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Announcement:

Moody's Disclosures on Credit Rating of Assured Guaranty Corp

15 May 2012

New York, May 15, 2012 -- The following release represents Moody's Investors Service's summary credit opinion on Assured Guaranty Corp and includes certain regulatory disclosures regarding its ratings. This release does not constitute any change in Moody's ratings or rating rationale for Assured Guaranty Corp.

Moody's current ratings on Assured Guaranty Corp and its affiliates are:

Assured Guaranty Corp

Insurance Financial Strength ratings of Aa3, on review for downgrade

Assured Guaranty (UK) Ltd

Insurance Financial Strength (foreign currency) ratings of Aa3, on review for downgrade

Assured Guaranty Capital Trust I

BACKED Preferred Shelf (foreign currency) ratings of (P)Baa1

Assured Guaranty Capital Trust II

BACKED Preferred Shelf (foreign currency) ratings of (P)Baa1

Assured Guaranty Re Ltd

Insurance Financial Strength rating of A1, on review for downgrade

Assured Guaranty Re Overseas Ltd.

Insurance Financial Strength ratings of A1, on review for downgrade

Assured Guaranty Mortgage Insurance Company

Insurance Financial Strength ratings of A1, on review for downgrade

RATING RATIONALE

The Aa3 insurance financial strength (IFS) rating of Assured Guaranty Corp. (AGC) reflects its strong capital profile, conservative underwriting of US municipal, structured, and infrastructure finance risks and the group's (collectively `Assured Guaranty')leading market position, reflecting, in part, the absence of material financial guaranty competition. These strengths are tempered by the firm's high operational leverage inherent in the business of a financial guarantor which makes the credit profile rather sensitive to the performance of individual insured sectors and even, in some cases, individual transactions. This has been particularly evident in the material increase in AGC's loss reserve between year end 2008 ($15 million) and the year end 2011 ($345 million) due to deterioration in its insured portfolio - predominantly from mortgage related risks and CDO (primarily TruPS) exposures.

AGC writes insurance on structured finance and public finance transactions and is one of the three main operating companies of Assured Guaranty Ltd. (`Assured', issuer rating A3) and a wholly owned subsidiary of Assured Guaranty US Holdings Inc. (senior unsecured debt at A3). Affiliated companies include Assured Guaranty Municipal Corp. (AGM, IFS rating at Aa3), which solely insures US municipal transactions and Assured Guaranty Re Ltd. (`AGRe', IFS rating at A1), a Bermuda domiciled reinsurer. The credit profiles of the operating companies are differentiated but intertwined due to the group's flexibility in managing capital among these entities, as demonstrated by AGM's capital support of AGC through a surplus notes investment. Moody's rates AG Re one notch below AGM and AGC to reflect its limited independent franchise and its role as internal reinsurer, optimizing the risk profile of its affiliated primary insurance writers.

All the Assured Guaranty ratings are under review for possible downgrade, reflecting Moody's opinion that the group's business and financial profiles may have meaningfully deteriorated due to narrower business opportunities and exposure to sectors adversely affected by the financial crisis and current economic stress. The financial guaranty niche in which Assured Guaranty operates remains under pressure with a municipal market penetration at 5.2% in 2011, down from 8.6% in 2009 (proforma FSA acquisition). The group's elevated below investment grade exposure, across a range of sectors including RMBS, trust preferred, and municipal risks, which, by Assured's estimate, stood at about 4.3 times the group's statutory capital and loss reserves and 2.2 times total reported claims paying resources, could also leave the firm particularly exposed to further deterioration.

Credit Strengths

Part of the only group active in the financial guaranty insurance segment

Generally well diversified insurance portfolio with nominal liquidity needs

Highly effective loss mitigation strategies have resulted in material reduction in claims realized

Strong embedded earnings

Credit Challenges

Demand for financial guaranty insurance has declined

Confidence sensitive business magnifies headline risks

Large RMBS portfolio makes the insurer vulnerable to weakness in the housing sector

Some single risk and sector concentrations including TruPS CDOs

Rating Outlook

The rating is on review for possible downgrade due to concerns about narrower business opportunities and substantial exposure to sectors affected by the current economic stress. As part of the review Moody's will evaluate

The evolving dynamics of the US municipal, infrastructure and structured finance debt markets and the role played by bond insurance generally and Assured specifically.

The risks embedded in Assured Guaranty's insured portfolio with a particular focus on downside risk sensitivities given its large sector and single risk concentrations to sectors and issuers adversely impacted by the financial crisis and the weak economic environment, including RMBS, trust preferred and select municipal exposures.

The firm's ongoing risk mitigation efforts, including loan put-backs and servicing transfers, will be considered in this context.

How Assured Guaranty is addressing the challenges stemming from managing the credit and headline risks of its legacy portfolio given the confidence sensitive nature of the financial guaranty insurance business.

What Could Change the Rating -- Up

As the rating is on review for possible downgrade, it is unlikely there would be an upgrade in the near term.

What Could Change the Rating - Down

Substantial narrowing of the firm's business opportunities

Greater acceptance of alternatives to bond insurance (including uninsured origination)

Material exposure, relative to capital, to sectors adversely affected by the financial crisis and current economic stress.

Meaningful continued exposure to headline risks and earnings volatility from portfolio's problem credits and sectors

The principal methodology used in these ratings was Moody's Rating Methodology for the Financial Guaranty Insurance Industry published in September 2006. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare each of the ratings are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Ranjini Venkatesan
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Stanislas F Rouyer
Senior Vice President
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Disclosures on Credit Rating of Assured Guaranty Corp
No Related Data.
© 2023 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service, Inc. and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Charter Documents - Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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