Good morning and welcome to the Assured Guaranty Limited fourth quarter 2011 earnings conference call and webcast. All participants will be in listen-only mode. (Operator instructions) After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Robert Tucker, Managing Director of Investor Relations and Corporate Communications. Mr. Tucker, please go ahead.

Thank you. Good morning and thank you for joining Assured Guaranty for our fourth 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 are listening to a replay of this call or if you are 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 Website for our recent presentations, SEC filings, most current financial filings, and for the risk factors. And 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. At the end of this or at the end of their presentation, we will open up the call to your questions. As the webcast is not enabled for Q&A, please dial into the call if you would like to ask a question. I would 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. In 2011, we earned near-record full-year operating income of $604 million and continued our steady growth in adjusted book value per share, which reached a new year-end high of $49.32. We successfully addressed new rating criteria from S&P by focusing on capital enhancement strategies that did not include raising common equity. Overall, we are very pleased with the results we achieved during the year filled with challenges from the housing market, the U.S. economy, eurozone troubles, and rating agency pressures. We also continued to benefit from the success of our RMBS, rep and warranty loss mitigation efforts. And finally, we took steps to further enhance shareholder value, including buying back 2 million shares at an average price of $11.66 per share, and in the first quarter of 2012, we doubled our quarterly dividend to $0.09 per common share starting in March of 2012. In terms of business production, our full-year PVP was $243 million. And while this fell short of what we thought we could achieve at the beginning of the year, when we were rated AA plus stable by S&P, we view our origination results as encouraging in light of the significant obstacles we encountered, which also included the lowest U.S. municipal issuance in 10 years and the slow pace of recovery for the international, infrastructure and structured finance markets. In addition to our $243 million of PVP we created additional economic shareholder value by executing well-planned alternative strategies. By purchasing $856 million of par of our uninsured securities at an average price of 49% of the par, we eliminated $320 million of expected loss and embedded future earnings of $103.2 million, which we will receive as a collateral phase down.…

Thank you, Dominic, and good morning to everyone on the call. Today, I will briefly review the financial highlights before providing more detail on the individual components of operating income and economic loss development in the insured portfolio. I will refer you to our press release and financial supplements for explanations and reconciliations of our non-GAAP financial measures. In my commentary, all comparisons are comparable prior-year periods. Overall, I am very pleased with the 2011 financial results, particularly considering today's global market challenges. Our fourth quarter 2011 operating income increased 13.6% to $173.5 million, or $0.95 per share. This brings our full-year 2011 operating income to $604.4 million or $3.26 per share. The largest driver of the increase in fourth quarter 2011 operating income is a 62% decrease in loss expense. Operating income was the primary driver of the 11.7% increase in operating shareholders' equity per share, which reached $28.91 per share. This resulted in annualized operating ROE of 12.1% in 2011. Adjusted book value edged upwards to $49.32 per share from $48.92 per share at year-end 2010. Before I begin my operating income summary, I would like to highlight the financial impact of some of our strategic initiatives on the full year 2011 financial results and also update you on some 2012 developments. New business development increased our adjusted book value and added to our future earnings stream by $242.7 million on a pre-tax basis. In addition, the company recognized $32.2 million in commutation gains related to the cancellations of several reinsurance contracts. As Dominic noted earlier, we continued to generate future earnings in 2012, with the rating transactions, which increases net par outstanding by $14.7 billion and future net earned premiums by approximately $110 million. Loss mitigation efforts had a direct benefit on the financial condition of the…

(Operator instructions) And our first question this morning will come from Mark Palmer of BTIG. Please go ahead, sir. Mark Palmer – BTIG: Good morning.

Good morning.

Good morning. Mark Palmer – BTIG: Particularly in light of your recent dividend increase, could you comment on your thinking about the balance between capital return and the concerns of the ratings agencies regarding capital levels, particularly with your goal of achieving a more solid AA rating?

I think you have hit the nail on the head. I mean, basically, we continue to await a final review that we expect sometime in the first half of the year from Moody's, which I think will further allow us to then measure not only capital adequacy, but obviously look at capital opportunities in terms of further capital management strategies like we have done in the past in terms of stock buybacks and increase in dividend. That number, hopefully, we should have, we would believe in the first half of the year, also it gives us a better chance through half of 2012 in sizing up business opportunities both from a standpoint of the normal markets, plus other opportunities we see to acquire portfolios of risk and therefore we can kind of work that into our overall capital model. So, we are very focused on capital management. We are very focused on rating agency, capital adequacy and shareholder return. And as you can imagine, it's kind of a delicate balancing point that we go through as we look to see what is the best decisions we can make relative to what we believe is excess capital in the company. Mark Palmer – BTIG: Thank you.

Our next question will come from Brian Meredith of UBS. Please go ahead. Brian Meredith – UBS: Hi, good morning. A couple of questions for you guys. First one, Skyway Concession, could you talk a little bit what is that, popped up on your list?

That's a toll road around Chicago that we have exposure on. We don't believe there is an economic loss potential in this thing as we have concessions from the road that go into the 2105 or 04 [ph] is the year something like that, but there is a refinancing bullet that's due I think 2017. So, really we will look at the ability of accomplishing a full refinancing could leave us with a short-term cash payment position that we believe is recoverable because of the extended concessions to the tolls on the road that go out over a significant period of time that will allow us to fully recover our exposure. Brian Meredith – UBS: Okay. Great. And then next question, did anything happen with R&W, did you have to actually pick down your R&W balance, because it appeared like that you actually had additional losses in some of your second liens, but the R&Ws actually went down, am I looking at that right?

You are looking at it right, but for a couple of wrong reasons. Our R&W went down because in some cases deals in which we had calculated R&W benefit actually reduced their ultimate lost costs, therefore and we would then give the credit back to the R&W provider. So, we kind of work out. Two, we continue to receive payments. Therefore, that's going to reduce the balance. In terms of the activity in rep and warranty, we have talked about the advances we have made with another counterparty. They have continued, but I guess as of this point in time, as we look to who is left in our Q for rep and warranty, it would appear that litigation is going to be or the near-term threat of going to trial on certain of these deals will be the only way we are going to get further agreements at this point in time. If you look at the disclosure and I think in our K, we will be a little bit more specific, but certain of the counterparties that you are well aware of, if you read their disclosure as of year-end, some of them continue to recognize liability and have increased the reserves. Therefore, we expect they will still be open to negotiation and settlement, others have continued to bury their head in the sand, like Credit Suisse for a good example that have virtually no reserves up, do not seem to admit to any liability. So, those type of situations are going to ultimately get settled, and we do still think we are optimistic that it's this year, because there are three trials that theoretically will be heard this year. We are one of them, Ambac is another and MBIA is the third, and obviously we believe very optimistically that if any of these actually do get into a courtroom, it will be a very good day for the monoline industry and the bond insurers. Brian Meredith – UBS: Great. And lastly, any thoughts on Moody's and when we are going to hear from them?

Brian Meredith – UBS: Thanks.

You are welcome.

Our next question will come from Geoffrey Dunn of Dowling & Partners. Please go ahead. Geoffrey Dunn – Dowling & Partners: Thank you, good morning. This is the first chance I had to ask you kind of in an open forum. What do you think the implications are on the capital changes from the S&P model? How much has it narrowed the market if at all versus the historical market, and how have the chargers generally affected the returns on new business prospects?

Jeff, as you know, we have to manage ourselves relative to three capital models, right; our own dual risk and the equity capital that we hold, the S&P risk model and then the Moody's risk model. And we do not leave ourselves slave to one, we don't take the lowest common denominator as we assess risk. So, for instance, you would point out or I could point out to you that, if we wrote a certain healthcare deal, if you look at the S&P model that would have a very low single-digit return, but remember the S&P model counts things beyond equity capital as part of the capital base, which we can write against. So, we did our reinsurance program at a 5% cost. Obviously, that allows us more flexibility in writing a lower ROE program relative to an S&P capital base, where at the same time, that same deal might be plus 20% return under the Moody's model and a 15% return under our own equity model. So, we don't leave ourselves slave to any one model as the way we look at returns, we look at returns overall and since we can create rating agency capital that's not equity capital, the cost of that capital obviously varies and therefore it allows us more flexibility in terms of permissible ratings relative to return scenario. Geoffrey Dunn – Dowling & Partners: Okay. And then just revisiting the capital management question, I think historically it's been a battle to even for you guys to get copies of the rating agency capital model. So, going forward, is capital management going to be really an interactive experience with the rating agencies, are you going to have a decent way of judging what your excess capital truly is against their models?

It's been a little bit interactive and challenging I think as they have been trying to assess where is the bottom of the market in this freefall economy and through the financial crisis that we have gone through, I don't think they knew. So therefore, they were going to react without a whole lot of advanced notice and very conservatively. I think as more stability comes to the market, you are going to see more certainty around capital benefits or capital requirements. So, one of the things I will tell you is, I think internally and we won't release it, but we have a very good comfort level in terms of what our excess capital is under the S&P model and therefore we can react accordingly to that. We would hope that coming out of the Moody's review, we get that same kind of confirmation, and therefore I think capital management for the company, as you look at 2012, 2012 is still a bad benchmark. We always hope to look for normalcy in the markets, but with a zero interest rate environment, there is no normalcy. You are not going to see penetration at any level of real normalcy at that level of interest rates, because people are going to be fighting for yields and returns and therefore insurance becomes kind of the last thing you want to think about. So, it's not an easy market for us to gauge business opportunities. However, we are working hard in other areas to create other business opportunities and specifically in the portfolio and servicing side that we continue to spend a lot of time and strategic manpower to address and to try to cultivate those opportunities. So, obviously we would like to get a good capital base, a good capital requirement, understand…

The statistics would support that, Geoff. Obviously, penetration rates in the quarter, in the fourth quarter were better than the previous quarter's, first quarter if you looked at January, I don't know if it's public or not, but the numbers are up again, and significantly, over January of last year, but that's not meaningful, because that's the time when S&P came out with their new rating criteria proposal. So, we are seeing that. We are seeing ourselves being used on bigger deals. We are seeing some institutional buying, but it's still sporadic. As I said, in a zero interest rate environment, it's just hard to really say that this is a good measuring poll and therefore we should then based all of our forecast, on something that's artificial. And until we get real interest rates and real spreads back in the market, it's going to be harder to really say here it’s victory or it’s defeat, but we are encouraged by the results we see today. We continue to work very hard on the calendar to make sure that we are getting a good look at every deal that comes to the market in the U.S., municipal marketplace and obviously, based on this guarantor replacement deal that we did in the U.K., we are somewhat optimistic, although we still think that activity will be sporadic in 2012, at least, we are on the map. We have got a clear direction on how we think we can add value and therefore create opportunities in a market that has been basically dormant for two years for us. So, we are seeing kind of snippets here and there that show a positive value and if you say, geez, is some of that related to S&P? I can tell you, yes, because when they…

You are welcome.

Larry Vitale – Moore Capital: Great, thank you. Good morning. I have a few questions. First is on the reinsurance transaction, I just want to make sure, Dominic, I understand what you said. It was a $435 million limit or you seeded away $435 million of par outstanding? How did that work?

I will let Rob talk to you about it.

Hi, Larry. It's an excess of loss agreement whereby the reinsures will attach excess of a certain amount and it's within the S&P capital model, within their seven-year depression test and it will be $435 million excess of that amount. So, we get full capital credit for the purchase of that cover. Larry Vitale – Moore Capital: Okay. And did you consider buying more? Was it a matter of price? Was it a matter of how much cover they are willing to provide? Could you give us any color on that at all?

We were very sensitive to price and at some point, we were just not going to do it, because as you know, we have been saying all along that we are not going to pay for something that is not going to be a good source of capital, a good cost-efficient source of capital. Raising equity in this market would have been very expensive, some cost of debt in this market would have been expensive, a 5% cost on an excess of loss muni portfolio provides rating agency benefit for S&P, a 100% benefit within the depression model was we were very sensitive on price. We thought the price was appropriate. We thought it was cost efficient and we have very good syndicate, five highly-rated reinsurers in the property casualty market. So we are very pleased with it.

I think Larry – kind of looking at it from the top it creates a new source of capital for not only Assured but for the industry that brings in new players into our market. Obviously, the first one is always the most difficult to get done. Obviously, we believe in the integrity of our underwriting and therefore the results and therefore we don’t expect the cover to be used, but obviously it does create the rating agency relief that we needed to continue to manage the company to the highest rating as possible and yet balancing what is the component of that rating agency capital. We continue to look for the most efficient kind of capital mix, bringing in something like this obviously creates more efficiency, lowers the overall cost of capital, very effective from the rating agency and after we finally – and I would give Rob Bailenson all the credits since he ran with this solely. Once we actually got the cover in place, got through all the agreements, and how this thing was structured and where it participates, we then start to get offers of additional capacity, which we did turn down because obviously we could buy as much we want, but if it is not beneficial that would make no sense. We weren’t looking to create headlines here. We’re looking to create rating agency capital and we are optimistic that this will become a future part of our capital strategy, and we do believe that the cost will lower upon subsequent renewals. Larry Vitale – Moore Capital: Yes, I know it all seems to make sense. My second question, Dominic, I just want to make sure, I heard you correctly, you said you have comfort that you have excess capital on the S&P model. You are not going to tell us how much but you do in fact have access relative to S&P?

Yes. Larry Vitale – Moore Capital: Okay. And my third question is you talked about – actually what appeared to be a pickup in the yield on the investment portfolio and I am just wondering how you are thinking about new money reinvestment rates or reinvesting coupons and maturities in this environment. You talked a lot about the zero interest rate environment and that’s one place where I would think it’s going to bite. So if you could just talk about that a bit that would be great. Thanks.

Larry, you are right. Reinvestment rates are problem but what we have done is we have strategically taken some of our short-term portfolio and gone a bit longer on the curve. We have not gone down from credit. We have not gone down the credit curve but we have gone a bit longer, so put more money to work from a short-term portfolio. What you are seeing in the investment yield going up is these loss mit bonds that Dominic and I talked about, the purchase of those bonds, once you buy those for loss mitigation they become an investment in your investment portfolio and the accretion that you have on those bonds goes through your investment yield. So, we have seen a big pick up by the loss mit bonds in the investment portfolio. Larry Vitale – Moore Capital: If you are paying $0.49 for those I would imagine you would try to get your hands on as many as you could.

That's right. So you have loss mitigation on the loss side as well as a pickup in yields on the investment side. Larry Vitale – Moore Capital: Okay, alright great. Thank you guys.

You are welcome.

(Operator instructions) Our next question will be from Matthew Howlett of Macquarie, please go ahead. Matthew Howlett – Macquarie: Hi guys, thanks for taking my question. Just on the high sort of level analysis, when you look at the tax exempt initial mark, I mean Dominic you said its 10-year low, what do we need to see change in that market? I know there is a tax proposal with Obama lowering the exemption. And then of course, when you see the credit card steep in, do we need to see state municipalities get their budgets in line? And what do we need to see before the market begins to sort of pick up again and do you expect that going forward?

Well, I think first and foremost you need economic growth, right. These guys rely on revenue and obviously in good years of revenue base expand and they go and authorize new projects or go back and correct some things they needed to correct, be it bridges, roads, etc. So economic expansion is the biggest key. We have been in a declining revenue environment through most of the crises now. In recent periods state revenues have started to pick up, but local revenues are still under a lot of pressure because remember they are dominated by real estate taxes and the real estate market for a lot of reasons and maybe some failed governmental policies as well just has not shown any signs of real stabilization let alone improvement and until that changes you are not going to see I think a real pick up in municipal originations and therefore the markets going to stay relatively mute for the near term. Matthew Howlett – Macquarie: Okay, got you. And then you said you acquired the MIAC from Radian could you just go over what was the sort of strategy behind that again that was sort of a shell at this point?

Yeah and what we are looking for is – we try to build flexibility into our capital, we try to build flexibility into our business model, this builds a tremendous amount of flexibility into our business model. As we look forward and we are trying to anticipate the demands in the market, one of the things we continue to consider is there need to be or doesn’t need to be a pure municipal type of insurer out there. Although we have AGM that we consider pure municipal it only does municipal risk. Going forward it still has a component of structured financing as portfolio. Obviously MIAC gives us the ability to focus strictly on a pure municipal basis if and when we decide to do that. Number two, as we look at the markets, there are certain segment of the markets that still haven’t come back or have had the same level of participation or opportunity and can we focus that as kind of a strategic weapon aimed at that specific segment of the market to generate new business originations, new penetrations to help the overall recovery of the total municipal market. So, for us it’s a very strategic, obviously gives us a third capital base, gives us a third license carrier. So when you think about spread of risk and how you meet the individual risk limits of any individual company, it gives us another company to put risk in. So, it is a very flexible vehicle for us, it was one of the critical things that we look for when we negotiated the re-assumption transaction with Radian because of this perception of ours is that what does the future market look like, what are going to be the demands of that market, how can we best continue to improve this company to meet those demands whatever they be and give us this flexible platform that allows us to move in those directions. Matthew Howlett – Macquarie: Got you, great thanks. And then just last question, Dominic. You mentioned Jefferson County and sort of following the developments done there. Could you just kind of go over where you see things eventually settling out? I mean, from what I understand the bankruptcy filing and there is potential to move the revenue away from this sort of bond to pay expenses and do other things. I know (inaudible) developments on there, I know that sort of could shake the market’s confidence in those type of transactions. How do you see it all playing out down there and what you think the implications are?

Well, if I had the answer to that question I would be way ahead of the curve. I have got my General Counsel scribbling furiously. Obviously, there was a negotiated settlement that took in consideration from all parties and basically came out with a formula where everyone took some level of responsibility at an acceptable level. Each individual, that was agreed to by the creditors and the authority and then got kind of voted down by the governmental folks, we would hope that they would go back and relook at that negotiated settlement. I am constantly amused and obviously very concerned that we have got these municipalities that believe somehow the bond holders are responsible for their own actions. Remember, the bond holders have really been a huge source for local municipalities, states, etc and they align them to accomplish their own plans on growth expansion, improvement, save them costs, provide them access, and yet now they are supposed to be punished when they didn’t make the decisions, they didn’t create these contracts that provide life-time benefits that no normal commercial enterprise provides anymore and yet we believe that they have the right to do that, it makes no sense. And then we are almost painted as a bad guy and yet, if someone checked, we saved your money, we got you access, helped you accomplish various goals and objectives including needed investments in infrastructure, etc. Here we had deals both in Harrisburg and in Jefferson County that were negotiated, that would have resolved by and large the majority of the issues and yet we now have politicians sit there and say, no, there is got to be more pain suffered by the bondholders. I don’t know what their thinking is, where are their long-term view of how they think…

You are welcome.

Our next question will come from Shobha Frey of Putnam Investments. Please go ahead. Shobha Frey – Putnam Investments: Hi, Dominic, I had two questions. One, I think in your last call, you had talked about another potential settlement. Is that still progressing?

Yes, it is, Shobha. Nice to hear from you. Shobha Frey – Putnam Investments: Yes, nice to hear from you, too. Okay, I guess that’s all you can say.

We have made very good progress. There are still some things we like to get accomplished with that counterparty. I think that will for us be significant as I said to date about 30% of our below-investment grade RMBS is now subject to loss sharing agreement. We hope to move that percentage up a little higher. But in order to make the quantum leap to say 80%, you are going to have to see some of these things get ready to go to trial. We have got one case that's supposed to be heard in the short term and we are very much looking forward to that. We are still amused by the fact that it doesn't seem like regulators in certain jurisdictions are paying attention to the non-regulated entities in those jurisdictions as to how they are adjusting this liability and it's not like this liability is going away. Every time you take up the press, there is another case being investigated, there is another level of charges being leveled against the banks and the originators. So, we are extremely bullish on this, obviously we are optimistic. We have been incredibly successful. We continue to make success in that one counterparty and just finalizing some things and hope to expand that program a little further in the current year. And then the rest as I said, we are willing to dig into the trenches and go to our neutral corners and come out fighting. Shobha Frey – Putnam Investments: Okay, great. So, I assume the one that you are negotiating with is not listed as one you are litigating against, right?

No, we are not at liberty to release their name. Obviously, we got to get comfortable with the disclosure they are going to have us make, etcetera. So, that's for future periods. Shobha Frey – Putnam Investments: Okay. My second question is, I guess if you can give a little color in terms of the RMBS severities that you saw productive in first liens and also the offsets. Should we look at these offsets in RMBS and TruPS as some sort of stabilization in losses in your portfolio, or is it just something that was a 4Q phenomenon or last year's phenomenon?

Yes, I don't think it's 4Q, Shobha, I think it is – and I wouldn't call stabilization either. I mean. If you go back to our discussions and we have been pretty direct about this, at some point of time a few years back or maybe a couple of years back, we had made the comment that as we looked at this RMBS issue that we thought that ultimately liability once either litigated or negotiated would pass from us, the substantial parts obviously we think are some of the responsible parties and that goes around originators principally at this point in time. So, that's the future, that's the past, that's we always believed. In the current quarter, that's exactly – or the current year, that's exactly what happened. And that, we have continued to still look at real estate market that although deteriorates more slowly or improves at even slower pace, it's not to a level that we get confidence that you hit bottom yet. Therefore we have got to look very closely at the reserves that we are holding and making sure that they are reasonable and based on our view how we look at information. We continue to up the severity charge, because that's we see coming through the statistics, but if you think about it, that severity charges meant it's based on two things. One, the service we did a bit for closure process therefore extended the amount of time and therefore incurred additional costs, we would hope someday we will be go back and recover that and what you are seeing is a lot of the litigation in the market today is around the servicer not the originator. Remember, we are kind of unique in that, we want to have the originators, and we have got…

Shobha Frey – Putnam Investments: All right. Thanks very much, Dominic.

You are welcome, Shobha.

And our next question will come from Andrew Kleinberg of Glickenhaus. Please go ahead. Andrew Kleinberg – Glickenhaus:

Yes. Andrew Kleinberg – Glickenhaus: And were any shares bought back in the fourth quarter?

No, they were bought back in the third quarter. Andrew Kleinberg – Glickenhaus: So, nothing in the fourth quarter?

No. Andrew Kleinberg – Glickenhaus: Got you, thank you very much.

You are welcome.

And ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Robert Tucker for any closing comments.

Thank you, operator. I would 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.

The conference had now concluded. Thank you for attending today's presentation. You may now disconnect.