Assured Guaranty Ltd. Reports Third Quarter 2008 Net Loss of $63.3 Million

Business Wire, Nov 6, 2008

Operating Income of $26.0 Million ($0.28 per Diluted Share)

HAMILTON, Bermuda -- Assured Guaranty Ltd. (NYSE:AGO) ("Assured" or "the Company") reported a net loss of $63.3 million ($0.70 per diluted share) for the quarter ended September 30, 2008 ("third quarter 2008") compared to a net loss of $115.0 million ($1.70 per diluted share) for the quarter ended September 30, 2007 ("third quarter 2007"). The reduction in the net loss for third quarter 2008 compared to third quarter 2007 resulted principally from lower after-tax unrealized losses on credit derivatives that were partially offset by higher after-tax realized losses on investments and an increase in loss and loss adjustment expenses on U.S. residential mortgage-backed securities ("RMBS") exposures.

"Market volatility, economic conditions and Moody's review for possible downgrade of Assured's ratings clearly presented us with many challenges this quarter," commented Dominic Frederico, President and Chief Executive Officer of Assured Guaranty Ltd. "Our new business production as well as our operating income was reasonable in light of these challenges. While Assured's loss and loss adjustment expenses for U.S. RMBS have increased this quarter, we continue to believe that Assured's lack of exposure to collateralized debt obligations of asset-backed securities and our non-participation in the guaranteed investment contract business will protect our balance sheet from the liquidity risks and significant credit losses experienced by many other financial institutions."

Operating income, a financial measure that is not in accordance with U.S. Generally Accepted Accounting Principles ("non-GAAP financial measure"), was $26.0 million ($0.28 per diluted share) in third quarter 2008 compared to operating income of $48.2 million ($0.70 per diluted share) in third quarter 2007. See the "Explanation of Non-GAAP Financial Measures" section of this press release for a definition of operating income and other non-GAAP financial measures referenced in this press release. The decrease in operating income was principally due to $82.5 million of third quarter 2008 pre-tax loss and loss adjustment expenses ($66.3 million after tax or $0.73 per diluted share) that were largely associated with U.S. RMBS exposures guaranteed by the Company's subsidiaries. The Company reported $2.0 million ($1.4 million after tax or $0.02 per diluted share) of loss and loss adjustment expenses in third quarter 2007.

Non-GAAP Financial Measures

This press release references several non-GAAP financial measures to assist analysts and investors in evaluating Assured's financial results. These non-GAAP financial measures are defined in the "Explanation of Non-GAAP Financial Measures" section of the press release. In each case, the most directly comparable GAAP financial measure, if available, is presented and a reconciliation of the non-GAAP financial measure and GAAP financial measure is provided. This presentation is consistent with how Assured's management, analysts and investors evaluate the Company's financial results and is comparable to estimates published by analysts in their research reports on Assured. The non-GAAP financial measures included in this press release are: operating income, present value of financial guaranty and credit derivative gross written premiums ("PVP"), net present value of estimated future installment premiums in force and adjusted book value.

[TABLE OMITTED]

Present Value of Financial Guaranty and Credit Derivative Gross Written Premiums

Assured's third quarter 2008 consolidated new business production as measured by the present value of financial guaranty and credit derivative gross written premiums ("PVP"), a non-GAAP financial measure, was $139.4 million, a 16% decrease compared to third quarter 2007, due to a decline in financial guaranty direct new business production that was partially offset by higher financial guaranty reinsurance production.

The financial guaranty direct segment generated third quarter 2008 PVP of $82.2 million, a 38% decrease from the same period last year, reflecting reduced production in the U.S. structured finance and international markets. U.S. structured finance PVP was $14.5 million, a decrease of 81% over third quarter 2007. Assured did not have any international PVP in third quarter 2008, as compared to $45.4 million in third quarter 2007. Reduced PVP in the U.S. structured finance and international markets was the result of a material reduction in new issuance activity attributable to the deteriorating global economic environment as well as due to the Company's tightening of underwriting standards. Financial guaranty direct U.S. public finance PVP rose to $67.7 million, an increase of 557% compared to $10.3 million in third quarter 2007, due to an increase in business, particularly in the competitive bid and secondary markets.

Financial guaranty reinsurance PVP for third quarter 2008 was $57.2 million, an increase of 74% compared to third quarter 2007 PVP of $32.8 million. The growth in PVP during third quarter 2008 resulted from two facultative portfolio reinsurance transactions for credit exposures that were recaptured from other financial guaranty reinsurers by a client of the Company's and then ceded to Assured Guaranty Re Ltd. Excluding these two transactions, financial guaranty reinsurance PVP for the quarter was minimal as most of the Company's reinsurance clients had reduced levels of new business production during third quarter 2008.