Full Description

Assured Guaranty Ltd. (Assured Guaranty), incorporated in 2003, is a holding company that provides, through its operating subsidiaries, credit enhancement products to the public finance, structured finance and mortgage markets. The Company markets its products directly and through financial institutions, serving the United States and international markets. Assured Guaranty operates through wholly owned subsidiaries including Assured Guaranty US Holdings Inc., Assured Guaranty Re Ltd. (AG Re), and Assured Guaranty Finance Overseas Ltd. (AGFOL). Its principal operating subsidiaries are Assured Guaranty Corp. (AGC) and AG Re. Its operations include four principal business segments: financial guaranty direct, financial guaranty reinsurance, mortgage guaranty and other. The Company primarily conducts its business in the United States, Bermuda and the European community. In July 2009, the Company completed the acquisition of Financial Security Assurance Holdings Ltd. from Dexia SA.

Financial Guaranty Direct

Financial guaranty direct insurance provides an unconditional and irrevocable guaranty that protects the holder of a financial obligation against non-payment of principal and interest when due. Financial guaranty insurance may be issued to the holders of the insured obligations at the time of issuance of those obligations, or may be issued in the secondary market to holders of public bonds and structured securities. As an alternative to traditional financial guaranty insurance, credit protection relating to a particular security or issuer can be provided through a credit derivative, such as a credit default swap.

Financial guaranty direct products are provided for structured finance and public finance obligations in the United States and international markets. Structured finance obligations in both the United States and international markets are generally backed by pools of assets, such as residential mortgage loans, consumer or trade receivables, securities or other assets having an ascertainable cash flow or market value, which are generally held by a special purpose issuing entity. Structured finance obligations can be funded or synthetic. Public finance obligations in both the United States and international markets consist primarily of debt obligations issued by or on behalf of states or their political subdivisions (counties, cities, towns and villages, utility districts, public universities and hospitals, public housing and transportation authorities), other public and quasi public entities, private universities and hospitals, and investor owned utilities. These obligations generally are supported by the taxing authority of the issuer, the issuer's or underlying obligor's ability to collect fees or assessments for certain projects or public services or revenues from operations. This market also includes project finance obligations, as well as other structured obligations supporting infrastructure and other public works projects.

Financial Guaranty Reinsurance

Financial guaranty reinsurance indemnifies a primary insurance company against part of a loss that the latter may sustain under a policy that it has issued. The reinsurer may itself purchase reinsurance protection (retrocessions) from other reinsurers, thereby reducing its own exposure. Reinsurance agreements take two major forms: treaty and facultative. Treaty reinsurance requires the reinsured to cede, and the reinsurer to assume, specific classes of risk underwritten by the ceding company over a specified period of time, typically one year. Facultative reinsurance is the reinsurance of part of one or more specified policies, and is subject to separate negotiation for each cession.

The principal types of obligations covered on a global basis by its financial guaranty direct and its financial guaranty reinsurance businesses are structured finance and public finance obligations. It insures and reinsures a number of different types of United States structured finance obligations. Credit support for the exposures written by it may come from a variety of sources, including some combination of subordinated tranches, excess spread, over-collateralization or cash reserves. Additional support also may be provided by transaction provisions intended to benefit noteholders or credit enhancers. The types of United States Structured Finance transactions it insures and reinsures include Pooled Corporate Obligations, Residential Mortgage-Backed and Home Equity, Structured Credit, Consumer Receivables, Commercial Receivables, Commercial Mortgage-Backed Securities, Insurance Securitizations and Other Structured Finance. The Company insures and reinsures a number of different types of public obligations, including Tax-Backed Bonds, General Obligation Bonds, Municipal Utility Bonds, Healthcare Bonds, Transportation Bonds, Higher Education Bonds, Investor-Owned Utility Bonds, Housing Revenue Bonds and Other Public Bonds.

The Company insures and reinsures a number of different types of international public and structured obligations. The types of international transactions it insures and reinsures include Residential Mortgage-Backed and Home Equity, Regulated Utilities, Pooled Corporate Obligations, Infrastructure and pooled infrastructure, Future Flow, Consumer receivables, Public Finance, Commercial Receivables, Insurance Securitizations, Structured Credit and Other International Structured Finance.

Mortgage Guaranty Insurance/Reinsurance

Mortgage guaranty insurance is a specialized class of credit insurance that provides protection to mortgage lending institutions against the default of borrowers on mortgage loans that, at the time of the advance, had a loan-to-value (LTV) in excess of a specified ratio. The Company has provided reinsurance of primary mortgage insurance and pool insurance in the United States on a quota share and excess of loss basis. The Company also provides excess of loss reinsurance to lender captives and third party insurers in the United Kingdom. The Company has entered into multi year reinsurance arrangements with several lenders and third party insurers. It has also participated in the mortgage reinsurance markets in Ireland, Hong Kong and Australia.

Other

The Company has participated in several lines of business that are reflected in its historical financial statements, but that the Company exited, including equity layer credit protection, trade credit reinsurance, title reinsurance, and auto residual value reinsurance. The underwriting, operations and risk management guidelines, policies and procedures of its insurance and reinsurance subsidiaries are tailored to their respective businesses, providing multiple levels of credit review and analysis.

The Company competes with Ambac Assurance Corporation, Berkshire Hathaway Assurance Corporation, Financial Security Assurance Inc., and MBIA Insurance Corporation.