July 30, 2010

Impact of the Dodd-Frank Act Derivative Provisions on Financial Guaranty Insurers
Agenda

I. Assured Guaranty Overview

II. Financial Guaranty Insurance

III. Assured Guaranty Participation in Derivatives IV. Issues Presented by the Dodd-Frank Act

V. Conclusion

2
3

Assured Guaranty Overview
Assured Guaranty Today

• We are the leading financial gu

- We are the only long-standin

writing new business today

- We have maintained financia

market

- Our core business is the insu

municipal bond insurance sefacilitating municipal issuers 

• Our sole focus is financial gua

- Publicly traded holding comp

quarterly financial disclosureinvestors

- 20+ year track record in fina

• We serve the U.S. capital mark

- Assured Guaranty Municipal 

Security Assurance Inc.), acfinance and infrastructure tra

- Assured Guaranty Corp. (“AG

infrastructure and structured 

• We also own the largest and o

reinsurer

- Assured Guaranty Re Ltd. (“

4

As of 

March 31, 2010

Net par insured $639.5 BTotal investment portfolio $10.5 BTotal assets $17.4 BNet unearned premium reserve $6.8 BClaims payingresources $13.4 B
• We have the highest ratings of any active 

financial guaranty insurer today:

- Moody’s confirmed the Aa3 financial strength ratings of 

AGC and AGM and the A1 financial strength rating of AG Re in fourth quarter 2009

- Standard & Poor’s confirmed AGC’s and AGM’s AAA 

rating, and AG Re’s AA rating, in second quarter 2010

• We have been able to maintain our ratings 

because our underwriting standards did not permit us to guarantee asset-backed securities (“ABS”) backed by mezzanine tranches of residential mortgage-backed securities (“RMBS”)

High Financial Strength Ratings

Financia

As 

M

(rati

AGC Aa3 

AGM Aa3 

AG Re A1 / 

5
Net Par Outstanding Diversified By Sector

Non-U.S. 

Structured 

Finance

5%

Non-U.S. 

Public 

Finance

7%

U.S. 

Structured 

Finance

21%

U.S. PNon-UNon-UU.S. S

Consolidate

As 

$639.5 billio

AA- average rating

AA+ average rating

A- average rating

6

• Assured Guaranty’s portfolio is diversified by 

asset class

- 67% U.S. public finance- 21% U.S. structured finance- 12% International

• Our portfolio has an A+ overall credit rating• New business originations are almost 

exclusively U.S. public finance

- Clarity is necessary for investors in municipal 

bonds insured by Assured Guaranty

• In 2009, Assured Guaranty’s gross par written 

for U.S. public finance totaled $41.1 billion

• Credit default swaps (“CDS”) constitute 

approximately 18% of net par insured

- All swaps written pursuant to comprehensive 

regulatory scheme
Financial Guaranty Insurance 
Assured Guaranty is Licensed and Regulate

• AGM is a New York domiciled insurance company regulated by the 

Department

– Licensed to write financial guaranty insurance in the 50 states of the United States, th

Guam and the U.S. Virgin Islands

• AGC is a Maryland domiciled insurance company regulated by the 

Administration

– Licensed to write financial guaranty insurance in the 50 states of the United States, t

Puerto Rico

• Assured Guaranty also has licensed insurance company affiliates i• Both AGM and AGC are subject to Article 69 of the New York Insura

- Comprehensive regulatory framework for financial guaranty insurers incorporated or 

contingency reserves; single and aggregate risk limits; diversified investments

- Establishes parameters for the terms of insured CDS- Recent New York Insurance Department Circular Letter places further restrictions on 

• Financial guaranty / surety policies

– Guarantee scheduled payments of principal and interest when due– Are unconditional and irrevocable– Cannot be accelerated

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Assured Guaranty 

Participation in Derivatives Business
Assured Guaranty Derivatives Business

• CDS are considered an extension of core financial guaranty insuran

- Typically cover scheduled payments of principal and interest when due

• Financial guaranty insurers such as AGC and AGM do not write CD

insure CDS written by affiliated special purpose entities known as “

- Transformers are trusts or corporations with little or no capital, no employees

issuance of CDS insured by their affiliated insurance companies

- Transformers may be specific to a single CDS or counterparty, or may cover - The financial guaranty insurer is the “credit support provider” to the transform- The financial guaranty insurer issues an insurance policy guaranteeing the tra

under its CDS

- Use of transformers is sanctioned by the insurance law as the means for finan

participate in the CDS business in a circumscribed manner comparable to the

• Financial guaranty insurers are not typical swap participants 

- Their transformers only sell credit protection – do not buy credit protection- Their CDS are held until maturity – do not “trade”- CDS reference a security or obligor that would otherwise qualify for financial g

of synthetic CDOs, a pool of securities or obligors generally subject to a “dedu

- Payments by transformers are triggered by specified credit events – typically 

- Transactions were highly negotiated and, with few exceptions, specifically exc

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Issues Presented by the Dodd-Frank Act

• Swap definition is broad – legislation should regulate derivatives, n

guaranty insurance, including municipal bond insurance, or surety 

• Financial guaranty insurers and their transformers should not be co

security-based swap) participants or swap (or security-based swap

- Financial guaranty insurers issue insurance policies and are not direct CDS c- Transformers have little capital and no business other than the issuance of C

insurers

- State insurance departments supervise financial guaranty insurers, including 

already subject to:

• Obligations to establish contingency reserves to protect policyholders a• Single risk limits applicable to all obligations issued by a single entity an

source, including CDS guaranteed by the insurer

• Aggregate risk limits on the basis of aggregate net liability insured as co

• Requirements that they diversify their investment portfolio• Restrictions on when they can pay dividends• Requirements to file financial statements with insurance departments ev

authorized or accredited to conduct insurance business

- Regulators conduct periodic examinations of the books and records, financial 

- The regulatory authorities of AGC and AGM’s industry peers that have suffere

the financial crisis have been extensively involved in restructuring the obligatio

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Issues Presented by the Dodd-Frank Act 

(Continued)

• Capital and margin requirements

- If retroactively applied to Assured Guaranty’s existing swap portfolio ($115 bil

Assured Guaranty’s financial condition and liquidity could be adversely affecte

- Collateral posting would subordinate investors in insured municipal bonds and 

CDS counterparties (investment banks; large commercial banks)

- Such requirements may conflict with existing state insurance law requirement- AGC and AGM (and, to our knowledge, other financial guaranty insurers) hav

(other than in connection with loss mitigation) and do not anticipate being able and margin were required

• Legal Certainty – the “legal certainty” provisions of Section 739 sho

to both “swaps” and “security-based swaps”

- Absent clarification, outstanding CDS may be subject to termination for illegal

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Conclusion
Conclusion

• Financial guaranty insurance policies or surety bond policies shou

swaps or security-based swaps

• Financial guaranty insurers and their transformers should not be co

security-based swap) participants or swap (or security-based swap

• Capital and margin requirements should not be applied retroactivel

financial guaranty insurers 

- Assured Guaranty’s financial condition and liquidity could be adversely affecte- Business was structured specifically to provide for no posting of collateral- Collateral posting would subordinate the claims of investors in the municipal b

insured by Assured Guaranty below those of CDS counterparties 

- Financial guaranty insurers and their swaps business are already highly regul- Do not anticipate being able to write or insure CDS in the future if capital or m

• Legal certainty provision (Section 739) should be extended to secu

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Appendix
16

Corporate Structure 

Assured Guaranty Ireland

Holdings Limited

Ireland Holding Company

NR

AG Financial 

Products Inc.

Swap Counterparty

NR

Assured Guaranty Ltd.

Hamilton, Bermuda

Publicly traded Holding Company (NYSE: AGO)

A+ (stable) / A3 (negative outlook) 

senior debt ratings

Assured Guaranty Corp. (“AGC”) 

Financial Guaranty Direct

AAA (negative outlook) / 

Aa3 (negative outlook)

financial strength ratings

Assured Guaranty (UK) Ltd.

Financial Guaranty Direct

AAA (negative outlook) / 

Aa3 (negative outlook) 

financial strength ratings

Assured Guaranty Re Overseas Ltd. (“AGRO”)

Financial Guaranty Reinsurance

AA (stable) / A1 (negative outlook) 

financial strength ratings

Assured Guaranty Overseas 

U.S. Holdings Inc.

U.S. Holding Company

NR

Assured Guaranty Re Ltd. (“AG Re”)

Financial Guaranty Reinsurance

AA (stable) / A1 (negative outlook)

financial strength ratings

Assured Guaranty Mortgage Insurance 

Company

Mortgage Guaranty

AA (stable) / A1 (negative outlook) 

financial strength ratings

Ratings and company names as of July 30, 2010. S&P / Moody’s. NR = Not rated 

Financial Security Assuranc

International Ltd. 

Bermuda Subsidiary

Financial Guaranty Direct 

and Reinsurance

AAA (negative outlook) / 

Aa3 (negative outlook) 

financial strength ratings

Assured Guaranty Finance 

Overseas Ltd.

European Credit Derivative Marketin

NR

Assured Guaranty US Holdings Inc.

U.S. Holding Company

A+ (stable) / A3 (negative outlook) 

senior debt ratings
Financial Information

March 31, 2010
First Quarter 2010 Financial Results

18

($ in millions, except per share data)

Q

Ma

Net earned premiums Net investment income Total revenues Loss & LAE and incurred losses on credit derivatives Total expenses Operating income Operating income per diluted share Operating ROE After-tax gain (loss) on investments / derivatives Net income Net income per diluted share 
Claims-Paying Resources

19

Consolidated Claims-Paying Resources

($ in millions)

1. AG Re numbers are the Company's estimate of U.S. statutory as this company files Bermuda statutory financial statemen

2. Includes financial guaranty and credit derivatives. 3. Statutory basis. 4. The capital ratio is calculated by dividing net debt service outstanding by qualified statutory capital. 5. The financial resources ratio is calculated by dividing net debt service outstanding by total claims paying resources. 6. In 2009, Assured Guaranty Corp. issued a $300.0 million note payable to Assured Guaranty Municipal Corp. 

As of March 31, 2010

Assured Guaranty

Corp.

Assured Guaranty

Re Ltd. 1

Assured 

Guaranty 

Municipal 

Corp. 

Claims paying resourcesPolicyholders' surplus $ 1,080 $ 1,021 $ 863 

Contingency reserve 587 - 1,357 

Qualified statutory capital 1,667 1,021 2,220 

Unearned premium reserve 890 1,052 2,229 Loss and loss adjustment expense reserves 454 256 1,252 

Total policyholders' surplus and reserves 3,011 2,329 5,701 

Present value of installment premium 2 584 330 846 

Standby line of credit/stop loss 200 200 498 

Total claims paying resources $ 3,795 $ 2,859 $ 7,045 

Net par insured outstanding 3 $ 128,049 $ 146,332 $ 352,809 

Net debt service outstanding 3 $ 183,997 $ 236,390 $ 525,788 Ratios:

Net par insured to statutory capital 77:1 143:1 159:1 

Capital ratio 4 110:1 232:1 237:1 

Financial resources ratio 5 48:1 83:1 75:1 
Assured Guaranty Contacts:

James M. MichenerGeneral CounselDirect: 212.261.5510jmichener@assuredguaranty.comBruce E. SternExecutive Officer, Government and Corporate AffairsDirect: 212.339.3482bstern@assuredguaranty.comLing ChowDeputy General Counsel, CorporateDirect: 212.261.5525lchow@assuredguaranty.com

July 30, 2010