EX-99.2 3 agl2q13supplement.htm FINANCIAL SUPPLEMENT AGL 2Q'13 Supplement



Assured Guaranty Ltd.
June 30, 2013
Financial Supplement

Table of Contents
 
 
Page
 
Selected Financial Highlights
1
 
Consolidated Statements of Operations (unaudited)
2
 
Net Income (Loss) Reconciliation to Operating Income
3
 
Consolidated Balance Sheets (unaudited)
5
 
Adjusted Book Value
6
 
Claims Paying Resources
7
 
New Business Production
8
 
Financial Guaranty Gross Par Written
9
 
New Business Production by Quarter
10
 
Available-for-Sale Investment Portfolio and Cash
11
 
Estimated Net Exposure Amortization and Estimated Future Net Premium and Credit Derivative Revenues
12
 
Expected Amortization of Net Par Outstanding
13
 
Present Value of Financial Guaranty Insurance Net Expected Loss to be Expensed
14
 
Financial Guaranty Profile
15
 
Direct Pooled Corporate Obligations Profile
19
 
Consolidated U.S. RMBS Profile
20
 
Direct U.S. RMBS Profile
21
 
Direct U.S. Commercial Real Estate Profile
23
 
Below Investment Grade Exposures
24
 
Largest Exposures by Sector
29
 
Rollforward of Net Expected Loss and Loss Adjustment Expenses to be Paid
33
 
Financial Guaranty Insurance and Credit Derivative U.S. RMBS Representations and Warranties Benefit Development
34
 
Losses Incurred
35
 
Summary Financial and Statistical Data
36
 
Glossary
37
 
Non-GAAP Financial Measures
40

This financial supplement should be read in conjunction with documents filed by Assured Guaranty Ltd. (‘‘AGL’’ and, together with its subsidiaries, ‘‘Assured Guaranty’’ or the ‘‘Company’’) with the Securities and Exchange Commission (‘‘SEC’’), including its Annual Report on Form 10-K for the year ended December 31, 2012 and its Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2013 and June 30, 2013.

Some amounts in this financial supplement may not add due to rounding.

Cautionary Statement Regarding Forward Looking Statements:

Any forward looking statements made in this supplement reflect the current views of Assured Guaranty with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Assured Guaranty's forward looking statements could be affected by many events. These events include (1) rating agency action, including a ratings downgrade, a change in outlook, the placement of ratings on watch for downgrade, or a change in rating criteria, at any time, of Assured Guaranty or any of its subsidiaries and/or of transactions that Assured Guaranty’s subsidiaries have insured; (2) developments in the world’s financial and capital markets, including changes in interest and foreign exchange rates, that adversely affect the demand for the Company's insurance, issuers’ payment rates, Assured Guaranty’s loss experience, its exposure to refinancing risk in transactions (which could result in substantial liquidity claims on its guarantees), its access to capital, its unrealized (losses) gains on derivative financial instruments or its investment returns; (3) changes in the world’s credit markets, segments thereof or general economic conditions; (4) the impact of rating agency action with respect to sovereign debt and the resulting effect on the value of securities in the Company's investment portfolio and collateral posted by and to the Company; (5) more severe or frequent losses impacting the adequacy of Assured Guaranty’s expected loss estimates; (6) the impact of market volatility on the mark-to-market of Assured Guaranty’s contracts written in credit default swap form; (7) reduction in the amount of insurance opportunities available to Assured Guaranty; (8) deterioration in the financial condition of Assured Guaranty's reinsurers, the amount and timing of reinsurance recoverables actually received and the risk that reinsurers may dispute amounts owed to Assured Guaranty under its reinsurance agreements; (9) failure of Assured Guaranty to realize insurance loss recoveries or damages expected from originators, sellers, sponsors, underwriters or servicers of residential mortgage-backed securities transactions through loan putbacks, settlement negotiations or litigation; (10) the possibility that budget shortfalls or other factors will result in credit losses or impairments on obligations of state and local governments that the Company insures or reinsures; (11) increased competition, including from new entrants into the financial guaranty industry; (12) changes in applicable accounting policies or practices; (13) changes in applicable laws or regulations, including insurance and tax laws; (14) other governmental actions; (15) difficulties with the execution of Assured Guaranty’s business strategy; (16) contract cancellations; (17) loss of key personnel; (18) adverse technological developments; (19) the effects of mergers, acquisitions and divestitures; (20) natural or man-made catastrophes; (21) other risks and uncertainties that have not been identified at this time; (22) management’s response to these factors; and (23) other risk factors identified in Assured Guaranty’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the dates on which they are made. Assured Guaranty undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law.




Assured Guaranty Ltd.
Selected Financial Highlights
(dollars in millions, except per share amounts)

 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
 
June 30,
 
June 30,
 
 
 
 
2013
 
2012
 
2013
 
2012
Operating income reconciliation:
 
 
 
 
 
 
 
 
 
Operating income
 
$
98

 
$
114

 
$
358

 
$
185

 
Plus after-tax adjustments:
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) on investments
 
2

 
(4
)
 
21

 
(5
)
 
 
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
 
28

 
160

 
(406
)
 
(357
)
 
 
Fair value gains (losses) on committed capital securities
 
(2
)
 
3

 
(8
)
 
(6
)
 
 
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and loss adjustment expense ("LAE") reserves
 
(3
)
 
3

 
(14
)
 
10

 
 
Effect of consolidating financial guaranty variable interest entities ("FG VIEs")
 
96

 
101

 
124

 
67

 
Net income (loss)
 
$
219

 
$
377

 
$
75

 
$
(106
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per diluted share:
 
 
 
 
 
 
 
 
 
Operating income
 
$
0.52

 
$
0.61

 
$
1.87

 
$
0.99

 
Plus after-tax adjustments:
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) on investments
 
0.01

 
(0.03
)
 
0.11

 
(0.03
)
 
 
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
 
0.15

 
0.85

 
(2.12
)
 
(1.94
)
 
 
Fair value gains (losses) on committed capital securities
 
(0.01
)
 
0.01

 
(0.04
)
 
(0.03
)
 
 
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
 
(0.01
)
 
0.02

 
(0.07
)
 
0.06

 
 
Effect of consolidating FG VIEs
 
0.50

 
0.54

 
0.64

 
0.37

 
Net income (loss)
 
$
1.16

 
$
2.01

 
$
0.39

 
$
(0.58
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective tax rate on operating income
 
29.4
%
 
29.9
%
 
26.8
%
 
25.7
 %
 
 
Effective tax rate on net income
 
33.5
%
 
32.0
%
 
36.4
%
 
25.0
 %
 
 
 
 
 
 
 
 
 
 
 
Return on equity ("ROE") calculations (1):
 
 
 
 
 
 
 
 
 
ROE, excluding unrealized gain (loss) on investment portfolio
 
20.4
%
 
36.9
%
 
3.4
%
 
(4.9
)%
 
Operating ROE
 
6.5
%
 
8.5
%
 
12.2
%
 
6.9
 %
 
 
 
 
 
 
 
 
 
 
 
New business:
 
 
 
 
 
 
 
 
 
 
Gross par written
 
$
2,276

 
$
4,705

 
$
3,870

 
$
9,586

 
 
Present value of new business production ("PVP") (2)
 
$
16

 
$
50

 
$
34

 
$
106

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
 
 
 
 
 
 
 
 
June 30,
 
December 31,
Other information:
 
 
 
 
 
2013
 
2012
 
 
Net debt service outstanding
 
 
 
 
 
$
727,997

 
$
782,180

 
 
Net par outstanding
 
 
 
 
 
486,989

 
519,893

 
 
Claims paying resources (3)
 
 
 
 
 
12,083

 
12,328


1) Quarterly ROE calculations represent annualized returns.

2) Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.

3) See page 7 for additional detail on claims paying resources.


Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.



1


Assured Guaranty Ltd.
Consolidated Statements of Operations (unaudited)
(dollars in millions, except per share amounts)

 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2013
 
2012
 
2013
 
2012
Revenues:
 
 
 
 
 
 
 
 
 
Net earned premiums
 
$
163

 
$
219

 
$
411

 
$
413

 
Net investment income
 
93

 
101

 
187

 
199

 
Net realized investment gains (losses)
 
2

 
(3
)
 
30

 
(2
)
 
Net change in fair value of credit derivatives:
 
 
 
 
 
 
 
 
 
 
 Realized gains (losses) and other settlements
 
(86
)
 
(23
)
 
(68
)
 
(80
)
 
 
 Net unrealized gains (losses)
 
160

 
284

 
(450
)
 
(350
)
 
 
 
Net change in fair value of credit derivatives
 
74

 
261

 
(518
)
 
(430
)
 
Fair value gains (losses) on committed capital securities
 
(3
)
 
4

 
(13
)
 
(10
)
 
Fair value gains (losses) on FG VIEs
 
143

 
168

 
213

 
127

 
Other income
 
(7
)
 
5

 
(21
)
 
96

 
 
Total revenues
 
465

 
755

 
289

 
393

 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expenses
 
62

 
118

 
14

 
360

 
Amortization of deferred acquisition costs
 
1

 
5

 
4

 
10

 
Interest expense
 
21

 
25

 
42

 
50

 
Other operating expenses
 
52

 
53

 
112

 
115

 
 
Total expenses
 
136

 
201

 
172

 
535

 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
329

 
554

 
117

 
(142
)
 
Provision (benefit) for income taxes
 
110

 
177

 
42

 
(36
)
Net income (loss)

$
219


$
377

 
$
75

 
$
(106
)
 
 
 
 
 
 
 
 
 
 
Less after-tax adjustments:
 
 
 
 
 
 
 
 
 
Realized gains (losses) on investments

2


(4
)
 
21

 
(5
)
 
Non-credit impairment unrealized fair value gains (losses) on credit derivatives

28


160

 
(406
)
 
(357
)
 
Fair value gains (losses) on committed capital securities

(2
)

3

 
(8
)
 
(6
)
 
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves

(3
)

3

 
(14
)
 
10

 
Effect of consolidating FG VIEs

96


101

 
124

 
67

Operating income

$
98


$
114

 
$
358

 
$
185

 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
Basic shares outstanding
 
187.8

 
186.3

 
190.8

 
184.4

 
Diluted shares outstanding (1)
 
188.8

 
187.0

 
191.7

 
184.4

 
Shares outstanding at the end of period (2)
 
182.9

 
194.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of refundings and terminations, net
 
 
 
 
 
 
 
 
 
Net earned premiums from refundings and terminations
 
$
46

 
$
68

 
$
159

 
$
105

 
Realized gains (losses) and other settlements from CDS terminations
 
14

 
1

 
15

 
1

 
Operating income effect
 
41

 
46

 
105

 
71

 
Operating income per diluted share effect
 
0.22

 
0.24

 
0.55

 
0.38


1)
Non-GAAP diluted shares outstanding were 188.8 million and 187.0 million for the three months ended June 30, 2013 and 2012, respectively, and 191.7 million and 186.6 million for the six months ended June 30, 2013 and 2012, respectively.

2)
On June 1, 2012, AGL issued 13.4 million common shares in connection with the 3,450,000 equity units it issued in June 2009. Each of the equity units included a forward purchase contract under which the holders were required to purchase such common shares for an aggregate purchase price of $173 million. As a result of the settlement of the forward purchase contracts, the equity units ceased to exist.

Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.

2


Assured Guaranty Ltd.
Net Income (Loss) Reconciliation to Operating Income
(dollars in millions) (1 of 2)

 
 
 
Three Months Ended
 
Three Months Ended
 
 
 
June 30, 2013
 
June 30, 2012
 
 
 
GAAP Income As Reported
 
Less: Operating Income Adjustments
 
Non-GAAP Operating Income Results
 
GAAP Income As Reported
 
Less: Operating Income Adjustments
 
Non-GAAP Operating Income Results
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
 
$
163

 
$
(15
)
(1
)
$
178

 
$
219

 
$
(16
)
(1
)
$
235

 
Net investment income
 
93

 
(1
)
(1
)
94

 
101

 
4

(1
)
97

 
Net realized investment gains (losses)
 
2

 
3

(2
)
(1
)
 
(3
)
 
(5
)
(2
)
2

 
Net change in fair value of credit derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) and other settlements
 
(86
)
 
(86
)
 
—

 
(23
)
 
(23
)
 
—

 
 
Net unrealized gains (losses)
 
160

 
160

 
—

 
284

 
284

 
—

 
 
Credit derivative revenues
 
—

 
(40
)
 
40

 
—

 
(34
)
 
34

 
 
 
Net change in fair value of credit derivatives
 
74

 
34

(3
)
40

 
261

 
227

(3
)
34

 
Fair value gains (losses) on committed capital securities
 
(3
)
 
(3
)
(4
)
—

 
4

 
4

(4
)
—

 
Fair value gains (losses) on FG VIEs
 
143

 
143

(1
)
—

 
168

 
168

(1
)
—

 
Other income
 
(7
)
 
(5
)
(5
)
(2
)
 
5

 
6

(5
)
(1
)
 
 
Total revenues
 
465

 
156

 
309

 
755

 
388

 
367

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial guaranty insurance
 
62

 
(22
)
(1
)
84

 
118

 
(4
)
(1
)
122

 
 
Credit derivatives
 
—

 
(12
)
(3
)
12

 
—

 
0

(3
)
0

 
Amortization of deferred acquisition costs
 
1

 
—

 
1

 
5

 
—

 
5

 
Interest expense
 
21

 
—

 
21

 
25

 
—

 
25

 
Other operating expenses
 
52

 
—

 
52

 
53

 
—

 
53

 
 
Total expenses
 
136

 
(34
)
 
170

 
201

 
(4
)
 
205

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
329

 
190

 
139

 
554

 
392

 
162

 
Provision (benefit) for income taxes
 
110

 
69

(6
)
41

 
177

 
129

(6
)
48

Net income (loss)
 
$
219

 
$
121

 
$
98

 
$
377

 
$
263

 
$
114


1)
Adjustments primarily related to elimination of the effects of consolidating FG VIEs.

2)
Adjustments to eliminate realized gains (losses) on available-for-sale investments.

3)
Adjustments to eliminate non-economic fair value gains (losses) on credit derivatives and reclassification to revenues and loss expense.

4)
Adjustments to eliminate fair value gain (loss) on committed capital securities.

5)
Adjustments primarily related to elimination of foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves.

6)
Tax effect of the above adjustments.

Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.



3


Assured Guaranty Ltd.
Net Income (Loss) Reconciliation to Operating Income
(dollars in millions) (2 of 2)

 
 
 
Six Months Ended
 
Six Months Ended
 
 
 
June 30, 2013
 
June 30, 2012
 
 
 
GAAP Income As Reported
 
Less: Operating Income Adjustments
 
Non-GAAP Operating Income Results
 
GAAP Income As Reported
 
Less: Operating Income Adjustments
 
Non-GAAP Operating Income Results
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
 
$
411

 
$
(33
)
(1
)
$
444

 
$
413

 
$
(33
)
(1
)
$
446

 
Net investment income
 
187

 
(1
)
(1
)
188

 
199

 
6

(1
)
193

 
Net realized investment gains (losses)
 
30

 
32

(2
)
(2
)
 
(2
)
 
(6
)
(2
)
4

 
Net change in fair value of credit derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) and other settlements
 
(68
)
 
(68
)
 
—

 
(80
)
 
(80
)
 
—

 
 
Net unrealized gains (losses)
 
(450
)
 
(450
)
 
—

 
(350
)
 
(350
)
 
—

 
 
Credit derivative revenues
 
—

 
(68
)
 
68

 
—

 
(63
)
 
63

 
 
 
Net change in fair value of credit derivatives
 
(518
)
 
(586
)
(3
)
68

 
(430
)
 
(493
)
(3
)
63

 
Fair value gains (losses) on committed capital securities
 
(13
)
 
(13
)
(4
)
—

 
(10
)
 
(10
)
(4
)
—

 
Fair value gains (losses) on FG VIEs
 
213

 
213

(1
)
—

 
127

 
127

(1
)
—

 
Other income
 
(21
)
 
(22
)
(5
)
1

 
96

 
9

(5
)
87

 
 
Total revenues
 
289

 
(410
)
 
699

 
393

 
(400
)
 
793

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss and loss adjustment expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial guaranty insurance
 
14

 
(15
)
(1
)
29

 
360

 
(11
)
(1
)
371

 
 
Credit derivatives
 
—

 
(22
)
(3
)
22

 
—

 
2

(3
)
(2
)
 
Amortization of deferred acquisition costs
 
4

 
—

 
4

 
10

 
—

 
10

 
Interest expense
 
42

 
—

 
42

 
50

 
—

 
50

 
Other operating expenses
 
112

 
—

 
112

 
115

 
—

 
115

 
 
Total expenses
 
172

 
(37
)
 
209

 
535

 
(9
)
 
544

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
117

 
(373
)
 
490

 
(142
)
 
(391
)
 
249

 
Provision (benefit) for income taxes
 
42

 
(90
)
(6
)
132

 
(36
)
 
(100
)
(6
)
64

Net income (loss)
 
$
75

 
$
(283
)
 
$
358

 
$
(106
)
 
$
(291
)
 
$
185


1)
Adjustments primarily related to elimination of the effects of consolidating FG VIEs.

2)
Adjustments to eliminate realized gains (losses) on available-for-sale investments.

3)
Adjustments to eliminate non-economic fair value gains (losses) on credit derivatives and reclassification to revenues and loss expense.

4)
Adjustments to eliminate fair value gain (loss) on committed capital securities.

5)
Adjustments primarily related to elimination of foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves.

6)
Tax effect of the above adjustments.

Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.




4


Assured Guaranty Ltd.
Consolidated Balance Sheets (unaudited)
(dollars in millions)
 
 
 
As of:
 
 
 
June 30,
 
December 31,
 
 
 
2013
 
2012
Assets:
 
 
 
 
 
Investment portfolio:
 
 
 
 
 
   Fixed maturity securities, available-for-sale, at fair value
 
$
9,564

 
$
10,056

 
   Short-term investments, at fair value
 
943

 
817

 
   Other invested assets
 
130

 
212

 
Total investment portfolio
 
10,637

 
11,085

 
 
 
 
 
 
 
Cash
 
143

 
138

 
Premiums receivable, net of ceding commissions payable
 
915

 
1,005

 
Ceded unearned premium reserve
 
510

 
561

 
Deferred acquisition costs
 
125

 
116

 
Reinsurance recoverable on unpaid losses
 
60

 
58

 
Salvage and subrogation recoverable
 
331

 
456

 
Credit derivative assets
 
101

 
141

 
Deferred tax asset, net
 
850

 
721

 
FG VIE assets, at fair value
 
2,674

 
2,688

 
Other assets
 
262

 
273

Total assets
 
$
16,608

 
$
17,242

 
 
 
 
 
 
Liabilities and shareholders' equity:
 
 
 
 
Liabilities:
 
 
 
 
 
Unearned premium reserve
 
$
4,812

 
$
5,207

 
Loss and loss adjustment expense reserve
 
564

 
601

 
Reinsurance balances payable, net
 
188

 
219

 
Long-term debt
 
827

 
836

 
Credit derivative liabilities
 
2,349

 
1,934

 
FG VIE liabilities with recourse, at fair value
 
1,940

 
2,090

 
FG VIE liabilities without recourse, at fair value
 
1,134

 
1,051

 
Other liabilities
 
310

 
310

Total liabilities
 
12,124

 
12,248

 
 
 
 
 
 
Shareholders' equity:
 
 
 
 
 
Common stock
 
2

 
2

 
Additional paid-in capital
 
2,483

 
2,724

 
Retained earnings
 
1,786

 
1,749

 
Accumulated other comprehensive income
 
209

 
515

 
Deferred equity compensation
 
4

 
4

Total shareholders' equity
 
4,484

 
4,994

Total liabilities and shareholders' equity
 
$
16,608

 
$
17,242





5


Assured Guaranty Ltd.
Adjusted Book Value
(dollars in millions, except per share amounts)


 
 
 
As of:
 
 
 
June 30, 2013
 
December 31, 2012
 
 
 
Total
 
Per Share
 
Total
 
Per Share
Reconciliation of shareholders' equity to adjusted book value:
 
 
 
 
 
 
 
 
 
Shareholders' equity
 
$
4,484

 
$
24.52

 
$
4,994

 
$
25.74

 
Less after-tax adjustments:
 
 
 
 
 
 
 
 
 
 
Effect of consolidating FG VIEs
 
(226
)
 
(1.23
)
 
(348
)
 
(1.79
)
 
 
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
 
(1,424
)
 
(7.78
)
 
(988
)
 
(5.09
)
 
 
Fair value gains (losses) on committed capital securities
 
15

 
0.08

 
23

 
0.12

 
 
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect
 
183

 
1.00

 
477

 
2.45

 
Operating shareholders' equity
 
5,936

 
32.45

 
5,830

 
30.05

 
After-tax adjustments:
 
 
 
 
 
 
 
 
 
 
Less: Deferred acquisition costs
 
163

 
0.89

 
165

 
0.85

 
 
Plus: Net present value of estimated net future credit derivative revenue
 
178

 
0.97

 
220

 
1.14

 
 
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed
 
3,022

 
16.53

 
3,266

 
16.83

 
Adjusted book value
 
$
8,973

 
$
49.06

 
$
9,151

 
$
47.17



Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.



6


Assured Guaranty Ltd.
Claims Paying Resources
(dollars in millions)

 
 
 
As of June 30, 2013
 
 
 
Assured Guaranty Municipal Corp.
 
Assured Guaranty Corp.
 
Assured Guaranty Re Ltd. (1)
 
Municipal Assurance Corp.(2)
 
Eliminations(3)
 
Consolidated
Claims paying resources
 
 
 
 
 
 
 
 
 
 
 
 
Policyholders' surplus
 
$
1,798

 
$
904

 
$
1,055

 
$
75

 
$
(300
)
 
$
3,532

Contingency reserve
 
1,655

 
891

 
—

 
—

 
—

 
2,546

 
Qualified statutory capital
 
3,453

 
1,795

 
1,055

 
75

 
(300
)
 
6,078

Unearned premium reserve
 
1,944

 
723

 
943

 
—

 
—

 
3,610

Loss and LAE reserves (4) (5)
 
214

 
174

 
255

 
—

 
—

 
643

 
Total policyholders' surplus and reserves
 
5,611

 
2,692

 
2,253

 
75

 
(300
)
 
10,331

Present value of installment premium (5)
 
416

 
290

 
211

 
—

 
—

 
917

Standby line of credit/stop loss
 
200

 
200

 
—

 
—

 
—

 
400

Excess of loss reinsurance facility
 
435

 
435

 
—

 
—

 
(435
)
 
435

 
Total claims paying resources
 
$
6,662

 
$
3,617

 
$
2,464

 
$
75

 
$
(735
)
 
$
12,083

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net par outstanding (6) 
 
$
260,148

 
$
87,241

 
$
116,092

 
$
—

 
$
(1,720
)
 
$
461,761

Net debt service outstanding (6) 
 
391,974

 
128,420

 
183,921

 
—

 
(3,567
)
 
700,748

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net par outstanding to qualified statutory capital
 
75
:1
 
49
:1
 
110
:1
 
N/A

 

 
76
:1
    Capital ratio (7)
 
114
:1
 
72
:1
 
174
:1
 
N/A

 

 
115
:1
    Financial resources ratio (8)
 
59
:1
 
36
:1
 
75
:1
 
N/A

 

 
58
:1


1)
Assured Guaranty Re Ltd. ("AG Re") numbers represent the Company's estimate of U.S. statutory accounting practices prescribed or permitted by insurance regulatory authorities.

2)
Assured Guaranty US Holdings Inc. acquired Municipal and Infrastructure Assurance Corporation, which it has renamed Municipal Assurance Corp. ("MAC"), from Radian Asset Assurance Inc. ("Radian") on May 31, 2012. As of June 30, 2013, MAC has not written any business. In July 2013, MAC was launched as a new US municipal only bond insurance company with $1.5 billion in claims-paying resources and capitalized to approximately $800 million through cash and securities.

3)
In 2009, Assured Guaranty Corp. ("AGC") issued a $300 million note payable to Assured Guaranty Municipal Corp. ("AGM"). Net par and net debt service outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary.

4)
Reserves are reduced by approximately $0.9 billion for benefit related to representation and warranty recoverables.

5)
Includes financial guaranty insurance and credit derivatives.

6)
Net par outstanding and net debt service outstanding are presented on a statutory basis. Under statutory accounting, such amounts would be reduced both when an outstanding issue is legally defeased (i.e., an issuer has legally discharged its obligations with respect to a municipal security by satisfying conditions set forth in defeasance provisions contained in transaction documents and is no longer responsible for the payment of debt service with respect to such obligations) and when such issue is economically defeased (i.e., transaction documents for a municipal security do not contain defeasance provisions but the issuer establishes an escrow account with U.S. government securities in amounts sufficient to pay the refunded bonds when due; the refunded bonds are not considered paid and continue to be outstanding under the transaction documents and the issuer remains responsible to pay debt service when due to the extent monies on deposit in the escrow account are insufficient for such purpose).

7)
The capital ratio is calculated by dividing net debt service outstanding by qualified statutory capital.

8)
The financial resources ratio is calculated by dividing net debt service outstanding by total claims paying resources.


7


Assured Guaranty Ltd.
New Business Production
(dollars in millions)

 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30,
 
June 30,
 
 
 
2013
 
2012
 
2013
 
2012
Consolidated new business production analysis:
 
 
 
 
 
 
 
 
 
PVP
 
 
 
 
 
 
 
 
 
Public finance - U.S.:
 
 
 
 
 
 
 
 
 
 
Assumed from Radian
 
$
—

 
$
—

 
$
—

 
$
22

 
 
Other
 
15

 
47

 
31

 
77

 
Public finance - non-U.S.
 
—

 
1

 
—

 
1

 
Structured finance - U.S.
 
1

 
2

 
3

 
6

 
Structured finance - non-U.S.
 
—

 
—

 
—

 
—

 
Total PVP

$
16


$
50

 
$
34

 
$
106

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total PVP
 
$
16

 
$
50

 
$
34

 
$
106

 
PVP of financial guaranty insurance
 
16

 
50

 
34

 
106

 
 
Less: financial guaranty installment premium PVP
 
—

 
3

 
1

 
7

 
Total: financial guaranty upfront gross written premiums ("GWP")
 
16

 
47

 
33

 
99

 
 
Plus: financial guaranty installment GWP (1)
 
6

 
(16
)
 
6

 
20

 
Total GWP
 
$
22

 
$
31

 
$
39

 
$
119

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial guaranty gross par written:
 
 
 
 
 
 
 
 
 
Public finance - U.S.:
 
 
 
 
 
 
 
 
 
 
Assumed from Radian
 
$
—

 
$
—

 
$
—

 
$
1,797

 
 
Other
 
2,276

 
4,670

 
3,856

 
7,716

 
Public finance - non-U.S.
 
—

 
35

 
—

 
35

 
Structured finance - U.S.
 
—

 
—

 
14

 
38

 
Structured finance - non-U.S.
 
—

 
—

 
—

 
—

 
Total

$
2,276


$
4,705

 
$
3,870

 
$
9,586



1)
Represents present value of new business on installment policies plus GWP adjustment on existing installment policies due to changes in assumptions and any cancellations of assumed reinsurance contracts.

Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.



8


Assured Guaranty Ltd.
Financial Guaranty Gross Par Written
(dollars in millions)



Financial Guaranty Gross Par Written by Asset Type

 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
June 30, 2013
 
June 30, 2013
 
 
 
Gross Par Written
 
Avg. Internal Rating
 
Gross Par Written
 
Avg. Internal Rating
Sector:
 
 
 
 
 
 
 
 
U.S. public finance
 
 
 
 
 
 
 
 
 
General obligation
 
$
1,304

 
A
 
$
2,239

 
A-
 
Municipal utilities
 
452

 
A-
 
626

 
A-
 
Tax backed
 
327

 
A-
 
556

 
A-
 
Transportation
 
135

 
A-
 
331

 
A
 
Healthcare
 
12

 
BBB+
 
58

 
BBB+
 
Higher education
 
31

 
A
 
31

 
A
 
Infrastructure finance
 
15

 
A
 
15

 
A
 
 
Total U.S. public finance
 
2,276

 
A-
 
3,856

 
A-
Non-U.S. public finance:
 
 
 
 
 
 
 
 
 
 
Total non-U.S. public finance
 
—

 
—
 
—

 
—
Total public finance
 
$
2,276

 
A-
 
$
3,856

 
A-
 
 
 
 
 
 
 
 
 
 
U.S. structured finance:
 
 
 
 
 
 
 
 
 
Other structure finance
 
$
—

 
—
 
$
14

 
A-
 
 
Total U.S. structured finance
 
—

 
—
 
14

 
A-
Non-U.S. structured finance:
 
 
 
 
 
 
 
 
 
 
Total non-U.S. structured finance
 
—

 
—
 
—

 
—
Total structured finance
 
$
—

 
—
 
$
14

 
A-
 
 
 
 
 
 
 
 
 
 
Total gross par written
 
$
2,276

 
A-
 
$
3,870

 
A-


Please refer to the Glossary for a description of internal ratings and sectors.




9


Assured Guaranty Ltd.
New Business Production by Quarter
(dollars in millions)


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months
 
 
 
1Q-12
 
2Q-12
 
3Q-12
 
4Q-12
 
1Q-13
 
2Q-13
 
2012
 
2013
PVP:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Public finance - U.S.:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assumed from Radian
 
$
22

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
22

 
$
—

 
Other
 
30

 
47

 
30

 
37

 
16

 
15

 
77

 
31

Public finance - non-U.S.
 
—

 
1

 
—

 
—

 
—

 
—

 
1

 
—

Structured finance - U.S.
 
4

 
2

 
5

 
32

 
2

 
1

 
6

 
3

Structured finance - non-U.S.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total PVP
 
$
56

 
$
50

 
$
35

 
$
69

 
$
18

 
$
16

 
$
106

 
$
34

 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total PVP
 
$
56

 
$
50

 
$
35

 
$
69

 
$
18

 
$
16

 
$
106

 
$
34

PVP of financial guaranty insurance
 
56

 
50

 
35

 
69

 
18

 
16

 
106

 
34

 
Less: financial guaranty installment premium PVP
 
4

 
3

 
5

 
33

 
1

 
—

 
7

 
1

Total: financial guaranty upfront GWP
 
52

 
47

 
30

 
36

 
17

 
16

 
99

 
33

 
Plus: financial guaranty installment GWP (1)
 
36

 
(16
)
 
(5
)
 
73

 
—

 
6

 
20

 
6

Total GWP
 
$
88

 
$
31

 
$
25

 
$
109

 
$
17

 
$
22

 
$
119

 
$
39

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial guaranty gross par written(2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Public finance - U.S.:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assumed from Radian
 
$
1,797

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
1,797

 
$
—

 
Other
 
3,046

 
4,670

 
3,007

 
3,641

 
1,580

 
2,276

 
7,716

 
3,856

Public finance - non-U.S.
 
—

 
35

 
—

 
—

 
—

 
—

 
35

 
—

Structured finance - U.S.
 
38

 
—

 
182

 
400

 
14

 
—

 
38

 
14

Structured finance - non-U.S.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
Total
 
$
4,881

 
$
4,705

 
$
3,189

 
$
4,041

 
$
1,594

 
$
2,276

 
$
9,586

 
$
3,870



1)
Represents present value of new business on installment policies plus GWP adjustment on existing installment policies due to changes in assumptions and any cancellations of assumed reinsurance contracts.

2)
Includes committed amount including undrawn revolvers.

Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.


10


Assured Guaranty Ltd.
Available-for-Sale Investment Portfolio and Cash
As of June 30, 2013
(dollars in millions)
                                           
 
 
 
Amortized Cost
 
Pre-Tax Book Yield
 
After-Tax Book Yield
 
Fair Value
 
Annualized Investment Income (1)
Investment portfolio, available-for-sale:
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities and obligations of U.S. government agencies
 
$
444

 
1.98
%
 
1.36
%
 
$
456

 
$
9

 
Agency obligations
 
262

 
3.94
%
 
3.31
%
 
285

 
10

 
Foreign government securities
 
291

 
2.52
%
 
1.65
%
 
294

 
7

 
Obligations of states and political subdivisions
 
3,788

 
4.00
%
 
3.78
%
 
3,945

 
152

 
Insured obligations of state and political subdivisions (2)(4)
 
1,313

 
4.67
%
 
4.41
%
 
1,389

 
61

 
Corporate securities
 
1,055

 
3.44
%
 
2.82
%
 
1,083

 
36

 
Mortgage-backed securities ("MBS") (3):
 
 
 
 
 
 
 
 
 
 
 
 
Residential MBS ("RMBS") (4)
 
1,306

 
6.17
%
 
4.59
%
 
1,218

 
81

 
 
Commercial MBS ("CMBS")
 
483

 
3.81
%
 
3.28
%
 
502

 
19

 
Asset-backed securities
 
459

 
6.16
%
 
4.13
%
 
483

 
28

 
 
Total fixed maturity securities
 
9,401

 
4.29
%
 
3.67
%
 
9,655

 
403

Short-term investments
 
926

 
0.02
%
 
0.01
%
 
926

 
0

Cash (5)
 
142

 
—
%
 
—
%
 
142

 
—

 
 
Total
 
$
10,469

 
3.90
%
 
3.34
%
 
$
10,723

 
$
403

 
 
 
 
 
 
 
 
 
 
 
 
Less: FG VIEs
 
115

 
12.42
%
 
8.07
%
 
73

 
14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
10,354

 
3.81
%
 
3.29
%
 
$
10,650

 
$
389

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratings (6):
 
Fair Value
 
% of Portfolio
 
 
 

 
 
 
U.S. Treasury securities and obligations of U.S. government agencies
 
$
456

 
4.7
%
 
 
 

 
 
 
Agency obligations
 
285

 
3.0
%
 
 
 
 
 
 
 
AAA/Aaa
 
1,327

 
13.7
%
 
 
 
 
 
 
 
AA/Aa
 
5,153

 
53.4
%
 
 
 
 
 
 
 
A/A
 
1,661

 
17.2
%
 
 
 
 
 
 
 
BBB
 
89

 
0.9
%
 
 
 
 
 
 
 
Below investment grade ("BIG") (7)
 
685

 
7.1
%
 
 
 
 
 
 
 
 
Total fixed maturity securities, available-for-sale
 
9,656

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less: FG VIEs
 
(92
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total fixed maturity securities, available-for-sale
 
$
9,564

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Duration of fixed maturity securities and short-term investments (in years):
 
 
 
4.9
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average ratings of fixed maturity securities and short-term investments
 
 
 
AA-
 
 
 
 
 
 


1)
Represents annualized investment income based on amortized cost and pre-tax book yields.
2)
Reflects obligations of state and local political subdivisions that have been insured by other financial guarantors. The underlying ratings of these bonds, after giving effect to the lower of the rating assigned by Standard & Poor's Ratings Services ("S&P") or Moody's Investors Service, Inc. ("Moody's"), average A+. Includes fair value of $325 million insured by AGC and AGM.
3)
Includes fair value of $180 million in subprime RMBS, which has an average rating of BIG.
4)
Includes securities purchased or obtained as part of loss mitigation or other risk management strategies.
5)
Represents operating cash and is not included in yield calculations.
6)
Ratings are represented by the lower of the Moody's and S&P classifications except for bonds purchased for loss mitigation or risk management strategies which use internal ratings classifications.
7)
Includes below investment grade securities that were purchased or obtained as part of loss mitigation or other risk management strategies of $1,905 million in par with carrying value of $685 million.


11


Assured Guaranty Ltd.
Estimated Net Exposure Amortization(1) and Estimated Future Net Premium
and Credit Derivative Revenues
(dollars in millions)
 
 
 
 
 
 
Financial Guaranty Insurance (2)
 
 
 
 
 
 
Estimated Net Debt Service Amortization
 
Estimated Ending Net Debt Service Outstanding
 
Expected PV Net Earned Premiums
 
Accretion of Discount
 
Future Net Premiums Earned (3)
 
Future Credit Derivative Revenues (4)
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013 (as of June 30)
 
 
 
$
727,997

 
 
 
 
 
 
 
 
 
 
2013 Q3
 
16,380

 
711,617

 
$
132

 
$
6

 
$
138

 
$
22

 
$
160

2013 Q4
 
15,499

 
696,118

 
125

 
6

 
131

 
19

 
150

2014
 
67,039

 
629,079

 
464

 
23

 
487

 
63

 
550

2015
 
57,834

 
571,245

 
400

 
20

 
420

 
41

 
461

2016
 
44,679

 
526,566

 
358

 
19

 
377

 
30

 
407

2017
 
44,290

 
482,276

 
319

 
18

 
337

 
23

 
360

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013-2017
 
245,721

 
482,276

 
1,798

 
92

 
1,890

 
198

 
2,088

2018-2022
 
159,625

 
322,651

 
1,204

 
70

 
1,274

 
51

 
1,325

2023-2027
 
127,458

 
195,193

 
750

 
45

 
795

 
29

 
824

2028-2032
 
89,638

 
105,555

 
448

 
26

 
474

 
24

 
498

After 2032
 
105,555

 
—

 
418

 
20

 
438

 
28

 
466

 
Total
 
$
727,997

 
 
 
$
4,618

 
$
253

 
$
4,871

 
$
330

 
$
5,201



1)
Represents the future expected amortization of current debt service outstanding (principal and interest), assuming no advance refundings, as of June 30, 2013. Actual amortization differs from expected maturities because borrowers may have the right to call or prepay guaranteed obligations and because of management's assumptions on structured finance amortization.

2)
See page 14 for ‘‘Present Value of Financial Guaranty Insurance Net Expected Loss to be Expensed.’’

3)
Includes $216 million in future net premiums earned related to FG VIEs.

4)
Excludes contracts with credit impairment.


12


Assured Guaranty Ltd.
Expected Amortization of Net Par Outstanding
(dollars in millions)

Structured Finance
 
 
 
Estimated Net Par Amortization
 
 
 
 
 
U.S. and Non-U.S. Pooled Corporate
 
U.S. RMBS
 
Financial Products (1)
 
Other Structured Finance
 
Total
 
Estimated Ending Net Par Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013 (as of June 30)
 
 
 
 
 
 
 
 
 
 
 
$
82,234

2013 Q3
 
$
2,230

 
$
791

 
$
295

 
$
296

 
$
3,612

 
78,622

2013 Q4
 
2,273

 
716

 
73

 
553

 
3,615

 
75,007

2014
 
17,355

 
2,837

 
435

 
1,752

 
22,379

 
52,628

2015
 
9,558

 
2,605

 
235

 
2,760

 
15,158

 
37,470

2016
 
4,114

 
2,233

 
137

 
1,320

 
7,804

 
29,666

2017
 
7,152

 
1,815

 
67

 
1,188

 
10,222

 
19,444

 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013-2017
 
42,682

 
10,997

 
1,242

 
7,869

 
62,790

 
19,444

2018-2022
 
2,373

 
3,386

 
318

 
3,263

 
9,340

 
10,104

2023-2027
 
504

 
1,032

 
278

 
1,760

 
3,574

 
6,530

2028-2032
 
407

 
291

 
580

 
703

 
1,981

 
4,549

After 2032
 
1,876

 
562

 
612

 
1,499

 
4,549

 
—

 
Total structured finance
 
$
47,842

 
$
16,268

 
$
3,030

 
$
15,094

 
$
82,234

 


Public Finance
 
 
 
Estimated Net Par Amortization
 
Estimated Ending Net Par Outstanding
 
 
 
 
 
 
2013 (as of June 30)
 
 
 
$
404,755

2013 Q3
 
$
7,604

 
397,151

2013 Q4
 
6,714

 
390,437

2014
 
25,197

 
365,240

2015
 
24,725

 
340,515

2016
 
20,203

 
320,312

2017
 
18,462

 
301,850

 
 
 
 
 
 
2013-2017
 
102,905

 
301,850

2018-2022
 
85,240

 
216,610

2023-2027
 
79,154

 
137,456

2028-2032
 
60,337

 
77,119

After 2032
 
77,119

 
—

 
Total public finance
 
$
404,755

 



Net par outstanding (end of period)
 
 
 
1Q-12
 
2Q-12
 
3Q-12
 
4Q-12
 
1Q-13
 
2Q-13
Public finance - U.S.
 
$
416,499

 
$
409,877

 
$
399,176

 
$
387,967

 
$
378,456

 
$
371,055

Public finance - non-U.S.
 
39,913

 
38,769

 
38,720

 
37,540

 
35,067

 
33,700

Structured finance - U.S.
 
87,784

 
83,430

 
78,504

 
74,695

 
70,280

 
65,396

Structured finance - non-U.S.
 
22,902

 
20,858

 
19,993

 
19,691

 
18,014

 
16,838

 
Total
 
$
567,098

 
$
552,934

 
$
536,393

 
$
519,893

 
$
501,817

 
$
486,989


1)
See Glossary for description of financial products.


13


Assured Guaranty Ltd.
Present Value ("PV") of Financial Guaranty Insurance Net Expected Loss to be Expensed
As of June 30, 2013
(dollars in millions)


 
 
 
Net Expected Loss to be Expensed (1)
 
 
 
Operating(2)
 
GAAP(2)
 
 
 
 
 
 
2013 Q3
 
$
20

 
$
18

2013 Q4
 
18

 
17

2014
 
64

 
54

2015
 
59

 
46

2016
 
52

 
40

2017
 
45

 
36

 
 
 
 
 
 
2013-2017
 
258

 
211

2018-2022
 
156

 
129

2023-2027
 
75

 
62

2028-2032
 
38

 
30

After 2032
 
31

 
21

 
Total expected PV of net expected loss to be expensed
 
558

 
453

Discount
 
456

 
411

 
Total future value
 
$
1,014

 
$
864



1)
The expected present value of net loss to be expensed is discounted by weighted-average risk free rates ranging from 0.0% to 4.03% for U.S. dollar denominated obligations.

2)
Operating income includes net expected loss to be expensed on consolidated FG VIEs. Losses on consolidated FG VIEs are eliminated for GAAP.



14


Assured Guaranty Ltd.
Financial Guaranty Profile (1 of 4)
(dollars in millions)


Net Par Outstanding and Average Rating by Asset Type

 
 
 
June 30, 2013
 
December 31, 2012
 
 
 
Net Par Outstanding
 
Avg. Internal Rating
 
Net Par Outstanding
 
Avg. Internal Rating
U.S. public finance:
 
 
 
 
 
 
 
 
 
General obligation
 
$
163,218

 
A+
 
$
169,985

 
A+
 
Tax backed
 
70,775

 
A+
 
73,787

 
A+
 
Municipal utilities
 
59,864

 
A
 
62,116

 
A
 
Transportation
 
31,892

 
A
 
33,799

 
A
 
Healthcare
 
17,084

 
A
 
17,838

 
A
 
Higher education
 
14,576

 
A
 
15,770

 
A+
 
Infrastructure finance
 
4,042

 
BBB
 
4,210

 
BBB
 
Housing
 
4,035

 
A+
 
4,633

 
AA-
 
Investor-owned utilities
 
1,042

 
A-
 
1,069

 
A-
 
Other public finance
 
4,527

 
A
 
4,760

 
A
 
 
Total U.S. public finance
 
371,055

 
A
 
387,967

 
A
Non-U.S. public finance:
 
 
 
 
 
 
 
 
 
Infrastructure finance
 
14,360

 
BBB
 
15,812

 
BBB
 
Regulated utilities
 
10,726

 
BBB+
 
12,494

 
BBB+
 
Pooled infrastructure
 
3,005

 
AA-
 
3,200

 
AA-
 
Other public finance
 
5,609

 
A
 
6,034

 
A
 
 
Total non-U.S. public finance
 
33,700

 
BBB+
 
37,540

 
BBB+
Total public finance
 
$
404,755

 
A
 
$
425,507

 
A
 
 
 
 
 
 
 
 
 
 
U.S. structured finance:
 
 
 
 
 
 
 
 
 
Pooled corporate obligations
 
$
35,319

 
AAA
 
$
41,886

 
AAA
 
RMBS
 
16,268

 
BB+
 
17,827

 
BB+
 
CMBS and other commercial real estate related exposures
 
4,036

 
AAA
 
4,247

 
AAA
 
Financial products
 
3,030

 
AA-
 
3,653

 
AA-
 
Insurance securitizations
 
2,440

 
AA-
 
2,190

 
A+
 
Consumer receivables
 
2,270

 
BBB
 
2,369

 
BBB+
 
Commercial receivables
 
791

 
BBB+
 
1,025

 
BBB+
 
Structured credit
 
184

 
B+
 
319

 
CCC+
 
Other structured finance
 
1,058

 
A-
 
1,179

 
BBB+
 
 
Total U.S. structured finance
 
65,396

 
AA-
 
74,695

 
AA-
 
 
 
 
 
 
 
 
 
 
Non-U.S. structured finance:
 
 
 
 
 
 
 
 
 
Pooled corporate obligations
 
12,523

 
AAA
 
14,813

 
AAA
 
RMBS
 
1,309

 
AA-
 
1,424

 
AA-
 
Commercial receivables
 
1,305

 
A-
 
1,463

 
A-
 
Insurance securitizations
 
923

 
CCC-
 
923

 
CCC-
 
Structured credit
 
401

 
BBB
 
591

 
BBB
 
CMBS and other commercial real estate related exposures
 
—

 
—
 
100

 
AAA
 
Other structured finance
 
377

 
AAA
 
377

 
AAA
 
 
Total non-U.S. structured finance
 
16,838

 
AA
 
19,691

 
AA
Total structured finance
 
$
82,234

 
AA-
 
$
94,386

 
AA-
 
 
 
 
 
 
 
 
 
 
Total net par outstanding
 
$
486,989

 
A+
 
$
519,893

 
A+


Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.



15


Assured Guaranty Ltd.
Financial Guaranty Profile (2 of 4)
As of June 30, 2013
(dollars in millions)


Distribution by Ratings of Financial Guaranty Portfolio

 
 
 
Public Finance - U.S.
 
Public Finance - Non-U.S.
 
Structured Finance - U.S.
 
Structured Finance - Non-U.S.
 
Consolidated
Ratings:
 
Net Par Outstanding
%
 
Net Par Outstanding
%
 
Net Par Outstanding
%
 
Net Par Outstanding
%
 
Net Par Outstanding
%
AAA
 
$
4,311

1.2
%
 
$
1,657

4.9
%
 
$
36,292

55.5
%
 
$
11,079

65.8
%
 
$
53,339

11.0
%
AA
 
115,820

31.2
%
 
487

1.4
%
 
9,808

15.0
%
 
669

4.0
%
 
126,784

26.0
%
A
 
202,440

54.6
%
 
8,965

26.6
%
 
2,872

4.4
%
 
863

5.1
%
 
215,140

44.2
%
BBB
 
43,554

11.7
%
 
20,701

61.5
%
 
3,526

5.4
%
 
2,313

13.7
%
 
70,094

14.4
%
BIG
 
4,930

1.3
%
 
1,890

5.6
%
 
12,898

19.7
%
 
1,914

11.4
%
 
21,632

4.4
%
 
Total net par outstanding
 
$
371,055

100.0
%
 
$
33,700

100.0
%
 
$
65,396

100.0
%
 
$
16,838

100.0
%
 
$
486,989

100.0
%

Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.





16


Assured Guaranty Ltd.
Financial Guaranty Profile (3 of 4)
As of June 30, 2013
(dollars in millions)


Geographic Distribution of Financial Guaranty Portfolio

 
 
 
Net Par Outstanding
 
% of Total
U.S.:
 
 
 
 
Public finance
 
 
 
 
 
California
 
$
56,209

 
11.5
%
 
Pennsylvania
 
29,844

 
6.1
%
 
New York
 
29,699

 
6.1
%
 
Texas
 
28,349

 
5.8
%
 
Illinois
 
24,688

 
5.1
%
 
Florida
 
23,297

 
4.8
%
 
New Jersey
 
15,370

 
3.2
%
 
Michigan
 
14,850

 
3.0
%
 
Georgia
 
9,618

 
2.0
%
 
Ohio
 
9,445

 
1.9
%
 
Other states
 
129,686

 
26.6
%
 
 
Total public finance
 
371,055

 
76.1
%
 
Structured finance (multiple states)
 
65,396

 
13.4
%
 
 
Total U.S.
 
436,451

 
89.5
%
 
 
 
 
 
 
Non-U.S.:
 
 
 
 
 
United Kingdom
 
21,224

 
4.4
%
 
Australia
 
6,516

 
1.3
%
 
Canada
 
4,001

 
0.8
%
 
France
 
3,738

 
0.8
%
 
Italy
 
2,041

 
0.4
%
 
Other
 
13,018

 
2.8
%
 
 
Total non-U.S.
 
50,538

 
10.5
%
 
 
 
 
 
 
Total net par outstanding
 
$
486,989

 
100.0
%




17


Assured Guaranty Ltd.
Financial Guaranty Profile (4 of 4)
As of June 30, 2013
(dollars in millions)


Net Economic Exposure to Selected European Countries

 
 
 
Greece
 
Hungary
 
Ireland
 
Italy
 
Portugal
 
Spain
 
Total
Sovereign and sub-sovereign exposure:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Public finance
 
$
—

 
$
—

 
$
—

 
$
981

 
$
102

 
$
261

 
$
1,344

 
Infrastructure finance
 
—

 
413

 
23

 
83

 
97

 
167

 
783

 
 
Total sovereign and sub-sovereign exposure
 
—

 
413

 
23

 
1,064

 
199

 
428

 
2,127

Non-sovereign exposure:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regulated utilities
 
—

 
—

 
—

 
215

 
—

 
0

 
215

 
RMBS
 
—

 
214

 
137

 
479

 
—

 
—

 
830

 
Commercial receivables
 
—

 
1

 
12

 
59

 
14

 
3

 
89

 
Pooled corporate obligations
 
22

 
—

 
172

 
224

 
15

 
499

 
932

 
 
Total non-sovereign exposure
 
22

 
215

 
321

 
977

 
29

 
502

 
2,066

 
 
Total
 
$
22

 
$
628

 
$
344

 
$
2,041

 
$
228

 
$
930

 
$
4,193

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total BIG
 
$
—

 
$
591

 
$
7

 
$
2

 
$
118

 
$
412

 
$
1,130



Note: While the Company’s exposures are shown in U.S. dollars, the obligations the Company insures are in various currencies, including U.S. dollars, Euros and British pounds sterling. Included in the tables above is $137 million of reinsurance assumed on a 2004 - 2006 pool of Irish residential mortgages that is part of the Company’s remaining legacy mortgage reinsurance business. One of the residential mortgage-backed securities included in the table above includes residential mortgages in both Italy and Germany, and only the portion of the transaction equal to the portion of the original mortgage pool in Italian mortgages is shown in the table.



18


Assured Guaranty Ltd.
Direct Pooled Corporate Obligations Profile
As of June 30, 2013
(dollars in millions)


Distribution of Direct Pooled Corporate Obligations by Ratings
 
 
 
Net Par Outstanding
 
% of Total
 
Avg. Initial Credit Enhancement
 
Avg. Current Credit Enhancement
Ratings:
 
 
 
 
 
 
 
 
 
AAA
 
$
39,946

 
84.2
%
 
29.7
%
 
30.7
%
 
AA
 
1,994

 
4.2
%
 
39.8
%
 
39.2
%
 
A
 
685

 
1.4
%
 
46.3
%
 
46.2
%
 
BBB
 
1,868

 
4.0
%
 
35.2
%
 
29.9
%
 
BIG
 
2,926

 
6.2
%
 
37.4
%
 
21.3
%
 
 
Total exposures
 
$
47,419

 
100.0
%
 
31.1
%
 
30.7
%


Distribution of Direct Pooled Corporate Obligations by Asset Class
 
 
 
Net Par Outstanding
 
% of Total
 
Avg. Initial Credit Enhancement
 
Avg. Current Credit Enhancement
 
Avg. Rating
Asset class:
 
 
 
 
 
 
 
 
 
 
 
CBOs/CLOs
 
$
26,070

 
54.9
%
 
30.8
%
 
33.1
%
 
AAA
 
Synthetic investment grade pooled corporates
 
9,626

 
20.3
%
 
21.6
%
 
19.7
%
 
AAA
 
Market value CDOs of corporates
 
3,111

 
6.6
%
 
31.2
%
 
32.7
%
 
AAA
 
Synthetic high yield pooled corporates
 
2,690

 
5.7
%
 
47.2
%
 
41.1
%
 
AAA
 
Trust preferred
 
 
 


 
 
 
 
 
 
 
 
Banks and insurance
 
2,700

 
5.7
%
 
46.1
%
 
38.6
%
 
BBB
 
 
U.S. mortgage and real estate investment trusts
 
1,713

 
3.6
%
 
50.1
%
 
34.5
%
 
BB-
 
 
European mortgage and real estate investment trusts
 
810

 
1.7
%
 
36.8
%
 
30.6
%
 
BBB-
 
Other pooled corporates
 
699

 
1.5
%
 
0.2
%
 
0.4
%
 
BBB-
 
 
Total exposures
 
$
47,419

 
100.0
%
 
31.1
%
 
30.7
%
 
AAA

Please refer to the Glossary for an explanation of internal ratings, performance indicators and sectors.



19


Assured Guaranty Ltd.
Consolidated U.S. RMBS Profile
As of June 30, 2013
(dollars in millions)


Distribution of U.S. RMBS by Rating and Type of Exposure
Ratings:
 
Prime First Lien
 
Closed End Seconds
 
HELOC
 
Alt-A First Lien
 
Option ARMs
 
Subprime First Lien
 
Total Net Par Outstanding
 
AAA
 
$
4

 
$
0

 
$
47

 
$
241

 
$
5

 
$
2,283

 
$
2,580

 
AA
 
107

 
106

 
119

 
432

 
456

 
1,851

 
3,070

 
A
 
1

 
0

 
228

 
7

 
27

 
118

 
383

 
BBB
 
41

 
—

 
6

 
257

 
24

 
289

 
617

 
BIG
 
442

 
321

 
2,480

 
3,322

 
700

 
2,353

 
9,618

 
 
Total exposures
 
$
595

 
$
428

 
$
2,881

 
$
4,259

 
$
1,212

 
$
6,894

 
$
16,268



Distribution of U.S. RMBS by Year Insured(1) and Type of Exposure
Year insured:
 
Prime First Lien
 
Closed End Seconds
 
HELOC
 
Alt-A First Lien
 
Option ARMs
 
Subprime First Lien
 
Total Net Par Outstanding
 
2004 and prior
 
$
29

 
$
1

 
$
210

 
$
92

 
$
32

 
$
1,307

 
$
1,671

 
2005
 
165

 
—

 
649

 
553

 
47

 
209

 
1,622

 
2006
 
99

 
192

 
846

 
362

 
119

 
2,709

 
4,327

 
2007
 
302

 
235

 
1,176

 
2,138

 
949

 
2,593

 
7,393

 
2008
 
—

 
—

 
—

 
1,114

 
65

 
76

 
1,255

 
 
Total exposures
 
$
595

 
$
428

 
$
2,881

 
$
4,259

 
$
1,212

 
$
6,894

 
$
16,268



Distribution of U.S. RMBS by Rating and Year Insured
Year insured:
 
AAA Rated
 
AA Rated
 
A Rated
 
BBB Rated
 
BIG Rated
 
Total
 
2004 and prior
 
$
1,036

 
$
136

 
$
45

 
$
108

 
$
346

 
$
1,671

 
2005
 
129

 
185

 
2

 
34

 
1,273

 
1,622

 
2006
 
1,319

 
1,386

 
64

 
114

 
1,445

 
4,327

 
2007
 
10

 
1,298

 
272

 
362

 
5,450

 
7,393

 
2008
 
87

 
65

 
—

 
—

 
1,103

 
1,255

 
 
Total exposures
 
$
2,580

 
$
3,070

 
$
383

 
$
617

 
$
9,618

 
$
16,268

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Total
 
15.9
%
 
18.9
%

2.3
%

3.8
%

59.1
%

100.0
%

1)
Assured Guaranty has not insured any U.S. RMBS transactions since 2008.

Please refer to the Glossary for a description of performance indicators and sectors.


20


Assured Guaranty Ltd.
Direct U.S. RMBS Profile (1 of 2)
As of June 30, 2013
(dollars in millions)

Distribution of Direct U.S. RMBS Insured January 1, 2005 or Later by Exposure Type, Average Pool Factor, Subordination, Cumulative Losses and 60+ Day Delinquencies

U.S. Prime First Lien
Year insured
 
Net Par Outstanding
 
Pool Factor
 
Subordination
 
Cumulative Losses
 
60+ Day Delinquencies
 
Number of Transactions
 
2005
 
$
162

 
26.1
%
 
4.8
%
 
2.5
%
 
11.6
%
 
6

 
2006
 
99

 
48.7
%
 
8.4
%
 
0.7
%
 
17.3
%
 
1

 
2007
 
302

 
38.0
%
 
4.3
%
 
6.1
%
 
21.1
%
 
1

 
2008
 
—

 
—
%
 
—
%
 
—
%
 
—
%
 
—

 
 
Total
 
$
563

 
36.5
%
 
5.1
%
 
4.1
%
 
17.7
%
 
8


U.S. Closed End Seconds
Year insured
 
Net Par Outstanding
 
Pool Factor
 
Subordination
 
Cumulative Losses
 
60+ Day Delinquencies
 
Number of Transactions
 
2005
 
$
—

 
—
%
 
—
%
 
—
%
 
—
%
 
—

 
2006
 
183

 
11.5
%
 
—
%
 
60.3
%
 
5.7
%
 
1

 
2007
 
235

 
13.7
%
 
—
%
 
70.1
%
 
6.1
%
 
8

 
2008
 
—

 
—
%
 
—
%
 
—
%
 
—
%
 
—

 
 
Total
 
$
418

 
12.8
%
 
—
%
 
65.8
%
 
5.9
%
 
9


U.S. HELOC
Year insured
 
Net Par Outstanding
 
Pool Factor
 
Subordination
 
Cumulative Losses
 
60+ Day Delinquencies
 
Number of Transactions
 
2005
 
$
606

 
13.2
%
 
3.1
%
 
17.5
%
 
9.2
%
 
6

 
2006
 
829

 
21.2
%
 
3.6
%
 
37.5
%
 
6.4
%
 
7

 
2007
 
1,176

 
34.8
%
 
2.5
%
 
32.8
%
 
5.3
%
 
9

 
2008
 
—

 
—
%
 
—
%
 
—
%
 
—
%
 
—

 
 
Total
 
$
2,612

 
25.5
%
 
3.0
%
 
30.8
%
 
6.6
%
 
22


U.S. Alt-A First Lien
Year insured
 
Net Par Outstanding
 
Pool Factor
 
Subordination
 
Cumulative Losses
 
60+ Day Delinquencies
 
Number of Transactions
 
2005
 
$
551

 
25.9
%
 
8.5
%
 
7.4
%
 
18.7
%
 
21

 
2006
 
362

 
31.8
%
 
0.0
%
 
21.3
%
 
38.0
%
 
7

 
2007
 
2,138

 
39.5
%
 
1.2
%
 
17.0
%
 
28.7
%
 
12

 
2008
 
1,114

 
37.6
%
 
15.1
%
 
16.4
%
 
26.3
%
 
5

 
 
Total
 
$
4,164

 
36.5
%
 
5.8
%
 
16.0
%
 
27.5
%
 
45



Please refer to the Glossary for a description of performance indicators and sectors.




21


Assured Guaranty Ltd.
Direct U.S. RMBS Profile (2 of 2)
As of June 30, 2013
(dollars in millions)

Distribution of Direct U.S. RMBS Insured January 1, 2005 or Later by Exposure Type, Average Pool Factor, Subordination, Cumulative Losses and 60+ Day Delinquencies

U.S. Option ARMs
Year insured
 
Net Par Outstanding
 
Pool Factor
 
Subordination
 
Cumulative Losses
 
60+ Day Delinquencies
 
Number of Transactions
 
2005
 
$
41

 
15.8
%
 
11.6
%
 
10.3
%
 
14.8
%
 
2

 
2006
 
113

 
31.6
%
 
—
%
 
20.4
%
 
36.0
%
 
5

 
2007
 
949

 
38.6
%
 
0.9
%
 
22.3
%
 
32.8
%
 
11

 
2008
 
65

 
41.2
%
 
48.3
%
 
16.9
%
 
26.2
%
 
1

 
 
Total
 
$
1,168

 
37.2
%
 
3.8
%
 
21.4
%
 
32.1
%
 
19


U.S. Subprime First Lien
Year insured
 
Net Par Outstanding
 
Pool Factor
 
Subordination
 
Cumulative Losses
 
60+ Day Delinquencies
 
Number of Transactions
 
2005
 
$
200

 
34.8
%
 
18.7
%
 
8.8
%
 
28.6
%
 
4

 
2006
 
2,704

 
18.5
%
 
61.4
%
 
19.7
%
 
33.2
%
 
4

 
2007
 
2,593

 
42.2
%
 
11.3
%
 
26.4
%
 
41.5
%
 
13

 
2008
 
76

 
54.1
%
 
17.4
%
 
21.6
%
 
30.8
%
 
1

 
 
Total
 
$
5,573

 
30.6
%
 
35.9
%
 
22.4
%
 
36.8
%
 
22



Please refer to the Glossary for a description of performance indicators and sectors.



22


Assured Guaranty Ltd.
Direct U.S. Commercial Real Estate Profile
As of June 30, 2013
(dollars in millions)


Distribution of Direct U.S. CMBS Insured January 1, 2005 or Later by Exposure Type, Internal Rating, Average Pool Factor, Subordination, Cumulative Losses and 60+ Day Delinquencies
                                                                                                                                                                                                 
U.S. CMBS
Rating:
 
Net Par Outstanding
 
Pool Factor
 
Subordination
 
Cumulative Losses
 
60+ Day Delinquencies
 
Number of Transactions
 
AAA
 
$
3,367

 
68.7
%
 
39.6
%
 
3.0
%
 
8.1
%
 
159

 
AA
 
—

 
—
%
 
—
%
 
—
%
 
—
%
 
—

 
A
 
38

 
15.7
%
 
43.0
%
 
2.8
%
 
3.8
%
 
1

 
BBB
 
—

 
—
%
 
—
%
 
—
%
 
—
%
 
—

 
BIG
 
—

 
—
%
 
—
%
 
—
%
 
—
%
 
—

 
 
Total exposures
 
$
3,405

 
68.1
%
 
39.6
%
 
3.0
%
 
8.1
%
 
160


CDOs of U.S. Commercial Real Estate(1) 
 
 
Net Par Outstanding
 
% of Total
 
Avg. Initial Credit Enhancement
 
Avg. Current Credit Enhancement
CDOs of commercial real estate
 
$
376

 
100.0
%
 
52.3
%
 
54.4
%
 
 
Total exposures
 
$
376

 
100.0
%
 
52.3
%
 
54.4
%


1)
Represents other U.S. Commercial Real Estate not included in the table above.

Please refer to the Glossary for a description of performance indicators and sectors.



23


Assured Guaranty Ltd.
Below Investment Grade Exposures (1 of 5)
(dollars in millions)

BIG Exposures by Asset Exposure Type
 
 
 
BIG Net Par Outstanding(1)
 
 
 
June 30, 2013
 
December 31, 2012
U.S. public finance:
 
 
 
 
 
Infrastructure finance
 
$
1,711

 
$
1,695

 
General obligation
 
1,108

 
1,122

 
Municipal utilities
 
966

 
596

 
Tax backed
 
472

 
514

 
Transportation
 
240

 
245

 
Healthcare
 
57

 
58

 
Higher education
 
17

 
18

 
Housing
 
17

 
2

 
Other public finance
 
342

 
353

 
 
Total U.S. public finance
 
4,930

 
4,603

Non-U.S. public finance:
 
 
 
 
 
Infrastructure finance
 
1,528

 
1,923

 
Other public finance
 
362

 
370

 
 
Total non-U.S. public finance
 
1,890

 
2,293

Total public finance
 
$
6,820

 
$
6,896

 
 
 
 
 
 
U.S. structured finance:
 
 
 
 
 
RMBS
 
$
9,618

 
$
10,605

 
Pooled corporate obligations
 
2,412

 
2,873

 
Consumer receivables
 
404

 
421

 
Structured credit
 
184

 
319

 
Commercial receivables
 
149

 
182

 
Other structured finance
 
131

 
132

 
 
Total U.S. structured finance
 
12,898

 
14,532

Non-U.S. structured finance:
 
 
 
 
 
Insurance securitizations
 
923

 
923

 
Pooled corporate obligations
 
768

 
805

 
RMBS
 
214

 
220

 
Commercial receivables
 
9

 
16

 
 
Total non-U.S. structured finance
 
1,914

 
1,964

Total structured finance
 
$
14,812

 
$
16,496

Total BIG net par outstanding
 
$
21,632

 
$
23,392



1)
Securities purchased for loss mitigation purposes represented $1,193 million and $1,133 million of gross par outstanding as of June 30, 2013 and December 31, 2012, respectively. In addition, under the terms of certain credit derivative contracts, the referenced obligations in such contracts have been delivered to the Company and recorded in other invested assets in the consolidated balance sheets. Such amounts totaled $219 million and $220 million in gross par outstanding as of June 30, 2013 and December 31, 2012, respectively.

Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.


24



Assured Guaranty Ltd.
Below Investment Grade Exposures (2 of 5)
(dollars in millions)


Net Par Outstanding by BIG Category(1)  
 
 
 
Financial Guaranty Insurance and Credit Derivatives Surveillance Categories(2)
 
 
 
June 30, 2013
 
December 31, 2012
Category 1
 
 
 
 
 
U.S. public finance
 
$
3,389

 
$
3,290

 
Non-U.S. public finance
 
992

 
2,293

 
U.S. structured finance
 
2,158

 
2,687

 
Non-U.S. structured finance
 
942

 
984

 
 
Total Category 1
 
7,481

 
9,254

Category 2
 
 
 
 
 
U.S. public finance
 
659

 
500

 
Non-U.S. public finance
 
898

 
—

 
U.S. structured finance
 
4,205

 
4,550

 
Non-U.S. structured finance
 
49

 
57

 
 
Total Category 2
 
5,811

 
5,107

Category 3
 
 
 
 
 
U.S. public finance
 
882

 
813

 
Non-U.S. public finance
 
—

 
—

 
U.S. structured finance
 
6,535

 
7,295

 
Non-U.S. structured finance
 
923

 
923

 
 
Total Category 3
 
8,340

 
9,031

 
 
 
BIG Total
 
$
21,632

 
$
23,392



1)
Assured Guaranty's surveillance department is responsible for monitoring our portfolio of credits and maintains a list of BIG credits. BIG Category 1: Below investment grade transactions showing sufficient deterioration to make lifetime losses possible, but for which none are currently expected. Transactions on which claims have been paid but are expected to be fully reimbursed (other than investment grade transactions on which only liquidity claims have been paid) are in this category. BIG Category 2: Below investment grade transactions for which lifetime losses are expected but for which no claims (other than liquidity claims) have yet been paid. BIG Category 3: Below investment grade transactions for which lifetime losses are expected and on which claims (other than liquidity claims) have been paid. Transactions remain in this category when claims have been paid and only a recoverable remains.

2)
Securities purchased for loss mitigation purposes represented $1,193 million and $1,133 million of gross par outstanding as of June 30, 2013 and December 31, 2012, respectively. In addition, under the terms of certain credit derivative contracts, the referenced obligations in such contracts have been delivered to the Company and recorded in other invested assets in the consolidated balance sheets. Such amounts totaled $219 million and $220 million in gross par outstanding as of June 30, 2013 and December 31, 2012, respectively.



25


Assured Guaranty Ltd.
Below Investment Grade Exposures (3 of 5)
As of June 30, 2013
(dollars in millions)


Public Finance BIG Exposures Greater Than $50 Million

 
 
 
Net Par Outstanding
 
Internal Rating
Name or description
 
 
 
 
U.S. public finance:
 
 
 
 
 
 
 
Skyway Concession Company LLC
 
$
1,134

 
BB
 
 
 
Jefferson County Alabama Sewer
 
464

 
D
 
 
 
Puerto Rico Aqueduct & Sewer Authority
 
384

 
BB+
 
 
 
Louisville Arena Authority Inc.
 
337

 
BB
 
 
 
Detroit (City of) Michigan
 
321

 
C+
 
 
 
San Joaquin Hills California Transportation
 
240

 
BB-
 
 
 
GMAC Military Housing Trust XVIII (Hickam Air Force Base)
 
216

 
BB
 
 
 
Lackawanna County, Pennsylvania
 
181

 
BB-
 
 
 
Jefferson County Alabama School Sales Tax
 
169

 
BB
 
 
 
Stockton City, California (includes $40.3 million purchased, 26% owned)¹
 
155

 
D
 
 
 
Woonsocket (City of), Rhode Island
 
150

 
BB
 
 
 
Guaranteed Student Loan Transaction
 
143

 
B
 
 
 
Orlando Tourist Development Tax - Florida
 
118

 
B+
 
 
 
Harrisburg (City of) Pennsylvania General Obligation
 
92

 
B-
 
 
 
Xenia Rural Water District, Iowa
 
79

 
B
 
 
 
Rockland County New York
 
72

 
BB+
 
 
 
Guaranteed Student Loan Transaction
 
54

 
CCC
 
 
 
Bridgeview Village Illinois General Obligation
 
50

 
BB+
 
 
Total
 
$
4,359

 
 
 
 
 
 
 
 
Non-U.S. public finance:
 
 
 
 
 
 
 
Reliance Rail Finance Pty. Limited
 
$
611

 
BB
 
 
 
M6 Duna Autopalya Koncesszios Zartkoruen Mukodo Reszvenytarsasag
 
377

 
BB
 
 
 
Cross City Tunnel Motorway Finance Limited
 
284

 
BB
 
 
 
Valencia Fair
 
250

 
BB-
 
 
 
Autovia de la Mancha, S.A.
 
142

 
BB-
 
 
 
Alte Liebe I Limited (Wind Farm)
 
81

 
BB
 
 
 
Metropolitano de Porto Lease and Sublease of Railroad Equipment
 
56

 
B+
 
 
Total
 
$
1,801

 
 
Total
 
$
6,160

 
 

1)
Represents amounts of gross par which were purchased or obtained as part of loss mitigation strategies and recorded as part of the investment portfolio.

Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.



26


Assured Guaranty Ltd.
Below Investment Grade Exposures (4 of 5)
As of June 30, 2013
(dollars in millions)

Structured Finance BIG Exposures Greater Than $50 Million
 
 
 
Net Par Outstanding
 
Internal Rating
 
Current Credit Enhancement
 
60+ Day Delinquencies
Name or description
 
 
 
 
 
 
 
 
U.S. structured finance:
 
 
 
 
 
 
 
 
 
U.S. RMBS:
 
 
 
 
 
 
 
 
 
 
 
Deutsche Alt-A Securities Mortgage Loan 2007-2
 
$
593

 
CCC
 
0.0%
 
25.5%
 
 
 
MABS 2007-NCW (includes $39.1 million purchased, 8% owned)¹
 
498

 
B
 
18.3%
 
56.5%
 
 
 
Option One 2007-FXD2
 
344

 
CCC
 
4.4%
 
28.6%
 
 
 
Private Residential Mortgage Transaction
 
342

 
CCC
 
3.9%
 
26.4%
 
 
 
Countrywide HELOC 2006-I
 
328

 
CCC
 
0.0%
 
5.1%
 
 
 
Private Residential Mortgage Transaction
 
306

 
B
 
14.2%
 
25.2%
 
 
 
Deutsche Alt-A Securities Mortgage Loan 2007-3
 
303

 
B
 
0.2%
 
19.7%
 
 
 
MortgageIT Securities Corp. Mortgage Loan 2007-2
 
302

 
B
 
4.3%
 
21.1%
 
 
 
Private Residential Mortgage Transaction
 
292

 
CCC
 
4.3%
 
24.2%
 
 
 
Private Residential Mortgage Transaction
 
289

 
CCC
 
—%
 
30.2%
 
 
 
AAA Trust 2007-2 (includes $127.3 million purchased, 47% owned)¹
 
268

 
CCC
 
7.8%
 
35.2%
 
 
 
Countrywide HELOC 2006-F (includes $79.0 million purchased, 30% owned)¹
 
261

 
CCC
 
0.0%
 
11.2%
 
 
 
Nomura Asset Accept. Corp. 2007-1 (includes $0.6 million purchased, 0.2% owned)¹
 
257

 
CCC
 
0.0%
 
39.2%
 
 
 
Private Residential Mortgage Transaction
 
235

 
B
 
10.3%
 
25.7%
 
 
 
Countrywide Home Equity Loan Trust 2005-J
 
204

 
CCC
 
0.0%
 
10.6%
 
 
 
Countrywide Home Equity Loan Trust 2007-D
 
203

 
CCC
 
0.0%
 
5.8%
 
 
 
Countrywide HELOC 2005-D
 
201

 
CCC
 
0.0%
 
10.6%
 
 
 
Terwin Mortgage Trust 2006-10SL (includes $139.8 million purchased, 76% owned)¹
 
183

 
CCC
 
—%
 
5.7%
 
 
 
Soundview 2007-WMC1
 
177

 
CCC
 
—%
 
62.6%
 
 
 
Countrywide HELOC 2007-A(includes $15.8 million purchased, 9% owned)¹
 
172

 
CCC
 
0.0%
 
5.0%
 
 
 
Countrywide HELOC 2007-B
 
158

 
CCC
 
0.0%
 
4.6%
 
 
 
GMACM 2004-HE3
 
155

 
CCC
 
0.0%
 
3.4%
 
 
 
New Century 2005-A
 
149

 
CCC
 
14.2%
 
28.3%
 
 
 
Renaissance (DELTA) 2007-3 (includes $131.5 million purchased, 91% owned)¹
 
145

 
CCC
 
2.4%
 
30.0%
 
 
 
Private Residential Mortgage Transaction
 
144

 
BB
 
20.1%
 
30.2%
 
 
 
IndyMac 2007-H1 HELOC
 
125

 
CCC
 
0.0%
 
5.1%
 
 
 
FHABS 2007-HE1 HELOC
 
125

 
BB
 
0.0%
 
2.1%
 
 
 
CSAB 2006-3
 
114

 
CCC
 
0.0%
 
44.5%
 
 
 
FHABS 2006-HE2 HELOC
 
107

 
BB
 
0.0%
 
2.5%
 
 
 
Countrywide HELOC 2005-C
 
94

 
CCC
 
0.0%
 
10.1%
 
 
 
Taylor Bean & Whitaker 2007-2 (includes $22.8 million purchased, 28% owned)¹
 
81

 
CCC
 
0.0%
 
21.2%
 
 
 
Soundview Home Loan Trust 2008-1
 
76

 
CCC
 
17.4%
 
30.8%
 
 
 
CSAB 2006-2 (includes $11.0 million purchased, 15% owned)¹
 
73

 
CCC
 
0.0%
 
40.2%
 
 
 
American Home Mortgage Assets Trust 2007-4
 
68

 
CCC
 
0.0%
 
35.6%
 
 
 
MASTR Asset-Backed Securities Trust 2005-NC2
 
66

 
CCC
 
—%
 
27.5%
 
 
 
FlagStar HELOC 2005-1
 
65

 
BB
 
27.1%
 
3.4%
 
 
 
FlagStar HELOC 2006-2
 
65

 
B
 
28.9%
 
2.3%
 
 
 
CSMC 2007-3 (includes $7.9 million purchased, 13% owned)¹
 
59

 
CCC
 
0.0%
 
32.2%
 
 
 
Terwin Mortgage Trust 2005-16HE
 
58

 
CCC
 
—%
 
28.1%
 
 
 
Lehman Excess Trust 2007-16N
 
54

 
CCC
 
0.0%
 
35.0%
 
 
 
Terwin Mortgage Trust 2007-6ALT (100% owned)¹
 
52

 
CCC
 
0.0%
 
32.1%
 
 
 
Total U.S. RMBS
 
$
7,791

 
 
 
 
 
 

1)
Represents amounts of gross par which were purchased or obtained as part of loss mitigation strategies and recorded as part of the investment portfolio.

Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.

27


Assured Guaranty Ltd.
Below Investment Grade Exposures (5 of 5)
As of June 30, 2013
(dollars in millions)

Structured Finance BIG Exposures Greater Than $50 Million (continued)
 
 
 
Net Par Outstanding
 
Internal Rating
 
Current Credit Enhancement
Name or description
 
 
 
 
 
 
U.S. structured finance:
 
 
 
 
 
 
 
Other:
 
 
 
 
 
 
 
 
Taberna Preferred Funding IV, LTD
 
$
292

 
CCC
 
22.7%
 
 
Taberna Preferred Funding III, LTD
 
271

 
CCC
 
15.8%
 
 
Alesco Preferred Funding XVI, LTD.
 
227

 
B+
 
18.3%
 
 
Taberna Preferred Funding II, LTD.
 
209

 
CCC
 
20.2%
 
 
Alesco Preferred Funding XVII, LTD.
 
175

 
B+
 
25.3%
 
 
Attentus CDO I Limited
 
161

 
BB
 
37.6%
 
 
Trapeza CDO XI
 
154

 
BB-
 
38.4%
 
 
Taberna Preferred Funding VI, LTD
 
152

 
B-
 
15.7%
 
 
US Capital Funding IV, LTD
 
141

 
B-
 
8.7%
 
 
Alesco Preferred Funding VII
 
127

 
BB+
 
34.1%
 
 
Preferred Term Securities XIX, LTD.
 
126

 
BB+
 
38.2%
 
 
Alesco Preferred Funding VI
 
122

 
BB+
 
40.6%
 
 
Private Other Non-Municipal Transaction (100% owned)¹
 
121

 
B
 
N/A
 
 
NRG Peaker² (100% owned)¹
 
116

 
B
 
N/A
 
 
Preferred Term Securities XVI, LTD.
 
104

 
B+
 
32.9%
 
 
National Collegiate Trust Series 2007-4
 
74

 
CCC
 
N/A
 
 
Conseco Finance Manufactured Housing Series 2001-2
 
69

 
CCC
 
15.5%
 
 
National Collegiate Trust Series 2006-2
 
68

 
B
 
N/A
 
 
CAPCO - Excess SIPC Excess of Loss Reinsurance
 
63

 
BB
 
N/A
 
 
GreenPoint 2000-4
 
54

 
CCC
 
5.5%
 
 
National Collegiate Trust Series 2007-3
 
52

 
CCC
 
N/A
 
 
Preferred Term Securities XVIII, LTD.
 
52

 
BB
 
38.3%
 
 
America West Airlines Series 2000-1 G-1
 
50

 
BB
 
N/A
 
 
Subtotal other
 
$
2,980

 
 
 
 
 
 
Subtotal U.S. structured finance
 
$
10,772

 
 
 
 
 
 
 
 
 
 
 
 
Non-U.S. structured finance:
 
 
 
 
 
 
 
 
Ballantyne Re Plc (includes $199.8 million purchased, 40% owned)¹
 
$
500

 
CC
 
N/A
 
 
Orkney Re II, Plc
 
423

 
CCC
 
N/A
 
 
Gleneagles Funding LTD (1st Issue)
 
229

 
BB
 
N/A
 
 
FHB 8.95% 2016
 
123

 
BB
 
N/A
 
 
OTP 10% 2012
 
85

 
BB+
 
N/A
 
 
Augusta Funding Limited 07 Perpetual Note Issue
 
81

 
BB
 
N/A
 
 
Private Pooled Corporate Transaction
 
81

 
BB
 
N/A
 
 
Augusta Funding Limited 05 Perpetual Note Issue
 
79

 
BB
 
N/A
 
 
Private Pooled Corporate Transaction
 
64

 
BB
 
N/A
 
 
Private Pooled Corporate Transaction
 
56

 
BB
 
N/A
 
 
Subtotal Non-U.S. structured finance
 
$
1,721

 
 
 
 
 
Total
 
$
12,493

 
 
 
 

1)
Represents amounts of gross par which were purchased or obtained as part of loss mitigation strategies and recorded as part of the investment portfolio.

2)
Net par shown is net of $72 million of ceded par. The Company owns 100% of the collateral in the insured transaction.

Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.

28


Assured Guaranty Ltd.
Largest Exposures by Sector (1 of 4)
As of June 30, 2013
(dollars in millions)

50 Largest U.S. Public Finance Exposures
 
Credit names:
 
Net Par Outstanding
 
Internal Rating
 
New Jersey (State of)
 
$
4,269

 
A+
 
California (State of)
 
3,406

 
A-
 
New York (City of) New York
 
3,219

 
AA-
 
Chicago (City of) Illinois
 
2,652

 
A+
 
Massachusetts (Commonwealth of)
 
2,569

 
AA
 
New York (State of)
 
2,441

 
A+
 
Los Angeles California Unified School District
 
2,263

 
AA-
 
Puerto Rico (Commonwealth of)
 
2,174

 
BBB-
 
Miami-Dade County Florida Aviation Authority - Miami International Airport
 
2,159

 
A
 
Houston Texas Water and Sewer Authority
 
1,982

 
AA-
 
Port Authority of New York and New Jersey
 
1,963

 
AA-
 
Illinois (State of)
 
1,897

 
A-
 
Philadelphia (City of) Pennsylvania
 
1,839

 
BBB
 
Wisconsin (State of)
 
1,838

 
A+
 
Pennsylvania (Commonwealth of)
 
1,777

 
AA-
 
Washington (State of)
 
1,735

 
AA
 
New York MTA Transportation Authority
 
1,631

 
A
 
Michigan (State of)
 
1,615

 
A+
 
Los Angeles California Department of Water & Power - Electric Revenue Bonds
 
1,601

 
AA-
 
Chicago-O'Hare International Airport
 
1,579

 
A
 
New York City Municipal Water Finance Authority
 
1,569

 
AA
 
Miami-Dade County Florida School Board
 
1,508

 
A-
 
Illinois Toll Highway Authority
 
1,502

 
AA
 
Long Island Power Authority
 
1,475

 
A-
 
Arizona (State of)
 
1,466

 
A+
 
Chicago Illinois Public Schools
 
1,452

 
A+
 
Atlanta Georgia Water & Sewer System
 
1,419

 
BBB+
 
Massachusetts (Commonwealth of) Water Resources
 
1,366

 
AA
 
Georgia Board of Regents
 
1,316

 
A
 
Metro Washington Airport Authority
 
1,271

 
A+
 
Puerto Rico Highway and Transportation Authority
 
1,264

 
BBB
 
Philadelphia Pennsylvania School District
 
1,255

 
A
 
Pennsylvania Turnpike Commission
 
1,169

 
A-
 
Skyway Concession Company LLC
 
1,134

 
BB
 
California State University System Trustee
 
1,123

 
A+
 
Kentucky (Commonwealth of)
 
1,090

 
A+
 
North Texas Tollway Authority
 
1,088

 
A
 
District of Columbia
 
1,082

 
A+
 
Detroit Michigan Sewer
 
1,040

 
BBB
 
New York State Thruway Authority
 
1,015

 
A
 
New York State Thruway - Highway Trust Fund
 
1,000

 
AA-
 
San Diego County, California Water
 
974

 
AA
 
Louisiana (State of) Gas and Fuel Tax
 
971

 
AA
 
University of California Board of Regents
 
970

 
AA
 
Garden State Preservation Trust, New Jersey Open Space & Farmland
 
962

 
AA
 
San Diego California Unified School District
 
957

 
AA
 
Broward County Florida School Board
 
952

 
A+
 
Puerto Rico Electric Power Authority
 
924

 
BBB+
 
Orlando-Orange County Expressway Authority, Florida
 
914

 
A+
 
Hartfield Atlanta International Airport
 
896

 
A
 
   Total top 50 U.S. public finance exposures
 
$
79,733

 
 

Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.


29


Assured Guaranty Ltd.
Largest Exposures by Sector (2 of 4)
As of June 30, 2013
(dollars in millions)

50 Largest U.S. Structured Finance Exposures
Credit Name
 
Net Par Outstanding
 
Internal Rating
 
Credit Enhancement
 
Fortress Credit Opportunities I, LP.
 
$
1,328

 
AA
 
36.1%
 
Synthetic Investment Grade Pooled Corporate CDO
 
1,188

 
AAA
 
13.4%
 
Stone Tower Credit Funding
 
994

 
AAA
 
31.0%
 
Synthetic High Yield Pooled Corporate CDO
 
978

 
AAA
 
40.6%
 
Synthetic Investment Grade Pooled Corporate CDO
 
767

 
AAA
 
14.8%
 
Synthetic Investment Grade Pooled Corporate CDO
 
763

 
AAA
 
29.0%
 
Synthetic Investment Grade Pooled Corporate CDO
 
745

 
AAA
 
27.7%
 
Synthetic High Yield Pooled Corporate CDO
 
734

 
AAA
 
37.4%
 
Synthetic Investment Grade Pooled Corporate CDO
 
716

 
AAA
 
22.5%
 
Synthetic Investment Grade Pooled Corporate CDO
 
655

 
AAA
 
15.8%
 
ARES Enhanced Credit Opportunities Fund
 
594

 
AAA
 
33.7%
 
Deutsche Alt-A Securities Mortgage Loan 2007-2
 
593

 
CCC
 
0.0%
 
Eastland CLO, LTD
 
532

 
AAA
 
39.4%
 
Synthetic Investment Grade Pooled Corporate CDO
 
516

 
AAA
 
14.3%
 
Private Other Structured Finance Transaction
 
500

 
AA
 
N/A
 
MABS 2007-NCW (includes $39.1 million purchased, 8% owned)¹
 
498

 
B
 
18.3%
 
Synthetic High Yield Pooled Corporate CDO
 
496

 
AAA
 
46.7%
 
Denali CLO VII, LTD.
 
493

 
AAA
 
19.5%
 
Shenandoah Trust Capital I Term Securities
 
484

 
A+
 
N/A
 
Churchill Financial Cayman
 
467

 
AAA
 
36.3%
 
SLM Private Credit Student Trust 2007-A
 
450

 
BBB-
 
16.2%
 
LIICA Holdings, LLC
 
428

 
AA
 
N/A
 
Private Other Structured Finance Transaction
 
400

 
AA
 
N/A
 
Phoenix CLO II
 
400

 
AAA
 
21.6%
 
Grayson CLO
 
399

 
AAA
 
29.8%
 
SLM Private Credit Student Loan Trust 2007-6
 
392

 
AAA
 
4.0%
 
Synthetic Investment Grade Pooled Corporate CDO
 
380

 
AAA
 
29.2%
 
KKR Financial CLO 2007-1
 
379

 
AAA
 
52.1%
 
ARES Enhanced Credit Opportunities Fund
 
369

 
AAA
 
33.7%
 
Synthetic Investment Grade Pooled Corporate CDO
 
365

 
AAA
 
14.2%
 
Symphony Credit Opportunities Fund
 
364

 
AAA
 
25.4%
 
Stone Tower CLO V
 
362

 
AAA
 
28.9%
 
SLM Private Credit Student Loan Trust 2006-C
 
356

 
BBB-
 
N/A
 
Muir Grove CLO
 
345

 
AAA
 
21.7%
 
Option One 2007-FXD2
 
344

 
CCC
 
4.4%
 
Synthetic Investment Grade Pooled Corporate CDO
 
343

 
AAA
 
16.3%
 
Private Residential Mortgage Transaction
 
342

 
CCC
 
3.9%
 
Countrywide HELOC 2006-I
 
328

 
CCC
 
0.0%
 
CENTURION CDO 9
 
324

 
AAA
 
36.1%
 
Cent CDO 15 Limited
 
307

 
AAA
 
18.4%
 
Private Residential Mortgage Transaction
 
306

 
B
 
14.2%
 
Deutsche Alt-A Securities Mortgage Loan 2007-3
 
303

 
B
 
0.2%
 
MortgageIT Securities Corp. Mortgage Loan 2007-2
 
302

 
B
 
4.3%
 
Prudential Closed Block Reinsurance Treaty
 
300

 
A+
 
N/A
 
Cent CDO 12 Limited
 
293

 
AAA
 
23.8%
 
Taberna Preferred Funding IV, LTD
 
292

 
CCC
 
22.7%
 
Private Residential Mortgage Transaction
 
292

 
CCC
 
4.3%
 
Private Residential Mortgage Transaction
 
289

 
CCC
 
—%
 
Synthetic Investment Grade Pooled Corporate CDO
 
283

 
AAA
 
30.3%
 
ColumbusNova CLO Ltd. 2006-II
 
279

 
AAA
 
19.2%
 
 Total top 50 U.S. structured finance exposures
 
$
24,357

 
 
 
 

1)
Represents amounts of gross par which were purchased or obtained as part of loss mitigation strategies and recorded as part of the investment portfolio.
Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.

30


Assured Guaranty Ltd.
Largest Exposures by Sector (3 of 4)
As of June 30, 2013
(dollars in millions)

25 Largest Non-U.S. Exposures
Credit Name
 
Net Par Outstanding
 
Internal Rating
 
Quebec Province
 
$
2,385

 
A+
 
Sydney Airport Finance Company
 
1,387

 
BBB
 
Thames Water Utility Finance PLC
 
1,362

 
A-
 
Channel Link Enterprises Finance PLC
 
902

 
BBB
 
Southern Gas Networks PLC
 
817

 
BBB
 
Societe des Autoroutes du Nord et de l'Est de France S.A.
 
767

 
BBB+
 
Capital Hospitals (Issuer) PLC
 
737

 
BBB-
 
Campania Region - Healthcare receivable
 
720

 
BBB-
 
Essential Public Infrastructure Capital II
 
678

 
AAA
 
Southern Water Services Limited
 
665

 
A-
 
International Infrastructure Pool
 
644

 
A-
 
International Infrastructure Pool
 
644

 
A-
 
International Infrastructure Pool
 
644

 
A-
 
Reliance Rail Finance Pty. Limited
 
611

 
BB
 
Synthetic Investment Grade Pooled Corporate CDO
 
534

 
AAA
 
Central Nottinghamshire Hospitals PLC
 
531

 
BBB
 
Verbund - Lease and Sublease of Hydro-Electric equipment
 
507

 
AAA
 
Ballantyne Re Plc (includes $199.8 million purchased, 40% owned)¹
 
500

 
CC
 
Envestra Limited
 
492

 
BBB-
 
NewHospitals (St Helens & Knowsley) Finance PLC
 
485

 
BBB
 
Scotland Gas Networks Plc (A2)
 
479

 
BBB
 
A28 Motorway
 
477

 
BBB
 
The Hospital Company (QAH Portsmouth) Limited
 
464

 
BBB
 
Integrated Accomodation Services PLC
 
458

 
BBB+
 
Orkney Re II, PLc
 
423

 
CCC
 
 Total top 25 non-U.S. exposures
 
$
18,313

 
 

1)
Represents amounts of gross par which were purchased or obtained as part of loss mitigation strategies and recorded as part of the investment portfolio.

Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.



31


Assured Guaranty Ltd.
Largest Exposures by Sector (4 of 4)
As of June 30, 2013
(dollars in millions)


10 Largest U.S. Residential Mortgage Servicer Exposures
Servicer:
 
Net Par Outstanding
 
Ocwen Loan Servicing, LLC(1)
 
$
4,596

 
Bank of America, N.A.(2)
 
3,412

 
Specialized Loan Servicing, LLC
 
2,660

 
Wells Fargo Bank NA
 
2,565

 
Select Portfolio Servicing, Inc.
 
760

 
JPMorgan Chase Bank
 
712

 
OneWest Bank Group LLC
 
381

 
Carrington Mortgage Services, LLC
 
327

 
First Horizon National Corporation
 
255

 
Doral Bank
 
99

 
   Total top 10 U.S. residential mortgage servicer exposures
 
$
15,767



10 Largest U.S. Healthcare Exposures
Credit Name:
 
Net Par Outstanding
 
Internal Rating
 
State
 
MultiCare Health System
 
$
468

 
A+
 
WA
 
CHRISTUS Health
 
444

 
A+
 
TX
 
Methodist Healthcare, TN
 
400

 
A
 
TN
 
Children's National Medical Center (DC)
 
353

 
A-
 
DC
 
Catholic Health Initiatives
 
347

 
AA-
 
CO
 
Catholic Health Partners
 
326

 
A+
 
OH
 
Bon Secours Health System Obligated Group
 
325

 
A-
 
MD
 
Carolina HealthCare System
 
319

 
AA-
 
NC
 
Iowa Health System
 
316

 
A+
 
IA
 
Virtua Health - New Jersey
 
315

 
A+
 
NJ
 
   Total top 10 U.S. healthcare exposures
 
$
3,613

 
 
 
 

1)
Includes Homeward Residential Inc.

2)
Includes Countrywide Home Loans Servicing LP.

Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.



32


Assured Guaranty Ltd.
Rollforward of Net Expected Loss and LAE to be Paid
(dollars in millions)

Rollforward of Net Expected Loss and LAE to be Paid for the Three Months Ended June 30, 2013

Financial Guaranty Insurance Contracts and Credit Derivatives
 
Net Expected Loss to be Paid as of March 31, 2013
 
Economic Loss Development During 2Q-13(1)
 
(Paid) Recovered Losses During 2Q-13
 
Net Expected Loss to be Paid as of June 30, 2013
U.S. RMBS
 
 
 
 
 
 
 
 
 
First lien:
 
 
 
 
 
 
 
 
 
 
Prime first lien
 
$
11

 
$
7

 
$
—

 
$
18

 
 
Alt-A first lien
 
313

 
(7
)
 
(18
)
 
288

 
 
Option ARMs
 
(327
)
 
21

 
286

 
(20
)
 
 
Subprime first lien
 
263

 
23

 
(12
)
 
274

 
 
 
Total first lien
 
260

 
44

 
256

 
560

 
Second lien:
 
 
 
 
 
 
 
 
 
 
Closed end seconds
 
(21
)
 
6

 
1

 
(14
)
 
 
HELOC
 
(122
)
 
(31
)
 
56

 
(97
)
 
 
 
Total second lien
 
(143
)
 
(25
)
 
57

 
(111
)
Total U.S. RMBS
 
117

 
19

 
313

 
449

TruPS
 
23

 
1

 
9

 
33

Other structured finance
 
307

 
(24
)
 
(125
)
 
158

U.S. public finance
 
(9
)
 
87

 
(7
)
 
71

Non-U.S. public finance
 
62

 
4

 
—

 
66

 
 
 
Subtotal
 
500

 
87

 
190

 
777

Other
 
(13
)
 
—

 
10

 
(3
)
Total
 
$
487

 
$
87

 
$
200

 
$
774


Rollforward of Net Expected Loss and LAE to be Paid for the Six Months Ended June 30, 2013
       
Financial Guaranty Insurance Contracts and Credit Derivatives
 
Net Expected Loss to be Paid as of December 31, 2012
 
Economic Loss Development During 2013(1)
 
(Paid) Recovered Losses During 2013
 
Net Expected Loss to be Paid as of June 30, 2013
U.S. RMBS
 
 
 
 
 
 
 
 
 
First lien:
 
 
 
 
 
 
 
 
 
 
Prime first lien
 
$
6

 
$
13

 
$
(1
)
 
$
18

 
 
Alt-A first lien
 
315

 
2

 
(29
)
 
288

 
 
Option ARMs
 
(131
)
 
(117
)
 
228

 
(20
)
 
 
Subprime first lien
 
242

 
48

 
(16
)
 
274

 
 
 
Total first lien
 
432

 
(54
)
 
182

 
560

 
Second lien:
 
 
 
 
 
 
 
 
 
 
Closed end seconds
 
(39
)
 
7

 
18

 
(14
)
 
 
HELOC
 
(111
)
 
(34
)
 
48

 
(97
)
 
 
 
Total second lien
 
(150
)
 
(27
)
 
66

 
(111
)
Total U.S. RMBS
 
282

 
(81
)
 
248

 
449

TruPS
 
27

 
(2
)
 
8

 
33

Other structured finance
 
312

 
(26
)
 
(128
)
 
158

U.S. public finance
 
7

 
94

 
(30
)
 
71

Non-U.S. public finance
 
52

 
14

 
—

 
66

 
 
 
Subtotal
 
680

 
(1
)
 
98

 
777

Other
 
(3
)
 
(10
)
 
10

 
(3
)
Total
 
$
677

 
$
(11
)
 
$
108

 
$
774



1)
Includes the effect of changes in the Company's estimate of future recovery on representations and warranties ("R&W").


33


Assured Guaranty Ltd.
Financial Guaranty Insurance and Credit Derivative U.S. RMBS R&W Benefit Development
(dollars in millions)

Financial Guaranty Insurance and Credit Derivatives U.S. RMBS Benefit Development for the Three Months Ended June 30, 2013

 
 
Future Net R&W Benefit at March 31, 2013
 
R&W Economic Loss Development During 2Q-13
 
R&W Recovered During 2Q-13
 
Future Net R&W Benefit at June 30, 2013
Financial guaranty insurance:
 
 
 
 
 
 
 
 
 
Prime first lien
 
$
4

 
$
—

 
$
—

 
$
4

 
Alt-A first lien
 
155

 
11

 
(6
)
 
160

 
Option ARMs
 
671

 
16

 
(410
)
 
277

 
Subprime first lien
 
113

 
(5
)
 
—

 
108

 
Closed end seconds
 
108

 
(3
)
 
(3
)
 
102

 
HELOC
 
161

 
51

 
(103
)
 
109

 
 
Subtotal
 
1,212

 
70

 
(522
)
 
760

 
 
 
 
 
 
 
 
 
 
 
Credit derivatives:
 
 
 
 
 
 
 
 
 
Alt-A first lien
 
207

 
(16
)
 
(3
)
 
188

 
Option ARMs
 
19

 
(3
)
 
—

 
16

 
 
Subtotal
 
226

 
(19
)
 
(3
)
 
204

 
 
 
 
 
 
 
 
 
Total
 
$
1,438

 
$
51

 
$
(525
)
 
$
964


Financial Guaranty Insurance and Credit Derivatives U.S. RMBS Benefit Development for the Six Months Ended June 30, 2013

 
 
Future Net R&W Benefit at December 31, 2012
 
R&W Economic Loss Development During 2013
 
R&W Recovered During 2013
 
Future Net R&W Benefit at June 30, 2013
Financial guaranty insurance:
 
 
 
 
 
 
 
 
 
Prime first lien
 
$
4

 
$
—

 
$
—

 
$
4

 
Alt-A first lien
 
158

 
10

 
(8
)
 
160

 
Option ARMs
 
574

 
167

 
(464
)
 
277

 
Subprime first lien
 
109

 
(1
)
 
—

 
108

 
Closed end seconds
 
138

 
(12
)
 
(24
)
 
102

 
HELOC
 
150

 
68

 
(109
)
 
109

 
 
Subtotal
 
1,133

 
232

 
(605
)
 
760

 
 
 
 
 
 
 
 
 
 

Credit derivatives:
 
 
 
 
 
 
 
 
 
Alt-A first lien
 
220

 
(23
)
 
(9
)
 
188

 
Option ARMs
 
17

 
(1
)
 
—

 
16

 
 
Subtotal
 
237

 
(24
)
 
(9
)
 
204

 
 
 
 
 
 
 
 

Total
 
$
1,370

 
$
208

 
$
(614
)
 
$
964



Financial Guaranty Insurance and Credit Derivatives U.S. RMBS Policies with R&W Benefit
 
 
Number of Risks as of
 
Debt Service as of
 
 
June 30, 2013
 
December 31, 2012
 
June 30, 2013
 
December 31, 2012
Financial guaranty insurance:
 
 
 
 
 
 
 
 
 
Prime first lien
 
1

 
1

 
$
40

 
$
44

 
Alt-A first lien
 
21

 
19

 
1,424

 
1,467

 
Option ARMs
 
9

 
9

 
601

 
846

 
Subprime first lien
 
5

 
5

 
965

 
989

 
Closed end seconds
 
4

 
4

 
175

 
260

 
HELOC
 
8

 
7

 
611

 
549

 
 
Subtotal
 
48

 
45

 
3,816

 
4,155

 
 
 
 
 
 
 
 
 
 
 
Credit derivatives:
 
 
 
 
 
 
 
 
 
Alt-A first lien
 
7

 
7

 
2,480

 
2,706

 
Option ARMs
 
1

 
1

 
314

 
337

 
 
Subtotal
 
8

 
8

 
2,794

 
3,043

 
 
 
 
 
 
 
 
 
Total
 
56

 
53

 
$
6,610

 
$
7,198



34


Assured Guaranty Ltd.
Losses Incurred
As of June 30, 2013
(dollars in millions)


Financial Guaranty Insurance Contracts and Credit Derivatives
 
 Total Net Par Outstanding for BIG Transactions (1)
 
2Q-13 Losses Incurred
 
2013 Losses Incurred
 
Net Reserve and Credit Impairment
 
Net Salvage and Subrogation Assets
 
Net Expected Loss to be Expensed
U.S. RMBS
 
 
 
 
 
 
 
 
 
 
 
 
 
First lien:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prime first lien
 
$
442

 
$
7

 
$
13

 
$
16

 
$
—

 
$
—

 
 
Alt-A first lien
 
3,322

 
(3
)
 
21

 
181

 
2

 
113

 
 
Option ARMs
 
700

 
24

 
(66
)
 
36

 
60

 
41

 
 
Subprime first lien
 
2,353

 
28

 
49

 
186

 
2

 
94

 
 
 
Total first lien
 
6,817

 
56

 
17

 
419

 
64

 
248

 
Second lien:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Closed end seconds
 
321

 
(1
)
 
19

 
2

 
49

 
36

 
 
HELOC
 
2,480

 
(18
)
 
(15
)
 
22

 
147

 
143

 
 
 
Total second lien
 
2,801

 
(19
)
 
4

 
24

 
196

 
179

Total U.S. RMBS
 
9,618

 
37

 
21

 
443

 
260

 
427

TruPS
 
2,412

 
(2
)
 
(4
)
 
21

 
—

 
1

Other structured finance
 
2,782

 
(18
)
 
(32
)
 
125

 
5

 
37

U.S. public finance
 
4,930

 
79

 
75

 
142

 
127

 
72

Non-U.S. public finance
 
1,890

 
—

 
1

 
31

 
—

 
21

 
 
 
Subtotal
 
21,632

 
96

 
61

 
762

 
392

 
558

Other
 
—

 
—

 
(10
)
 
2

 
5

 
—

 
 
 
Subtotal
 
21,632

 
96

 
51

 
764

 
397

 
558

Effect of consolidating FG VIEs
 
—

 
(22
)
 
(15
)
 
(87
)
 
(103
)
 
(105
)
Total
 
$
21,632

 
$
74

 
$
36

 
$
677

 
$
294

 
$
453


 
 
Insurance Reserves
 
Credit Impairment on Credit Derivative Contracts (2)
 
Reserve and Credit Impairment
 
Salvage and Subrogation Recoverable
 
Net
Gross
 
$
564

 
$
176

 
$
740

 
$
331

 
$
409

Ceded
 
60

 
3

 
63

 
37

(3)
26

 
Net
 
$
504

 
$
173

 
$
677

 
$
294

 
$
383



1)
As of June 30, 2013, securities purchased for loss mitigation purposes represented $1,193 million of gross par outstanding. In addition, under the terms of certain credit derivative contracts, the referenced obligations in such contracts have been delivered to the Company and recorded in other invested assets in the consolidated balance sheets. Such amounts totaled $219 million in gross par outstanding.

2)
Credit derivative assets and liabilities recorded on the balance sheet considers estimates of expected losses.

3)
Recorded in "reinsurance balances payable, net" on the consolidated balance sheets.



35


Assured Guaranty Ltd.
Summary Financial and Statistical Data
(dollars in millions, except per share amounts)
 
 
 
 
Year Ended December 31,
 
 
As of and for Six Months Ended June 30, 2013
 
2012
 
2011
 
2010
 
2009
GAAP Summary Income Statement Data
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
 
$
411

 
$
853

 
$
920

 
$
1,187

 
$
930

 
Net investment income
 
187

 
404

 
396

 
361

 
262

 
Realized gains and other settlements on credit derivatives
 
(68
)
 
(108
)
 
6

 
153

 
164

 
Total expenses
 
172

 
822

 
776

 
776

 
808

 
Income (loss) before income taxes
 
117

 
132

 
1,029

 
534

 
109

 
Net income (loss) attributable to Assured Guaranty Ltd.
 
75

 
110

 
773

 
484

 
82

 
Net income (loss) attributable to Assured Guaranty Ltd. per diluted share
 
0.39

 
0.57

 
4.16

 
2.56

 
0.63

 
 
 
 
 
 
 
 
 
 
 
 
GAAP Summary Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
 
Total investments and cash
 
$
10,780

 
$
11,223

 
$
11,314

 
$
10,849

 
$
11,013

 
Total assets
 
16,608

 
17,242

 
17,709

 
19,370

 
16,449

 
Unearned premium reserve
 
4,812

 
5,207

 
5,963

 
6,973

 
8,381

 
Loss and LAE reserve
 
564

 
601

 
679

 
574

 
300

 
Long-term debt
 
827

 
836

 
1,038

 
1,053

 
1,066

 
Shareholders’ equity attributable to Assured Guaranty Ltd.
 
4,484

 
4,994

 
4,652

 
3,670

 
3,455

 
Book value attributable to Assured Guaranty Ltd. per share
 
24.52

 
25.74

 
25.52

 
19.97

 
18.76

 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Financial Measures
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
$
358

 
$
535

 
$
601

 
$
655

 
$
278

 
Operating income per diluted share
 
1.87

 
2.81

 
3.24

 
3.46

 
2.15

 
Adjusted book value
 
8,973

 
9,151

 
8,987

 
8,989

 
8,887

 
PVP
 
34

 
210

 
243

 
363

 
640

 
 
 
 
 
 
 
 
 
 
 
 
Other Financial Information (GAAP Basis)
 
 
 
 
 
 
 
 
 
 
 
Net debt service outstanding (end of period)
 
$
727,997

 
$
782,180

 
$
845,665

 
$
927,143

 
$
958,265

 
Gross debt service outstanding (end of period)
 
776,546

 
834,950

 
936,132

 
1,029,982

 
1,095,037

 
Net par outstanding (end of period)
 
486,989

 
519,893

 
558,048

 
617,131

 
640,422

 
Gross par outstanding (end of period)
 
517,081

 
552,039

 
614,342

 
681,248

 
726,929

 
 
 
 
 
 
 
 
 
 
 
 
Other Financial Information (Statutory Basis)(1)
 
 
 
 
 
 
 
 
 
 
 
Net debt service outstanding (end of period)
 
$
700,748

 
$
757,914

 
$
829,545

 
$
905,131

 
$
942,193

 
Gross debt service outstanding (end of period)
 
747,525

 
809,341

 
917,719

 
1,004,096

 
1,076,039

 
Net par outstanding (end of period)
 
461,761

 
497,399

 
543,100

 
598,843

 
626,274

 
Gross par outstanding (end of period)
 
490,219

 
528,318

 
597,290

 
659,765

 
709,786

 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated qualified statutory capital
 
6,078

 
5,943

 
5,688

 
4,915

 
4,841

 
Consolidated policyholders' surplus and reserves
 
10,331

 
10,288

 
10,626

 
10,247

 
10,409

 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios:
 
 
 
 
 
 
 
 
 
 
 
 
Par insured to statutory capital
 
76
:1
 
84:1

 
95:1

 
122:1

 
129:1

 
 
Capital ratio(2)
 
115
:1
 
128:1

 
146:1

 
184:1

 
195:1

 
 
Financial resources ratio(3)
 
58
:1
 
61:1

 
65:1

 
72:1

 
72:1

 
 
 
 
 
 
 
 
 
 
 
 
 
Gross debt service written:
 
 
 
 
 
 
 
 
 
 
 
 
Public finance - U.S.
 
$
5,988

 
$
25,252

 
$
26,630

 
$
48,990

 
$
87,940

 
 
Public finance - non-U.S.
 
—

 
40

 
208

 
51

 
894

 
 
Structured finance - U.S.
 
17

 
623

 
1,731

 
2,962

 
2,501

 
 
Structured finance - non-U.S.
 
—

 
—

 
—

 
—

 
—

 
Total gross debt service written
 
$
6,005

 
$
25,915

 
$
28,569

 
$
52,003

 
$
91,335

 
 
 
 
 
 
 
 
 
 
 
 
 
Net debt service written
 
$
6,055

 
$
25,915

 
$
28,569

 
$
52,003

 
$
91,335

 
Net par written
 
3,870

 
16,816

 
16,892

 
30,759

 
49,759

 
Gross par written
 
3,870

 
16,816

 
16,892

 
30,759

 
49,921


1)
Statutory amounts prepared on a consolidated basis. The NAIC Annual Statements for U.S. Domiciled Insurance Subsidiaries are prepared on a stand-alone basis.
2)
The capital ratio is calculated by dividing net debt service outstanding by qualified statutory capital.
3)
The financial resources ratio is calculated by dividing net debt service outstanding by total claims paying resources.

Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.

36


Glossary

Net Par Outstanding and Internal Ratings
Internal Rating for the Company’s ratings scale is similar to that used by the nationally recognized statistical rating organizations; however, the ratings in the tables may not be the same as ratings assigned by any such rating agency.

Net par outstanding is insured par exposure net of reinsurance cessions.

Performance Indicators
The performance information described below is obtained from third parties and/or provided by the trustee and may be subject to restatement or correction:

60+ Day Delinquencies are defined as loans that are greater than 60 days delinquent and all loans that are in foreclosure, bankruptcy or real estate owned divided by current collateral balance.

Average Credit Enhancement is intended to provide a measure of the amount of equity and/or subordinated tranches that are junior in the capital structure to Assured Guaranty’s exposure, expressed as a percentage of the total transaction size, and reflects any reduction of that credit support resulting from defaults or other factors. For transactions where excess spread may be available to absorb certain losses, the amounts shown do not include any benefit from excess spread. The calculation methodologies differ for the various asset classes to reflect differences in transaction structures in order to provide a measure that management believes is comparable across asset classes.

Cumulative Losses are defined as net charge-offs on the underlying loan collateral divided by the original collateral balance.

Pool Factor is the percentage of the current collateral balance divided by the original collateral balance of the transactions at inception.

Subordination represents the sum of subordinate tranches and overcollateralization, expressed as a percentage of total transaction size, and does not include any benefit from excess spread collections that may be used to absorb losses. Many of the closed-end second lien RMBS transactions insured by the Company have unique structures whereby the collateral may be written down for losses without a corresponding write-down of the obligations insured by the Company. Many of these transactions are currently undercollateralized, with the principal amount of collateral being less than the principal amount of the obligation insured by the Company. The Company is not required to pay principal shortfalls until legal maturity (rather than making timely principal payments), and takes the undercollateralization into account when estimating expected losses for these transactions.

Sectors
Below are brief descriptions of selected types of public and structured finance obligations that the Company insures and reinsures. For a more complete description, please refer to Assured Guaranty Ltd.’s Annual Report on Form 10-K for the year ended December 31, 2012.

Public Finance:
General Obligation Bonds are full faith and credit bonds that are issued by states, their political subdivisions and other municipal issuers, and are supported by the general obligation of the issuer to pay from available funds and by a pledge of the issuer to levy ad valorem taxes in an amount sufficient to provide for the full payment of the bonds.

Tax-Backed Bonds are obligations that are supported by the issuer from specific and discrete sources of taxation. They include tax-backed revenue bonds, general fund obligations and lease revenue bonds. Tax-backed obligations may be secured by a lien on specific pledged tax revenues, such as a gasoline or excise tax, or incrementally from growth in property tax revenue associated with growth in property values. These obligations also include obligations secured by special assessments levied against property owners and often benefit from issuer covenants to enforce collections of such assessments and to foreclose on delinquent properties. Lease revenue bonds typically are general fund obligations of a municipality or other governmental authority that are subject to annual appropriation or abatement; projects financed and subject to such lease payments ordinarily include real estate or equipment serving an essential public purpose. Bonds in this category also include moral obligations of municipalities or governmental authorities.

Municipal Utility Bonds are obligations of all forms of municipal utilities, including electric, water and sewer utilities and resource recovery revenue bonds. These utilities may be organized in various forms, including municipal enterprise systems, authorities or joint action agencies.

Transportation Bonds include a wide variety of revenue-supported bonds, such as bonds for airports, ports, tunnels, municipal parking facilities, toll roads and toll bridges.

Healthcare Bonds are obligations of healthcare facilities, including community-based hospitals and systems, as well as of health maintenance organizations and long-term care facilities.

Higher Education Bonds are obligations secured by revenue collected by either public or private secondary schools, colleges and universities. Such revenue can encompass all of an institution’s revenue, including tuition and fees, or in other cases, can be specifically restricted to certain auxiliary sources of revenue.


37


Glossary (continued)

Sectors (continued)
Infrastructure Bonds include obligations issued by a variety of entities engaged in the financing of infrastructure projects, such as roads, airports, ports, social infrastructure and other physical assets delivering essential services supported by long-term concession arrangements with a public sector entity.

Investor-Owned Utility Bonds are obligations primarily backed by investor-owned utilities, first mortgage bond obligations of for-profit electric or water utilities providing retail, industrial and commercial service, and also include sale-leaseback obligation bonds supported by such entities.

Housing Revenue Bonds are obligations relating to both single and multi-family housing, issued by states and localities, supported by cash flow and, in some cases, insurance from entities such as the Federal Housing Administration.

Regulated Utilities Obligations are issued by government-regulated providers of essential services and commodities, including electric, water and gas utilities. The majority of the Company's international regulated utility business is conducted in the United Kingdom.

Pooled Infrastructure Obligations are synthetic asset-backed obligations that take the form of CDS obligations or credit‑-linked notes that reference either infrastructure finance obligations or a pool of such obligations, with a defined deductible to cover credit risks associated with the referenced obligations.

Other Public Finance primarily includes government insured student loans, government-sponsored project finance and structured municipal transactions, which includes excess of loss reinsurance on portfolios of municipal credits.

Structured Finance:
Pooled Corporate Obligations are securities primarily backed by various types of corporate debt obligations, such as secured or unsecured bonds, bank loans or loan participations and trust preferred securities. These securities are often issued in ‘‘tranches,’’ with subordinated tranches providing credit support to the more senior tranches. The Company’s financial guaranty exposures generally are to the more senior tranches of these issues.

Residential Mortgage-Backed Securities (‘‘RMBS’’) and Home Equity Securities are obligations backed by closed-end first mortgage loans and closed- and open-end second mortgage loans or home equity loans on one-to-four family residential properties, including condominiums and cooperative apartments. First mortgage loan products in these transactions include fixed rate, adjustable rate (‘‘ARM’’) and option adjustable-rate (‘‘Option ARM’’) mortgages. The credit quality of borrowers covers a broad range, including ‘‘prime’’, ‘‘subprime’’ and ‘‘Alt-A’’. A prime borrower is generally defined as one with strong risk characteristics as measured by factors such as payment history, credit score, and debt-to-income ratio. A subprime borrower is a borrower with higher risk characteristics, usually as determined by credit score and/or credit history. An Alt-A borrower is generally defined as a prime quality borrower that lacks certain ancillary characteristics, such as fully documented income.

Additional insured obligations within RMBS include Home Equity Lines of Credit (“HELOCs”), which refers to a type of residential mortgage-backed transaction backed by second-lien loan collateral consisting of home equity lines of credit. U.S. Prime First Lien is a type of residential mortgage-backed securities transaction backed primarily by prime first-lien loan collateral plus an insignificant amount of other miscellaneous RMBS transactions.

CBOs/CLOs (collateralized bond obligations and collateralized loan obligations) are asset-backed securities largely backed by non-investment grade/high yield collateral.

Commercial Mortgage-Backed Securities (‘‘CMBS’’) are obligations backed by pools of commercial mortgages. The collateral supporting CMBS include office, multifamily, retail, hotel, industrial and other specialized or mixed-use properties.

Financial Products is the guaranteed investment contracts ("GICs") portion of the former Financial Products Business of AGMH. AGM has issued financial guaranty insurance policies on the GICs and in respect of the GICs business that cannot be revoked or cancelled. Assured Guaranty is indemnified against exposure to the former financial products business by Dexia SA and certain of its affiliates. In addition, the French and Belgian governments have issued guaranties in respect of the GICs portion of the financial products business. The financial products business is currently being run off.

Consumer Receivables Securities are obligations backed by non-mortgage consumer receivables, such as automobile loans and leases, credit card receivables and other consumer receivables.

Commercial Receivables Securities are obligations backed by equipment loans or leases, fleet auto financings, business loans and trade receivables. Credit support is derived from the cash flows generated by the underlying obligations, as well as property or equipment values as applicable.

Insurance Securitization Securities are obligations secured by the future earnings from pools of various types of insurance/reinsurance policies and income produced by invested assets.


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Glossary (continued)

Sectors (continued)
Structured Credit Securities include program-wide credit enhancement for commercial paper conduits in the U.S., and securities issued in whole business securitizations and intellectual property securitizations. Program-wide credit enhancement generally involves insuring against the default of ABS in a bank-sponsored commercial paper conduit. Securities issued in whole business and intellectual property securitizations are backed by revenue-producing assets sold to a limited-purpose company by an operating company, including franchise agreements, lease agreements, intellectual property and real property.

Other Structured Finance Securities are obligations backed by assets not generally described in any of the other described categories. One such type of asset is a tax benefit to be realized by an investor in one of the Federal or state programs that permit such investor to receive a credit against taxes (such as Federal corporate income tax or state insurance premium tax) for making qualified investments in specified enterprises, typically located in designated low-income areas.


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Non-GAAP Financial Measures
 
The Company references financial measures that are not in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
 
Management and the board of directors utilize non-GAAP measures in evaluating the Company’s financial performance and as a basis for determining senior management incentive compensation. By providing these non-GAAP financial measures, investors, analysts and financial news reporters have access to the same information that management reviews internally. In addition, Assured Guaranty’s presentation of non-GAAP financial measures is consistent with how analysts calculate their estimates of Assured Guaranty’s financial results in their research reports on Assured Guaranty and with how investors, analysts and the financial news media evaluate Assured Guaranty’s financial results.
 
The following paragraphs define each non-GAAP financial measure and describe why it is useful. A reconciliation of the non-GAAP financial measure and the most directly comparable GAAP financial measure, if available, is presented within this financial supplement. Non-GAAP financial measures should not be viewed as substitutes for their most directly comparable GAAP measures.

Operating Income: Management believes that operating income is a useful measure because it clarifies the understanding of the underwriting results of the Company’s financial guaranty insurance business, and also includes financing costs and net investment income, and enables investors and analysts to evaluate the Company’s financial results as compared with the consensus analyst estimates distributed publicly by financial databases. Operating income is defined as net income (loss) attributable to Assured Guaranty Ltd., as reported under GAAP, adjusted for the following:

1) Elimination of the after-tax realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading. The timing of realized gains and losses, which depends largely on market credit cycles, can vary considerably across periods. The timing of sales is largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile. Trends in the underlying profitability of the Company’s business can be more clearly identified without the fluctuating effects of these transactions.

2) Elimination of the after-tax non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated economic credit losses and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss. Additionally, such adjustments present all financial guaranty contracts on a more consistent basis of accounting, whether or not they are subject to derivative accounting rules.

3) Elimination of the after-tax fair value gains (losses) on the Company’s committed capital securities. Such amounts are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.

4) Elimination of the after-tax foreign exchange gains (losses) on remeasurement of net premium receivables and loss and LAE reserves. Long-dated receivables constitute a significant portion of the net premium receivable balance and represent the present value of future contractual or expected collections. Therefore, the current period’s foreign exchange remeasurement gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that the Company will ultimately recognize.

5) Elimination of the effects of consolidating FG VIEs in order to present all financial guaranty contracts on a more consistent basis of accounting, whether or not GAAP requires consolidation. GAAP requires the Company to consolidate certain VIEs that have issued debt obligations insured by the Company even though the Company does not own such VIEs.

Operating Shareholders’ Equity: Management believes that operating shareholders’ equity is a useful measure because it presents the equity of Assured Guaranty Ltd. with all financial guaranty contracts accounted for on a more consistent basis and excludes fair value adjustments that are not expected to result in economic loss. Many investors, analysts and financial news reporters use operating shareholders’ equity as the principal financial measure for valuing Assured Guaranty Ltd.’s current share price or projected share price and also as the basis of their decision to recommend buying or sellingAssured Guaranty Ltd.’s common shares. Many of the Company’s fixed income investors also use operating shareholders’ equity to evaluate the Company’s capital adequacy. Operating shareholders’ equity is the basis of the calculation of adjusted book value (see below). Operating shareholders’ equity is defined as shareholders’ equity attributable to Assured Guaranty Ltd. , as reported under GAAP, adjusted for the following:

1) Elimination of the effects of consolidating FG VIEs in order to present all financial guaranty contracts on a more consistent basis of accounting, whether or not GAAP requires consolidation. GAAP requires the Company to consolidate certain VIEs that have issued debt obligations insured by the Company even though the Company does not own such VIEs.

2) Elimination of the after-tax non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated economic credit losses and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.

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Non-GAAP Financial Measures (continued)

Operating Shareholders’ Equity (continued):
3) Elimination of the after-tax fair value gains (losses) on the Company’s committed capital securities. Such amounts are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.

4) Elimination of the after-tax unrealized gains (losses) on the Company’s investments, that are recorded as a component of accumulated other comprehensive income ("AOCI") (excluding foreign exchange remeasurement). The AOCI component of the fair value adjustment on the investment portfolio is not deemed economic because the Company generally holds these investments to maturity and therefore should not recognize an economic gain or loss.

Operating return on equity (‘‘Operating ROE’’): Operating ROE represents operating income for a specified period divided by the average of operating shareholders’ equity at the beginning and the end of that period. Management believes that operating ROE is a useful measure to evaluate the Company’s return on invested capital. Many investors, analysts and members of the financial news media use operating ROE to evaluate Assured Guaranty Ltd.’s share price and as the basis of their decision to recommend, buy or sell the Assured Guaranty Ltd. common shares. Quarterly and year-to-date operating ROE are calculated on an annualized basis.

Adjusted Book Value: Management believes that adjusted book value is a useful measure because it enables an evaluation of the net present value of the Company’s in-force premiums and revenues in addition to operating shareholders’ equity. The premiums and revenues included in adjusted book value will be earned in future periods, but actual earnings may differ materially from the estimated amounts used in determining current adjusted book value due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults and other factors. Many investors, analysts and financial news reporters use adjusted book value to evaluate Assured Guaranty Ltd.’s share price and as the basis of their decision to recommend, buy or sell the Assured Guaranty Ltd. common shares. Adjusted book value is operating shareholders’ equity, as defined above, further adjusted for the following:

1) Elimination of after-tax deferred acquisition costs, net. These amounts represent net deferred expenses that have already been paid or accrued and will be expensed in future accounting periods.

2) Addition of the after-tax net present value of estimated net future credit derivative revenue. See below.

3) Addition of the after-tax value of the unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed, net of reinsurance. This amount represents the expected future net earned premiums, net of expected losses to be expensed which are not reflected in GAAP equity.

Net present value of estimated net future credit derivative revenue: Management believes that this amount is a useful measure because it enables an evaluation of the value of future estimated credit derivative revenue. There is no corresponding GAAP financial measure. This amount represents the present value of estimated future revenue from the Company’s credit derivative in-force book of business, net of reinsurance, ceding commissions and premium taxes for contracts without expected economic losses, and is discounted at 6%. Estimated net future credit derivative revenue may change from period to period due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults or other factors that affect par outstanding or the ultimate maturity of an obligation.

PVP or present value of new business production: Management believes that PVP is a useful measure because it enables the evaluation of the value of new business production for Assured Guaranty by taking into account the value of estimated future installment premiums on all new contracts underwritten in a reporting period as well as premium supplements and additional installment premium on existing contracts as to which the issuer has the right to call the insured obligation but has not exercised such right,  whether in insurance or credit derivative contract form, which GAAP gross premiums written and the net credit derivative premiums received and receivable portion of net realized gains and other settlements on credit derivatives (“Credit Derivative Revenues”) do not adequately measure. PVP in respect of financial guaranty contracts written in a specified period is defined as gross upfront and installment premiums received and the present value of gross estimated future installment premiums, in each case, discounted at 6%. For purposes of the PVP calculation, management discounts estimated future installment premiums on insurance contracts at 6%, while under GAAP, these amounts are discounted at a risk free rate. Additionally, under GAAP, management records future installment premiums on financial guaranty insurance contracts covering non-homogeneous pools of assets based on the contractual term of the transaction, whereas for PVP purposes, management records an estimate of the future installment premiums the Company expects to receive, which may be based upon a shorter period of time than the contractual term of the transaction. Actual future net earned or written premiums and Credit Derivative Revenues may differ from PVP due to factors including, but not limited to, changes in foreign exchange rates, prepayment speeds, terminations, credit defaults, or other factors that affect par outstanding or the ultimate maturity of an obligation.


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Assured Guaranty Ltd.                        
30 Woodbourne Avenue
Hamilton HM 08
Bermuda
(441) 279-5705
www.assuredguaranty.com


 



Contacts:

Equity and Fixed Income Investors:
Robert Tucker
Managing Director, Investor Relations and Corporate Communications
(212) 339-0861
rtucker@assuredguaranty.com

Michael Walker
Managing Director, Fixed Income Investor Relations
(212) 261-5575
mwalker@assuredguaranty.com

Ross Aron
Vice President, Equity Investor Relations
(212) 261-5509
raron@assuredguaranty.com

Media:
Ashweeta Durani
Vice President, Corporate Communications
(212) 408-6042
adurani@assuredguaranty.com