September 22, 2010

Impact of the Dodd-Frank Act Derivative Provisions on Financial Guaranty Insurers
Issues Presented by the Dodd-Frank Act

• Application to Core Financial Guaranty Business: 

- Financial guaranty insurance policies or surety bonds should not be 

swaps or security-based swaps

• Application to Financial Guarantors’ CDS Business:

- Retroactive Application: Capital and margin requirements should no

retroactively to financial guaranty insurers or their affiliated transformentered into credit default swap (“CDS”) transactions

- Entity Characterization: Financial guaranty insurers should not be c

dealers or major swap participants as a result of their legacy CDS p

- Future Business: The imposition of margin would be inconsistent wi

insurance regulation and the financial guaranty insurance marketplapreclude the participation of financial guarantors in these transactio

2
Traditional Financial Guaranty Insurance 

Policies Should Not be Regulated as Swaps

• The Dodd-Frank Act was not intended to displace current state regulation of in

- McCarran-Ferguson Act precludes the regulation of insurance under the Dodd-Frank Act- Members of Congress referred in colloquies to Title VII’s purpose as establishing a regulato

the previously unregulated over-the-counter derivatives market

- Scope of Federal Insurance Office’s preemption and other powers are limited- Orderly liquidation authority does not cover insurers generally

- Bureau of Consumer Financial Protection is generally prohibited from regulating insurance 

• Financial guarantors are subject to extensive regulation

- Assured Guaranty Municipal Corp. (“AGM”) is a New York domiciled insurance company re

New York Insurance Department

- Assured Guaranty Corp. (“AGC”) is a Maryland domiciled insurance company regulated by 

Insurance Administration

- All financial guaranty insurers incorporated or licensed in New York, including AGM and AG

Article 69 of the New York Insurance Law

- State regulators have been actively engaged during the credit crisis; e.g., the New York Ins

Department’s Circular Letter No. 19 (Sept. 2008) was a direct response to concerns raised 

3
Traditional Financial Guaranty Insurance Policies 

Should Not be Regulated as Swaps – Key Differences

4

Traditional Financial Guaranty / 

Surety Policies Traditio

Purpose: Core business is the insurance of municipal 

bondsMunicipal bond insurance serves a substantial public purpose by facilitating the ability of municipal issuers to access the capital markets and lowering their borrowing costs

Enables buyers of protexposure with sellers oenables buyers to take on an obligation withou

Ownership of Insured Obligation: Beneficiaries of insurance policies are required 

to have an insurable interest

Buyers of protection arthe insured obligation; transaction syntheticalof outstanding swap noprincipal amount outstaobligation

Legal Rights: Insurers typically have direct control, information 

and inspection rights in transaction documents for insured obligations, including opportunities to participate in workouts, as well as rights as third party beneficiaries of representations and warranties and covenants

Sellers of protection dethrough the buyers of p
Traditional Financial Guaranty Insurance Policies 

Should Not be Regulated as Swaps – Key Differences (continued)

Traditional Financial Guaranty / 

Surety Policies Traditio

Risk of Acceleration: There can be no acceleration of the payment 

required to be made under a policy except at the sole option of the insurer

Physical settlement of of swap may be requirePay (which may relate fraction of the notional single interest paymen

Termination Payments: Traditional financial guaranty insurance policies 

do not cover destabilizing mark-to-market termination payments – risk does not apply

Risk of mark-to-market exists

Accounting Treatment: ASC 944: “Financial Services – Insurance” ASC 815: “Derivatives 

Requirements to apply including for revenue rliability measurement

Market Perception: Market participants do not consider financial 

guaranty insurance policies to be swaps or security-based swaps

5
Traditional Financial Guaranty Insurance 

Policies Should Not be Regulated as Swaps –Conclusion

• Dodd-Frank Act was not intended to provide for substantive 

regulation of insurance

• Extensive existing state regulation and regulatory involveme• Many significant differences between financial guaranty insu

policies and swaps

6
Legislation Should Not Be Applied 

Retroactively to Existing CDS Portfolios

• How financial guaranty insurers participated in CDS business

- Financial guaranty insurers did not execute CDS directly, but rather issued financial guaran

policies covering CDS written by affiliated special purpose entities known as “transformers” business 

- Transformers may be specific to a single CDS or counterparty, or may cover multiple CDS - The financial guaranty insurer was the “credit support provider” to the transformer

- Transformers only sold credit protection – they did not buy credit protection- Transformers’ CDS were held until maturity – they did not “trade” or make a market- Transactions were highly negotiated and, with few exceptions, specifically excluded collate

• Use of transformers was explicitly regulated by insurance law 

- Article 69 of the New York Insurance Law establishes parameters for the terms of insured C- Circular Letter No. 19 restricts financial guarantors’ insurance of CDS – including by prohib

collateral by financial guaranty insurers

- Circular Letter No. 19 constitutes part of the NYID’s plan to address the serious challenges 

insurance industry; it outlines “best practices” to which the NYID expects financial guaranty 

7
Legislation Should Not Be Applied 

Retroactively to Existing CDS Portfolios (continued)

• Capital and margin requirements

- If retroactively applied to existing swap portfolios, the financial condition and liquidity of fina

insurers could be adversely affected

- Collateral posting would subordinate insured municipal bondholders and other insurance po

counterparties, which historically were mostly investment banks and large commercial bank

- Such requirements would conflict with existing state insurance law requirements- Insurance regulators have been extensively involved in restructuring the financial guaranty 

severely impaired by the financial crisis

- Legacy portfolios have never presented any meaningful systemic risk and the risk presente

institutions has significantly diminished as a result of the passage of time without additional 

the restructurings that have taken place

• Existing CDS portfolios 

- Assured Guaranty’s CDS portfolio, $112.2 billion in net par outstanding as of the end of Q2 

amortizing and is expected to run off by approximately three quarters by the end of 2015, c

balance at the end of Q2 2010

- Neither Assured Guaranty, nor, to our knowledge, any other financial guaranty insurer has 

transactions since early 2009 (other than in connection with loss mitigation)

8
• Prior CDS activity of financial guarantors has been and is gov

insurance law

• Retroactive application could have an adverse impact on finan

condition and liquidity of financial guarantors

Legislation Should Not Be Applied Retroactively to Existing CDS Portfolios -Conclusion

9
Conflicting Regulations and Market Structure

• Current insurance regulatory policy as expressed in, e.g., the 

Insurance Department’s Circular No. 19 (2008), prohibits finaguaranty insurers’ posting of collateral in connection with in

• Collateral posting would subordinate insured municipal bond

and other insurance policyholders to CDS counterparties
11

Assured Guaranty Overview
Assured Guaranty Today

• We are the leading financial guaranty franc

- We are a publicly traded holding company (

makes 10-K, 10-Q and other periodic filings and Exchange Commission

- We have maintained financial strength ratin

market

- Our core business is the insurance of munic

• Our sole focus is financial guaranty insuran

- Extensive quarterly financial disclosures pro

all investors

- 20+ year track record in financial guaranty i

• We serve the U.S. capital markets through t

- AGM guarantees public finance and infrastr- AGC guarantees public finance, infrastructu

finance transactions 

12

As of 

June 30, 2010

Net par insured $627.5 BTotal investment portfolio $10.5 BTotal assets $17.6 BClaims paying resources $13.3 B
• We have the highest ratings of any active 

financial guaranty insurer today:

- Moody’s confirmed AGC’s and AGM’s Aa3 financial 

strength ratings in fourth quarter 2009

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

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 

backed by mezzanine tranches of residential mortgage-backed securities

High Financial Strength Ratings

Financial Strength R

As of September 17, 2

Moody’s

(rating/outlook)

AGC Aa3 / negative AGM Aa3 / negative 

13
Net Par Outstanding Diversified By Sector

Consolidated Net Par Ou

As of June 30, 2010

($ in billions)

$627.5 billion, A+ averag

AA- average rating

AA+ average rating

A- average rating

14

• Assured Guaranty’s portfolio is largely 

concentrated in U.S. public finance

– 69% U.S. public finance– 20% U.S. structured finance– 11% International

• Our portfolio has an A+ average internal 

credit rating

• In 2009, Assured Guaranty’s gross par 

written for U.S. public finance totaled $41.1 billion

• New business originations are almost 

exclusively U.S. public finance

– Clarity is necessary for investors in municipal 

bonds insured by Assured Guaranty

• CDS constitutes approximately 18% of net 

par insured

– All CDS were written pursuant to a comprehensive 

regulatory scheme

20%

5%

69%
15

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 Gu

(formerly Fi

F

AAA (negativ

fi

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 

September 17, 2010. 

S&P / Moody’s. NR = Not rated 

FS

Fina

AA

f

Assu

(formerly 

F

AAA (negativ

fi

Financial Security Assurance

International Ltd. 

Bermuda Subsidiary

Financial Guaranty Direct 

and Reinsurance

AAA (negative outlook) / 

Aa3 (negative outlook) 

financial strength ratings

Assured G

(formerly 

U

A+ (sta

Assured Guaranty Finance 

Overseas Ltd.

European Credit Derivative Marketing

NR

Assured Guaranty US Holdings Inc.

U.S. Holding Company

A+ (stable) / A3 (negative outlook) 

senior debt ratings
Safe Harbor Disclosure

• Forward-looking statements are being made in this presentation that reflect the current views of Assured Guaranty Ltd. (“AGL” and, together with 

Guaranty” or the “Company”) with respect to future events and financial performance. They are made pursuant to the safe harbor provisions of thReform Act of 1995. Actual results could differ materially from these statements. For example, Assured Guaranty’s forward-looking statements c

- rating agency action, including a ratings downgrade at any time of Assured Guaranty Ltd. or any of its subsidiaries and/or of transactio

subsidiaries, both of which have occurred in the past; 

- developments in the world's financial and capital markets that adversely affect issuers’ payment rates, Assured Guaranty’s loss experi

exposure to reinsurers, its access to capital, its unrealized (losses) gains on derivative financial instruments or its investment returns;

- changes in the credit markets, segments thereof or general economic conditions;- more severe or frequent losses implicating the adequacy of Assured Guaranty’s loss reserve;- the impact of market volatility on the mark-to-market of its contracts written in credit default swap form;- reduction in the amount of reinsurance portfolio opportunities available to Assured Guaranty; - decreased demand or increased competition;- changes in applicable accounting policies or practices;- changes in applicable laws or regulations, including insurance and tax laws;- other governmental actions;- difficulties with the execution of Assured Guaranty’s business strategy;- contract cancellations;- Assured Guaranty’s dependence on customers;- loss of key personnel;- adverse technological developments;- the effects of mergers, acquisitions and divestitures;- natural or man-made catastrophes;- other risks and uncertainties that have not been identified at this time;- management's response to these factors; and- other risk factors identified in Assured Guaranty’s filings with the Securities and Exchange Commission (the “SEC”). 

• See Assured Guaranty’s SEC filings and latest earnings press release and financial supplement, which are available on its website, for more infor

affect its forward-looking statements. Do not place undue reliance on these forward-looking statements, which are made only as of September 21not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

16
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

September 22, 2010