Exhibit 99.2
| Table of Contents Page Selected Financial Highlights 1 Consolidated Statements of Operations 2 Net Income (Loss) Reconciliation to Operating Income 3-4 Consolidated Balance Sheets 5 Adjusted Book Value 6 Claims Paying Resources 7 New Business Production 8 Financial Guaranty Gross Par Written 9 New Business Production by Quarter 10 Available-for-Sale Investment Portfolio and Cash 11 Estimated Net Exposure Amortization and Estimated Future Net Premium and Credit Derivative Revenues 12 Expected Amortization of Net Par Outstanding 13 Present Value of Financial Guaranty Insurance Net Expected Loss to be Expensed 14 Financial Guaranty Profile 15-18 Direct Pooled Corporate Obligations Profile 19 Consolidated U.S. RMBS Profile 20 Direct U.S. RMBS Profile 21-22 Direct U.S. Commercial Real Estate Profile 23 Direct U.S. Consumer Receivables Profile 24 Below Investment Grade Exposures 25-29 Assured Guaranty Ltd. Financial Supplement December 31, 2011 Largest Exposures by Sector 30-33 Rollforward of Net Expected Loss and Loss Adjustment Expenses to be Paid 34 Financial Guaranty Insurance and Credit Derivative U.S. RMBS Representations and Warranties Benefit Development 35 Losses Incurred 36 Summary Financial and Statistical Data 37 Glossary 38-39 Non-GAAP Financial Measures 40-41 Some amounts in this financial supplement may not add due to rounding. This financial supplement should be read in conjunction with documents filed by Assured Guaranty Ltd. (“AGL” and, together with its subsidiaries, “Assured Guaranty” or the “Company”) with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K for the year ended December 31, 2011. Cautionary Statement Regarding Forward Looking Statements: Any forward looking statements made in this supplement reflect the current views of Assured Guaranty with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Assured Guaranty's forward looking statements could be affected by many events. These events include (1) rating agency action, including a ratings downgrade, a change in outlook, the placement of ratings on watch for downgrade, or a change in rating criteria, at any time, of Assured Guaranty or any of its subsidiaries and/or of transactions that Assured Guaranty’s subsidiaries have insured, all of which have occurred in the past; (2) developments in the world’s financial and capital markets that adversely affect issuers’ payment rates, Assured Guaranty’s loss experience, its access to capital, its unrealized (losses) gains on derivative financial instruments or its investment returns; (3) changes in the world’s credit markets, segments thereof or general economic conditions; (4) the impact of ratings agency action with respect to sovereign debt and the resulting effect on the value of securities in the Company's investment portfolio and collateral posted by and to the Company; (5) more severe or frequent losses implicating the adequacy of Assured Guaranty’s expected loss estimates; (6) the impact of market volatility on the mark-to-market of Assured Guaranty’s contracts written in credit default swap form; (7) reduction in the amount of insurance opportunities available to Assured Guaranty; (8) deterioration in the financial condition of Assured Guaranty's reinsurers, the amount and timing of reinsurance recoverables actually received and the risk that reinsurers may dispute amounts owed to Assured Guaranty under its reinsurance agreements; (9) the possibility that Assured Guaranty will not realize insurance loss recoveries or damages expected from originators, sellers, sponsors, underwriters or servicers of residential mortgage-backed securities transactions; (10) the possibility that budget shortfalls or other factors will result in credit losses or impairments on obligations of state and local governments that the Company insures or reinsures; (11) increased competition; (12) changes in applicable accounting policies or practices; (13) changes in applicable laws or regulations, including insurance and tax laws; (14) other governmental actions; (15) difficulties with the execution of Assured Guaranty’s business strategy; (16) contract cancellations; (17) Assured Guaranty’s dependence on customers; (18) loss of key personnel; (19) adverse technological developments; (20) the effects of mergers, acquisitions and divestitures; (21) natural or man-made catastrophes; (22) other risks and uncertainties that have not been identified at this time; (23) management’s response to these factors; and (24) other risk factors identified in Assured Guaranty’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the dates on which they are made. Assured Guaranty undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law. |
| 2011 2010 2011 2010 Operating income reconciliation: Operating income 173.5 $ 152.7 $ 604.4 $ 664.1 $ Plus after-tax adjustments: Realized gains (losses) on investments (6.5) (0.1) (20.0) 1.0 Non-credit impairment unrealized fair value gains (losses) on credit derivatives (265.2) (71.3) 243.6 13.0 Fair value gains (losses) on committed capital securities 20.5 2.2 22.8 6.0 Foreign exchange gains (losses) on revaluation of premiums receivable (1.0) (6.9) (3.5) (24.5) Effect of consolidating financial guaranty variable interest entities ("FG VIEs") (4.9) (260.1) (71.7) (165.9) Net income (loss) (83.6) $ (183.5) $ 775.6 $ 493.7 $ Earnings per diluted share: Operating income 0.95 $ 0.81 $ 3.26 $ 3.51 $ Plus after-tax adjustments: Realized gains (losses) on investments (0.04) - (0.11) 0.01 Non-credit impairment unrealized fair value gains (losses) on credit derivatives (1.45) (0.39) 1.31 0.07 Fair value gains (losses) on committed capital securities 0.11 0.01 0.12 0.03 Foreign exchange gains (losses) on revaluation of premiums receivable (0.01) (0.04) (0.02) (0.13) Effect of consolidating FG VIEs (0.03) (1.42) (0.39) (0.88) Net income (loss) (0.46) $ (1.00) $ 4.18 $ 2.61 $ Effective tax rate on operating income 19.7% 17.8% 24.5% 19.0% Effective tax rate on net income 43.0% 41.3% 25.0% 10.1% Return on equity ("ROE") calculations 1: ROE, excluding unrealized gain (loss) on investment portfolio (7.5)% (19.7)% 19.3% 14.1% Operating ROE 13.4% 13.0% 12.1% 14.9% New Business: Gross par written 5,592 $ 7,884 $ 16,892 $ 30,759 $ Present value of new business production ("PVP") 2 87.5 $ 105.1 $ 242.7 $ 362.7 $ Other information: December 31, 2011 December 31, 2010 Net debt service outstanding 845,665 $ 927,143 $ Net par outstanding 558,048 617,131 Claims paying resources 3 12,839 12,630 1. Quarterly ROE calculations represent annualized returns. 2. Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement. 3. See page 7 for additional detail on claims paying resources. Assured Guaranty Ltd. Selected Financial Highlights (dollars in millions, except per share amounts) Year Ended As of December 31, December 31, Three Months Ended Page 1 |
| 2011 2010 2011 2010 Revenues: Net earned premiums 225.0 $ 286.3 $ 920.1 $ 1,186.7 $ Net investment income 100.3 93.9 391.0 354.7 Net realized investment gains (losses) (4.6) (0.6) (18.0) (2.0) Net change in fair value of credit derivatives: Realized gains and other settlements (19.1) 36.0 6.0 153.5 Net unrealized gains (losses) (276.1) (165.9) 553.7 (155.1) Net change in fair value of credit derivatives (295.2) (129.9) 559.7 (1.6) Fair value gains (losses) on committed capital securities 31.6 3.4 35.1 9.2 Net change in fair value of FG VIEs 21.9 (408.6) (132.0) (273.6) Other income - 32.7 63.4 40.1 Total revenues 79.0 (122.8) 1,819.3 1,313.5 Expenses: Loss and loss adjustment expenses 148.6 104.8 461.9 412.2 Amortization of deferred acquisition costs 6.7 11.0 30.9 34.1 - - - 6.8 Interest expense 24.7 24.7 99.1 99.6 Other operating expenses 45.8 49.3 193.0 211.5 Total expenses 225.8 189.8 784.9 764.2 Income (loss) before income taxes (146.8) (312.6) 1,034.4 549.3 Provision (benefit) for income taxes (63.2) (129.1) 258.8 55.6 Net income (loss) (83.6) $ (183.5) $ 775.6 $ 493.7 $ Less after-tax adjustments: Realized gains (losses) on investments (6.5) (0.1) (20.0) 1.0 Non-credit impairment unrealized fair value gains (losses) on credit derivatives (265.2) (71.3) 243.6 13.0 Fair value gains (losses) on committed capital securities 20.5 2.2 22.8 6.0 Foreign exchange gains (losses) on revaluation of premiums receivable (1.0) (6.9) (3.5) (24.5) Effect of consolidating FG VIEs (4.9) (260.1) (71.7) (165.9) Operating income 173.5 $ 152.7 $ 604.4 $ 664.1 $ Weighted average shares outstanding Basic shares outstanding 182.2 183.7 183.4 184.0 Diluted shares outstanding 1 182.2 183.7 185.5 188.9 Shares outstanding at the end of period 182.2 183.7 Effect of refundings and accelerations, net Net earned premiums from refundings and accelerations 47.8 $ 38.0 $ 125.2 $ 90.0 $ Operating income effect 32.6 26.6 85.5 63.1 Operating income per diluted share effect 0.18 0.14 0.46 0.33 1. Note: Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement. Assured Guaranty Ltd. Consolidated Statements of Operations (dollars and shares in millions, except per share amounts) Non-GAAP diluted shares outstanding were 183.2 million and 189.1 million for the three months ended December 31, 2011 and 2010, respectively, and 185.5 million and 189.2 million for the year ended December 31, 2011 and December 31, 2010, respectively. Year Ended December 31, Assured Guaranty Municipal Holdings Inc. ("AGMH") acquisition-related expenses December 31, Three Months Ended Page 2 |
| GAAP Income Statement As Reported Less: Operating Income Adjustments Non-GAAP Operating Income Results GAAP Income Statement As Reported Less: Operating Income Adjustments Non-GAAP Operating Income Results Revenues: Net earned premiums 225.0 $ (17.9) $ (1) 242.9 $ 286.3 $ (13.2) $ (1) 299.5 $ Net investment income 100.3 7.7 (1) 92.6 93.9 - 93.9 Net realized investment gains (losses) (4.6) (4.6) (2) - (0.6) (0.6) (2) - Net change in fair value of credit derivatives: Realized gains and other settlements (19.1) (19.1) - 36.0 36.0 - Net unrealized gains (losses) (276.1) (276.1) - (165.9) (165.9) - Credit derivative revenues - (37.3) 37.3 - (53.2) 53.2 Net change in fair value of credit derivatives (295.2) (332.5) (3) 37.3 (129.9) (183.1) (3) 53.2 Fair value gain (loss) on committed capital securities 31.6 31.6 (4) - 3.4 3.4 (4) - Net change in fair value of FG VIEs 21.9 21.9 (1) - (408.6) (408.6) (1) - Other income - (2.6) (5) 2.6 32.7 (7.2) (5) 39.9 Total revenues 79.0 (296.4) 375.4 (122.8) (609.3) 486.5 Expenses: Loss expense: Financial guaranty insurance 148.6 12.8 (1) 135.8 104.8 (21.5) (1) 126.3 Credit derivatives - 53.8 (3) (53.8) - (89.5) (3) 89.5 Amortization of deferred acquisition costs 6.7 - 6.7 11.0 - 11.0 AGMH acquisition-related expenses - - - - - - Interest expense 24.7 - 24.7 24.7 - 24.7 Other operating expenses 45.8 - 45.8 49.3 - 49.3 Total expenses 225.8 66.6 159.2 189.8 (111.0) 300.8 Income (loss) before income taxes (146.8) (363.0) 216.2 (312.6) (498.3) 185.7 Provision (benefit) for income taxes (63.2) (105.9) (6) 42.7 (129.1) (162.1) (6) 33.0 Net income (loss) (83.6) $ (257.1) $ 173.5 $ (183.5) $ (336.2) $ 152.7 $ 1. Adjustments primarily related to elimination of the effects of consolidating FG VIEs. 2. Adjustments to eliminate realized gains (losses) on investments. 3. Adjustments to eliminate non-economic fair value gains (losses) on credit derivatives and reclassification to revenues and loss expense. 4. Adjustments to eliminate fair value gain (loss) on committed capital securities. 5. 6. Tax effect of the above adjustments. Note: Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement. Adjustments to eliminate foreign exchange gains (losses) on revaluation of net premiums receivable and reclassification of net realized investment gains (losses) on trading portfolio. December 31, 2011 December 31, 2010 Assured Guaranty Ltd. Net Income (Loss) Reconciliation to Operating Income (1 of 2) (in millions) Three Months Ended Three Months Ended Page 3 |
| GAAP Income Statement As Reported Less: Operating Income Adjustments Non-GAAP Operating Income Results GAAP Income Statement As Reported Less: Operating Income Adjustments Non-GAAP Operating Income Results Revenues: Net earned premiums 920.1 $ (74.7) $ (1) 994.8 $ 1,186.7 $ (47.6) $ (1) 1,234.3 $ Net investment income 391.0 3.0 (1) 388.0 354.7 - 354.7 Net realized investment gains (losses) (18.0) (18.0) (2) - (2.0) (2.0) (2) - Net change in fair value of credit derivatives: Realized gains and other settlements 6.0 6.0 - 153.5 153.5 - Net unrealized gains (losses) 553.7 553.7 - (155.1) (155.1) - Credit derivative revenues - (188.1) 188.1 - (210.3) 210.3 Net change in fair value of credit derivatives 559.7 371.6 (3) 188.1 (1.6) (211.9) (3) 210.3 Fair value gain (loss) on committed capital securities 35.1 35.1 (4) - 9.2 9.2 (4) - Net change in fair value of FG VIEs (132.0) (132.0) (1) - (273.6) (273.6) (1) - Other income 63.4 17.2 (5) 46.2 40.1 (20.4) (5) 60.5 Total revenues 1,819.3 202.2 1,617.1 1,313.5 (546.3) 1,859.8 Expenses: Loss expense: Financial guaranty insurance 461.9 (92.7) (1) 554.6 412.2 (65.9) (1) 478.1 Credit derivatives - 61.3 (3) (61.3) - (209.4) (3) 209.4 Amortization of deferred acquisition costs 30.9 - 30.9 34.1 - 34.1 AGMH acquisition-related expenses - - - 6.8 - 6.8 Interest expense 99.1 - 99.1 99.6 - 99.6 Other operating expenses 193.0 - 193.0 211.5 - 211.5 Total expenses 784.9 (31.4) 816.3 764.2 (275.3) 1,039.5 Income (loss) before income taxes 1,034.4 233.6 800.8 549.3 (271.0) 820.3 Provision (benefit) for income taxes 258.8 62.4 (6) 196.4 55.6 (100.6) (6) 156.2 Net income (loss) 775.6 $ 171.2 $ 604.4 $ 493.7 $ (170.4) $ 664.1 $ 1. Adjustments primarily related to elimination of the effects of consolidating FG VIEs. 2. Adjustments to eliminate realized gains (losses) on investments. 3. Adjustments to eliminate non-economic fair value gains (losses) on credit derivatives and reclassification to revenues and loss expense. 4. Adjustments to eliminate fair value gain (loss) on committed capital securities. 5. 6. Tax effect of the above adjustments. Note: Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement. Adjustments to eliminate foreign exchange gains (losses) on revaluation of net premiums receivable, reclassification of termination fees on credit derivative contracts and net realized investment gains (losses) on trading portfolio. December 31, 2011 December 31, 2010 Assured Guaranty Ltd. Net Income (Loss) Reconciliation to Operating Income (2 of 2) (in millions) Year Ended Year Ended Page 4 |
| Assured Guaranty Ltd. Consolidated Balance Sheets December 31, December 31, 2011 2010 Assets: Investment portfolio: Fixed maturity securities, available-for-sale, at fair value 10,141.9 $ 9,402.3 $ Short-term investments, at fair value 734.0 1,055.6 Other invested assets 222.9 283.0 Total investment portfolio 11,098.8 10,740.9 Cash 214.5 108.4 Premiums receivable, net of ceding commissions payable 1,002.9 1,167.6 Ceded unearned premium reserve 708.9 821.8 Deferred acquisition costs 231.9 239.8 Reinsurance recoverable on unpaid losses 69.3 22.3 Salvage and subrogation recoverable 367.7 1,032.4 Credit derivative assets 468.9 592.9 Deferred tax asset, net 770.9 1,259.1 Current income tax receivable 76.4 - FG VIE assets, at fair value 2,819.1 3,657.5 Other assets 262.2 199.2 Total assets 18,091.5 $ 19,841.9 $ Liabilities and shareholders' equity: Liabilities: Unearned premium reserve 5,962.8 $ 6,972.9 $ Loss and loss adjustment expense reserve 679.0 574.4 Reinsurance balances payable, net 171.0 274.4 Long-term debt 1,038.3 1,052.9 Credit derivative liabilities 1,772.8 2,462.8 Current income tax payable - 93.0 FG VIE liabilities with recourse, at fair value 2,396.9 3,030.9 FG VIE liabilities without recourse, at fair value 1,061.5 1,337.2 Other liabilities 290.8 309.9 Total liabilities 13,373.1 16,108.4 Shareholders' equity: Common stock 1.8 1.8 Additional paid-in capital 2,569.9 2,585.4 Retained earnings 1,774.8 1,032.5 Accumulated other comprehensive income 367.5 111.8 Deferred equity compensation 4.4 2.0 Total shareholders' equity 4,718.4 3,733.5 Total liabilities and shareholders' equity 18,091.5 $ 19,841.9 $ As of : (in millions) Page 5 |
| Total Per share Total Per share Reconciliation of shareholders' equity to adjusted book value: Shareholders' equity 4,718.4 $ 25.89 $ 3,733.5 $ 20.32 $ Less after-tax adjustments: Effect of consolidating FG VIEs (405.2) (2.22) (371.4) (2.02) Non-credit impairment unrealized fair value gains (losses) on credit derivatives (498.0) (2.74) (763.0) (4.15) Fair value gains (losses) on committed capital securities 35.0 0.19 12.2 0.07 Unrealized gain (loss) on investment portfolio excluding foreign exchange effect 318.4 1.75 101.2 0.55 Operating shareholders' equity 5,268.2 $ 28.91 $ 4,754.5 $ 25.88 $ After-tax adjustments: Less: Deferred acquisition costs 240.9 1.32 248.4 1.35 Plus: Net present value of estimated net future credit derivative revenue 302.3 1.66 424.8 2.31 Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed 3,658.0 20.07 4,058.0 22.08 Adjusted book value 8,987.6 $ 49.32 $ 8,988.9 $ 48.92 $ Note: Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement. Assured Guaranty Ltd. Adjusted Book Value (dollars in millions, except per share amounts) December 31, 2011 December 31, 2010 As of : Page 6 |
| Assured Guaranty Municipal Corp. Assured Guaranty Corp. Assured Guaranty Re Ltd.1 Eliminations 2 Consolidated Claims paying resources Policyholders' surplus 1,227 $ 1,021 $ 1,168 $ (300) $ 3,116 $ Contingency reserve 1,881 691 - - 2,572 Qualified statutory capital 3,108 1,712 1,168 (300) 5,688 Unearned premium reserve 2,172 826 1,038 - 4,036 Loss and loss adjustment expense reserves 3, 4 318 345 239 - 902 Total policyholders' surplus and reserves 5,598 2,883 2,445 (300) 10,626 Present value of installment premium 4 523 406 249 - 1,178 Standby line of credit/stop loss 200 200 200 - 600 Excess of loss reinsurance facility 5 435 435 - (435) 435 Total claims paying resources 6,756 $ 3,924 $ 2,894 $ (735) $ 12,839 $ Net par outstanding 6 308,538 $ 104,977 $ 131,172 $ (1,587) $ 543,100 $ Net debt service outstanding 6 466,415 $ 154,252 $ 212,589 $ (3,711) $ 829,545 $ Ratios: Net par outstanding to qualified statutory capital 99:1 61:1 112:1 95:1 Capital ratio 7 150:1 90:1 182:1 146:1 Financial resources ratio 8 69:1 39:1 73:1 65:1 1. 2. 3. Reserves are reduced by approximately $1.5 billion for benefit related to representation and warranty recoverables. 4. Includes financial guaranty insurance and credit derivatives. 5. 6. 7. The capital ratio is calculated by dividing net debt service outstanding by qualified statutory capital. 8. The financial resources ratio is calculated by dividing net debt service outstanding by total claims paying resources. Net par outstanding and net debt service outstanding are presented on a statutory basis. Under statutory accounting, such amounts would be reduced both when an outstanding issue is legally defeased (i.e., an issuer has legally discharged its obligations with respect to a municipal security by satisfying conditions set forth in defeasance provisions contained in transaction documents and is no longer responsible for the payment of debt service with respect to such obligations) and when such issue is economically defeased (i.e., transaction documents for a municipal security do not contain defeasance provisions but the issuer establishes an escrow account with U.S. government securities in amounts sufficient to pay the refunded bonds when due; the refunded bonds are not considered paid and continue to be outstanding under the transaction documents and the issuer remains responsible to pay debt service when due to the extent monies on deposit in the escrow account are insufficient for such purpose). Assured Guaranty Ltd. Claims Paying Resources (dollars in millions) In 2009, Assured Guaranty Corp. ("AGC") issued a $300.0 million note payable to Assured Guaranty Municipal Corp. ("AGM"). Net par and net debt service outstanding eliminations represent second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary. On December 23, 2011, AGM terminated its $298 million non-recourse credit facility. This credit facility has been replaced, effective as of January 1, 2012, with a new $435 million excess of loss reinsurance facility for the benefit of AGM and AGC. Assured Guaranty Re Ltd. ("AG Re") numbers represent the Company's estimate of U.S. statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of December 31, 2011 Page 7 |
| 2011 2010 2011 2010 Consolidated new business production analysis: PVP Public finance - U.S.: Primary markets 51.6 $ 77.8 $ 148.0 $ 285.6 $ Secondary markets 3.0 10.1 25.0 42.5 Public finance - non-U.S.: Primary markets 2.7 - 2.7 - Secondary markets - - - 0.7 Structured finance - U.S. 30.2 16.3 59.8 30.2 Structured finance - non-U.S. - 0.9 7.2 3.7 Total PVP 87.5 $ 105.1 $ 242.7 $ 362.7 $ Total PVP 87.5 $ 105.1 $ 242.7 $ 362.7 $ Less: PVP of credit derivatives - - - - PVP of financial guaranty insurance 87.5 105.1 242.7 362.7 Less: financial guaranty installment premium PVP 32.9 15.8 68.8 33.2 Total: financial guaranty upfront gross written premiums ("GWP") 54.6 89.3 173.9 329.5 Plus: financial guaranty installment GWP 1 45.1 (128.4) (47.1) (107.2) Total GWP 99.7 $ (39.1) $ 126.8 $ 222.3 $ Consolidated financial guaranty gross par written: Public finance - U.S.: Primary markets 4,759 $ 7,057 $ 14,015 $ 26,195 $ Secondary markets 124 464 1,077 1,567 Public finance - non-U.S.: Primary markets 127 - 127 - Secondary markets - - - 34 Structured finance - U.S. 582 363 1,673 2,963 Structured finance - non-U.S. - - - - Total 5,592 $ 7,884 $ 16,892 $ 30,759 $ 1. Note: Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement. Represents present value of new business on installment policies plus GWP adjustment on existing installment deals due to changes in assumptions and any cancellations of assumed reinsurance contracts. December 31, Three Months Ended Assured Guaranty Ltd. New Business Production (in millions) Year Ended December 31, Page 8 |
| Financial Guaranty Gross Par Written by Asset Type Sector: Gross Par Written Avg. Internal Rating Gross Par Written Avg. Internal Rating U.S. public finance: General obligation 2,731 $ A 8,514 $ A Municipal utilities 755 A 2,262 A Tax backed 527 A 1,988 A Transportation 458 A- 940 A-Higher education 146 A 673 A Healthcare 155 A- 388 A-Other public finance 111 A 327 A Total U.S. public finance 4,883 A 15,092 A Non-U.S. public finance: Total non-U.S. public finance 127 BBB 127 BBB Total public finance 5,010 $ A 15,219 $ A U.S. structured finance: Consumer receivables - $ - 700 $ Super Senior Insurance securitizations 500 AA 600 AA Commercial receivables 82 AA 82 AA Other structure finance - - 291 A-Total U.S. structured finance 582 AA 1,673 AA+ Non-U.S. structured finance: Total non-U.S. structured finance - - - - Total structured finance 582 $ AA 1,673 $ AA+ Total gross par written 5,592 $ A 16,892 $ A Note: Please refer to the Glossary for a description of internal ratings and sectors. Three Months Ended December 31, 2011 Assured Guaranty Ltd. Financial Guaranty Gross Par Written (in millions) Year Ended December 31, 2011 Page 9 |
| Year Ended Year Ended 1Q-10 2Q-10 3Q-10 4Q-10 1Q-11 2Q-11 3Q-11 4Q-11 2010 2011 PVP: Public finance - U.S.: Primary markets 60.4 $ 72.7 $ 74.7 $ 77.8 $ 26.7 $ 36.0 $ 33.7 $ 51.6 $ 285.6 $ 148.0 $ Secondary markets 13.9 8.7 9.8 10.1 7.3 8.8 5.9 3.0 42.5 25.0 Public finance - non-U.S.: Primary markets - - - - - - - 2.7 - 2.7 Secondary markets - 0.7 - - - - - - 0.7 - Structured finance - U.S. 4.5 5.7 3.7 16.3 11.3 7.1 11.2 30.2 30.2 59.8 Structured finance - non-U.S. - 2.1 0.7 0.9 7.2 - - - 3.7 7.2 Total PVP 78.8 $ 89.9 $ 88.9 $ 105.1 $ 52.5 $ 51.9 $ 50.8 $ 87.5 $ 362.7 $ 242.7 $ Total PVP 78.8 $ 89.9 $ 88.9 $ 105.1 $ 52.5 $ 51.9 $ 50.8 $ 87.5 $ 362.7 $ 242.7 $ Less: PVP of credit derivatives - - - - - - - - - PVP of financial guaranty insurance 78.8 89.9 88.9 105.1 52.5 51.9 50.8 87.5 362.7 242.7 Less: financial guaranty installment premium PVP 4.5 8.0 4.9 15.8 18.7 5.9 11.3 32.9 33.2 68.8 Total: financial guaranty upfront GWP 74.3 81.9 84.0 89.3 33.8 46.0 39.5 54.6 329.5 173.9 Plus: financial guaranty installment GWP 1 17.8 9.8 (6.4) (128.4) (45.3) (29.0) (17.9) 45.1 (107.2) (47.1) Total GWP 92.1 $ 91.7 $ 77.6 $ (39.1) $ (11.5) $ 17.0 $ 21.6 $ 99.7 $ 222.3 $ 126.8 $ Consolidated financial guaranty gross par written2: Public finance - U.S.: Primary markets 5,816 $ 6,537 $ 6,785 $ 7,057 $ 1,886 $ 3,292 $ 4,078 $ 4,759 $ 26,195 $ 14,015 $ Secondary markets 372 290 441 464 333 356 264 124 1,567 1,077 Public finance - non-U.S.: - Primary markets - - - - - - - 127 - 127 Secondary markets - 34 - - - - - - 34 - Structured finance - U.S. 1,000 1,400 200 363 100 725 266 582 2,963 1,673 Structured finance - non-U.S. - - - - - - - - - - Total 7,188 $ 8,261 $ 7,426 $ 7,884 $ 2,319 $ 4,373 $ 4,608 $ 5,592 $ 30,759 $ 16,892 $ 1. 2. Includes committed amount including undrawn revolvers. Note: Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement. Represents present value of new business on installment policies plus GWP adjustment on existing installment deals due to changes in assumptions and any cancellations of assumed reinsurance contracts. Assured Guaranty Ltd. New Business Production by Quarter (in millions) Page 10 |
| Pre-Tax After-Tax Annualized Amortized Book Book Fair Investment Cost Yield Yield Value Income1 Investment portfolio, available-for-sale: Fixed maturity securities: U.S. Treasury securities and obligations of U.S. government agencies 497.6 $ 2.70% 2.06% 527.7 $ 13.4 $ Agency obligations 352.6 3.77% 3.13% 394.7 13.3 Foreign government securities 332.6 3.07% 2.00% 339.7 10.2 Obligations of states and political subdivisions 3,515.1 4.03% 3.80% 3,758.5 141.7 Insured obligations of state and political subdivisions 2 1,582.1 4.78% 4.53% 1,696.9 75.6 Corporate securities 989.0 3.57% 2.94% 1,038.3 35.3 Mortgage-backed securities ("MBS") 3: Residential MBS ("RMBS") 4 1,588.8 5.68% 4.50% 1,502.4 90.2 Commercial MBS ("CMBS") 475.6 4.13% 3.46% 500.0 19.6 Asset-backed securities 5 439.5 7.27% 5.13% 458.1 31.9 Total fixed maturity securities 9,772.9 4.41% 3.82% 10,216.3 431.4 Short-term investments 699.8 0.04% 0.02% 699.8 0.3 Cash6 208.6 - - 208.6 - Total 10,681.3 $ 4.12% 3.56% 11,124.7 $ 431.6 $ Less: FG VIEs 94.3 12.14% 7.90% 34.3 11.4 Total 10,587.0 $ 4.00% 3.49% 11,090.4 $ 420.2 $ Fair Ratings 7: Value % of Portfolio U.S. Treasury securities and obligations of U.S. government agencies 527.7 $ 5.2% Agency obligations 394.7 3.9% AAA/Aaa 1,923.9 18.8% AA/Aa 5,433.7 53.2% A/A 1,462.1 14.3% BBB 0.8 0.0% Below investment grade ("BIG") 8 240.1 2.3% Not rated 8 233.3 2.3% Total fixed maturity securities, available-for-sale 10,216.3 $ 100.0% Less: FG VIEs 74.4 Total fixed maturity securities, available-for-sale 10,141.9 $ Duration of available-for-sale investment portfolio (in years): 4.7 Average ratings of available-for-sale investment portfolio AA 1. Represents annualized investment income based on amortized cost and pre-tax book yields. 2. 3. Includes $11.5 million in U.S. subprime RMBS, which has an average rating of BIG. 4. Includes investments purchased for loss mitigation purposes. 5. Contains no collateralized debt obligations ("CDOs") of asset-backed securities ("ABS"). 6. 7. 8. Included in the investment portfolio are securities purchased or obtained as part of loss mitigation or other risk management strategies of $1,560.4 million in par with carrying value of $452.7 million. As of December 31, 2011 Assured Guaranty Ltd. (dollars in millions) Reflects obligations of state and local political subdivisions that have been insured by other financial guarantors. The underlying ratings of these bonds, after giving effect to the lower of the rating assigned by Standard & Poor's Ratings Services ("S&P") or Moody's Investors Service, Inc. ("Moody's") average AA-. Includes $308.6 million insured by AGC and AGM. Ratings are represented by the lower of the Moody's and S&P classifications except for bonds purchased for loss mitigation or risk management strategies which use internal ratings classifications. Available-for-Sale Investment Portfolio and Cash Represents operating cash and is not included in yield calculations. Page 11 |
| Estimated Future Estimated Net Ending Net Expected PV Future Net Credit Debt Service Debt Service Net Earned Accretion of Premiums Derivative Amortization Outstanding Premiums 3 Discount Earned Revenues 4 Total 2011 (as of December 31) 845,665 $ 2012 Q1 16,157 $ 829,508 153.5 $ 6.8 $ 160.3 $ 33.7 $ 194.0 $ 2012 Q2 16,509 812,999 147.5 6.6 154.1 32.3 186.4 2012 Q3 18,304 794,695 140.5 6.6 147.1 30.4 177.5 2012 Q4 16,048 778,647 134.5 6.5 141.0 27.6 168.6 2013 61,367 717,280 485.8 24.3 510.1 96.8 606.9 2014 62,205 655,075 426.5 22.5 449.0 69.4 518.4 2015 52,057 603,018 378.4 20.8 399.2 48.2 447.4 2016 42,762 560,256 343.1 19.2 362.3 38.3 400.6 2012-2016 285,409 560,256 2,209.8 113.3 2,323.1 376.7 2,699.8 2017-2021 185,156 375,100 1,297.7 76.2 1,373.9 100.8 1,474.7 2022-2026 147,280 227,820 811.8 50.2 862.0 55.1 917.1 2027-2031 99,650 128,170 492.5 31.2 523.7 40.8 564.5 After 2031 128,170 - 507.1 25.1 532.2 41.1 573.3 Total 845,665 $ 5,318.9 $ 296.0 $ 5,614.9 $ 614.5 $ 6,229.4 $ 1. 2. See page 14 for “Present Value of Financial Guaranty Insurance Net Expected Loss to be Expensed.” 3. Excludes $407.2 million in expected present value of net earned premiums related to FG VIEs. 4. Excludes contracts with credit impairment. Assured Guaranty Ltd. Estimated Net Exposure Amortization 1 and Estimated Future Net Premium and Credit Derivative Revenues (in millions) Represents the future expected amortization of current debt service outstanding (principal and interest), assuming no advance refundings, as of December 31, 2011. Actual amortization differs from expected maturities because borrowers may have the right to call or prepay guaranteed obligations and because of management's assumptions on structured finance amortization. Financial Guaranty Insurance 2 Page 12 |
| Structured Finance U.S. and Other Estimated Non-U.S. Pooled U.S. Financial Structured Ending Net Par Corporate RMBS Products 1 Finance Total Outstanding 2011 (as of December 31) 115,929 $ 2012 11,023 $ 4,740 $ 961 $ 3,845 $ 20,569 $ 95,360 2013 13,329 3,320 746 1,845 19,240 76,120 2014 17,768 2,313 572 1,683 22,336 53,784 2015 8,741 1,935 310 3,247 14,233 39,551 2016 3,364 1,714 181 1,274 6,533 33,018 2012-2016 54,225 14,022 2,770 11,894 82,911 33,018 2017-2021 10,294 4,281 353 2,834 17,762 15,256 2022-2026 1,503 1,813 519 1,776 5,611 9,645 2027-2031 434 675 741 772 2,622 7,023 After 2031 2,795 776 834 2,618 7,023 - Total structured finance 69,251 $ 21,567 $ 5,217 $ 19,894 $ 115,929 $ Public Finance Estimated Estimated Net Par Ending Net Par Amortization Outstanding 2011 (as of December 31) 442,119 $ 2012 23,629 $ 418,490 2013 20,770 397,720 2014 19,884 377,836 2015 19,055 358,781 2016 18,544 340,237 2012-2016 101,882 340,237 2017-2021 93,625 246,612 2022-2026 90,545 156,067 2027-2031 65,528 90,539 After 2031 90,539 - Total public finance 442,119 $ Net par outstanding (end of period): 1Q-10 2Q-10 3Q-10 4Q-10 1Q-11 2Q-11 3Q-11 4Q-11 Public finance - U.S. 430,112 $ 429,874 $ 426,584 $ 426,996 $ 417,367 $ 413,274 $ 408,065 $ 403,073 $ Public finance - non-U.S. 41,406 39,573 42,125 40,743 41,828 41,226 39,267 39,046 Structured finance - U.S. 133,544 125,955 125,679 118,756 113,108 103,978 97,969 92,234 Structured finance - non-U.S. 34,403 32,112 33,684 30,636 29,984 28,718 26,424 23,695 Total 639,465 $ 627,514 $ 628,072 $ 617,131 $ 602,287 $ 587,196 $ 571,725 $ 558,048 $ 1. See Glossary for description of financial products. Estimated Net Par Amortization Assured Guaranty Ltd. Expected Amortization of Net Par Outstanding (in millions) Page 13 |
| Operating 2 GAAP 2 2012 Q1 37.1 $ 32.1 $ 2012 Q2 31.8 27.5 2012 Q3 28.1 24.0 2012 Q4 24.7 20.9 2013 80.6 61.0 2014 63.7 44.0 2015 53.2 34.9 2016 46.5 30.9 2012-2016 365.7 275.3 2017-2021 183.3 135.3 2022-2026 92.6 68.1 2027-2031 62.3 34.4 After 2031 56.2 24.3 Total expected PV of net expected loss to be expensed 760.1 537.4 Discount 321.4 276.1 Total future value 1,081.5 $ 813.5 $ 1. 2. Assured Guaranty Ltd. Present Value ("PV") of Financial Guaranty Insurance Net Expected Loss to be Expensed As of December 31, 2011 (in millions) Operating income includes net expected loss to be expensed on consolidated FG VIEs. Losses on consolidated FG VIEs are eliminated for GAAP. Net Expected Loss to be Expensed 1 The expected present value of net loss to be expensed is discounted by weighted-average risk free rates ranging from 0% to 3.27%. Page 14 |
| Net Par Outstanding and Average Rating by Asset Type Net Par Outstanding Avg. Internal Rating Net Par Outstanding Avg. Internal Rating U.S. public finance: General obligation 173,061 $ A+ 181,799 $ A+ Tax backed 78,006 A+ 83,403 A+ Municipal utilities 65,204 A 70,066 A Transportation 35,396 A 36,973 A Healthcare 19,495 A 21,592 A Higher education 15,677 A+ 15,687 A+ Housing 5,696 AA- 6,562 AA- Infrastructure finance 4,110 BBB 4,092 BBB+ Investor-owned utilities 1,124 A- 1,505 A- Other public finance 5,304 A- 5,317 A- Total U.S. public finance 403,073 A+ 426,996 A+ Non-U.S. public finance: Infrastructure finance 15,405 BBB 15,973 BBB Regulated utilities 13,260 BBB+ 13,978 BBB+ Pooled infrastructure 3,130 AA- 3,432 AA Other public finance 7,251 A+ 7,360 AA- Total non-U.S. public finance 39,046 BBB+ 40,743 A- Total public finance 442,119 $ A 467,739 $ A U.S. structured finance: Pooled corporate obligations 51,520 $ AAA 67,384 $ AAA RMBS 21,567 BB 25,130 BB Financial products 5,217 AA- 6,831 AA- CMBS and other commercial real estate related exposures 4,774 AAA 7,084 AAA Consumer receivables 4,326 AA- 6,073 AA- Insurance securitizations 1,893 A+ 1,584 A+ Commercial receivables 1,214 BBB 2,139 BBB+ Structured credit 424 B- 1,729 BBB Other structured finance 1,299 A- 802 A- Total U.S. structured finance 92,234 AA- 118,756 AA- Non- U.S. structured finance: Pooled corporate obligations 17,731 AAA 22,610 AAA Commercial receivables 1,865 A- 1,729 A- RMBS 1,598 AA 3,394 AA+ Structured credit 979 BBB 1,267 BBB Insurance securitizations 964 CCC- 964 CCC- CMBS and other commercial real estate related exposures 180 AAA 251 AAA Other structured finance 378 Super Senior 421 Super Senior Total non-U.S. structured finance 23,695 AA 30,636 AA+ Total structured finance 115,929 $ AA- 149,392 $ AA Total net par outstanding 558,048 $ A+ 617,131 $ A+ December 31, 2010 Note: Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors. Assured Guaranty Ltd. Financial Guaranty Profile (1 of 4) (in millions) December 31, 2011 Page 15 |
| Distribution by Ratings of Financial Guaranty Portfolio Ratings: Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Super senior - $ 0.0% 1,138 $ 2.9% 16,756 $ 18.2% 5,660 $ 23.9% 23,554 $ 4.2% AAA 5,074 1.3% 1,381 3.5% 35,736 38.7% 10,231 43.2% 52,422 9.4% AA 139,693 34.6% 1,056 2.7% 11,079 12.0% 976 4.1% 152,804 27.4% A 213,164 52.9% 11,744 30.1% 4,116 4.5% 1,518 6.4% 230,542 41.3% BBB 40,635 10.1% 21,399 54.8% 5,087 5.5% 3,391 14.3% 70,512 12.6% BIG 4,507 1.1% 2,328 6.0% 19,460 21.1% 1,919 8.1% 28,214 5.1% Total net par outstanding 403,073 $ 100.0% 39,046 $ 100.0% 92,234 $ 100.0% 23,695 $ 100.0% 558,048 $ 100.0% Note: Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors. Assured Guaranty Ltd. Financial Guaranty Profile (2 of 4) As of December 31, 2011 Structured Finance - Non-U.S. Consolidated Structured Finance - U.S. Public Finance - U.S. Public Finance - Non-U.S. (dollars in millions) Page 16 |
| Geographic Distribution of Financial Guaranty Portfolio U.S.: Net Par Public finance: Outstanding % of Total California 57,815 $ 10.4% New York 33,268 6.0% Pennsylvania 30,656 5.5% Texas 29,922 5.4% Florida 25,664 4.6% Illinois 25,645 4.6% New Jersey 17,071 3.1% Michigan 15,832 2.8% Massachusetts 11,390 2.0% Other states 155,810 27.9% Total public finance 403,073 72.3% Structured finance (multiple states) 92,234 16.5% Total U.S. 495,307 88.8% Non-U.S.: United Kingdom 24,202 4.3% Australia 8,356 1.5% Canada 4,186 0.8% France 4,056 0.7% Italy 2,396 0.4% Other 19,545 3.5% Total non-U.S. 62,741 11.2% Total net par outstanding 558,048 $ 100.0% Assured Guaranty Ltd. Financial Guaranty Profile (3 of 4) (dollars in millions) As of December 31, 2011 Page 17 |
| Net Economic Exposure to Selected European Countries Greece Hungary Ireland Italy Portugal Spain Total Sovereign and sub-sovereign exposure: Public finance 282 $ - $ - $ 1,011 $ 113 $ 264 $ 1,670 $ Infrastructure finance - 453 24 332 102 169 1,080 Total sovereign and sub-sovereign exposure 282 453 24 1,343 215 433 2,750 Non-sovereign exposure: Regulated utilities - - - 220 - 20 240 RMBS - 257 136 516 - - 909 Commercial receivables - 1 28 29 15 23 96 Pooled corporate obligations 34 - 241 289 25 550 1,139 Total non-sovereign exposure 34 258 405 1,054 40 593 2,384 Total 316 $ 711 $ 429 $ 2,397 $ 255 $ 1,026 $ 5,134 $ Total BIG 282 $ 414 $ 15 $ 245 $ 130 $ 141 $ 1,227 $ (dollars in millions) Note: While the Company’s exposures are shown in U.S. dollars, the obligations the Company insures are in various currencies, including U.S. dollars, Euros and British pounds sterling. Included in the table above is $136.1 million of reinsurance on a 2004 - 2006 pool of Irish residential mortgages that is part of the Company’s legacy mortgage reinsurance business ($171.6 million remaining, including the Irish exposure) and so is not included in the Company’s exposure tables elsewhere in this document. One of the residential mortgage-backed securities included in the table above includes residential mortgages in both Italy and Germany, and only the portion of the transaction equal to the portion of the original mortgage pool in Italian mortgages is shown in the table. Assured Guaranty Ltd. Financial Guaranty Profile (4 of 4) As of December 31, 2011 Page 18 |
| Distribution of Direct Pooled Corporate Obligations by Ratings Ratings: Net Par Outstanding % of Total Avg. Initial Credit Enhancement Avg. Current Credit Enhancement Super Senior 17,384 $ 25.6% 31.0% 30.3% AAA 41,057 60.5% 30.0% 28.5% AA 2,368 3.5% 41.0% 39.6% A 168 0.2% 36.5% 35.9% BBB 2,556 3.8% 35.4% 29.7% BIG 4,311 6.4% 39.2% 20.6% Total exposures 67,844 $ 100.0% 31.4% 28.9% Distribution of Direct Pooled Corporate Obligations by Asset Class Asset class: Net Par Outstanding % of Total Avg. Initial Credit Enhancement Avg. Current Credit Enhancement Avg. Rating CBOs/CLOs 39,315 $ 57.9% 31.6% 31.4% AAA Synthetic investment grade pooled corporates 12,391 18.3% 20.4% 18.7% AAA Market value CDOs of corporates 4,791 7.1% 34.1% 28.1% AAA Synthetic high yield pooled corporates 4,116 6.1% 43.8% 37.2% AAA Trust preferred Banks and insurance 3,213 4.7% 46.7% 33.3% BBBU.S. mortgage and real estate investment trusts 2,246 3.3% 50.0% 32.8% BB- European mortgage and real estate investment trusts 875 1.3% 36.7% 33.2% BBB- Other pooled corporates 897 1.3% 25.5% 13.1% BBB- Total exposures 67,844 $ 100.0% 31.4% 28.9% AAA Note: Please refer to the Glossary for an explanation of internal ratings, performance indicators and sectors. Assured Guaranty Ltd. Direct Pooled Corporate Obligations Profile (dollars in millions) As of December 31, 2011 Page 19 |
| Distribution of U.S. RMBS by Rating and Type of Exposure Ratings: Prime First Lien Closed End Seconds HELOC Alt-A First Lien Option ARMs Subprime First Lien Net Interest Margin Total Net Par Outstanding AAA 7 $ 0 $ 366 $ 164 $ - $ 2,064 $ - $ 2,601 $ AA 21 24 213 158 - 1,705 - 2,122 A 2 1 21 11 39 888 - 962 BBB 133 - 11 340 191 552 - 1,228 BIG 576 1,015 3,279 4,655 2,203 2,902 25 14,655 Total exposures 739 $ 1,040 $ 3,890 $ 5,329 $ 2,433 $ 8,111 $ 25 $ 21,567 $ Distribution of U.S. RMBS by Year Insured 1 and Type of Exposure Year insured: Prime First Lien Closed End Seconds HELOC Alt-A First Lien Option ARMs Subprime First Lien Net Interest Margin Total Net Par Outstanding 2004 and prior 44 $ 1 $ 289 $ 117 $ 43 $ 1,512 $ 0 $ 2,007 $ 2005 176 - 879 633 116 238 0 2,042 2006 121 447 1,163 424 556 3,456 0 6,167 2007 398 591 1,559 2,720 1,626 2,809 25 9,727 2008 - - - 1,434 93 97 - 1,624 Total exposures 739 $ 1,040 $ 3,890 $ 5,329 $ 2,433 $ 8,111 $ 25 $ 21,567 $ Distribution of U.S. RMBS by Rating and Year Insured AAA AA A BBB BIG Year insured: Rated Rated Rated Rated Rated Total 2004 and prior 1,307 $ 86 $ 75 $ 192 $ 347 $ 2,007 $ 2005 179 - 1 117 1,744 2,042 2006 832 1,531 842 281 2,681 6,167 2007 266 371 44 544 8,502 9,727 2008 17 134 - 93 1,381 1,624 Total exposures 2,601 $ 2,122 $ 962 $ 1,228 $ 14,655 $ 21,567 $ % of total 12.1% 9.8% 4.5% 5.7% 67.9% 100.0% 1. Assured Guaranty has not insured any U.S. RMBS transactions since 2008. Note: Please refer to the Glossary for a description of performance indicators and sectors. Assured Guaranty Ltd. Consolidated U.S. RMBS Profile (dollars in millions) As of December 31, 2011 Page 20 |
| U.S. Prime First Lien Year insured: Net Par Outstanding Pool Factor Subordination Cumulative Losses 60+ Day Delinquencies Number of Transactions 2005 173 $ 40.1% 5.1% 1.5% 10.6% 6 2006 121 58.2% 8.5% 0.1% 17.8% 1 2007 398 52.3% 8.4% 3.9% 17.8% 1 2008 - - - - - - 691 $ 50.3% 7.6% 2.7% 16.0% 8 U.S. Closed End Seconds Year insured: Net Par Outstanding Pool Factor Subordination Cumulative Losses 60+ Day Delinquencies Number of Transactions 2005 - $ - - - - - 2006 437 15.3% - 60.7% 11.1% 2 2007 591 18.5% - 66.3% 10.5% 10 2008 - - - - - - 1,028 $ 17.1% - 63.9% 10.8% 12 U.S. HELOC Year insured: Net Par Outstanding Pool Factor Subordination Cumulative Losses 60+ Day Delinquencies Number of Transactions 2005 827 $ 17.6% 2.7% 15.0% 12.8% 6 2006 1,139 28.1% 2.5% 33.5% 10.5% 7 2007 1,559 43.2% 3.3% 29.4% 7.6% 9 2008 - - - - - - 3,525 $ 32.3% 2.9% 27.4% 9.7% 22 U.S. Alt-A First Lien Year insured: Net Par Outstanding Pool Factor Subordination Cumulative Losses 60+ Day Delinquencies Number of Transactions 2005 631 $ 34.6% 9.8% 5.9% 19.2% 21 2006 424 40.1% 0.0% 17.4% 37.7% 7 2007 2,720 51.5% 4.7% 12.6% 33.9% 12 2008 1,434 48.3% 22.3% 12.5% 30.7% 5 5,209 $ 47.6% 9.8% 12.2% 31.5% 45 Assured Guaranty Ltd. Direct U.S. RMBS Profile (1 of 2) (dollars in millions) Distribution of Direct U.S. RMBS Insured January 1, 2005 or Later by Exposure Type, Average Pool Factor, Subordination, Cumulative Losses and 60+ Day Delinquencies Note: Please refer to the Glossary for a description of performance indicators and sectors. As of December 31, 2011 Page 21 |
| U.S. Option ARMs Year insured: Net Par Outstanding Pool Factor Subordination Cumulative Losses 60+ Day Delinquencies Number of Transactions 2005 107 $ 24.8% 6.7% 9.7% 36.8% 4 2006 550 47.9% 2.2% 14.7% 53.9% 7 2007 1,626 51.4% 3.5% 16.0% 40.7% 11 2008 93 54.3% 49.2% 10.9% 37.1% 1 2,375 $ 49.5% 5.1% 15.2% 43.4% 23 U.S. Subprime First Lien Year insured: Net Par Outstanding Pool Factor Subordination Cumulative Losses 60+ Day Delinquencies Number of Transactions 2005 227 $ 40.1% 29.4% 5.4% 35.3% 4 2006 3,449 22.4% 61.8% 16.3% 37.7% 4 2007 2,809 52.5% 22.3% 18.2% 46.9% 13 2008 81 64.9% 27.5% 12.8% 30.3% 1 6,565 $ 36.4% 43.4% 16.7% 41.5% 22 Assured Guaranty Ltd. Direct U.S. RMBS Profile (2 of 2) (dollars in millions) Distribution of Direct U.S. RMBS Insured January 1, 2005 or Later by Exposure Type, Average Pool Factor, Subordination, Cumulative Losses and 60+ Day Delinquencies Note: Please refer to the Glossary for a description of performance indicators and sectors. As of December 31, 2011 Page 22 |
| U.S. CMBS Rating: Net Par Outstanding Pool Factor Subordination Cumulative Losses 60+ Day Delinquencies Number of Transactions Super senior 3,216 $ 79.8% 37.0% 1.6% 8.1% 148 AAA 204 74.9% 27.0% 1.6% 11.2% 11 AA - - - - - - A 151 45.3% 17.0% 1.5% 7.0% 1 BBB - - - - - - BIG - - - - - - Total exposures 3,571 $ 78.1% 35.6% 1.6% 8.3% 160 CDOs of U.S. Commercial Real Estate and CMBS1 Net Par Outstanding % of Total Avg. Initial Credit Enhancement Avg. Current Credit Enhancement CDOs of commercial real estate 664 $ 80.7% 49.8% 52.2% CDOs of CMBS2 159 19.3% 32.2% 60.6% Total exposures 823 $ 100.0% 46.4% 53.8% 1. Represents other U.S. Commercial Real Estate not included in the table above. 2. Relates to vintages 2003 and prior. Note: Please refer to the Glossary for a description of performance indicators and sectors. Assured Guaranty Ltd. Direct U.S. Commercial Real Estate Profile (dollars in millions) Distribution of Direct U.S. CMBS Insured January 1, 2005 or Later by Exposure Type, Internal Rating, Average Pool Factor, Subordination, Cumulative Losses and 60+ Day Delinquencies As of December 31, 2011 Page 23 |
| Distribution of Direct U.S. Consumer Receivables by Rating Rating: Credit Cards Student Loans Manufactured Housing Auto Total Net Par Outstanding Super senior 400 $ - $ - $ 700 $ 1,100 $ AAA - 392 - 579 971 AA - - 67 227 294 A - - - 38 38 BBB - 869 41 - 910 BIG - - 145 - 145 Total exposures 400 $ 1,261 $ 253 $ 1,544 $ 3,458 $ Average rating Super Senior A BB+ AAA AA Avg. initial credit enhancement 62.2% 7.2% 27.5% 34.7% 27.3% Avg. current credit enhancement 62.2% 9.6% 25.6% 47.6% 33.8% Note: Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors. Assured Guaranty Ltd. Direct U.S. Consumer Receivables Profile (dollars in millions) As of December 31, 2011 Page 24 |
| BIG Exposures by Asset Exposure Type December 31, 2011 December 31, 2010 U.S. public finance: Infrastructure finance 1,335 $ 61 $ General obligation 966 882 Municipal utilities 672 541 Tax backed 459 430 Transportation 246 162 Healthcare 134 333 Higher education 20 21 Housing 0 8 Other public finance 675 721 Total U.S. public finance 4,507 3,159 Non-U.S. public finance: Infrastructure finance 1,924 1,506 Regulated utilities 9 289 Other public finance 395 - Total non-U.S. public finance 2,328 1,795 Total public finance 6,835 $ 4,954 $ U.S. structured finance: RMBS 14,655 $ 16,355 $ Pooled corporate obligations 3,628 2,976 Consumer receivables 466 425 Structured credit 361 399 Commercial receivables 202 240 Other structured finance 148 163 Total U.S. structured finance 19,460 20,558 Non-U.S. structured finance: Pooled corporate obligations 980 355 Insurance securitizations 923 923 Commercial receivables 16 16 Total non-U.S. structured finance 1,919 1,294 Total structured finance 21,379 $ 21,852 $ Total BIG net par outstanding 28,214 $ 26,806 $ 1. Assured Guaranty Ltd. Below Investment Grade Exposures (1 of 5) (in millions) Securities purchased for loss mitigation purposes represented $1,293.0 million and $489.3 million of gross par outstanding as of December 31, 2011 and December 31, 2010, respectively. In addition, under the terms of certain credit derivative contracts, the Company has obtained the underlying collateral of transactions and recorded it in invested assets in the consolidated balance sheets. Such amounts totaled $222.4 million and $251.8 million in gross par outstanding as of December 31, 2011 and December 31, 2010, respectively. Note: Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors. BIG Net Par Outstanding 1 Page 25 |
| Net Par Outstanding by BIG Category 1 December 31, 2011 2 December 31, 2010 2 Category 1 U.S. public finance $ 3,395 $ 1,958 Non-U.S. public finance 2,046 1,794 U.S. structured finance 6,207 4,646 Non-U.S. structured finance 927 293 Total Category 1 12,575 8,691 Category 2 U.S. public finance 274 282 Non-U.S. public finance 282 1 U.S. structured finance 5,397 8,889 Non-U.S. structured finance 42 2 Total Category 2 5,995 9,174 Category 3 U.S. public finance 838 919 Non-U.S. public finance - - U.S. structured finance 7,856 7,023 Non-U.S. structured finance 950 999 Total Category 3 9,644 8,941 BIG Total $ 28,214 $ 26,806 1. 2. Securities purchased for loss mitigation purposes represented $1,293.0 million and $489.3 million of gross par outstanding as of December 31, 2011 and December 31, 2010, respectively. In addition, under the terms of certain credit derivative contracts, the Company has obtained the underlying collateral of transactions and recorded it in invested assets in the consolidated balance sheets. Such amounts totaled $222.4 million and $251.8 million in gross par outstanding as of December 31, 2011 and December 31, 2010, respectively. Assured Guaranty Ltd. Below Investment Grade Exposures (2 of 5) (in millions) Assured Guaranty's surveillance department is responsible for monitoring our portfolio of credits and maintains a list of BIG credits. BIG Category 1: Below investment grade transactions showing sufficient deterioration to make lifetime losses possible, but for which none are currently expected. Transactions on which claims have been paid but are expected to be fully reimbursed (other than investment grade transactions on which only liquidity claims have been paid) are in this category. BIG Category 2: Below investment grade transactions for which lifetime losses are expected but for which no claims (other than liquidity claims) have yet been paid. BIG Category 3: Below investment grade transactions for which lifetime losses are expected and on which claims (other than liquidity claims) have been paid. Transactions remain in this category when claims have been paid and only a recoverable remains. Financial Guaranty Insurance and Credit Derivatives Surveillance Categories Page 26 |
| Public Finance BIG Exposures Greater Than $50 Million Net Par Internal Name or description Outstanding Rating U.S. public finance: Skyway Concession Company LLC 1,086 $ BB Jefferson County Alabama Sewer 496 D Detroit (City of) Michigan 385 BB San Joaquin Hills California Transportation 246 BB- GMAC Military Housing Trust XVIII (Hickam Air Force Base Project Certificates 2007A) 216 BB Lackawanna County, PA Revenue Stream 184 BBJefferson County Alabama School Sales Tax Limited Obligation 176 BB Guaranteed Student Loan Transaction 158 B Detroit (City of) School District Michigan 152 BB Guaranteed Student Loan Transaction 137 CCC Guaranteed Student Loan Transaction 134 B Orlando Tourist Development Tax - Florida 118 BB+ Harrisburg (City of) Pennsylvania General Obligation 95 B- Puerto Rico Public Finance Corporation - Commonwealth Appropriation 87 BB+ Xenia Rural Water District, Iowa 81 B Mashantucket Pequot Tribe, Connecticut 60 B Bessemer City, Alabama - Water Revenue 59 BB+ Guaranteed Student Loan Transaction 57 B Total 3,927 $ Non-U.S. public finance: Reliance Rail Finance Pty. Limited 683 $ BB M6 Duna Autoplaya Koncesszios Zartkoruen Mukodo Reszvenytarsasag 415 BB+ Cross City Tunnel Motorway Finance Limited 307 BB Hellenic Republic 282 B Aeroporti Di Roma (ADR) Romulus Finance S.R.L. (Rome Airport) 244 BB Autovia de la Mancha, S.A. 141 BB+ Alte Liebe I Limited (Wind Farm) 93 BB Metropolitano de Porto Lease and Sublease of Railroad Equipment 57 BB+ Total 2,222 $ Total 6,149 $ Assured Guaranty Ltd. Below Investment Grade Exposures (3 of 5) As of December 31, 2011 (dollars in millions) Note: Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors. Page 27 |
| Structured Finance BIG Exposures Greater Than $50 Million Net Par Internal Current Credit 60+ Day Name or description Outstanding Rating Enhancement Delinquencies U.S. structured finance: U.S. RMBS: Deutsche Alt-A Securities Mortgage Loan 2007-2 779 $ CCC 0.0% 31.7% MABS 2007-NCW 551 B 29.2% 63.3% Countrywide HELOC 2006-I 427 CCC 0.0% 7.3% Private Residential Mortgage Transaction 406 BB 15.7% 31.2% MortgageIT Securities Corp. Mortgage Loan 2007-2 398 B 8.4% 17.8% MASTR 2007-3 (NEGAM) 373 CCC 0.0% 52.6% Private Residential Mortgage Transaction 370 BB 18.5% 29.5% Option One 2007-FXD2 370 CCC 15.1% 30.6% Deutsche Alt-A Securities Mortgage Loan 2007-3 366 B 3.7% 23.1% Private Residential Mortgage Transaction 364 CCC 17.0% 31.2% Countrywide HELOC 2006-F (includes $110.2 million purchased, 28% owned)¹ 361 CCC 0.0% 19.3% Private Residential Mortgage Transaction 328 BB 7.9% 35.3% Private Residential Mortgage Transaction 327 BB 17.7% 27.6% CWALT Alternative Loan Trust 2007-HY9 322 B 4.6% 48.4% Nomura Asset Accept. Corp. 2007-1 (includes $0.8 million purchased, 0.2% owned)¹ 321 CCC 0.0% 40.5% AAA Trust 2007-2 (includes $103.1 million purchased, 35% owned)¹ 297 CCC 24.2% 44.5% Harborview 2006-12 288 CCC 4.5% 59.9% Countrywide Home Equity Loan Trust 2005-J 273 CCC 0.0% 18.2% Countrywide Home Equity Loan Trust 2007-D 270 CCC 0.0% 8.6% Countrywide HELOC 2005-D 261 CCC 0.0% 13.3% Countrywide 2007-13 255 B 29.8% 55.3% Terwin Mortgage Trust 2006-12SL (includes $255.3 million purchased, 100% owned)¹ 247 B - 11.9% Countrywide HELOC 2007-A (includes $20.7 million purchased, 8% owned)¹ 225 CCC 0.0% 7.3% CWABS 2007-4 219 B 19.2% 43.8% GMACM 2004-HE3 204 B 0.0% 2.9% Countrywide HELOC 2007-B 203 CCC 0.0% 6.0% Terwin Mortgage Trust 2007-1SL (includes $210.5 million purchased, 100% owned)¹ 202 B - 10.0% Private Residential Mortgage Transaction 197 BB 26.3% 35.3% Terwin Mortgage Trust 2006-10SL (includes $102.1 million purchased, 52% owned)¹ 190 CCC - 10.1% Soundview 2007-WMC1 186 CCC 3.6% 69.0% MARM 2007-1 (FKA MASTR 2007-OA1) (includes $1.1 million purchased, 1% owned)¹ 177 CCC 0.0% 33.9% FHABS 2007-HE1 HELOC 171 BB 0.0% 4.6% Harborview 2007-1 166 CCC 7.2% 58.2% IndyMac 2007-H1 HELOC 163 CCC 0.0% 9.0% New Century 2005-A 157 CCC 19.7% 32.3% FHABS 2006-HE2 HELOC 151 BB 0.0% 5.3% Renaissance (DELTA) 2007-3 (includes $62.5 million purchased, 41% owned)¹ 147 CCC 16.0% 33.5% CSAB 2006-3 128 CCC 0.0% 44.1% Countrywide HELOC 2005-C 124 CCC 0.0% 12.4% CWALT 2007-OA10 (includes $38.1 million purchased, 53% owned)¹ 119 CCC 8.5% 50.8% Harborview 2006-1 119 CCC - 61.9% Lehman Excess Trust 2007-16N 112 CCC 2.5% 45.5% Taylor Bean & Whitaker 2007-2 (includes $26.2 million purchased, 58% owned)¹ 93 CCC 0.0% 22.9% FlagStar HELOC 2005-1 90 BB 22.3% 3.1% FlagStar HELOC 2006-2 88 CCC 24.7% 4.7% CSAB 2006-2 (includes $11.0 million purchased, 13% owned)¹ 83 CCC 0.0% 39.0% Deutsche Alt-B 2006-AB1 82 CCC 0.0% 27.5% American Home Mortgage Assets Trust 2007-4 82 CCC 0.0% 35.3% ACE Home Equity Loan Trust 2007-SL3 81 CCC 0.0% 9.2% Soundview Home Loan Trust 2008-1 81 B 27.5% 30.3% MASTR Asset-Backed Securities Trust 2005-NC2 80 CCC 3.8% 31.9% ACE 2007-D1 78 B 20.0% 36.7% NAAC 2007-S2 (includes $2.2 million purchased, 3% owned)¹ 72 CCC 0.0% 10.2% Countrywide Alt-A 2005-22T 69 B 5.0% 32.6% Terwin Mortgage Trust 2005-16HE 64 CCC 3.8% 25.2% CSMC 2007-3 64 CCC 0.0% 32.8% Harborview 2006-10 62 CCC 0.0% 27.7% ACE 2007-SL1 61 CCC - 10.7% Countrywide HELOC 2006-H (includes $22.2 million purchased, 21% owned)¹ 61 CCC - 17.9% IndyMac IMSC Mortgage Loan Trust 2007-HOA1 60 CCC - 42.9% Terwin Mortgage Trust 2007-6 ALT (includes $30.2 million purchased, 35% owned)¹ 59 CCC 0.0% 54.3% CSAB Mortgage-Backed Trust 2007-1 (includes $10.9 million purchased, 20% owned)¹ 55 CCC 0.0% 35.5% Total U.S. RMBS 12,779 $ 1.Represents amounts of gross par which were purchased or obtained as part of loss mitigation strategies and recorded as part of the investment portfolio. Note: Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors. Assured Guaranty Ltd. Below Investment Grade Exposures (4 of 5) As of December 31, 2011 (dollars in millions) Page 28 |
| Structured Finance BIG Exposures Greater Than $50 Million (continued) Net Par Internal Current Credit Name or description Outstanding Rating Enhancement U.S. structured finance: Other: Taberna Preferred Funding IV, Ltd. 292 $ CCC 24.1% Taberna Preferred Funding III, Ltd. 287 CCC 15.6% Alesco Preferred Funding XVI, Ltd. 256 B 8.2% Taberna Preferred Funding II, Ltd. 220 CCC 22.4% Attentus CDO I Limited 219 BB 31.7% Alesco Preferred Funding XVII, Ltd. 202 B 17.9% Trapeza CDO XI 195 BB- 29.0% Weinstein Film Securitization 187 CCC N/A Attentus CDO II Limited 179 BB 32.4% Synthetic High Yield Pooled Corporate CDO 160 CCC 3.9% Taberna Preferred Funding VIII, Ltd. 154 BB 38.3% Taberna Preferred Funding VI, Ltd. 152 CCC 18.9% Trapeza CDO X, Ltd. 148 BB- 28.1% Preferred Term Securities XIX, Ltd. 146 BB+ 33.2% Alesco Preferred Funding VI 146 BB+ 32.4% US Capital Funding IV, Ltd. 144 B- 13.1% Taberna Preferred Funding VIII, Ltd. 133 BB 38.3% NRG Peaker (includes $209.8 million of bonds, 100% owned)1 2 130 CCC N/A Alesco Preferred Funding V 123 BB+ 34.1% Private Student Loan Transaction 121 CCC N/A Preferred Term Securities XVI, Ltd. 119 B 26.7% Private Other Non-Municipal Transaction (includes $72.8 million purchased, 88% owned)¹ 111 CCC N/A Private Student Loan Transaction 97 CCC N/A Conseco Finance Manufactured Housing Series 2001-2 86 BB 15.7% America West Airlines Series 2000-1 G-1 84 BB N/A GreenPoint 2000-4 64 CCC 9.6% CAPCO - Excess SIPC Excess of Loss Reinsurance 63 BB N/A Preferred Term Securities XVIII, Ltd. 59 BB 34.6% Preferred Term Securities XVII, Ltd. 55 BB+ 32.6% Preferred Term Securities XX, Ltd. 53 BB 28.3% Total other 4,385 $ Total 17,164 $ Non-U.S. structured finance: Ballantyne Re Plc (includes $106.4 million purchased, 21% owned)1 500 $ CC N/A Orkney Re II, Plc 423 CCC N/A Gleneagles Funding Ltd. 374 BB N/A Augusta Funding Limited 05 Perpetual Note Issue 81 BB N/A Augusta Funding Limited 07 Perpetual Note Issue 81 BB N/A Private Pooled Corporate Transaction 81 BB N/A Private Pooled Corporate Transaction 64 BB N/A Private Pooled Corporate Transaction 56 BB N/A Total 1,660 $ Total 18,824 $ 1. 2. Net par shown is net of $80.2 million of ceded par. The Company owns 100% of the collateral in the insured transaction. Note: Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors. Assured Guaranty Ltd. Below Investment Grade Exposures (5 of 5) As of December 31, 2011 (dollars in millions) Represents amounts of gross par which were purchased or obtained as part of loss mitigation strategies and recorded as part of the investment portfolio. Page 29 |
| Net Par Internal Credit name: Outstanding Rating New Jersey (State of) 4,330 $ A+ California (State of) 3,479 BBB+ New York (City of) New York 3,087 AA Massachusetts (Commonwealth of) 2,981 AA New York (State of) 2,707 AA- Chicago (City of) Illinois 2,548 AA- Puerto Rico (Commonwealth of) 2,323 BBBMiami- Dade County Florida Aviation Authority - Miami International Airport 2,318 A Port Authority of New York and New Jersey 2,273 AA- Los Angeles California Unified School District 2,164 AA- Wisconsin (State of) 2,159 AA- New York MTA Transportation Authority 2,132 A Washington (State of) 2,099 AA- Houston Texas Water and Sewer Authority 2,076 AA- Illinois (State of) 2,011 BBB+ Massachusetts (Commonwealth of) State Sales Tax 1,928 AA University of California Board of Regents 1,916 AAPennsylvania (Commonwealth of) 1,861 AA Philadelphia (City of) Pennsylvania 1,764 BBBLos Angeles California Department of Water & Power - Electric Revenue Bonds 1,755 AAMichigan (State of) 1,710 A+ Long Island Power Authority 1,638 ANew York City Municipal Water Finance Authority 1,624 AA+ Chicago-O'Hare International Airport 1,609 A Miami-Dade County Florida School Board 1,539 AArizona (State of) 1,520 A+ Chicago Illinois Public Schools 1,452 A+ New Jersey Turnpike Authority 1,398 AMassachusetts (Commonwealth of) Water Resources 1,362 AA Atlanta Georgia Water & Sewer System 1,349 BBB+ Illinois Toll Highway Authority 1,300 AA Puerto Rico Highway and Transportation Authority 1,286 BBB Metro Washington Airport Authority 1,252 A+ Kentucky (Commonwealth of) 1,224 A+ Hawaii (State of) Department of Hawaiian Home Lands 1,207 AA New York State Thruway - Highway Trust Fund 1,202 AAPuerto Rico Electric Power Authority 1,175 APhiladelphia Pennsylvania School District 1,162 A Georgia Board of Regents Revenue Stream 1,152 A California State University System Trustee 1,097 A+ Pennsylvania Turnpike Commission 1,091 A+ Skyway Concession Company LLC 1,086 BB Detroit Michigan Sewer 1,086 BBB+ Broward County Florida School Board 1,084 AADistrict of Columbia 1,081 A+ Orlando-Orange County Expressway Authority, Florida 1,081 A+ North Texas Tollway Authority 1,060 A Connecticut (State of) 1,052 AA+ New York MTA Dedicated Tax 1,044 AASan Francisco Airports Commission 999 A Total top 50 U.S. public finance exposures 85,833 $ Note: Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors. Assured Guaranty Ltd. 50 Largest U.S. Public Finance Exposures As of December 31, 2011 (in millions) Largest Exposures by Sector (1 of 4) Page 30 |
| Net Par Internal Credit Credit name: Outstanding Rating Enhancement Fortress Credit Opportunities I, LP. 1,302 $ AA 31.1% Stone Tower Credit Funding 1,254 AAA 32.0% Synthetic Investment Grade Pooled Corporate CDO 1,157 AAA 13.3% Synthetic High Yield Pooled Corporate CDO 975 AAA 42.2% Deutsche Alt-A Securities Mortgage Loan 2007-2 779 CCC 0.0% Synthetic Investment Grade Pooled Corporate CDO 763 Super Senior 14.8% Synthetic Investment Grade Pooled Corporate CDO 754 Super Senior 24.2% Synthetic Investment Grade Pooled Corporate CDO 742 Super Senior 29.2% Synthetic High Yield Pooled Corporate CDO 731 AAA 39.2% Mizuho II Synthetic CDO 716 A N/A Synthetic Investment Grade Pooled Corporate CDO 713 Super Senior 23.6% Private Consumer Receivable Transaction 700 Super Senior 53.4% 280 Funding I 660 AAA 39.2% Synthetic Investment Grade Pooled Corporate CDO 653 AAA 17.2% ARES Enhanced Credit Opportunities Fund 608 AAA 29.7% MABS 2007-NCW 551 B 29.2% Eastland CLO, Ltd. 530 Super Senior 38.7% Synthetic Investment Grade Pooled Corporate CDO 514 Super Senior 14.3% Denali CLO VII, Ltd. 494 AAA 19.8% Synthetic High Yield Pooled Corporate CDO 494 AAA 46.7% Shenandoah Trust Capital I Term Securities 484 A+ N/A Churchill Financial Cayman 465 AAA 36.2% SLM Private Credit Student Trust 2007-A 450 BBB 12.8% Phoenix CLO II 449 AAA 21.6% Synthetic High Yield Pooled Corporate CDO 431 AAA 29.0% LIICA Holdings, LLC 428 AA N/A Countrywide HELOC 2006-I 427 CCC 0.0% KKR Financial CLO 2007-1 409 AAA 51.2% Private Residential Mortgage Transaction 406 BB 15.7% Private Consumer Receivable Transaction 400 Super Senior 62.2% MortgageIT Securities Corp. Mortgage Loan 2007-2 398 B 8.4% Grayson CLO 397 Super Senior 29.3% SLM Private Credit Student Loan Trust 2007-6 392 AAA 3.8% Synthetic Investment Grade Pooled Corporate CDO 391 Super Senior 12.0% Synthetic High Yield Pooled Corporate CDO 383 AAA 29.4% Synthetic High Yield Pooled Corporate CDO 380 Super Senior 35.5% Synthetic Investment Grade Pooled Corporate CDO 380 Super Senior 29.2% MASTR 2007-3 (NEGAM) 373 CCC 0.0% Private Residential Mortgage Transaction 370 BB 18.5% Option One 2007-FXD2 370 CCC 15.1% ARES Enhanced Credit Opportunities Fund 369 AAA 29.7% Deutsche Alt-A Securities Mortgage Loan 2007-3 366 B 3.7% Symphony Credit Opportunities Fund 364 AAA 31.6% Private Residential Mortgage Transaction 364 CCC 17.0% Countrywide HELOC 2006-F (includes $110.2 million purchased, 28% owned)¹ 361 CCC 0.0% Synthetic Investment Grade Pooled Corporate CDO 361 Super Senior 14.2% Stone Tower CLO V 359 Super Senior 28.6% Southfork CLO Ltd. Series 2005-A1 359 AAA 30.4% SLM Private Credit Student Loan Trust 2006-C 356 BBB 11.2% Private Other Structured Finance Transaction 347 A- N/A Total top 50 U.S. structured finance exposures 26,879 $ 1. Note: Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors. Represents amounts of gross par which were purchased or obtained as part of loss mitigation strategies and recorded as part of the investment portfolio. 50 Largest U.S. Structured Finance Exposures Assured Guaranty Ltd. Largest Exposures by Sector (2 of 4) As of December 31, 2011 (dollars in millions) Page 31 |
| Net Par Internal Credit name: Outstanding Rating Quebec Province 2,224 $ A+ Sydney Airport Finance Company 1,553 BBB Thames Water Utility Finance PLC 1,546 AFortress Credit Investments I 1,009 AAA Channel Link Enterprises Finance PLC 908 BBB Southern Gas Networks PLC 821 BBB International AAA Sovereign Debt Synthetic CDO 821 AAA Campania Region - Healthcare receivable 740 AJapan Expressway Holding and Debt Repayment Agency 721 AA Societe des Autoroutes du Nord et de l'est de France S.A. 720 BBB+ Capital Hospitals (Issuer) PLC 717 BBBEssential Public Infrastructure Capital II 713 Super Senior United Utilities Water PLC 698 BBB+ Reliance Rail Finance Pty. Limited 683 BB Southern Water Services Limited 668 ASynthetic Investment Grade Pooled Corporate CDO 665 Super Senior International Infrastructure Pool (WISE 2006-1 Plc Senior Swap - B) 664 AInternational Infrastructure Pool (WISE 2006-1 Plc Senior Swap - A) 664 AInternational Infrastructure Pool (WISE 2006-1 Plc Senior Swap - C) 664 AETSA Utility Finance Pty. Limited 576 ADBNGP Finance Co Pty Ltd Note Issue 1 & 2 564 BBBEnvestra Limited 556 BBBCentral Nottinghamshire Hospitals PLC 540 BBB Synthetic Investment Grade Pooled Corporate CDO 532 Super Senior Powercor Australia LLC 530 ATotal top 25 non-U.S. exposures 20,497 $ Note: Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors. 25 Largest Non-U.S. Exposures Assured Guaranty Ltd. Largest Exposures by Sector (3 of 4) As of December 31, 2011 (in millions) Page 32 |
| Net Par Servicer: Outstanding Bank of America, N.A.1 7,028 $ Wells Fargo Bank, N.A. 2,356 American Home Mortgage Servicing, Inc. 2,339 Ally Financial, Inc.2 1,877 Specialized Loan Servicing LLC 1,616 Ocwen Loan Servicing, LLC 1,362 JPMorgan Chase Bank 1,316 OneWest Bank Group LLC 639 Select Portfolio Servicing, Inc. 460 First Horizon National Corporation 346 Total top 10 U.S. residential mortgage servicers exposures 19,339 $ Net Par Internal Credit name: Outstanding Rating State CHRISTUS Health 467 $ A+ TX MultiCare Health System 446 A+ WA Methodist Healthcare, TN 375 A TN Virtua Health - New Jersey 355 A NJ Meridian Health System 355 A- NJ Catholic Healthcare West Healthcare Revenue Bonds 332 A CA Iowa Health System 327 A+ IA Bon Secours Health System Obligated Group 310 A- MD Asante Health System 291 A OR Lehigh Valley Health Network 287 A+ PA Total top 10 U.S. healthcare exposures 3,545 $ 1. Includes Countrywide Home Loans Servicing LP. 2. Includes GMAC Mortgage LLC, Residential Funding Corp and Homecomings Financial Network, Inc. Note: Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors. 10 Largest U.S. Healthcare Exposures 10 Largest U.S. Residential Mortgage Servicers Exposures Assured Guaranty Ltd. Largest Exposures by Sector (4 of 4) As of December 31, 2011 (in millions) Page 33 |
| Rollforward of Net Expected Loss and LAE to be Paid for the Three Months Ended December 31, 2011 Net Expected Loss to be Paid as of Economic Loss Development (Paid) Recovered Losses Net Expected Loss to be Paid as of Credit Derivatives September 30, 2011 During 4Q-11 1 During 4Q-11 December 31, 2011 First lien: Prime first lien 2.4 $ (0.6) $ - $ 1.8 $ Alt-A first lien 311.8 4.6 (21.9) 294.5 Option ARMs 313.6 42.0 (145.2) 210.4 Subprime first lien 317.8 (70.0) (6.5) 241.3 Total first lien 945.6 (24.0) (173.6) 748.0 Second lien: Closed end seconds (54.4) (13.6) (18.1) (86.1) HELOC (70.0) 54.1 (15.2) (31.1) Total second lien (124.4) 40.5 (33.3) (117.2) Total U.S. RMBS 821.2 16.5 (206.9) 630.8 TruPS 98.3 (32.9) (1.2) 64.2 Other structured finance 356.9 (5.1) (9.7) 342.1 Public finance 42.7 50.0 (25.8) 66.9 1,319.1 $ 28.5 $ (243.6) $ 1,104.0 $ Rollforward of Net Expected Loss and LAE to be Paid for the Year Ended December 31, 2011 Net Expected Loss to be Paid as of Economic Loss Development (Paid) Recovered Losses Net Expected Loss to be Paid as of Credit Derivatives January 1, 2011 During 2011 1 During 2011 December 31, 2011 First lien: Prime first lien 1.4 $ 0.4 $ - $ 1.8 $ Alt-A first lien 399.8 (10.6) (94.7) 294.5 Option ARMs 628.8 7.6 (426.0) 210.4 Subprime first lien 310.6 (47.1) (22.2) 241.3 Total first lien 1,340.6 (49.7) (542.9) 748.0 Second lien: Closed end seconds 87.5 (100.6) (73.0) (86.1) HELOC (805.7) 151.0 623.6 (31.1) Total second lien (718.2) 50.4 550.6 (117.2) Total U.S. RMBS 622.4 0.7 7.7 630.8 TruPS 90.3 (21.0) (5.1) 64.2 Other structured finance 261.2 100.8 (19.9) 342.1 Public finance 88.9 43.3 (65.3) 66.9 1,062.8 $ 123.8 $ (82.6) $ 1,104.0 $ 1 Includes the effect of changes in the Company's estimate of future recovery on representations and warranties ("R&W"). Financial Guaranty Insurance Contracts and U.S. RMBS Total Total Assured Guaranty Ltd. Rollforward of Net Expected Loss and Loss Adjustment Expenses ("LAE") to be Paid (in millions) Financial Guaranty Insurance Contracts and U.S. RMBS Page 34 |
| Financial Guaranty Insurance and Credit Derivatives U.S. RMBS R&W Benefit Development for the Three Months Ended December 31, 2011 R&W R&W Future Net R&W Economic Recovered Future Net R&W Benefit at Loss Development During Benefit at September 30, 2011 During 4Q-11 4Q-11 December 31, 2011 Financial guaranty insurance: Prime first lien 3.0 $ - $ - $ 3.0 $ Alt-A first lien 192.7 11.1 (1.1) 202.7 Option ARMs 772.7 (34.8) (24.0) 713.9 Subprime first lien 1 107.7 (6.2) - 101.5 Closed end seconds 206.8 17.0 - 223.8 HELOC 268.1 (27.7) (50.5) 189.9 Total 1,551.0 $ (40.6) $ (75.6) $ 1,434.8 $ Credit derivatives 213.0 $ 2.0 $ - $ 215.0 $ Financial Guaranty Insurance and Credit Derivatives U.S. RMBS R&W Benefit Development for the Year Ended December 31, 2011 R&W R&W Future Net R&W Economic Recovered Future Net R&W Benefit at Loss Development During Benefit at December 31, 2010 During 2011 2011 December 31, 2011 Financial guaranty insurance: Prime first lien 1.1 $ 1.9 $ - $ 3.0 $ Alt-A first lien 81.0 122.8 (1.1) 202.7 Option ARMs 309.3 496.1 (91.5) 713.9 Subprime first lien 1 26.8 74.7 - 101.5 Closed end seconds 178.2 54.6 (9.0) 223.8 HELOC 1,004.1 139.3 (953.5) 189.9 Total 1,600.5 $ 889.4 $ (1,055.1) $ 1,434.8 $ Credit derivatives 70.2 $ 149.1 $ (4.3) $ 215.0 $ Financial Guaranty Insurance and Credit Derivatives U.S. RMBS Policies With R&W Benefit December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010 Financial guaranty insurance: Prime first lien 1 1 52.3 $ 57.1 $ Alt-A first lien 22 17 1,781.1 1,882.8 Option ARMs 12 10 1,621.4 1,909.8 Subprime first lien 1 5 1 1,054.0 228.7 Closed end seconds 4 4 361.4 444.9 HELOC 15 13 2,978.5 2,969.8 Total 59 46 7,848.7 $ 7,493.1 $ Credit derivatives 8 6 3,387.4 $ 3,616.5 $ 1. Includes net interest margin. Assured Guaranty Ltd. Financial Guaranty Insurance and Credit Derivatives U.S. RMBS R&W Benefit Development (dollars in millions) Number of Risks as of Debt Service as of Page 35 |
| Total Net Par Outstanding for BIG Transactions 1 4Q-11 Losses Incurred 2011 Losses Incurred Net Reserve and Credit Impairment Net Salvage and Subrogation Assets Net Expected Loss to be Expensed U.S. RMBS First lien: Prime first lien 576.2 $ (0.6) $ 0.1 $ 1.2 $ - $ 0.5 $ Alt-A first lien 4,654.7 5.3 39.2 204.3 55.4 142.9 Option ARMs 2,203.4 69.0 203.7 198.3 140.3 196.6 Subprime first lien 2 2,926.9 (60.5) (37.7) 146.3 0.3 83.6 Total first lien 10,361.2 13.2 205.3 550.1 196.0 423.6 Second lien: Closed end seconds 1,015.2 (6.2) (23.3) 4.7 136.2 98.4 HELOC 3,278.8 66.2 182.7 61.1 177.2 165.2 Total second lien 4,294.0 60.0 159.4 65.8 313.4 263.6 Total U.S. RMBS 14,655.2 73.2 364.7 615.9 509.4 687.2 TruPS 3,452.5 (31.9) (11.1) 50.4 - 2.1 Other structured finance 3,272.0 (5.7) 110.4 321.7 5.9 36.9 Other public finance 6,834.7 46.4 29.3 100.3 69.9 33.9 28,214.4 82.0 493.3 1,088.3 585.2 760.1 Effect of consolidating FG VIEs - 12.8 (92.7) (61.6) (258.1) (222.7) Total 28,214.4 94.8 400.6 1,026.7 327.1 537.4 Other - - - 1.9 - - Total 28,214.4 $ 94.8 $ 400.6 $ 1,028.6 $ 327.1 $ 537.4 $ Insurance Reserves Credit Impairment on Credit Derivative Contracts 3 Reserve and Credit Impairment Salvage and Subrogation Recoverable Net Gross 679.0 $ 434.0 $ 1,113.0 $ 367.7 $ 745.3 $ Ceded 69.3 15.1 84.4 40.6 4 43.8 Net 609.7 $ 418.9 $ 1,028.6 $ 327.1 $ 701.5 $ 1. 2. Includes net interest margin. 3. Credit derivative assets and liabilities recorded on the balance sheet considers estimates of expected losses. 4. Recorded in "reinsurance balances payable, net" on the consolidated balance sheets. As of December 31, 2011, securities purchased for loss mitigation purposes represented $1,293.0 million of gross par outstanding. In addition, under the terms of certain credit derivative contracts, the Company has obtained the underlying collateral of transactions and recorded it in invested assets in the consolidated balance sheets. Such amounts totaled $222.4 million in gross par outstanding. Subtotal Financial Guaranty Insurance Contracts and Credit Derivatives Assured Guaranty Ltd. Losses Incurred As of December 31, 2011 (in millions) Page 36 |
| 2011 2010 2009 2008 2007 GAAP Summary Income Statement Data Net earned premiums 920.1 $ 1,186.7 $ 930.4 $ 261.4 $ 159.3 $ Net investment income 391.0 354.7 259.2 162.6 128.1 Realized gains and other settlements on credit derivatives 6.0 153.5 163.6 117.6 74.0 Total expenses 784.9 764.2 800.2 440.9 161.5 Income (loss) before income taxes 1,034.4 549.3 116.9 112.3 (463.0) Net income (loss) attributable to Assured Guaranty Ltd. 775.6 493.7 86.0 68.9 (303.3) Net income (loss) attributable to Assured Guaranty Ltd. per diluted share 4.18 2.61 0.66 0.77 (4.38) GAAP Summary Balance Sheet Data Total investments and cash 11,313.3 10,849.3 11,012.5 3,643.6 3,147.9 Total assets 18,091.5 19,841.9 16,779.4 4,555.7 3,762.9 Unearned premium reserve 5,962.8 6,972.9 8,381.0 1,233.7 887.2 Loss and LAE reserve 679.0 574.4 299.7 196.8 125.6 Long-term debt 1,038.3 1,052.9 1,066.5 347.2 347.1 Shareholders’ equity attributable to Assured Guaranty Ltd. 4,718.4 3,733.5 3,509.3 1,926.2 1,666.6 Book value attributable to Assured per share 25.89 20.32 19.06 21.18 20.85 Non-GAAP Financial Measures Operating income 604.4 $ 664.1 $ 282.2 $ 74.5 $ 178.0 $ Operating income per diluted share 3.26 3.51 2.18 0.84 2.57 Adjusted book value 8,987.6 8,988.9 8,886.9 3,817.8 3,349.8 PVP 242.7 362.7 640.2 823.0 874.6 Other Financial Information (GAAP Basis) Net debt service outstanding (end of period) 845,665 $ 927,143 $ 958,265 $ 348,816 $ 302,413 $ Gross debt service outstanding (end of period) 936,132 1,029,982 1,095,037 354,858 307,657 Net par outstanding (end of period) 558,048 617,131 640,422 222,722 200,279 Gross par outstanding (end of period) 614,342 681,248 726,929 227,164 204,809 Other Financial Information (Statutory Basis) Net debt service outstanding (end of period) 829,545 $ 905,131 $ 942,193 $ 348,816 $ 302,413 $ Gross debt service outstanding (end of period) 917,719 1,004,096 1,076,039 354,858 307,657 Net par outstanding (end of period) 543,100 598,843 626,274 222,722 200,279 Gross par outstanding (end of period) 597,290 659,765 709,786 227,164 204,809 Consolidated qualified statutory capital 5,688 4,915 4,841 2,310 2,079 Consolidated policyholders' surplus and reserves 10,626 10,247 10,409 3,652 3,040 Ratios: Par insured to statutory capital 95:1 122:1 129:1 96:1 96:1 Capital ratio 1 146:1 184:1 195:1 151:1 145:1 Financial resources ratio 2 65:1 72:1 72:1 70:1 68:1 Gross debt service written: Public finance - U.S. 26,630 $ 48,990 $ 87,940 $ 68,265 $ 66,190 $ Public finance - non-U.S. 208 51 894 3,350 11,849 Structured finance - U.S. 1,731 2,962 2,501 13,972 42,414 Structured finance - non-U.S. - - - 5,490 13,122 Total gross debt service written 28,569 $ 52,003 $ 91,335 $ 91,077 $ 133,575 $ Net debt service written 28,569 $ 52,003 $ 91,335 $ 89,871 $ 129,872 $ Net par written 16,892 30,759 49,759 55,418 84,686 Gross par written 16,892 30,759 49,921 56,140 88,117 1. The capital ratio is calculated by dividing net debt service outstanding by qualified statutory capital. Note: Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement. Assured Guaranty Ltd. Summary Financial and Statistical Data (dollars in millions, except per share amounts) 2. The financial resources ratio is calculated by dividing net debt service outstanding by total claims paying resources. Year Ended December 31, Page 37 |
| Glossary Net Par Outstanding and Internal Ratings Internal Rating for the Company’s ratings scale is similar to that used by the nationally recognized statistical rating organizations; however, the ratings in the tables may not be the same as ratings assigned by any such rating agency. The super senior category, which is not generally used by rating agencies, is used by the Company in instances where Assured Guaranty's AAA-rated exposure on its internal rating scale has additional credit enhancement due to either (a) the existence of another security rated AAA that is subordinated to Assured Guaranty's exposure or (b) Assured Guaranty's exposure benefiting from a different form of credit enhancement that would pay any claims first in the event that any of the exposures incurs a loss, and such credit enhancement, in management's opinion, causes Assured Guaranty's attachment point to be materially above the AAA attachment point. Net par outstanding is insured par exposure net of reinsurance cessions. Performance Indicators The performance information described below is obtained from sources such as Intex, Bloomberg and/or provided by the trustee and may be subject to restatement or correction: 60+ Day Delinquencies are defined as loans that are greater than 60 days delinquent and all loans that are in foreclosure, bankruptcy or real estate owned divided by current collateral balance. Average Credit Enhancement is intended to provide a measure of the amount of equity and/or subordinated tranches that are junior in the capital structure to Assured Guaranty’s exposure, expressed as a percentage of the total transaction size, and reflects any reduction of that credit support resulting from defaults or other factors. For transactions where excess spread may be available to absorb certain losses, the amounts shown do not include any benefit from excess spread. The calculation methodologies differ for the various asset classes to reflect differences in transaction structures in order to provide a measure that management believes is comparable across asset classes. Cumulative Losses are defined as net charge-offs on the underlying loan collateral divided by the original collateral balance. Pool Factor is the percentage of the current collateral balance divided by the original collateral balance of the transactions at inception. Subordination represents the sum of subordinate tranches and overcollateralization, expressed as a percentage of total transaction size, and does not include any benefit from excess spread collections that may be used to absorb losses. Many of the closed-end second lien RMBS transactions insured by the Company have unique structures whereby the collateral may be written down for losses without a corresponding write-down of the obligations insured by the Company. Many of these transactions are currently undercollateralized, with the principal amount of collateral being less than the principal amount of the obligation insured by the Company. The Company is not required to pay principal shortfalls until legal maturity (rather than making timely principal payments), and takes the undercollateralization into account when estimating expected losses for these transactions. Sectors Below are brief descriptions of selected types of public and structured finance obligations that the Company insures and reinsures. For a more complete description, please refer to Assured Guaranty Ltd.’s Annual Report on Form 10-K for December 31, 2011. Public Finance: General Obligation Bonds are full faith and credit bonds that are issued by states, their political subdivisions and other municipal issuers, and are supported by the general obligation of the issuer to pay from available funds and by a pledge of the issuer to levy ad valorem taxes in an amount sufficient to provide for the full payment of the bonds. Tax-Backed Bonds are obligations that are supported by the issuer from specific and discrete sources of taxation. They include tax-backed revenue bonds, general fund obligations and lease revenue bonds. Tax-backed obligations may be secured by a lien on specific pledged tax revenues, such as a gasoline or excise tax, or incrementally from growth in property tax revenue associated with growth in property values. These obligations also include obligations secured by special assessments levied against property owners and often benefit from issuer covenants to enforce collections of such assessments and to foreclose on delinquent properties. Lease revenue bonds typically are general fund obligations of a municipality or other governmental authority that are subject to annual appropriation or abatement; projects financed and subject to such lease payments ordinarily include real estate or equipment serving an essential public purpose. Bonds in this category also include moral obligations of municipalities or governmental authorities. Municipal Utility Bonds are obligations of all forms of municipal utilities, including electric, water and sewer utilities and resource recovery revenue bonds. These utilities may be organized in various forms, including municipal enterprise systems, authorities or joint action agencies. Transportation Bonds include a wide variety of revenue-supported bonds, such as bonds for airports, ports, tunnels, municipal parking facilities, toll roads and toll bridges. Healthcare Bonds are obligations of healthcare facilities, including community-based hospitals and systems, as well as of health maintenance organizations and long-term care facilities. Higher Education Bonds are obligations secured by revenue collected by either public or private secondary schools, colleges and universities. Such revenue can encompass all of an institution’s revenue, including tuition and fees, or in other cases, can be specifically restricted to certain auxiliary sources of revenue. Page 38 |
| Glossary (continued) Sectors (continued) Infrastructure Bonds include obligations issued by a variety of entities engaged in the financing of infrastructure projects, such as roads, airports, ports, social infrastructure and other physical assets delivering essential services supported by long-term concession arrangements with a public sector entity. Investor-Owned Utility Bonds are obligations primarily backed by investor-owned utilities, first mortgage bond obligations of for-profit electric or water utilities providing retail, industrial and commercial service, and also include sale-leaseback obligation bonds supported by such entities. Housing Revenue Bonds are obligations relating to both single and multi-family housing, issued by states and localities, supported by cash flow and, in some cases, insurance from entities such as the Federal Housing Administration. Regulated Utilities Obligations are issued by government-regulated providers of essential services and commodities, including electric, water and gas utilities. The majority of the Company’s international regulated utility business is conducted in the United Kingdom. Pooled Infrastructure Obligations are synthetic asset-backed obligations that take the form of CDS obligations or credit-linked notes that reference either infrastructure finance obligations or a pool of such obligations, with a defined deductible to cover credit risks associated with the referenced obligations. Other Public Finance primarily includes government insured student loans, government-sponsored project finance and structured municipal transactions, which includes excess of loss reinsurance on portfolios of municipal credits. Structured Finance: Pooled Corporate Obligations are securities primarily backed by various types of corporate debt obligations, such as secured or unsecured bonds, bank loans or loan participations and trust preferred securities. These securities are often issued in “tranches,” with subordinated tranches providing credit support to the more senior tranches. The Company’s financial guaranty exposures generally are to the more senior tranches of these issues. Residential Mortgage-Backed Securities (“RMBS”) and Home Equity Securities are obligations backed by closed-end first mortgage loans and closed- and open-end second mortgage loans or home equity loans on one-to-four family residential properties, including condominiums and cooperative apartments. First mortgage loan products in these transactions include fixed rate, adjustable rate (“ARM”) and option adjustable-rate (“Option ARM”) mortgages. The credit quality of borrowers covers a broad range, including “prime”, “subprime” and “Alt-A”. A prime borrower is generally defined as one with strong risk characteristics as measured by factors such as payment history, credit score, and debt-to-income ratio. A subprime borrower is a borrower with higher risk characteristics, usually as determined by credit score and/or credit history. An Alt-A borrower is generally defined as a prime quality borrower that lacks certain ancillary characteristics, such as fully documented income. Additional insured obligations within RMBS include Home Equity Lines of Credit (“HELOCs”), which refers to a type of residential mortgage-backed transaction backed by second-lien loan collateral consisting of home equity lines of credit. U.S. Prime First Lien is a type of residential mortgage-backed securities transaction backed primarily by prime first-lien loan collateral plus an insignificant amount of other miscellaneous RMBS transactions. CBOs/CLOs (collateralized bond obligations and collateralized loan obligations) are asset-backed securities largely backed by non-investment grade/high yield collateral. Commercial Mortgage-Backed Securities (“CMBS”) are obligations backed by pools of commercial mortgages. The collateral supporting CMBS include office, multifamily, retail, hotel, industrial and other specialized or mixed-use properties. Financial Products is the guaranteed investment contracts ("GICs") portion of the former Financial Products Business of AGMH. AGM has issued financial guaranty insurance policies on the GICs and in respect of the GICs business that cannot be revoked or cancelled. Assured Guaranty is indemnified against exposure to the former financial products business by Dexia SA and certain of its affiliates. In addition, the French and Belgian governments have issued guaranties in respect of the GICs portion of the financial products business. The financial products business is currently being run off. Consumer Receivables Securities are obligations backed by non-mortgage consumer receivables, such as automobile loans and leases, credit card receivables and other consumer receivables. Commercial Receivables Securities are obligations backed by equipment loans or leases, fleet auto financings, business loans and trade receivables. Credit support is derived from the cash flows generated by the underlying obligations, as well as property or equipment values as applicable. Insurance Securitization Securities are obligations secured by the future earnings from pools of various types of insurance/reinsurance policies and income produced by invested assets. Structured Credit Securities include program-wide credit enhancement for commercial paper conduits in the U.S., and securities issued in whole business securitizations and intellectual property securitizations. Program-wide credit enhancement generally involves insuring against the default of ABS in a bank-sponsored commercial paper conduit. Securities issued in whole business and intellectual property securitizations are backed by revenue-producing assets sold to a limited-purpose company by an operating company, including franchise agreements, lease agreements, intellectual property and real property. Other Structured Finance Securities are obligations backed by assets not generally described in any of the other described categories. One such type of asset is a tax benefit to be realized by an investor in one of the Federal or state programs that permit such investor to receive a credit against taxes (such as Federal corporate income tax or state insurance premium tax) for making qualified investments in specified enterprises, typically located in designated low-income areas. Page 39 |
| Non-GAAP Financial Measures The Company references financial measures that are not in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Assured Guaranty’s management and board of directors utilize non-GAAP measures in evaluating the Company’s financial performance and as a basis for determining senior management incentive compensation. By providing these non-GAAP financial measures, investors, analysts and financial news reporters have access to the same information that management reviews internally. In addition, Assured Guaranty’s presentation of non-GAAP financial measures is consistent with how analysts calculate their estimates of Assured Guaranty’s financial results in their research reports on Assured Guaranty and with how investors, analysts and the financial news media evaluate Assured Guaranty’s financial results. The following paragraphs define each non-GAAP financial measure and describe why it is useful. A reconciliation of the non-GAAP financial measure and the most directly comparable GAAP financial measure, if available, is presented within this financial supplement. Non-GAAP financial measures should not be viewed as substitutes for their most directly comparable GAAP measures. Operating Income: Management believes that operating income is a useful measure because it clarifies the understanding of the underwriting results of the Company’s financial guaranty insurance business, and also includes financing costs and net investment income, and enables investors and analysts to evaluate the Company’s financial results as compared with the consensus analyst estimates distributed publicly by financial databases. Operating income is defined as net income (loss) attributable to Assured Guaranty Ltd., as reported under GAAP, adjusted for the following: 1) Elimination of the after-tax realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading. The timing of realized gains and losses, which depends largely on market credit cycles, can vary considerably across periods. The timing of sales is largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile. Trends in the underlying profitability of the Company’s business can be more clearly identified without the fluctuating effects of these transactions. 2) Elimination of the after-tax non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated economic credit losses and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss. Additionally, such adjustments present all financial guaranty contracts on a more consistent basis of accounting, whether or not they are subject to derivative accounting rules. 3) Elimination of the after-tax fair value gains (losses) on the Company’s committed capital securities. Such amounts are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss. 4) Elimination of the after-tax foreign exchange gains (losses) on revaluation of net premium receivables. Long-dated receivables constitute a significant portion of the net premium receivable balance and represent the present value of future contractual or expected collections. Therefore, the current period’s foreign exchange revaluation gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that the Company will ultimately recognize. 5) Elimination of the effects of consolidating FG VIEs in order to present all financial guaranty contracts on a more consistent basis of accounting, whether or not GAAP requires consolidation. GAAP requires the Company to consolidate certain VIEs that have issued debt obligations insured by the Company even though the Company does not own such VIEs. Operating Shareholders’ Equity: Management believes that operating shareholders’ equity is a useful measure because it presents the equity of Assured Guaranty Ltd. with all financial guaranty contracts accounted for on a more consistent basis and excludes fair value adjustments that are not expected to result in economic loss. Many investors, analysts and financial news reporters use operating shareholders’ equity as the principal financial measure for valuing Assured Guaranty Ltd.’s current share price or projected share price and also as the basis of their decision to recommend, buy or sell Assured Guaranty Ltd.’s common shares. Many of the Company’s fixed income investors also use operating shareholders’ equity to evaluate the Company’s capital adequacy. Operating shareholders’ equity is the basis of the calculation of adjusted book value (see below). Operating shareholders’ equity is defined as shareholders’ equity attributable to Assured Guaranty Ltd. , as reported under GAAP, adjusted for the following: 1) Elimination of the effects of consolidating FG VIEs in order to present all financial guaranty contracts on a more consistent basis of accounting, whether or not GAAP requires consolidation. GAAP requires the Company to consolidate certain VIEs that have issued debt obligations insured by the Company even though the Company does not own such VIEs. 2) Elimination of the after-tax non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated economic credit losses and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss. 3) Elimination of the after-tax fair value gains (losses) on the Company’s committed capital securities. Such amounts are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss. 4) Elimination of the after-tax unrealized gains (losses) on the Company’s investments, that are recorded as a component of accumulated other comprehensive income ("AOCI") (excluding foreign exchange revaluation). The AOCI component of the fair value adjustment on the investment portfolio is not deemed economic because the Company generally holds these investments to maturity and therefore should not recognize an economic gain or loss. Operating return on equity (“Operating ROE”): Operating ROE represents operating income for a specified period divided by the average of operating shareholders’ equity at the beginning and the end of that period. Management believes that operating ROE is a useful measure to evaluate the Company’s return on invested capital. Many investors, analysts and members of the financial news media use operating ROE to evaluate Assured Guaranty Ltd.’s share price and as the basis of their decision to recommend, buy or sell the Assured Guaranty Ltd. common shares. Quarterly and year-to-date operating ROE are calculated on an annualized basis. Page 40 |
| Non-GAAP Financial Measures (continued) Adjusted Book Value: Management believes that adjusted book value is a useful measure because it enables an evaluation of the net present value of the Company’s in-force premiums and revenues in addition to operating shareholders’ equity. The premiums and revenues included in adjusted book value will be earned in future periods, but actual earnings may differ materially from the estimated amounts used in determining current adjusted book value due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults and other factors. Many investors, analysts and financial news reporters use adjusted book value to evaluate Assured Guaranty Ltd.’s share price and as the basis of their decision to recommend, buy or sell the Assured Guaranty Ltd. common shares. Adjusted book value is operating shareholders’ equity, as defined above, further adjusted for the following: 1) Elimination of after-tax deferred acquisition costs. These amounts represent net deferred expenses that have already been paid or accrued and will be expensed in future accounting periods. 2) Addition of the after-tax net present value of estimated net future credit derivative revenue. See below. 3) Addition of the after-tax value of the unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed, net of reinsurance. This amount represents the expected future net earned premiums, net of expected losses to be expensed. Net expected losses to be expensed are not reflected in GAAP equity. Net present value of estimated net future credit derivative revenue: Management believes that this amount is a useful measure because it enables an evaluation of the value of future estimated credit derivative revenue. There is no corresponding GAAP financial measure. This amount represents the present value of estimated future revenue from the Company’s credit derivative in-force book of business, net of reinsurance, ceding commissions and premium taxes for contracts without expected economic losses, and is discounted at 6% (which represents the Company’s tax-equivalent pre-tax investment yield on its investment portfolio). Estimated net future credit derivative revenue may change from period to period due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults or other factors that affect par outstanding or the ultimate maturity of an obligation. PVP or present value of new business production: Management believes that PVP is a useful measure because it enables the evaluation of the value of new business production for Assured Guaranty by taking into account the value of estimated future installment premiums on all new contracts underwritten in a reporting period as well as premium supplements and additional installment premium on existing contracts as to which the issuer has the right to call the insured obligation but has not exercised such right, whether in insurance or credit derivative contract form, which GAAP gross premiums written and the net credit derivative premiums received and receivable portion of net realized gains and other settlement on credit derivatives (“Credit Derivative Revenues”) do not adequately measure. PVP in respect of insurance and credit derivative contracts written in a specified period is defined as gross upfront and installment premiums received and the present value of gross estimated future installment premiums, in each case, discounted at 6% (the Company’s tax-equivalent pre-tax investment yield on its investment portfolio). For purposes of the PVP calculation, management discounts estimated future installment premiums on insurance contracts at 6%, while under GAAP, these amounts are discounted at a risk free rate. Additionally, under GAAP, management records future installment premiums on financial guaranty insurance contracts covering non-homogeneous pools of assets based on the contractual term of the transaction, whereas for PVP purposes, management records an estimate of the future installment premiums the Company expects to receive, which may be based upon a shorter period of time than the contractual term of the transaction. Actual future net earned or written premiums and Credit Derivative Revenues may differ from PVP due to factors including, but not limited to, changes in foreign exchange rates, prepayment speeds, terminations, credit defaults, or other factors that affect par outstanding or the ultimate maturity of an obligation. Page 41 |
| Contacts: Equity and Fixed Income Investors: Robert Tucker Managing Director, Investor Relations (212) 339-0861 rtucker@assuredguaranty.com Ross Aron Vice President, Investor Relations (212) 261-5509 raron@assuredguaranty.com Assured Guaranty Ltd. Michael Walker 30 Woodbourne Avenue Director, Fixed Income Investor Relations Hamilton HM 08 (212) 261-5575 Bermuda mwalker@assuredguaranty.com (441) 279-5705 www.assuredguaranty.com Media: Ashweeta Durani Vice President, Corporate Communications (212) 408-6042 adurani@assuredguaranty.com |
