Good day, ladies and gentlemen, and welcome to the Third Quarter 2011 Assured Guaranty Earnings Conference Call. My name is Latasha and I’ll be your coordinator for today. (Operator Instructions) I would now like to turn the call over to Mr. Robert Tucker, Managing Director of Investor Relations. Please proceed.

Good morning and thank you for joining Assured Guaranty for our Third Quarter 2011 Financial Results Conference Call. Today’s presentation is made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. It may contain forward-looking statements about our new business and credit outlooks, market conditions, credit spreads, financial ratings, loss reserves, financial results, future reps and warranty settlement agreements or other items that may affect our future results. These statements are subject to change due to new information or future events, therefore, you should not place undue reliance on them as we do not undertake any obligation to publicly update or revise them, except as required by law. If you’re listening to the call by the replay or if you’re reading the transcript of the call, please note that our statements made today may have been updated since this call. Please refer to the Investor Information section of our Web site for our recent presentations, SEC filings and most current financial filings, and for the risk factors. Turning to the presentation, our speakers today are: Dominic Frederico, President and Chief Executive Officer of Assured Guaranty Limited; and Rob Bailenson, our Chief Financial Officer. After their remarks, we will open up the call to questions. As the webcast is not enabled for Q&A, please dial into the call if you’d like to ask a question. I will now turn the call over to Dominic.

Thank you, Robert, and thanks to all of you for your interest in and support of Assured Guaranty. On today’s call, I’d like to review our quarterly results, our new business activity and future opportunities, the performance of our insured portfolio, and the status of our S&P and Moody’s rating reviews. We reported third-quarter operating income of $38 million or $0.21 per share. Our operating income would have been significantly higher if not for the effect of the change in the discount rate required by GAAP to calculate our present value of future losses. While Rob will provide the details, one important takeaway is that our incurred losses were theoretically increased by $120 million because of this rate movement and this does not represent economic losses related to credit deterioration in the performance of our portfolio. A similar impact, although in the opposite direction, was realized in our net income figure for the quarter, which ballooned to a profit of $761.2 million, due to the widening of our credit spreads. Measurements like these need to be eliminated from our GAAP accounting so that results present a more realistic economic picture. Regarding new business activities in the quarter, we insured $4.3 billion of municipal par. For the first nine months, we insured an aggregate of $9.3 billion in par on 883 new issued transactions. These insured transactions resulted in an estimated $100 million in present value financing savings to municipal issuers. The par insured transaction count and cost savings shows that our product continues to occupy a vital role in the municipal market. For September, our U.S. municipal insured penetration by transaction count increased to 15.3%, a high for the year, while our par penetration also increased to its highest level of the year, at 7.3%. For the third quarter, these…

Thank you, Dominic, and good morning to everyone on the call. Today, I will briefly review the financial highlights and then, provide you with more detail on the individual components of operating income, followed by a summary of economic loss development in the insured portfolio for the quarter. I refer you to our press release and financial supplement for explanations and reconciliations of our non-GAAP financial measures. Operating income for the third quarter of 2011 was $38.3 million or $0.21 per diluted share, which as Dominic mentioned, would have been significantly higher if not for the impact of declining discount rates on loss expense. The impact of changing risk-free rates on the third quarter of 2011, was approximately $120 million of pre-tax loss expense, which is not indicative of additional credit impairments. Despite the drag on operating income from declining risk-free rates in 2011, our year-to-date total operating income remains strong at $430.9 million, or $2.31 per diluted share. All the other significant components of pre-tax operating income are either in line with expectations or have shown favorable improvements. The effective tax rate on operating income was 32.6%, which is higher than expected due to the operating losses in AG rates. Year-to-date, the effective tax rate on operating income was 26.3%, which is in line with the expected annual effective tax rates of 24% to 28%. A comparable operating income for third quarter 2010 was $222.6 million or $1.19 per diluted share and the comparable operating income for the nine months ended September 30, 2010, was $511.4 million. I will discuss variances of operating results from third quarter 2010 by component, later in my discussion. On a GAAP basis, we reported net income of $761.2 million, which is primarily driven by net unrealized gains on credit derivates due to the…

(Operator Instructions) And your first question comes from the line of Mike Grasher with Piper Jaffray. Please proceed. Michael Grasher – Piper Jaffray: Hi. Good morning, everyone.

Hey, Mike. Michael Grasher – Piper Jaffray: Rob, just to follow up on your conversation here with the reserving and the discount rate. Can you explain a little bit more – in terms of the change in discount rate quarter-to-quarter, do you go back and adjust prior quarters along the way? Or is this just for the specific quarter that is being reported?

So, Mike, every quarter end, you’re required to discount your loss reserves at the risk-free rate at the end of the quarter. So if the Treasury yield curve decreases, if you have yields that decrease, then you’re going to have increases in loss reserves. Conversely, if the yield curves – if interest rates increase, then your reserves will go down. Michael Grasher – Piper Jaffray: Okay. So it is the cumulative and not just that quarter’s activity.

It’s the cumulative balance sheet. Yes. Michael Grasher – Piper Jaffray: Okay. Thanks for clarifying that. And then, just around – Dominic, you were running through these capital generation numbers, can you go back and just in total, what they were for the quarter? And where it stands year-to-date, as far as rating agency capital?

Well, Michael, for us, we really count since the last time Standard & Poor’s did a review, because obviously we got the AA+ rating back at that second review, with AA+ capital. That reflected the capital changes that we had talked about on previous quarters, in light of what we thought was going to be their new criteria that was issued back in January. So now we have another new threshold and new account that we’re taking. And if you add up the rep and warranty settlements, the terminations, the runoff and the buyback in matured securities – and remember, this is not an exact science because we’re still getting some further information on actual capital charges, we think we’re somewhere in the $600 million to $800 million of further capital benefit relative to S&P. Michael Grasher – Piper Jaffray: Just in 3Q?

Well, since April 1. Michael Grasher – Piper Jaffray: Since April 1. Okay.

And obviously, we have other strategies that we’re still continuing to implement and specifically related to potential new reinsurance or other re-sharing vehicles as well. Michael Grasher – Piper Jaffray: Okay. And then, just to transition out is there’s all this concern about capital, yet we see you buying back shares and granted, it wasn’t a huge number. But it was I guess in total $20 plus million in the quarter. Can you comment just in terms of how you weigh the two and how you think through that? How we should be thinking about it.

Well, our first and foremost goal is to maintain ratings in the AA category and that’s what we’re striving to achieve. However, we still have to think about where are accretive transactions that can be exercised or executed by the company as we see opportunities. So we’re trying to do a delicate balancing act and as you point out, the amount of share buyback was not significant, but we believe took advantage of an opportune price in the market, that was significantly below both operating book and adjusted book. And we will continue to look at those opportunities. But the first and foremost goal, especially as we’re now getting fairly close to getting final determinations, we hope, on our ratings to maintain ratings in the AA level, which we believe will give us an excellent opportunity for new business production and obviously to continue to achieve higher, longer-term value for the company. Michael Grasher – Piper Jaffray: Okay. Thanks much.

You’re welcome.

Your next question comes from the line of Brian Meredith with UBS. Please proceed. Brian Meredith – UBS: Yeah. Good morning.

Hi, Brian.

Good morning. Brian Meredith – UBS: A couple of questions here. First one, I wonder if you could just elaborate a little bit on the increases in severity that you had with the RMBS securities and the change in the model. What happened there? And maybe provide us some kind of a view of what we can expect here going forward given the current economic environment?

Well, as we say, we use basically current data that continue to affect our estimates and our models. What we’re seeing is a continued uptick in first lien severities, which we believe is principally due to modifications that are be counted in the trustee reports as, in fact, foreclosure losses. We’ve had to moved up those first lien estimates of stress, of severity to basically encompass that and we will continue to carry this 90% estimated stress loss severities for first lien for at least a few more months as we see the effect of these modifications coming through the trustee reports. It’s for first lien and subprime only that we’ve seen that aberration in severity, Brian. Brian Meredith – UBS: Okay. Great. And then the second question – just curious – I noticed disclosure on Greece in the 10-Q, and I guess your point here is that you don’t think you have any exposure to the commission’s announcement on debt relief measures. I wonder if you could talk a little bit more about that as to exactly why there’s no exposure there for you,

Well, because this so far – and obviously, things are continuing to change – is a voluntary exchange. Under our policy that would not appear to be a default and therefore, a default subject to reimbursement, as long as it remains voluntary. Brian Meredith – UBS: Okay. So as long as it’s voluntary? Okay. Terrific. Thanks. That’s all I have for now.

Thank you.

Thank you.

(Operator Instructions) And your next question comes from the line of Andrew Kleinberg with Glickenhaus. Please proceed. Andrew Kleinberg – Glickenhaus: Hi. Good morning. My question is actually a different spin on the first questioner. With an operating book value north of $20, an adjusted book value north of $45, an operating business that’s questionable going forward, under fire from S&P and very time consuming, and most importantly, a stock price of $11.32, can you please explain to shareholders why this company shouldn’t just go into run-off and start returning cash in the form of dividends and what would be extraordinarily accretive, share buybacks?

Well, Andrew, it goes back to the age-old question in terms of what are we trying to achieve. We’re trying to achieve what we believe is long-term value creation. We believe, based on our preferred position in the market, our ability to demand pricing and terms that that’s an opportunity that one doesn’t walk away from easily. And we believe our goal of attaining AA rating stable through the end of this year is achievable. But like any other strategy, that’s subject to continued re-evaluation and we will re-evaluate it at the appropriate time. We do see the same thing you see in terms of accretive opportunities, relative to the stock price again both operating and adjusted book value and we try to effect those transactions when we think it’s appropriate. But at this point in time, and we’ll have plenty of time to make further evaluations and decisions if that changes into the future, we still think this is the best course of action. Andrew Kleinberg – Glickenhaus: Okay. Thank you for your response.

You’re welcome.

Your next question comes from the line of Mike Grasher with Piper Jaffray. Please proceed. Michael Grasher – Piper Jaffray: Okay. So soon for the follow-up.

You just have to pay for it, Mike, that’s all. Michael Grasher – Piper Jaffray: Your comments about going into states and having them have this actual guideline in terms of potential events happening down the road. Is this a change to the terms and conditions? And how important is that from the standpoint that a lot of these states and municipalities hadn’t thought about that or don’t have those sort of terms and conditions in place?

Yeah. I think it is a change, I wouldn’t say it’s in terms and conditions. I think as we look at our underwriting standards, Mike, we have to keep current on what we believe is the appropriate level of risk. We continue to evaluate policies around what is appropriate risk-taking opportunities or situations. We are concerned that the term bankruptcy gets thrown around a little bit too easily these days in the municipal market. We’re not very happy with people that provide you terms like, full faith and credit, and then decide to challenge that wording in either a court of law or court of public opinion, as you see constantly in Harrisburg. We’re being asked to make concessions that make absolutely no sense. And we have provided value to these municipalities in helping them achieve debt financing at a cheaper cost. And we like states that have structures that deal with some level of process and even potentially approval of any bankruptcy filing from a local municipality, like we have in Pennsylvania. And we will have to now consider that as a very important fact relative to our underwriting appetite and most states do have this in place. Michael Grasher – Piper Jaffray: And for those who don’t, has there been pushback already? Or what has been the (inaudible)?

The pushback is going to be entirely ours, right? As we’re getting opportunities in those states, we’re going to start to tell the bankers that we’re not interested in insuring in those states, until such time as we see real change happening. Alabama’s going to be a classic one. Michael Grasher – Piper Jaffray: Okay. And then, in terms of the market that’s available to you or so, in other words, there’s the below investment grade that you won’t go and underwrite and at the other end of the spectrum, there’s the AAA that makes no sense. What is the percent of the market that would be available to you? And have you seen any change in that since S&P came out with their initial criteria? And even after the revisions?

No. I think it’s a good question relative to the market opportunity and our market appetite. We talked about in the quarter, roughly 40% of all A rated transactions were insured by us in the quarter. That is typically our targeted area, our sweet spot, but if you actually break down the quarter, we also insured 14 transactions in the AA category. So it seems that our rating still has value up and down the rating scale. And yet against that, we only did two transactions in the BBB area. So you can see the predominance of our transactions are A rated or AA rated. The second thing is, if you read in the press today, the changes of ratings by the rating agencies are in a downward trend, where downgrades are outpacing upgrades by that same five to six to one factor that it was in the opposite direction back in ‘08 and ‘09 and 2010. So as the market also comes back to us from a ratings point of view, we believe that will broaden our opportunities. And as I said, we’re dominant today in the A rated category. Michael Grasher – Piper Jaffray: Okay. Thank you.

You’re welcome.

Your next question comes from the line of Robert Chapman with Chapman Cap. Please proceed. Robert Chapman – Chapman Cap: Going back to the Greek exposure, while I understand the voluntary nature of the proposed – and I emphasize the word proposed, settlement that’s been put out there. It’s pretty fragile structure that one could argue is not going to be seeing consummations. Is the main purpose of not reserving against that, given there’s probably an inevitable default of sorts down the road, diminution in the principal value of the asset, I don’t know if it’s this year or next year – that you want to strengthen any kind of legal discussion you have regarding the triggering of your exposure in the same way that maybe Credit Suisse hasn’t taken reserves because they want to strengthen their legal argument as well?

Well, I’m glad you brought the Credit Suisse part up, to call attention to that, but no, the situations are not the same. Number one, we do carry a reserve for Greece. If you remember, in our GAAP accounting, which I’ll continue to say, has some strange components to it, we’re required to create in effect, loss scenarios and then, probability weight them. Obviously, the settlement or the proposed settlement, is one of our scenarios in our loss reserving model that gets a probability weighting. However, we have other scenarios like bankruptcy, et cetera, which trigger claims to which we then have to probability weight and carry a reserve. We did talk I think on our last call, that our two exposures are due – they’re sovereign obligations, Greek bonds. One set is due in 2037 that carries a 4.5% coupon rate and that’s for $267 million gross. Remember our net’s $291 here and the remaining piece is another bond that’s due in 2057. So both of our obligations are incredibly long term, so on a net present value basis, would be significantly discounted except if you use the current risk-free discount rate, which is another accounting anomaly that I’ll leave for other days. But the two numbers are there and we have them in our reserve model and we have them probability weighted that we will pay the claim. Robert Chapman – Chapman Cap: But would you say as the materiality of the probable loss increase has gotten worse, if there’s been a linear relationship to the reserving at AGO?

Say that again. Robert Chapman – Chapman Cap: Essentially, have you been increasing your reserves in line with the increasing fragility of the situation in Greece?

Of course. We’ve been monitoring Greece for some time now and continue to make reserve assessments on these scenario analyses and probably weighting, which we try to keep as current as possible. Obviously, the most recent quarter has the unique feature of both this tentative settlement and obviously, a worsening condition in Greece. Robert Chapman – Chapman Cap: Thank you.

And we do adjust our scenarios based upon new facts and all of them are probability weighted. So if the facts get worse, then the probability weight towards the non-settlement will go up. If the facts get better, then we probability weight it towards a better scenario.

So unlike Credit Suisse, we do have reserves and we do do a full disclosure of our obligations. Robert Chapman – Chapman Cap: Right. Well, Credit Suisse simply can’t afford to take the reserves because then their equity disintegrates.

No, once again that’s hopefully an issue for their regulators, their auditors and their board of directors. Robert Chapman – Chapman Cap: Thank you.

You’re welcome.

(Operator Instructions) Your next question comes from the line of Brian Meredith with UBS. Please proceed. Brian Meredith – UBS: Hey. One more for you all here.

You’re going to get charged as well as Grasher. So get it right. Brian Meredith – UBS: Actually, Dominic, I was wondering if you could walk through how you come to a $19 million reserve for Jefferson County, giving all of the exposure you have? And just, what are the key components that reduce your exposure down to that $18 million or $19 million?

Well, obviously, we paid some already, as you well know and that was part of the settlement discussions that we went through with the commissioners. Two, we looked at the deal that was presented and agreed that carries a probability weight. Three, we obviously look at all parties involved in this transaction. Of course, if you read the press, you know there is a significant party that has culpability and has recognized liability in this transaction, which would further diminish the amount of our contribution. And once again, we do a probability weighting of all the scenarios, including the acceptance of the bankruptcy filing of Jefferson County, to try to look at the view of our loss. Also, it’s very important to remember these are revenue bonds and we don’t really have an asset per se, we have to lien on the future revenues of the water authority, which based on the position of Mr. Young, who is the receiver of the water authority, will be adequate to repay the substantial amount of the debt as we go forward, based on the rate increases that he has planned for the water authority customers. Brian Meredith – UBS: Great. Thank you.

You’re welcome.

I show no further questions in the queue. Please stand by.

Great. Thank you, operator. I’d like to thank everyone, for joining us on the call today. If you have additional questions, please feel free to give us a call. My number is listed on the press release. Thank you very much.

Thank you for your participation in today’s conference. This concludes the presentation. You may all now disconnect. Good day.