Good day everyone, and welcome to the Assured Guaranty Limited 2017 Fourth Quarter and Year-end Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note today’s event is being recorded. I would now like to turn the conference over to Robert Tucker, Senior Managing Director, Investor Relations and Corporate Communication. Please go ahead.

Thank you, operator, and thank you all for joining Assured Guaranty for our 2017 fourth quarter and year-end financial results conference call. Today’s presentation is made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The presentation may contain forward-looking statements about our new business and credit outlooks, market conditions, credit spreads, financial ratings, loss reserves, financial results 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 the replay of this call, or if you are reading the transcript of the call, please note that our statements made today and may have been updated since this call. Please refer to the Investor Information section of our website for our most recent presentations and SEC filings, most current financial filings and for the risk factors. This presentation also includes references to non-GAAP financial measures. We present the GAAP financial measures most directly comparable to the non-GAAP financial measures referenced in this presentation, along with a reconciliation between such GAAP and non-GAAP financial measures, and our current financial supplement, and equity investor presentation, which are on our website at assuredguaranty.com. 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 the call to your questions. [Operator Instructions]. I will now turn the call over to Dominic.

Thank you, Robert, and welcome to everyone joining today's call. In 2017, Assured Guaranty demonstrated once again that our long-term vision, well conceived strategy and skilled execution can create impressive growth in the value of our Company. We earned $661 million in non-GAAP operating income increased our non-GAAP adjusted booked value to $9 billion for the first time, further advanced our financial strength and broaden the scope of the Company all while paying substantial claims to protect insured bondholders. Our 2017 accomplishments include, our greatest annual dollar increase in non-GAAP adjusted book value per share, which ended the year in a record $77.74 up 70% from year earlier. A record year-end non-GAAP operating shareholders' equity per share of $56.20, 13% higher than year earlier. The return to shareholders of $571 million of excess capital through $70 million in dividends and repurchases of 12.7 million common shares, a 35% annual growth and the present value of new business production of PVP which reached $289 million to highest annual amount since 2010. A widening of our leadership in the U.S. municipal bond insurance market guaranteed more than 58% of insured bond sold. The completion of our acquisition of the European Arm of MBIA Insurance Corporation, which generated $57 million of after tax gain and increased non-GAAP adjusted book value by $322 million at the acquisition date. Our first direct investment in an asset management firm as part of our strategy to identify alternative investments that complement our existing financial guarantee business provide accretive returns and complement our core strengths, and the continued success of loss mitigation efforts, one of our key strategies including a major RMBS settlement in the fourth quarter for a pre-tax gain of $105 million. In new business production, we saw a significant contributions from all three of our…

Thanks, Dominic and good morning to everyone on the call. As Dominic mentioned, 2017 was another successful year, where the execution of our strategic initiatives contributed to our key financial metrics, which I will highlight in a minute. But first, I would like to comment on the impact to Assured Guarantee related to Tax Reform that was enacted in December. We believe the Tax Reform will be a net positive going forward, as we expect non-GAAP operating income effective tax rate to decrease to approximately 14% to 16%, but the rate will vary as it has in the past, due to the portion of income in different tax jurisdictions in any given period. From an adjusted book value perspective, the decrease in the corporate tax rates from 35% to 21%, but the benefit of approximately $239 million or $2.06 per share, because ABV includes unearned premium reserve that is now reflected at a lower tax rate. The immediate impact to non-GAAP operating income was estimate charge of $35 million in the fourth quarter of 2017 comprised of a $24 million LA charge due to the deemed repatriation of undistributed bond earnings of our UK subsidiaries and an $11 million write-down of deferred tax assets attributable to the reduction of the corporate tax rate. Please note this difference from the GAAP charge of $61 million; it was adjusted for the portion of deferred tax asset and liability write-downs that are related to non-GAAP adjustments such as mark-to-market adjustments on CDS. Operating income including this Tax Reform charge was $91 million in the fourth quarter of 2017, compared with $139 million for the fourth quarter of 2016. The fourth quarter of 2017 included lower net earned premiums offset impart by a benefit, our R&W settlement associated with the transaction that was part…

[Operator Instructions]. And our first questioner today will be Bose George with KBW. Please go ahead.

Hey guys good morning. Actually first question is just on the, of the capital returns. On the last call you guys noted I think about 500 million expectations for 2018. With the redemptions you have from AGM and AGC you already have the special so you are already kind of positioned for that. So just in terms of this going forward will the next special dividend quest be for 2019. And then in terms of the pace of the buybacks is it going to continue to be spread out over the year or could you do something accelerating over here?

Well as we have said the $500 million is an annual target not necessarily going to be achieved in every 12 calendar months, but over the flow of the period that’s what we look achieve. Number two, we will always need the help of a special dividend required sometime in a year, because the operating dividend capacity of the subsidiaries will not be enough to reach that total. So each year and typically towards the end of the year we put a request in towards the middle end and then get approval at the end and as I said before, we wanted to be kind of automatic with the regulators so that it’s a amount that very comfortable as they look at the financial strength of the organization. However, we have other cash needs as well at the parent company and we still continue to evaluate our Alternative Strategy program in terms of making other investments that will provide growth and accretive returns to the organization. So we have goal, we have the methodology to achieve that goal and we continue to execute our strategies across all the various disciplines that we evaluate as we look to the put the money to work.

Okay great, thanks. And then switching over to the Syncora transaction. Can you give us some indication of the potential accretion from that?

Well - risk that we were able to re-underwrite and except going to risk and met our underwriting standards at a pricing value that is above current market availability. This will be a different effective transaction than other transactions we have done in that you will earn the benefit, the accretion over time. And therefore in any given period it’s just is a matter of who we wrote new business at a better premium rate relative to the current rates. So more comes in as a higher ROE per deal as it oppose to specific accretion per value of the transaction, because the nature of the earning and the timing.

I mean it’s going to be accretive to all of our measures. It depends when it closes as well, but on an annual basis we think it will increase earned premium to the extent of between $25 million and $30 million because we are writing about $360 million of premium. So it depends on when it closes, but I would use in the first year or full-year it would be about $25 million to $30 million of earned premium.

Okay, great. And then actually just one more on the higher rate environment, could you sort of quantify the potential benefit to the investment portfolio from higher rate shift?

Well remember we talked about I guess it goes back to like third quarter of 2016, where we see the run up in rates and also the Trump effect last year in the election, where we saw immediate increase spike in demand. We always felt that 50% rate improvement probably improves production opportunity by a percentage equal to that, but as you go up the scale the relation between increased opportunity against rate increases becomes geometric not linear. So it’s really hard to predict and of course with the Tax Reform potentially having other impacts on issuance et cetera and maybe demand for Municipal Bonds, it’s going to be harder to determine the exact value. All we could say is in the long run increased interest rates benefit our Company, benefits our insured portfolio, benefits our investment portfolio and benefits the demand for the product.

And we also do see, I mean to your question on investment portfolio, we see an increase in rates as a benefit and also our duration, our portfolio is anywhere between five to six years in addition to which Tax Reform there is an advantage to actually shifting some taxable munis which could also increase our investment portfolio and our total return on the investment portfolio.

Okay, great thanks.

And our next questioner today will be Michael Temple a Private Investor. Please go ahead.

Good morning gentlemen and congratulation. Series of quick question, but I hope you can bear with me. Regarding the categorization of the Syncora transaction, when I take that face amount with I guess it was approximately $14 billion of insured and if I simply give you credit for duplicating your 2017 production of roughly $18 billion. Again, giving you no growth for 2018 and measure that against your anticipated run-off of existing insured, I actually come up with a number for 2018 which perhaps the first time since 2009 your book will not amortize, it will actually show a modest uptick, am I doing that calculation correctly, I assume that you do $18 billion in production this year equal to what 2017 was? A – Dominic Frederico: Yes, you are correct, and as you remember on previous calls, we had always referred to when we would hope to see the bounce in the portfolio amortization and we expected it around 2020. However transactions like this is one of the recapture, reinsurance last year begins to build back to portfolio in addition to its normal production effort in terms of the new business market, new issue market provides. So we have look at the issue, we have try to calculate our own bounce to see when do we start building back the unearned premium reserves, realizing that these transactions could have a significant impact on when that bounce occurs. So hopefully we are getting ahead of that bounce pure which is positive thing to start building up here and restoring the Company. Q – Unidentified Analyst: And a follow-up to that, so if we exclude the one-time nature of the Syncora transaction and Dan just look at the $18 billion in phase from last year, do you believe, I mean I know you are low to the precise guidance, but do you believe with the trends in the interest rates and perhaps more importantly, going by the way site of national nor that day in a longer providing new business, a combination of higher anticipated rates and with that, your market share might move markedly higher in the current 58%? Should we be optimistic that we will see that $18 billion figure than last year improved upon going forward?

Well, we always to try to incentivize our production people to achieve greater results throughout the year. Obviously, that’s how we build the budget that’s how we build the incentive opportunities in terms of the compensation more performance based. So obviously, we expect the continued growth, and as I said most of the work we have done over the past few years was rebuilding the reputation of the financial guarantee and especially in the international markets. And to your point, we believe the international markets probably represent the stronger growth opportunity at this point time on the domestic and then the other reason for that is there is this wild card out there called both the Tax Reform and the infrastructure build whatever that looks like when it gets passed. So those two things really will have an impact on demand kind of hard to determine exactly in which direction we served the lower rate that need the budget as the bonds becomes less. However on the individual side, the retail side becomes more, because obviously the top rate didn’t change much and a lot of individual exemptions or deductions were done away with. So it’s hard at this point in time to make that call. Obviously, we expect to continue to build the infrastructure or the platform that we operate under, we are optimistic about our chances in all marketplaces, because of our diversified strategy. We see positive trends in both interest rates and the acceptance of the products. So long answer to a short question. We expect our volumes to hopefully increase. But once again, there is enough factors out there that’s going to still allow us to be developing story as we see and how certain things take hold through 2018. And we look for other acquisition opportunities that will further benefit the portfolio to the extent that become available.

Okay. A couple of just quick ones as you talk about your overseas growth, are there opportunities for your services in the Far East, we will again, be famously caring about the China one belt one road and now that’s more of governmental initiatives from, but are there opportunities for you in the Far East or because that longer-term something that we could look to or is it principally UK and Europe that you see your services being utilized.

A couple of things. So there is obviously, we always look to benefit our franchise, make what I would call complementary and strategic either acquisitions or investments that basically benefit both the entity that we are looking at as part of the diversified strategy as well as our core financial guarantee business. So that’s as I can tell you without time yet more than I can tell you. Number two, if you notice we have been dominant in the UK as our international platform, and we have had operations before in other locations just in to the long-term commitment demand, where the necessary market specifics to really false our type of product, even Australia for the same environment, but they really didn’t have any long-term financing obligations, everything was financed to our short-term basis. However, we do see changes in that market. As I said in my commentary for the first time in my memory, we have done the risks that are outside of UK risk. In this current year, we anticipate further increasing those operations and opportunities as well as the strategic acquisitions or things that we are considering should also further our international platform. So, objective is to make sure we continue to put financial guarantee, provide attractive investments that not only provide us growth and opportunity to expand our platform, but also ties along with the Assured Guaranty, financial guarantee product as another way to access new markets. Obviously, any environment we look at must have rule of law. We believe that the United States will continue to have rule of law, which is going to be critical in the Puerto Rico environment and that’s another part of how we have to look at expansion overseas. So yes, we look at international is a great platform, great opportunity. We are expanding out of the UK. We are planning for further international growth, tied to some other things that we are working on today and obviously, that’s in the hope of driving that franchise because of its value to us, and the fact that in the financial guarantee space, we have no competitors in that marketplace.

And then final question regarding Puerto Rico. Clearly, you and other creditors had to be heartened by charge claims recent actions on the couple loans that Puerto Rico was seeking. I’m just curious if we should read into that that you expect further observation of the rule of law from this charge in other matters that come before her and any hint or protection that the Puerto Rican Government has perhaps begun to realize that the scorched-earth tactics they have been taking are being met, was favored by this quarter?

Okay. I got to be really careful here, because you are getting to the end of the topic, that’s what I like them. Anyway, so I’m not heartened by anything Judge Swain does so be very clear. They do not need the loan at present. All they have to do is collect their utility bills from principally municipal authorities, in which the government had the ability especially with the aid money coming in to support those authorities and paying their electrical bills. If we pay their electric bill, there is no need for cash from PREPA. Therefore, the loan is just another way of trying to find creditors and which I do not accept and we will litigate that issue specifically. This Judge needs to understand that choosing the position to reestablish rule of law, which is critical to the entire behavior of our financial market. Just imagine that all of our businesses is somehow retroactively all contractual rights could be taken away from you, the chaos that wouldn’t sue in the financial markets in the United States and that’s the exact path this Judge is going down. So, this is going to be applied in court. We are going to appeal every decision and everything that the government puts in front of us, we believe relief will come when we get the first appeal heard especially sales and transportation revenues, and hopefully that happens in a very reasonable period of time. When that first reversal comes back, then I think you’ll see changes in behavior and a real commitment to getting these things done and understanding where the creditors stand in the whole argument of contextual restructuring. So, I’m not happy at all.

[Operator Instructions]. And our next questioner today will be David Einhorn with Greenlight. Please go ahead.

Hey, good morning guys. I got a couple of questions on Puerto Rico. It sounds like there is a wide range of outcomes still there. I know when you do your reserving, you feel like look at different scenarios and probability to complete them. What do you see is like the worse scenario and the best scenario and what probabilities do you sign and how do you think about it from a reserving perspective? A – Dominic Frederico: You know why won’t you sit with next Reserve Committee and you can then sit there and look at the detail. Obviously we don't spend that kind of [Multiple Speakers].

I would be happy to come. A – Robert Bailenson: I'll leave it to my CEO to get the invitation now. A – Dominic Frederico: See understand we react remember on capital required to do [indiscernible] we have got a basically the final possible scenarios and then probably wait there. Obviously with each illegal behavior of the government and supported by the control board and the judge we have to work that factor into our reserving model. The concern we had today is the continued push out of any possible recoveries, the more they put out plan which I know that service, we had to than incorporate that into the potential scenario that are in our model and therefore move probabilities accordingly. That's why you see in regardless of our own personnel feelings in terms of how this ultimately works out, the FDC and GAAP do not allow us that freedom to say no its your view not this analytical scenario model probability waiting, so because of the current - we had another fiscal plan now say this one is even worse zero that service. We then have to accordingly change what is the basically payout or repayment scenarios that exist and that quarter just becomes the present value gain and anytime there is movement in interest rates it’s going to affect the present value of say recoveries that are back end weighted versus payments in our front end weighted. So the reserve is going to change period-to-period based on news and change in rates and I think we have been really responsive to reflect all scenarios with a reasonable level of view in terms of possible outcomes. A – Robert Bailenson: And let me do these analysis, we look at anything that happens within that quarter, if its positive, then that would affect the positive scenario, we will probably change the probability with that. If it is in negative, we would increase our more pessimistic scenario and increase the probability rate to that as well. We also analyze do scenario still make sense and add scenarios if we think another scenario is appropriate.

Great. So, I mean I understand the methodology and I think that's really all you just spoke to. Can you touch scribe what you think the worse scenario in your analysis is and what probability you had signed it out and what you think the best is and for how many scenarios there are, give some color to that? A – Dominic Frederico: Yes, I will just add, we were in rather intense negotiation, disclosing any of that information I think really does influence or in fact the position of the negotiating table and therefore it’s never a public information, we don't anticipate making it public information.

Okay, let me ask one another question then. Can you talk about your internal ratings just some for Puerto Rico. You rate that [indiscernible] on your supplement, CCC minus, bond seem to had defaulted regular rating agencies rate and D, what is the difference between your CCC minus and the D and if you move your own ratings from a CCC minus to a D, would that impact your financial reporting? A – Dominic Frederico: Well I will put it this way, wont impact our reserves. When we do this, we will call this is a reserve off model, so really not relying on the rating or the probability of that rating causing a default, and therefore going to the standard to vary by specific category class in the municipal finance, this is our off model reserve, so neither that has any impact. And I would say we have to look at the entirety, remember we still believe in our legal claims here, so at the end of the day although the behavior goes in one direction, we believe we have – legal claims and obviously recoveries also affect our view of future recoveries affect that overall comprehensive rating. So as I said, this is an off reserve. This is our off reserve credit, that is done on this other basis of using. And obviously you see rating probability default into various of the asset classes, so we do take specific credits offline of that model.

These specific models, they are an off model, they are specific models that we designed for Puerto Rico. As Dom was describing as there are some below necessary credits that would attract the reserve through the scenario loss model which takes frequency and severity of loss based on rating agency statistics, but with Puerto Rico this would have no effect. We have discrete models that we built for them. A – Dominic Frederico: They are in a position all by themselves as you could well imagine.

And our next questioner today is Geoffrey Dunn with Dowling & Partners. Please go ahead.

Thank you good morning. Rob, I got a couple of to start with you. Just to be clear, the 505 at the U.S. wholesale that is after the 2018 dividend from AGC?

The 505, are you talking about what is sitting at the Hold-co?

Yes. I just want to make sure.

Yes, that is after we sent the money out. After what we called the special dividend has come up. All that money is now sitting at the holding company.

Perfect. And then I wanted to ask you about funded premiums. Obviously there have been big boost to earnings and premium line over the last several years. 10 year anniversary [indiscernible] the Tax Reform impact. Can you talk a little bit about at least directionally, how do you think where funded premiums could trend versus what we've seen over the few years. Are we set for a big correction going into 2018 and 2019?

Yes. And Geoff I mean, advanced refundings were significant portion of refundings over the last number of years. And you are right, I think it will have an effect in 2018. So we should see a drop over the year from 2017. How much, it's hard to say, but given that came out in December and now municipalities could not use advanced refundings in the tax of that market, we should see a drop. How much, it's too early to tell, but directionally it will be down.

Okay. And then can you give a little bit more detail behind you or 14% or 16% non-GAAP effective rate. What are some of the nuances that get you to that level?

It's really based on the fact that AG re is obviously in a zero tax rate here in Bermuda and U.S. operating entities, U.S. income will be taxed, it's taxed to 35% previously now comes down to 21%. When we run our models and we look at the mix of income, we said, okay, U.S. income is going to be at 21%, how much income is going to come from AG-re? And I wanted to give some guidance as to what we expect this year between 14% and 16%. But obviously that could change, it's the mix of business changes and more businesses actually in Bermuda, more earnings are in Bermuda. If more is in Bermuda, that number will go at the lower end of that range and obviously it mores in the U.S., it would tend higher between, higher end of range of 16%. So that was the main difference.

I get the mixed side. I guess I'm wondering how the beat plays into this at all?

What the beat. Well, the base erosion obviously can be an issue to the extent that we see the significant amount of business to Bermuda. And that was obviously that's a minimum tax and at this point, we don't see that being an issue for our business plan with 2018. But we will closely monitor that. And as if in fact it would become an issue, we could also adjust how much we see to Bermuda.

We had 35% statutory going on in the past years. And our effective has always been in the 20s, isolating two more 20s and mid-to-upper 20s because of these are tax expense in the U.S. that's why we are look to the 21 now in the U.S. is okay, somewhere in the teens we should be once again using taxes and securities in New York’s base…

That’s also based on our forecast in our business plan.

Now, I guess I just want to make sure there is no curve walls…

Geoff before we go on, I just want to answer another question that was asked earlier and it’s got some information I mean we think that the Syncora transactions would be anything roughly about $0.35 to book value per share and adjusted book value we expect it to be about $2.43 per share accretive to the company. That’s our expectation depending on when it closes.

All right. Dominic, last question, I think the expectation was for the fiscal plan for Puerto Rico towards the end of December and then you’ll be to look at it by February, what is going on with the Oversight Board right now with respect to reviewing that plan, has there been any formal push back or requested revisions. What is the update on that front?

Well obviously with the letter that all creditors basically most of the creditors signed on the 14th of February to the Oversight Board, I think we have concluded that there are no creditors that are accepting the plan as currently filed. And therefore, they are trying to put a lot of pressure on the oversight board to basically start to get this thing back to some reasonable level of adherence to PROMESA. You saw the official has written the letter as well. Congressman Bishop [indiscernible] that current law has stated saying that there is got to be creditor involvement you’ve got to go back and respect the constitutional priorities and contractual liens. So, I think there is coming in from all sides now and on a more unified basis, you can always look at well there is one creditor or marginally against therefore how much noise will have to pay attention to. Now they to understand basically, you have all creditors, you can win a battle against one, it’s a little hard to win battle against safety. But I think there is starting the momentum building up on that side. Number two you got to remember the Oversight Board only has 18 more months in their terms. So, do we believe there is going to be anything really concrete accomplish, especially the outset to the marketplace? Therefore, this is going to be a waiting game. Swing seems to be making decisions that are kind of delaying the obvious, basically hiding behind Title III [indiscernible] forcing them to pay those revenues overdue. Okay, fine. That only lasts for so long as we get it with appellate court. So, I think there is a lot of momentum pushing back finally that we have got a unified position by the creditors, I think every inch of behavior of both the government and the Oversight Board has been illegal and ultimately has to be corrected. Obviously, we are going to have rule of law. As I said contractual rights, you can imagine in all financial markets, all contractual rights are retroactively taken away; we then have no longer a financial system in the United States. We have pure chaos and that’s exactly what Puerto Rico wants to do. And once again, we did close the distinction between Guam and the Virgin Islands in Puerto Rico. Like I said when hurricane hit Houston, the Houston there immediately got on television, I’m not going to pay any of my debt, absolutely not, why do we think it’s applicable here in Puerto Rico. And if any Congress man or senator wants to forget Puerto Rico’s debt, then fine. Do it to the U.S. Government, don’t put in – basically a visible task on U.S. citizens and voters and tax payers that happen to own those bonds, let alone the companies that insured them, this is ridiculous and so it needs to be held accountable for.

Okay. Thank you.

And it looks to be no further questions at this time. So, this will conclude our Question-and-Answer Session. I would now like to turn the conference back over to Robert Tucker for any closing remarks.

Thank you, operator, and I would like to thank everyone for joining us on today’s call. If you have additional questions, please feel free to give us a call. Thank you very much.

And the conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.