UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.               )

March 26, 2007
Hamilton, Bermuda

Dear Shareholders:

It is with great pleasure that we invite you to our 2007 Annual General Meeting of shareholders. The meeting will be held on Thursday, May 3, 2007, at the Hamilton Princess Hotel, 76 Pitts Bay Road, Hamilton, Bermuda at 8:00 a.m. Atlantic time.

Our formal agenda for this year’s meeting is to vote on the election of directors, to ratify the selection of independent auditors for 2007, and to vote on directors and independent auditors for one of our subsidiaries. In addition, we will report to you the highlights of 2006 and discuss the outlook for our business in 2007. We will also answer any questions you may have. Representatives of our independent accountants will be in attendance at the meeting and will be available to answer questions. We have provided additional information relevant to our annual general meeting, including compensation and other disclosures in the new format required by the Securities and Exchange Commission, in the attached proxy statement.

Whether or not you plan to attend the meeting, your vote on these matters is important to us. Please complete, sign and return the enclosed proxy card in the envelope provided. Alternatively, you can vote your proxy by telephone or through the Internet by following the instructions on the enclosed proxy card.

We look forward to seeing you at the meeting.

TABLE OF CONTENTS

i

ii

NOTICE OF ANNUAL GENERAL MEETING

March 26, 2007
Hamilton, Bermuda

TO THE SHAREHOLDERS OF ASSURED GUARANTY LTD.:

The Annual General Meeting of Assured Guaranty Ltd., which we refer to as the Company, will be held on Thursday, May 3, 2007, at 8:00 a.m. Atlantic Time at the Hamilton Princess, 76 Pitts Bay Road, Hamilton, Bermuda, for the following purposes:

1.                To elect three Class III directors to hold office until 2010;

2.                To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors for the fiscal year ending December 31, 2007;

3.                To direct the Company to act on various matters concerning our subsidiary, Assured Guaranty Re Ltd.; and

4.                To transact such other business, if any, as lawfully may be brought before the meeting.

Only shareholders of record, as shown by the transfer books of the Company, at the close of business on March 8, 2007, are entitled to notice of, and to vote at, the Annual General Meeting.

PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE FURNISHED FOR THAT PURPOSE, AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. YOU MAY ALSO VOTE OVER THE INTERNET OR BY TELEPHONE BY FOLLOWING THE VOTING INSTRUCTIONS PRINTED ON THE ACCOMPANYING PROXY CARD. FOR FURTHER INFORMATION CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ENCLOSED PROXY STATEMENT.

ASSURED GUARANTY LTD.

30 Woodbourne Avenue
Hamilton HM 08 Bermuda

March 26, 2007

PROXY STATEMENT

INFORMATION ABOUT THE ANNUAL GENERAL MEETING AND VOTING

Why Did You Send Me this Proxy Statement?

We sent you this Proxy Statement and the enclosed proxy card because the Board of Directors of Assured Guaranty Ltd., which we refer to as Assured Guaranty, we, us, our, or the Company is soliciting your proxy to vote at the 2007 Annual General Meeting, which will be held on Thursday, May 3, 2007, at 8:00 a.m. Atlantic time at the Hamilton Princess, 76 Pitts Bay Road, Hamilton, Bermuda. A copy of our Annual Report to Shareholders for the fiscal year ended December 31, 2006 accompanies this Proxy Statement.

This Proxy Statement summarizes the information you need to vote at the Annual General Meeting. You do not need to attend the Annual General Meeting to vote your shares. You may simply complete, sign and return the enclosed proxy card or vote by telephone or over the Internet.

What Proposals Will be Voted on at the Annual General Meeting?

There are three proposals scheduled to be voted on at the Annual General Meeting:

·       The election of three Class III directors.

·       The ratification of the selection of PricewaterhouseCoopers LLP, an independent registered public accounting firm, as our independent auditors for 2007.

·       Authorizing the Company to vote for the election directors and independent auditors for our subsidiary, Assured Guaranty Re Ltd., which we refer to as AG Re.

Assured Guaranty’s Board recommends that you vote your shares “FOR” each of the nominees of the Board, “FOR” the appointment of the selection of PricewaterhouseCoopers LLP as our independent auditors for 2007 and “FOR” authorizing the Company to vote for the election of the directors and independent auditors of our subsidiary, Assured Guaranty Re Ltd.

Who Is Entitled to Vote?

March 8, 2007 is the record date for the Annual General Meeting. If you owned our common shares at the close of business on March 8, 2007, you are entitled to vote. On that date, we had 74,428,961 of our common shares outstanding and entitled to vote at the Annual General Meeting. Our common shares are our only class of voting stock. We will begin mailing this Proxy Statement on or about March 30, 2007 to all shareholders entitled to vote.

How Many Votes Do I Have?

You have one vote for each of our common shares that you owned at the close of business on March 8, 2007, except that if, and so long as, the “controlled shares”, which our Bye-laws defined generally to include all of our common shares directly, indirectly or constructively owned or beneficially owned by any person or group of persons, of any “United States person,” as defined in the Internal Revenue Code, constitute 9.5% or more of our issued common shares, the voting rights with respect to the controlled shares owned by such person will be limited, in the aggregate, to a voting power of approximately 9.5%, pursuant to a formula specified in our Bye-Laws.

The proxy card indicates the number of common shares you are entitled to vote, without giving effect to the controlled share rule described above.

What is the Difference Between Holding Shares as a Shareholder of Record and as a Beneficial Owner?

Many of our shareholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some differences between shares held of record and those owned beneficially.

Shareholder of Record

If your shares are registered directly in your name with our transfer agent, The Bank of New York, you are considered, with respect to those shares, the shareholder of record and these proxy materials are being sent to you directly. As the shareholder of record, you have the right to grant your voting proxy directly to Assured Guaranty or to vote in person at the Annual General Meeting. Assured Guaranty has enclosed a proxy card for you to use. You may also vote on the Internet or by telephone as described below under the heading “Information About the Annual General Meeting and Voting—May I Vote by Telephone or Via the Internet?”.

Beneficial Owner

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your broker or nominee on how to vote your shares and are also invited to attend the Annual General Meeting. However, since you are not the shareholder of record, you may only vote these shares in person at the Annual General Meeting if you follow the instructions described below under the heading “Information About the Annual General Meeting and Voting—How Do I Vote In Person at the Annual General Meeting?”. Your broker or nominee has enclosed a voting instruction card for you to use in directing your broker or nominee as to how to vote your shares. You may also vote on the Internet or by telephone as described below under the heading “Information About the Annual General Meeting and Voting—May I Vote by Telephone or Via the Internet?”.

How Do I Vote by Proxy?

If you properly fill in your proxy card and send it to us in time to vote, your “proxy” (one of the individuals named on your proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, your proxy will vote your shares as recommended by the Board:

·       “FOR” the election of three Class III directors.

·       “FOR” the ratification of PricewaterhouseCoopers LLP as our independent auditors for 2007.

·       “FOR” directing the Company to vote for the election of directors and the ratification of independent auditors for our subsidiary, AG Re.

If any other matter is presented, your proxy will vote in accordance with his or her best judgment. At the time we began printing this Proxy Statement, we knew of no matters that needed to be acted on at the Annual General Meeting, other than those discussed in this Proxy Statement.

2

May I Vote by Telephone or Via the Internet?

Yes. Instead of submitting your vote by mail on the enclosed proxy card, you may be able to vote via the Internet or by telephone. We encourage you to do so because your vote is then tabulated faster than if you mailed it. Please note that there are separate Internet and telephone arrangements depending on whether you are a shareholder of record (that is, if you hold your stock in your own name), or whether you are a beneficial owner and hold your shares in “street name” (that is, if your stock is held in the name of your broker or bank).

If you are a shareholder of record, you may vote by telephone, or electronically through the Internet, by following the instructions provided on your proxy card.

If you are a beneficial owner and held your shares in “street name”, you may need to contact your bank or broker to determine whether you will be able to vote by telephone or electronically.

The telephone and Internet voting procedures are designed to authenticate shareholders’ identities, to allow shareholders to give their voting instructions and to confirm that shareholders’ instructions have been recorded properly. If you vote via the Internet, you may incur costs, such as usage charges from Internet access providers and telephone companies. You will be responsible for those costs.

Whether or not you plan to attend the Annual General Meeting, we urge you to vote. Returning the proxy card or voting by telephone or over the Internet will not affect your right to attend the Annual General Meeting and vote.

May I Revoke My Proxy?

Yes. If you change your mind after you vote, you may revoke your proxy by following any of the procedures described below. To revoke your proxy:

·       Send in another signed proxy with a later date or resubmit your vote by telephone or the Internet,

·       Send a letter revoking your proxy to Assured Guaranty’s Secretary at 30 Woodbourne Avenue, Hamilton HM 08, Bermuda, or

·       Attend the Annual General Meeting and vote in person.

If you wish to revoke your proxy, you must do so in sufficient time to permit the necessary examination and tabulation of the subsequent proxy or revocation before the vote is taken

How Do I Vote in Person at the Annual General Meeting?

You may vote shares held directly in your name as the shareholder of record in person at the Annual General Meeting. If you choose to vote your shares in person at the Annual General Meeting, please bring the enclosed proxy card or proof of identification. Even if you plan to attend the Annual General Meeting, Assured Guaranty recommends that you vote your shares in advance as described above so that your vote will be counted if you later decide not to attend the Annual General Meeting.

Shares beneficially owned and held in “street name” may be voted in person by you only if you obtain a signed proxy from the shareholder of record giving you the right to vote the shares. If your shares are held in the name of your broker, bank or other nominee, you must bring to the Annual General Meeting an account statement or letter from the broker, bank or other nominee indicating that you are the owner of the shares and a signed proxy from the shareholder of record giving you the right to vote the shares. The account statement or letter must show that you were beneficial owner of the shares on March 8, 2007.

3

What Votes Need to be Present to Hold the Annual General Meeting?

To have a quorum for our Annual General Meeting, two or more persons must be present, in person or by proxy, representing more than 50% of the common shares that were outstanding on March 8, 2007. As of March 8, 2007, our subsidiary Assured Guaranty US Holdings Inc. owns 5,361,016 of our common shares. While it does not intend to vote these shares at the upcoming Annual General Meeting, it does intend for these shares to be present at the meeting so they will be counted towards the quorum.

What Vote Is Required to Approve Each Proposal?

How are Votes Counted?

In the election of Assured Guaranty directors, your vote may be cast “FOR” all of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees. For the ratification of Assured Guaranty’s independent auditors, your vote may be cast “FOR” or “AGAINST” or you may “ABSTAIN”. For authorizing the Company to vote for election of directors of our subsidiary, AG Re, your vote may be cast “FOR” all of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees and authorizing the Company to vote for the ratification of AG Re’s independent auditors, your vote may be cast “FOR” or “AGAINST” or you may “ABSTAIN”. If you sign your proxy card or broker voting instruction card with no further instructions, your shares will be voted in accordance with the recommendations of the Board. We will appoint one or more inspectors of election to count votes cast in person or by proxy.

What Is the Effect of Broker Non-Votes and Abstentions?

A broker “non-vote” occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.

Common shares owned by shareholders electing to abstain from voting with respect to any proposal and broker “non-votes” will be counted towards the presence of a quorum but will not be considered present and voting with respect to elections of directors or other matters to be voted upon at the Annual General Meeting. Therefore, abstentions and “broker non-votes” will have no effect on the outcome of the proposals to elect directors, to approve the subsidiary matters or to ratify the appointment of the Company’s independent accountants.

4

What Are the Costs of Soliciting these Proxies and Who Will Pay Them?

Assured Guaranty will pay all the costs of soliciting these proxies. Our directors and employees may also solicit proxies by telephone, by fax or other electronic means of communication, or in person. We will reimburse banks, brokers, nominees and other fiduciaries for the expenses they incur in forwarding the proxy materials to you. Georgeson Inc. is assisting us with the solicitation of proxies for a fee of $6,500 plus out-of-pocket expenses.

Where Can I Find the Voting Results?

We will publish the voting results in our Form 10-Q for the second quarter of 2007, which we will file with the SEC in August 2007. You can find the Form 10-Q on our website at www.assuredguaranty.com.

Do Directors Attend the Annual General Meeting?

Our Corporate Governance Guidelines provide that directors are expected to attend our annual meeting of shareholders and any special meeting of shareholders called by the Company to consider extraordinary business transactions, unless they are unable to do so as a result of special circumstances; directors are encouraged to attend all other special meetings of shareholders called by the Company. Last year, all of our directors attended the Annual General Meeting.

Can a Shareholder Communicate Directly with our Board? If so, how?

Our Board provides a process for shareholders, employees or other interested parties to send communications to our Board. Shareholders, employees or other interested parties wanting to contact the Board concerning accounting or auditing matters may send an e-mail to the Chairman of the Audit Committee at chmaudit@assuredguaranty.com. Shareholders, employees or other interested parties wanting to contact the Board, the independent directors, the Chairman of the Board, the chairman of any Board committee or any other director, as to other matters may send an e-mail to corpsecy@assuredguaranty.com. The Secretary has access to both of these e-mail addresses. Alternatively, shareholders, employees or other interested parties may send written communications to the Board c/o Secretary, 30 Woodbourne Avenue, Hamilton HM 08, Bermuda, although mail to Bermuda is not as prompt as e-mail. Communication with the Board may be anonymous. The Secretary will forward all communications to the Board to the Chairman of the Audit Committee or the Chairman of the Nominating and Governance Committee, who will determine when it is appropriate to distribute such communications to other members of the Board or to management.

Whom Should I Call If I Have Any Questions?

If you have any questions about the Annual General Meeting or voting, please contact James Michener, our Secretary, at 441-278-6679 or at jmichener@assuredguaranty.com.

If you have any questions about your ownership of Assured Guaranty common shares, please contact Sabra Purtill, our Managing Director, Investor Relations and Strategic Planning at 441-278-6665 or at spurtill@assuredguaranty.com.

5

CORPORATE GOVERNANCE

Overview

6

The Board of Directors

Our Board oversees our  business and monitors the performance of management. In accordance with our corporate governance principles, the Board does not involve itself in day-to-day operations. The directors keep themselves informed by discussing matters with the CEO, other key executives and our principal external advisors, such as legal counsel, outside auditors, investment bankers and other consultants, by reading the reports and other materials that we send them regularly and by participating in Board and committee meetings.

The Board usually meets four times per year in regularly scheduled meetings, but will meet more often if necessary. The Board met four times during 2006 plus attended a business review meeting. All directors in office during 2006 attended at least 75% of the aggregate number of meetings of the Board of Directors and committees of the Board of which they were a member held during the year ended December 31, 2006, except Mr. Layton. Mr. Layton could not attend the August 2006 board meeting due to a commitment made prior to his election to the board in May 2006.

Director Independence

In February 2007 our Board determined that the following directors are independent under the listing standards of the New York Stock Exchange: Neil Baron, G. Lawrence Buhl, Stephen A. Cozen, John G. Heimann, Patrick W. Kenny, Donald H. Layton, Robin Monro-Davies, Michael T. O’Kane and Walter A. Scott. These independent directors constitute substantially more than a majority of the Company’s Board of Directors. In making its determination of independence, the Board applied its Categorical Standards for Director Independence and determined that no other material relationships existed between the Company and these directors. A copy of our Categorical Standards for Director Independence is attached as Exhibit A to this proxy statement and is also available by accessing our website at www.assuredguaranty.com, then clicking on “Investor Information,” followed by “Corporate Governance.” The Board also considered the other directorships held by the independent directors and determined that none of these directorships constituted a material relationship with the Company. In considering the independence of Mr. Cozen, the Board took into consideration the fact that in 2006, the Company paid approximately $5,617 for legal services rendered in 2005 from Cozen O’Conner, the law firm of which

7

Mr. Cozen is a partner and determined that this did not constitute a material relationship with the Company.

The Committees of the Board

The Board of Directors has established an Audit Committee, a Compensation Committee, Finance Committee, a Nominating and Governance Committee and Risk Oversight Committee, all of which consist exclusively of members who qualify as independent directors under the applicable requirements of the New York Stock Exchange.

8

How are Directors Compensated?

We pay our non-management directors an annual retainer of $150,000 per year, $60,000 of which we pay in cash and $90,000 of which we pay in stock units or restricted stock. A director may elect to receive up to 100 percent his annual retainer in stock units or restricted stock. The Chairman of the Board receives an additional $100,000 annual retainer, the Chairman of the Audit Committee receives an additional $20,000 annual retainer and the Chairman of each of the Compensation Committee, the Nominating and Governance Committee, the Finance Committee and the Risk Oversight Committee receives an additional $10,000 annual retainer. Members of the Audit Committee, other than the chairman, receive an additional $10,000 annual retainer and members, other than the chairmen, of each of the Compensation Committee, the Nominating and Governance Committee, the Finance Committee and the Risk Oversight Committee receive an additional $5,000 annual retainer. The Company will generally not pay a fee for attendance at board or committee meetings, though the CEO has the discretion to pay attendance fees of $2,000 for extraordinary or special meetings.

9

We awarded an initial, one-time grant of restricted shares with a value of $100,000 to each non-management director upon closing of the our initial public offering, which we refer to as our IPO, or, if later, upon the director’s initial election to the Board of Directors. These restricted shares will vest on the day immediately prior to the third annual shareholders meeting at which directors are elected following the grant of the shares.

The Board of Directors has recommended that each director own at least 10,000 Common Shares within three years after joining the board. Common Shares represented by stock units will count toward that guideline, though restricted shares awarded upon a director’s initial election will not. We grant annual retainer awards in the form of stock units until the share ownership guidelines have been met. The first 10,000 stock units awarded to each director became, or will become, non-forfeitable on the day immediately prior to the first annual shareholders meeting at which directors are elected following the grant of the units. We mandatorily defer the issuance of Common Shares for these units until six months after termination of the director’s service on the Board of Directors. After directors meet the share ownership guidelines, they may elect to receive their annual retainer equity award in the form of either restricted shares that vest on the day immediately prior to the first annual shareholders meeting at which directors are elected following the grant of the shares, or stock units that become non-forfeitable on the day immediately prior to the first annual shareholders meeting at which directors are elected following the grant of the units, with the issuance of Common Shares deferred to a later date chosen by the director. The directors that have been in office since immediately following the IPO have satisfied our stock ownership guidelines. Directors cannot sell or transfer stock units until we issue the Common Shares to them. We credit dividend equivalents to stock units as additional stock units.

The following table sets forth our 2006 non-management director compensation:

Director Compensation

(1)          Other compensation includes matching gift donations of $3,000 for Mr. Buhl and $5,000 for Messrs. Heimann, Kenny, Scott and O’Kane. Mr. Monro-Davies’s other compensation represents business trip reimbursement of $7,694 for his spouse in connection with an annual board dinner.

(2)          Includes a fee of $20,000 paid in February 2006 for work on a special audit project, as we disclosed in our 2006 proxy statement.

(3)          Mr. Kenny elected to receive $20,000 of these fees in the form of stock units. Accordingly he actually received 820 stock units and $40,000 in cash with respect to his annual retainer fees plus committee fees of $20,000.

10

The grant date fair value of the May 2006 stock awards for each director, based on the grant date of May 5, 2006, was $90,000 for all directors except Mr. Kenny; and $110,000 for Mr. Kenny. The following table shows information related to director awards outstanding on December 31, 2006:

(1)          Vests or becomes non-forfeitable May 2, 2007.

(2)          Vest one day prior to 2009 annual general meeting.

(3)          Vests one day prior to 2008 annual general meeting.

How are Directors Nominated?

In accordance with its charter, the Nominating and Governance Committee identifies potential nominees for directors from various sources. The Nominating and Governance Committee reviews the qualifications of these persons to determine whether they might make good candidates for consideration for membership on the Board of Directors. The Nominating and Governance Committee includes a review of the person’s judgment, experience, independence, understanding of the Company’s business or other related industries and such other factors as the Nominating and Governance Committee determines are relevant in light of the needs of the Board of Directors and the Company. The Nominating and Governance Committee will select qualified candidates and review its recommendations with the Board of Directors, which will decide whether to nominate the person for election to the Board of Directors at an annual general meeting. Between annual general meetings, the Board, upon the recommendation of the Nominating and Governance Committee, can approve additions to the Board.

The Company’s corporate governance guidelines require the Nominating and Governance Committee to review annually the skills and attributes of Board members within the context of the current make-up of the full Board. Board members should have individual backgrounds that when combined provide a portfolio of experience and knowledge that will serve the Company’s governance and strategic needs. The Nominating and Governance Committee will consider Board candidates on the basis of a range of criteria including broad-based business knowledge and contacts, prominence and sound reputation in their fields as well as a global business perspective and commitment to good corporate citizenship. Directors should be able and prepared to provide wise and thoughtful counsel to top management on the full range of potential issues facing the Company. They should represent all shareholders and not any special interest group or constituency. Directors shall possess the highest personal and professional integrity and commitment to ethical and moral values. Directors must have the time necessary to fully meet their duty of due care to the shareholders and be willing to commit to service over the long term, if called upon.

The Nominating and Governance Committee will consider a shareholder’s recommendation for director, but the Nominating and Governance Committee has no obligation to recommend such candidates for nomination by the Board of Directors. Assuming that appropriate biographical and background

11

material is provided for candidates recommended by shareholders, the Nominating and Governance Committee will evaluate those candidates by following substantially the same process and applying substantially the same criteria as for candidates recommended by other sources. If a shareholder has a suggestion for candidates for election, the shareholder should mail it to:  Secretary, Assured Guaranty Ltd., 30 Woodbourne Avenue, Hamilton HM 08 Bermuda. No person recommended by a shareholder will become a nominee for director and be included in a proxy statement unless the Nominating and Governance Committee recommends, and the Board approves, such person.

If a shareholder desires to nominate a person for election as director at a shareholders meeting, that shareholder must comply with Article 14 of the Company’s Bye-Laws, which requires notice no later than 90 days prior to the anniversary date of the immediately preceding annual general meeting. This time period has passed with respect to the 2007 Annual General Meeting. With respect to the 2008 Annual General Meeting, the Company must receive such written notice on or prior to February 3, 2008. Such notice must describe the nomination in sufficient detail to be summarized on the agenda for the meeting and must set forth:

·       the shareholder’s name as it appears in the Company’s books;

·       a representation that the shareholder is a record holder of the Company’s shares and intends to appear in person or by proxy at the meeting to present such proposal;

·       the class and number of shares beneficially owned by the shareholder;

·       the name and address of any person to be nominated;

·       a description of all arrangements or understanding between the shareholder and each nominee and any other person or persons, naming such other person or persons, pursuant to which the nomination or nominations are to be made by the shareholder;

·       such other information regarding such nominee proposed by such shareholders as would be required to be included in a proxy statement filed pursuant to the SEC’s proxy regulations; and

·       the consent of each nominee to serve as a director of the Company, if so elected.

Compensation Committee Interlocking and Insider Participation

The Compensation Committee of the Company’s Board of Directors has responsibility for determining the compensation of the Company’s executive officers. None of the members of the Compensation Committee is a current or former officer or employee of the Company. No executive officer of the Company serves on the compensation committee of any company that employs any member of the Compensation Committee.

What is our Related Party Transactions Approval Policy and What Procedures Do We Use To Implement It?

Through our committee charters, we have established review and approval policies for transactions involving the Company and related persons, with the Nominating and Governance Committee taking the primary approval responsibility for transactions with our executive officers and directors and the Audit Committee taking the primary  approval responsibility for transactions with our 5% shareholders. No member of these committees that has an interest in a transaction being reviewed is allowed to participate in any decision regarding any such transaction.

Our Nominating and Governance Committee charter requires the Nominating and Governance Committee to review and approve or disapprove of all proposed transactions with executive officers and directors that, if entered into, would be required to be disclosed pursuant to Item 404 of Regulation S-K, the SEC provision which requires disclosure of any  related person transaction with the Company that 

12

exceeds $120,000 per fiscal year. The Nominating Committee must also review reports, which our general counsel provides periodically, and not less often than annually, regarding transactions with executive officers and directors (other than compensation) that have resulted, or could result, in expenditures that are not required to be disclosed pursuant to Item 404 of Regulation S-K.

Our Audit Committee charter requires our Audit Committee to review and approve or disapprove of all proposed transactions with any person owning more than 5% of any class of  our voting securities that, if entered into, would be required to be disclosed pursuant to Item 404 of Regulation S-K. In addition, our Audit Committee charter requires the Audit Committee to review reports, which our general counsel provides to the Audit Committee periodically, and not less often than annually, regarding all transactions with any persons owning more than 5% of any class of the voting securities of the Company that have resulted, or could result in expenditures that are not required to be disclosed pursuant to Item 404 of Regulation S-K. Our Audit Committee charter also requires the Audit Committee to review other reports and disclosures of insider and affiliated party transactions which our general counsel provides periodically, and not less often than annually.

Our general counsel identifies related party transactions requiring committee review pursuant to our committee charters from transactions that are

·       disclosed in director and officer questionnaires (which are also be completed by nominees for director) or in certifications of code of conduct compliance,

·       reported directly by the related person or by another employee of the Company, or

·       reported by our chief accounting officer based on a list of directors, executive officers and known 5% shareholders that our general counsel has given to him.

If we have a related person transaction that requires committee approval in accordance with the policies set forth in our committee charters, we either seek that approval before we enter the transaction or, if that timing is not practical, we ask the appropriate committee to ratify the transaction.

Prior to the adoption of our formal related party transaction approval policy in August 2006, we entered into transactions with ACE Limited, which we refer to as ACE, related to our IPO that were approved by the Board of Directors of the Company that was in office prior to our IPO. Some of these transactions remained in place in 2006 and, to the extent these arrangements were renewed or modified prior to the adoption of our approval policy, our CEO approved such renewals and modifications.

In 2006 we purchased 5,692,599 of our common shares from a subsidiary of ACE. The transaction was approved by our full board of directors.

What Related Person Transactions Do We Have?

Relationships with ACE Limited.   During the time the Company was a subsidiary of ACE, it was party to a number of service agreements with subsidiaries of ACE under which either the Company provided services to subsidiaries of ACE, or they provided services to the Company. Since the IPO, many of these service agreements have been terminated, though some still remain in place.

During 2006, 2005 and 2004, ACE provided certain general and administrative services to some of the Company’s subsidiaries, including Assured Guaranty Corp., which we refer to as AGC, AG Re and Assured Guaranty Re Overseas Ltd., which we refer to as AGRO. Those services primarily included information technology related services and tax consulting and preparation services. Expenses included in the Company’s consolidated financial statements related to these services were $0.6 million for the year ended December 31, 2006.  As of December 31, 2006 the only services performed under this agreement were technology support services for our Bermuda location.

13

Real Estate.   Prior to the IPO, AG Re was party to an arrangement with ACE pursuant to which it subleased approximately 5,000 square feet of office space in Bermuda from ACE at an annual cost of $0.4 million. This amount was a prorated portion of amounts payable by ACE under the master lease. The property owner is a company of which ACE owns 40% of the outstanding capital stock. In connection with the IPO, the Company terminated the sublease arrangement and leased directly from the property owner the space used prior to the IPO plus additional space for a total of 9,000 square feet at an annual rent of approximately $0.8 million. This lease expired on April 30, 2005. In May 2005, AG Re and the landowner signed a five year renewal of this lease covering approximately 11,000 square feet at an annual rent of approximately $0.9 million. In May 2005, the Company subleased approximately 2,700 square feet to a subsidiary of ACE at an annual rent of approximately $0.2 million.

Prior to August 2006, the Company provided Mr. Frederico a housing allowance by leasing a house in Bermuda for him from the ACE Foundation. Since December 2004, the rent on this house is $20,000 per month. In August 2006 the lease with the ACE Foundation was terminated and Mr. Frederico currently leases the property directly from the ACE Foundation pursuant to his housing allowance.   In addition, beginning March 1, 2004, the Company leased an apartment from the ACE Foundation at $5,500 per month. This lease expired in February 2006 and was not renewed.

Reinsurance Transactions.   The Company cedes business to affiliates of ACE under certain reinsurance agreements.

·       AGC and AGRO, effective April 1, 2004, entered into 100% quota share retrocession agreements with ACE American. ACE American reinsures both existing and trade credit reinsurance business written by these entities.

Amounts related to reinsurance ceded are reflected in the table below:

The Company also writes business with affiliates of ACE under insurance and reinsurance agreements. Amounts related to business assumed from affiliates are reflected in the table below:

14

Keepwell Agreement.   AGRO provided a keepwell to ACE Capital Title, which was its subsidiary until shortly prior to the IPO. Pursuant to the terms of this agreement, AGRO agreed to provide funds to ACE Capital Title sufficient for it to meet its obligations. In connection with the IPO, AGRO assigned this keepwell to ACE Bermuda, and ACE Bermuda has agreed to indemnify and hold harmless AGRO in respect of the keepwell. No payment was made in connection with the assignment of the keepwell agreement.

Formation Transactions and Capital Contributions.   In connection with the IPO, ACE engaged in certain formation transactions that involved capital contributions to the Company and its subsidiaries. ACE, through a US subsidiary, formed Assured Guaranty US Holdings Inc. as a Delaware holding company to hold the shares of AGC and AG Financial Products, Inc. ACE’s US subsidiary transferred the shares of AGC and AG Financial Products, Inc. to Assured Guaranty US Holdings in exchange for stock of Assured Guaranty US Holdings and a $200 million promissory note. AGRO has transferred 100% of the stock ownership in ACE Capital Title to ACE Bermuda in exchange for a $39.3 million promissory note which was paid upon the completion of the IPO.

ACE transferred 100% of the stock ownership in Assured Guaranty US Holdings and Assured Guaranty Finance Overseas to the Company in exchange for 35,171,000 of the Company’s Common Shares and two promissory notes of the Company in an aggregate amount of $1 million and 100% of the stock of AG Re to the Company in exchange for 38,629,000 of the Company’s Common Shares and a $1 million promissory note of the Company. These notes matured in April 2006 and were paid by the Company. The Company repaid $2.1 million and related interest during 2006.

Tax Allocation Agreement.   In connection with the IPO and related share exchange, the Company and ACE Financial Services Inc., which we refer to as AFS entered into a tax allocation agreement. Pursuant to the tax allocation agreement, the Company and AFS has made an election under sections 338(g) and 338(h)(10) of the Internal Revenue Code of 1986, as amended, with the effect that the portion of the tax basis of the Company’s assets covered by this election was increased to the deemed purchase price of the assets and an amount equal to such increase was included in income in the consolidated federal income tax return filed by US tax-paying subsidiaries of ACE. It is expected that this additional basis will result in increased income tax deductions and, accordingly, reduced income taxes payable by the Company. Pursuant to the tax allocation agreement, the Company will pay AFS any tax benefits realized by the Company, on a quarterly basis, generally calculated by comparing our actual taxes to the taxes that would have been owed by the Company had the increase in basis not occurred. During 2006, the Company paid AFS and correspondingly reduced its liability by $5.1 million to $15.0 million. In the event that any taxing authority successfully challenges any deductions reflected in a tax benefit payment to AFS, AFS will reimburse the Company for the loss of the tax benefit and any related interest or penalties imposed upon us. The tax benefit payments to AFS should have no material effect on the Company’s earnings or cash flows, which should not be materially less than they would have been in the absence of the tax allocation agreement and additional tax basis.

The tax allocation agreement provides that the tax benefit calculation for any period ending after the consummation of the IPO will not be less than the tax benefit calculated without giving effect to any items of income, expense, loss, deduction, credit or related carryovers or carrybacks from businesses conducted by the Company or relating to the Company’s assets and liabilities other than those businesses conducted by the Company and those assets and liabilities existing immediately prior to the consummation of the offering (taking into account any assets acquired from AFS or its subsidiaries after the offering and any liabilities incurred or assumed with respect to such assets). The tax allocation agreement further provides that the Company will not enter into any transaction a significant effect of which is to reduce the amount payable to AFS under the tax allocation agreement.

15

Registration Rights Agreement.   The Company entered into a registration rights agreement with ACE in connection with the transactions associated with the IPO to provide it and its affiliates with registration rights relating to Common Shares of the Company which they hold.

The registration rights agreement provides ACE and its affiliates with registration rights relating to the Common Shares held by ACE and its affiliates immediately after the IPO and any Common Shares ACE or its affiliates acquires thereafter. ACE and its affiliates are able to require the Company to register under the Securities Act of 1933, as amended, which we refer to as the Securities Act all or any portion of the Company’s Common Shares covered by the registration rights agreement. In addition, the registration rights agreement provides for various piggyback registration rights for ACE and its affiliates. Whenever the Company proposes to register any of its securities under the Securities Act for itself or others, subject to customary exceptions, the Company must provide prompt notice to ACE and its affiliates and include in that registration all Common Shares which ACE or its affiliates owns and requests to be included.

The registration rights agreement sets forth customary registration procedures, including an agreement by us to make available the Company’s senior management for roadshow presentations. All registration related expenses incurred in connection with any registration, other than underwriting commissions, will be paid by the Company. In addition, the Company is required to reimburse ACE for the fees and disbursements of its outside counsel retained in connection with any such registration. The registration rights agreement also imposes customary indemnification and contribution obligations on the Company for the benefit of ACE and any underwriters, although ACE must indemnify the company for any liabilities resulting from information provided by ACE. These payment and indemnification obligations may be subject to restrictions under Bermuda law.

ACE’s rights under the registration rights agreement remain in effect with respect to the Common Shares covered by the agreement until:

·                    those shares have been sold under an effective registration statement under the Securities Act;

·                    those shares have been sold to the public under Rule 144 under the Securities Act; or

·                    those shares have been transferred in a transaction where a subsequent public distribution of those shares would not require registration under the Securities Act.

The Company filed a shelf registration statement under the Securities Act, which was declared effective in June 2005, pursuant to which ACE would be able to sell its Common Shares of the Company.

On December 18, 2006, the Company, ACE Bermuda Insurance Ltd. and Banc of America Securities LLC, as underwriter, entered into an underwriting agreement pursuant to which ACE Bermuda agreed to sell and the underwriter agreed to purchase, subject to and upon terms and conditions set forth in the agreement, 1,150,000 of the Company’s common shares. The shares were offered pursuant to the above-referenced shelf registration statement. In conjunction with such sale we paid approximately $75,000 in registration related expenses.

On December 20, 2006, Assured Guaranty US Holdings Inc., a subsidiary of the Company, completed the issuance of $150.0 million Series A Enhanced Junior Subordinated Debentures and used the proceeds to repurchase 5,692,599 of the Company’s common shares from a subsidiary of ACE. As of December 31, 2006 ACE owns approximately 28% of the Company’s outstanding common shares, excluding shares held by Assured Guaranty US Holdings Inc.

Did Our Insiders Comply with Section 16(a) Beneficial Ownership Reporting in 2006?

Our executive officers and directors are subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended. We believe that all of our executive officers and directors complied with all filing requirements imposed by Section 16(a) of the Exchange Act on a timely basis during fiscal 2006.

16

PROPOSAL NO. 1:  ELECTION OF DIRECTORS

General

Our Bye-laws divide our  Board of Directors into three classes with the terms of office of each class ending in successive years. Our Bye-Laws provide for a maximum of 21 directors and empower our Board of Directors to fix the exact number of directors and appoint persons to fill any vacancies on the Board until the next Annual General Meeting.

Following the recommendation of the Nominating and Governance Committee, our Board of Directors has nominated Neil Baron, G. Lawrence Buhl and Dominic J. Frederico as Class III directors of the Company to serve three year terms to expire at the Annual General meeting in 2010 and, in each case, until their respective successors shall have been elected and shall have qualified. Each nominee  is currently serving as a director of the Company.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE NOMINEES AS DIRECTORS OF THE COMPANY.

It is the intention of the persons named as proxies, subject to any direction to the contrary, to vote in favor of the candidates nominated by the Board of Directors. We know of no reason why any nominee may be unable to serve as a director. If any nominee is unable to serve, your proxy may vote for another nominee proposed by the Board, or the Board may reduce the number of directors to be elected. If any director resigns, dies or is otherwise unable to serve out his or her term, or the Board increases the number of directors, the Board may fill the vacancy until the annual  general meeting.

We have set forth below information with respect to the nominees for election as directors and the other directors whose terms of office as directors will continue after the Annual General Meeting. There are no arrangements or understandings between any director and any other person pursuant to which any director was or is selected as a director or nominee.

Nominees for Election for Terms Expiring in 2010

17

Directors Whose Terms of Office Will Continue after this Meeting

Directors Whose Terms Expire in 2008

18

Directors Whose Terms Expire in 2009

19

INFORMATION ABOUT OUR COMMON SHARE OWNERSHIP

How Much Stock is Owned By Directors and Executive Officers?

The following table shows our common shares owned directly or indirectly by our directors and executive officers as of March 8, 2007. Unless otherwise indicated, the named individual has sole voting and investment power over the common shares under the column “Common Shares Beneficially Owned.”  The common shares listed for each director and executive officer constitute less than one percent of our outstanding common shares, except for Mr. Frederico who owns approximately 1.69% of our outstanding common shares. The common shares beneficially owned by all directors and executive officers as a group constitute approximately 3.94% of our outstanding common shares if stock units are treated as outstanding and 3.80% of our outstanding common shares if stock units are not treated as outstanding. For the purposes of calculating the percentages of our outstanding common shares held by our directors and executive officers, we did not include as outstanding the common shares held by our subsidiary, Assured Guaranty US Holdings Inc.

(1)          The reporting person has the right to vote (but not dispose of) the common shares listed under “Unvested Restricted Common Shares.”

(2)          Represents common shares which the reporting person has the right to acquire within 60 days of March 8, 2007 pursuant to options.

(3)          Each non-management director holds stock units, including dividend accruals, which will be mandatorily deferred at least 6 months after the termination of such directors’ service on the Board. As a result, these shares cannot be voted or disposed of within 60 days of March 8, 2007 so these shares are not considered beneficially owned under SEC rules. We include them in the table above, however, because we view them as an integral part of directors’ share ownership.

Which Shareholders Own More Than 5% of our Common Shares?

The following table shows all persons we know to be direct or indirect owners of more than 5% of our  common shares as of December 31, 2006. For the purpose of determining the percentage of class held by

20

each such shareholder, we did not include as outstanding the common shares held by our subsidiary Assured Guaranty US Holdings Inc. Our information is based on reports filed with the SEC by each of the firms listed in the table below. You may obtain these reports from the SEC.

(1)          As of December 31, 2006, based on a Schedule 13G filed by ACE Limited, a Cayman Islands company.

(2)          As of December 31, 2006, based on a Schedule 13G/A filed by Ariel Capital Management, LLC. According to such Schedule 13G/A, Ariel had sole voting power of 5,963,360 common shares and sole power to dispose of 7,527,460 common shares.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Objectives of the Compensation Program

We are committed to building shareholder value by achieving the following key strategic goals:

·       Develop our  financial guaranty direct business

·       Obtain Triple-A ratings from the three major rating agencies for our subsidiary, AGC

·       Maintain our  financial guaranty reinsurance franchise

·       Maintain underwriting discipline and the quality of our financial guaranty portfolio

·       Manage capital efficiently

The Compensation Committee reviews the philosophy and objectives of our compensation program annually and designs them to recognize and support the achievement of our key strategic goals by:

·       Attracting and retaining talented executives with established records of success in the financial guaranty or financial services industry to implement the Company’s long-term business strategy. As a Bermuda-based company, we also need to manage the unusual circumstances related to attracting and retaining superior executives in Bermuda.

·       Closely aligning the financial rewards of management with those of the Company’s shareholders by linking executive incentives to achieving the Company’s short-term and long-term business goals and reward them for such achievement, including growth in shareholder value.

·       Creating accountability for individual performance measured by individual, unit and Company achievement of goals.

The compensation program is also designed to reward each executive officer for:

·       Working together as a team to achieve the Company’s strategic goals.

21

·       Increased company-wide profitability through high quality new business, loss mitigation and expense control.

·       Achieving identified objectives in their area of responsibility.

·       Responding quickly and effectively to unanticipated opportunities or challenges.

·       Demonstrating ethical behavior in compliance with current legal and regulatory standards.

Compensation Governance and Administration

The Compensation Committee of our Board of Directors oversees all aspects of our executive compensation program. The Compensation Committee has responsibility for establishing executive compensation policies, determining the compensation of the CEO, reviewing the CEO’s compensation recommendations regarding other senior officers and determining appropriate compensation levels for such officers. In 2004, our board adopted a Compensation Committee Charter to govern the Compensation Committee’s activities, a copy of which may be found at www.assuredguaranty.com. The charter is reviewed annually by the Compensation Committee. Under its charter, the Compensation Committee is authorized to retain compensation, legal, accounting and other consultants to assist it.

The Compensation Committee has retained Frederic W. Cook & Co., Inc., who we refer to as Cook, as its compensation consultant, to advise on executive compensation developments and to assist with peer comparisons for the purposes of both executive compensation and the aggregate size of equity-based compensation, such as stock options and restricted stock, to all employees. Cook prepares some of the materials for Compensation Committee meetings and meets with the Compensation Committee and the Chairman of the Board in January to review peer company information.  With the exception of Cook’s involvement with the Company shortly after our IPO, Cook’s work has been solely with respect to matters under the committee’s authority.

The CEO is the principal executive involved with the Compensation Committee in establishing compensation policy and setting the compensation for other executive officers. The CEO generally attends the Compensation Committee meetings, although the Compensation Committee also meets regularly in executive session. Both the General Counsel and the Director of Human Resources communicate with Cook on committee matters, attend portions of the Compensation Committee meetings and provide additional information and analysis to the Compensation Committee, as requested. Between meetings, the chairman of the Compensation Committee will often speak with the CEO or the General Counsel regarding committee and compensation matters.

The board of directors has delegated to the CEO the power to approve:

·       Routine changes to benefit plans.

·       New hire packages for non-executive officers with expected annual compensation below a specified amount.

·       New hire equity grants for non-executive officers up to a specified amount of stock options and restricted stock for each new hire. All equity grants authorized by the CEO must be reported to the Compensation Committee at its next meeting.

·       Routine salary and employment termination arrangements for employees below the top three levels of the Company.

The Compensation Committee meets in February of each year to make executive compensation decisions with respect to the previous year’s performance. The Compensation Committee follows this schedule because the February meeting is the earliest practical opportunity to review the prior year’s financial results and the performance of the executive officers. To date, other than equity granted in connection with

22

the IPO, all equity grants to executive officers have been approved during the February meeting. At the February meeting, the Compensation Committee discusses its compensation decisions with the independent, non-management directors who are not on the Compensation Committee. All independent, non-management directors approve executive officer salary increases, bonuses, equity awards and Performance Retention Plan awards. Stock options are priced at the New York Stock Exchange closing price of Assured Guaranty stock on the day the awards are approved by the Compensation Committee and the other independent non-management directors.

Elements of Compensation

The Company provides various elements of compensation to its executive officers. These elements can be grouped into base compensation and variable compensation. Base compensation is provided for an executive officer’s acceptable performance and is only adjusted periodically. Base compensation includes base salary, retirement and other post termination benefits, employee benefits and perquisites.  Variable compensation is adjusted annually to provide a strong incentive to achieve annual and long term goals and to tailor compensation levels to actual performance.  As a result, the Compensation Committee believes that a significant component of executive officer compensation should be variable. Variable compensation includes annual bonus and various types of long term compensation.

Base Compensation

·      Base Salary—The Compensation Committee establishes a base salary for each executive based on his or her position, taking into account market conditions, business or professional experience, prior salary history and contractual arrangements. No executive officer received a salary increase in 2006.

·      Retirement Benefits—We maintain tax-qualified and non-qualified defined contribution retirement plans for our eligible employees, including executive officers. We contribute 6% of each employee’s salary and cash bonus compensation, which we call eligible compensation, to the defined contribution plans. We also have 401(k) type plans, with 100% Company matching up to 6% of eligible compensation. As a result, we will make higher contributions if an executive officer’s base salary or bonus increases. We make contributions to these plans to be competitive with other companies and to retain talented employees. The investment return in each employee’s retirement account depends on the performance of the investment elections made by each employee. No executive officer is guaranteed any level of retirement payout or preferential return on their accounts. To date, retirement plan contributions and balances have not affected other elements of executive compensation. The Company does not maintain any defined benefit pension plans.

·      Other Post-Termination Benefits—The Company provides executive officers other post-termination benefits such as accelerated vesting and severance payments in certain circumstances. See “Executive Compensation—Potential Payments upon Termination or Change of Control”.

·      Employee Benefits—Assured Guaranty provides comprehensive employee benefits to its employees, including its executive officers. These benefits include life, health and disability insurance. We believe the level of benefits provided under our programs is generally consistent with practices among our principal competitors for employees, including other financial guaranty companies. The Company also maintains an Employee Stock Purchase Plan, which we refer to as the ESPP, to increase stock ownership by employees. Under the ESPP, employees, including executive officers, may annually purchase up to $25,000 of our stock at a 15% discount. In 2006 Mr. Frederico and Mr. Mills participated in the ESPP to the maximum extent allowable.

23

·       Perquisites—We also provide executive officers fringe benefits that are not available to employees generally. These include tax preparation, financial planning, a golf club membership, executive medical physical and excess health insurance. In Mr. Frederico’s case, he is provided a golf club membership in Bermuda and the United States. These benefits are provided to retain and motivate highly valued executives. In addition, to attract Mr. Frederico and Mr. Michener to work and reside in Bermuda, we provide to each of them a housing allowance, car allowance and family travel benefit. These fringe benefits are customary for non-Bermudians who are senior executives working in Bermuda. These benefits are provided for under Mr. Frederico’s and Mr. Michener’s employment agreements. In 2006, changes in US tax law significantly increased the individual US income tax on the housing allowances provided to Mr. Frederico and Mr. Michener. To maintain the net value of their housing allowances, in August 2006, the Compensation Committee approved a tax gross up to Mr. Frederico and Mr. Michener for the cost of the increased taxes. The Company also reimburses Mr. Frederico and Mr. Michener for US Social Security and Medicare taxes incurred when they are working in the United States. This compensates Mr. Frederico and Mr. Michener for similar taxes they pay in Bermuda.

·       Employment agreements—Beginning in 2003, we recruited executives to implement our business plan and achieve our key strategic goals. Implementation of our business plan involved substantial risk, including the risks of completing a successful IPO, achieving rating improvements and accomplishing the strategic shift to write financial guaranty direct business along with financial guaranty reinsurance. To mitigate these risks, we recruited executives with established records of success in the financial guaranty or financial services industry. Prior to the IPO, Mr. Frederico, Mr. Mills, Mr. Schozer and Mr. Michener left senior positions at well established companies to join us and employment agreements were entered into with all four at that time. The Compensation Committee believes these employment agreements were essential to recruit Mr. Frederico, Mr. Mills, Mr. Schozer and Mr. Michener prior to the IPO. In October 2006, we entered into an employment agreement with Mr. Bailenson. We believe the employment agreements serve as a powerful retention tool by proscribing compensation ranges and benefits to executives if their employment is terminated without cause or after a change of control. Details of these agreements is shown under the headings “Executive Compensation—Employment Agreements” and “Potential Payments Upon Termination or Change in Control.”

·       Change of Control Benefits—The vesting of any unvested stock options and restricted stock held by an executive officer will be accelerated on a change of control. We provide for the use of single trigger change of control equity vesting because we believe that is appropriate to best motivate an executive to pursue increases in shareholder value when evaluating a transaction which could result in a change of control. In addition, the employment agreements provide that in the event of a change of control, severance benefits are provided if the executive officer, other than Mr. Bailenson, is terminated without cause or resigns during the first 12 months following a change of control. In Mr. Bailenson’s case, he will receive severance benefits if he is terminated for any reason after a change in control or resigns during 12 month period beginning 3 months after a change in control. In each case, the definition of change in control excludes transactions, such as an internal reorganization and when the Company issues shares directly, for which it may not be appropriate to provide change of control benefits. Additional information on benefits provided upon a change of control is shown in “Executive Compensation—Employment Agreements” and “Potential Payments Upon Termination or Change in Control.”

24

Variable Compensation

·       Annual Cash Bonus—The Compensation Committee awards annual cash bonuses to provide short term incentive compensation to executives for achieving annual goals established for each executive officer. Annual bonuses are also intended to reward executives for overall success of the Company. In February 2006 we awarded bonus payments to the executive officers for 2005 performance. These amounts was reported in our 2006 proxy statement. The goals for 2006 and our results are discussed below under “2006 Performance and Compensation Decisions.”

·       Long Term Incentive Program: 2004 Long-Term Incentive Plan—In 2004, we adopted a long-term incentive plan, which uses equity awards to create incentives for employees to enhance the long-term value of the Company. A key goal of the long-term incentive plan is to increase officer ownership of Company shares, thereby aligning executives’ interests with long-term shareholder interests. While the Company’s long-term incentive plan provides for a variety of types of awards, the Compensation Committee has made awards to employees, including executive officers, only in the form of shares of restricted stock and stock options. Restricted stock and stock option awards were granted in conjunction with the IPO and as part of annual compensation grants. In February 2006 we awarded restricted stock and stock option grants to the executive officers for 2005 performance. These grants were reported in our 2006 proxy statement. Further detail on those awards is shown on “Executive Compensation—2006 Grants of Plan-Based Awards.”  Dividends are paid currently on unvested restricted stock. The Compensation Committee believes that restricted share awards with delayed vesting are crucial in helping to recruit and retain high caliber executives. By providing an immediate equity stake in the Company, restricted stock enables the Company to provide incentives to achieve its long-term goals. The Company includes stock options as part of long-term compensation because the Company believes that options are a valuable incentive tool, providing compensation only if stock price increases.  Restricted stock and stock option grants serve as a powerful retention incentive since executive officers forfeit unvested stock and stock options if they leave the Company. Additional information on our long-term incentive program is provided in “Potential Payments Upon Termination or Change in Control—Equity and Incentive Plans”.

·       Long Term Incentive Program: Performance Retention Plan—In February 2006, we adopted the Performance Retention Plan, which we refer to as the PRP. In February 2007 we amended and restated the PRP. PRP awards were made for the first time in February 2007. PRP awards are cash-based and vest after a four year performance period. Awards will increase in value at the rate that the Company’s modified adjusted book value increases during the performance period. We believe the PRP will be a valuable tool in attracting and retaining talented employees because employees will be rewarded for staying with the Company and for profitable growth in our business. Because PRP awards are cash-based there will be no shareholder dilution from the awards. Additional information on the PRP is provided in “Potential Payments Upon Termination or Change in Control—Equity and Incentive Plans”.

Stock Ownership Guidelines

Since the IPO, the board of directors has recommended that each director hold at least 10,000 shares of Company stock within three years of joining the board. Each of our outside directors who has been on our Board since our IPO has attained the recommended ownership levels. Directors who have more recently joined our Board are in the process of meeting these guidelines.

Since the IPO, no executive officer has sold any Company stock or exercised any stock options. However, to further demonstrate the Company’s commitment to build shareholder value, in

25

February 2007, the Company’s board of directors adopted management stock ownership guidelines. Under the guidelines, the executive officers will have the following Company stock ownership goals:

Unvested restricted shares and unexercised option do not count towards the guidelines.

Our guidelines do not mandate a time frame by which this ownership must be attained, but Mr. Frederico, Mr. Mills, Mr. Michener and Mr. Schozer must retain 100% of their after-tax receipt of Company stock until they reach their ownership goal. Mr. Bailenson must retain at least 50% of his after-tax receipt of Company stock until he reaches his ownership goal.

In addition, in February 2007, the Company amended its stock trading policy to prohibit hedging with respect to Company stock so as to be consistent with its stock ownership philosophy.

Please see “Information About Our Common Share Ownership—How Much Stock is Owned by Directors and Executive Officers” for detailed information on the executive officers’ stock ownership.

Regulatory Requirements

Section 162(m) of the US Internal Revenue Code limits the deductibility of annual compensation in excess of $1 million paid to the Company’s CEO and any of the four other highest paid executive officers, which we refer to as the $1 million limit. The Company is not subject to US income taxes and so, generally, the limit would not affect amounts payable by the Company. However, if an employee of a US subsidiary is among the five most highly compensated officers, that subsidiary’s deduction for compensation paid to the officer would be subject to the $1 million limit. Mr. Schozer is a full time employee of a US subsidiary. The other executive officers allocate their time between our Bermuda and US operations.

Compensation otherwise subject to the $1 million limit will be exempt from the limit if it qualifies as performance-based compensation, as defined by the IRS. In May 2005, we received shareholder approval of our 2004 Long-Term Incentive Plan, which is one of the conditions for treatment of a payment or distribution as performance-based compensation. A payment or distribution will be treated as performance-based compensation under the limit only if it is contingent on achievement of performance objectives. For example, stock options are generally treated as performance-based compensation, while guaranteed payments are not. For 2006, the highest paid five executive officers received stock option awards and participated in an annual cash and stock bonus program that were designed to satisfy the requirements for performance-based compensation.

The annual cash and stock bonus program provided for establishment of a bonus pool of cash and a bonus pool of shares of Company stock. The amount of cash and shares to be allocated to the respective bonus pools was based on the level of “adjusted net income” compared to pre-established objectives for such income or the “adjusted net income goal”. The cash bonus pool began to accrue if adjusted net income was 50% of the adjusted net income goal and increased at higher rates as adjusted net income increased. The bonus pool of shares was established if adjusted net income was 50% of the adjusted net income goal and increased by 50% if the adjusted net income goal was reached. The Compensation Committee viewed the threshold for cash and stock bonus amounts as substantially uncertain at the time established.

26

Adjusted net income means net income of the Company, excluding the after-tax earnings impact of each of the following items if they occur during the 2006 Performance Period:

·       realized investment gains and losses, including those resulting from the sale of subsidiaries and affiliates, for the 2006 Performance Period;

·       the cumulative effect of changes in accounting principles for the 2006 Performance Period required by the Financial Accounting Standards Board, the United States Securities and Exchange Commission or any other governing body that sets accounting standards as set forth in the Consolidated Statement of Income or the Notes thereto as reported in the Annual Report;

·       the cumulative effect of changes in the tax law occurring during the 2006 Performance Period as set forth in the Consolidated Statement of Income or the Notes thereto as reported in the Annual Report;

·       extraordinary items, as defined under generally accepted accounting principles, during the 2006 Performance Period as set forth in the Consolidated Statement of Income as reported in the Annual Report;

·       charges related to the acquisition and integration of a company or business acquired within twelve months of such acquisition; such charges would result primarily from anticipated costs of the acquisition and the application of the company’s strategies, policies and practices to the acquired company’s reserves;

·       unrealized gains/losses on derivative financial instruments;

·       gains or losses related to accounting for any reinsurance transactions between the Company and its subsidiaries and ACE and its subsidiaries that are treated as retroactive reinsurance; and

·       losses in excess of $50 million related to any single credit.

Under the cash portion of the program, the CEO is permitted to receive up to 40% of the bonus pool, and the other four executive officers were each permitted to receive up to 15% of the bonus pool. For 2006, the cash bonus pool was $7.86 million.

Under the stock portion of the program, the CEO is permitted to receive up to 125,000 shares, the second and third highest paid executive offices are each permitted to receive up to 60,000 shares, and the fourth and fifth highest paid executive officers are each permitted to receive up to 30,000 shares.

The program permits the Compensation Committee to reduce the cash bonus amount or the stock bonus amount at its discretion based on such factors as the committee determines to be appropriate. The financial and non-financial measures and goals considered by the committee in determining the amount of the final cash and share awards under the program are described below under the heading 2006 Performance and Compensation Decisions.

The Compensation Committee does not use deductibility as the sole factor in determining appropriate levels or methods of compensation. Since Company objectives may not always be consistent with the requirements for full deductibility, the Company and subsidiaries may enter into compensation arrangements under which payments would not be deductible by reason of the $1 million limit. In 2006 the Company incurred approximately $570,000 in non-deductible compensation expense that would otherwise have been deductible in the absence of the $1 million limit.

Section 409A of the US Internal Revenue Code imposes restrictions on nonqualified deferred compensation plans. The Company maintains defined contribution plans in the US and Bermuda that are subject to the requirements of section 409A. Those plans provide for employee and employer contributions in excess of the IRS limits, and the Company believes that they satisfy section 409A.

27

The Company’s Compensation Committee and Board of Directors have reviewed the increased accounting costs of stock options and restricted stock under FAS 123R. The Compensation Committee has especially focused on the acceleration of costs related to employees such as Mr. Frederico, Mr. Mills, and Mr. Michener that either are or will shortly be retirement eligible. While the Company has considered various changes to its compensation practices as a result of the accelerated costs, no changes have been made to date.

Compensation Process

The Compensation Committee annually establishes executive officer performance goals, reviews prior compensation decisions, reviews the performance of the Company and each executive officer, benchmarks the performance of the Company and executive compensation against a peer group and makes annual compensation decisions.

Executive Officer Performance Goals—The Compensation Committee annually establishes performance goals for the CEO, which we call CEO performance measures. Not all CEO performance measures are of equal weight and there is no quantitative method by which the Compensation Committee applies the CEO performance measures. The 2006 CEO performance measures included the following financial performance measures from the 2006 business plan, as approved by the board:  net income, operating income, book value, adjusted book value, per share operating income, operating return on equity, expense ratio, total and direct present value of premiums, which we refer to as PVP, and par written. (See the explanation of non-GAAP financial measures at the end of the Compensation Discussion and Analysis.) The CEO performance measures included the following non-financial performance measures focused on implementation of our key strategic goals: effective communication and implementation of our business strategy, ratings improvement, effective management of enterprise risk, management development, succession planning and employee relations.

The Compensation Committee also uses the CEO financial performance measures to evaluate the performance of the other executive officers. In addition, the Compensation Committee approves annual performance goals for each other executive officer based on the recommendations of the CEO. The performance goals for these officers are primarily related to the following position responsibilities:

Mr. Mills—Financial management, financial reporting and corporate administration

Mr. Schozer—Direct business

Mr. Michener—Legal and human resources

Mr. Bailenson—Accounting policy and financial reporting

The difficulty of achieving each component of the CEO performance measures and other individual performance goals varied. In the aggregate, the Compensation Committee viewed the CEO performance measures and other individual performance goals as significant challenges for the CEO and the other executive officers.

Prior Compensation Decisions—The Compensation Committee reviews  executive employment agreements, including tally sheets of current compensation, pension balances, prior equity grants, change of control benefits and perquisites. The Compensation Committee reviews the amount of vested and unvested stock and stock options held by each executive officer. As a relatively new company, a substantial portion of the Company stock and stock options held by the executive officers is unvested. The Compensation Committee views the unvested equity as a positive element in retaining the services of the executive officers. Other than the February 2007 PRP awards, accumulated stock ownership has not affected annual award decisions. To date, other compensation and retirement benefits have not affected

28

the Compensation Committee’s award of variable compensation in order to provide the maximum incentive value from our variable compensation.

Annual Performance—The Compensation Committee, with input from the other non-management directors, reviews the financial performance of the Company compared to its annual business plan and the progress the Company is making toward achieving its key strategic objectives.

The Compensation Committee, with input from the other non-management directors, uses its judgment to evaluate the degree to which each executive officer has met or exceeded his performance goals based on the following:

·       Level of achievement of the CEO financial performance measures

·       In the case of the CEO, the level of achievement of the CEO non-financial performance measures

·       Other Company information, such as stock performance

·       External information, such as competitor performance

·       Success in dealing with unanticipated problems and opportunities

·       In the case of the chief financial officer and the chief accounting officer, the Audit Committee Chairman’s evaluation of their performance

·       In the case of the other executive officers, the CEO’s evaluation of their performance

Benchmarking—The Compensation Committee designated a 2006 compensation peer group of Ambac Financial Group, Inc., Financial Security Assurance Holdings Ltd., MBIA Inc., Radian Group Inc. and Security Capital Assurance Ltd. The Compensation Committee selected this compensation peer group because these companies are the primary financial guaranty companies competing with us and for which comprehensive compensation data is publicly available. Assured Guaranty is smaller than the 25th percentile of the executive compensation peer group, as measured by revenues and market capitalization. The Compensation Committee considered whether the Company’s size should affect its executive compensation decisions. The Compensation Committee concluded that the Company’s size should not be a significant factor in executive compensation decisions in the financial guaranty business since the Company is competing for the same business and talent as its larger competitors. Cook has advised the Compensation Committee that this conclusion is consistent with its experience within the financial guaranty industry.

The Compensation Committee also designated a 2006 equity usage peer group of Ambac Financial Group, Inc., Financial Security Assurance Holdings Inc., MBIA Inc., Radian Group Inc., Security Capital Assurance Ltd, Allied World Assurance Company Holdings, Ltd, Endurance Specialty Holdings Ltd., MGIC, Montpelier Re Holdings Ltd., Odyssey Re Holdings Corp., Platinum Asset Management, PMI, RAM Re Holdings Ltd., and Renaissance Re Holdings Ltd. to compare the overall level of equity grants to all employees, including the executive officers. The Compensation Committee selected this larger peer group because, according to Cook, equity grant amounts tend to be similar among broader groups of companies that have similarities in size, Bermuda location, business and structure. The larger group is useful because it provides more data for comparison purposes.  Cook performed a share dilution and market value transfer calculations of equity usage for the Compensation Committee. Assured Guaranty’s market capitalization is smaller than the 25th percentile of the total equity usage peer group. Cook advised the Compensation Committee that as a generalization there tends to be an inverse relationship between market capitalization and aggregate equity needs because smaller companies require a greater percentage of outstanding equity to deliver competitive compensation.

29

At the time it considers annual executive compensation awards, the Compensation Committee compares the Company’s current year performance to the performance of the compensation peer group. At the same time, the committee compares the Company’s executive compensation to the prior year’s (the most recent available data) executive compensation of the compensation peer group. For executive officers other than the CEO, the committee compares the Company’s second through the fifth highest paid executive officers to the second through the fifth highest paid executive officers of the compensation peer group. These comparisons are often less useful than the CEO comparison because of different position responsibilities at different companies. The Compensation Committee does not set executive compensation by targeting any percentile of the compensation peer group. The Compensation Committee determines if its decisions are generally consistent with the compensation peer group taking into account factors such as age of the information, relative performance, age of the Company and strategic accomplishments. Later in each year, the Compensation Committee compares its most recent executive compensation decisions to the compensation peer group using more current year data from SEC filings.

Annual Compensation Decisions—For the executive officers, other than Mr. Bailenson, the overall mix of compensation elements was largely established by their employment agreements entered in conjunction with the IPO. The agreements were the result of negotiation between each executive officer and the pre-IPO shareholder of the Company. The agreements reflect the Committee’s view that effective executive compensation should be a blend of several elements of compensation, with no undue reliance on any one element. The Compensation Committee has noted favorable rating agency comments with respect to the mix of executive compensation at Assured Guaranty. The compensation mix for Mr. Bailenson has generally followed mix for the other executive officers.

The Compensation Committee uses its judgment to set variable compensation for each executive officer so that their total compensation (base salary, annual bonus and long term incentives) is appropriate taking into account the following:

·       Company performance

·       Executive officer performance

·       Employment agreement terms

·       Retention of high performing executives

·       Benchmarking against the compensation peer group, especially for total compensation

Taking these factors into account, the Compensation Committee has primarily used its judgment to adjust the cash bonuses of the executive officers. The Compensation Committee believes this process is an effective method of tying compensation to performance. For more details about our approach in this regard, see the discussion under the headings “Regulatory Requirements” and “2006 Performance and Compensation Decisions.”

2006 Performance and Compensation Decisions

In the judgment of the Compensation Committee, the Company’s performance in 2006 was very strong. The Company achieved its most important annual goals and made good progress toward all its key strategic goals.

·       Direct financial guaranty PVP increased from $146 million in 2005 to $302 million in 2006, a 108% increase. The Company significantly expanded its asset classes and developed a strong flow of international business. These results, which were achieved despite split ratings and challenging market conditions, show the Company is making progress in developing its direct business.

·       In June 2006 Moody’s Investor Services put AGC on Positive Outlook for an upgrade to Aaa. This is a very significant milestone toward our strategic goal of AGC having Triple-A ratings from Moody’s, Standard & Poor’s and Fitch Ratings.

30

·       Reinsurance financial guaranty PVP increased from $128 million in 2005 to $152 million in 2006. This 19% increase was a strong result, especially in light of the growth in the direct business, which competes with our reinsurance customers.

·       During 2006 the credit quality of the Company’s financial guaranty portfolio remained AA-. During 2006 the Company also made substantial progress in developing its underwriting, credit, risk management and governance processes.

·       In December 2006 the Company repurchased $150 million of Company shares from ACE. The transaction was financed by the issuance of $150 million in junior subordinated debentures, an innovative form of debt which receives high equity credit from the rating agencies. The transaction will be accretive to earnings per share and return on equity.

As a result, all of the 2006 non-financial CEO performance measures were achieved.  In addition, after evaluating the performance of the other executive officers, Mr. Frederico concluded, and the Compensation Committee agreed, that each executive officer performed his position responsibilities at a high level in 2006. All of the financial CEO performance measures were achieved, except the book value and expense ratio measures. Book value was below budget because of the repurchase of Company shares from ACE.  The Company’s expense ratio exceeded the performance measure due to higher costs of outside services and acceleration of costs related to equity grants to retirement eligible executives under FAS 123R.

The Compensation Committee views the Company’s 2006 performance compared to the compensation peer group and other competitors as excellent. During the first three quarters of 2006 the Company more than doubled its direct PVP market share to 6.8% from 3.2% in 2005 and its direct par market share to 7.8% from 3.4% in 2005. In addition, the Compensation Committee compared the Company’s growth through the first three quarters of 2006 to that of Ambac Financial Group, Inc., FGIC, Financial Security Assurance Holdings Inc., MBIA and Security Capital Assured Ltd. Assured Guaranty had the highest percentage increase in the following areas: PVP, net written par, adjusted book value and the sum of after tax-unearned premium reserves and present value of future installment premiums. The Company was ranked number two in percentage of growth of net par outstanding; number four in percentage of growth in book value per share and number five in percentage of growth in operating income. The Compensation Committee noted that for the first three quarters of 2006, the Company’s net income growth and earnings per share growth was below the 25% percentile of the compensation peer group. Return on average equity through September 30, 2006 and 2006 total shareholder return were at the 25th percentile of the compensation peer group. The Compensation Committee noted that increased earnings and return on equity emerge relatively slowly in the financial guaranty industry. Accordingly, these results were expected given the Company’s stage of development and its key strategic goals.  The Compensation Committee also noted that from the IPO to the end of 2006, the Company’s stock price increased by 48%.

Accordingly, in February 2007, the Compensation Committee, in conjunction with the other independent directors, awarded the executive officers the following cash bonuses, equity awards and PRP awards for their 2006 performance:

31

Restricted shares are valued based on the per Common Share NYSE closing price of $26.70 on February 8, 2007, the date of the grant. The stock options are ten-year options to purchase Company stock at an exercise price of $26.70, per share. The stock options are valued at $6.82 each, based on FAS 123R.

The cash bonus awards for Mr. Frederico, Mr. Mills, Mr. Schozer and Mr. Michener are above the bonus range or bonus target in their employment agreements. Mr. Frederico’s, Mr. Mills’ and Mr. Schozer’s equity awards are the target awards under their employment agreements. Mr. Michener’s equity award is consistent with prior awards and is 5,000 restricted shares and 10,000 stock options above the target award in his employment agreement. The executive officers’ total compensation for 2006 matched the comparable position’s 2005 total compensation of the compensation peer group as follows: Mr. Frederico - between the median and 75th percentile; Mr. Mills and Mr. Schozer - above the 75th percentile; Mr. Michener - at the 75th percentile and Mr. Bailenson - below the 25th percentile.  The Compensation Committee approved a $30,000 PRP award to Mr. Bailenson. The committee decided that based upon previous equity grants to the other executive officers, PRP awards were not necessary for those executive officers.

The Compensation Committee also approved the following base salary increases for 2007:

Conclusion

The Company believes that the total compensation and components of compensation awarded to the executive officers are appropriate and in the best interests of the Company and the shareholders. The Company’s strategy requires experienced management in the senior financial guaranty executive, finance and legal positions. The Company believes that the various elements of total compensation have worked well together to attract and motivate management. This is demonstrated by the Company’s progress in achieving its strategic objectives since the IPO.

Definitions of non-GAAP Terms

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

Adjusted book value, which is a non-GAAP financial measure, is defined as shareholders’ equity (book value) plus the after-tax value of the financial guaranty and mortgage guaranty unearned premium reserve net of prepaid reinsurance premiums and deferred acquisition costs plus the net present value of estimated future installment premiums in force, less future ceding commissions, after-tax, discounted at 6%. We believe adjusted book value is a useful measure for management, equity analysts and investors because the calculation of adjusted book value permits an evaluation of the net present value of the Company’s in-force premiums and capital base. The premiums described above will be earned in future

32

periods, but may differ materially from the estimated amounts used in determining current adjusted book value due to changes in market interest rates, refinancing or refunding activity, pre-payment speeds, policy changes or terminations, credit defaults, and other factors that management cannot control or predict. This measure should not be viewed as a substitute for book value determined in accordance with GAAP.

Net present value of estimated future installment premiums in force, which is a non-GAAP financial measure, is defined as the present value of estimated future financial guaranty and mortgage guaranty installment premiums from our in-force book of business, net of reinsurance and discounted at 6%. We believe net present value of estimated future installment premiums in force is a useful measure for management, equity analysts and investors because it permits an evaluation of the value of future estimated installment premiums. Estimated future premiums may change from period to period due to changes in par outstanding, maturity or other factors that management cannot control or predict that result from market interest rates, refinancing or refunding activity, pre-payment speeds, policy changes or terminations, credit defaults, or other factors. There is no comparable GAAP financial measure.

Present value of financial guaranty and mortgage guaranty gross written premiums, or PVP, which is a non-GAAP financial measure, is defined as gross upfront and installment premiums received and the present value of gross estimated future installment premiums, on contracts written in the current period, discounted at 6% per year. We believe PVP is a useful measure for management, equity analysts and investors because it permits the evaluation of the value of new business production for Assured Guaranty by taking into account the value of estimated future installment premiums on new contracts underwritten in a reporting period, which GAAP gross premiums written does not adequately measure. Actual future net earned or written premiums may differ from PVP due to factors such as prepayments, amortizations, refundings, contract terminations or defaults that may or may not be influenced by market interest rates, refinancing or refunding activity, pre-payment speeds, policy changes or terminations, credit defaults, or other factors that management cannot control or predict. This measure should not be viewed as a substitute for gross written premiums determined in accordance with GAAP.

For adjusted book value, net present value of estimated future installment premiums in force and present value of financial guaranty and mortgage guaranty gross written premiums or PVP we use 6% as the present value discount rate because it is the approximate taxable equivalent yield on our investment portfolio for the periods presented.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management and based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s annual report on Form 10-K for the year ended December 31, 2006 and this proxy statement.

The foregoing report has been approved by all members of the Committee.

33

2006 Summary Compensation Table

The following table provides compensation information for 2006 for all of our executive officers.

(1)          Payment for bonuses for 2006 were made in 2007.

(2)          This column discloses the dollar amount recognized for financial reporting purposes with respect to the fiscal year in accordance with FAS 123R. For all assumptions used in the valuation, see footnote 19 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006. Additional detail regarding the 2006 awards is provided in the Grants of Plan-Based Awards table elsewhere in this proxy statement. In 2006, Mr. Frederico’s and Mr. Michener’s stock award expense increased due to accelerated retirement costs over 2 years by $1,062,496 and $318,750, respectively. Mr. Mills equity expense increased by acceleration over 1 year which represents an additional $1,020,000 in restricted stock expense.

(3)          This column discloses the dollar amount recognized for financial statement reporting purposes with respect to fiscal year in accordance with FAS 123R. For all assumptions used in the valuation, see footnote 19 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006. Additional detail regarding the 2006 awards is provided in the 2006 Grants of Plan-Based Awards table elsewhere in this proxy statement. In 2006, Mr. Frederico’s and Mr. Michener’s stock option expense increased due to accelerated retirement costs over 2 years by $559,109 and $167,733, respectively. Mr. Mills equity expense increased by acceleration over 1 year which represents an additional $536,744 in option value expense.

34

(4)          All Other Compensation includes: