Subsidiary Information

The following tables present the condensed consolidating financial information for AGUS and AGMH, wholly-owned subsidiaries of AGL, which have issued publicly traded debt securities (see Note 15, Long Term Debt and Credit Facilities) as of June 30, 2014 and December 31, 2013 and for the three and six months ended June 30, 2014 and 2013. The information for AGUS and AGMH presents its subsidiaries on the equity method of accounting.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF JUNE 30, 2014

(in millions)



	Assured Guaranty Ltd. (Parent)		AGUS (Issuer)		AGMH (Issuer)		Other Entities		Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
ASSETS
Total investment portfolio and cash	$	46	$	550	$	35	$	11,410	$	(300	)	$	11,741
Investment in subsidiaries	5,172		4,476		3,858		319		(13,825		)	—
Premiums receivable, net of commissions payable	—		—		—		981		(132		)	849
Ceded unearned premium reserve	—		—		—		1,544		(1,104		)	440
Deferred acquisition costs	—		—		—		193		(71		)	122
Reinsurance recoverable on unpaid losses	—		—		—		232		(173		)	59
Credit derivative assets	—		—		—		497		(417		)	80
Deferred tax asset, net	—		109		—		550		(88		)	571
Intercompany receivable	—		—		—		90		(90		)	—
Financial guaranty variable interest entities’ assets, at fair value	—		—		—		1,284		—			1,284
Other	29		15		39		670		(209		)	544
TOTAL ASSETS	$	5,247	$	5,150	$	3,932	$	17,770	$	(16,409	)	$	15,690
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unearned premium reserves	$	—	$	—	$	—	$	5,474	$	(1,083	)	$	4,391
Loss and LAE reserve	—		—		—		954		(179		)	775
Long-term debt	—		847		433		31		—			1,311
Intercompany payable	—		90		—		300		(390		)	—
Credit derivative liabilities	—		—		—		2,334		(417		)	1,917
Deferred tax liabilities, net	—		—		94		—		(94		)	—
Financial guaranty variable interest entities’ liabilities, at fair value	—		—		—		1,490		—			1,490
Other	5		10		16		865		(332		)	564
TOTAL LIABILITIES	5		947		543		11,448		(2,495		)	10,448
TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO ASSURED GUARANTY LTD.	5,242		4,203		3,389		6,003		(13,595		)	5,242
Noncontrolling interest	—		—		—		319		(319		)	—
TOTAL SHAREHOLDERS' EQUITY	5,242		4,203		3,389		6,322		(13,914		)	5,242
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,247	$	5,150	$	3,932	$	17,770	$	(16,409	)	$	15,690

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2013

(in millions)



	Assured Guaranty Ltd. (Parent)		AGUS (Issuer)		AGMH (Issuer)		Other Entities		Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
ASSETS
Total investment portfolio and cash	$	33	$	186	$	42	$	11,008	$	(300	)	$	10,969
Investment in subsidiaries	5,066		4,191		3,574		289		(13,120		)	—
Premiums receivable, net of commissions payable	—		—		—		1,025		(149		)	876
Ceded unearned premium reserve	—		—		—		1,598		(1,146		)	452
Deferred acquisition costs	—		—		—		198		(74		)	124
Reinsurance recoverable on unpaid losses	—		—		—		170		(134		)	36
Credit derivative assets	—		—		—		482		(388		)	94
Deferred tax asset, net	—		97		—		681		(90		)	688
Intercompany receivable	—		—		—		90		(90		)	—
Financial guaranty variable interest entities’ assets, at fair value	—		—		—		2,565		—			2,565
Other	23		17		31		638		(226		)	483
TOTAL ASSETS	$	5,122	$	4,491	$	3,647	$	18,744	$	(15,717	)	$	16,287
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unearned premium reserves	$	—	$	—	$	—	$	5,720	$	(1,125	)	$	4,595
Loss and LAE reserve	—		—		—		733		(141		)	592
Long-term debt	—		348		430		38		—			816
Intercompany payable	—		90		—		300		(390		)	—
Credit derivative liabilities	—		—		—		2,175		(388		)	1,787
Deferred tax liabilities, net	—		—		95		—		(95		)	—
Financial guaranty variable interest entities’ liabilities, at fair value	—		—		—		2,871		—			2,871
Other	7		7		16		853		(372		)	511
TOTAL LIABILITIES	7		445		541		12,690		(2,511		)	11,172
TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO ASSURED GUARANTY LTD.	5,115		4,046		3,106		5,765		(12,917		)	5,115
Noncontrolling interest	—		—		—		289		(289		)	—
TOTAL SHAREHOLDERS’ EQUITY	5,115		4,046		3,106		6,054		(13,206		)	5,115
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,122	$	4,491	$	3,647	$	18,744	$	(15,717	)	$	16,287

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2014

(in millions)



	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
REVENUES
Net earned premiums	$	—		$	—		$	—		$	135		$	1		$	136
Net investment income	0			0			0			98			(2		)	96
Net realized investment gains (losses)	0			0			0			(8		)	—			(8		)
Net change in fair value of credit derivatives:
Realized gains (losses) and other settlements	—			—			—			15			0			15
Net unrealized gains (losses)	—			—			—			88			—			88
Net change in fair value of credit derivatives	—			—			—			103			0			103
Other	—			—			—			27			(1		)	26
TOTAL REVENUES	—			—			—			355			(2		)	353
EXPENSES
Loss and LAE	—			—			—			53			4			57
Amortization of deferred acquisition costs	—			—			—			5			(2		)	3
Interest expense	—			7			14			3			(4		)	20
Other operating expenses	8			1			0			46			—			55
TOTAL EXPENSES	8			8			14			107			(2		)	135
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES	(8		)	(8		)	(14		)	248			—			218
Total (provision) benefit for income taxes	—			3			4			(67		)	1			(59		)
Equity in net earnings of subsidiaries	167			152			120			8			(447		)	—
NET INCOME (LOSS)	$	159		$	147		$	110		$	189		$	(446	)	$	159
Less: noncontrolling interest	—			—			—			16			(16		)	—
NET INCOME (LOSS) ATTRIBUTABLE TO ASSURED GUARANTY LTD.	$	159		$	147		$	110		$	173		$	(430	)	$	159

COMPREHENSIVE INCOME (LOSS)	$	227		$	191		$	137		$	302		$	(630	)	$	227

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED JUNE 30, 2013

(in millions)



	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
REVENUES
Net earned premiums	$	—		$	—		$	—		$	161		$	2		$	163
Net investment income	—			—			—			98			(5		)	93
Net realized investment gains (losses)	—			—			1			(3		)	4			2
Net change in fair value of credit derivatives:
Realized gains (losses) and other settlements	—			—			—			(86		)	—			(86		)
Net unrealized gains (losses)	—			—			—			160			—			160
Net change in fair value of credit derivatives	—			—			—			74			—			74
Other	—			—			—			132			1			133
TOTAL REVENUES	—			—			1			462			2			465
EXPENSES
Loss and LAE	—			—			—			61			1			62
Amortization of deferred acquisition costs	—			—			—			(11		)	12			1
Interest expense	—			8			14			5			(6		)	21
Other operating expenses	7			0			0			44			1			52
TOTAL EXPENSES	7			8			14			99			8			136
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES	(7		)	(8		)	(13		)	363			(6		)	329
Total (provision) benefit for income taxes	—			2			4			(119		)	3			(110		)
Equity in net earnings of subsidiaries	226			252			220			—			(698		)	—
NET INCOME (LOSS)	$	219		$	246		$	211		$	244		$	(701	)	$	219

COMPREHENSIVE INCOME (LOSS)	$	(19	)	$	92		$	122		$	(142	)	$	(72	)	$	(19	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(in millions)



	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
REVENUES
Net earned premiums	$	—		$	—		$	—		$	266		$	2		$	268
Net investment income	0			0			0			203			(4		)	199
Net realized investment gains (losses)	0			0			0			(4		)	(2		)	(6		)
Net change in fair value of credit derivatives:
Realized gains (losses) and other settlements	—			—			—			34			—			34
Net unrealized gains (losses)	—			—			—			(142		)	—			(142		)
Net change in fair value of credit derivatives	—			—			—			(108		)	—			(108		)
Other	—			—			—			196			(1		)	195
TOTAL REVENUES	—			—			—			553			(5		)	548
EXPENSES
Loss and LAE	—			—			—			92			6			98
Amortization of deferred acquisition costs	—			—			—			11			(3		)	8
Interest expense	—			14			27			8			(9		)	40
Other operating expenses	16			1			0			99			(1		)	115
TOTAL EXPENSES	16			15			27			210			(7		)	261
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES	(16		)	(15		)	(27		)	343			2			287
Total (provision) benefit for income taxes	—			5			9			(100		)	—			(86		)
Equity in net earnings of subsidiaries	217			239			289			16			(761		)	—
NET INCOME (LOSS)	$	201		$	229		$	271		$	259		$	(759	)	$	201
Less: noncontrolling interest	—			—			—			16			(16		)	—
NET INCOME (LOSS) ATTRIBUTABLE TO ASSURED GUARANTY LTD.	$	201		$	229		$	271		$	243		$	(743	)	$	201

COMPREHENSIVE INCOME (LOSS)	$	373		$	356		$	349		$	560		$	(1,265	)	$	373

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2013

(in millions)



	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
REVENUES
Net earned premiums	$	—		$	—		$	—		$	407		$	4		$	411
Net investment income	0			0			0			197			(10		)	187
Net realized investment gains (losses)	0			—			1			25			4			30
Net change in fair value of credit derivatives:
Realized gains (losses) and other settlements	—			—			—			(68		)	—			(68		)
Net unrealized gains (losses)	—			—			—			(450		)	—			(450		)
Net change in fair value of credit derivatives	—			—			—			(518		)	—			(518		)
Other	—			—			—			179			—			179
TOTAL REVENUES	0			0			1			290			(2		)	289
EXPENSES
Loss and LAE	—			—			—			17			(3		)	14
Amortization of deferred acquisition costs	—			—			—			(3		)	7			4
Interest expense	—			15			27			11			(11		)	42
Other operating expenses	12			0			0			102			(2		)	112
TOTAL EXPENSES	12			15			27			127			(9		)	172
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES	(12		)	(15		)	(26		)	163			7			117
Total (provision) benefit for income taxes	—			5			9			(54		)	(2		)	(42		)
Equity in net earnings of subsidiaries	87			170			382			—			(639		)	—
NET INCOME (LOSS)	$	75		$	160		$	365		$	109		$	(634	)	$	75

COMPREHENSIVE INCOME (LOSS)	$	(231	)	$	(45	)	$	239		$	(395	)	$	201		$	(231	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(in millions)



	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Net cash flows provided by (used in) operating activities	$	264		$	68		$	32		$	275		$	(417	)	$	222
Cash flows from investing activities
Fixed-maturity securities:
Purchases	—			(356		)	(6		)	(995		)	—			(1,357		)
Sales	—			126			7			311			—			444
Maturities	—			3			1			393			—			397
Sales (purchases) of short-term investments, net	(13		)	(199		)	6			155			—			(51		)
Net proceeds from financial guaranty variable entities’ assets	—			—			—			315			—			315
Investment in subsidiary	—			—			25			—			(25		)	—
Other	—			—			—			23			—			23
Net cash flows provided by (used in) investing activities	(13		)	(426		)	33			202			(25		)	(229		)
Cash flows from financing activities
Return of capital	—			—			—			(25		)	25			—
Dividends paid	(40		)	(200		)	(65		)	(152		)	417			(40		)
Repurchases of common stock	(212		)	—			—			—			—			(212		)
Share activity under option and incentive plans	1			—			—			—			—			1
Net paydowns of financial guaranty variable entities’ liabilities	—			—			—			(311		)	—			(311		)
Proceeds from issuance of long-term debt	—			496			—			—			—			496
Payment of long-term debt	—			—			—			(7		)	—			(7		)
Net cash flows provided by (used in) financing activities	(251		)	296			(65		)	(495		)	442			(73		)
Effect of exchange rate changes	—			—			—			2			—			2
Increase (decrease) in cash	—			(62		)	—			(16		)	—			(78		)
Cash at beginning of period	0			67			0			117			—			184
Cash at end of period	$	0		$	5		$	0		$	101		$	—		$	106

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2013

(in millions)



	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Net cash flows provided by (used in) operating activities	$	86		$	43		$	14		$	172		$	(193	)	$	122
Cash flows from investing activities
Fixed-maturity securities:
Purchases	—			—			(23		)	(1,029		)	65			(987		)
Sales	171			1			19			506			(65		)	632
Maturities	21			—			2			423			—			446
Sales (purchases) of short-term investments, net	5			(56		)	1			(76		)	—			(126		)
Net proceeds from financial guaranty variable entities’ assets	—			—			—			440			—			440
Investment in subsidiary	—			—			25			—			(25		)	—
Other	—			—			—			67			—			67
Net cash flows provided by (used in) investing activities	197			(55		)	24			331			(25		)	472
Cash flows from financing activities
Return of capital	—			—			—			(25		)	25			—
Dividends paid	(38		)	—			(38		)	(155		)	193			(38		)
Repurchases of common stock	(244		)	—			—			—			—			(244		)
Share activity under option and incentive plans	(1		)	—			—			—			—			(1		)
Net paydowns of financial guaranty variable entities’ liabilities	—			—			—			(289		)	—			(289		)
Payment of long-term debt	—			—			—			(13		)	—			(13		)
Net cash flows provided by (used in) financing activities	(283		)	—			(38		)	(482		)	218			(585		)
Effect of exchange rate changes	—			—			—			(4		)	—			(4		)
Increase (decrease) in cash	—			(12		)	—			17			—			5
Cash at beginning of period	—			13			0			125			—			138
Cash at end of period	$	—		$	1		$	0		$	142		$	—		$	143