Assured Guaranty Ltd. Annual Report 2014

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FY2014 Annual Report · Assured Guaranty Ltd.

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THE
PROVEN
LEADER
IN BOND
INSURANCE

2014 ANNUAL REPORT

Assured Guaranty Ltd., through its subsidiaries (collectively, Assured Guaranty),

guarantees scheduled principal and interest payments when due on municipal,

public infrastructure and structured finance transactions in the United States and

select markets around the world.

OUR FOCUS ON FINANCIAL
STRENGTH AND CREDIT
DISCIPLINE HAS DRIVEN
OUR SUCCESS SINCE OUR
APRIL 2004 IPO

INCREASE IN ADJUSTED
BOOK VALUE PER SHARE

119%
$372Billion
$3.8Billion

CUMULATIVE OPERATING INCOME

INSURED PAR WRITTEN

$372Billion$3.8Billion119%2 / THE PROVEN LEADER IN BOND INSURANCE

Dominic J. Frederico
President and Chief Executive Officer

Dear Fellow Shareholders & Policyholders,

I am pleased to report that Assured Guaranty had
another successful year in 2014. In the tenth full year
since our initial public offering, our operating share-
holders’ equity per share reached $37.48, the highest
level in our history. During the year, our adjusted book
value per share increased 8.2%, ending the year at
$53.66, and, to top it off, we earned $491 million of
operating income.*

Additionally, we accomplished the four strategic
objectives that I discussed in last year’s Annual Report.
Specifically:

• We further optimized our capital management,
primarily by continuing our share repurchases;

• We increased new business production, with contri-
butions from our U.S. public finance, international
infrastructure and global structured finance businesses;

• We reached an agreement to acquire a legacy insurer
—Radian Asset Assurance Inc. (Radian Asset) —and
further augmented our unearned premium reserve by
reassuming previously ceded business;

• And we extracted value from our own insured
portfolio through loss mitigation and other loss
recovery strategies.

OBJECTIVE 1: CAPITAL MANAGEMENT
Over the past few years, we have been generating
more capital than we can put to work at acceptable
returns in the current low-interest-rate environment.
To address this excess capital position, during 2014,
we repurchased 24.4 million common shares for $590
million at an average of $24.17 per share, representing

a substantial discount to both operating shareholders’
equity per share and adjusted book value per share.
We also increased our quarterly dividend per share by
10% in February 2014. Then, in February 2015, we
increased it by an additional 9%.

Over the two years from January 2013 through the
end of 2014, we returned $1 billion of excess capital
through the repurchase of 37 million shares, or 19%
of our January 1, 2013 share count, and through
quarterly dividends.

We took some additional steps during 2014 to improve
our capital flexibility and optimize our capital structure.
First, we were able to increase unencumbered assets by
approximately $275 million at Bermuda-based Assured
Guaranty Re Ltd. (AG Re) by obtaining approvals for
Assured Guaranty Municipal Corp. (AGM), Assured
Guaranty (Europe) Ltd. and Assured Guaranty Corp. (AGC)
to reassume certain contingency reserves from AG Re
that had previously required collateralization by AG Re.
In addition, AG Re increased its unencumbered assets
by more than $100 million as a result of a commuta-
tion agreement with a ceding company.

Second, we requested and received regulatory approval
to release more than $1.1 billion from contingency
reserves into policyholders’ surplus at AGM and AGC,
thereby increasing the dividend capacity of these
subsidiaries.

And third, we issued $500 million of 10-year, 5% senior
notes. In a powerful market endorsement, the issue
was eight times oversubscribed at its original target of
$300 million, with bids from 130 investors.

ASSURED GUARANTY / 3

10 Years

IPO ANNIVERSARY

THE KEY PRINCIPLES OF OUR SUCCESS ARE VIRTUALLY
UNCHANGED SINCE OUR INITIAL PUBLIC OFFERING

OBJECTIVE 2: GROWTH IN NEW BUSINESS PRODUCTION
Assured Guaranty recorded a present value of new busi-
ness production (PVP)* of $168 million, 19% more than
in 2013, with contributions from each business segment.

In the U.S. public finance market, industry insurance
penetration of new-issue par sold climbed to 5.9% from
3.9% the previous year. Assured Guaranty insured 43%
more par volume of new issues sold in 2014 than in
2013. This is impressive progress considering the strong
headwinds during the year. Thirty-year municipal bond
yields dropped 133 basis points over the course of the
year, and credit spreads were as tight as at any time
since 2008. Additionally, there was no meaningful growth
in primary market volume.

We continued to lead the market with a 58% share
of U.S. public finance primary-market insured par sold,
even as we conceded numerous small and mid-size
issues that were insured by our competition at prices
we found unacceptable.

While small and mid-size issues represented the majority
of our 2014 municipal business, we also guaranteed 41
new issues sold with insured par of more than $50 million
each, 12 of which exceeded $100 million. The compar-
able figures in 2013 were 26 transactions over $50 mil-
lion, of which eight exceeded $100 million. This growth
in the number of larger transactions reflects improved
demand for our insurance from institutional investors.

We attribute the increased demand for our insurance
to the proven value of our guarantees. Investors have
seen us pay claims and relieve insured bondholders of
the burden of prolonged restructuring negotiations
and bankruptcy litigation.

They have also seen clear evidence that Assured
Guaranty-insured bonds of troubled issuers hold their
trading value much better than those issuers’ compara-
ble uninsured bonds. And with over $400 million of our
insured bonds trading every day, investors can see that
bonds with our guaranty enjoy enhanced market liquidity.

In the international infrastructure market, where
transactions can take a year or more to complete,
we guaranteed an innovative United Kingdom social
housing project during 2014. In the last two years, we
have demonstrated the viability of our capital market
solution for new infrastructure projects, and we also
continue to pursue opportunities related to interna-
tional transactions previously wrapped by other legacy
financial guarantors.

In structured finance, we found opportunities for growth.
We reopened the market for insured diversified payment
rights transactions and found other opportunities in
state-sponsored new markets tax credits and private
transactions to provide capital relief for large institutions,
such as life insurance companies. Our 2014 structured
finance PVP of $33 million was more than four times
that of the prior year.

*Please see note 2 on page 18 regarding non-GAAP financial measures used in this Annual Report.

4 / THE PROVEN LEADER IN BOND INSURANCE

EXERCISE DISCIPLINED UNDERWRITING
AND RISK MANAGEMENT

MAINTAIN HIGH FINANCIAL
STRENGTH LEVELS

ASSURED GUARANTY / 5

Our discipline in credit selection, underwriting and enterprise risk management defines

Assured Guaranty’s core competencies. This discipline is an important factor in preserving

and building financial strength. We are the only financial guaranty company that maintained

sufficient financial strength to write financial guaranty insurance before, during and since the

Great Recession.

6 / THE PROVEN LEADER IN BOND INSURANCE

$48.92

$49.32

$49.58

$47.17

$53.66

$15.49
$0.69
$37.48

$14.95
$0.80
$33.83

$19.12
$1.66
$28.54

$15.98
$1.14
$30.05

$21.08

$2.31

$25.53

ADJUSTED BOOK VALUE PER SHARE*

Net unearned premium reserve on financial guaranty
contracts in excess of net expected loss to be expensed
less deferred acquistion costs, after tax

Net present value of estimated net future credit derivative
revenue, after tax

Operating shareholders’ equity per share

583.333333

466.666667

350.000000

233.333333

116.666667

0.000000

$655

$601

$609

$535

$491

OPERATING

INCOME*

(Dollars in Millions)

’10

’11

’12

’13

’14

’10

’11

’12

’13

’14

36.9The number of shares we repurchased from

MILLION

January 1, 2013 through December 31, 2014

*Non-GAAP financial measure. See note 2 on page 18.

OBJECTIVE 3: ACCRETIVE REASSUMPTIONS

AND ACQUISITIONS
In addition to reassuming previously ceded business
totaling $1.2 billion of par in 2014, we agreed to
purchase Radian Asset from the Radian Group Inc. for
$810 million, subject to certain closing adjustments.
We expect to close the transaction in the first half
of 2015, subject to regulatory approval. When the
transaction is completed, Radian Asset will be merged
into AGC, and its book of business will become part
of AGC’s insured portfolio. As of December 31, 2014,
Radian Asset’s statutory capital was approximately $1.3
billion, and its insured statutory net par outstanding
was $18.0 billion. Since the beginning of 2015, its
structured finance net par outstanding has declined
by $3.8 billion as a result of the termination of seven

AAA-rated pooled corporate transactions, bringing the
portfolio to be acquired down to $14.2 billion. We
expect the Radian Asset transaction to be accretive to
earnings, operating shareholders’ equity and adjusted
book value. It should also increase AGC’s capital base
and policyholders’ surplus and therefore AGC’s dividend
capabilities. The transaction will benefit not only our
shareholders and policyholders but also holders of bonds
insured by Radian Asset, which will gain enhanced
valuation and increased market liquidity.

OBJECTIVE 4: LOSS MITIGATION AND OTHER LOSS

RECOVERY STRATEGIES
We succeeded in our loss mitigation efforts during
2014, achieving a $30 million benefit in our total net
economic loss development and a $2 billion, or 27%,

ASSURED GUARANTY / 7

$655

$601

$609

$535

$491

OPERATING
INCOME*
(Dollars in Millions)

ADJUSTED BOOK VALUE PER SHARE*

Net unearned premium reserve on financial guaranty
contracts in excess of net expected loss to be expensed
less deferred acquistion costs, after tax

Size of Radian Asset insured portfolio we agreed to acquire
(statutory net par amount as of December 31, 2014)

583.333333

$18.0

233.333333

350.000000

466.666667

BILLION

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0.0

$48.92

$49.32

$49.58

$47.17

$53.66

$15.49

$0.69

$37.48

$14.95

$0.80

$33.83

$19.12

$1.66

$28.54

$15.98

$1.14

$30.05

$21.08

$2.31

$25.53

DIVIDENDS

Per share ($)

Total paid ($ millions)

$.40

$.36

$69

$.16

$.14

$.12

$10

$11

$.18 $.18 $.18 $.18

$33

$22

$16

2004* 2005 2006 2007 2008 2009 2010 2011 2012

2013

’10

’11

’12

’13

’14

’10

’11

’12

’13

’14

Net present value of estimated net future credit derivative

116.666667

revenue, after tax

Operating shareholders’ equity per share

0.000000

$0.40

$75

$0.44

$76

$0.36

$69

DIVIDENDS

$0.16

$0.14

$0.12

$10

$11

$0.18

$33

$22

$16

Per Share (Dollars)
Total Paid (Dollars in Millions)

†

’04

’05

’06

’07

’08

’09

’10

’11

’12

’13

’14

In February 2015, we increased our quarterly dividend by 9% to $0.12 per share ($0.48 annualized).
†In 2004, dividends were paid following our April IPO. The amount shown is the quarterly dividend, annualized.

losses and contributing to adjusted book value. We
also terminated over $4 billion of net par outstanding,
including the transactions terminated under agreements
with R&W counterparties, thereby reducing rating agency
capital charges and accelerating premium earnings.

Another way we mitigate losses is by working with
troubled credits to resolve their fiscal difficulties,
preferably before a default occurs, and by asserting
our rights in distressed situations when necessary.
In 2014, the bankruptcies of Detroit and Stockton
were resolved with outcomes considerably better for
us than the original offers. In these and other cases,
we have shown that by consolidating the interests
of insured investors under our guarantor’s umbrella,
and by pursuing a constructive approach to developing

In February 2014, we increased our quarterly dividend
by 10% to $0.11 per share.

*In 2004, dividends were paid following our
April IPO. The amount shown is the quarterly dividend,
annualized.

reduction in our below-investment-grade residential
mortgage-backed securities (RMBS) exposure. These
positive results were largely due to a number of
agreements we reached during the year with providers
of representations and warranties (R&W) on RMBS
we insured, including one with Credit Suisse. Through
these agreements, we caused R&W providers and
other responsible parties to make or agree to make
payments or to terminate certain insured transactions
whose projected future losses we thereby avoided.
An estimated $581 million of such payments and pro-
jected future losses are associated with our 2014 R&W
agreements.

Additionally, in 2014, we purchased $355 million of our
wrapped bonds for $309 million, mitigating expected

0.5

0.4

0.3

0.2

0.1

0.0

8 / THE PROVEN LEADER IN BOND INSURANCE

GROW OUR FINANCIAL
GUARANTY FRANCHISE

ASSURED GUARANTY / 9

We pursue business growth with close attention to its long-term impact on risk exposure and

profitability. During 2014, we increased PVP by 19% year-over-year, reassumed $1.2 billion par

of previously ceded business and agreed to acquire Radian Asset, including its insured portfolio.

10 / THE PROVEN LEADER IN BOND INSURANCE

$11,091 $11,011

$10,799

$10,566

$11,333

$11,091 $11,011

$10,799

$10,566

$11,333

AVAILABLE-FOR-SALE

INVESTMENT PORTFOLIO

AND CASH

(Dollars in Millions)

AVAILABLE-FOR-SALE
INVESTMENT PORTFOLIO
AND CASH
(Dollars in Millions)

$1.8

$4.2

R&W RECOVERIES
(Dollars in Billions)

$4.2

R&W RECOVERIES

(Dollars in Billions)

$1.8

’12

’13

’11

’14

Lifetime
Total

GAAP basis investment portfolio and
cash, excluding other invested assets.

’10

’11

’12

’09
& Prior

’14

’10

’13

$0.4

$0.2

$0.7

$0.6

$0.5

13.0

6.5

0.0

400

300

200

100

’10

’11

’12

’13

’14

GAAP basis investment portfolio and

cash, excluding other invested assets.

13.0

6.5

400

200

100

$12,630

$12,839

47X

$12,328 $12,147

$12,189

42X

40X

36X

CONSOLIDATED CLAIMS-PAYING
RESOURCES AND INSURED
PORTFOLIO LEVERAGE
(Dollars in Millions)

31X

$12,630

$12,839

$12,328 $12,147

$12,189

47X

42X

40X

CONSOLIDATED CLAIMS-PAYING
RESOURCES AND INSURED
PORTFOLIO LEVERAGE
(Dollars in Millions)

36X

31X

0.0

’10

’11

’12

’13

’14

Consolidated claims-paying resources

Ratio of statutory net par outstanding
to total claims-paying resources

’10

’11

’12

’13

’14

Consolidated claims-paying resources

Ratio of statutory net par outstanding
to total claims-paying resources

$396

$404

$393

$403

$361

NET INVESTMENT

INCOME

(Dollars in Millions)

300

$396

$404

$393

$403

$361

solutions, we are in a position to reach a more favorable
settlement in a shorter time than could investors nego-
NET INVESTMENT
tiating independently. We have consistently defied early
INCOME
speculations of large losses, and we have defended
(Dollars in Millions)
fundamental principles of municipal bond security, as
we did by requiring that the secured status of unlim-
ited tax general obligations be stipulated in our Detroit
ULTGO settlement.

Represents amounts included in

operating income.

’10

’11

’12

’13

’14

Represents amounts included in

operating income.

’10

’11

RECENT DEVELOPMENTS IN PUERTO RICO
While we have successfully resolved a significant number
of the troubled exposures in our public finance insured
portfolio, the Puerto Rico credits remain an area of
concern, for which we established additional reserves
’13
during 2014.

’14

’12

In February 2015, the United States District Court for
the District of Puerto Rico ruled that the legislation
enacted by the Commonwealth to establish a restruc-
turing procedure for certain public corporations is void
because it is preempted by the federal Bankruptcy Code,
which explicitly excludes Puerto Rico’s public corpora-
tions and municipalities from chapter 9 bankruptcy
protection. While the Commonwealth is appealing that
decision, the U.S. Congress is considering legislation
that would extend to Puerto Rico the right to allow its
public corporations and municipalities to reorganize
under chapter 9.

Within our Puerto Rico exposures, the most vulnerable
credit is the Puerto Rico Electric Power Authority (PREPA),
which is developing its restructuring plan. Through a

Estimated total, gross of reinsurance, of (i) settlement
receipts and commitments; (ii) R&W putbacks; and (iii)
future projected losses on terminated insurance protection.
The putbacks flow through the transaction waterfalls and do
not necessarily benefit Assured Guaranty dollar-for-dollar.

$0.4

$0.7

$0.6

$0.5

’10

’11

’12

’13

’14

Lifetime

Total

$0.2

’09
& Prior

Estimated total, gross of reinsurance, of (i) settlement

receipts and commitments; (ii) R&W putbacks; and (iii)

future projected losses on terminated insurance protection.

The putbacks flow through the transaction waterfalls and do

not necessarily benefit Assured Guaranty dollar-for-dollar.

13.0

6.5

0.0

400

300

200

100

$11,091 $11,011

$10,799

$10,566

$11,333

AVAILABLE-FOR-SALE

INVESTMENT PORTFOLIO

AND CASH

(Dollars in Millions)

’10

’11

’12

’13

’14

GAAP basis investment portfolio and
cash, excluding other invested assets.

$11,091 $11,011

$11,333

ASSURED GUARANTY / 11

$4.2

R&W RECOVERIES

(Dollars in Billions)

$1.8

$0.4

$0.7

$0.6

$0.5

’10

’11

’12

’13

’14

Lifetime

Total

Estimated total, gross of reinsurance, of (i) settlement

receipts and commitments; (ii) R&W putbacks; and (iii)

future projected losses on terminated insurance protection.

The putbacks flow through the transaction waterfalls and do

not necessarily benefit Assured Guaranty dollar-for-dollar.

$0.2

’09
& Prior

$10,566

$10,799

$12,839

$12,630

$12,328 $12,147

$12,189

47X

42X

40X

AVAILABLE-FOR-SALE
INVESTMENT PORTFOLIO
AND CASH
(Dollars in Millions)

36X

CONSOLIDATED CLAIMS-PAYING
RESOURCES AND INSURED
3
PORTFOLIO LEVERAGE
(Dollars in Millions)

31X

$1.8

’10

’11

’12

’13

’14

’10

’11

’12

’13

’14

GAAP basis investment portfolio and
cash, excluding other invested assets.

Consolidated claims-paying resources

Ratio of statutory net par outstanding
to total claims-paying resources

$396

$404

$393

$403

$361

NET INVESTMENT
INCOME
(Dollars in Millions)

$12,630

$12,839

$12,328 $12,147

$12,189

47X

42X

40X

36X

CONSOLIDATED CLAIMS-PAYING

RESOURCES AND INSURED

PORTFOLIO LEVERAGE

31X

(Dollars in Millions)

Consolidated claims-paying resources

Ratio of statutory net par outstanding

to total claims-paying resources

13.0

6.5

0.0

$4.2

R&W RECOVERIES

(Dollars in Billions)

$0.4

$0.7

$0.6

$0.5

$0.2

’09

& Prior

’10

’11

’12

’13

’14

Lifetime

Total

Estimated total, gross of reinsurance, of (i) settlement

receipts and commitments; (ii) R&W putbacks; and (iii)

future projected losses on terminated insurance protection.

The putbacks flow through the transaction waterfalls and do

not necessarily benefit Assured Guaranty dollar-for-dollar.

Represents amounts included in

operating income.

’10

’11

’12

’13

’14

’10

’11

’12

’13

’14

400

forbearance agreement, we and other creditors have
agreed to allow PREPA time to develop a plan to restore
its financial stability. Simultaneously, we are exploring
possible ways to work with the Puerto Rico Highway
and Transportation Authority (PRHTA).

300

200

We have appropriately reserved for our Puerto Rico
exposure. Our current ratings and outlooks from
Standard and Poor’s Rating Services (S&P), Moody’s
Investors Service (Moody’s) and Kroll Bond Rating
Agency (KBRA) all reflect our ability to withstand
Puerto Rico stress-loss scenarios of varying severity.

100

RATING AGENCY RECOGNITION
As we have continued to meet our operating objectives
and build financial strength, rating agencies have begun
to take notice. S&P upgraded our operating subsidiaries’

Represents amounts included in
operating income.

$396

$404

$393

$403

$361
ratings to AA from AA- and confirmed their stable
outlook in March 2014. Significantly, this was the first
upgrade we have received since the start of the Great
Recession. Additionally, in November, KBRA initiated its
coverage of AGM with a rating of AA+ stable, giving
both AGM and MAC the highest rating assigned to any
active bond insurer by a nationally recognized statistical
rating organization.

NET INVESTMENT
INCOME
(Dollars in Millions)

Moody’s continues to rate us at levels below our S&P
and KBRA ratings, but its reasons have essentially
nothing to do with our capital adequacy or financial
strength. Moody’s recently moved the goalposts again
when it revised its bond insurer rating criteria on
’10
January 20, 2015. While Moody’s subsequently published
an article maintaining our existing ratings under the new
methodology, the revised criteria are clearly designed

’14

’13

’12

’11

12 / THE PROVEN LEADER IN BOND INSURANCE

MANAGE CAPITAL EFFICIENTLY
AND RESPONSIBLY

CONDUCT RIGOROUS SURVEILLANCE
AND REMEDIATION

ASSURED GUARANTY / 13

During 2014, we bought back 24 million shares, which helped raise operating shareholders’

equity per share to a record $37.48 and adjusted book value per share to $53.66, and we

issued $500 million of 10-year, 5% senior notes. Our success in reaching RMBS settlements

led to a $30 million net benefit in our total economic loss development. We also negotiated

settlements that limited our losses in two municipal bankruptcies.

14 / THE PROVEN LEADER IN BOND INSURANCE

CONSOLIDATED NET PAR
OUTSTANDING
(as of December 31, 2014)

80% U.S. Public Finance
A average rating

10% U.S. Structured Finance
AA- average rating

8% Non-U.S. Public Finance
BBB+ average rating
2% Non-U.S. Structured Finance
AA average rating

$403.7 billion

A average rating

Ratings are based on our internal rating scale.

43%Growth in par amount sold of new U.S. municipal bonds

insured by Assured Guaranty, 2014 vs. 2013

U.S. PUBLIC FINANCE
NET PAR OUTSTANDING
BY SECTOR
(as of December 31, 2014)

44% General Obligation

19% Tax-Backed

16% Municipal Utilities

9% Transportation

5% Healthcare

4% Higher Education

3% Other Public Finance

$322.1 billion

A average rating

to cap the potential rating of any bond insurer at a
level below the AA category by relying, for example,
on an unrealistic requirement of $2 billion for the
industry’s aggregate annual present value premiums—
a measure that says little, if anything, about an insur-
er’s ability to meet its obligations or about its financial
strength in general.

PROVEN SUCCESS THROUGH A TUMULTUOUS DECADE
At the end of our tenth full year since our initial public
offering, we can look back with satisfaction on a decade
that included some of the most difficult economic years
in living memory. Through it all, Assured Guaranty
has been profitable each year and one of the strongest
financial companies, with a proven record of reducing
issuers’ borrowing costs and keeping investors whole
in distressed situations, while building value for our

shareholders. In the ten-and-a-half years since our IPO,
we more than doubled adjusted book value, insured
$372 billion par of new business, earned $3.8 billion
of operating income and built the industry’s leading
franchise.

The credit for these accomplishments is shared by all
the dedicated individuals who have helped to build
Assured Guaranty—our underwriters, risk management
professionals, finance professionals, attorneys and
administrative personnel, as well as our senior leadership
and the highly engaged members of our board of
directors. I want to give special thanks to Robert Mills,
who served as our Chief Operating Officer through
March 2015. His counsel and leadership were essential
to the success of our IPO, the acquisition of AGM, our
RMBS recovery program and so many other initiatives.

U.S. PUBLIC FINANCE

NET PAR OUTSTANDING

BY RATING

(as of December 31, 2014)

1% AAA

28% AA

55% A

14% BBB

2% BIG*

$322.1 billion

Ratings are based on our internal rating scale.

*Below Investment Grade

CONSOLIDATED NET PAR

OUTSTANDING

(as of December 31, 2014)

80% U.S. Public Finance

A average rating

10% U.S. Structured Finance

AA- average rating

8% Non-U.S. Public Finance

BBB+ average rating

2% Non-U.S. Structured Finance

AA average rating

$403.7 billion

A average rating

ASSURED GUARANTY / 15

U.S. PUBLIC FINANCE

NET PAR OUTSTANDING

BY RATING

(as of December 31, 2014)

1% AAA

28% AA

55% A

14% BBB

2% BIG*

$322.1 billion

Ratings are based on our internal rating scale.

*Below Investment Grade

$400MILLION

Average daily trading volume of municipal bonds
insured by Assured Guaranty

CONSOLIDATED NET PAR

OUTSTANDING

(as of December 31, 2014)

80% U.S. Public Finance

A average rating

10% U.S. Structured Finance

AA- average rating

8% Non-U.S. Public Finance

BBB+ average rating

2% Non-U.S. Structured Finance

AA average rating

$403.7 billion

A average rating

Ratings are based on our internal rating scale.

U.S. PUBLIC FINANCE

NET PAR OUTSTANDING

BY SECTOR

(as of December 31, 2014)

44% General Obligation

19% Tax-Backed

16% Municipal Utilities

9% Transportation

5% Healthcare

4% Higher Education

3% Other Public Finance

$322.1 billion

A average rating

Ratings are based on our internal rating scale.

U.S. PUBLIC FINANCE
NET PAR OUTSTANDING
BY SECTOR
(as of December 31, 2014)

44% General Obligation

19% Tax-Backed
16% Municipal Utilities

9% Transportation
5% Healthcare

4% Higher Education
3% Other Public Finance

$322.1 billion

A average rating

U.S. PUBLIC FINANCE
NET PAR OUTSTANDING
BY RATING
(as of December 31, 2014)

1% AAA
28% AA
55% A
14% BBB
2% BIG*

$322.1 billion

Ratings are based on our internal rating scale.
*Below Investment Grade

READY FOR THE FUTURE
I am confident about the years ahead because we
continue to adhere to the core principles that have
served us well. I do not know when interest rates will
ultimately rise from their current near-record lows, but
we are the best positioned guarantor to benefit from
rising rates when they come.

There is pent-up demand for capital to rebuild and
expand governmental infrastructure. The asset-backed
market continues to revive, and we see many applications
of our guaranty for banks and insurance companies.
With the challenges of many of our troubled exposures
behind us, and with our legacy structured finance
portfolio amortizing rapidly, we look forward in 2015
to building our financial guaranty franchise, further
optimizing our capital structure and completing the

Radian Asset acquisition, while continuing to manage
risk intelligently. As we pursue the opportunities the
market provides, we will continue, above all, to be
responsible stewards of capital on behalf of our
policyholders and shareholders.

Dominic J. Frederico
President and Chief Executive Officer

March 2015

16 / THE PROVEN LEADER IN BOND INSURANCE

ASSURED GUARANTY LTD.

LEADERSHIP

EXECUTIVE OFFICERS OF ASSURED GUARANTY LTD.

ASSURED GUARANTY / 17

Robert A. Bailenson
Chief Financial Officer

James M. Michener
General Counsel
and Secretary

Howard W. Albert
Chief Risk Officer

Russell B. Brewer II
Chief Surveillance Officer

Bruce E. Stern
Executive Officer

SENIOR MANAGEMENT

Ling Chow
Deputy General Counsel,
Corporate

Stephen Donnarumma
Chief Credit Officer

Ivana M. Grillo
Managing Director,
Human Resources

Donald H. Paston
Managing Director
and Treasurer

BUSINESS LEADERS

Gary F. Burnet
President,
Assured Guaranty
Re Ltd.

William J. Hogan
Senior Managing
Director, Public Finance

Paul R. Livingstone
Senior Managing
Director, Structured
Finance

William B. O’Keefe
Senior Managing
Director, Public Finance

Nicholas J. Proud
Senior Managing
Director,
International

Robert S. Tucker
Managing Director,
Investor Relations
and Corporate
Communications

18 / THE PROVEN LEADER IN BOND INSURANCE

FINANCIAL HIGHLIGHTS

(Dollars in millions, except per share amounts)
Year ended December 31,

SUMMARY OF OPERATIONS
Revenues:
Net earned premiums
Net investment income
Net realized investment gains (losses)
Realized gains and other settlements on credit derivatives
Net unrealized gains (losses) on credit derivatives
Fair value gains (losses) on committed capital securities
Fair value gains (losses) on financial guaranty variable interest entities
Other income (loss)

Total revenues in net income

Expenses:
Loss and loss adjustment expenses
Interest expense
Other expenses 1

Total expenses in net income

Income before income taxes
Provision (benefit) for income taxes

Net income

Less after-tax items not included in operating income:
Realized gains (losses) on investments
Non-credit impairment unrealized fair value gains (losses) on
credit derivatives
Fair value gains (losses) on committed capital securities
Foreign exchange gains (losses) on remeasurement of premiums

receivable and loss and loss adjustment expense reserves

Effect of consolidating financial guaranty variable interest entities

Operating income 2

Net income per diluted share
Operating income per diluted share 2

YEAR-END DATA
Shareholders’ equity
Shareholders’ equity per share

Operating shareholders’ equity 2
Operating shareholders’ equity per share 2

Adjusted book value 2
Adjusted book value per share 2

NEW BUSINESS AND FINANCIAL GUARANTY
INSURED PORTFOLIO
Present value of new business production (PVP)

2014

2013

2012

2011

2010

570
403
(60)
23
800
(11)
255
14

752
393
52
(42)
107
10
346
(10)

1,994

1,608

126
92
245

463

1,531
443

1,088

(34)

500
(7)

(15)
153

491

6.26
2.83

154
82
230

466

1,142
334

808

(40)
7

(1)
193

609

4.30
3.25

853
404
1
(108)
(477)
(18)
191
108

954

504
92
226

822

132
22

110

(4)

(486)
(12)

15
62

535

0.57
2.81

920
396
(18)
6
554
35
(146)
58

$ 1,187
361
(2)
153
(155)
9
(274)
34

1,805

1,313

448
99
229

776

1,029
256

773

(20)

244
23

(3)
(72)

601

4.16
3.24

412
100
267

779

534
50

484

13
6

(25)
(166)

655

2.56
3.46

$ 5,758
36.37

$ 5,933
37.48

$ 8,495
53.66

$ 5,115
28.07

$ 6,164
33.83

$ 9,033
49.58

$ 4,994
25.74

$ 5,830
30.05

$ 9,151
47.17

$ 4,652
25.52

$ 5,201
28.54

$ 8,987
49.32

$ 3,670
19.97

$ 4,691
25.53

$ 8,989
48.92

168

141

210

243

363

Net debt service outstanding (end of period) 3

$609,622

$690,535

$780,356

$844,447

$926,698

Net par outstanding (end of period) 3
Public finance
Structured finance

Total net par outstanding

CLAIMS-PAYING RESOURCES
Policyholders’ surplus
Contingency reserve

Qualified statutory capital

Claims-paying resources 4

$353,482
50,247

$386,179
72,928

$425,469
93,303

$442,119
114,711

$467,739
148,947

$403,729

$459,107

$518,772

$556,830

$616,686

$ 4,142
2,330

$ 3,202
2,934

$ 3,579
2,364

$ 3,116
2,571

$ 2,627
2,288

$ 6,472

$ 6,136

$ 5,943

$ 5,687

$ 4,915

$ 12,189

$ 12,147

$ 12,328

$ 12,839

$ 12,630

1 Includes operating expenses, amortization of deferred acquisition costs and, for 2010 only, expenses related to the acquisition of Assured Guaranty Municipal Holdings Inc.
2 Operating income, operating income per diluted share, operating shareholders’ equity, operating shareholders’ equity per share, adjusted book value, adjusted book value per share and present value of
new business production (PVP) are financial measures that are not in accordance with GAAP, and we refer to them as non-GAAP financial measures. Please see Assured Guaranty’s annual report on Form
10-K, around which this Annual Report is wrapped, for a definition of these non-GAAP financial measures and a reconciliation of these non-GAAP financial measures to the most comparable financial
information prepared in accordance with GAAP.

3 Net debt service and net par outstanding amounts are on a GAAP basis and exclude amounts related to securities the Company has purchased for loss mitigation purposes, which securities the Company

refers to as “loss mitigation bonds.” See AGL’s Form 10-K Note 3, Outstanding Exposure, of the Financial Statements and Supplementary Data for additional information.

4 Includes $450 million excess-of-loss reinsurance facility for the benefit of AGM, AGC and MAC, which became effective on January 1, 2014; 2013 and 2012 include $435 million excess-of-loss reinsurance

facility for the benefit of AGM and AGC, which became effective January 1, 2012 and replaced a $298 million non-recourse credit facility terminated by AGM on December 23, 2011.

CORPORATE & SHAREHOLDER INFORMATION

Corporate Headquarters
Assured Guaranty Ltd.
30 Woodbourne Avenue
Hamilton HM 08
Bermuda
Phone: 1 441 279 5700

Other Locations
Bermuda
Assured Guaranty Re Ltd.
30 Woodbourne Avenue
Hamilton HM 08
Phone: 1 441 279 5700

United States
Assured Guaranty Municipal Corp.
Municipal Assurance Corp.
Assured Guaranty Corp.

31 West 52nd Street
New York, NY 10019
Phone: 1 212 974 0100

One Market, 1550 Spear Tower
San Francisco, CA 94105
Phone: 1 415 995 8000

United Kingdom
Assured Guaranty (Europe) Ltd.
1 Finsbury Square
London, EC2A 1AE
Phone: 44 0 20 7562 1900

Stock Exchange Listing
Assured Guaranty Ltd. is listed on
the New York Stock Exchange under
the symbol AGO.

Board of Directors of
Assured Guaranty Ltd.
Robin Monro-Davies
Chairman of the Board and
of the Executive Committee

Dominic J. Frederico
President and Chief Executive Officer
and member of the Executive
Committee

Francisco L. Borges
Chairman of the Compensation
Committee; member of the
Nominating and Governance, Risk
Oversight and Executive Committees

G. Lawrence Buhl
Chairman of the Risk Oversight
Committee and member of the
Compensation Committee

Stephen A. Cozen
Chairman of the Nominating and
Governance Committee and member
of the Compensation Committee

Bonnie L. Howard
Member of the Audit and
Finance Committees

Patrick W. Kenny
Chairman of the Audit Committee;
member of the Nominating
and Governance and Executive
Committees

Simon W. Leathes
Member of the Audit, Finance and
Executive Committees

Michael T. O’Kane
Chairman of the Finance Committee
and member of the Audit Committee

Yukiko Omura
Member of the Finance and Risk
Oversight Committees

Investor Inquiries
Our annual report on Form 10-K,
quarterly reports on Form 10-Q,
proxy statement, quarterly earnings
releases and other investor informa-
tion may be obtained at no cost by
contacting our Investor Rela tions
Department. Links to our SEC filings,
press releases and product descrip-
tions and other information may
be found on our website at
AssuredGuaranty.com.

Our Code of Conduct, Corporate
Governance Guidelines and
Categorical Standards of Director
Independence, Board Committee
Charters and other information
relating to corporate governance
are also available on our website at
AssuredGuaranty.com/governance.

Our Investor Relations Department
can be contacted at:
Assured Guaranty Ltd.
Investor Relations Department
30 Woodbourne Avenue
Hamilton HM 08
Bermuda
Phone: 1 441 279 5705
E-mail: info@assuredguaranty.com

Independent Auditors
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017

Transfer Agent of
Shareholder Records
Shareholder correspondence should
be mailed to:
Computershare
P.O. Box 30170
College Station, TX 77842-3170

Overnight correspondence should
be sent to:
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845

Shareholder website
www.computershare.com/investor

Shareholder online inquiries
https://www-us.computershare.com/
investor/contact

In the U.S.
Phone: 1 866 214 2267
Outside the U.S.
Phone: 1 201 680 6578
For hearing impaired in the U.S.
Phone: 1 800 231 5469
For hearing impaired outside the U.S.
Phone: 1 201 680 6610

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30 Woodbourne Avenue, Hamilton HM 08, Bermuda | 1 441 279 5700 | AssuredGuaranty.com