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Announcement:

Moody's reviews Assured Guaranty ratings for possible downgrade

20 Mar 2012

New York, March 20, 2012 -- Moody's Investors Service has placed the Aa3 Insurance Financial Strength (IFS) ratings of Assured Guaranty Municipal Corp. (AGM), Assured Guaranty Corp. (AGC) and their affiliated insurance operating companies on review for possible downgrade. In the same rating action, Moody's also placed the A3 senior unsecured ratings of Assured Guaranty US Holdings, Inc. and Assured Guaranty Municipal Holdings, Inc. on review for possible downgrade.

"Today's rating action reflects Moody's opinion that Assured Guaranty's business and financial profiles may have meaningfully deteriorated due to the firm's narrower business opportunities and substantial exposure to sectors adversely affected by the financial crisis and current economic stress," commented Moody's Associate Managing Director Stanislas Rouyer.

Today's rating action has implications for the various transactions wrapped by AGM and AGC as discussed later in this press release.

RATING RATIONALE

Moody's highlighted the following considerations as prominent in its decision to review Assured Guaranty's ratings:

1) Constrained business opportunities reflecting lower origination volume and reduced demand for financial guaranty insurance across sectors;

2) Continued economic stress in the US (e.g. mortgage and municipal finance) and in Europe resulting in an elevated portion of Assured Guaranty's portfolio in risks assessed as below investment grade;

3) Pressure on new business margins due to low interest rates and tight credit spreads.

Expanding on its rating rationale, Moody's said that while Assured Guaranty has survived the financial crisis, the financial guaranty niche in which it operates remains under pressure. Assured's municipal market penetration stood at 5.2% in 2011, down from 8.6% in 2009 (proforma FSA acquisition). The rating agency further stated that 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 qualified statutory capital and loss reserves and 2.2 times total reported claims paying resources, could leave the firm particularly exposed to further deterioration.

The changing dynamics of the municipal debt market, with an increase in distressed issuers that may be more willing than in the past to default and/or go into bankruptcy to re-negotiate contracts and reduce financial pressure, are also negative for Assured, added Moody's. Since the fortunes of financial guaranty insurers have declined, municipal issuers may be less focused on their relationship with the guarantors and more focused on taking strategic actions, possibly involving a default on their debt, to restore their financial health. In extreme stress scenarios, Moody's also noted that correlation across municipal credits is likely to be greater than evidenced in recent history's loss patterns.

SCOPE OF THE REVIEW

As part of its 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 Guaranty specifically. The rating agency will also further evaluate 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 also be considered in this context.

According to analyst Ranjini Venkatesan, "Moody's will also assess 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."

The rating agency stated that if a ratings downgrade were to occur upon the conclusion of the review, Assured Guaranty's ratings are likely to remain within one or two notches of the current level.

TREATMENT OF WRAPPED TRANSACTIONS

Moody's ratings on securities that are guaranteed or "wrapped" by a financial guarantor are generally maintained at a level equal to the higher of the following: a) the rating of the guarantor (if rated at the investment grade level); or b) the published underlying rating (and for structured securities, the published or unpublished underlying rating). Moody's approach to rating wrapped transactions is outlined in Moody's special comment entitled "Assignment of Wrapped Ratings When Financial Guarantor Falls Below Investment Grade" (May, 2008); and Moody's November 10, 2008 announcement entitled "Moody's Modifies Approach to Rating Structured Finance Securities Wrapped by Financial Guarantors".

As a result of today's rating action, the Moody's-rated securities that are guaranteed or "wrapped" by AGC or AGM are also placed under review for possible downgrade, except those with equal or higher published underlying ratings (and for structured finance securities, except those with equal or higher published or unpublished underlying ratings). A list of these securities will be made available under "Ratings Lists" at www.moodys.com/guarantors.

AFFECTED RATINGS

In addition to the ratings on certain transactions wrapped by Assured, as described above, the following ratings have been placed under review for possible downgrade:

Assured Guaranty Municipal Corp. -- insurance financial strength rating at Aa3;

Assured Guaranty Corp. -- insurance financial strength rating at Aa3;

Assured Guaranty (UK) Ltd. -- insurance financial strength rating at Aa3;

Assured Guaranty (Europe) Ltd. -- insurance financial strength rating at Aa3;

AGM Guaranty (Bermuda) Ltd. -- insurance financial strength rating at Aa3;

Assured Guaranty Re Ltd. -- insurance financial strength rating at A1;

Assured Guaranty Re Overseas Ltd. -- insurance financial strength rating at A1;

Assured Guaranty Mortgage Insurance Company -- insurance financial strength rating at A1;

Assured Guaranty US Holdings Inc. -- senior unsecured at A3, junior subordinated debt at Baa1(hyb), provisional senior unsecured at (P)A3, provisional subordinated debt at (P)Baa1;

Assured Guaranty Municipal Holdings Inc. -- senior unsecured at A3, junior subordinated debt at Baa1 (hyb), provisional senior unsecured at (P)A3, provisional subordinated debt at (P)Baa1, provisional preferred at (P)Baa2;

Assured Guaranty Ltd. (Bermuda) -- issuer rating at A3, provisional senior unsecured at (P)A3, provisional subordinated debt at (P)Baa1, provisional preferred at (P)Baa2:

Woodbourne Capital Trusts I, II, III, and IV -- contingent capital securities at A3 (hyb);

Sutton Capital Trust I, II, III, and IV -- contingent capital securities at A3 (hyb).

Assured Guaranty Municipal Corp. (previously called Financial Security Assurance Inc.) and Assured Guaranty Corp. are financial guaranty insurance companies based in New York. Assured Guaranty Re Ltd. is a Bermuda based financial guaranty reinsurance company. They are wholly owned by Assured Guaranty Ltd. [NYSE:AGO], the ultimate holding company.

The principal methodology used in rating Assured Guaranty 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 the methodology.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations.

For more information, visit our website at www.moodys.com/insurance.

REGULATORY DISCLOSURES

Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. 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.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating 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 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 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 reviews Assured Guaranty ratings for possible downgrade
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