Assured Guaranty's 2009 financial results include the July 1, 2009 acquisition of Financial Security Assurance Holdings Ltd. ("FSAH Acquisition"). The FSAH Acquisition substantially increased Assured Guaranty's total assets and liabilities, including a material increase in the Company's unearned premium reserve and investment assets. The FSAH acquisition also resulted in material increases in earned premium, net investment income, employee headcount, operating expenses and interest expense. Both 2009 net income and operating income included $92.3 million of pre-tax FSAH Acquisition-related expenses ($62.6 million after tax or $0.48 per diluted share).

"We recorded strong operating earnings for the year, despite losses in our residential mortgage-backed insured portfolio," said Dominic Frederico, President and Chief Executive Officer of Assured Guaranty. "This was in large part due to the earnings power we achieved through the FSAH. Additionally, the Company has a strong platform for future growth supported by our strong market acceptance in the fixed income and equity markets, as evidenced by record 2009 originations in our core U.S. municipal business and by our two successful capital raises during the year.

"Turning to insurer financial strength ratings, as previously announced, at our request Fitch has withdrawn its ratings on us at our current rating levels. We took this action because Fitch decided as a credit policy matter to withdraw insurer bond ratings on all Assured Guaranty wrapped bonds for which it did not provide an underlying rating on the issuer, which in our case affects 90% of issuers in our insured portfolio. We believe that our two financial strength ratings are more than sufficient to support our business activity. Should Fitch, in the future, expand its participation in the municipal bond market, or reverse their policy decision we would reconsider carrying the Fitch rating."

1.Effective January 1, 2009, the Company adopted FASB Accounting Standards Codification ("ASC") 260-10, "Earnings Per Share" (FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities"), which clarifies that share-based payment awards that entitle their holders to receive nonforfeitable dividends or dividend equivalents before vesting should be considered participating securities and shall be included in the calculation of basic and diluted net income (loss) per share. There was no effect on previously reported diluted net income per share for the year ended December 31, 2008.Operating income, a non-GAAP financial measure, for both periods is positive, therefore the per diluted share calculation ignores the effect of ASC 260-10 and includes the effect of dilutive securities.

2.Total may not add due to differences in calculating GAAP and non-GAAP per diluted share amounts.

Shareholders' Equity: Shareholders' equity attributable to AGL ("book value") at December 31, 2009 was $3,520.5 million, a $1,594.3 million or 83% increase from $1,926.2 million at December 31, 2008. The increase in shareholders' equity was principally due to two common share offerings that closed in June and December 2009 for total net proceeds of $1,022.7 million.

The Company's December 31, 2009 book value per share was $19.12, a decrease of $2.06 per share from $21.18 at December 31, 2008. The Company's decline in book value per share resulted from the significant increase in shares outstanding from 91.0 million at December 31, 2008 to 184.2 million at December 31, 2009 due to the June 2009 sale of 44.3 million common shares and July 2009 issuance of 22.3 million common shares to Dexia to complete the FSAH Acquisition, both of which were related to the FSAH Acquisition, as well as the December 2009 common equity sale of 27.5 million shares for net proceeds of $573.8 million.

Operating shareholders' equity, a non-GAAP financial measure, was $4,142.2 million, a 79% increase from $2,319.1 million at December 31, 2008, principally due to the 2009 common share offerings as well as $316.7 million in full year 2009 operating income. Operating shareholders' equity per share was $22.49 at December 31, 2009, a decrease of 12% from $25.50 at December 31, 2008, due to the aforementioned increase in shares outstanding during 2009.

Adjusted Book Value: The Company's adjusted book value, a non-GAAP financial measure, was $8,913.7 million ($48.40 per share) at December 31, 2009, a $5,095.9 million ($6.43 per share) increase from December 31, 2008 adjusted book value of $3,817.8 million ($41.97 per share). Table 2 provides a reconciliation of shareholders' equity to operating shareholders' equity and adjusted book value.

The FSAH Acquisition significantly increased the Company's adjusted book value due to acquisition accounting adjustments and FSAH's large book of inforce business and unearned premium revenue. However, the Company's 2009 adjusted book value per share did not increase as much as adjusted book value due to the increase in shares outstanding during 2009 resulting from the FSAH Acquisition and the 2009 equity offerings.

Fourth Quarter 2009 Financial Results

Assured Guaranty also announced today its financial results for the fourth quarter ended December 31, 2009 ("fourth quarter 2009"). Fourth quarter 2009 present value of new business production ("PVP"), a non-GAAP financial measure, was $120.4 million due to a 79% increase in U.S. public finance new business production to $114.0 million from $63.6 million for the quarter ended December 31, 2008 ("fourth quarter 2008"). Table 3 below provides a reconciliation of gross premiums written to PVP. Gross par written totaled $8.0 billion in fourth quarter 2009, up 10% from fourth quarter 2008.

Commenting on the quarter's new public finance originations, Mr. Frederico stated: "We insured 8.5% of all 2009 new issue volume in the U.S. municipal market despite the ratings uncertainty that prevailed throughout most of the year, which ended when Moody's affirmed our ratings on December 18, 2009. This business had average underlying ratings of single-A and was executed at attractive rates of return."

Fourth quarter 2009 PVP declined 6% from fourth quarter 2008 PVP of $128.1 million due to a substantial decline in the Company's structured finance business. Structured finance PVP declined from $49.8 million in fourth quarter 2008 to $6.3 million in fourth quarter 2009. The Company's tightened underwriting standards and the limited new issue activity in those structured finance sectors that the Company would consider for credit enhancement, such as commercial receivables and non-mortgage consumer securitizations such as auto loans, both reduced the amount of 2009 structured finance PVP.

The Company's operating income and operating income per diluted share rose significantly from $3.5 million in fourth quarter 2008 to $155.9 million in fourth quarter 2009 due to the growth in net earned premiums and net investment income, largely associated with the FSAH Acquisition. Fourth quarter 2009 operating income per share also increased rising to $0.91 per diluted share compared to $0.04 per diluted share in fourth quarter 2008. Both fourth quarter 2009 operating income and net income included $12.1 million of pre-tax FSAH Acquisition-related expenses ($8.2 million after tax or $0.05 per diluted share. The Company did not incur any FSAH Acquisition-related expenses in fourth quarter 2008.

Fourth quarter 2009 consolidated net income was $216.7 million ($1.27 per diluted share) as compared to a net loss of $243.8 million ($2.66 per diluted share) in fourth quarter 2008. Table 4 below provides a reconciliation of fourth quarter consolidated net income and operating income. Fourth quarter 2009 consolidated net income increased due to higher operating income and also due to $83.6 million of non-credit impairment unrealized after-tax gains on credit derivatives ($0.49 gain per diluted share), as compared to a non-credit impairment unrealized after-tax loss on credit derivatives of $212.5 million ($2.34 loss per diluted share) in fourth quarter 2008. The change in non-credit impairment unrealized gains (losses) in any financial reporting period reflects the change in the market value of credit enhancement contracts written by the Company's subsidiaries in credit derivative form. The market value of these contracts fluctuates due to changes in market values of the reference securities in these contracts as well as due to changes in market value of credit derivates referencing the Company's subsidiaries.

1.Effective January 1, 2009, the Company adopted FASB Accounting Standards Codification ASC 260-10.Upon retrospective adoption of ASC 260-10, Assured Guaranty decreased previously reported diluted net loss per share by $0.02 for Q4 2008.Operating income, a non-GAAP financial measure, for both periods is positive, therefore the per diluted share calculation ignores the effect of ASC 260-10 and includes the effect of dilutive securities.

2.Total may not add due to differences in calculating GAAP and non-GAAP per diluted share amounts.

Fourth Quarter 2009 Income Statement Highlights:

The Company's consolidated fourth quarter 2009 total revenues included in operating income grew 271% over fourth quarter 2008 to $457.2 million, reflecting the FSAH Acquisition and the resulting increase in the Company's net earned premiums and investment income. Table 5 provides an analysis of fourth quarter 2009 revenues versus fourth quarter 2008.

Fourth quarter 2009 net earned premiums totaled $373.4 million, a 382% or $296.0 million increase from $77.4 million the prior year period due to the FSAH Acquisition and increased net earned premiums from refundings. Net earned premiums from refundings were $46.1 million before tax ($26.0 million after tax or $0.15 per diluted share) in fourth quarter 2009 compared to $25.8 million before tax ($15.3 million after tax or $0.17 per diluted share) in fourth quarter 2008.

Assured Guaranty's fourth quarter 2009 net investment income rose to $87.6 million, an increase of 107% compared to $42.3 million in fourth quarter 2008, as a result of a higher amount of invested assets, partially offset by lower pre-tax book yields. The Company's total investment portfolio was $10.8 billion at December 31, 2009, a $7.2 billion increase from $3.6 billion at December 31, 2008 that resulted from the FSAH Acquisition, operating cash flow and the December 2009 common share offering.

The pre-tax book yield on the portfolio was 3.5% for fourth quarter 2009, down from 4.6% in fourth quarter 2008, due to the increased proportion of municipal securities in the portfolio resulting from the FSAH Acquisition and a high proportion of short-term investments. Municipal securities were 55% of the fixed maturity portfolio at December 31, 2009 as compared to 39% at December 31, 2008. The Company had approximately $1.7 billion of short-term investments at December 31, 2009 (0.13% pre-tax book yield) versus $0.5 billion at December 31, 2008 (1.0% pre-tax book yield) due to the December 2009 common share offering as well as the FSAH Acquisition.

Fourth quarter 2009 realized gains on credit derivatives increased 96% to $55.4 million from $28.2 million for fourth quarter 2008. As of December 31, 2009, the Company had $122.4 billion of credit derivative contracts outstanding up from $75.1 billion at December 31, 2008 due to the FSAH Acquisition.

The Company incurred $60.2 million in credit-related losses on credit derivatives in fourth quarter 2009, a substantial increase from $24.8 million in fourth quarter 2008. Trust preferred securities ("TruPS") accounted for approximately 54% of the fourth quarter 2009 incurred losses on credit derivatives while approximately 40% was incurred on U.S. residential mortgage-backed securities ("RMBS"). TruPS continued to experience adverse development due to defaults by banks and real estate investment trusts. U.S. RMBS exposures continue to experience high delinquency rates, leading Assured Guaranty's management to extend by three months the conditional default rate curve used for modeling projected losses on RMBS exposures. Fourth quarter 2009 credit-related incurred losses on credit derivatives decreased from third quarter 2009, in which the Company incurred $142.2 million of credit-related losses on credit derivatives, largely for U.S. RMBS.

The Company's total expenses rose 76% to $228.7 million in fourth quarter 2009 from $129.9 million in fourth quarter 2008. The Company incurred higher loss and loss adjustment, other operating and interest expenses in fourth quarter 2009 compared to fourth quarter 2008. Table 6 below provides a further quarter expense analysis for 2009 and 2008.

Fourth quarter 2009 loss and loss adjustment expenses ("LAE") were $126.7 million, a 41% increase from $90.0 million in fourth quarter 2008. Fourth quarter 2009 LAE associated with U.S. RMBS exposures totaled $89.6 million, or 71%, but also included credit deterioration on a few public and non-mortgage structured finance transactions. The RMBS-related reserves resulted primarily from adverse development in the first lien sectors, mainly related to rising mortgage delinquencies, defaults and foreclosures, which led Assured Guaranty's management to extend by three months the conditional default rate curve used for modeling projected losses on RMBS exposures.

Amortization of deferred acquisition costs, which reflects the amortization of ceding commissions paid and received and also of operating expenses that were deferred previously and were related to the acquisition of new business, was $12.6 million, down 31% from $18.2 million in fourth quarter 2008. This decrease is primarily due to the elimination of deferred acquisition costs related to policies Assured Guaranty Re Ltd., the Company's Bermuda-based reinsurer, assumed from Assured Guaranty Municipal Corp.

Other operating expenses, which are principally for employee-related expenses, were $52.0 million in fourth quarter 2009 as compared to $15.9 million in fourth quarter 2008, principally due to the FSAH Acquisition and the resulting increase in employee headcount. Other operating expenses do not include FSAH acquisition-related expenses, which totaled $12.1 million ($8.2 million after tax or $0.05 per diluted share) in fourth quarter 2009, down from $51.3 million in third quarter 2009. The Company did not incur any FSAH acquisition-related expenses in fourth quarter 2008. Additional FSAH Acquisition-related expenses, but at a reduced level from fourth quarter 2009, are expected in the first half of 2010 as the Company completes the FSAH Acquisition integration.

Interest expense was $25.3 million in fourth quarter 2009 compared to $5.8 million in fourth quarter 2008, due to the increase in the Company's outstanding debt as a result of the FSAH Acquisition.

Assured Guaranty recorded a $72.6 million provision for operating income taxes in fourth quarter 2009 versus a $10.1 million benefit for income taxes in fourth quarter 2008. The increase in fourth quarter tax expenses and the average tax rate was principally due to higher amounts of U.S. net earned premiums and investment income due to the FSAH Acquisition.

Loss and Loss Adjustment Expense Reserves and RMBS Loss Mitigation Update:

As of December 31, 2009, the Company's loss and LAE reserves and credit-impairment related incurred losses on credit derivatives totaled $718.7 million gross of reinsurance recoverables. The Company also had losses expected to be incurred included in its unearned premium reserve ("UPR") that will be expensed in the future of $1,278.8 million, largely associated with U.S. RMBS exposures. U.S. RMBS loss reserves and losses expected to be incurred included in the UPR are largely for the Company's below investment grade ("BIG") U.S. RMBS exposures. Please see Table 7 for a summary of the Company's fourth quarter 2009 incurred and paid losses and December 31, 2009 loss and LAE reserves and losses expected to be incurred that are included in the UPR.

Assured Guaranty paid losses and LAE on financial guaranty and credit derivative transactions totaling $183.9 million and $675.2 million for fourth quarter 2009 and full year 2009, respectively. Paid losses in both periods were largely related to BIG U.S. RMBS exposures.

The Company continues to pursue loss mitigation strategies for its U.S. RMBS exposures including pursuit of all contractual rights under its transactions such as repurchases of mortgage loans due to breaches of representations and warranties ("R&W"). December 31, 2009 loss and LAE reserves incurred losses on credit derivatives and losses expected to be incurred included in the UPR have an estimated benefit of $1,210.7 million for R&W claims, up $95.6 million from $1,115.1 million at September 30, 2009. Since October 1, 2008 and through December 31, 2009, the Company has reached agreements for $173.6 million in mortgages to be purchased due to R&W claims, including $43.8 million in fourth quarter 2009.

Conference Call and Webcast Information: The Company will host a conference call for investors and analysts on Friday, February 26, 2010 at 8:30 a.m. Eastern Time (9:30 a.m. Atlantic Time). The conference call will be available via live and archived webcast in the Investor Information section of the Company's website at http://www.assuredguaranty.com or by dialing 866-203-2528 (in the U.S.) or 617-213-8847 (International), passcode 13314791. A replay of the call will be available through March 26, 2010 by dialing 888-286-8010 (in the U.S.) or 617-801-6888 (International), passcode 30491470.

Please refer to Assured Guaranty's December 31, 2009 Financial Supplement, which is posted on the Company's website at http://www.assuredguaranty.com/investor/ltd/financial.aspx for more information on the Company's individual segment performance, financial guaranty portfolios, investment portfolio and other items. The Company has also posted on its website Assured Guaranty's Financial Guaranty Direct Segment's U.S. and International Structured Finance Transaction List and New Issue U.S. Public Finance List, both as of December 31, 2009.

Assured Guaranty Ltd. is a publicly-traded (NYSE:AGO) Bermuda-based holding company. Its operating subsidiaries provide credit enhancement products to the U.S. and international public finance, infrastructure and structured finance markets. More information on Assured Guaranty Ltd. and its subsidiaries can be found at www.assuredguaranty.com.