Credit derivatives are recorded at fair value. Changes in fair value are recorded in "net change in fair value of credit derivatives" on the consolidated statement of operations. Realized gains and other settlements on credit derivatives include credit derivative premiums received and receivable for credit protection the Company has sold under its insured CDS contracts, premiums paid and payable for credit protection the Company has purchased, contractual claims paid and payable and received and receivable related to insured credit events under these contracts, ceding commissions (expense) income and realized gains or losses related to their early termination. Net unrealized gains (losses) on credit derivatives represent the adjustments for changes in fair value in excess of realized gains and other settlements that are recorded in each reporting period. Fair value of credit derivatives is reflected as either net assets or net liabilities determined on a contract by contract basis in the Company's consolidated balance sheets. See Note 7 for a discussion on the fair value methodology for credit derivatives.

The Company has a portfolio of financial guaranty contracts accounted for as derivatives (primarily CDS) that meet the definition of a derivative in accordance with GAAP. Management considers these agreements to be a normal part of its financial guaranty business. A loss payment is made only upon the occurrence of one or more defined credit events with respect to the referenced securities or loans. A credit event may be a non-payment event such as a failure to pay, bankruptcy or restructuring, as negotiated by the parties to the credit derivative transactions. Credit derivative transactions are governed by ISDA documentation and operate differently from financial guaranty contracts accounted for as insurance. For example, the Company's control rights with respect to a reference obligation under a credit derivative may be more limited than when the Company issues a financial guaranty contract accounted for as insurance. In addition, while the Company's exposure under credit derivatives, like the Company's exposure under financial guaranty contracts accounted for as insurance, has been generally for as long as the reference obligation remains outstanding, unlike financial guaranty contracts, a credit derivative may be terminated for a breach of the ISDA documentation or other specific events. If events of default or termination events specified in the credit derivative documentation were to occur, the non-defaulting or the non-affected party, which may be either the Company or the counterparty, depending upon the circumstances, may decide to terminate a credit derivative prior to maturity. The Company may be required to make a termination payment to its swap counterparty upon such termination.

The estimated remaining weighted average life of credit derivatives was 4.9 years at December 31, 2010 and 6.0 years at December 31, 2009. The components of the Company's credit derivative net par outstanding as of December 31, 2010 and December 31, 2009 are:

			As of December 31, 2010									As of December 31, 2009

Asset Type			Original Subordination(1)			Current Subordination(1)			Net Par Outstanding		Weighted Average Credit Rating(2)	Original Subordination(1)			Current Subordination(1)			Net Par Outstanding		Weighted Average Credit Rating(2)
			(dollars in millions)
Financial Guaranty Direct:
	Pooled corporate obligations:
		CLOs/CBOs		32.2	%		30.4	%	$	45,953	AAA		31.1	%		27.4	%	$	49,447	AAA
		Synthetic investment grade pooled corporate(3)		19.2			17.6			14,905	AAA		19.2			17.7			14,652	AAA
		Synthetic high yield pooled corporate		39.4			34.6			7,316	AAA		36.7			34.4			11,040	AAA
		TruPS CDOs		46.8			32.0			5,757	BB+		46.6			37.3			6,041	BBB-
		Market value CDOs of corporate obligations		36.0			42.9			5,069	AAA		32.1			36.9			5,401	AAA

	Total pooled corporate obligations			31.7			29.3			79,000	AAA		30.9			27.9			86,581	AAA
	U.S. RMBS:
		Alt-A option ARMs and Alt-A first lien		19.7			17.0			4,767	B+		20.3			22.0			5,662	BB
		Subprime first lien (including net interest margin)		27.9			50.4			4,460	A+		27.6			52.4			4,970	A+
		Prime first lien		10.9			10.3			468	B		10.9			11.1			560	BB
		Closed end second lien and HELOCs(4)		—			—			81	B		—			—			111	B

	Total U.S. RMBS			23.1			32.4			9,776	BBB-		22.9			34.6			11,303	BBB
	CMBS			29.8			31.3			6,751	AAA		28.5			30.9			7,191	AAA
	Other			—			—			12,612	A+		—			—			15,700	AA-

Total Financial Guaranty Direct										108,139	AA+								120,775	AA+
Financial Guaranty Reinsurance										1,632	AA-								1,642	AA-

Total									$	109,771	AA+							$	122,417	AA+

(1): Represents the sum of subordinate tranches and over-collateralization and does not include any benefit from excess interest collections that may be used to absorb losses.
(2): Based on the Company's internal rating. The Company's rating scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency.
(3): Increase in net par outstanding in the synthetic investment grade pooled corporate sector is due principally to the reassumption of a previously ceded book of business.
(4): Many of the CES transactions insured by the Company have unique structures whereby the collateral may be written down for losses without a correspondence write-down of the obligations insured by the Company. Many of these transactions are currently under-collateralized, with the principal amount of collateral being less than the principal amount of the obligation insured by the Company. The Company is not required to pay principal shortfalls until legal maturity (rather than making timely principal payments), and takes the under- collateralization into account when estimating expected losses for these transactions.

The Company's exposure to pooled corporate obligations is highly diversified in terms of obligors and, except in the case of TruPS CDOs, industries. Most pooled corporate transactions are structured to limit exposure to any given obligor and industry. The majority of the Company's pooled corporate exposure consists of CLOs or synthetic pooled corporate obligations. Most of these CLOs have an average obligor size of less than 1% and typically restrict the maximum exposure to any one industry to approximately 10%. The Company's exposure also benefits from embedded credit enhancement in the transactions which allows a transaction to sustain a certain level of losses in the underlying collateral, further insulating the Company from industry specific concentrations of credit risk on these deals.

The Company's TruPS CDO asset pools are generally less diversified by obligors and industries than the typical CLO asset pool. Also, the underlying collateral in TruPS CDOs consists primarily of subordinated debt instruments such as TruPS CDOs issued by banks, real estate investment trusts and insurance companies, while CLOs typically contain primarily senior secured obligations. Finally, TruPS CDOs typically contain interest rate hedges that may complicate the cash flows. However, to mitigate these risks TruPS CDOs were typically structured with higher levels of embedded credit enhancement than typical CLOs.

The Company's exposure to "Other" CDS contracts is also highly diversified. It includes $3.4 billion of exposure to three pooled infrastructure transactions comprised of diversified pools of international infrastructure project transactions and loans to regulated utilities. These pools were all structured with underlying credit enhancement sufficient for the Company to attach at super senior AAA levels. The remaining $9.2 billion of exposure in "Other" CDS contracts is comprised of numerous deals typically structured with significant underlying credit enhancement and spread across various asset classes, such as commercial receivables, international RMBS securities, infrastructure, regulated utilities and consumer receivables.

The following table summarizes net par outstanding by rating of the Company's direct credit derivatives as of December 31, 2010 and December 31, 2009.

		December 31, 2010					December 31, 2009

Ratings(1)		Net Par Outstanding		% of Total			Net Par Outstanding		% of Total
		(dollars in millions)
Super Senior		$	29,344		27.1	%	$	41,307		34.2	%
AAA			49,751		46.0			40,065		33.2
AA			7,937		7.3			14,613		12.1
A			6,471		6.0			8,255		6.8
BBB			6,278		5.8			9,076		7.5
BIG			8,358		7.8			7,459		6.2

	Total direct credit derivative net par outstanding	$	108,139		100.0	%	$	120,775		100.0	%

(1): Assured Guaranty's internal rating. The Company's ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. The super senior category, which is not generally used by rating agencies, is used by the Company in instances where Assured Guaranty's AAA-rated exposure on its internal rating scale has additional credit enhancement due to either (1) the existence of another security rated AAA that is subordinated to Assured Guaranty's exposure or (2) Assured Guaranty's exposure benefiting from a different form of credit enhancement that would pay any claims first in the event that any of the exposures incurs a loss, and such credit enhancement, in management's opinion, causes Assured Guaranty's attachment point to be materially above the AAA attachment point.

The following tables present additional details about the Company's unrealized U.S. RMBS CDS by vintage:

		December 31, 2010

		December 31, 2010									Full Year 2010 Unrealized Gain (Loss) (in millions) (restated)
Vintage		Original Subordination(1)			Current Subordination(1)			Net Par Outstanding (in millions)		Weighted Average Credit Rating(2)
2004 and Prior			6.2	%		19.9	%	$	165	A	$	(0.5	)
2005			27.2			55.6			3,086	AA-		(1.9	)
2006			29.0			37.5			1,563	BBB		(13.7	)
2007			18.7			14.7			4,962	B		(284.7	)
2008			—			—			—	—		—
2009			—			—			—	—		—
2010			—			—			—	—		—

	Total		23.1	%		32.4	%	$	9,776	BBB-	$	(300.8	)

The following table presents additional details about the Company's CMBS transactions by vintage:

		December 31, 2010

Vintage		Original Subordination(1)			Current Subordination(1)			Net Par Outstanding (in millions)		Weighted Average Credit Rating(2)	Full Year 2010 Unrealized Gain (Loss) (in millions)
2004 and Prior			29.3	%		47.0	%	$	458	AAA	$	0.1
2005			17.7			25.4			681	AAA		0.2
2006			28.0			28.5			4,197	AAA		5.8
2007			41.1			37.3			1,415	AAA		4.0
2008			—			—			—	—		—
2009			—			—			—	—		—
2010			—			—			—	—		—

	Total		29.8	%		31.3	%	$	6,751	AAA	$	10.1

The following table disaggregates the components of net change in fair value of credit derivatives.

		Year Ended December 31,

		2010			2009			2008
		(in millions)
		(restated)
Net credit derivative premiums received and receivable		$	206.8		$	168.1		$	118.1
Net ceding commissions (paid and payable) received and receivable			3.5			2.2			(0.9	)

	Realized gains on credit derivatives		210.3			170.3			117.2
	Net credit derivative losses (paid and payable) recovered and recoverable		(56.8	)		(6.7	)		0.4

Total realized gains and other settlements on credit derivatives			153.5			163.6			117.6
Total unrealized gains and other settlements on credit derivatives			(155.1	)		(337.8	)		38.0

	Net change in fair value of credit derivatives	$	(1.6	)	$	(174.2	)	$	155.6

Changes in the fair value of credit derivatives occur primarily because of changes in interest rates, credit spreads, credit ratings of the referenced entities, realized gains and other settlements, and the issuing company's own credit rating, credit spreads and other market factors. Except for estimated credit impairments (i.e., net expected payments), the unrealized gains and losses on credit derivatives is expected to reduce to zero as the exposure approaches its maturity date. During 2010 and 2009, the Company made $44.1 million and $17.7 million in claim payments on credit derivatives, respectively. With considerable volatility continuing in the market, unrealized gains (losses) on credit derivatives may fluctuate significantly in future periods.

			Year Ended December 31,

Asset Type			2010			2009			2008
			(in millions)
			(restated)
Financial Guaranty Direct:
	Pooled corporate obligations:
		CLOs/CBOs	$	2.1		$	152.3		$	263.3
		Synthetic investment grade pooled corporate		(1.9	)		(24.0	)		3.8
		Synthetic high yield pooled corporate		11.4			95.1			—
		TruPS CDOs		59.1			(44.1	)		7.5
		Market value CDOs of corporate obligations		(0.1	)		(0.6	)		48.7
		Commercial real estate		—			—			7.5
		CDO of CDOs (corporate)		—			6.3			(3.4	)

	Total pooled corporate obligations			70.6			185.0			327.4
	U.S. RMBS:
		Alt-A option ARMs and Alt-A first lien		(280.4	)		(429.3	)		(194.9	)
		Subprime first lien (including net interest margin)		(10.1	)		4.9			185.4
		Prime first lien		(8.3	)		(85.2	)		5.2
		Closed end second lien and HELOCs		(2.0	)		11.6			0.3

	Total U.S. RMBS			(300.8	)		(498.0	)		(4.0	)
	CMBS			10.1			(41.1	)		79.0
	Other(1)			65.6			6.7			(336.7	)

Total Financial Guaranty Direct				(154.5	)		(347.4	)		65.7
Financial Guaranty Reinsurance				(0.6	)		9.6			(27.7	)

Total			$	(155.1	)	$	(337.8	)	$	38.0

In 2010, U.S. RMBS unrealized fair value losses were generated primarily in the Alt-A option ARM and Alt-A first lien sector due to wider implied net spreads. The wider implied net spreads were a result of internal ratings downgrades on several of these Alt-A option ARM and Alt-A first lien policies. The unrealized fair value gain within the TruPS CDO and Other asset classes resulted from tighter implied spreads. These transactions were pricing above their floor levels (or the minimum rate at which the Company would consider assuming these risks based on historical experience); therefore when the cost of purchasing CDS protection on AGC and AGM increased, which management refers to as the CDS spread on AGC or AGM, the implied spreads that the Company would expect to receive on these transactions decreased. During 2010, AGC's and AGM's spreads widened. However, gains due to the widening of the Company's own CDS spreads were offset by declines in fair value resulting from price changes and the internal downgrades of several U.S. RMBS policies referenced above.

In 2009, AGC's and AGM's credit spreads narrowed, however they remained relatively wide compared to pre-2007 levels. Offsetting the benefit attributable to AGC's and AGM's wide credit spread were declines in fixed income security market prices primarily attributable to widening spreads in certain markets as a result of the continued deterioration in credit markets and some credit rating downgrades. The higher credit spreads in the fixed income security market were primarily due to continuing market concerns over the most recent vintages of Subprime RMBS and trust-preferred securities.

The 2008 gain included an amount of $4.1 billion associated with the change in AGC's credit spread, which widened substantially from 180 basis points at December 31, 2007 to 1,775 basis points at December 31, 2008. Management believed that the widening of AGC's credit spread was due to the correlation between AGC's risk profile and that experienced currently by the broader financial markets and increased demand for credit protection against AGC as the result of its increased business volume. Offsetting the gain attributable to the significant increase in AGC's credit spread were declines in fixed income security market prices primarily attributable to widening spreads in certain markets as a result of the continued deterioration in credit markets and some credit rating downgrades, rather than from delinquencies or defaults on securities guaranteed by the Company. The higher credit spreads in the fixed income security market were due to the lack of liquidity in the high yield CDO and CLO markets as well as continuing market concerns over the most recent vintages of subprime RMBS and CMBS.

The impact of changes in credit spreads will vary based upon the volume, tenor, interest rates, and other market conditions at the time these fair values are determined. In addition, since each transaction has unique collateral and structural terms, the underlying change in fair value of each transaction may vary considerably. The fair value of credit derivative contracts also reflects the change in the Company's own credit cost based on the price to purchase credit protection on AGC and AGM. The Company determines its own credit risk based on quoted CDS prices traded on the Company at each balance sheet date. Generally, a widening of the CDS prices traded on AGC and AGM has an effect of offsetting unrealized losses that result from widening general market credit spreads, while a narrowing of the CDS prices traded on AGC and AGM has an effect of offsetting unrealized gains that result from narrowing general market credit spreads. An overall narrowing of spreads generally results in an unrealized gain on credit derivatives for the Company and an overall widening of spreads generally results in an unrealized loss for the Company.

		As of December 31,

		2010			2009			2008
		(dollars in millions)
		(restated)
Quoted price of CDS contract (in basis points):
	AGC		804			634			1,775
	AGM		650			541	(1)		N/A
Fair value gain (loss) of credit derivatives:
	Before considering implication of the Company's credit spreads	$	(5,539.3	)	$	(5,830.8	)	$	(4,734.4	)
	After considering implication of the Company's credit spreads	$	(1,869.9	)	$	(1,542.1	)	$	(586.8	)

As of December 31, 2010, AGC's and AGM's credit spreads remained relatively wide compared to pre-2007 levels, as did general market spreads. The $5.5 billion liability as of December 31, 2010, which represents the fair value of CDS contracts before considering the implications of AGC's and AGM's credit spreads, is a direct result of continued wide credit spreads in the fixed income security markets, and ratings downgrades. The asset classes that remain most affected are recent vintages of Subprime RMBS and Alt-A deals, as well as trust-preferred securities. When looking at December 31, 2010 compared to December 31, 2009, there was tightening of general market spreads as well as a run-off in net par outstanding, resulting in a gain of approximately $292 million before taking into account AGC or AGM's credit spreads.

Management believes that the trading level of AGC's and AGM's credit spreads are due to the correlation between AGC's and AGM's risk profile and that experienced currently by the broader financial markets and increased demand for credit protection against AGC and AGM as the result of its direct segment financial guaranty volume as well as the overall lack of liquidity in the CDS market. Offsetting the benefit attributable to AGC's and AGM's credit spread were declines in fixed income security market prices primarily attributable to widening spreads in certain markets as a result of the continued deterioration in credit markets and some credit rating downgrades. The higher credit spreads in the fixed income security market are due to the lack of liquidity in the high yield CDO and collateralized loan obligation ("CLO") markets as well as continuing market concerns over the most recent vintages of subprime RMBS.

Some of the Company's CDS have rating triggers that allow the CDS counterparty to terminate in the case of a rating downgrade. If the ratings of certain of the Company's insurance subsidiaries were reduced below certain levels and the Company's counterparty elected to terminate the CDS, the Company could be required to make a termination payment on certain of its credit derivative contracts, as determined under the relevant documentation. Under certain documents, the Company may have the right to cure the termination event by posting collateral, assigning its rights and obligations in respect of the transactions to a third party or seeking a third party guaranty of the obligations of the Company. The Company currently has three ISDA master agreements under which the applicable counterparty could elect to terminate transactions upon a rating downgrade of AGC: if AGC's ratings were downgraded to BBB- or Baa3, $90 million in par insured could be terminated by one counterparty; and if AGC's ratings were downgraded to BB+ or Ba1, approximately $2.8 billion in par insured could be terminated by the other two counterparties. None of AG Re, Assured Guaranty Re Overseas Ltd. ("AGRO") or AGM has any material CDS exposure subject to termination based on its rating. The Company does not believe that it can accurately estimate the termination payments it could be required to make if, as a result of any such downgrade, a CDS counterparty terminated its CDS contracts with the Company. These payments could have a material adverse effect on the Company's liquidity and financial condition.

Under a limited number of other CDS contracts, the Company may be required to post eligible securities as collateral—generally cash or U.S. government or agency securities. For certain of such contracts, this requirement is based on a mark-to-market valuation, as determined under the relevant documentation, in excess of contractual thresholds that decline or are eliminated if the ratings of certain of the Company's insurance subsidiaries decline. Under other contracts, the Company has negotiated caps such that the posting requirement cannot exceed a certain amount. As of December 31, 2010, and without giving effect to thresholds that apply at current ratings, the amount of par that is subject to collateral posting is approximately $18.8 billion, for which the Company has agreed to post approximately $765.9 million of collateral. The Company may be required to post additional collateral from time to time, depending on its ratings and on the market values of the transactions subject to the collateral posting. Counterparties have agreed that for approximately $18.0 billion of that $18.8 billion, the maximum amount that the Company could be required to post is capped at $635 million at current rating levels (which amount is included in the $765.9 million as to which the Company has agreed to post). Such cap increases by $50 million to $685 million in the event AGC's ratings are downgraded to A+ or A3.

The following table summarizes the estimated change in fair values on the net balance of the Company's credit derivative positions assuming immediate parallel shifts in credit spreads on AGC and AGM and on the risks that they both assume:

	As of December 31, 2010

Credit Spreads(1)	Estimated Net Fair Value (Pre-Tax)			Estimated Change in Gain/(Loss) (Pre-Tax)
	(in millions) (restated)
100% widening in spreads	$	(3,961.7	)	$	(2,091.8	)
50% widening in spreads		(2,923.3	)		(1,053.4	)
25% widening in spreads		(2,399.2	)		(529.3	)
10% widening in spreads		(2,084.1	)		(214.2	)
Base Scenario		(1,869.9	)		—
10% narrowing in spreads		(1,706.9	)		163.0
25% narrowing in spreads		(1,462.5	)		407.4
50% narrowing in spreads		(1,059.8	)		810.1