Assured Guaranty [Cover Art to Follow] 2018 Annual Meeting of Shareholders and Proxy Statement

It is with great pleasure that we invite you to our 2018 Annual General Meeting of shareholders on Wednesday, May 2, 2018, at 6 Bevis Marks in London. Whether or not you plan to attend the meeting in person, please vote your shares; your vote is important to us.

Assured Guaranty’s 2017 financial performance was excellent. Our shareholders’ equity per share, non-GAAP operating shareholder’s equity per share¹ and non-GAAP adjusted book value per share¹ all reached record levels, at $58.95, $56.20 and $77.74, respectively. These records reflect the great strides we continued to make on our four main strategies:

We provide further detail about our accomplishments and plans for the future in the Letter to Shareholders accompanying our 2017 Annual Report. We encourage you to review that letter and our 2017 Annual Report, as well as the Proxy Statement that follows this letter.

We look forward to another successful year.

Sincerely,

March 21, 2018

Hamilton, Bermuda

NOTICE OF ANNUAL

GENERAL MEETING

TO THE SHAREHOLDERS OF ASSURED GUARANTY LTD.:

The Annual General Meeting of Assured Guaranty Ltd., which we refer to as AGL, will be held on Wednesday, May 2, 2018, at 8:00 a.m. London Time, at 6 Bevis Marks, London, EC3A 7BA, United Kingdom, for the following purposes:

Shareholders of record are being mailed a Notice Regarding the Availability of Proxy Materials on or around March 21, 2018, which provides shareholders with instructions on how to access the proxy materials and our 2017 annual report on the Internet, and if they prefer, how to request paper copies of these materials.

Only shareholders of record, as shown by the transfer books of AGL, at the close of business on March 8, 2018, are entitled to notice of, and to vote at, the Annual General Meeting.

SHAREHOLDERS OF RECORD MAY VOTE UP UNTIL 12:00 NOON EASTERN DAYLIGHT TIME ON MAY 1, 2018. BENEFICIAL OWNERS MUST SUBMIT THEIR VOTING INSTRUCTIONS SO THAT THEIR BROKERS WILL BE ABLE TO VOTE BY 11:59 P.M. EASTERN DAYLIGHT TIME ON April 30, 2018.

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL GENERAL MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF SHARES YOU OWN, PLEASE VOTE AS PROMPTLY AS POSSIBLE VIA THE INTERNET OR BY TELEPHONE. ALTERNATIVELY, IF YOU HAVE REQUESTED WRITTEN PROXY MATERIALS, PLEASE SIGN, DATE AND RETURN THE PROXY CARD IN THE RETURN ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. 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 ATTACHED PROXY STATEMENT.

By Order of the Board of Directors,

Ling Chow

Secretary

PROXY STATEMENT

SUMMARY

This summary highlights information contained elsewhere in this proxy statement and does not contain all of the information that you should consider before voting. For more complete information about the following topics, please review the complete proxy statement and the Annual Report on Form 10-K of Assured Guaranty Ltd. (which we refer to as AGL, we, us or our; we use Assured Guaranty, our Company or the Company to refer to AGL and its subsidiaries).

We intend to begin distribution of the Notice Regarding the Availability of Proxy Materials to shareholders on or about March 21, 2018.

ANNUAL GENERAL MEETING OF SHAREHOLDERS

We will also transact any other business that may properly come before the meeting.

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SUMMARY DIRECTOR INFORMATION

The following table provides summary information about each director nominee. Each director nominee will be elected for a one-year term by a majority of votes cast.

  A: Audit; C: Compensation; F: Finance; NG: Nominating and Governance; RO: Risk Oversight; E: Executive;

  «: Chair; ✓: Member

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CORPORATE GOVERNANCE

OVERVIEW

THE BOARD OF DIRECTORS

Our Board of Directors maintains strong corporate governance policies.

The full text of our Corporate Governance Guidelines, our Code of Conduct and each committee charter, are available on our website at www.assuredguaranty.com/governance. In addition, you may request copies of the Corporate Governance Guidelines, the Code of Conduct and the committee charters by contacting our Secretary via:

MEETINGS OF THE BOARD

Our Board of Directors oversees our business and monitors the performance of management. The directors keep themselves up-to-date on our Company by discussing matters with Mr. Frederico, who is our Chief Executive Officer (and whom we refer to as our CEO), other key executives and our principal external advisors, such as outside auditors, outside legal counsel, 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. During 2017, the Board met four times. All of our directors attended at least 75% of the aggregate number of meetings of the Board and committees of the Board of which they were a member held while they were in office during the year ended December 31, 2017.

DIRECTOR INDEPENDENCE

In February 2018, our Board determined that, other than our CEO Mr. Frederico, all of our directors are independent under the listing standards of the NYSE. These independent directors constitute substantially more than a majority of our Board. In making its determination of independence, the Board applied its Categorical Standards for Director Independence and determined that no other material relationships existed between our Company and these directors. A copy of our Categorical Standards for Director Independence is available as part of our Corporate Governance Guidelines, which are available on our website at www.assuredguaranty.com/governance. In addition, as part of the independence determination, our Board monitors the independence of Audit and Compensation Committee members under rules of the SEC and NYSE listing standards that are applicable to members of the audit committee and compensation committees.

As part of its independence determinations, the Board considered the other directorships held by the independent directors and determined that none of these directorships constituted a material relationship with our Company.

DIRECTOR EXECUTIVE SESSIONS

The independent directors meet at regularly scheduled executive sessions without the participation of management. The Chairman of the Board is the presiding director for executive sessions of independent directors.

OTHER CORPORATE GOVERNANCE HIGHLIGHTS

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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:

The Nominating and Governance Committee has the authority to retain search firms to be used to identify director candidates and to approve the search firm’s fees and other retention terms. The Nominating and Governance Committee may also retain other advisors.

We believe that diversity among members of the Board is an important consideration and is critical to the Board’s ability to perform its duties and various roles. Accordingly, in recommending nominees, the Board considers a wide range of individual perspectives and backgrounds in addition to diversity in professional experience and training. Our Board is currently composed of individuals from different disciplines, including lawyers, accountants and individuals who have industry, finance, executive and international experience, and is composed of both men and women and citizens of the United States, the United Kingdom and Japan. Our Corporate Governance Guidelines address diversity of experience, requiring 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. Our Corporate Governance Guidelines also provide that Board members should have individual backgrounds that when combined provide a portfolio of experience and knowledge that will serve our 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 having a global business perspective and commitment to good corporate citizenship. Our Corporate Governance Guidelines specify that directors should represent all shareholders and not any special interest group or constituency. The Nominating and Governance Committee annually reviews its own performance. In connection with such evaluation, the Nominating and Governance Committee assesses whether it effectively nominates candidates for director in accordance with the above described standards specified by the Corporate Governance Guidelines. See each nominee’s biography appearing later in this proxy statement for a description of the specific experience that each such individual brings to our Board.

Our Corporate Governance Guidelines additionally specify that directors should be able and prepared to provide wise and thoughtful counsel to top management on the full range of potential issues facing us. Directors must possess the highest personal and professional integrity. 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.

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The Nominating and Governance Committee will consider a shareholder’s recommendation for director but has no obligation to recommend such candidates for nomination by the Board of Directors. Assuming that appropriate biographical and background 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 send 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 an Annual General Meeting, that shareholder must comply with Article 14 of AGL’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 2018 Annual General Meeting. With respect to the 2019 Annual General Meeting, AGL must receive such written notice on or prior to February 1, 2019. Such notice must describe the nomination in sufficient detail to be summarized on the agenda for the meeting and must set forth:

COMMITTEES OF THE BOARD

The Board of Directors has established an Audit Committee, a Compensation Committee, a Finance Committee, a Nominating and Governance Committee, a Risk Oversight Committee and an Executive Committee.

The Audit Committee provides oversight of the integrity of our Company’s financial statements and financial reporting process, our compliance with legal and regulatory requirements (including cybersecurity requirements), the system of internal controls, the audit process, the performance of our internal audit program and the performance, qualification and independence of the independent auditor.

The Audit Committee is composed entirely of directors who are independent of our Company and management, as defined by the NYSE listing standards.

The Board has determined that each member of the Audit Committee satisfies the financial literacy requirements of the NYSE and, except for Mr. Kreczko, is an audit committee financial expert, as that term is defined under Item 407(d) of the SEC’s Regulation S-K. For additional information about the qualifications of the Audit Committee members, see their respective biographies set forth in “Proposal No. 1: Election of Directors.”

The Compensation Committee has responsibility for evaluating the performance of our CEO and senior management and determining executive compensation in conjunction with the independent directors. The Compensation Committee also works with the Nominating and Governance Committee and our CEO on succession planning.

The Compensation Committee is composed entirely of directors who are independent of our Company and management, as defined by the NYSE listing standards.

The Compensation Committee’s meetings included discussions with Cook to review executive compensation trends and peer group compensation data and to evaluate the risk of our executive compensation program.

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The Finance Committee of the Board of Directors oversees management’s investment of our Company’s investment portfolio, including in alternative investments. The Finance Committee also oversees, and makes recommendations to the Board with respect to, our capital structure, dividends, financing arrangements, investment guidelines, potential alternative investments and any corporate development activities.

The responsibilities of the Nominating and Governance Committee include identifying individuals qualified to become Board members, recommending director nominees to the Board and developing and recommending corporate governance guidelines. The Nominating and Governance Committee also has responsibility to review and make recommendations to the full Board regarding director compensation. In addition to general corporate governance matters, the Nominating and Governance Committee assists the Board and the Board committees in their self-evaluations. The Nominating and Governance Committee is composed entirely of directors who are independent of our Company and management, as defined by the NYSE listing standards.

The Risk Oversight Committee oversees management’s establishment and implementation of standards, controls, limits, guidelines and policies relating to risk assessment and enterprise risk management. The Risk Oversight Committee focuses on both the underwriting and surveillance of credit risks and the assessment and management of other risks, including, but not limited to, financial, legal, operational (including cybersecurity) and other risks concerning our Company’s reputation and ethical standards.

The Executive Committee was established to have, and to exercise, certain of the powers and authority of the Board in the management of the business and affairs of our Company between regularly scheduled meetings of the Board when, in the opinion of a quorum of the Executive Committee, a matter should not be postponed to the next scheduled meeting of the Board. The Executive Committee’s authority to act is limited by our Company’s Bye-Laws, rules of the NYSE and applicable law and regulation and the Committee’s charter.

HOW ARE DIRECTORS COMPENSATED?

In 2017, our Nominating and Governance Committee engaged Cook to conduct a comprehensive review and assessment of our independent director compensation program. Cook reviews this program periodically. Cook evaluated the director compensation by comparing it against the compensation awarded to directors of companies in our executive compensation comparison group. (The compensation comparison group is discussed below under “Compensation Discussion and Analysis–Compensation Governance–Executive Compensation Comparison Group”.) Cook also looked at a broader market segment using data from Cook’s report regarding compensation packages for public company independent directors for 2016, the most recent year for which information was available. Cook again found that the structure of our director compensation program was generally consistent with peer group policies and best practice design as recognized by the proxy advisory firms and investors, noting:

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Cook found that the percentage of our independent director compensation paid in equity was below the median of the comparison group practice of 61%, while the retainer for the non-executive Chairman was at the 25^th percentile of the comparison group practice. Cook recommended that the non-executive Chairman retainer should be reviewed for reasonableness and appropriateness in light of the strategic importance of the position to our Company, the skill set and experience of the Chairman, and the expected time commitment.

After considering Cook’s market data, analysis and recommendations, the Nominating and Governance Committee made two changes to the independent director compensation in light of the expanding scope of the Company’s business as well as the time commitment associated with attending Board meetings in the U.K. The Nominating and Governance Committee increased the equity portion of the annual retainer of our independent directors by $25,000. We now pay $145,000 of the retainer in restricted stock, and $120,000 of the retainer in cash, for a total annual retainer of $265,000. The Nominating and Governance Committee also increased the annual retainer paid to the non-executive Chairman, which had not been increased for several years and, as a result, was at the 25th percentile of the peer group practice. In 2017, the Chairman’s annual retainer was increased from $125,000 to $225,000. A director may elect to receive his or her entire annual retainer (plus the additional amounts described below) in restricted stock.

The restricted stock vests on the day immediately prior to the next Annual General Meeting following the grant of the stock. However, if, prior to such vesting date, either (i) a change in control (as defined in the Assured Guaranty Ltd. 2004 Long-Term Incentive Plan, as amended) of Assured Guaranty Ltd. occurs before the director terminates service on the Board or (ii) the director terminates service on the Board as a result of such director’s death or disability, then the restricted stock will vest on the date of such change in control or the date of the director’s termination of service, whichever is applicable. Grants of restricted stock receive cash dividends and have voting rights; the cash dividends accrue during the vesting period and are paid upon vesting.

In addition to the annual retainers described above:

The Company generally will not pay a fee for attendance at Board or committee meetings, although the Chairman of the Board has the discretion to pay attendance fees of $2,000 for extraordinary or special meetings. There were no extraordinary or special meetings of the Board in 2017. We do not pay a fee for being a member, or attending meetings, of the Executive Committee.

In addition to the annual retainers paid to independent directors, Cook also reviewed the director stock ownership requirements. Cook noted that because the director stock ownership guidelines are expressed as the greater of 25,000 shares or a multiple of the cash portion of the non-employee director retainer, the dollar value of the ownership requirement fluctuates based on changes in our Company’s stock price until the ownership guideline is met. Cook found that the ownership requirement expressed as a multiple of the cash retainer and as a dollar value is above the 75th percentile of the peer group practice, and above the ISS best practice of five times the current annual cash retainer. Cook suggested the Nominating and Governance Committee consider moving to a guideline of five times the current annual cash retainer with no minimum share ownership requirement. The Nominating and Governance Committee considered Cook’s suggestion and increased the share ownership guidelines to five times the current cash annual retainer to be consistent with best practices but did not eliminate the 25,000 share ownership component since doing so would reduce the share ownership guideline.

As recently revised, our share ownership guidelines require that each independent director own the greater of (i) at least 25,000 Common Shares or (ii) Common Shares with a market value of at least five times the maximum cash portion of the annual director retainer, before being permitted to dispose of any shares acquired as compensation from our Company. Once a director has reached the share ownership guideline, for so long as he or she serves on the Board, such director may not dispose of any Common Shares if such disposition would cause the director to be below the share ownership guideline. Common Shares that had been restricted but subsequently vested and purchased Common Shares count toward the share ownership guideline. Our four longest serving independent directors meet our share ownership guidelines. Our five newer Board members (Ms. Howard, who joined the Board in August 2012; Mr. Leathes, who joined the Board in May 2013; Ms. Omura, who joined the Board in May 2014; and Messrs. Jones and Kreczko, who joined the Board in August 2015) are accumulating Common Shares toward their ownership goals.

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The following table sets forth our 2017 independent director compensation, including the compensation for the directors’ committee assignments as of such date.

The following table shows information related to independent director equity awards outstanding on December 31, 2017:

WHAT IS OUR BOARD LEADERSHIP STRUCTURE?

Our current Chairman of the Board is Francisco L. Borges. The position of CEO is held by Dominic Frederico.

While the Board has no fixed policy with respect to combining or separating the offices of Chairman of the Board and CEO, those two positions have been held by separate individuals since our 2004 initial public offering. We believe this is the appropriate leadership

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structure for us at this time. Mr. Borges and Mr. Frederico have had an excellent working relationship, which has continued to permit Mr. Frederico to focus on running our business and Mr. Borges to focus on Board matters, including oversight of our management. Mr. Borges and Mr. Frederico collaborate on setting agendas for Board meetings to be sure that the Board discusses the topics necessary for its oversight of the management and affairs of our Company. As Chairman of the Board, Mr. Borges sets the final Board agenda and chairs Board meetings, including executive sessions at which neither our CEO nor any other member of management is present. The Chairman of the Board also chairs our Annual General Meetings.

HOW DOES THE BOARD OVERSEE RISK?

The Board’s role in risk oversight is consistent with our leadership structure, with our CEO and other members of senior management having responsibility for assessing and managing risk exposure and the Board and its committees providing oversight in connection with these activities. Our Company’s policies and procedures relating to risk assessment and risk management are overseen by our Board. The Board takes an enterprise-wide approach to risk management that is designed to support our business plans at a reasonable level of risk. A fundamental part of risk assessment and risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for us. The Board annually approves our business plan, factoring risk management into account. The involvement of the Board in setting our business strategy is a key part of its assessment of management’s risk tolerance and also a determination of what constitutes an appropriate level of risk for us.

While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk assessment and risk management. As discussed under “Committees of the Board,” the Board has created a Risk Oversight Committee that oversees the standards, controls, limits, guidelines and policies that our Company establishes and implements in respect of credit underwriting and risk management. It focuses on management’s assessment and management of both (i) credit risks and (ii) other risks, including, but not limited to, financial, legal and operational risks (including cybersecurity risks), and risks relating to our reputation and ethical standards. Our Risk Oversight Committee and Board pay particular attention to credit risks we assume when we issue financial guaranties or engage in strategic transactions. In addition, the Audit Committee of the Board of Directors is responsible for reviewing policies and processes related to the evaluation of risk assessment and risk management, including our major financial risk exposures and the steps management has taken to monitor and control such exposures. It also reviews compliance with legal and regulatory requirements. The Finance Committee of the Board of Directors oversees the investment of the Company’s investment portfolio and the Company’s capital structure, financing arrangements and any corporate development activities in support of the Company’s financial plan. The Nominating and Governance Committee of the Board of Directors oversees risk at the Company by developing appropriate corporate governance guidelines and identifying qualified individuals to become board members.

As part of its oversight of executive compensation, the Compensation Committee reviews compensation risk. The Compensation Committee oversaw the performance of a risk assessment of our employee compensation program to determine whether any of the risks arising from our compensation program are reasonably likely to have a material adverse effect on us. Since January 2011, the Compensation Committee has retained Cook to perform an annual review of each of our compensation plans and identify areas of risk and the extent of such risk. The Compensation Committee directs that our Chief Risk Officer work with Cook to perform such risk assessment and to be sure that compensation risk is included in our enterprise risk management system. In conducting this assessment, Cook performs a systemic, qualitative review of all of our incentive compensation programs and reviews its findings with our Chief Risk Officer for completeness and accuracy. Cook seeks to identify any general areas of risk or potential for unintended consequences that exist in the design of our compensation programs and to evaluate our incentive plans relative to our enterprise risks to identify potential areas of concern, if any.

Cook undertook a compensation risk assessment most recently in February 2018 and concluded that our incentive plans are well-aligned with sound compensation design principles and do not encourage behaviors that would create material risk for our Company. Our Chief Risk Officer reviewed their findings and agreed with their conclusion. Based on this update, the Compensation Committee continued to find that there is an appropriate balance between the risks inherent in our business and our compensation program.

COMPENSATION COMMITTEE INTERLOCKING AND INSIDER PARTICIPATION

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

WHAT IS OUR RELATED PERSON 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 our 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 5% shareholders. No member of these committees who has an interest in a transaction being reviewed is allowed to participate in any decision regarding any such transaction.

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Our Nominating and Governance Committee charter requires the Nominating and Governance Committee to review and approve or disapprove 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 our Company that exceeds $120,000 per fiscal year. The Nominating and Governance 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 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 regarding such transactions, which our General Counsel provides to the Audit Committee periodically, and not less often than annually, regarding transactions with any persons owning more than 5% of any class of the voting securities of AGL 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:

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 into the transaction or, if that timing is not practical, we ask the appropriate committee to ratify the transaction.

WHAT RELATED PERSON TRANSACTIONS DO WE HAVE?

From time to time, institutional investors, such as large investment management firms, mutual fund management organizations and other financial organizations become beneficial owners (through aggregation of holdings of their affiliates) of 5% or more of a class of our voting securities and, as a result, are considered “related persons” under the SEC’s rules. These organizations may provide services to us. In 2017, the following transactions occurred with investors who reported beneficial ownership of 5% or more of our voting securities.

As indicated in “Which Shareholders Own More Than 5% of Our Common Shares,” Wellington Management Group LLP, which we refer to as Wellington Management, and BlackRock, Inc., which we refer to as BlackRock, own approximately 8.25% and 5.18% of AGL’s Common Shares outstanding, respectively, as of March 8, 2018, based on the amount of Common Shares they reported in their Schedule 13G filings. We appointed both Wellington Management and BlackRock as investment managers to manage certain of our investment accounts prior to their reaching such ownership thresholds. As of December 31, 2017, Wellington Management managed approximately $2.3 billion of our investment assets, which is approximately 20% of our total fixed maturity and short-term investment portfolio, and BlackRock managed approximately $2.4 billion of our investment assets, which is approximately 21% of our total fixed maturity and short-term investment portfolio. In 2017, we incurred expenses of approximately $1.8 million related to our investment management agreement with Wellington Management and $2.3 million with respect to our investment management and investment reporting agreements with BlackRock.

In addition, as previously disclosed, we repurchased 297,131 common shares from our CEO and 23,062 common shares from our then General Counsel on January 6, 2017 at a per share price equal to $38.73, the closing price of one of our Common Shares on the New York Stock Exchange on such date, with our CEO receiving aggregate proceeds of $11,507,883.63 and our then General Counsel receiving aggregate proceeds of $893,191.26 from such repurchases. Our CEO and then General Counsel also separately received 297,131 and 23,062 Common Shares, respectively, on January 6, 2017 in settlement of 297,131 share units and 23,062 share units which such officers held in the employer stock fund of the Assured Guaranty Ltd. Supplemental Employee Retirement Plan that were required to be distributed in January 2017 to comply with requirements of Sections 409A and 457A of the Internal Revenue Code of 1986, as amended.

DID OUR INSIDERS COMPLY WITH SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING IN 2017?

Our executive officers and directors are subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. 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 year 2017.

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PROPOSAL NO. 1: ELECTION OF DIRECTORS

GENERAL

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. The Board may appoint any person as a director to fill a vacancy on the Board occurring as the result of any existing director being removed from office pursuant to the Bye-Laws or prohibited from being director by law; being or becoming bankrupt or making any arrangement or composition with his or her creditors generally; being or becoming disqualified, of unsound mind, or dying; or resigning. The Board may also appoint a person as a director to fill a vacancy resulting from an increase in the size of the Board or a vacancy left unfilled at an Annual General Meeting.

Our Board currently consists of 10 members. Following the recommendation of the Nominating and Governance Committee, our Board of Directors has nominated Francisco L. Borges, G. Lawrence Buhl, Dominic J. Frederico, Bonnie L. Howard, Thomas W. Jones, Patrick W. Kenny, Alan J. Kreczko, Simon W. Leathes, Michael T. O’Kane and Yukiko Omura as directors of AGL. Proposal No. 1 is Item 1 on the proxy card.

Our directors are elected annually to serve until their respective successors shall have been elected.

		The board of directors recommends that you vote “FOR” the election of the nominees as directors of AGL.

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.

We have set forth below information with respect to the nominees for election as directors. 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.

DIRECTOR TENURE 8.7 YEARS Average Tenure 5 4 1 0-5 years 6-10 years 11-15 years

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NOMINEES FOR DIRECTOR

Francisco L. Borges   Chairman of the Board   Director Since: 2007   Committee Memberships:       Nominating and Governance (Chair),       Executive (Chair)

 

 

 

 

 

Qualifications:

Mr. Borges has expertise in finance arising from his experience structuring and marketing financial guaranty insurance. In addition, his public service background has given him insight on public finance. His current position gives Mr. Borges insights into the financial markets in which our Company operates. Each of these areas is important to our business.

Biography:

Mr. Borges, age 66, became a director of AGL in August 2007, and has been Chairman of our Board of Directors since May 2015. He is Chairman of Landmark Partners, LLC, an alternative investment management firm where he has been employed since 1999. Prior to joining Landmark, Mr. Borges was managing director of GE Capital’s Financial Guaranty Insurance Company and capital markets subsidiaries. Mr. Borges is a former Treasurer for the State of Connecticut and a former Deputy Mayor of the City of Hartford, Connecticut.

Mr. Borges serves on the board of directors for Connecticut Public Broadcasting Network, the Knight Foundation, and Millbrook School. He is also a member of the board of directors of Davis Selected Funds, where he serves on the Pricing Committee, and Leucadia National Corporation, where he serves on the Audit Committee and the Nominating and Governance Committee.

G. Lawrence Buhl   Independent Director   Director Since: 2004   Committee Memberships:       Audit (Chair),       Compensation

 

 

 

 

 

Qualifications:

Mr. Buhl’s insurance and Board experience and his knowledge of specific financial reporting requirements applicable to financial guaranty companies and familiarity with compliance, finance, governance, control environment and risk management requirements and processes for public companies and the financial guaranty industry benefit the Board in its deliberations and oversight.

Biography:

Mr. Buhl, age 71, became a director of AGL upon completion of our 2004 initial public offering. Through 2003, Mr. Buhl served as the Regional Director for Insurance Services in Ernst & Young LLP’s Philadelphia, New York and Baltimore offices and as audit engagement partner for insurance companies, including those in the financial guaranty industry.

Mr. Buhl began in 2004 to serve as a director for Harleysville Group, Inc. (NASDAQ: HGIC) and its majority shareholder, Harleysville Mutual Insurance Company, through their 2012 merger/combination with Nationwide Mutual Insurance Company and served on an Advisory Board to Nationwide through April 2014. Mr. Buhl has been a member of the Board of Directors of Penn National Insurance Group in Harrisburg, PA since April 2015 and is also an emeritus member of the Board of Sponsors of the Sellinger School of Business and Management of Loyola University Maryland.

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Dominic J. Frederico   Chief Executive Officer   Director Since: 2004   Committee Memberships:   Executive

 

 

 

 

 

Qualifications:

Mr. Frederico has the most comprehensive knowledge of all aspects of our operations as well as executive experience. He also has extensive industry experience, which makes him valuable both as an officer and as a director of AGL.

Biography:

Mr. Frederico, age 65, has been a director of AGL since our 2004 initial public offering, and the President and Chief Executive Officer of AGL since 2003. Mr. Frederico served as Vice Chairman of ACE Limited from 2003 until 2004 and served as President and Chief Operating Officer of ACE Limited and Chairman of ACE INA Holdings, Inc. from 1999 to 2003. Mr. Frederico was a director of ACE Limited from 2001 through May 2005. From 1995 to 1999 Mr. Frederico served in a number of executive positions with ACE Limited. Prior to joining ACE Limited, Mr. Frederico spent 13 years working for various subsidiaries of the American International Group.

 

Bonnie L. Howard   Independent Director   Director Since: 2012   Committee Memberships:   Risk Oversight (Chair),   Nominating and Governance

 

 

 

 

 

Qualifications:

Ms. Howard’s background in audit, finance and enterprise risk management is valuable to the Board in its oversight of our financial reporting and credit and risk management policies.

Biography:

Ms. Howard, age 64, became a director of AGL in August 2012. Ms. Howard has more than 30 years of experience in credit, risk management and financial reporting policies. She worked at Citigroup, Inc. from 2003 to 2011, serving as Chief Auditor from 2004 to 2011 and Global Head of Control and Emerging Risk from 2010 to 2011, leading a team of over 1,500 professionals covering $1.9 trillion of assets in over 100 countries, until her retirement in 2011. She was previously Managing Director of Capital Markets Audit at Fleet Boston Financial and a Managing Director at JPMorgan in the roles of Deputy Auditor and head of Global Markets Operational Risk Management. Ms. Howard is a certified public accountant in the United States and has over a decade of experience with KPMG and Ernst & Young.

Ms. Howard currently serves on the board of directors of BMO Financial Corp., where she is a member of the Audit Committee, and the board of directors of BMO Harris Bank N.A., where she chairs the Directors’ Trust Committee and the Audit Committee. Ms. Howard also serves on the board of directors of Artisan Partners Fund.

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INFORMATION ABOUT OUR COMMON SHARE OWNERSHIP

HOW MUCH STOCK IS OWNED BY DIRECTORS AND EXECUTIVE OFFICERS?

The following table sets forth information, as of March 8, 2018, the record date for our Annual General Meeting, regarding the beneficial ownership of our Common Shares by our directors and executive officers whose compensation is reported in the compensation tables that appear later in this proxy statement, to whom we refer as our named executive officers, and by the group comprising our directors, and those persons who, as of December 31, 2017, constituted our named executive officers and other executive officers. 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 1% of our outstanding Common Shares, except that Mr. Frederico beneficially owns approximately 1.39% of our Common Shares. The Common Shares beneficially owned by all directors, named executive officers and other executive officers as a group constitute approximately 2.54% of our outstanding Common Shares.

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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 the close of business on March 8, 2018, the record date for the Annual General Meeting, except to the extent indicated. On March 8, 2018, 114,967,800 Common Shares were outstanding, including 50,225 unvested restricted Common Shares. 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.

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

    CD&A ROADMAP

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SUMMARY

Our executive compensation program is designed to attract and retain talented and experienced business leaders who drive our corporate strategies and build long-term shareholder value.

The guiding principles of our program are:

We assess performance using pre-established measures of success that are tied to our key business strategies. We encourage balanced performance, measured relative to financial, non-financial and share price goals, and discourage excessive risk taking or undue leverage by avoiding too much emphasis on any one metric or on short-term results.

Our Compensation Committee determines our executive officers’ compensation in February of each year, with much of the compensation based on quantitative and qualitative performance goals, objectives and formulas established at the beginning of the relevant year for performance during that year, which we refer to as our performance year. Accordingly, in February 2018 our Compensation Committee determined our executive officers’ performance-based cash awards, performance-based equity awards and time-based equity awards based on their performance during the 2017 calendar year, which we refer to as the 2017 performance year. These compensation components are backward-looking, in the sense that they reflect performance in the just completed performance year. Also in February 2018, our Compensation Committee set our executive officers’ base salaries, which are forward-looking, in the sense that they are intended to motivate the recipients during the year in which they are paid, and established the quantitative and qualitative performance goals for the upcoming 2018 performance year.

2017 Highlights

In 2017, our shareholders’ equity per share, non-GAAP operating shareholder’s equity* per share and non-GAAP adjusted book value* per share all reached record levels, at $58.95, $56.20 and $77.74, respectively. Our growth in shareholder’s equity per share was 16% and our growth in non-GAAP adjusted book value* per share was $11.28, the largest one-year dollar increase in our history. Our net income for the year was $730 million, or $5.96 per share, and our non-GAAP operating income* was $661 million, or $5.41 per share, even after taking a tax expense of $61 million against our net income and $35 million against our non-GAAP operating income for the estimated impact of the 2017 Tax Cut and Jobs Act, which we refer to as the 2017 Tax Act.

These results were driven in part by our successful pursuit of all four of our primary business strategies:

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We achieved these results despite a persistently challenging business environment.

The achievements described in this section were important considerations in determining the compensation of our named executive officers for the 2017 performance year.

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Our Total Shareholder Return

After the price of our Common Shares reached $45.38 in the summer of 2017, the highest since our 2004 initial public offering, the price fell in the aftermath of the landfall of Hurricane Maria in the Commonwealth of Puerto Rico in September 2017, ending 2017 at $33.87 compared to $37.77 at year-end 2016. Despite this, the total shareholder return, which we refer to as TSR, on our Common Shares has been admirable over the last several years in relation to relevant S&P index measures and our comparison group.

The table and chart below depict the dollar change in the cumulative TSR on our Common Shares from December 31, 2012 through December 31, 2017 as compared to the cumulative total return of the Standard & Poor’s 500 Stock Index and the cumulative total return of the Standard & Poor’s 500 Financials Index over the same period. The table and chart depict the value on December 31 of each year from 2012 through 2017 of a $100 investment made on December 31, 2012, with all dividends reinvested:

Calculated from total returns published by Bloomberg.

Our 21.04% per annum five-year TSR exceeded the S&P 500 Index’s 15.79% per annum return and the S&P 500 Financial Index’s 18.19% per annum return over the same period.

Our cumulative TSR also exceeded the average cumulative TSR of our comparison group over the last two, three and five years, despite our negative one-year TSR, which we attribute primarily to developments related to Puerto Rico. Our comparison group is described on page 44 under “Executive Compensation Comparison Group.”

Total Shareholder Return Comparison

Calculated from total returns published by Bloomberg.

Cumulative Total Shareholder Return S&P 500 Financial Index S&P 500 Index Assured Guaranty

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2017 Results Against Targets

The Compensation Committee attributed the disappointing one-year TSR result primarily to developments related to Puerto Rico, including the impact of the landfall of Hurricane Maria. The Compensation Committee believed it was therefore particularly important to measure our success in creating value using other available objective measures.

In February 2017, the Compensation Committee established targets for five financial performance goals for our executive officers for the 2017 performance year. The financial performance goals were based on the business plan that the Board of Directors reviewed and approved in November 2016 and were designed to measure our progress in creating value for our shareholders. The financial performance goals use the same measures as those that the Compensation Committee used when assessing the executive officers’ achievements for the 2014 through 2016 performance years. We believe the price of our Common Shares will reflect the progress these targets measure once there is less uncertainty regarding the outcome in Puerto Rico.

Page 31 under “Executive Compensation Program Structure and Process” contains a detailed description of the financial performance goals, and why the Compensation Committee considers them to be important in assessing our Company and our executive officers’ performance. All of these are non-GAAP financial measures. We refer to four of these financial measures as “core” to distinguish them from other similar non-GAAP financial measures that have not been adjusted to exclude the impact of consolidating financial guaranty variable interest entities, which we refer to as FG VIEs. The four “core” measures have been adjusted to exclude the impact of consolidating FG VIEs. Page 48 under “Non-GAAP Financial Measures” contains a description of the adjustments we make to the most comparable GAAP financial measures to arrive at these measures.

The Compensation Committee considered the unique earnings model of the financial guaranty industry in designing its five financial performance goals for our executive officers. When a financial guarantor writes a new financial guaranty policy, it does not earn the full amount of the premium immediately; rather, the premium for the policy is earned over the period of the policy, often as long as twenty or thirty years. In 2017, for example, only approximately 5% of the premiums we earned related to new financial guaranty policies we wrote in 2017. As a consequence, the premiums a financial guarantor earns in a year are primarily related to business it has written over a long period, in our case decades. Such earnings may be accelerated in the event insured public finance obligations are refunded and when the insurance on insured structured finance obligations is canceled or terminated, but such acceleration also reduces earnings from the current portfolio for future periods. Our earnings in a particular year may also be impacted by, among other things, strategic activities such as acquisitions or reassumptions of previously ceded insured par and changes in investment income, loss reserves and expenses. However, the volume and pricing of new business written in a year has only a small impact on premium earnings for that year. As a consequence, we set a target for PVP, which more directly measures business production during the year. We also want to encourage our executive officers to build intrinsic value in our Company over time for our shareholders, so we set targets for core operating shareholder’s equity per share and core adjusted book value per share. We also set targets for core operating income per diluted share and core operating return on equity, but since most of our financial guaranty earnings in a year are derived as a result of insurance policies written in previous decades, we set those targets in relation to our projections of earnings on the existing inforce portfolio rather than in relation to the previous year’s results or targets.

We significantly exceeded four out of five of our targets and, if either (a) the price of our Common Shares had not increased in the middle of the year and we had been able to repurchase the number of Common Shares we originally projected we would with $500 million, or (b) if it had not been for the 2017 Tax Act (which was adopted well after the goals were established), we would have exceeded them all. The table below summarizes our 2017 results against the targets.

The Compensation Committee viewed all of the 2017 targets for the financial performance goals as challenging in light of current market conditions, particularly interest rate levels. It had set all of the 2017 targets above the comparable 2016 targets (except core operating return on equity, which we refer to as ROE) and above the comparable 2016 actual results (except core operating income per diluted share and core operating ROE).

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Our Compensation Committee set our 2017 targets for core operating income per diluted share above our 2016 target but lower than 2016 actual results and core operating ROE lower than our 2016 target and our 2016 actual results in large part due to the nature of a financial guarantor’s earnings, as described above. As a result of the amortization of the insured portfolio from 2016, we projected lower premium earnings in 2017 regardless of the amount of new financial guaranty insurance we originated in 2017. We also project potential public finance refundings, which we refer to as refundings, based on the volume of insured bonds reaching the dates beyond which they can be redeemed (generally ten years after issuance) and the level of interest rates currently compared to ten years ago. Based on these factors, we projected lower refundings for 2017 than we had experienced in 2016. We also determined that, with the amortization of our structured finance portfolio, particularly the portion written in credit default swap form, there were few remaining opportunities for cancellation or termination of the insurance on such structured finance obligations, which we refer to as terminations. Finally, we noted that our purchase of CIFG Holding Inc., which we refer to as CIFG, in 2016 significantly impacted our 2016 earnings and that our ability to consummate strategic transactions with similarly significant impacts in 2017 was uncertain. As a result, the Compensation Committee determined that the targets it set for these two financial measures would be difficult to attain despite being lower than the 2016 actual results and in one case lower than the 2016 target.

The Compensation Committee was aware that, given the anticipated decline of earned premium and the uncertainty of acquisition and other strategic transactions, the executive officers also would be required to manage losses and make strategic moves to meet all of the targets except for PVP.

As noted above, in 2017, we exceeded all but one of the 2017 targets for the financial performance goals and, had it not been for the increase in our Common Share price, which caused us to repurchase fewer shares than we had planned although we met our goal of repurchasing $500 million of Common Shares, or the impact of the 2017 Tax Act, we would have exceeded all of the targets:

Given that we would have achieved our core operating shareholders’ equity per share financial performance goal if either the price of our Common Shares had not risen in the middle of the year as much as it did or if the 2017 Tax Act had not been enacted, neither of which was in the control of our senior management, the Compensation Committee viewed the target as substantially met and awarded an achievement score of 95% for this financial performance goal.

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The weighted average achievement score resulting from the Company’s success in exceeding all but one of its financial performance goals in 2017 was 83.8%, as described under “CEO Performance Review–Cash Incentive”, and constituted two-thirds of each executive officer’s total achievement score used to calculate that executive officer’s cash incentive compensation amount.

Our executive officers achieved these results despite a persistently challenging business environment that included low interest rates, tight credit spreads and competition in some markets.

Snapshot of Our CEO’s 2017 Compensation

For 2017, approximately 89% of Mr. Frederico’s compensation constituted incentive compensation: 39% was in the form of a performance-based cash incentive that was awarded based on measuring performance against financial performance goals and non-financial objectives set at the beginning of the year, and 50% was in the form of a long-term equity-based incentive, with half of that award subject to achieving pre-established share price hurdles. The allocation between fixed and incentive compensation, and between performance-based cash incentive and long-term equity-based incentive compensation, for the 2017 performance year is consistent with the allocation for the 2016 performance year.

Mr. Frederico received a compensation package for the 2017 performance year 3.4% higher than he received for the 2016 performance year. The increase reflects Mr. Frederico’s considerable accomplishments with respect to the financial performance goals as well as his non-financial objectives, but also takes into account our negative one-year TSR. The Compensation Committee concluded that, in light of our one-year TSR, it was appropriate that Mr. Frederico’s cash incentive of $4,525,000 for the 2017 performance year and his base salary for 2018 largely remain the same as the prior year.

Most of the 3.4% increase in Mr. Frederico’s compensation package for the 2017 performance year was due to the 4.5% increase in his long-term equity award, reflecting Mr. Frederico’s achievements over 2017, including especially our Company’s success in exceeding all but one of the financial performance goals established by the Compensation Committee, in certain cases substantially; and due to the 8.7% increase in his base salary for 2017, which was awarded at the beginning of the 2017 performance year based on Mr. Frederico’s accomplishments during the 2016 performance year and the importance of maintaining his strategic leadership in the future.

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Mr. Frederico’s compensation packages for 2017 and 2016 were composed of the following:

EXECUTIVE COMPENSATION PROGRAM STRUCTURE AND PROCESS

Overview of Philosophy and Design

Our executive compensation program is designed to recognize and reward outstanding achievement and to attract, retain and motivate the talented individuals needed to lead and grow our Company’s business. We maintain an ongoing dialog with our shareholders and incorporate their feedback into our program so that the program is aligned with their interests.

We Align Pay With Performance

Our program rewards performance by having more variable and performance-based compensation at the most senior levels. We use a mix of variable at-risk compensation with different time horizons and payout forms to provide an incentive for both annual and long-term sustained performance, in order to maximize shareholder value in a manner consistent with our Company’s risk parameters. The Compensation Committee assesses the performance of our executive officers from both a financial and a non-financial perspective, using pre-established goals.

Our executive officers can receive a cash incentive, which is performance-based. They can also receive a long-term equity incentive, 50% of which is performance-based and cliff vests at the end of a three-year performance period if we achieve particular average share price targets, and 50% of which is time-based and cliff vests at the end of a three-year period. The long-term equity incentive is structured to encourage retention and a long-range mindset.

Executive Compensation Is Closely Tied To Long-Term Performance

The compensation program is structured with upside potential for superior executive achievements, but also the possibility of reduced compensation if executives are unable to successfully execute our Company’s strategies. By increasing management’s motivation to enhance shareholder value over the long term, our compensation program aligns executive officer and shareholder interests.

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For the 2017 performance year, the compensation package for the executive officers contains three principal elements.

Shareholder Outreach on Our Executive Compensation Program

For the past several years, we have been actively engaging with our shareholders in order to obtain their feedback on our executive compensation program. Beginning in the fall, we contact our large shareholders to invite them to speak directly with the chairman of the Compensation Committee.

We believe our shareholders support our executive compensation program. At each of our last three Annual General Meetings, investors holding over 98% of the Common Shares voting approved our say-on-pay proposal. Both of the proxy advisory firms of Institutional Shareholder Services Inc. and Glass, Lewis & Co. LLC also recommended that our investors vote in support of our say-on-pay proposal.

Even with the strong support that our executive compensation program received at our three most recent advisory votes, as the Compensation Committee began to determine compensation for the 2017 performance year, we again sought to engage with our shareholders to discuss their concerns and recommendations. We contacted holders of an aggregate of 67% of our Common Shares and invited them to speak with Mr. Kenny, the chairman of the Compensation Committee. While none of those holders accepted our invitation to speak to Mr. Kenny this year, the holders of an aggregate of approximately 34% of our Common Shares specifically responded that they did not need to speak with us because they were comfortable with the executive compensation program. The investors we spoke to indicated they were generally pleased with the executive compensation program and with management’s performance, and on the whole found the program to reward management appropriately. Most shareholders were not prescriptive about plan design, and instead were more interested in seeing that results were aligned appropriately with performance. Certain shareholders supported tying long-term incentive compensation to the price of our Common Shares while others supported looking at other performance measures.

Our Compensation Committee takes the feedback from our shareholders into consideration when making its compensation decisions.

The Decision-Making Process

The Compensation Committee, composed solely of independent directors, is responsible for all decisions about our executive officer compensation. The Compensation Committee works closely with Cook, the Chairman of the Board and management to examine pay and performance matters throughout the year, and consults with the Board prior to making final compensation decisions.

The Compensation Committee conducts in-depth reviews of performance and then applies judgment to make compensation decisions. The Compensation Committee believes its process, described below, is an effective way to assess the quality of performance, risk management and leadership demonstrated by Mr. Frederico and the senior management team.

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In making its compensation decisions, the Compensation Committee follows a five-step approach:

The Compensation Committee considers Cook’s analysis of the compensation paid to executive officers in our comparison group when evaluating the compensation of our executive officers.

Components of Our Executive Compensation Program

For the 2017 performance year, the compensation package for the executive officers consists of three principal elements: base salary, cash incentive compensation and long-term equity incentives. Our practice is to review the components of our executive officer compensation separately and monitor the total of the various components. We consider each component and the total against our compensation objectives described in “Overview of Philosophy and Design.” Decisions related to one compensation component (e.g., cash incentive compensation) generally do not materially affect decisions regarding any other component (e.g., long-term equity incentives) because the objectives of each element differ. Positions at higher levels generally have a greater emphasis on variable pay elements, although no specific formula, schedule or structure is currently applied in establishing the percentage of total compensation delivered through any compensation element.

Base Salary

The Compensation Committee establishes each executive officer’s base salary in consultation with Cook. We believe base salary is necessary to attract and retain key executives by providing appropriate compensation that is based on position, experience, scope of responsibility and performance. Base salary provides liquidity to our executive officers and balances the levels of guaranteed pay with at-risk pay to properly manage our compensation-related risk. The amount is based on the executive officer’s responsibilities, skills and experience, as well as market measures. The level of an executive officer’s base salary reflects the Compensation Committee’s view of the contribution that executive officer has consistently made to our Company’s success over several years, the continuing importance of that executive officer to our Company’s future, and the difficulty and expense of replacing the executive officer with one of a similar

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caliber. The Compensation Committee does not guarantee salary adjustments on an annual basis. Base salary is set at the beginning of the year and is paid to the executive officers for ongoing performance throughout the year. For the 2017 performance year, the Compensation Committee established the base salary in February 2017.

Cash Incentive Compensation

Unlike base salary, which is set at the beginning of the year in which it is paid, cash incentive compensation is determined after the end of the performance year to which such compensation relates. For the 2017 performance year, the Compensation Committee determined the amount of the cash incentive compensation in February 2018.

The Compensation Committee uses a formula to award cash incentive compensation in order to enhance the transparency of our process. The amount of cash incentive compensation is determined based on the extent to which the executives achieve certain pre-established performance targets. The Compensation Committee has used a two-step process for granting and paying annual cash incentive compensation awards to our executive officers as detailed below, although changes made by the 2017 Tax Act may make the first step unnecessary in future years as described in greater detail under “Tax Treatment” below.

For the first step, in order for the payment of cash incentive compensation to qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, which we refer to as the Internal Revenue Code, the Compensation Committee annually establishes a performance goal based on performance metrics, and awards the cash incentive to the executive officers pursuant to the Assured Guaranty Ltd. 2004 Long-Term Incentive Plan, as amended (LTIP), subject to such performance goal being met. If the performance goal is not met, no cash incentive will be awarded to the executive officers for such year. If the performance goal is met, a cash pool is established pursuant to which payments can be made to the executive officers subject to limitations contained in the LTIP and to further limitations established by the Compensation Committee in the grant. For the 2017 performance year, the performance goal for this first step was established in November 2016 and the Compensation Committee determined the extent to which it had been met in February 2018.

For the second step, if the Section 162(m) performance goal has been met for a particular performance year, the actual amount of the cash incentive compensation payable to each executive officer for such performance year is then linked 67% to financial performance goals and 33% to non-financial objectives. The Compensation Committee considers the five financial performance goals to be important in assessing our Company and our executive officers’ performance; each goal has a weighting of 13.4% (for a total of 67%) and constitutes a non-GAAP financial measure that is described on pages 47 to 48 under “Non-GAAP Financial Measures.” Similar to the financial performance goals, the non-financial objectives also relate to matters that are important to our business. The Compensation Committee believes the qualitative objectives are necessary to fully evaluate the annual achievements that benefit our shareholders, and it does not individually weight the non-financial objectives because it believes it is more appropriate to evaluate the level of achievement of all of the objectives in their totality. Of the companies in our comparison group, an analysis by Cook revealed that:

The Compensation Committee believes the pre-established target financial performance goals and individual non-financial objectives are the most important for assessing Assured Guaranty’s performance and the value we create for our shareholders. Therefore, performance relative to the financial goals and non-financial objectives is the primary driver of the final cash incentive compensation determined by the Compensation Committee in applying its discretion.

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The financial performance goals for 2017 for all the executive officers and the non-financial objectives for 2017 for Mr. Frederico, our CEO, are set out below. For the executive officers other than Mr. Frederico, the Compensation Committee evaluates the extent to which those executives contributed to Mr. Frederico’s non-financial objectives and the extent of such executives’ personal achievements of their individual non-financial objectives, which are discussed under “Compensation Decisions of Other Executive Officers.” For the 2017 performance year, the financial performance goals and the non-financial objectives for the named executive officers were established in February 2017 and the Compensation Committee determined the extent to which they had been satisfied in February 2018.

Cash Incentive Compensation Determinants Financial Performance Goals: 67% PVP Core operating income per diluted share Core operating shareholders’ equity per share Core operating ROE Core ABV per share Non-Financial Objectives: 33% Strategy and leadership Active management of potential losses Maintenance of financial strength ratings Maintenance of comprehensive risk management practices Management development and succession planning 13.4% 33.0% 13.4% 13.4% 13.4% 13.4%

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The financial performance goals that the Compensation Committee uses to assess our Company’s performance are described in greater detail below. The financial goals are based on non-GAAP financial measures and four are labeled “core” to distinguish them from similar non-GAAP financial measures that have not been adjusted to exclude the impact of consolidating FG VIEs. See “Non-GAAP Financial Measures” on page 47 below.

The Compensation Committee assigns each executive an Individual Target Cash Incentive Amount, which is calculated as a multiple, which we refer to as the Individual Target Cash Incentive Multiple, of the executive officer’s base salary. The amounts of the base salary and Individual Target Cash Incentive Multiples vary by individual based on the executive officer’s position and level of responsibility, historic pay level, importance to the future strategic direction of our Company and Cook’s advice about the compensation practices of companies in our comparison group. All of the Individual Target Cash Incentive Multiples assigned by the Compensation Committee for the 2017 performance year were the same as it had assigned the previous year, except that Mr. Stern’s multiple was increased from 1.75x to 2.0x in recognition of his contributions to our strategic initiatives, including reinsurance reassumptions, and the active role he is playing in our loss mitigation activities, especially with regard to Puerto Rico. The Compensation Committee assigned the named executive officers the following Individual Target Cash Incentive Multiples for the 2017 performance year:

Then, for each executive officer, the Compensation Committee calculates and aggregates the weighted achievement scores for the financial performance goals and the individual non-financial objectives. When assessing the level of achievement and assigning scores for the year, the Compensation Committee takes into account the difficulty of achieving particular goals or objectives. The Compensation Committee has discretion to assign achievement scores of up to 200% for outstanding performance and achievement scores of down to 0% for performance below target, based on its view of the level of achievement attained for each financial performance goal and each individual non-financial objective.

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Based on the executive officer’s achievements of these priorities, the individual payouts of the cash incentive for 2017 were calculated as follows:

The formula for determining cash incentive compensation has remained the same since the Compensation Committee developed the approach to calculating such amount, together with Cook at the beginning of 2015. Our Company’s share price performance and performance on other key financial measures has improved greatly since the approach was developed at the beginning of 2015. At year end 2014, the price of our Common Shares closed at $25.99, compared to $33.87 at year end 2017. Our performance in respect of the financial performance goals most important to our Company has also improved, as reflected in the table below.

The progress we have made on these fronts is the result of the leadership of Mr. Frederico and the efforts of his management team. As a result, the Compensation Committee has maintained the approach and the formulas put in place for the cash incentive compensation for Mr. Frederico and the other named executive officers.

Long-Term Equity Incentives

In addition to the cash incentive compensation, the Compensation Committee awards long-term incentive compensation in the form of our Common Shares.

Like cash incentive compensation, equity incentive compensation is awarded after the end of the performance year to which such compensation relates. For the 2017 performance year, the Compensation Committee determined the amount of equity incentive compensation in February 2018.

Half of the nominal value of the award is in the form of performance share units (which we refer to as PSUs) that may be earned over a 3-year performance period based on share price targets, and are paid at the end of the 3-year performance period if particular share price targets are achieved, and the other half is in the form of RSUs that cliff vest at the end of a 3-year period. Details about the individual awards are set out in “CEO Performance Review” and “Other Named Executive Officer Compensation Decisions.”

Performance Share Units. Each performance share unit represents a contingent right to receive up to two of our Common Shares as described under “Incentive Plans – Assured Guaranty Ltd. 2004 Long-Term Incentive Plan” on page 58. The Compensation Committee awards performance share units with the intent of aligning executive pay with our Company’s performance, as measured by the price of our Common Shares.

The percentage of performance share units an executive can earn is based on the price of our Common Shares over a 3-year performance period. For each 40 consecutive trading day sequence that occurs during the last 18 months of a performance period, we calculate the average price of a Common Share as traded on the New York Stock Exchange during that time. The highest average is used to determine whether a share price hurdle has been reached, and consequently, the percentage of the performance share units that has been earned. Use of the highest average share price during the last 18 months of the performance period mitigates concerns that short-term gains may yield payouts even if long-term performance lags, and was a refinement made by the Compensation Committee with respect to the 2014 performance year to address shareholder concerns raised at that time.

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In considering the awards for 2017 performance, the Compensation Committee and Cook determined to use the same methodology for calculating whether the share price hurdle had been reached as had been applied for the 2016 performance year. The Compensation Committee and Cook also reviewed the rigor of the share price hurdles and the vesting percentage at each hurdle. For the performance share units granted for the 2017 performance year, in February 2018, the Compensation Committee established the share price hurdles and vesting percentages set out in the table below. The table shows the percentage that could be earned if the highest average share price over 40 consecutive trading days occurring in the second half of the 2018-2020 performance period reaches the stated share price hurdles.

The share price hurdles represent increases over the $28/$32/$36 hurdles that applied for the grants for the 2014 and 2015 performance years and are unchanged from the hurdles that applied for the grants for the 2016 performance year.

In making its decision with respect to the hurdles, the Compensation Committee considered the price of our Common Shares in 2017 and asked Cook to prepare an analysis with respect to Cook’s recommendation that the Compensation Committee maintain the current share price hurdles. Cook presented data on the one-, three- and five-year compound annual growth rates of the S&P 500 Financial Index, our Company’s comparison group median stock performance, and the stock performance of a subset of certain companies within the comparison group in order to obtain hypothetical minimum and maximum ranges for the hurdles. Cook then applied the ranges to the Company’s average share price over 40 consecutive trading days as of a recent date of the analysis, and utilized those results to evaluate the current share price hurdles.

The Compensation Committee considered Cook’s analysis as well as other factors, including the extent to which particular hurdles would exceed the 40 consecutive trading day average (i) at the beginning of the performance period and (ii) as of a date close to the grant date. For all three of the hurdles, the amount of the excess over the 40 consecutive trading day average at the beginning of the performance period and as of a date close to the grant date was greater than that of the prior year grant.

The Compensation Committee also noted the extent of the total equity payout as a percentage above the GAAP value and above the nominal value of the equity at the time of grant, under the methodology that the committee had developed with Cook. The Compensation Committee examined the benefit of the equity grants to the executive officers compared to the cost to our Company. In addition, the Compensation Committee reviewed other relevant statistics for the performance periods, including our Company’s TSR and the TSR of the S&P 500 Financial Index and our comparison group average TSR, and the growth in core operating book value and in core ABV, during those periods.

Restricted Stock Units. Each restricted stock unit represents a right to receive one of our Common Shares at the end of a three-year vesting period as described under “Incentive Plans – Assured Guaranty Ltd. 2004 Long-Term Incentive Plan” on page 57. The Compensation Committee awards RSUs with the intent of providing executives with long-term incentive compensation the value of which increase as our Company achieves its strategies. The Compensation Committee believes this incentivizes executives to remain with the Company and help build shareholder value over the long term.

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CEO PERFORMANCE REVIEW

Overview

In light of Mr. Frederico’s achievements in the 2017 performance year, as detailed below, but also considering our negative one-year TSR, the Compensation Committee awarded him total compensation of $11,525,000, a 3.4% increase over his total compensation for the 2016 performance year. The Compensation Committee concluded that, in light of our negative one-year TSR, it was appropriate that Mr. Frederico’s cash incentive for 2017 and his base salary for 2018 largely remain the same as the prior year. Most of the 3.4% increase in Mr. Frederico’s compensation package for the 2017 performance year was due to the 4.5% increase in his long-term equity award, which reflects his achievements in the 2017 performance year as detailed below, and the 8.7% increase in his base salary for 2017, which was awarded at the beginning of the 2017 performance year based on Mr. Frederico’s accomplishments in the 2016 performance year and the importance of maintaining his strategic leadership. Mr. Frederico’s compensation for the 2017 performance year was composed of the following:

The compensation package presented in the table above is different from the SEC-required disclosure in the Summary Compensation Table on page 50 and is not a substitute for the information in that table. Rather, it is intended to show how the Compensation Committee linked Mr. Frederico’s compensation and its components to our performance results and his achievements for the prior year. The base salary is paid during the performance year, while all of the components of the incentive compensation is based on achievements during the performance year and so is awarded in the first part of the following year.

Base Salary

In February 2017, in light of Mr. Frederico’s accomplishments in 2016 and the importance of maintaining his strategic leadership in the future, particularly in respect of managing our capital, mitigating the risks in our insured portfolio, and deciding upon appropriate alternative investments that complement our financial guaranty business and core competencies, the Compensation Committee decided to grant him an 8.7% increase in his base salary, to $1,250,000, for the 2017 performance year.

In February 2018, given the continued importance of maintaining Mr. Frederico’s strategic leadership, but also considering our negative one-year TSR and the salary increase Mr. Frederico had received in February 2017 based on his performance in the 2016 performance year, the Compensation Committee chose to maintain his salary at $1,250,000 for the 2018 performance year.

Cash Incentive

To determine Mr. Frederico’s cash incentive, as discussed above under “Executive Compensation Program Structure and Process—Components of Our Executive Compensation Program—Cash Incentive Compensation,” the Compensation Committee used a formula that involved aggregating the weighted achievement scores for certain financial performance goals and individual non-financial objectives, and multiplying the result by his Individual Target Cash Incentive Amount. The financial performance goals for 2017 were based on the business plan for the upcoming year that the Board of Directors reviewed and approved in November 2016. The non-financial objectives were established taking into account the nature of our business, which requires qualitative goals to fully evaluate the annual achievements that benefit our shareholders.

In reviewing Mr. Frederico’s 2017 performance scorecard, the Compensation Committee determined that he had a very strong year. In particular, the Compensation Committee found that Mr. Frederico should be recognized for our success in exceeding all but one of the targets for the financial performance goals established by the Compensation Committee, in certain cases substantially, and also noting that, if either (a) the price of our Common Shares had not increased in the middle of the year and we had been able to repurchase the number of Common Shares we originally projected we would with $500 million, or (b) if it had not been for the 2017 Tax Act (which was adopted well after the goals were established), we would have exceeded all of our financial performance goals. Mr. Frederico’s very strong performance was reflected in our record core operating shareholders’ equity per share and core adjusted book value per share of $56.17 and $77.86, respectively. Mr. Frederico’s leadership was also credited for the growth in our new business production, with contributions from our U.S. public finance, international infrastructure and global structured finance businesses, despite a challenging business and economic environment.

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The Compensation Committee assigned Mr. Frederico achievement scores for his achievements against each individual financial performance goal, which averaged 125% across the five goals. The Compensation Committee’s rationale for establishing these 2017 financial performance goals in February 2017 is discussed on pages 23-24 of “Compensation Discussion and Analysis — Summary — 2017 Results Against Targets”. The Compensation Committee weighted this score 67% in accordance with the cash incentive formula, which resulted in a weighted score of 83.8%:

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The Compensation Committee also evaluated Mr. Frederico’s 2017 achievements against his 2017 non-financial objectives. Highlights of those achievements include the positive financial impact from our acquisition of MBIA UK; the positive impact from our reassumption of previously ceded portfolios; achievement of the highest level of PVP since 2010; and the prominent role our Company continues to assume in the restructuring of the debt of Puerto Rico and its related authorities and public corporations. The details of Mr. Frederico’s 2017 achievements against his 2017 non-financial objectives are set out in the pages that follow.

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Based on Mr. Frederico’s 2017 achievements against his 2017 non-financial objectives, the Compensation Committee awarded him an achievement score of 185% against those objectives. Applying that score to the cash incentive formula resulted in a weighted non-financial objective score of 61%.

The Compensation Committee then added the weighted non-financial objective score of 61% to the weighted financial performance goal score of 83.8% achieved by Mr. Frederico, to derive a total achievement score of 144.8% in accordance with the cash incentive formula, as follows: