adequate internal controls over financial reporting and for performing an assessment of the effectiveness of these controls. PwC audits our year-end financial statements and reviews interim financial statements. PwC also audits the effectiveness of our internal controls over financial reporting. The Audit Committee, on behalf of the Board of Directors, monitors and reviews these processes, acting in an oversight capacity relying on the information provided to it and on the representations made to it by our management, PwC and other advisors. We have also retained Ernst & Young LLP, which we refer to as E&Y, to provide services to support itsour Company's internal audit program and compliance with Sarbanes-Oxley Section 404. The Audit Committee has adopted an Internal Audit Charter.
The Audit Committee held five meetings in 2013.2014. Audit Committee meetings are usually held in conjunction with the quarterly meetings of the Board of Directors. At all of its quarterly meetings, the Audit Committee met with management, PwC, E&Y, the Chief Financial Officer and the General Counsel or Deputy General Counsel to review, among other matters, the overall scope and plans for the internal and independent audits, and the results of such audits; critical accounting estimates and policies; the status of our loss reserves and compliance with our conflict of interest, regulatory compliance and code of conduct policies. At each quarterly meeting the Audit Committee also reviewed underwriting and risk management with the Chief Risk Officer, the Chief Surveillance Officer, and the Chief Credit Officer. The Audit Committee coordinates the oversight of underwriting and risk management with the Risk Oversight Committee. At its meetings inIn February 20132014, the Audit Committee reviewed and approved our Company's December 31, 20122013 audited consolidated financial statements and Annual Report on Form 10-K. TheIn February 2014, the Audit Committee also at that time reviewed our Company's program to ensure compliance with the requirements of Sarbanes-Oxley Section 404 and its internal controls over financial reporting, including controls to prevent and detect fraud.
The Audit Committee also met with management and PwC in February 2014,2015, over the course of two meetings, to review our Company's program to ensure compliance with the requirements of Sarbanes-Oxley Section 404 and its internal controls over financial reporting, to review results of operations and audit results, and approve our Company's December 31, 20132014 audited consolidated financial statements and Annual Report on Form 10-K. TheIn February 2015, the Audit Committee also reviewed drafts of the 20142015 proxy statement and approved this Audit Committee Report at the second of its February 2014 meetings.
At each meeting in 20132014 and February 2014,2015, the Audit Committee met in executive session (i.e., without management present) with representatives of PwC to discuss the results of their examinations and their evaluations of our Company's internal controls and overall financial reporting. Similar executive sessions are held at least annuallysemi-annually with
| PAGE 80 | | ASSURED GUARANTY |
representatives of E&Y. At each quarterly meeting, E&Y has the opportunity to address pending issues with the Audit Committee and semi-annually specifically reviewed the results of internal audits and the overall internal audit program. Portions of quarterly meetings were dedicated to further education of Audit Committee members.
The Audit Committee has also discussed with PwC all the matters required to be discussed by U.S. GAAP, including those described in Public Company Accounting Oversight Board AS 16. These discussions included:
The Audit Committee also reviewed all other material written communications between PwC and management. The Audit Committee has also discussed with PwC their independence from our Company and management, including a review of audit and non-audit fees, and has reviewed in that context the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant'sauditor's communications with the Audit Committee concerning independence.
Based on the review and discussions referred to above, and in reliance on the information, opinions, reports or statements presented to the Audit Committee by our Company's management and PwC, the Audit Committee recommended to the Board of Directors that the December 31, 20132014 audited consolidated financial statements be included in our Company's Annual Report on Form 10-K.
The foregoing report has been approved by all members of the Audit Committee.
| Patrick W. Kenny, Chairman | ||
Bonnie L. Howard | ||
Simon W. Leathes | ||
Michael T. O'Kane |
| 2015 PROXY STATEMENT | | PAGE 81 |
PROPOSAL NO. 2: ADVISORY APPROVAL OF
EXECUTIVE COMPENSATION
As described in detail under the heading "Executive Compensation—Compensation Discussion and Analysis," and highlighted in the "Compensation Highlights" of such section, our executive compensation program is designed to attract, motivate, and retain talented executives who possess the skills required to formulate and drive our Company's strategic direction and achieve annual and long-term performance goals necessary to create shareholder value. The program seeks to align executive compensation with shareholder value on an annual and long-term basis through a combination of base pay, annual incentives and long-term incentives. The Compensation Committee continually reviews the compensation programs for our named executive officers to ensure they achieve the desired goals of aligning our executive compensation structure with our shareholders' interests and current market practices. Please read the "Compensation Discussion and Analysis" discussion for additional details about our executive compensation programs, including information about the fiscal year 20132014 compensation of our named executive officers.
We believe that our executive compensation programs are structured in the best manner possible to support our Company and our business objectives. We are asking our shareholders to indicate their support for our named executive officer compensation as described on pages 2931 to 6981 of this proxy statement, which include the "Compensation Discussion and Analysis" section and the compensation tables and related narrative disclosure. This proposal, commonly known as a "say-on-pay" proposal, gives our shareholders the opportunity to express their views on our named executive officers' compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly, we will ask our shareholders to vote "FOR" the following resolution at the Annual General Meeting:
| | | |
| The board of directors recommends that you vote "FOR" the following resolution at the Annual General Meeting: | |
| | | |
"RESOLVED, that the compensation paid to the Company's named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC, including the compensation discussion and analysis, the compensation tables and any related material disclosed in this proxy statement, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED."
The say-on-pay vote is advisory, and therefore not binding on our Company, the Compensation Committee or the Board of Directors. However, the Board of Directors and the Compensation Committee value the opinions of our shareholders and will review the voting results carefully.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF EXECUTIVE COMPENSATION.
| PAGE 82 | | ASSURED GUARANTY |
PROPOSAL NO. 3: APPROVAL OF THE ASSURED GUARANTY LTD. 2004
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | ||||||
| Equity compensation plans approved by security holders | 3,494,968 | (1) | $ | 20.64 | 3,433,126 | (2) | |||
| Equity compensation plans not approved by security holders | N/A | N/A | N/A | ||||||
| Total | 3,494,968 | $ | 20.64 | 3,433,126 | |||||
PwC served as our independent auditor for the year endingended December 31, 2013.2014. Our audited financial statements for the year ended December 31, 20132014 will be presented at the Annual General Meeting. Representatives of PwC will attend the Annual General Meeting and will have an opportunity to make a statement if they wish. They will also be available to answer questions at the meeting. Proposal No. 43 is Item 43 on the proxy card.
INDEPENDENT AUDITOR FEE INFORMATION
The following table presents fees for professional audit services rendered by PwC for the audit of our annual consolidated financial statements for 20132014 and 20122013 and fees for other services rendered by PwC for 2013in 2014 and 2012.
| | | | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2013 | 2012(5) | 2014 | | 2013 | |||||||||
| Audit fees(1) | $ | 6,284,550 | $ | 5,475,550 | |||||||||
| Audit-related fees(2) | $ | 240,450 | $ | 90,450 | |||||||||
| Tax fees(3) | $ | 719,000 | $ | 204,510 | |||||||||
| All other fees(4) | $ | 60,000 | $ | 509,518 | |||||||||
| Audit fees(1) | $6,175,000 | $6,284,550 | |||||||||||
| | | | | | |||||||||
| Audit-related fees(2) | $508,000 | $240,450 | |||||||||||
| | | | | | |||||||||
| Tax fees(3) | $438,359 | $719,000 | |||||||||||
| | | | | | |||||||||
| All other fees(4) | $58,600 | $60,000 | |||||||||||
| | | | | | |||||||||
Compliance-related tax fees for 20132014 and 20122013 were for professional services rendered in connection with the preparation of the 20122013 and 20112012 federal tax returns, respectively, as well as for compliance services rendered in connection with the preparation of the corporate tax return of Assured Guaranty Services (Australia) Pty Ltd.
Tax advice-related fees for 2014 and 2013 were primarily related to assistAGL's establishment of tax residence in the United Kingdom. In addition, in 2014, PwC provided advice to us on various other tax matters.
| 2015 PROXY STATEMENT | |
PRE-APPROVAL POLICY OF AUDIT AND NON-AUDIT SERVICES
The Audit Committee pre-approved all of the fees described above. The Audit Committee has adopted policies and procedures for the pre-approval of all audit and permissible non-audit services provided by our independent auditor, PwC. The Audit Committee provides a general pre-approval of certain audit and non-audit services on an annual basis. The types of services that may be covered by a general pre-approval include other audit services, audit-related services and permissible non-audit services. If a type of service is not covered by the Audit Committee's general pre-approval, the Audit Committee must review the service on a specific case by case basis and pre-approve it if such service is to be provided by the independent auditor. Annual audit services engagement terms and fees require specific pre-approval of the Audit Committee and management and the auditor will report actual fees versus the budget periodically throughout the year by category of service. Any proposed services exceeding pre-approved costs also require specific pre-approval by the Audit Committee. For both types of pre-approval, the Audit Committee will consider whether such services are consistent with the SEC's rules on auditor independence. Either the Audit Committee Chairman, the designated Committee member or the entire Audit Committee must pre-approve the provision of any significant additional audit fees in excess of the budgeted amount and/or any excess related to non-audit fees over the budgeted amount. All fees related to internal control work are pre-approved by the Audit Committee before such services are rendered. The Audit Committee pre-approved all of the fees described above pursuant to its pre-approval policies and procedures.
| | | |
| The board of directors and the audit committee recommend that you vote "FOR" the appointment of PwC as the independent auditor. | |
| | | |
| PAGE 84 | | ASSURED GUARANTY |
PROPOSAL NO. 5:4: PROPOSALS CONCERNING OUR
SUBSIDIARY,
Proposal 5.1—4.1—Election of AG Re Directors.We propose that AGL be directed to elect the following eightseven directors of AG Re: Howard W. Albert, Robert A. Bailenson, Russell B. Brewer, II, Gary Burnet, Stephen Donnarumma, Dominic J. Frederico and James M. Michener, and Robert B. Mills, with such persons constituting the entire board of directors of AG Re, to serve for one year terms commencing at the annual general meeting of AG Re. Each AG Re director is an officer of AGL or one of its subsidiaries and has consented to serve as directors of AG Re without fee if elected. We do not expect that any of the nominees will become unavailable for election as a director of AG Re, but if any nominees should become unavailable prior to the meeting, proxy cards, whether submitted by telephone, via the Internet or by mail, authorizing the proxies to vote for the nominees will instead be voted for substitute nominees recommended by AG Re's board of directors. Proposal 5.14.1 is Item 1B on the proxy card.
In connection with his separation from the Company, Robert B. Mills will resign as a director of AG Re effective as of March 31, 2015. Accordingly, we have not proposed that Mr. Mills be nominated for re-election to the AG Re board of directors. Upon his resignation a vacancy will remain on the AG Re board of directors until such time as the AG Re board of directors elects a director to fill the vacancy or the Company, as sole shareholder of AG Re, proposes to decrease the number of directors from eight to seven.
The biographies for these nominees are set forth below:
Howard W. Albert, age 54,55, has been Chief Risk Officer of AGL since May 2011. Prior to that, he was Chief Credit Officer of AGL from 2004 to April 2011. Mr. Albert joined Assured Guaranty in September 1999 as Chief Underwriting Officer of Capital Re Company, the predecessor to AGC. Before joining Assured Guaranty, he was a Senior Vice President with Rothschild Inc. from February 1997 to August 1999. Prior to that, he spent eight years at Financial Guaranty Insurance Company from May 1989 to February 1997, where he was responsible for underwriting guaranties of asset-backed securities and international infrastructure transactions. Prior to that, he was employed by Prudential Capital, an investment arm of The Prudential Insurance Company of America, from September 1984 to April 1989, where he underwrote investments in asset-backed securities, corporate loans and project financings.
Mr. Albert's experience in risk management, underwriting and credit and his position as the Chief Risk Officer of AGL make him valuable to the Board of Directors of AG Re.
Robert A. Bailenson, age 47,48, has been the Chief Financial Officer of AGL since June 2011. Prior to that, he had been the Chief Accounting Officer of AGL since May 2005 and has been with AGL and its predecessor companies since 1990. Mr. Bailenson also serves as the Chief Financial Officer of our Company's U.S. subsidiaries. He was Chief Financial Officer and Treasurer of AG Re from 1999 until 2003 and was previously the Assistant Controller of Capital Re Corp., which was acquired by ACE in 1999 and the parent holding company of AGC until the IPO.AGL's 2004 initial public offering.
| 2015 PROXY STATEMENT | | PAGE 85 |
Mr. Bailenson's background as the Chief Financial Officer of AGL and as an accountant provides an important perspective to the Board of Directors of AG Re.
Russell B. Brewer II, age 57,58, has been Chief Surveillance Officer of AGL since November 2009 and Chief Surveillance Officer of AGC and AGM since July 2009. Mr. Brewer has been with AGM since 1986. Mr. Brewer was Chief Risk Management Officer of AGM from September 2003 until July 2009 and Chief Underwriting Officer of AGM from September 1990 until September 2003. Mr. Brewer was also a member of the Executive Management Committee of AGM. He was a Managing Director of Assured Guaranty Municipal Holdings Inc. from May 1999 until July 2009. From March 1989 to August 1990, Mr. Brewer was Managing Director, Asset Finance Group, of AGM. Prior to joining AGM, Mr. Brewer was an Associate Director of Moody's Investors Service, Inc.
Mr. Brewer's risk management and surveillance expertise and his position as the Chief Surveillance Officer of AGL enhance the deliberations of the Board of Directors of AG Re.
Gary Burnet, age 43,44, has been President of AG Re since August 2012, and prior to that he served as the Managing Director—Chief Credit Officer of AG Re from 2006 until his appointment as President. Mr. Burnet also served as the Vice President—Risk Management and Operations of AG Re from 2002 to 2005. Prior to joining our Company, Mr. Burnet's previous experience included two years at ACE Asset Management, where he was Investment Officer with responsibility for developing and modeling the ACE group's consolidated investment and insurance credit risk. Prior to ACE Asset Management, he was an Assistant Vice President—Investments at ACE Bermuda. Mr. Burnet trained as a Chartered Accountant with Geoghegan & Co. CA from 1993 to 1996 in Edinburgh Scotland and also worked as an audit senior for Coopers & Lybrand from 1996 to 1998 in Bermuda.
As the President of AG Re, Mr. Burnet has the most comprehensive knowledge of its operations, including the key areas of accounting, risk management and credit.
Stephen Donnarumma,age 51,52, was appointed as a director of AG Re on September 11, 2012 and has been with Assured Guaranty since 1993. Mr. Donnarumma has been the Deputy Chief Credit Officer of AGL since May 2007 and also serves as the Chief Credit Officer of our U.S. operating companies.companies since January 1, 2010. Over the past 20 years, Mr. Donnarumma has held several positions at Assured Guaranty, including Deputy Chief Credit Officer of AGL, President of AG Re, Chief Surveillance Officer of AGC, and Senior Managing Director, Head of Mortgage and Asset-backed Securities of AGC. Prior to joining Assured Guaranty, Mr. Donnarumma was with Financial Guaranty Insurance Company from 1989 until 1993, where his responsibilities included underwriting domestic and international financial guaranty transactions and prior to that he served as a Director of Credit Risk Analysis at Fannie Mae from 1987 until 1989. Mr. Donnarumma was also an analyst with Moody's Investors Services from 1985 until 1987.
Mr. Donnarumma's experience with credit analysis and risk management, and his position as the Chief Credit Officer of AGM, MACMunicipal Assurance Corp. and AGC, provide important perspective to the Board of Directors of AG Re.
Dominic J. Frederico—See Mr. Frederico's biography in "Election of Directors—Nominees for Director." The benefits of his experience described therein with respect to the Board of Directors of AGL also make him valuable as a director of AG Re.
James M. Michener, age 61,62, has been General Counsel and Secretary of AGL since February 2004. Mr. Michener also serves as the General Counsel of our U.S. subsidiaries. Mr. Michener was General Counsel and Secretary of Travelers Property Casualty Corp. from January 2002 to February 2004. From April 2001 to January 2002, Mr. Michener served as General Counsel of Citigroup's Emerging Markets business. Prior to joining Citigroup's Emerging Markets business, Mr. Michener was General Counsel of Travelers Insurance from April 2000 to April 2001 and General Counsel of Travelers Property Casualty Corp. from May 1996 to April 2000.
Mr. Michener's experience as a lawyer and his position as the General Counsel of AGL enables him to make valuable contributions as a member of the Board of Directors of AG Re.
Proposal 5.2—4.2—Appointment of AG Re Auditors.Auditor.We propose that AGL be directed to ratify the appointment of PwC as the independent auditorsauditor of AG Re for the fiscal year ending December 31, 2014,2015, subject to PwC being appointed as our Company's independent auditors.auditor. We expect representatives of the firm to be present at the meeting with an opportunity to make a statement if they desire to do so and to be available to respond to appropriate questions. Proposal 5.24.2 is Item 54 on the proxy card.
The following table presents fees for professional audit services rendered by PwC for the audit of AG Re's financial statements for 20132014 and 2012 and fees for other services rendered by PwC to AG Re for 2013 and 2012.
| 2013 | 2012 | 2014 | | 2013 | |||||||||
| Audit fees | $ | 84,700 | $ | 82,250 | $87,250 | $84,700 | |||||||
| | | | | | | | |||||||
| Audit-related fees | $ | — | $ | — | $— | $— | |||||||
| | | | | | |||||||||
| Tax fees | $ | — | $ | — | $— | $— | |||||||
| | | | | | |||||||||
| All other fees | $ | — | $ | — | $— | $— | |||||||
| | | | | | |||||||||
The above audit fees are included in the audit fees shown in "Proposal No. 4:3: Ratification of Appointment of Independent Auditors.Auditor."
Other Matters.The Board of Directors of AGL does not know of any matter to be brought before the annual general meeting of AG Re that we have not described in this proxy statement. If any other matter properly comes before the annual general meeting of AG Re, AGL's representative or proxy will vote in accordance with his or her judgment on such matter.
| | | |
| The board of directors recommends that you direct AGL to vote "FOR" each of the proposals concerning AGL's subsidiary, AG Re. | |
| | | |
| 2015 PROXY STATEMENT | | PAGE 87 |
SHAREHOLDER PROPOSALS FOR 2015
2016 ANNUAL MEETING
If you wish to submit a proposal to be considered for inclusion in the proxy material for the next Annual General Meeting, please send it to the Secretary, Assured Guaranty Ltd., 30 Woodbourne Avenue, Hamilton HM 08, Bermuda. Under the rules of the SEC, proposals must be received no later than November 28, 20142015 and otherwise comply with the requirements of the SEC to be eligible for inclusion in AGL's 20152016 Annual General Meeting proxy statement and form of proxy.
HOW DO I SUBMIT A PROPOSAL OR MAKE A NOMINATION AT AN ANNUAL GENERAL MEETING?
Our Bye-Laws provide that if a shareholder desires to submit a proposal for consideration at an Annual General Meeting, or to nominate persons for election as directors, the shareholder must provide written notice of an intent to make such a proposal or nomination which the Secretary of the Company must receive at our principal executive offices no later than 90 days prior to the anniversary date of the immediately preceding Annual General Meeting. With respect to the 20152016 Annual General Meeting, such written notice must be received on or prior to February 6, 2015.2016. The notice must meet the requirements set forth in our Bye-Laws. Under the circumstances described in, and upon compliance with, Rule 14a-4(c) under the Exchange Act, management proxies would be allowed to use their discretionary voting authority to vote on any proposal with respect to which the foregoing requirements have been met.
| PAGE 88 | | ASSURED GUARANTY |
OTHER MATTERS
| By Order of the Board of Directors, | ||
James M. Michener | ||
Secretary |
| 2015 PROXY STATEMENT | | PAGE 89 |
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. Date Signature (Joint Owners) Date Signature [PLEASE SIGN WITHIN BOX] VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on May 5, 2015. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May 5, 2015. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. ASSURED GUARANTY LTD. 30 WOODBOURNE AVENUE HAMILTON, HM 08 BERMUDA M81957-TBD To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. ASSURED GUARANTY LTD. For All Withhold All For All Except The Board of Directors recommends you vote FOR each of the following nominees: ! ! ! 1A. Election of Directors of Assured Guaranty Ltd. (the "Company") Nominees: 06) Patrick W. Kenny 07) Simon W. Leathes 08) Michael T. O’Kane 09) Yukiko Omura 01) Francisco L. Borges 02) G. Lawrence Buhl 03) Stephen A. Cozen 04) Dominic J. Frederico 05) Bonnie L. Howard 1B. Authorizing the Company to vote for directors of our subsidiary, Assured Guaranty Re Ltd. ("AG Re"): Nominees: 10) Howard W. Albert 11) Robert A. Bailenson 12) Russell B. Brewer II 13) Gary Burnet 14) Stephen Donnarumma 15) Dominic J. Frederico 16) James M. Michener For Against Abstain The Board of Directors recommends you vote FOR the following proposals: ! ! ! 2. To vote, on an advisory basis, on executive compensation. ! ! ! 3. To ratify the appointment of PricewaterhouseCoopers LLP ("PwC") as the Company's independent auditors for the fiscal year ending December 31, 2015. ! ! ! 4. Authorizing the Company to vote for the ratification of the appointment of PwC as AG Re's independent auditors for the fiscal year ending December 31, 2015. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
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Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting: The |
