Assured Guaranty Municipal 8K Results of Operations and Financial Condition | SEC 16 Feb 07

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Exhibit 99.2

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Quarterly Operating Supplement
December 2006

TABLE OF CONTENTS

		Page
Financial Security Assurance Holdings Ltd.
Earnings Release		4
Consolidated Statements of Operations and Comprehensive Income		14
Consolidated Balance Sheets		15
Annual Financial Data		16
Quarterly Financial Data		17
Operating Expense Analysis		18
Gross Par Value and PV Originations		19
Gross Premiums Written		20
Financial Security Assurance Inc.
Effect of Refundings and Accelerations		22
Fixed Income Investment Portfolio		23
Selected Financial Statistics		24
U.S Municipal New-Issue Market Data		25
Insured Portfolio Profile		26
Geographic Distribution of Public Finance Insured Portfolio		27
50 Largest Public Finance Exposures		28
25 Largest Asset-Backed Exposures		29
Debt Service and Premiums		30
Amortization of Net Debt Service and Net Premiums		31

Financial Security Assurance Holdings Ltd. (the Company), headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial products to clients in both the public and private sectors around the world. The principal operating subsidiary, Financial Security Assurance Inc. (FSA), a leading guarantor of public finance and asset-backed obligations, has been assigned Triple-A ratings, the highest ratings available, from Fitch Ratings, Moody's Investors Service, Inc., Standard & Poor's Ratings Services and Rating and Investment Information, Inc. Through other subsidiaries, the Company provides FSA-insured financial products, such as guaranteed investment contracts, to obtain funds at Triple-A cost and then invests those funds in high-quality, liquid securities. The Company is a member of the Dexia group.

Financial Security Assurance Holdings Ltd.

FSA HOLDINGS 2006 RESULTS

NET INCOME
$93 Million in Q4 06 (+55% vs. Q4 05)
$424 Million in 12M 06 (+30% vs. 12M 05)

ORIGINATIONS (PRESENT VALUE)
$292 Million in Q4 06 (Unchanged vs. Q4 05)
$910 Million in 12M 06 (-10% vs. 12M 05)

New York, New York, February 15, 2007—Financial Security Assurance Holdings Ltd. (the Company), a member of the Dexia group and the holding company for bond insurer Financial Security Assurance Inc. (FSA), announced 2006 net income of $424.2 million, 30.1% higher than for 2005. Non-GAAP operating earnings, which exclude fair-value adjustments for both insured investment-grade credit default swaps (CDS) and economic interest rate hedges, were $363.0 million, 8.7% higher than for the prior year.

Fourth-quarter net income of $92.8 million was 55.0% higher than for the fourth quarter of last year. Fourth-quarter operating earnings were $86.1 million, a 3.8% increase.

NET INCOME AND RECONCILIATION TO NON-GAAP OPERATING EARNINGS
(in millions)

	Three Months Ended December 31,					Year Ended December 31,
	2006		2005			2006		2005
Net Income	$	92.8	$	59.8		$	424.2	$	326.1
Less fair-value adjustments for economic interest rate hedges (1)		1.9		(12.9	)		40.5		(15.0	)
Less fair-value adjustments for insured CDS (1)		4.8		(10.2	)		20.7		7.2

Operating Earnings (1)	$	86.1	$	82.9		$	363.0	$	333.9

(1): For a discussion of operating earnings and the adjustments made to net income in calculating operating earnings, see below, "Analysis of Financial Results — Operating Earnings." Also see "Non-GAAP Measures" below for a discussion of measures not promulgated in accordance with accounting principles generally accepted in the United States of America (GAAP).

Shareholders' equity (book value) was $2.7 billion and non-GAAP adjusted book value (ABV) was $3.9 billion at December 31, 2006. Over the past 12 months, after taking dividends into account, ABV grew 14.0%. The Company's management considers ABV to be an operating measure of the Company's intrinsic value and discloses ABV because it provides information important to management that would not be available to investors through GAAP disclosure alone. As of December 31, 2006, the Company began to calculate ABV on the basis of International Financial Reporting Standards (IFRS) results that the Company reports to its principal shareholder, Dexia, in order to better align the interests of employees with the interests of Dexia, whose accounts are maintained under IFRS. See "Non-GAAP Measures" below for a more detailed discussion of ABV and a reconciliation to U.S. GAAP shareholders' equity.

Present value (PV) originations, a non-GAAP measure, totaled $910.2 million for 2006, 10.2% lower than for 2005. PV originations were flat for the fourth quarter at $292.4 million.

Robert P. Cochran, chairman and chief executive officer of the Company and FSA, said: "Bolstered by a strong performance in our international public finance business, FSA achieved good results despite the challenging business environment that persisted throughout 2006.

"In the U.S. municipal business, where narrowing credit spreads and a significant reduction in refundings reduced insurance penetration, we continued to focus primarily on basic municipal sectors that met our credit and pricing guidelines. In the global asset-backed market, our business was restrained due to a combination of tight spreads and aggressive structures until the fourth quarter, when we began to see a greater number of opportunities. Our financial products business continued on a growth trend.

"Looking ahead, we believe that we will maintain our strong position in the U.S. public finance market, continue to expand our role in international public infrastructure markets and further diversify our business in the global asset-backed markets," he added.

BUSINESS PRODUCTION

TOTAL ORIGINATIONS

	Three Months Ended December 31,				Year Ended December 31,
	2006		2005		2006		2005
Gross par insured (in billions)	$	33.7	$	23.5	$	93.8	$	103.4
Gross PV originations (in millions)(1)		292.4		293.1		910.2		1,014.0

(1): Estimated by the Company for business originated in the period as the sum of (a) the present value of premiums originated (PV premiums originated), defined as estimated future installment premiums discounted to their present value, as well as upfront premiums, plus (b) the present value of net interest margin originated (PV NIM originated) in the financial products segment, defined as estimated interest to be received on investments less estimated transaction expenses and interest to be paid on liabilities issued in the form of guaranteed investment contracts (GICs) plus results from derivatives used for hedging purposes, discounted to present value. The discount rate was 5.07% for 2006 originations and 5.30% for 2005 originations. PV premiums originated, PV NIM originated and PV originations are non-GAAP measures based on estimates of, among other things, prepayment speeds of asset-backed securities. Additionally, PV premiums originated is a measure of gross origination activity and does not reflect premiums ceded to reinsurers or the cost of credit default swaps or other credit protection, which may be considerable, employed by the Company to manage its credit exposures. Management believes that, by disclosing the components of PV originations in addition to premiums written, the Company provides investors with a more comprehensive description of its new business activity in a given period. For further discussion, see "Non-GAAP Measures" below. For a reconciliation of PV premiums originated to gross premiums written, see "Analysis of Financial Results — Premiums" below.

Unless otherwise noted, percentage changes mentioned in this release compare the period named with the comparable period of the previous year.

PUBLIC FINANCE ORIGINATIONS

	Three Months Ended December 31,				Year Ended December 31,
	2006		2005		2006		2005
United States:
Gross par insured (in billions)	$	17.0	$	14.8	$	46.5	$	64.8
Gross PV premiums originated (in millions)		92.8		139.8		309.6		484.5
International:
Gross par insured (in billions)	$	3.0	$	3.6	$	9.4	$	7.5
Gross PV premiums originated (in millions)		98.7		99.7		317.7		185.3

After strong new-issue volume in the fourth quarter, total issuance in the U.S. municipal bond market reached $387.7 billion for the year, down approximately 5%. Reduced refunding volume during the year was largely offset by growth in new-money issuance. Insurance penetration was approximately 49% in 2006, compared with 57% in 2005. FSA insured approximately 24% of the par amount of insured new municipal bond issues sold in 2006.

Including both primary and secondary U.S. municipal obligations with closing dates in the fourth quarter, the par amount insured by FSA increased 14.9%, and PV premiums originated decreased 33.6%. Fourth-quarter PV premiums declined primarily because of lower volume in the health care sector, where premiums tend to be higher relative to par insured, and a general shift toward higher quality, lower capital charge transactions. For the year, U.S. municipal par insured declined 28.3%, and PV premiums declined 36.1%, as FSA increased its strategic focus on core municipal sectors where high-quality transactions provided greater relative value.

In international public finance, par insured decreased 18.3% in the fourth quarter, while PV premiums originated remained flat due to longer average lives. FSA insured two major airport financings in Australia and a number of long-term U.K. utility transactions during the quarter, among other transactions. For the year, international public finance originations grew 26.7% in par insured, while PV premiums grew at a higher rate, 71.4%, because of longer average lives. Originations were strongest in the United Kingdom and Australia, but FSA also guaranteed public finance transactions in Western and Central Europe, Asia and the Americas.

ASSET-BACKED ORIGINATIONS

	Three Months Ended December 31,				Year Ended December 31,
	2006		2005		2006		2005
United States:
Gross par insured (in billions)	$	10.5	$	4.3	$	28.6	$	24.5
Gross PV premiums originated (in millions)		39.4		24.2		113.4		195.4
International:
Gross par insured (in billions)	$	3.2	$	0.8	$	9.3	$	6.6
Gross PV premiums originated (in millions)		26.0		9.3		49.0		56.2

FSA's fourth-quarter U.S. asset-backed originations increased 146.6% in par insured and 62.5% in PV premiums originated. PV premiums did not rise as much as par insured because of tight spreads and a shift in the business mix to a higher proportion of Triple-A and Super Triple-A pooled corporate and residential mortgage transactions. Such higher quality transactions tend to have lower premium rates. FSA also increased its production in the home equity line of credit (HELOC) sector. For the year, U.S. asset-backed par insured increased 17.0%, and PV premiums declined 42.0%. Throughout the year, the asset-backed market was characterized by tight credit spreads, excess market liquidity and aggressive uninsured structures, which had a negative impact on pricing. Additionally, 2006 originations had shorter average lives.

Outside the United States, fourth-quarter asset-backed originations exceeded those of the fourth quarter of 2005 by 293.5% in par insured and 181.7% in PV premiums, with the bulk of the growth occurring in Triple-A and Super Triple-A pooled corporate transactions, where premiums tend to be lower relative to par. For the year, FSA increased international asset- backed par originations by 39.8%, while PV premiums originated declined 12.7%. As in the United States, tight spreads generally constrained pricing throughout the year. Approximately 90% of the 2006 originations were of Triple-A or Super Triple-A quality.

FINANCIAL PRODUCTS ORIGINATIONS

		Three Months Ended December 31,						Year Ended December 31,
		2006			2005			2006			2005
Gross PV NIM originated (in millions)		$	35.5		$	20.1		$	120.5		$	92.6

Fourth-quarter PV NIM originated in the financial products (FP) segment increased 77.2% compared with the result in the fourth quarter of last year. Certain investment opportunities with long gestation periods closed in the fourth quarter, enhancing the PV NIM result. For the year, PV NIM originations increased 30.1%, reflecting the general growth trend of the financial products segment.

ANALYSIS OF FINANCIAL RESULTS

NET INCOME. Fourth-quarter net income increased 55.0% to $92.8 million from $59.8 million for the fourth quarter of last year. For the year, net income increased 30.1%. The following table provides the after-tax amounts of certain income and expense items that management believes are useful in analyzing net income in conjunction with the adjustments used to calculate operating earnings.

NOTEWORTHY ITEMS
(in millions, net of taxes)

	Three Months Ended December 31,						Year Ended December 31,
	2006			2005			2006			2005
Premiums from refundings and accelerations (1)	$	10.5		$	4.8		$	26.8		$	29.4
Realized gains (losses), net (2)		(0.3	)		0.1			2.9			7.8
Equity-based compensation (1)(3)		(11.4	)		(8.2	)		(32.7	)		(31.5	)
Bermuda tax rate change (4)		(3.1	)		(2.9	)		(12.7	)		(29.3	)
Realized foreign exchange gain from one-time sale of sterling-denominated bonds, net		—			—			—			7.7

(1): Net of deferred acquisition cost amortization.
(2): Includes realized gains and losses and realized gains and losses from refinancing transactions.
(3): The Company has always included in net income the currently vested future-value payout cost of its performance share unit program.
(4): In connection with the Company's decision to repatriate income from its Bermuda subsidiary Financial Security Assurance International Ltd. (FSA International) effective third quarter 2005, the Company no longer intends to leave future earnings of that subsidiary permanently offshore, with the effect that 2005 and future income of FSA International have become subject to an increased effective U.S. tax rate. The adjustment in 2005 includes amounts related to prior years.

OPERATING EARNINGS. Operating earnings (a non-GAAP measure) and the adjustments to net income used to calculate it are disclosed above, in the table entitled "Net Income and Reconciliation to Non-GAAP Operating Earnings." The Company defines operating earnings as net income before the effects of fair-value adjustments for:

•: economic interest rate hedges, defined as derivatives that are intended to hedge interest rate risk but do not meet the criteria necessary to receive hedge accounting treatment under Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), with any residual hedge ineffectiveness remaining in operating earnings; and
•: FSA-insured CDS that have investment-grade underlying credit quality and are marked to fair value under SFAS 133.

The Company typically converts the fixed interest rates of certain assets and liabilities to dollar-denominated LIBOR-based floating rates by means of interest rate derivatives. Without hedge accounting, SFAS 133 requires the marking to fair value of each such derivative in the income statement without the offsetting mark to fair value on the asset or liability it is intended to hedge. These one-sided mark-to-fair-value valuations cause income volatility. Under the Company's definition of operating earnings, the economic effect of these hedges is recognized, which, for interest rate swaps, generally results in any cash paid or received being recognized ratably as an expense or revenue over the hedged item's life.

The fair-value adjustments for economic interest rate hedges reflect movements of LIBOR-based interest rates. During 2005, almost all of the derivatives intended to mitigate the interest rate risk of GICs issued by the Company did not qualify for hedge accounting under SFAS 133. They were therefore considered economic interest rate hedges rather than designated accounting hedges. In January 2006, the Company designated certain interest rate swaps used to mitigate interest rate risk on GICs as accounting hedges. Therefore both the interest rate swaps and the interest rate risk of the corresponding liabilities are marked to fair value in both net income and operating earnings for all periods of 2006. In last year's comparable periods, only the interest rate swaps were marked to fair value in net income, while operating earnings included, in effect, the marks for both the interest rate swaps and liabilities. The hedge designation therefore affects the comparability of net income between corresponding periods of 2006 and 2005 but not the comparability of operating earnings.

CDS contracts are generally non-cancelable prior to maturity, and the Company views insured CDS risks as comparable to other insured risks. CDS transactions insured by the Company generally reference either a specific security otherwise qualifying for FSA insurance or a pool of corporate or consumer debt securities or bank loans, structured such that the risk insured is investment grade without the benefit of the credit protection provided by the Company. In the event a CDS were to migrate below investment grade, the fair-value impact would be fully reflected in operating earnings. Given the high credit quality of the CDS insured by FSA, management believes it is probable that the financial impact of the fair-value adjustments for the insured CDS will sum to zero over the finite terms of the exposures, which are typically five to ten years at inception. Notwithstanding this eventual outcome, sharp swings in the estimated fair value of the CDS portfolio may occur from quarter to quarter, as the credit spreads that drive the fair-value estimates are volatile.

For the fourth quarter of 2006, the fair-value adjustments for insured CDS reflected a tightening of credit spreads. The comparable adjustments in the fourth quarter of last year reflected a widening of market credit spreads.

For 2006 and for the comparable 2005 period, the fair-value adjustments for insured CDS primarily reflect a tightening of credit spreads.

PREMIUMS. The following table reconciles gross premiums written, which captures premiums collected and accrued for in the period regardless of when the related business was originated, to PV premiums originated, a non-GAAP measure that management uses to evaluate current business production.

RECONCILIATION OF GROSS PREMIUMS WRITTEN TO PV PREMIUMS ORIGINATED
(in millions)

	Three Months Ended December 31,						Year Ended December 31,
	2006			2005			2006			2005
Gross premiums written	$	256.5		$	263.3		$	816.0		$	833.8
Gross installment premiums received		(63.0	)		(68.4	)		(241.9	)		(280.5	)

Gross upfront premiums originated		193.5			194.9			574.1			553.3
Gross PV estimated installment premiums originated		63.4			78.1			215.6			368.1

Gross PV premiums originated	$	256.9		$	273.0		$	789.7		$	921.4

The following table summarizes earned and written premiums, net of reinsurance.

NET EARNED AND WRITTEN PREMIUMS
(in millions)

	Three Months Ended December 31,				Year Ended December 31,
	2006		2005		2006		2005
Net premiums written	$	161.8	$	163.4	$	527.2	$	577.7
Net premiums earned		104.0		96.1		388.7		404.1
Net premiums earned excluding effect of refundings and accelerations		85.0		87.1		339.9		349.8

For the fourth quarter, gross premiums written decreased 2.6%, and net premiums written decreased 1.0%, both reflecting a decrease in municipal premiums written, partially offset by a slight increase in asset-backed premiums written. For the year, gross premiums written decreased 2.1%, while net premiums written decreased 8.7%, due primarily to the reassumption of a block of health care business in 2005.

For the fourth quarter, net premiums earned totaled $104.0 million, an 8.2% increase. This includes $19.0 million of net premiums earned from refundings and accelerations, compared with $9.0 million for the fourth quarter of 2005. Excluding premiums from refundings and accelerations, fourth-quarter net premiums earned decreased 2.4%, primarily reflecting a decrease in asset-backed earned premiums.

For the year, net premiums earned totaled $388.7 million, a 3.8% decrease. This includes $48.8 million of net premiums earned from refundings and accelerations, compared with $54.3 million in 2005. Excluding premiums from refundings and accelerations, full-year net premiums earned decreased 2.8%, reflecting a decrease in asset-backed earned premiums, partially offset by an increase in municipal earned premiums.

FP SPREAD PORTFOLIO NET INTEREST MARGIN. FP spread portfolio NIM was $15.6 million for the fourth quarter of 2006, compared with $11.7 million for the fourth quarter a year ago. For 2006, FP spread portfolio NIM was $68.8 million, compared with $40.5 million for 2005. Portfolio growth was the most significant reason for the increases. FP spread portfolio NIM is a non-GAAP measure defined as the net interest margin from financial products operations excluding variable interest entity (VIE) NIM and fair-value adjustments for economic interest rate hedges. It is comparable to FP operating NIM reported for periods ending prior to December 31, 2006. The name has been changed because, beginning in the fourth quarter of 2006, FP segment reporting includes the results of VIEs formerly reported in the financial guaranty segment.

INVESTMENT PORTFOLIO. Fourth-quarter net investment income was $57.1 million, an increase of 13.7%. For the year, net investment income increased 9.0% to $218.9 million. The increases primarily reflect higher invested balances in the investment portfolio. The Company's effective tax rate on investment income (excluding the effects of realized gains and losses, variable interest entities and assets acquired in refinancing transactions) for the year was 12.2%, versus 13.2% a year ago.

EXPENSES AND RESERVES. For the fourth quarter, policy acquisition and other operating expenses increased to $63.8 million ($41.5 million after taxes) from $39.1 million ($25.4 million after taxes) for the previous year's fourth quarter. For the year, policy acquisition and other operating expenses increased to $187.6 million ($122.0 million after taxes) from $162.0 million ($105.3 million after taxes) for the prior year. These expenses include certain compensation expenses related primarily to the Company's deferred compensation plans and supplemental executive retirement plans, which are based on changes in the market value of related investments and are perfectly offset by amounts in other income arising from marking to fair value the assets held to economically defease such obligations. Excluding such expenses, policy acquisition and other operating expenses were $53.4 million for the fourth quarter of 2006 and $41.3 million for the comparable period a year earlier. For 2006, those expenses rose to $173.2 million from $159.8 million in the prior year. The increases related primarily to lower deferral rates.

The Company recorded losses and loss adjustment expenses incurred of $7.0 million ($4.5 million after taxes) for the fourth quarter of 2006 and $5.0 million ($3.2 million after taxes) for the fourth quarter of 2005. For the year, losses and loss adjustment expenses were $23.3 million ($15.1 million after taxes) in 2006 and $25.4 million ($16.5 million after taxes) for 2005. Adjustments to reserves represent management's estimate of the amount required to cover the present value of the net cost of claims, based on statistical provisions for new originations.

During 2006, a net amount of $1.2 million was transferred from the non-specific reserve to case reserves, primarily reflecting a new case reserve for a healthcare transaction, offset in part by decreases in existing case reserves for certain CDO transactions. Transfers between non-specific and case reserves represent a reallocation of existing loss reserves and have no impact on earnings. At December 31, 2006, aggregate case and non-specific reserves, net of reinsurance recoverables, totaled $190.8 million, compared with $169.4 million at December 31, 2005.

NOTES PAYABLE AND SHAREHOLDERS' EQUITY. During the fourth quarter, the Company issued $300 million of 6.40% Junior Subordinated Debentures, Series 2006-1, also known as hybrid securities, for the purpose of optimizing its capital structure. The debentures are intended to qualify for certain levels of equity credit from the rating agencies and are therefore expected to be excluded, in whole or in part, by the rating agencies in applying limitations on indebtedness permitted to be issued by the Company without rating consequences. The Company subsequently paid extraordinary dividends totaling $400 million to its shareholders.

NON-GAAP MEASURES

To reflect accurately how the Company's management evaluates the Company's operations and progress toward long-term goals, this release contains both measures promulgated in accordance with accounting principles generally accepted in the United States of America (GAAP measures) and measures not so promulgated (non-GAAP measures). Although the measures identified as non-GAAP in this release should not be considered substitutes for GAAP measures, management considers them key performance indicators and employs them in determining compensation. Non-GAAP measures therefore provide investors with important information about the way management analyzes its business and rewards performance.

Non-GAAP measures used in this release include ABV, operating earnings, PV premiums originated, PV NIM originated, PV originations and FP spread portfolio NIM. In the tables above,

operating earnings is reconciled to net income, and PV premiums originated is reconciled to gross premiums written. PV NIM originated is the present value of estimated future net interest margin generated by new business in the financial products segment during a given period. PV originations is the sum of PV premiums originated and PV NIM originated. The Company employs PV originations to describe the present value of all the Company's originations in a given period.

Management uses ABV as a measure of performance and to calculate a portion of employee compensation. An investor attempting to evaluate the Company using GAAP measures alone would not have the benefit of this information. The ABV calculation relies on estimates of the amount and timing of installment premiums and net interest margin and applies discount factors to determine the present value. Actual values may vary from the estimates. As of December 31, 2006, the Company began to calculate ABV on the basis of IFRS results that the Company reports to its principal shareholder, Dexia, in order to better align the interests of employees with the interests of Dexia, whose accounts are maintained under IFRS. The IFRS adjustments relate primarily to accounting for foreign exchange, contingencies and fair value adjustments. ABV is reconciled to book value in the table that follows.

RECONCILIATION OF SHAREHOLDERS' EQUITY TO
ADJUSTED BOOK VALUE (IFRS BASIS)
(in millions)

		December 31, 2006		December 31, 2005
Shareholders' Equity (Book Value)—U.S. GAAP		$	2,722.3	$	2,822.9
After-tax adjustments:
	Plus net unearned premium revenues (net of taxes of $576.9 and $528.5)		1,071.4		981.4
	Plus PV future net installment premiums and financial products PV future net interest margin (net of taxes of $337.7 and $299.4) (1)		627.2		556.0
	Less net deferred acquisition costs (net of taxes of $119.2 and $117.3)		221.4		217.8
	Less fair-value adjustments for insured CDS (net of taxes of $31.2 and $20.1)		58.0		37.4
	Less fair value of economic interest rate hedges (net of taxes of $39.1 and $23.0)		72.6		42.7
	Less unrealized gains on investments (net of taxes of $83.4 and $70.6)		154.9		131.0

Adjusted Book Value before IFRS adjustments			3,914.0		3,931.4
IFRS Adjustments			4.8		(22.1	)

Adjusted Book Value (IFRS basis)		$	3,918.8	$	3,909.3

(1): Amounts include the effects of PV future ceding commission and premium taxes. The discount rate varies according to the year of origination. For each year's originations, the Company calculates the discount rate as the average pre-tax yield on its investment portfolio for the previous three years. The rate was 5.07% for 2006 and was 5.30% for 2005.

This release also contains certain other non-GAAP measures that are based on statutory accounting principles applicable to insurance companies. Management uses such measures because the measures are required by regulators or used by rating agencies to assess the capital adequacy of the Company. The following table presents statutory-basis information for FSA.

CLAIMS-PAYING RESOURCES (STATUTORY BASIS)
FINANCIAL SECURITY ASSURANCE INC. AND SUBSIDIARIES
(dollars in thousands)

		December 31, 2006		December 31, 2005
Contingency Reserve		$	1,011,034	$	906,841
Surplus to Policyholders			1,543,113		1,510,675

	Qualified Statutory Capital		2,554,147		2,417,516
Net Unearned Premium Reserve			2,070,751		1,850,446
Loss and Loss Adjustment Expense Reserve			52,964		54,445

	Qualified Statutory Capital and Reserves		4,677,862		4,322,407
Net Present Value of Installment Premiums			827,916		803,434
Third-Party Capital Support(1)			550,000		550,000

	Total Claims-Paying Resources(2)	$	6,055,778		5,675,841

Net Insurance in Force (principal & interest)		$	552,695,033	$	497,624,738
Capital Ratio(3)			216:1		206:1
Claims-Paying Ratio(4)			91:1		88:1

(1): Standby line of credit facility and money market committed preferred trust securities.
(2): Total claims-paying resources refers to a term used by rating agencies to quantify total resources available to pay claims in their stress-case scenarios. Rating agencies may apply further adjustments to some or all of the figures in order to reflect their views of realization.
(3): Capital ratio is net insurance in force divided by qualified statutory capital.
(4): Claims-paying ratio is net insurance in force divided by claims-paying resources.

ADDITIONAL INFORMATION

The Company will post its current Operating Supplement to its website, www.fsa.com, today. The Operating Supplement contains additional information about results for the period covered in this release.

FORWARD-LOOKING STATEMENTS

The Company relies on the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. This safe harbor requires that the Company specify important factors that could cause actual results to differ materially from those contained in forward-looking statements made by or on behalf of the Company. Accordingly, forward-looking statements by the Company and its affiliates are qualified by reference to the following cautionary statements.

In its filings with the SEC, reports to shareholders, press releases and other written and oral communications, the Company from time to time makes forward-looking statements. Such forward-looking statements include, but are not limited to:

•: projections of revenues, income (or loss), earnings (or loss) per share, dividends, market share or other financial forecasts;
•: statements of plans, objectives or goals of the Company or its management, including those related to growth in adjusted book value or return on equity; and
•: expected losses on, and adequacy of loss reserves for, insured transactions.

Words such as "believes," "anticipates," "expects," "intends" and "plans" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

The Company cautions that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in forward-looking statements made by the Company. These factors include:

•: changes in capital requirements or other criteria of securities rating agencies applicable to FSA;
•: competitive forces, including the conduct of other financial guaranty insurers;
•: changes in domestic or foreign laws or regulations applicable to the Company, its competitors or its clients;
•: changes in accounting principles or practices that may result in a decline in securitization transactions or affect the Company's reported financial results;
•: an economic downturn or other economic conditions (such as a rising interest rate environment) adversely affecting transactions insured by FSA or its investment portfolio;
•: inadequacy of reserves established by the Company for losses and loss adjustment expenses;
•: disruptions in cash flow on FSA-insured structured transactions attributable to legal challenges to such structures;
•: downgrade or default of one or more of FSA's reinsurers;
•: market conditions, including the credit quality and market pricing of securities issued;
•: capacity limitations that may impair investor appetite for FSA-insured obligations;
•: market spreads and pricing on insured CDS exposures, which may result in gain or loss due to mark-to-market accounting requirements;
•: prepayment speeds on FSA-insured asset-backed securities and other factors that may influence the amount of installment premiums paid to FSA; and
•: other factors, most of which are beyond the Company's control.

The Company cautions that the foregoing list of important factors is not exhaustive. In any event, such forward-looking statements made by the Company speak only as of the date on which they are made, and the Company does not undertake any obligation to update or revise such statements as a result of new information, future events or otherwise.

THE COMPANY

Financial Security Assurance Holdings Ltd. (FSA Holdings) is a New York-headquartered holding company whose subsidiaries provide financial guarantees and financial products in both the public and private sectors around the world. Its principal operating subsidiary, Financial Security Assurance Inc. (FSA), is a leading guarantor of municipal bonds, infrastructure financings and asset-backed securities. FSA has earned Triple-A ratings, the highest ratings available, from Fitch Ratings, Moody's Investors Service, Inc., Standard & Poor's Ratings Services and Rating and Investment Information, Inc. FSA Holdings is a member of the Dexia group, a leading European banking group. For additional information, visit www.fsa.com.

Financial Security Assurance Holdings Ltd.
Consolidated Statements of Operations and Comprehensive Income
(in thousands)

		Three Months Ended December 31,						Year Ended December 31,
		2006			2005			2006			2005
REVENUES
	Net premiums written	$	161,794		$	163,358		$	527,177		$	577,694

	Net premiums earned	$	103,998		$	96,092		$	388,709		$	404,059
	Net investment income		57,147			50,281			218,850			200,827
	Net realized gains (losses)		(394	)		114			(8,328	)		6,392
	Net interest income from financial products and variable interest entities		251,248			163,548			861,772			487,916
	Financial products net realized gains (losses)		31			(7,602	)		108			(7,473	)
	Net realized and unrealized gains (losses) on derivative instruments		60,825			(77,410	)		163,046			(172,475	)
	Income from assets acquired in refinancing transactions		5,997			7,353			24,661			35,190
	Net realized gains (losses) from assets acquired in refinancing transactions		(66	)		36			12,729			5,601
	Other income		12,807			(1,312	)		29,321			21,198

TOTAL REVENUES			491,593			231,100			1,690,868			981,235
EXPENSES
	Losses and loss adjustment expenses		6,960			4,958			23,303			25,365
	Interest expense		8,852			6,745			29,096			26,990
	Policy acquisition costs		18,278			16,487			63,012			68,340
	Financial products and variable interest entities' foreign exchange (gains) losses		60,156			(22,055	)		159,424			(189,785	)
	Net interest expense from financial products and variable interest entities		228,292			152,509			768,583			491,640
	Other operating expenses		45,509			22,586			124,622			93,614

TOTAL EXPENSES			368,047			181,230			1,168,040			516,164
INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATES			123,546			49,870			522,828			465,071
Provision for income taxes			30,796			11,639			150,680			126,873

NET INCOME BEFORE MINORITY INTEREST AND EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATES			92,750			38,231			372,148			338,198
Less: Minority interest			—			(21,603	)		(52,006	)		11,224
Plus: Equity in losses of unconsolidated affiliates, net of income tax provision of $2,026			—			—			—			(866	)

NET INCOME			92,750			59,834			424,154			326,108
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
	Unrealized gains (losses) arising during the period, net of deferred income tax provision (benefit) of $999, $(11,528), $5,476, and $(13,427)		1,856			(21,410	)		10,272			(32,012	)
	Less: Reclassification adjustment for gains (losses) included in net income, net of deferred income tax provision (benefit) of $143, $(2,230), $3,480, and $6,205		265			(4,142	)		6,463			11,523

	Other comprehensive income (loss)		1,591			(17,268	)		3,809			(43,535	)

COMPREHENSIVE INCOME (LOSS)		$	94,341		$	42,566		$	427,963		$	282,573

See Notes to Consolidated Financial Statements to be filed on Form 10-K.

Financial Security Assurance Holdings Ltd.
Consolidated Balance Sheets
(in thousands, except share data)

			December 31, 2006			December 31, 2005
ASSETS
Bonds at fair value (amortized cost of $4,546,147 and $4,219,344)			$	4,721,512		$	4,382,037
Equity securities at fair value (cost of $54,291 and $54,370)				54,325			54,370
Short-term investments				74,067			182,645
Variable interest entities' bonds at fair value (amortized cost of $1,127,698 and $1,155,832)				1,128,255			1,155,992
Variable interest entities' short-term investment portfolio				19,478			2,674
Financial products bond portfolio at fair value (amortized cost of $15,564,485 and $11,754,330)				15,629,724			11,827,824
Financial products short-term investment portfolio				640,226			1,015,509
Financial products trading portfolio at fair value				119,424			—

		Total investment portfolio		22,387,011			18,621,051
Assets acquired in refinancing transactions:
	Bonds at fair value (amortized cost of $40,133 and $65,865)			41,051			68,421
	Securitized loans			241,785			296,965
	Other			55,036			102,487

		Total assets acquired in refinancing transactions		337,872			467,873

		Total investments		22,724,883			19,088,924
Cash				54,982			20,117
Deferred acquisition costs				340,673			335,129
Prepaid reinsurance premiums				1,004,987			865,192
Reinsurance recoverable on unpaid losses				37,342			36,339
Other assets				1,610,759			1,655,941

TOTAL ASSETS			$	25,773,626		$	22,001,642

LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY
Deferred premium revenue			$	2,653,321		$	2,375,059
Losses and loss adjustment expenses				228,122			205,718
Guaranteed investment contracts and variable interest entities' debt				18,349,665			14,947,118
Deferred federal income taxes				298,542			231,265
Notes payable				730,000			430,000
Accrued expenses, other liabilities and minority interest				791,664			989,580

TOTAL LIABILITIES AND MINORITY INTEREST				23,051,314			19,178,740

COMMITMENTS AND CONTINGENCIES
Common stock (200,000,000 shares authorized; 33,517,995 issued; par value of $.01 per share)				335			335
Additional paid-in capital — common				906,687			905,190
Accumulated other comprehensive income (net of deferred income taxes of $86,119 and $84,123)				160,038			156,229
Accumulated earnings				1,655,252			1,761,148
Deferred equity compensation				19,225			20,177
Treasury stock at cost (241,978 and 254,736 shares held)				(19,225	)		(20,177	)

TOTAL SHAREHOLDERS' EQUITY				2,722,312			2,822,902

TOTAL LIABILITIES, MINORITY INTEREST AND
SHAREHOLDERS' EQUITY			$	25,773,626		$	22,001,642

See Notes to Consolidated Financial Statements to be filed on Form 10-K.

Financial Security Assurance Holdings Ltd.
Annual Financial Data
(in millions)

	Years Ended December 31,
	2006			2005			2004			2003			2002
Income Statement
Gross premiums written	$	816.0		$	833.8		$	832.0		$	895.8		$	803.7
Net premiums written		527.2			577.7			587.8			614.3			532.7
Net premiums earned		388.7			404.1			395.0			356.4			314.9
Net investment income		218.9			200.8			172.1			154.0			139.1
Losses and loss adjustment expenses		23.3			25.4			20.6			34.5			65.6
Fair-value adjustments for economic interest rate hedges, net of taxes		40.5			(15.0	)		17.1			9.3			13.0
Fair-value adjustments for insured credit default swaps, net of taxes		20.7			7.2			37.7			23.4			(34.1	)
Net income		424.2			326.1			378.6			298.1			197.0
Operating earnings		363.0			333.9			323.8			265.4			218.1
Balance Sheet
Investment portfolio	$	22,387.0		$	18,621.1		$	13,836.8		$	9,493.2		$	5,037.4
Prepaid reinsurance premiums		1,005.0			865.2			759.2			695.4			557.7
Total assets		25,773.6			22,001.6			17,081.0			12,407.6			7,045.8
Deferred premium revenue		2,653.3			2,375.1			2,095.4			1,845.0			1,448.2
Loss reserves		228.1			205.7			179.9			233.4			223.6
Guaranteed investment contracts and variable interest entities' debt		18,349.7			14,947.1			10,444.1			6,639.4			2,409.9
Notes payable		730.0			430.0			430.0			430.0			430.0
Total liabilities and minority interest		23,051.3			19,178.7			14,469.7			10,188.4			5,126.4
Shareholders' equity (book value)		2,722.3			2,822.9			2,611.3			2,219.2			1,919.4
Dividends		530.0			71.1			22.9			—			11.7
Adjusted book value per share, before IFRS adjustments		116.8			117.3			104.8			90.4			77.3
Adjusted book value per share		116.9			116.6			104.5			N/A			N/A
Book value per share		81.2			84.2			77.9			66.2			57.3
Return on equity		14.8	%		11.9	%		15.8	%		14.4	%		11.1	%
Operating return on equity		13.7	%		13.5	%		14.8	%		14.0	%		13.0	%

N/A – not available

Financial Security Assurance Holdings Ltd.
Quarterly Financial Data
(in millions)

	Three Months Ended December 31,					Year Ended December 31,
	2006		2005			2006		2005
Income Statement
Gross premiums written	$	256.5	$	263.3		$	816.0	$	833.8
Net premiums written		161.8		163.4			527.2		577.7
Net premiums earned		104.0		96.1			388.7		404.1
Net investment income		57.1		50.3			218.9		200.8
Losses and loss adjustment expenses		7.0		5.0			23.3		25.4
Fair-value adjustments for economic interest rate hedges, net of taxes		1.9		(12.9	)		40.5		(15.0	)
Fair-value adjustments for insured credit default swaps, net of taxes		4.8		(10.2	)		20.7		7.2
Net income		92.8		59.8			424.2		326.1
Operating earnings		86.1		82.9			363.0		333.9

	As of December 31, 2006			As of December 31, 2005
Balance Sheet
Investment portfolio	$	22,387.0		$	18,621.1
Prepaid reinsurance premiums		1,005.0			865.2
Total assets		25,773.6			22,001.6
Deferred premium revenue		2,653.3			2,375.1
Loss reserves		228.1			205.7
Guaranteed investment contracts and variable interest entities' debt		18,349.7			14,947.1
Notes payable		730.0			430.0
Total liabilities and minority interest		23,051.3			19,178.7
Shareholders' equity (book value)		2,722.3			2,822.9
Dividends		530.0			71.1
Adjusted book value per share, before IFRS adjustments		116.8			117.3
Adjusted book value per share		116.9			116.6
Book value per share		81.2			84.2
Return on equity		14.8	%		11.9	%
Operating return on equity		13.7	%		13.5	%

Financial Security Assurance Holdings Ltd.
Operating Expense Analysis
(in thousands)

2006			1^st Qtr.			2^nd Qtr.			3^rd Qtr.			4^th Qtr.			Year-to-Date
Amortization of previously deferred underwriting expenses and reinsurance commissions			$	16,210		$	14,421		$	14,103		$	18,278		$	63,012
Gross financial guaranty underwriting and operating expenses				56,358			59,176			53,950			74,840			244,324
Deferred compensation/SERP expenses(1)				5,909			(6,235	)		4,344			10,395			14,413
Underwriting expenses deferred				(34,275	)		(36,330	)		(33,606	)		(44,055	)		(148,266	)
Financial products other operating expenses				3,312			3,356			3,154			4,329			14,151
Reinsurance commissions written, net				(10,398	)		(23,809	)		(17,673	)		(27,833	)		(79,713	)
Reinsurance commissions deferred, net				10,398			23,809			17,673			27,833			79,713

	Other operating expenses			31,304			19,967			27,842			45,509			124,622
		Total expenses	$	47,514		$	34,388		$	41,945		$	63,787		$	187,634

2005			1^st Qtr.			2^nd Qtr.			3^rd Qtr.			4^th Qtr.			Year
Amortization of previously deferred underwriting expenses and reinsurance commissions			$	15,408		$	16,198		$	20,247		$	16,487		$	68,340
Gross financial guaranty underwriting and operating expenses				55,103			57,750			56,516			66,867			236,236
Deferred compensation/SERP expenses(1)				4,952			(99	)		(437	)		(2,237	)		2,179
Underwriting expenses deferred				(36,640	)		(36,948	)		(39,181	)		(45,858	)		(158,627	)
Financial products other operating expenses				3,594			3,165			3,253			3,814			13,826
Reinsurance commissions written, net				(10,131	)		(6,370	)		(20,618	)		(26,055	)		(63,174	)
Reinsurance commissions deferred, net				10,131			6,370			20,618			26,055			63,174

	Other operating expenses			27,009			23,868			20,151			22,586			93,614
		Total expenses	$	42,417		$	40,066		$	40,398		$	39,073		$	161,954

(1): Not a deferred acquisition cost. These expenses include certain compensation expenses related primarily to the Company's deferred compensation plans and supplemental executive retirement plans (SERP), which are based on changes in the market value of related investments and are perfectly offset by amounts in other income arising from marking to fair value the assets held to economically defease such obligations.

Financial Security Assurance Holdings Ltd.
Gross Par Value and Present Value (PV) Originations
(in millions)

		Three Months Ended December 31,				Year Ended December 31,
		2006		2005		2006		2005
Gross Par Insured
Public Finance
	United States	$	16,979	$	14,772	$	46,448	$	64,806
	International		2,933		3,591		9,404		7,421

Total Public Finance			19,912		18,363		55,852		72,227
Asset-Backed Finance
	United States	$	10,580	$	4,291	$	28,648	$	24,491
	International		3,213		816		9,281		6,637

Total Asset-Backed Finance			13,793		5,107		37,929		31,128
Total Gross Par Insured(1)		$	33,705	$	23,470	$	93,781	$	103,355

		Three Months Ended December 31,				Year Ended December 31,
		2006		2005		2006		2005
Gross PV Premiums Originated
Public Finance
	United States	$	92.8	$	139.8	$	309.6	$	484.5
	International		98.7		99.7		317.7		185.3

Total Public Finance			191.5		239.5		627.3		669.8
Asset-Backed Finance
	United States	$	39.4	$	24.2	$	113.4	$	195.4
	International		26.0		9.3		49.0		56.2

Total Asset-Backed Finance			65.4		33.5		162.4		251.6
Financial Products Gross PV NIM Originated		$	35.5	$	20.1	$	120.5	$	92.6
Total Gross PV Originations(2)		$	292.4	$	293.1	$	910.2	$	1,014.0

(1): Excludes FSA-insured GICs issued by the Company.
(2): The Company evaluates its business production for a given period based on its gross present value of originations (gross PV originations), which consists of the total present value of premiums originated (gross PV premiums originated) by FSA and its subsidiaries and the present value of net interest margin originated (PV NIM originated) by the Financial Products segment. Gross PV premiums originated for a particular period include both (i) premiums received in such period under insurance policies in which premiums are payable upfront and (ii) estimated future premiums to be received under the Company's installment-based policies issued during such period, discounted to present value. The discount rate for business originated in 2006 was 5.07% per annum and in 2005 was 5.30% per annum, equal to the average pre-tax yield on the Company's investment portfolio for the previous three calendar years. Management uses its best estimate of the life of each insurance policy for which premiums are receivable in installments when calculating gross PV premiums originated. However, the total amount actually received will vary from management's estimate if the insured obligation pays down according to a different schedule or remains outstanding for a different period from those estimated by management. If the average life of an insured obligation is shorter than the estimate, PV premiums outstanding will be reduced. Conversely, if the average life of an insured obligation extends longer than the estimate, the PV premiums outstanding will be increased. PV NIM originated represents the present value of estimated interest to be received on investments less the present value of estimated transaction expenses and interest to be paid on liabilities issued in the form of guaranteed investment contracts (GICs) plus results from derivatives used as hedges.

Financial Security Assurance Holdings Ltd.
Gross Premiums Written
(in millions)

		Three Months Ended December 31,				Year Ended December 31,
		2006		2005		2006		2005
Public Finance
United States:
	Upfront	$	91.0	$	138.1	$	303.7	$	443.4
	Installments(1)		3.5		4.2		17.4		12.8
International:
	Upfront		94.2		55.8		251.5		102.3
	Installments(1)		3.9		7.1		20.2		24.9

Total Public Finance			192.6		205.2		592.8		583.4
Asset-Backed Finance
United States:
	Upfront	$	0.2	$	0.5	$	1.1	$	2.5
	Installments(1)		41.7		46.1		158.0		194.0
International:
	Upfront		8.1		0.5		17.8		5.1
	Installments(1)		13.9		11.0		46.3		48.8

Total Asset-Backed Finance			63.9		58.1		223.2		250.4
	Upfront		193.5		194.9		574.1		553.3
	Installments(1)		63.0		68.4		241.9		280.5

Total Gross Premiums Written		$	256.5	$	263.3	$	816.0	$	833.8

(1): Installments are the periodic premium payments received by FSA for business originated in current and prior years.

Financial Security Assurance Inc.

Financial Security Assurance Inc.
Effect of Refundings and Accelerations
(in thousands)

2006		1^st Qtr.		2^nd Qtr.		3^rd Qtr.		4^th Qtr.		Year-to-Date
Earned premium		$	9,072	$	14,170	$	6,569	$	19,003	$	48,814
Less:
	Amortization of deferred acquisition costs		1,545		2,101		1,052		2,835		7,533

Net effect before taxes			7,527		12,069		5,517		16,168		41,281
Tax provision			2,634		4,224		1,931		5,659		14,448

Net income effect		$	4,893	$	7,845	$	3,586	$	10,509	$	26,833

2005		1^st Qtr.		2^nd Qtr.		3^rd Qtr.			4^th Qtr.		Year
Earned premium		$	9,405	$	15,553	$	20,423		$	8,977	$	54,358
Less:
	Amortization of deferred acquisition costs		1,323		2,992		3,366			1,519		9,200

Net effect before taxes			8,082		12,561		17,057			7,458		45,158
Tax provision			2,829		4,017		6,349	⁽¹⁾		2,610		15,805

Net income effect		$	5,253	$	8,544	$	10,708		$	4,848	$	29,353

(1): Includes cumulative tax adjustment expense related to repatriation of earnings of the Company's Bermuda Subsidiary.

Financial Security Assurance Inc.
Fixed Income Investment Portfolio
(dollars in thousands)

Fixed Income Investment Portfolio as of
December 31, 2006(1)

		Fixed Income Portfolio by Type
Type of Security		Amortized Cost		Market Value		% of Amortized Cost		Yield		Income(2)
Long-term bonds:
U.S government obligations		$	148,415	$	148,804	3.2	%	4.68	%	$	7,970
U.S agency obligations			1,887		1,847	0.0		5.71			180
U.S municipal obligations			3,663,821		3,834,202	80.0		4.91			170,628
Foreign obligations			213,066		221,399	4.7		4.54			6,206
Corporate obligations			208,586		207,927	4.6		4.95			9,588
Mortgage-backed securities			247,690		244,524	5.4		5.34			12,811
Asset-backed securities			22,433		22,441	0.5		4.58			1,592

	Total long-term investments		4,505,898		4,681,144	98.4		4.91			208,975
Short-term investments			72,167		72,167	1.6		5.11			3,638

Total		$	4,578,065	$	4,753,311	100.0	%	4.91	%	$	212,613

	Fixed Income Portfolio by Maturity
Maturity	Amortized Cost		% of Amortized Cost
Within 1 year	$	188,116	4.1	%
1 to 5 years		1,160,189	25.3
5 to 10 years		855,032	18.7
10 or more years		2,104,605	46.0
Mortgage-backed securities		247,690	5.4
Asset-backed securities		22,433	0.5

Total	$	4,578,065	100.0	%

Quality Distribution of Long-Term Fixed Income Investments(3)
AAA	85.5	%
AA	11.5
A	2.9
NR	0.1

	100.0	%

(1): Excludes portfolios related to the variable interest entities and assets acquired in refinancing transactions.
(2): Income before investment management expenses and taxes, if applicable.
(3): Ratings are based on the lower of Moody's or S&P ratings at December 31, 2006. 6.2% of the Investment Portfolio is rated Triple-A by virtue of insurance provided by FSA. Without giving effect to the FSA guaranty, the weighted-average rating of the FSA-insured investments was in the Double-A range, and substantially all of these investments were investment grade.

Financial Security Assurance Inc.
Selected Financial Statistics
(dollars in thousands)

	Current Period
	Three Months Ended December 31,				Year Ended December 31,
	2006		2005		2006			2005
GAAP Basis(1)
Loss ratio	6.1	%	4.8	%		5.5	%		5.9	%
Expense ratio	42.2		34.5			36.4			33.1

Combined ratio	48.3	%	39.3	%		41.9	%		39.0	%

SAP Basis(1)
Loss ratio	2.3	%	7.8	%		—	%		2.1	%
Expense ratio	34.6		22.5			29.9			27.8

Combined ratio	36.9	%	30.3	%		29.9	%		29.9	%

Gross insurance in force(2)					$	765,632,196		$	686,134,377
Net insurance in force(2)						552,695,033			497,624,738
Qualified statutory capital						2,554,147			2,417,516
Capital ratio						216:1			206:1

	Annual Data
	Years Ended December 31,
	2006			2005			2004			2003			2002
GAAP Basis(1)
Loss ratio		5.5	%		5.9	%		5.0	%		9.5	%		20.6	%
Expense ratio		36.4			33.1			31.9			30.4			29.5

Combined ratio		41.9	%		39.0	%		36.9	%		39.9	%		50.1	%
SAP Basis(1)
Loss ratio		—	%		2.1	%		5.0	%		3.7	%		15.1	%
Expense ratio		29.9			27.8			26.8			21.3			20.9

Combined ratio		29.9	%		29.9	%		31.8	%		25.0	%		36.0	%
Gross insurance in force(2)	$	765,632,196		$	686,134,377		$	633,037,230		$	565,371,437		$	512,232,953
Net insurance in force(2)		552,695,033			497,624,738			454,359,331			409,476,253			365,256,111
Qualified statutory capital		2,554,147			2,417,516			2,280,883			2,104,257			1,876,117
Capital ratio		216:1			206:1			199:1			195:1			194:1

(1): The GAAP loss ratio is calculated as GAAP losses and loss adjustment expenses incurred divided by GAAP net premiums earned. The SAP loss ratio is SAP losses and loss adjustment expenses incurred divided by SAP net premiums earned. The GAAP expense ratio is underwriting and operating expenses, policy acquisition expense and interest expense, divided by net GAAP premiums earned. The SAP expense ratio is underwriting and operating expenses divided by net premiums written. The combined ratio on both a GAAP and SAP basis is the sum of the applicable loss and expense ratios.
(2): Amounts are statutory data for FSA Inc. and Subsidiaries.

Financial Security Assurance Inc.
U.S. Municipal New-Issue Market Data(1)
(dollars in billions)

	Industry						FSA Market Share(2)
	Par Value Issued		Par Value Insured		Percent Insured		Amount		Percent
4^th Qtr. 2006	$	120.9	$	57.6	47.6	%	$	16.4	28.5	%
3^rd		87.5		43.0	53.4			9.5	20.3
2^nd		109.6		57.1	47.1			12.7	24.6
1^st		69.7		32.9	47.3			7.4	21.3
4^th Qtr. 2005		98.3		48.8	49.6			12.0	24.6
3^rd		100.2		55.4	55.3			17.0	30.7
2^nd		111.5		68.0	61.0			16.4	24.1
1^st		98.3		60.8	61.9			14.6	24.0
2006		387.7		190.6	49.2			46.0	24.1
2005		408.3		233.0	57.1			60.0	25.8
2004		359.7		194.9	54.2			46.9	24.1
2003		383.6		190.5	49.7			52.2	27.4
2002		358.6		178.9	49.9			47.5	26.6
2001		288.1		134.3	46.6			36.3	27.0
2000		200.9		79.3	39.5			19.5	24.6
1999		227.7		105.6	46.4			24.2	22.9
1998		286.8		145.5	50.7			32.0	22.0
1997		220.7		106.0	48.0			16.2	15.3
1996		185.2		83.3	45.0			11.2	13.4
1995		160.4		68.6	42.8			3.3	4.8
1994		165.1		61.5	37.3			2.7	4.4
1993		292.2		107.9	36.9			7.5	7.0
1992		234.7		80.8	34.4			4.8	5.9
1991		172.4		51.9	30.1			2.8	5.4

(1): FSA estimates based on industry sources, including The Bond Buyer and Thomson Financial Securities Data. Industry data is on a sale-date basis and subject to revision as additional information becomes available.
(2): Share of insured bond market. FSA volume for 1993 through 2006 is based on sale date and will differ from closing-date data presented elsewhere in this Supplement. Excludes secondary-market transactions.

Financial Security Assurance Inc.
Insured Portfolio Profile—Par Value
(dollars in millions)

		Insured in 2006								Outstanding as of December 31, 2006
		Gross Amount		%		Net Amount		%		Net Amount		%
Public Finance Obligations(1)
United States
General obligation		$	23,584	42.2	%	$	20,589	47.1	%	$	103,112	41.0	%
Tax-supported			8,218	14.7			6,434	14.7			46,479	18.5
Municipal utility revenue			7,086	12.7			6,207	14.2			40,495	16.1
Health care revenue			3,451	6.2			1,924	4.4			13,155	5.2
Housing revenue			936	1.7			861	2.0			7,576	3.0
Transportation revenue			2,511	4.5			1,545	3.5			16,164	6.5
Education/University			600	1.1			575	1.3			4,378	1.7
Other public finance			62	0.1			58	0.1			1,628	0.7

	Subtotal		46,448	83.2			38,193	87.3			232,987	92.7
International			9,404	16.8			5,581	12.7			18,424	7.3

Total public finance obligations		$	55,852	100.0	%	$	43,774	100.0	%	$	251,411	100.0	%
Asset-Backed Obligations
United States
Residential mortgages		$	8,861	19.6	%	$	7,785	19.8	%	$	15,711	12.6	%
Consumer receivables			7,861	17.4			7,673	19.5			10,599	8.5
Pooled corporate			11,006	24.3			8,593	21.8			45,945	36.7
Other asset-backed			920	2.0			520	1.3			6,891	5.5
Financial products(2)			7,337	16.2			7,337	18.6			16,558	13.2

	Subtotal		35,985	79.5			31,908	81.0			95,704	76.5
International			9,281	20.5			7,464	19.0			29,341	23.5

Total asset-backed obligations		$	45,266	100.0	%	$	39,372	100.0	%	$	125,045	100.0	%
Total Portfolio(3)		$	101,118			$	83,146			$	376,456

Distribution of Insured Portfolio
by Ratings as of December 31, 2006

Rating(4)	Percent of Public Finance		Percent of Asset-Backed		Percent of Portfolio
AAA	2.5	%	65.7	%	23.5	%
AA	38.7		18.0		31.8
A	46.3		3.2		32.0
BBB	12.2		12.7		12.4
Other	0.3		0.4		0.3

	100.0	%	100.0	%	100.0	%

(1): Certain sub-categories totaling $9,413 million of U.S. public finance transactions were reclassified in December 2006 from the Other category to the General Obligation, Tax-supported and Transportation sectors. Additionally, Education/University issues formerly included in the Other category are shown under a separate caption.
(2): GICs issued by affiliates of FSA, which are eliminated in consolidation at the holding company.
(3): Includes amounts related to FSA-insured GICs issued by affiliates of FSA, FSA Global investments insured by FSA and refinanced transactions.
(4): Based upon internal FSA ratings.

Financial Security Assurance Inc.
Geographic Distribution of Public Finance Insured Portfolio—Par Value
(dollars in millions)

		Insured in 2006								Outstanding as of December 31, 2006
		Gross Amount		%		Net Amount		%		Net Amount		%
Domestic by State
California		$	6,055	10.8	%	$	4,780	11.0	%	$	31,724	12.7	%
New York			2,301	4.2			1,533	3.5			19,800	7.9
Texas			3,194	5.7			2,720	6.2			17,123	6.8
Pennsylvania			4,520	8.1			3,641	8.3			16,429	6.5
Florida			2,554	4.6			1,595	3.6			13,061	5.2
Illinois			3,119	5.6			2,210	5.0			12,641	5.0
New Jersey			1,727	3.1			1,270	2.9			10,817	4.3
Michigan			2,939	5.3			2,673	6.1			10,173	4.0
Washington			1,971	3.5			1,262	2.9			9,067	3.6
Massachusetts			1,000	1.8			536	1.2			6,304	2.5
Ohio			2,033	3.6			1,709	3.9			6,160	2.5
Indiana			1,517	2.7			1,233	2.8			5,451	2.2
Georgia			540	1.0			514	1.2			5,050	2.0
All Other U.S. Jurisdictions			12,978	23.2			12,517	28.7			69,187	27.5

	Subtotal		46,448	83.2			38,193	87.3			232,987	92.7
International			9,404	16.8			5,581	12.7			18,424	7.3

Total public finance obligations		$	55,852	100.0	%	$	43,774	100.0	%	$	251,411	100.0	%

Financial Security Assurance Inc.
50 Largest Public Finance Exposures
as of December 31, 2006
(dollars in millions)

Obligor		Net Par Outstanding		% of Total Net Par Outstanding
Port of New York and New Jersey, Consolidated Bonds		$	1,289.8	0.34	%
State of Washington G.O.			1,227.8	0.33
New York City, NY, G.O.			1,204.1	0.32
Massachusetts School Building Authority — Dedicated Sales Tax			1,182.9	0.31
Chicago, Illinois G.O.			1,153.4	0.31
New Jersey Transportation Trust Fund Authority			1,062.6	0.28
Clark County School District, NV, G.O.			1,028.8	0.27
New York City, NY, Municipal Water Finance Authority			999.0	0.27
Atlanta, GA, Water and Sewer Revenue Bonds			995.5	0.26
Commonwealth of Massachusetts G.O.			982.4	0.26
State of California Department of Water Resources Power Supply			980.6	0.26
Illinois State Toll Highway Authority, Revenue Bond			972.9	0.26
Metropolitan Transportation Authority, NY, Transportation Revenue Bonds			955.8	0.25
State of Illinois G.O.			948.4	0.25
Dept. of Water and Power of City of Los Angeles, CA, Power System Revenue			927.6	0.25
State of California, G.O.			914.1	0.24
New Jersey Turnpike Authority Revenue Bonds			895.6	0.24
Seattle, WA, Light and Power			888.9	0.24
California Housing Finance Agency Home Mortgage Revenue Bonds			869.5	0.23
Detroit, MI, Sewage Disposal System Revenue Bonds			849.6	0.23
State of Hawaii G.O.			803.0	0.21
San Diego Unified School District, CA G.O.			793.8	0.21
New York State Thruway Authority, Highway and Bridge Trust Fund			790.2	0.21
Broward County School District, FL, Certificates of Participation			776.7	0.21
International AAA Sovereign Debt Synthetic CDO			770.0	0.20
Houston, TX, Airport System, Subordinate Lien Revenue			762.0	0.20
District of Columbia, G.O.			755.3	0.20
New York Local Government Assistance Corporation (Sales Tax)			731.3	0.19
Florida Public Education, Capital Outlay Bonds (G.O.)			711.6	0.19
South Carolina Public Service Authority (Santee Cooper) Revenue Bonds			700.8	0.19
Kentucky State Property and Buildings Commission Revenue Bonds			698.9	0.19
Los Angeles Unified School District, CA, G.O.			682.6	0.18
Chicago Public Schools, IL, G.O.			676.6	0.18
State of Michigan — State Trunk Line Fund			667.5	0.18
Long Island Power Authority, NY, Electric System General Revenues			665.5	0.18
Houston Combined Utility System, TX, First Lien Revenues			651.2	0.17
Metropolitan Washington Airports Authority, Airport System Revenues			647.2	0.17
King County, WA, Sewer Revenue Bonds			634.2	0.17
Metropolitan Transportation Authority, NY Dedicated Tax			633.4	0.17
Skyway Concession Company LLC			626.5	0.17
Hydro-Quebec — Province of Quebec Guaranteed			619.6	0.16
Garden State Preservation Trust, NJ, Open Space & Farmland Preservation			615.8	0.16
Philadelphia School District, PA, G.O.			595.1	0.16
Massachusetts Water Resources Authority, General Revenue			588.9	0.16
Puerto Rico Electric Power Authority, Power Revenue			584.4	0.16
State of Louisiana Gasoline and Fuels Tax Revenue Bonds			582.1	0.16
Los Angeles Unified School District, CA, G.O.			578.8	0.15
State of Nevada G.O.			572.4	0.15
New York State Thruway Authority, General Revenue			570.2	0.15
Palm Beach County School District, FL, Certificates of Participation			566.6	0.15

	Total	$	40,381.5	10.73	%

Financial Security Assurance Inc.
25 Largest Asset-Backed Exposures
as of December 31, 2006
(dollars in millions)

Obligor		Net Par Outstanding		% of Total Net Par Outstanding
International Super AAA Synthetic CDO		$	5,060.1	1.34	%
International Super AAA Synthetic Residential MBS			3,133.2	0.83
US AAA Prime Automobile Loan Portfolio			3,017.5	0.80
International Super AAA Synthetic CDO			2,776.2	0.74
International Super AAA Synthetic CDO			1,851.8	0.49
Countrywide HELOC 2006-I			1,745.5	0.46
International Synthetic CDO			1,666.6	0.44
US Super AAA Synthetic CDO			1,465.5	0.39
International Super AAA Synthetic CDO			1,348.4	0.36
Countrywide HELOC 2006-F			1,288.9	0.34
International Super AAA Synthetic CDO			1,284.4	0.34
US Super AAA Synthetic CDO			1,210.5	0.32
Americredit 2006-A-F			1,162.6	0.31
International Super AAA Synthetic CDO			1,102.9	0.29
International Super AAA Synthetic CDO			929.5	0.25
International Super AAA Synthetic Residential MBS			919.3	0.24
International Super AAA Synthetic Residential MBS			892.0	0.24
US Super AAA Synthetic CDO			864.6	0.23
US Super AAA Synthetic CDO			854.6	0.23
International Super AAA Synthetic CDO			849.3	0.23
International Super AAA Synthetic CDO			812.0	0.22
US Super AAA Synthetic CDO			807.0	0.21
International Super AAA Synthetic CDO			779.1	0.21
US Super AAA Synthetic CDO			779.0	0.21
International Super AAA Synthetic CDO			772.1	0.21

	Total	$	37,372.6	9.93	%

"International" denotes a transaction with 20% or greater non-US collateral. "Super AAA" means the level of first-loss protection exceeds 1.3x the level required for an Aaa/AAA rating. Where indicated, ratings are current FSA internal ratings expressed in industry terms.

Financial Security Assurance Inc.
Debt Service and Premiums
(in millions)

Debt Service(1)
(Principal and Interest)

	Insured Debt Service
	Insured Debt Service						Portfolio Run Off			Net Outstanding
	Gross		Ceded		Net		Portfolio Run Off			Net Outstanding
4^th Qtr. 2006	$	62,107	$	16,816	$	45,291	$	(22,692	)	$	552,695
3^rd		45,313		16,736		28,577		(14,825	)		530,096
2^nd		43,902		10,837		33,065		(15,969	)		516,344
1^st		24,766		5,543		19,223		(17,600	)		499,248
4^th Qtr. 2005		39,028		12,824		26,204		(22,232	)		497,625
3^rd		47,965		11,671		36,294		(16,801	)		493,653
2^nd		42,392		8,083		34,309		(23,899	)		474,160
1^st		31,707		6,214		25,493		(16,102	)		463,750
2006		176,088		49,932		126,156		(71,086	)		552,695
2005		161,092		38,792		122,300		(79,034	)		497,625
2004		152,128		33,701		118,427		(73,544	)		454,359
2003		124,322		26,998		97,324		(53,104	)		409,476
2002		149,755		37,630		112,125		(47,506	)		365,256

Premiums (GAAP Basis)

	Premium Written
	Premium Written						Ending Net Unearned Premium		Net PV Premium Outstanding(2)
	Gross		Ceded		Net		Ending Net Unearned Premium		Net PV Premium Outstanding(2)		Total Net
4^th Qtr. 2006	$	266.4	$	94.7	$	171.7	$	1,653.6	$	827.9	$	2,481.5
3^rd		200.6		66.1		134.5		1,595.9		805.1		2,401.0
2^nd		250.1		90.6		159.5		1,562.0		801.6		2,363.6
1^st		134.0		37.4		96.6		1,509.6		794.7		2,304.3
4^th Qtr. 2005		271.1		100.0		171.1		1,515.4		803.4		2,318.8
3^rd		243.9		75.8		168.1		1,448.2		824.8		2,273.0
2^nd		175.9		25.8		150.1		1,404.2		783.3		2,187.5
1^st		169.6		54.5		115.1		1,356.6		747.0		2,103.6
2006		851.1		288.8		562.3		1,653.6		827.9		2,481.5
2005		860.5		256.1		604.4		1,515.4		803.4		2,318.8
2004		847.1		244.2		602.9		1,342.1		727.3		2,069.4
2003		903.4		281.5		621.9		1,149.6		607.1		1,756.7
2002		806.9		270.9		536.0		892.5		589.7		1,482.2

(1): Statutory basis.
(2): This is a non-GAAP term and refers to estimated present value of installment premiums yet to be received.

Financial Security Assurance Inc.
Amortization of Net Debt Service and Net Premiums
(in millions)

Net Debt Service(1)

		Scheduled Amortization		Outstanding
4^th Qtr 2006			—	$	552,695
2007			54,139		498,556
2008			41,701		456,855
2009			41,590		415,265
2010			39,290		375,975
2011–2015			137,935		238,040
2016–2020			88,890		149,150
2021–2025			64,899		84,251
2026+			84,251		—

	Total	$	552,695

Net Premiums

				Scheduled GAAP Premium Earnings
				Unearned Premium Reserve
				Amortization
		GAAP Unearned Premiums		Periodic UPR		Upfront UPR		Installments		Total Net
4^th Qtr 2006		$	1,653.6		—		—		—		—
2007			1,476.2		29.5		147.9		163.2		340.6
2008			1,339.9		1.5		134.8		153.9		290.2
2009			1,215.5		1.4		123.0		132.3		256.7
2010			1,099.9		1.4		114.2		97.4		213.0
2011–2015			647.2		1.2		451.5		283.2		735.9
2016–2020			354.9		0.2		292.1		120.9		413.2
2021–2025			177.9		—		177.0		84.1		261.1
2026+			—		—		177.9		112.0		289.9

	Total			$	35.2	$	1,618.4	$	1,147.0	$	2,800.6

(1): Statutory basis.

Contacts

Investor Relations

Robert S. Tucker
Managing Director
(1)(212) 339-0861
rtucker@fsa.com

Corporate Communications

Betsy Castenir
Managing Director
(1)(212) 339-3424
bcastenir@fsa.com

QuickLinks

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