The Company's insurance policies and credit derivative contracts are written in different forms, but collectively are considered financial guaranty contracts. They typically guarantee the scheduled payments of principal and interest ("Debt Service") on public finance and structured finance obligations. The Company seeks to limit its exposure to losses by underwriting obligations that are investment grade at inception, diversifying its portfolio and maintaining rigorous subordination or collateralization requirements on structured finance obligations. The Company also utilizes reinsurance by ceding business to third-party reinsurers. The Company provides financial guaranties with respect to debt obligations of special purpose entities, including VIEs. Based on accounting standards in effect during any given reporting period, some of these VIEs are consolidated as described in Note 9. Outstanding par and Debt Service amounts are presented below, including outstanding exposures on VIEs whether or not they are consolidated.

			Gross Par Outstanding				Ceded Par Outstanding				Net Par Outstanding

Sector			December 31, 2010		December 31, 2009		December 31, 2010		December 31, 2009		December 31, 2010		December 31, 2009
			(in millions)
Public finance:
U.S.:
	General obligation		$	198,553	$	201,264	$	16,754	$	22,880	$	181,799	$	178,384
	Tax backed			92,246		94,825		8,843		11,796		83,403		83,029
	Municipal utilities			75,588		77,872		5,522		8,294		70,066		69,578
	Transportation			42,482		42,540		5,509		7,243		36,973		35,297
	Healthcare			26,383		28,214		4,791		6,205		21,592		22,009
	Higher education			16,584		16,399		897		1,267		15,687		15,132
	Housing			7,316		9,623		754		1,099		6,562		8,524
	Infrastructure finance			4,945		4,530		853		977		4,092		3,553
	Investor-owned utilities			1,507		1,694		2		4		1,505		1,690
	Other public finance—U.S.			5,417		6,002		100		120		5,317		5,882

		Total public finance—U.S.		471,021		482,963		44,025		59,885		426,996		423,078
Non-U.S.:
	Infrastructure finance			18,780		19,404		2,807		3,060		15,973		16,344
	Regulated utilities			18,427		18,979		4,449		5,128		13,978		13,851
	Pooled infrastructure			3,656		4,684		224		280		3,432		4,404
	Other public finance—non-U.S.			9,582		10,485		2,222		2,309		7,360		8,176

		Total public finance—non-U.S.		50,445		53,552		9,702		10,777		40,743		42,775

Total public finance obligations			$	521,466	$	536,515	$	53,727	$	70,662	$	467,739	$	465,853

Structured finance:
U.S.:
	Pooled corporate obligations		$	71,591	$	82,622	$	4,207	$	8,289	$	67,384	$	74,333
	RMBS			26,609		31,033		1,479		1,857		25,130		29,176
	Commercial Mortgage-Backed Securities ("CMBS") and other commercial real estate related exposures			7,137		7,463		53		53		7,084		7,410
	Financial products(1)			6,831		10,251		—		—		6,831		10,251
	Consumer receivables			6,343		9,314		270		441		6,073		8,873
	Commercial receivables			2,142		2,485		3		3		2,139		2,482
	Structured credit			1,794		2,738		65		131		1,729		2,607
	Insurance securitizations			1,656		1,731		72		80		1,584		1,651
	Other structured finance—U.S.			1,980		2,754		1,178		1,236		802		1,518

		Total structured finance—U.S.		126,083		150,391		7,327		12,090		118,756		138,301
Non-U.S.:
	Pooled corporate obligations			25,087		27,743		2,477		3,046		22,610		24,697
	RMBS			3,749		5,623		355		396		3,394		5,227
	Commercial receivables			1,764		1,908		35		36		1,729		1,872
	Structured credit			1,397		2,285		130		216		1,267		2,069
	Insurance securitizations			979		995		15		14		964		981
	CMBS and other commercial real estate related exposures			251		752		—		—		251		752
	Other structured finance—non-U.S.			472		717		51		47		421		670

		Total structured finance—non-U.S.		33,699		40,023		3,063		3,755		30,636		36,268

Total structured finance obligations			$	159,782	$	190,414	$	10,390	$	15,845	$	149,392	$	174,569

Total			$	681,248	$	726,929	$	64,117	$	86,507	$	617,131	$	640,422

		As of December 31, 2010

		Public Finance U.S.					Public Finance Non-U.S.					Structured Finance U.S					Structured Finance Non-U.S					Total
Rating Category(1)		Net Par Outstanding		%			Net Par Outstanding		%			Net Par Outstanding		%			Net Par Outstanding		%			Net Par Outstanding		%
		(dollars in millions)
Super senior		$	—		—	%	$	1,420		3.5	%	$	21,837		18.4	%	$	7,882		25.7	%	$	31,139		5.0	%
AAA			5,784		1.4			1,378		3.4			45,067		37.9			13,573		44.3			65,802		10.7
AA			161,906		37.9			1,330		3.3			17,355		14.6			1,969		6.4			182,560		29.6
A			214,199		50.2			12,482		30.6			6,396		5.4			1,873		6.1			234,950		38.1
BBB			41,948		9.8			22,338		54.8			7,543		6.4			4,045		13.2			75,874		12.3
Below investment grade ("BIG")			3,159		0.7			1,795		4.4			20,558		17.3			1,294		4.3			26,806		4.3

	Total net par outstanding	$	426,996		100.0	%	$	40,743		100.0	%	$	118,756		100.0	%	$	30,636		100.0	%	$	617,131		100.0	%

		As of December 31, 2009

		Public Finance U.S.					Public Finance Non-U.S.					Structured Finance U.S					Structured Finance Non-U.S					Total
Rating Category(1)		Net Par Outstanding		%			Net Par Outstanding		%			Net Par Outstanding		%			Net Par Outstanding		%			Net Par Outstanding		%
		(dollars in millions)
Super senior		$	25		0.0	%	$	2,316		5.4	%	$	28,272		20.4	%	$	12,740		35.1	%	$	43,353		6.8	%
AAA			6,461		1.5			1,477		3.5			40,022		28.9			11,826		32.6			59,786		9.3
AA			164,986		39.0			2,105		4.9			26,799		19.4			2,969		8.2			196,859		30.7
A			208,771		49.4			13,542		31.7			8,305		6.0			2,582		7.1			233,200		36.4
BBB			39,709		9.4			22,691		53.0			14,514		10.5			5,145		14.2			82,059		12.8
BIG			3,126		0.7			644		1.5			20,389		14.8			1,006		2.8			25,165		4.0

	Total net par outstanding	$	423,078		100.0	%	$	42,775		100.0	%	$	138,301		100.0	%	$	36,268		100.0	%	$	640,422		100.0	%

Actual maturities of insured obligations could differ from contractual maturities because borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties. The expected maturities for structured finance obligations are, in general, considerably shorter than the contractual maturities for such obligations. For structured finance obligations, the full par outstanding for each insured risk is shown in the maturity category that corresponds to the final legal maturity of such risk:

Contractual Terms to Maturity of
Net Par Outstanding of Financial Guaranty Insured Obligations

In addition to amounts shown in the tables above, the Company had outstanding commitments to provide guaranties of $3.6 billion for structured finance and $1.2 billion for public finance commitments at December 31, 2010. The structured finance commitments include the unfunded component of and delayed draws on pooled corporate transactions. Public finance commitments typically relate to primary and secondary public finance debt issuances. The expiration dates for the public finance commitments range between January 1, 2011 through February 1, 2019, with $0.9 billion expiring prior to December 31, 2011. All the commitments are contingent on the satisfaction of all conditions set forth in them and may expire unused or be cancelled at the counterparty's request. Therefore, the total commitment amount does not necessarily reflect actual future guaranteed amounts.

The Company seeks to maintain a diversified portfolio of insured public finance obligations designed to spread its risk across a number of geographic areas. The following table sets forth those states in which municipalities located therein issued an aggregate of 2% or more of the Company's net par amount outstanding of insured public finance securities:

				December 31, 2010

				Number of Risks		Net Par Amount Outstanding		Percent of Total Net Par Amount Outstanding			Ceded Par Amount Outstanding
				(dollars in millions)
U.S.:
U.S. Public finance:
	California				1,638	$	59,699		9.7	%	$	6,788
	New York				1,054		35,397		5.7			4,758
	Texas				1,317		31,629		5.1			2,139
	Pennsylvania				1,180		31,162		5.0			2,083
	Florida				514		26,759		4.3			2,177
	Illinois				1,046		26,077		4.2			3,426
	New Jersey				824		18,073		2.9			3,190
	Michigan				801		16,737		2.7			1,237
	Washington				383		12,568		2.0			1,886
	Massachusetts				343		12,473		2.0			2,379
	Other states				5,834		156,422		25.5			13,962

		Total U.S. Public finance			14,934		426,996		69.1			44,025
	Structured finance (multiple states)				1,373		118,756		19.3			7,327

		Total U.S.			16,307		545,752		88.4			51,352
Non-U.S.:
	United Kingdom				142		27,058		4.4			5,455
	Australia				42		9,224		1.5			1,484
	Canada				9		4,486		0.7			577
	France				15		2,555		0.4			911
	Italy				10		2,021		0.3			735
	Other				151		26,035		4.3			3,603

			Total non-U.S.		369		71,379		11.6			12,765

Total					16,676	$	617,131		100.0	%	$	64,117

As of December 31, 2010 and December 31, 2009, the Company's net mortgage guaranty insurance in force (representing the current principal balance of all mortgage loans currently reinsured) was approximately $0.3 billion and $0.4 billion, respectively, and net risk in force was approximately $0.3 billion and $0.4 billion, respectively. These amounts are not included in the above table.

The Risk Oversight and Audit Committees of the Board of Directors of AGL oversee the Company's risk management policies and procedures. With input from the board committees, specific risk policies and limits are set by the Portfolio Risk Management Committee, which includes members of senior management and senior Credit and Surveillance officers.

Risk Management and Surveillance personnel are responsible for monitoring and reporting on all transactions in the insured portfolio, including exposures in both financial guaranty direct and financial guaranty reinsurance segments. The primary objective of the surveillance process is to monitor trends and changes in transaction credit quality, detect any deterioration in credit quality, and recommend to management such remedial actions as may be necessary or appropriate. All transactions in the insured portfolio are assigned internal credit ratings, and Surveillance personnel are responsible for recommending adjustments to those ratings to reflect changes in transaction credit quality. Risk Management and Surveillance personnel are also responsible for managing work-out and loss situations when necessary.

Work-out personnel are responsible for managing work-out and loss mitigation situations. They develop strategies designed to enhance the ability of the Company to enforce its contractual rights and remedies and to mitigate its losses, engage in negotiation discussions with transaction participants and, when necessary, manage (along with legal personnel) the Company's litigation proceedings.

Since the onset of the financial crisis, the Company has shifted personnel to loss mitigation and work-out activities and hired new personnel to augment its efforts. Although the Company's loss mitigation efforts may extend to any transaction it has identified as having loss potential, much of the recent activity has been focused on RMBS.

Generally, when mortgage loans are transferred into a securitization, the loan originator(s) and/or sponsor(s) provide representations and warranties ("R&W"), that the loans meet certain characteristics, and a breach of such R&W often requires that the loan be repurchased from the securitization. In many of the transactions the Company insures, it is in a position to enforce these requirements. The Company uses internal resources as well as third party forensic underwriting firms and legal firms to pursue breaches of R&W. If a provider of R&W refuses to honor its repurchase obligations, the Company may choose to initiate litigation. See "Recovery Litigation" in Note 6 below.

The quality of servicing of the mortgage loans underlying an RMBS transaction influences collateral performance and ultimately the amount (if any) of the Company's insured losses. The Company has established a group to mitigate RMBS losses by influencing mortgage servicing, including, if possible, causing the transfer of servicing or establishing special servicing.

In the fall of 2010, several large RMBS servicers suspended foreclosures because of allegations of a widespread failure to comply with foreclosure procedures and faulty loan documentation. These issues are being investigated by various state attorney general offices throughout the U.S. The suspension of foreclosures and subsequent investigation will lead to additional servicing costs and expenses, including without limitation, increased advances by the servicers for principal and interest, taxes, insurance and legal costs. The Company is increasing its monitoring efforts to ensure that the servicers comply with their obligations under servicing contracts, including bearing the losses and expenses incurred as a result of this issue. These same foreclosure issues are expected to impact the timing of losses to RMBS transactions that the Company has insured, which may impact the speed at which various classes of RMBS securities amortize, and so could impact the size of losses ultimately paid by the Company. The Company expects these issues to take some time to resolve.

The Company may also employ other strategies as appropriate to avoid or mitigate losses in U.S. RMBS or other areas. For example, the Company may pursue litigation or enter into other arrangements to alleviate all or a portion of certain risks.

The Company segregates its insured portfolio into investment grade and BIG surveillance categories to facilitate the appropriate allocation of resources to monitoring and loss mitigation efforts and to aid in establishing the appropriate cycle for periodic review for each exposure. BIG exposures include all exposures with internal credit ratings below BBB-. The Company's internal credit ratings are based on the Company's internal assessment of the likelihood of default. The Company's internal credit ratings are expressed on a ratings scale similar to that used by the rating agencies and are generally reflective of an approach similar to that employed by the rating agencies.

The Company monitors its investment grade credits to determine whether any new credits need to be internally downgraded to BIG. The Company refreshes its internal credit ratings on individual credits in quarterly, semi-annual or annual cycles based on the Company's view of the credit's quality, loss potential, volatility and sector. Ratings on credits in sectors identified as under the most stress or with the most potential volatility are reviewed every quarter. The Company's insured credit ratings on assumed credits are based in large part on the ceding company's credit rating, although, to the extent information is available, the Company will conduct an independent review of low rated credits or credits in volatile sectors. For example the Company models all assumed RMBS credits with ceded par above $1 million, as well as certain RMBS credits below that amount.

Credits identified as BIG are subjected to further review to determine the probability of a loss (see Note 6 "Loss estimation process"). Surveillance personnel then assign each BIG transaction to the appropriate BIG surveillance category based upon whether a lifetime loss is expected and whether a claim has been paid. The Company expects "lifetime losses" on a transaction when the Company believes there is more than a 50% chance that, on a present value basis, it will pay more claims over the life of that transaction than it will ultimately have been reimbursed. For surveillance purposes, the Company calculates present value using a constant discount rate of 5%. (A risk free rate is used for recording of reserves for financial statement purposes.) A "liquidity claim" is a claim that the Company expects to be reimbursed within one year.

Intense monitoring and intervention is employed for all BIG surveillance categories, with internal credit ratings reviewed quarterly:

In 2010 the Company revised the definitions of the three BIG surveillance categories to more closely track the Company's view of whether a transaction is expected to experience a loss, without regard to whether the probability weighted expected loss exceeded the unearned premium reserve. The revisions do not impact whether a transaction would be considered BIG or whether reserves are established for a transaction or the amount of any such reserves, but only the distribution within the BIG surveillance categories. While the revisions resulted in a number of transactions moving between BIG categories, the revisions had a relatively small impact on the totals in each category.

				December 31, 2010

				BIG Net Par Outstanding
				BIG Net Par Outstanding								Net Par Outstanding		BIG Net Par as a % of Net Par Outstanding
				BIG 1		BIG 2		BIG 3		Total BIG		Net Par Outstanding		BIG Net Par as a % of Net Par Outstanding
				(in millions)
				(restated)		(restated)
First lien U.S. RMBS:
	Prime first lien			$	82	$	542	$	—	$	624	$	849		0.1	%
	Alt-A first lien				976		3,108		573		4,657		6,134		0.8
	Alt-A option ARM				33		2,186		640		2,859		3,214		0.5
	Subprime (including net interest margin securities)				729		2,248		106		3,083		9,039		0.4
Second lien U.S. RMBS:
	Closed end second lien				63		444		624		1,131		1,164		0.2
	Home equity lines of credit ("HELOCs")				369		—		3,632		4,001		4,730		0.6

		Total U.S. RMBS			2,252		8,528		5,575		16,355		25,130		2.6
Other structured finance					2,687		363		2,447		5,497		124,262		0.9
Public finance					3,752		283		919		4,954		467,739		0.8

			Total	$	8,691	$	9,174	$	8,941	$	26,806	$	617,131		4.3	%

				December 31, 2009

				BIG Net Par Outstanding
				BIG Net Par Outstanding								Net Par Outstanding		BIG Net Par as a % of Net Par Outstanding
				BIG 1		BIG 2		BIG 3		Total BIG		Net Par Outstanding		BIG Net Par as a % of Net Par Outstanding
				(in millions)
First lien U.S. RMBS:
	Prime first lien			$	564	$	51	$	—	$	615	$	985		0.1	%
	Alt-A first lien				752		3,698		173		4,623		7,108		0.7
	Alt-A option ARM				629		2,811		—		3,440		3,882		0.6
	Subprime (including net interest margin securities)				985		1,648		55		2,688		9,956		0.4
Second lien U.S. RMBS:
	Closed end second lien				123		628		509		1,260		1,305		0.2
	HELOCs				13		113		4,372		4,498		5,940		0.7

		Total U.S. RMBS			3,066		8,949		5,109		17,124		29,176		2.7
Other structured finance					1,211		967		2,093		4,271		145,393		0.7
Public finance					2,361		723		687		3,771		465,853		0.6

			Total	$	6,638	$	10,639	$	7,889	$	25,166	$	640,422		4.0	%