8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant To Section 13 or 15 (d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)—May 11, 2004

ASSURED GUARANTY LTD.

(Exact name of registrant as specified in its charter)

Bermuda	001-32141	Not Applicable
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer of Incorporation Identification No.)

Assured Guaranty Ltd.

30 Woodbourne Avenue

Hamilton HM 08 Bermuda

(Address of principal executive offices)

Registrant’s telephone number, including area code: (441) 296-4004

Not applicable

(Former name or former address, if changed since last report)

Item 7.           Financial Statements, Pro Forma Financial Information and Exhibits.

(c)Exhibits

Exhibit Number	Description
99.1	Press release, dated May 11, 2004, reporting first quarter results
99.2	First quarter 2004 Financial Supplement

Item 12.         Results of Operations and Financial Condition

On May 11, 2004, Assured Guaranty Ltd. issued a press release reporting its first quarter 2004 results and the availability of its first quarter financial supplement. The press release and the financial supplement are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and are hereby incorporated herein by reference.

In accordance with general instruction B.6 of Form 8-K, the information in this report, including exhibits, is furnished pursuant to Item 12 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ASSURED GUARANTY LTD.
	By:	/s/ Robert B. Mills
		Robert B. Mills Chief Financial Officer
DATE:  May 11, 2004

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EXHIBIT INDEX

Number	Description	Method of Filing
99.1	Press release, dated May 11, 2004, reporting first quarter results	Furnished herewith
99.2	First quarter 2004 Financial Supplement	Furnished herewith

3

EX-99.1

Exhibit 99.1

Assured Guaranty Ltd.
30 Woodbourne Avenue – 5^th Floor
Hamilton Bermuda HM 08
441-299-9375
www.assuredguaranty.com

Press Release

Assured Guaranty Reports First Quarter 2004 Earnings

Hamilton, Bermuda – May 11, 2004. Assured Guaranty Ltd. (NYSE: AGO) announced net income of $46.9 million for the first quarter ended March 31, 2004, an increase of 48% compared with $31.8 million earned in the first quarter of 2003.  Net income per diluted share was $0.63 in the quarter, up 50%, compared to $0.42 earned in the first quarter of 2003, based on 75 million shares outstanding upon completion of the IPO on April 28, 2004.

Analysis of Net Income

($ in millions)

	1Q 2004		1Q 2003			% Change
Net income	$	46.9	$	31.8		48	%
After-tax realized gains (losses) on investments	—		1.3			NMF
After-tax unrealized gains (losses) on derivatives	3.1		(0.3		)	NMF
Operating income (1)	$	43.7	$	30.7		42	%
IPO-related income	11.1		—			NMF
Subtotal excluding IPO-related income	$	32.6	$	30.7		6	%

NMF = not meaningful

Operating income, which we define as net income excluding after-tax net realized gains (losses) on investments and after-tax unrealized gains (losses) on derivative financial instruments, was $43.7 million or $0.58 per diluted share in the first quarter of 2004, up 42% compared with $30.7 million or $0.41 per diluted share in the first quarter of 2003.  Management, investors and analysts use operating income to evaluate our results of operations, as this measure highlights the underlying profitability of our business.  A portion of operating income arose in connection with transactions associated with our IPO, which included our exiting certain lines of business, and expenses associated with a staff reduction in February 2004.  The net impact of these actions on first quarter 2004 results was an increase in operating income of $11.1 million, or $0.15 per share in the quarter.

Gross Premiums Written by Segment

($ in millions)

	1Q 2004			1Q 2003		% change
Financial guaranty direct	$	25.6		$	14.0	83	%
Financial guaranty reinsurance	52.4			29.8		76	%
Mortgage guaranty	14.0			8.1		73	%
Sub-total	$	92.0		$	51.9	77	%
Other segment	(93.6		)	60.9		NMF
Total gross premium written	$	(1.5	)	$	112.7	NMF

NMF = not meaningful

Gross premiums written were a negative $1.5 million in the quarter.  Gross premiums written in our other segment (which represents our exited lines of business) were reduced by $97.8 million in the quarter due to the accounting for the unwinding of equity layer credit protection products.  Partially offsetting this premium reduction was the recognition of $10.4 million of gross premiums written in the financial guaranty direct segment due to the closing out of transaction types in which we no longer participate; excluding this amount, gross premiums written in the financial guaranty direct segment grew 9%.

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Analysis of Present Value of Gross Financial Guaranty Premiums Written (“PVP”)(2)

($ in millions)

	1Q 2004		1Q 2003		% change
Financial guaranty direct segment	$	7.9	$	20.7	(62%	)
Financial guaranty reinsurance segment(3)	74.6		38.6		93	%
PVP	$	82.5	$	59.3	39	%

The present value of gross financial guaranty premiums written (“PVP”) in the quarter was $82.5 million, compared with $59.3 million in the first quarter of 2003.  Management, equity analysts and investors use this non-GAAP measure to evaluate the value of new financial guaranty business production, as the GAAP gross premiums written measure does not reflect the present value of installment premiums on new contracts underwritten in a reporting period.  See “Selected Financial Highlights” for a reconciliation of PVP to gross premiums written.

Dominic Frederico, CEO of Assured Guaranty, noted, “This quarter demonstrates the strength of our flexible operating structure.  Our reinsurance business produced outstanding results despite a soft financial guaranty market.  Our mortgage guaranty platform also produced solid new business that will contribute to our future earnings base.”

Financial guaranty direct PVP totaled $7.9 million, down 62%, consistent with management’s expectations.  While the structured finance market normally experiences some seasonal slowdown in the first quarter, Assured Guaranty’s marketing efforts were relatively modest in the quarter given the Company’s focus on the IPO and implementing the change in business strategy.  Management expects PVP in this segment to increase over the remainder of the year; the fourth quarter is historically the strongest quarter for this business.

Financial guaranty reinsurance PVP totaled $74.6 million, up 93%.  This quarter’s strong volumes reflect relatively higher primary insurance volumes from the fourth quarter of 2003, combined with changes in treaty terms that increased our reinsurance market share with some cedants in 2004 compared to the prior year’s quarter.  Management expects 2004 reinsurance volumes to be below the annualized level of the first quarter of 2004, reflecting our cedants’ expectations that their 2004 financial guaranty new business production will be level or lower than 2003.

Net Premiums Earned by Segment

($ in millions)

	1Q 2004		1Q 2003		% Change
Financial guaranty direct	$	40.7	$	14.7	177	%
Financial guaranty reinsurance	20.4		16.9		21	%
Mortgage guaranty	8.4		9.6		(13%	)
Sub-total	$	69.5	$	41.2	69	%
Other segment	17.2		22.4		(23%	)
Total	86.7		63.6		36	%
Municipal refunding premiums	2.9		3.3		(12%	)
Sub-total	$	83.8	$	60.3	39	%

Net premiums earned were $86.7 million in the first quarter of 2004, up 36% compared with $63.6 million in the first quarter of 2003.  Financial guaranty direct net premiums earned included $24.2 million associated with the closing out of transaction types that we do not expect to underwrite in the future.  Financial guaranty reinsurance net premiums earned were $20.4 million, up 21% from $16.9 million in the first quarter of 2003.  Included in this amount were $2.9 million of municipal bond refunding premiums, compared with $3.3 million in the first quarter of 2003.  Mortgage

2

guaranty net premiums earned were $8.4 million, compared with $9.6 million in the first quarter of 2003, reflecting the run-off of our quota share mortgage guaranty reinsurance business.

Investment income in the quarter was $24.4 million, up modestly compared with $24.1 million in the first quarter of 2003.  The average portfolio yield was 4.8%, compared with 5.3% in the prior year on an investment portfolio of $2.2 billion at March 31, 2004.  The portfolio’s average credit quality remained at AA+/Aa2.  As a result of IPO-related transactions in the other segment, we expect a $163 million reduction in the investment portfolio in the second quarter.

Consolidated GAAP Combined Ratio

	1Q 2004		1Q 2003		Change
Loss ratio	27.3	%	36.5	%	(9.2	)pp
Expense ratio	35.9	%	41.6	%	(5.7	)pp
Combined ratio	63.2	%	78.1	%	(14.9	)pp

Loss and loss adjustment expenses in the quarter were $23.7 million, or 27.3% of net premiums earned (“loss ratio”), compared with $23.2 million or a 36.5% loss ratio in the first quarter of 2003.  Both loss ratios are significantly affected by the other segment and the closing out of transactions in the financial guaranty direct segment in preparation for our IPO.

Assured Guaranty’s profit commission expense, acquisition costs and other operating expenses were $31.2 million in the quarter and 35.9% as a percent of net premiums earned (“expense ratio”), as compared to $26.4 million or a 41.6% expense ratio in the first quarter of 2003.  The increase in expenses reflects the addition of IPO-related and holding company expenses as well as $1.5 million of severance expenses in the quarter.

The Company’s March 31, 2004 book value per share was $20.13, up 5% from December 31, 2003.  Excluding the effects of FAS 115, book value per share was $18.81 per share or up 4%.  Management, investors and analysts use the calculation of adjusted book value to evaluate the net present value of the Company’s in-force premium and capital base.  Adjusted book value(4) per share was $26.38, up 9% from December 31, 2003.  Book value and adjusted book value per share do not include the financial impact of the issuance of the $200 million note to ACE Limited after the first quarter of 2004 and prior to the IPO.  Including this note and closing IPO adjustments, book value per share and adjusted book value per share would have been $18.24 and $24.41, respectively.

Robert Mills, CFO of Assured Guaranty, commented, “The first quarter’s results reflect the numerous actions undertaken as part of our IPO.  Excluding these items, our first quarter results represent a baseline for our earnings going forward, as we work toward achieving our target of an 11% ROE in 2004. While our direct financial guaranty production was low, it was consistent with our expectations given the numerous initiatives underway at the Company in preparation for our IPO and was more than offset by strong business production in our financial guaranty reinsurance segment.”

The Company will host a conference call for investors at 8:30 a.m. EDT (9:30 a.m. ADT) on Tuesday, May 11, 2004.  The conference call will be available via live and archived webcast at www.assuredguaranty.com or by dialing 1-800-901-5217 (in the United States) and 1-617-786-2962 (International), passcode 65812948.  A replay of the call will be available from May 11, 2004

3

until May 25, 2004. To listen to the replay dial: 1-888-286-8010 (in the United States) or 1-617-801-6888 (International), passcode 16047630.

Please refer to the Assured Guaranty Financial Supplement March 31, 2004, which is posted on the Company’s investor information page on the Company’s website, for more detailed information on individual segment performance, together with additional disclosure on our financial guaranty portfolio and investment portfolio.

Assured Guaranty is a Bermuda-based holding company providing credit enhancement products to the municipal finance, structured finance and mortgage markets.  More information can be found at www.assuredguaranty.com.

Cautionary Statement Regarding Forward-Looking Statements:

Any forward-looking statements made in this press release reflect the Company’s current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements.  The Company’s forward-looking statements also could be affected by rating agency action such as a ratings downgrade, difficulties with the execution of the Company’s new business strategy, a significant reduction in the amount of reinsurance ceded by one or more of our principal ceding companies, developments in the world’s financial and capital markets, more severe losses or more frequent losses associated with products affecting the adequacy of the Company’s loss reserve, changes in regulation or tax laws, the Company’s dependence on customers, decreased demand or increased competition, loss of key personnel, the effects of mergers, acquisitions and divestitures, changes in accounting policies or practices, and changes in general economic conditions, as well as management’s response to these factors, and other risk factors identified in the Company’s filings with the Securities and Exchange Commission.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Glossary:

(1) We believe the presentation of operating income enhances the understanding of our results of operations by highlighting the underlying profitability of our business.  We exclude net realized gains (losses) on investments and net unrealized gains (losses) on derivative financial instruments because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to, the market interest rates, credit spreads and other factors that management cannot control or predict.  This measure should not be viewed as a substitute for net income determined in accordance with generally accepted accounting principles (GAAP).

(2) PVP, which is a non-GAAP measure, represents gross premiums related to financial guaranty contracts written in the current period, including the full amount of upfront installment premiums received and the present value of all installment premiums, discounted at 6% per year.

(3) Due to reporting lags by our ceding companies, PVP for our financial guaranty reinsurance segment is reported on a one-quarter lag.

4

(4) Adjusted book value, which is a non-GAAP measure, is derived by beginning with shareholder’s equity (book value) and adding or subtracting the after-tax value of: the financial guaranty net unearned premium reserve; deferred acquisition costs and the present value of estimated net future installment premiums (discounted at 6%).  These adjustments will not be realized until future periods and may differ materially from the amounts used in determining adjusted book value.

Contact Information:

Media:

Barbara Van Hassel

212-261-5580

bvanhassel@assuredguaranty.com

Investors:

Sabra Purtill

441- 299-9375

spurtill@assuredguaranty.com

5

Assured Guaranty Ltd.

Consolidated Income Statements

	Quarter Ended March 31,
	2004			2003
	(dollars in thousands)
Revenues
Gross written premiums	$	(1,543	)	$	112,735
Net written premiums	(6,871		)	104,073
Net earned premiums	$	86,667		$	63,588
Net investment income	24,385			24,101
Other income	532			557
Total revenues	$	111,584		$	88,246
Expenses
Loss and loss adjustment expenses	23,668			23,188
Profit commission expenses	5,486			2,969
Acquisition costs	13,108			11,843
Other operating expenses	12,623			11,635
Goodwill expense	1,645			—
Interest expense	1,434			1,434
Total expenses	$	57,964		$	51,069
Income before provision for income taxes	53,620			37,177
Total provision for income taxes	9,902			6,434
Net income excluding after-tax realized gains on investments and after-tax unrealized gains (losses) on derivative financial instruments	$	43,718		$	30,743
After-tax realized gains on investments	31			1,297
After-tax unrealized gains (losses) on derivative financial instruments	3,143			(289		)
Net income	$	46,892		$	31,751

6

Assured Guaranty Ltd.

Consolidated Balance Sheets

	As of
	March 31, 2004			December 31, 2003
	(dollars in thousands)
Assets
Fixed maturity securities available for sale, at fair value	$	2,065,948		$	2,052,217
Short-term investments, at cost, which approximates market	154,355			137,517
Total investments	2,220,303			2,189,734
Cash	36,254			32,365
Accrued investment income	24,302			23,758
Deferred acquisition costs	186,267			178,673
Premium receivable	35,133			63,997
Prepaid reinsurance premiums	17,012			10,974
Reinsurance recoverable on ceded losses	106,131			122,124
Due from affiliate	—			115,000
Value of reinsurance business assumed	11,915			14,226
Goodwill	85,417			87,062
Other assets	26,490			19,954
Total assets	$	2,749,224		$	2,857,867
Liabilities
Unearned premium reserve	$	537,930		$	625,429
Reserve for losses and loss adjustment expenses	431,297			522,593
Profit commissions payable	56,805			71,237
Deferred federal income taxes payable	73,865			55,637
Unrealized losses on derivative financial instruments	1,209			8,558
Funds held by Company under reinsurance contracts	9,289			9,635
Long-term debt	75,000			75,000
Other liabilities	53,757			52,154
Total liabilities	$	1,239,152		$	1,420,243
Shareholder’s equity
Common stock	16,403			16,403
Additional paid-in capital	961,853			955,490
Accumulated other comprehensive income	99,405			81,185
Unearned stock grant compensation	(4,506		)	(5,479		)
Retained earnings	436,917			390,025
Total shareholder’s equity	$	1,510,072		$	1,437,624
Total liabilities and shareholder’s equity	$	2,749,224		$	2,857,867

7

Assured Guaranty Ltd.

Selected Financial Highlights

	Quarter Ended March 31,
	2004			2003
	(dollars in thousands except per share amounts)
Premium analysis:
Present value of gross premiums written (“PVP”)	$	82,500		$	59,300
Present value of installment premiums written in period	(47,900		)	(36,400		)
Upfront gross premiums writen	34,600			22,900
Installment gross premiums written	43,408			20,857
Financial guaranty gross premiums written	$	78,008		$	43,757
Mortgage	14,007			8,114
Other	(93,558		)	60,864
Total gross premiums written	$	(1,543	)	$	112,735
Book value	$	1,510,072		$	1,437,624
Net UPR less DAC - after-tax	216,129			177,680
Net present value of installment premiums in-force - after-tax	252,200			205,700
Adjusted book value	$	1,978,401		$	1,821,004
Average basic shares outstanding  *	75,000,000			75,000,000
Average fully diluted shares outstanding  *	75,000,000			75,000,000
Per fully-diluted share:
Net income	$	0.63		$	0.42
less: After-tax realized gains on investments	0.00			0.02
less: After-tax unrealized gains (losses) on derivatives	0.04			(0.00		)
Operating income	$	0.58		$	0.41
Book value	$	20.13		$	19.17
Net UPR less DAC - after-tax	2.88			2.37
Net present value of installment premiums in-force - after-tax	3.36			2.74
Adjusted book value	$	26.38		$	24.28

*  Represents shares issued upon the IPO closing

8

EX-99.2

Exhibit 99.2

Quarterly Operating Supplement

First Quarter 2004

March 31, 2004

Worksheet Page

Largest Single Name Corporate/Sovereign CDS Exposures

This report is for informational purposes only.  It should be read in conjunction with documents filed by Assured Guaranty Ltd. with the Securities and Exchange Commission, including our IPO prospectus dated April 22, 2004.

Cautionary Statement Regarding Forward-Looking Statements:

Any forward-looking statements made in this quarterly operating supplement reflect the Company’s current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements.  The  Company’s forward-looking statements also could be affected by rating agency action such as a ratings downgrade, difficulties with the execution of the Company’s new business strategy, a significant reduction in the amount of reinsurance ceded by one or more of our principal ceding companies, developments in the world’s financial and capital markets, more severe losses or more frequent losses associated with products affecting the adequacy of the Company’s loss reserve, changes in regulation or tax laws, the Company’s dependence on customers, decreased demand or increased competition, loss of key personnel, the effects of mergers, acquisitions and divestitures, changes in accounting policies or practices, and changes in general economic conditions, as well as management’s response to these factors, and other risk factors identified in the Company’s filings with the Securities and Exchange Commission.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

1

Assured Guaranty Ltd.

Selected Financial Highlights

(dollars in thousands except per share amounts)

		Quarter Ended March 31, 2004			Quarter Ended March 31, 2003			Percentage Change vs. 1Q 2003
	Premium analysis:
(1)	Present value of financial guaranty gross premiums written (“PVP”)	$	82,500		$	59,300		39	%
	Present value of installment premiums written in period	(47,900		)	(36,400		)	32	%
	Upfront gross premiums writen	34,600			22,900			51	%
	Installment gross premiums written	43,408			20,857			108	%
	Financial guaranty gross premiums written	$	78,008		$	43,757		78	%
	Mortgage guaranty	14,007			8,114			73	%
	Other	(93,558		)	60,864			NMF
	Total gross premiums written	$	(1,543	)	$	112,735		NMF
	Net income	$	46,892		$	31,751		48	%
	less: After-tax realized gains (losses) on investments	31			1,297			NMF
	less: After-tax unrealized gains (losses) on derivatives	3,143			(289		)	NMF
(2)	Operating income	$	43,718		$	30,743		42	%
	Book value	$	1,510,072		$	1,437,624		5	%
	Net UPR less DAC - after-tax	216,129			177,680			22	%
	Net present value of installment premiums in-force - after-tax	252,200			205,700			23	%
	Adjusted book value	$	1,978,401		$	1,821,004		9	%
	ROE, excluding FAS 115	13.6		%	10.1		%	35	%
	less: After-tax realized gains (losses) on investments	0.0		%	0.4		%	NMF
	less: After-tax unrealized gains (losses) on derivatives	0.9		%	-0.1		%	NMF
(2)	Operating ROE, excluding FAS 115	12.6		%	9.7		%	30	%
	Average basic shares outstanding  *	75,000,000			75,000,000			0	%
	Average fully diluted shares outstanding  *	75,000,000			75,000,000			0	%
	Per fully-diluted share:
	Net income	$	0.63		$	0.42		50	%
	less: After-tax realized gains (losses) on investments	—			0.02			NMF
	less: After-tax unrealized gains (losses) on derivatives	0.04			—			NMF
	Operating income	$	0.58		$	0.41		41	%
	Book value	$	20.13		$	19.17		5	%
	Net UPR less DAC - after-tax	2.88			2.37			22	%
	Net present value of installment premiums in-force - after-tax	3.36			2.74			23	%
(3)	Adjusted book value	$	26.38		$	24.28		9	%

*  Represents shares issued upon the IPO closing

(1)PVP, which is a non-GAAP measure, represents gross premiums related to financial guaranty contracts written in the current period, including the full amount of upfront installment premiums received and the present value of all installment premiums, discounted at 6% per year.  Management, equity analysts and investors use this non-GAAP measure to evaluate the value of new financial guaranty business production for Assured Guaranty, as the GAAP gross premiums written measure does not adequately measure the value of installment premiums on new contracts underwritten in a reporting period.

(2)Operating income is defined as net income excluding after-tax realized gains (losses) on investments and after-tax unrealized gains (losses) on derivative financial instruments.  Operating ROE represents operating income as a percentage of average shareholder’s equity, excluding FAS 115.  We believe the presentation of operating income and operating ROE enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business.  We exclude net realized gains (losses) on investments and net unrealized gains (losses) on derivative financial instruments because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to, the market interest rates, credit spreads and other factors that management cannot control or predict.  This measure should not be viewed as a substitute for net income determined in accordance with generally accepted accounting principles (GAAP).

(3)Adjusted book value, which is a non-GAAP measure, is derived by beginning with shareholder’s equity (book value) and adding or subtracting the after-tax value of: the financial guaranty net unearned premium reserve; deferred acquisition costs and the present value of estimated net future installment premiums (discounted at 6%).  The adjustments described above will not be realized until future periods and may differ materially from the amounts used in determining adjusted book value.  Management, investors and analysts use the calculation of adjusted book value to evaluate the net present value of the Company’s in-force premium and capital base.

2

Assured Guaranty Ltd.

Consolidated Income Statements

(dollars in thousands)

	Quarter Ended March 31,
	2004			2003			% Change
Revenues
Gross written premiums	$	(1,543	)	$	112,735		NMF
Net written premiums	(6,871		)	104,073			NMF
Net earned premiums	$	86,667		$	63,588		36	%
Net investment income	24,385			24,101			1	%
Other income	532			557			-4	%
Total revenues	$	111,584		$	88,246		26	%
Expenses
Loss and loss adjustment expenses	23,668			23,188			2	%
Profit commission expenses	5,486			2,969			85	%
Acquisition costs	13,108			11,843			11	%
Other operating expenses	12,623			11,635			8	%
Goodwill expense	1,645			—			NMF
Interest expense	1,434			1,434			0	%
Total expenses	$	57,964		$	51,069		14	%
Income before provision for income taxes	53,620			37,177			44	%
Total provision for income taxes	9,902			6,434			54	%
Net income excluding after-tax realized gains on investments and after-tax unrealized gains (losses) on derivative financial instruments	$	43,718		$	30,743		42	%
After-tax net realized gains on investments	31			1,297			—98	%
After-tax unrealized gains (losses) on derivative financial instruments	3,143			(289		)	NMF
Net income	$	46,892		$	31,751		48	%

3

Assured Guaranty Ltd.

Consolidated Balance Sheets

(dollars in thousands)

	As of
	March 31, 2004			December 31, 2003
Assets
Fixed maturity securities available for sale, at fair value	$	2,065,948		$	2,052,217
Short-term investments, at cost, which approximates market	154,355			137,517
Total investments	2,220,303			2,189,734
Cash	36,254			32,365
Accrued investment income	24,302			23,758
Deferred acquisition costs	186,267			178,673
Premium receivable	35,133			63,997
Prepaid reinsurance premiums	17,012			10,974
Reinsurance recoverable on ceded losses	106,131			122,124
Due from affiliate	—			115,000
Value of reinsurance business assumed	11,915			14,226
Goodwill	85,417			87,062
Other assets	26,490			19,954
Total assets	$	2,749,224		$	2,857,867
Liabilities
Unearned premium reserve	$	537,930		$	625,429
Reserve for losses and loss adjustment expenses	431,297			522,593
Profit commissions payable	56,805			71,237
Deferred federal income taxes payable	73,865			55,637
Unrealized losses on derivative financial instruments	1,209			8,558
Funds held by Company under reinsurance contracts	9,289			9,635
Long-term debt	75,000			75,000
Other liabilities	53,757			52,154
Total liabilities	$	1,239,152		$	1,420,243
Shareholder’s equity
Common Stock	16,403			16,403
Additional paid-in capital	961,853			955,490
Accumulated other comprehensive income	99,405			81,185
Unearned stock grant compensation	(4,506		)	(5,479		)
Retained earnings	436,917			390,025
Total shareholder’s equity	$	1,510,072		$	1,437,624
Total liabilities & shareholder’s equity	$	2,749,224		$	2,857,867

4

Assured Guaranty Ltd.

Segment Results

(dollars in millions)

	Quarter Ended March 31, 2004
	Financial Guaranty Direct			Financial Guaranty Reinsurance(1)			Mortgage Guaranty			Subtotal			Other			Total
Present value of gross premiums written:
Municipal	$	—		$	42.3					$	42.3					$	42.3
Structured finance	7.9			32.3						40.2						40.2
Total	$	7.9		$	74.6					$	82.5					$	82.5
Income statement:
Gross premiums written	$	25.6		$	52.4		$	14.0		$	92.0		$	(93.6	)	$	(1.5	)
Net premiums written	25.3			52.4			14.0			91.7			(98.5		)	(6.9		)
Net premiums earned	40.7			20.4			8.4			69.5			17.2			86.7
Loss and loss adjustment expenses	13.4			3.9			(1.2		)	16.1			7.5			23.7
Profit commission expense	—			0.1			5.0			5.1			0.4			5.5
Acquisition costs	1.4			7.1			0.9			9.4			3.6			13.0
Operating expenses	3.3			4.1			1.7			9.2			3.5			12.6
Underwriting gain (loss)	$	22.6		$	5.1		$	2.0		$	29.7		$	2.1		$	31.9
Loss and loss adjustment expense ratio	33.0		%	19.3		%	-14.6		%	23.2		%	43.8		%	27.3		%
Expense ratio	11.5		%	55.6		%	90.7		%	34.0		%	43.7		%	35.9		%
Combined ratio	44.5		%	74.8		%	76.1		%	57.2		%	87.5		%	63.2		%

	Quarter Ended March 31, 2003
	Financial Guaranty Direct			Financial Guaranty Reinsurance(1)			Mortgage Guaranty			Subtotal			Other			Total
Present value of gross premiums written:
Municipal	$	—		$	26.8					$	26.8					$	26.8
Structured finance	20.7			11.8						32.5						32.5
Total	$	20.7		$	38.6					$	59.3					$	59.3
Income statement:
Gross premiums written	$	14.0		$	29.8		$	8.1		$	51.9		$	60.9		$	112.7
Net premiums written	13.8			29.1			8.1			51.0			53.1			104.1
Net premiums earned	14.7			16.9			9.6			41.2			22.4			63.6
Loss and loss adjustment expenses	2.0			1.8			1.2			5.0			18.2			23.2
Profit commission expense	—			0.1			3.2			3.3			(0.3		)	3.0
Acquisition costs	—			5.4			1.0			6.4			5.4			11.8
Operating expenses	2.7			3.1			1.8			7.5			4.1			11.6
Underwriting gain (loss)	$	10.1		$	6.5		$	2.5		$	19.0		$	(5.0	)	$	14.0
Loss and loss adjustment expense ratio	13.3		%	10.9		%	12.0		%	12.0		%	81.6		%	36.5		%
Expense ratio	18.3		%	50.9		%	62.3		%	41.9		%	40.8		%	41.6		%
Combined ratio	31.6		%	61.7		%	74.4		%	53.9		%	122.4		%	78.1		%

(1) Due to the timing of receipts of reports prepared by our ceding companies, present value of financial guaranty gross premiums written, par written and par outstanding in our Financial Guaranty Reinsurance segment are reported on a one-quarter lag.

5

Assured Guaranty Ltd.

Financial Guaranty PVP, Par Written and Par Outstanding

(dollars in millions)

	Quarter Ended March 31, 2004
	Financial Guaranty Direct		Financial Guaranty Reinsurance		Total
Present value of gross premiums written:
Municipal	$	—	$	42.3	$	42.3
Structured finance	7.9		32.3		40.2
Total	$	7.9	$	74.6	$	82.5
Par written:
Municipal	$	—	$	1,933	$	1,933
Structured finance	1,488		1,153		2,641
Total	$	1,488	$	3,086	$	4,574
Par outstanding:
Municipal	$	4,698	$	49,219	$	53,917
Structured finance	21,573		14,099		35,671
Total	$	26,271	$	63,318	$	89,589

	Quarter Ended March 31, 2003
	Financial Guaranty Direct		Financial Guaranty Reinsurance		Total
Present value of gross premiums written:
Municipal	$	—	$	26.8	$	26.8
Structured finance	20.7		11.8		32.5
Total	$	20.7	$	38.6	$	59.3
Par written:
Municipal	$	—	$	1,279	$	1,279
Structured finance	1,212		1,264		2,476
Total	$	1,212	$	2,543	$	3,755
Par outstanding:
Municipal	$	2,120	$	47,238	$	49,358
Structured finance	17,709		13,089		30,798
Total	$	19,829	$	60,327	$	80,156

6

Assured Guaranty Ltd.

Fixed Income Investment Portfolio

as of March 31, 2004

(dollars in thousands)

	Amortized Cost		Fair Value		Pre-Tax Yield		Duration	Annualized Investment Income
Fixed maturity securities available for sale:
U.S. Treasury securities and obligations of U.S. government agencies	$	233,878	$	252,866	5.13	%	5.5	$	12,972
Obligations of states and political subdivisions	817,827		887,965		4.83	%	7.8	42,889
Corporate securities	284,311		308,174		5.97	%	4.8	18,398
Mortgage-backed securities	526,279		543,935		4.95	%	2.7	26,925
Asset-backed securities	70,277		73,008		5.68	%	5.4	4,147
Total fixed maturity securities available for sale	1,932,572		2,065,948		5.10	%	5.3	105,330
Short-term investments	154,354		154,355		0.75	%		1,158
Total investments available for sale	$	2,086,926	$	2,220,303	4.80	%	5.3	$	106,488

Maturity Schedule:	Fair Value		%
Due within one year	$	22,770	1.1	%
Due in one to five years	257,919		12.5	%
Due in five to ten years	337,217		16.3	%
Due in greater than ten years	904,107		43.8	%
Mortgage-backed securities	543,935		26.3	%
Total	$	2,065,948	100.0	%

Quality Distribution:	Fair Value		%
Treasury	$	29,767	1.4	%
Agency	223,099		10.8	%
AAA	1,261,068		61.0	%
AA	327,091		15.8	%
A	208,134		10.1	%
BBB	16,789		0.8	%
Total	$	2,065,948	100.0	%

7

Assured Guaranty Ltd.

Financial Guaranty Profile

(dollars in millions)

	Gross Par Written (7)				Outstanding as of March 31, 2004
Sector	Q1 2004		Q1 2003		Net Par		%		Avg. Rating
Municipal Finance
Tax backed	$	822	$	469	$	21,611	24.1	%	A+
Municipal utilities	161		320		11,157		12.5	%	A+
Special revenue	207		228		9,078		10.1	%	A
Healthcare	507		137		6,028		6.7	%	A
Structured municipal (1)	—		—		3,266		3.6	%	AAA
Other municipal (2)	236		124		2,777		3.1	%	A-
Total Municipal	$	1,933	$	1,279	$	53,917	60.2	%	A+
Structured Finance
Senior layer CDO’s (3)	$	67	$	852	$	15,780	17.6	%	AA+
Consumer receivables (4)	2,037		1,053		10,602		11.8	%	A+
Single name corporate CDS	—		100		2,086		2.3	%	A+
Commercial Receivables (5)	292		343		5,428		6.1	%	AA-
Other structured finance (6)	246		128		1,775		2.0	%	A+
Total Structured Finance	$	2,641	$	2,476	$	35,671	39.8	%	AA
Total Exposure	$	4,574	$	3,755	$	89,589	100.0	%	AA-

(1)Structured Municipal: includes excess of loss reinsurance on portfolios of municipal credits where the Company attached in excess of the AAA rating level.

(2)Other Municipal: primarily includes first mortgage bonds on investor-owned utilities and government-sponsored project finance.

(3)Collateralized debt obligations (CDO’s) are structured financings backed by a pool of investment grade assets. These financings are typically structured in multiple tranches (layers) from equity (first loss) through super senior (high excess). Losses on defaulted pool assets are allocated successively first to the equity tranche then to higher rated tranches.

(4)Consumer receivables: principally includes auto loan receivables, residential mortgage-backed securities and credit card receivables.

(5)Commercial Receivables: principally includes equipment leases and commercial mortgage-backed securities.

(6)Other structured Finance: predominantly trade receivable securitization, secured structured lending, and future flow transactions.

(7)Gross par approximates net par as the company is a net line writer.

Note - - Ratings are internally determined based on rating agency guidelines

8

Assured Guaranty Ltd.

Ratings and Geographic Distribution

(dollars in millions)

Distribution by Ratings of Financial Guaranty Portfolio

Ratings	3/31/2004 Net Par Outstanding		%		12/31/2003 Net Par Outstanding		%
AAA	$	26,907	30.0	%	$	26,245	30.0	%
AA	18,419		20.6	%	17,557		20.1	%
A	30,144		33.6	%	29,924		34.2	%
BBB	12,595		14.1	%	12,290		14.0	%
Below investment grade	1,524		1.7	%	1,507		1.7	%
	$	89,589	100	%	$	87,523	100	%

Geographic Distribution of Financial Guaranty Portfolio, as of March 31, 2004

	Net Par Outstanding		%
U.S.:
California	$	7,269	8.1	%
New York	5,580		6.2	%
Texas	3,273		3.7	%
Illinois	2,824		3.2	%
Florida	2,810		3.1	%
New Jersey	2,216		2.5	%
Pennsylvania	2,039		2.3	%
Massachusetts	1,698		1.9	%
Puerto Rico	1,503		1.7	%
Washington	1,333		1.5	%
Other - Muni	19,128		21.4	%
Other - Non Muni	32,617		36.4	%
Total U.S.	$	82,290	91.9	%
International:
United Kingdom	$	3,749	4.2	%
Australia	532		0.6	%
Brazil	352		0.4	%
France	324		0.4	%
Netherlands	295		0.3	%
Other	2,047		2.3	%
Total International	$	7,299	8.1	%
Total	$	89,589	100.0	%

9

Assured Guaranty Ltd.

25 Largest Municipal Exposures

as of March 31, 2004

(dollars in millions)

Revenue Source	Net Par In Force *		Rating
California State General Obligation & Leases	$	900	BBB
New Jersey State General Obligation & Leases	724		AA
Long Island Power Authority	720		A-
New York City General Obligation	695		A
Denver Colorado Airport System	632		A
Jefferson County Alabama Sewer	607		A
Chicago Illinois General Obligation	589		A+
Puerto Rico Electric Power Authority	555		A-
New York City Municipal Water Finance Authority	548		AA
New York State Metro Trans Auth - Trans Revenue	539		A
Massachusetts State GO & Bay Transportation & Leases	516		AA-
San Francisco California Airport	505		A+
Energy Northwest (FKA WPPSS)	469		AA-
New York State General Obligation	448		AA
Puerto Rico General Obligation & Leases	430		A-
Houston Texas Water & Sewer System	393		A+
Los Angeles County Metro Trans - Sales Tax - 1st	365		AA
Dade County Florida Water & Sewer System	327		A
Mental Health Services Facilities - New York	320		AA-
Intermountain Power Agency	320		A+
Illinois State General Obligation & Leases	307		AA
Puerto Rico Government Development Bank	300		AAA
Chicago Illinois Public Building - Board of Education	300		A+
New Jersey State Turnpike	298		A
District of Columbia General Obligation	297		A-

* Excludes Net Par In Force for transactions insured by a AAA monoline financial guaranty companies

10

Assured Guaranty Ltd.

25 Largest Structured Finance Exposures

as of March 31, 2004

(dollars in millions)

Revenue Source	Net Par In Force *		Rating
SALS 2002-6 - Synthetic CDO	$	740	AAA
Argent Securities Inc. 2003-W6	736		AAA
Absolute CDO OF ABS	594		AAA
Triplas CDO OF ABS	584		AAA
Taurus 2001-06 - Synthetic CDO	571		A+
Sears Credit Card Master Trust 2002-3 Class A - Credit Cards	550		AAA
Dresdner 2001 - 1 - Synthetic CDO	500		AAA
Houston CDO Portfolio 2000-1	470		AA
Stars 2001-3 - Synthetic CDO	440		AAA
Merrill Lynch Synthetic CDO Taurus 8	440		AAA
Merrill Lynch Dots 4 - Synthetic CDO	430		AAA
SALS 2003-9 - Synthetic CDO	410		AAA
Providian Gateway Master Trust	392		BB-
Magrathea V - Synthetic CDO	360		AAA
Lehman Sprint 2001-1 Super Senior - Synthetic CDO	360		AAA
Taurus 2001-01 - Synthetic CDO	347		AAA
Option One Mortgage Loan Trust 2003-1 Cl A-1	344		AAA
ING Equity Trust (Pilgrim Principal Protection)	322		AAA
Europa II Limited Class A1 - Synthetic CDO	301		AAA
Bistro 2000-07 Class A-1 - Synthetic CDO	300		AAA
Hights 2001-1 - Synthetic CDO	295		BBB+
Metris Master Credit Card Trust	281		BB
CDO ^2 - CDO of CDOs	281		AAA
Halcyon Synthetic CDO	278		AAA
Morgan Stanley Dean Witter 2003-NC9 Class A1	276		AAA

* Excludes Net Par In Force for transactions insured by a AAA monoline financial guaranty companies

11

Assured Guaranty Ltd.

Largest Single Name Corporate / Sovereign CDS Exposures

as of March 31, 2004

(dollars in millions)

Obligor	Net Par In Force *		Rating
General Electric Company	$	60	AAA
ABN AMRO Bank NV	53		AA-
Fortis NV	52		A+
Japan Republic Sovereign Obligation	50		AA-
American International Group, Inc. (AIG)	50		AAA
FNMA - Fannie Mae	45		AAA
Allianz AG	41		AA-
France Telecom	40		BBB+
Deutsche Telekom AG	40		BBB+
Citigroup, Inc.	39		AA-

Single Name Corporate CDS by Rating	1Q 2004		Gross Par  Written ** 1Q 2003		Net Par Outstanding
AAA	$	—	$	30	420
AA	—		10		377
A	—		50		1,020
BBB	—		10		270
Below investment grade	—		—		—
Total	$	—	$	100	$	2,086

	Outstanding Net Par
Single Name Corporate CDS Run-off	2004***		2005		2006		2007		2008
Beginning Outstanding Par	$	2,086	$	1,687	$	697	$	511	$	279
Scheduled Runoff Amount	400		989		186		232		100
Ending Outstanding Par	$	1,687	$	697	$	511	$	279	$	179

* Excludes Net Par In Force for transactions insured by a AAA monoline financial guaranty companies

** Gross par approximates net par as the company is a net line writer

*** Beginning balance as of April 1, 2004

12