THIRD QUARTER 2007 OPERATING SUPPLEMENTlibrary.corporate-ir.net/library/19/198/198015/items/269926/3Q 2007...Fundamental strength in triple-A rated financial guarantee ... Summary

NYSE: SCA www.scafg.com

OPERATING SUPPLEMENT

Fundamental strength in triple-A rated financial guarantee insurance and reinsurance

THIRD QUARTER 2007

This supplement is being furnished to you for informational purposes only. It should be read in conjuction with documents filed by Security Capital Assurance Ltd with the Securities and Exchange Commission, including the Annual Report on Form 10-K for 2006 and Quarterly Reports on Form 10-Q. Please refer to the Company’s website at www.scafg.com for further information describing Security Capital Assurance Ltd.

Index

Page NoAmendments 2

Revisions to Non-GAAP Metrics 3

Certain Definitions 4

Financial and Statistical Data 5

Return on Common Shareholders' Equity 6

Segment Consolidation 7

Summary Financial Information - U.S. GAAP Basis 8

Interim Condensed Statements of Operations 9

Interim Condensed Balance Sheets 10

Investment Portfolio 11

Claims Paying Resources 12

Unpaid Losses and Loss Adjustment Expenses 13

Net Premiums Earned 14

Financial Guarantee Production - Current Quarter 15

Financial Guarantee Production - YTD 16

U. S. Public Finance New Issuance 17

Debt Service and Premium Amortization 18

Insured Portfolio - Insurance Segment Par Outstanding 19

Insured Portfolio - Reinsurance Segment Par Outstanding 20

Insured Portfolio - Combined Insurance and Reinsurance Segment Par Outstanding 21

Insured Portfolio - Summary of Below Investment Grade Exposures 22

Insured Portfolio - Insurance Par Written by Bond Type 23

Insured Portfolio - Reinsurance Par Written by Bond Type 24

Insured Portfolio - Combined Insurance and Reinsurance Par Written by Bond Type 25

Insured Portfolio - Profile by Geographic Distribution 26

Insured Portfolio - Distribution by Rating 27

Insured Portfolio - CDO Exposure by Rating and Year of Issue 28

Insured Portfolio - 25 Largest Public Finance Credits 29

Insured Portfolio - Top 10 Structured Finance Servicer Exposures 30

Reconciliation of Non-GAAP Measures 31

XL Capital Assurance Exhibits

Insured Portfolio - Par Written by Bond Type 33

Insured Portfolio - Par Outstanding by XLCA Categories 34

Insured Portfolio - Geographic Distribution 35

Insured Portfolio - Distribution by Rating 36

Insured Portfolio - 10 Largest Credits within Each Business Area 37

1

Amendments

The SCA 3rd Quarter 2007 Operating Supplement has been amended on November 13, 2007 to reflect the following changes made to the XL Capital Assurance page 37 entitled 'Insured Portfolio - 10 Largest Credits within Each Business Area': (i) to correctly state the Net Par figures for Structured Single Risk and Public Finance credits; (ii) revise the descriptions for CDO credits; and iii) to provide full description for two municipal CDS transactions.

2

Revisions to Non-GAAP Metrics

Operating return on equity Operating ROE for the year ended December 31, 2004, 2005, 2006 and the three and six month ended, March 31, 2007 and June 30, 2007 have been revised to exclude from equity the after-tax impact of our credit derivative mark-to-market asset/liability to be consistent with how the change in the mark-to-market on CDS has been treated in operating income. Although the effect of this revision does not materially affect our operating ROE in any historical period,this revision is a more precise calculation.

Total claims-paying resources Total CPR have been revised to reflect the following: (i) exclude XLFA's GAAP accumulated other comprehensive income and derivative asset (liability) from policyholders' surplus as they are not applicable for statutory accounting as of December 31, 2004, 2005 and 2006; (ii) eliminate inter-company ceding commission from the deferred premium revenue as of December 31, 2004, 2005 and 2006; and (iii) revise NPVFIP to reflect the elimination of the inter-company deferred ceding commission as of December 31, 2006.

Net present value of future installment premiums

NPVFIP as of December 31, 2004, 2005 and 2006 have been revised to increase the tax rate from 5% to 11% and the balance as of December 31, 2006 has also been revised to eliminate inter-company ceding commission.

Adjusted book value and adjusted book value per share

ABV and adjusted book value per share as of December 31, 2004, 2005 and 2006 has been revised to reflect the change in the effective tax rate from 5% to 11% and ABV as of December 31, 2006 has been revised to reflect the adjustment to NPVFIP.

3

Certain Definitions

Adjusted book value1,2 (ABV) GAAP book value attributable to common shareholders plus the after-tax effects of deferred premium revenue, net of prepaid reinsurance premiums and deferred acquisition costs, plus the after-tax effect of the net present value of future installment premiums.

Adjusted gross premiums1,2 (AGP) The sum of: (i) upfront premiums written in such period, (ii) current installment premiums due on business written in such period and (iii) expected future installment premiums on contracts written during such period that remain in force and for which there is a binding obligation on the part of the insured to pay the future installments, discounted at 7%. AGP is a management estimate which can be negatively affected by prepayments, early terminations, credit losses or other factors.

Core net premiums earned2 Net premiums earned excluding the impact of refundings, calls and other accelerations.

Core income2 Operating income (see below) excluding the impact of refundings, calls and other accelerations.

Gross par outstanding Aggregate principal value of obligations insured at the end of the reporting period.

Gross par written Total principal value of obligations insured during the period.

Gross principal and interest outstanding Aggregate principal value of obligations insured at the end of reporting period including all future interest payable on obligations.

Net par outstanding Aggregate principal value of obligations insured at the end of the reporting period, reduced by cessions to reinsurers.

Net present value of future installment premiums1 (NPVFIP)

Estimated installment premiums written on insurance policies and structured credit derivatives anticipated to be earned in future periods on policies in force, reduced by planned cessions to reinsurers, plus associated ceding commissions received from reinsurers, discounted at 7%. NPVFIP is a management estimate which can be negatively affected by prepayments, early terminations, credit losses or other factors.

Net principal and interest outstanding Aggregate principal value of obligations insured at the end of the reporting period including all future interest payable on obligations, reduced by cessions to reinsurers.

Operating income2 Net income excluding net realized gains (losses) on investments and the after-tax impact of net realized and unrealized gains (losses) on non-trading derivative financial instruments and certain other items including the impact of the perpetual non-cumulative preferred shares as if the dividends were accrued ratably over the period.

Present value of future installment premiums1

(PVFIP)Expected future installment premiums discounted at 7% on business written during the reporting period. PVFIP is a management estimate which can be negatively affected by prepayments, early terminations, credit losses or other factors.

Notes:1Includes certain management estimates.2See Reconciliation of Non-GAAP Financial Measures on pages 31-32.

This supplement may include forward-looking statements, both with respect to us and our industry, that reflect our current views with respect to future events and financial performance. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “will,” “may” and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements. A non-exclusive list of these factors can be found in Security Capital Assurance Ltd's ("SCA") most recent annual report on Form 10-K and other documents on file with the Securities and Exchange Commission. SCA undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future developments or otherwise.

Numbers throughout the supplement may not add due to rounding.

4

Financial and Statistical Data(U.S. dollars in millions, except share data)

Three Months Ended

9/30/2007 12/31/2006 12/31/2005 12/31/2004

141$ 556$ 396$ 295$ 111 409 285 277 58 183 152 116 32 78 51 36

Net losses and loss adjustment expenses 7 15 26 21 26 89 80 67

133 514 342 267 8 42 54 28

(1.40)$ 2 2.18$ 1.74$ 1 1.28$ 1

NM 25.3% 35.9%12.3% 12.6% 10.9% 6.6%0.02$ 0.02$ -$ -$

Loss and loss expense ratio 12.7% 8.2% 17.1% 18.3%Underwriting expense ratio 45.0% 48.5% 52.6% 57.3%Combined ratio 57.7% 56.7% 69.7% 75.6%

9/30/2007 12/31/2006 12/31/2005 12/31/2004

2,372$ 1,958$ 1,364$ 1,157$ 2,985 2,497 1,684 1,472

908 796 593 487 181 179 147 116

Case 76 85 69 51 Unallocated 105 93 78 65

10 15 17 5 - - - -

247 - - - 1,347 1,367 868 805

64,169,788 64,136,364 46,127,245 46,127,245 40.86$ 38.17$ 34.66$ 30.73$

1,753$ 1,392$ 898$ 806$ 720 656 474 389 88 82 72 54

Total policyholders' surplus and reserves 2,561 2,130 1,443 1,250 200 200 200 200 730 573 358 303

Total claims paying resources 3,491$ 2,902$ 2,001$ 1,753$

154,164$ 118,012$ 81,891$ 66,934$ 230,473 183,702 121,898 97,301

As of

Summary Balance Sheet Data:

Summary Income Statement Data:

Year Ended

Insurance Segment AGPReinsurance Segment AGP

Acquisition and operating expenses

Net (loss) income per diluted share

Net (loss) income per diluted share growth rateOperating return on common shareholders' equity

Total common shareholders' equity

Gross unpaid losses and loss adjustment expensesDeferred premium revenue

Total preferred shareholders' equity

Adjusted gross premiumsTotal premiums writtenNet premiums earnedNet investment income

Common dividends per diluted share

Statutory Data:

Net unpaid case losses and loss adjustment expenses

Qualified statutory capital

Adjusted book value attributable to common shares

Long-term debt

Common shares outstanding (excludes restricted shares)

U.S. GAAP Financial Ratios:

InvestmentsTotal assets

Net present value of installment premiums

Notes:1Based on 46,127,245 shares outstanding immediately prior to our initial public offering.2Because we reported net losses for the three and the nine months ended September 30, 2007, under GAAP we cannot take into consideration dilutive securities when calculating a net loss per share.

NM - Not meaningful

Net par outstandingNet principal and interest outstanding

Deferred premium revenue

Soft capital

Loss and loss adjustment expense reserves

5

Return on Equity(Unaudited)

Period Ended Reported1 Operating2

Nine months ended 9/30/2007 -2.6% 12.6%Six months ended 6/30/2007 8.9% 12.7%Three months ended 3/31/2007 10.6% 12.6%

Year ended 12/31/06 10.3% 12.6%Year ended 12/31/05 9.5% 10.9%Year ended 12/31/04 8.3% 6.6%

Notes:

2Annualized operating income divided by average common shareholders' equity less accumulated other comprehensive (loss) income and less the tax effect of the derivative asset (liability).

1Annualized net income available to common shareholders divided by average common shareholders' equity less accumulated other comprehensive (loss) income.

6

Segment Consolidation(Unaudited)

Financial Financial Financial FinancialGuarantee Guarantee Guarantee GuaranteeInsurance Reinsurance Total Insurance Reinsurance Total

88.8$ 1.2$ 90.0$ 125.9$ 1.9$ 127.8$ 152.3 - 152.3 99.2 1.2 100.4 125.3 25.9 151.2 102.5 28.1 130.6

Total AGP 366.4$ 27.1$ 393.5$ 327.6$ 31.3$ 358.9$

242,787$ -$ 242,787$ 235,212$ -$ 235,212$ - 43,612 43,612 - 40,184 40,184

242,787 43,612 286,399 235,212 40,184 275,396 Ceded premiums (54,343) - (54,343) 1,156 - 1,156

188,444 43,612 232,056 236,368 40,184 276,552 Change in net deferred premium revenue (54,161) (19,146) (73,308) (118,292) (19,451) (137,743)

134,283 24,466 158,748 118,076 20,733 138,809 Fee income and other 85 - 85 2,290 - 2,290

8,379 1,213 9,592 9,149 2,174 11,323 7,392 4,751 12,143 8,561 4,487 13,048

54,241 9,532 63,773 46,776 5,937 52,713 Underwriting profit 64,356$ 8,970$ 73,325$ 55,880$ 8,135$ 64,015$

6.2% 5.0% 6.0% 7.7% 10.5% 8.2%45.9% 58.4% 47.8% 46.9% 50.3% 47.4%52.1% 63.3% 53.9% 54.6% 60.8% 55.5%

Financial Financial Financial FinancialGuarantee Guarantee Guarantee GuaranteeInsurance Reinsurance Total Insurance Reinsurance Total

34.2$ 0.4$ 34.6$ 17.0$ 0.4$ 17.5$ 52.4 - 52.4 39.6 - 39.6 46.6 7.5 54.2 23.2 10.9 34.2

Total AGP 133.2$ 7.9$ 141.1$ 79.9$ 11.4$ 91.3$

88,135$ -$ 88,135$ 65,081$ -$ 65,081$ - 22,645 22,645 - 20,489 20,489

88,135 22,645 110,780 65,081 20,489 85,570 Ceded premiums (25,546) - (25,546) 14,908 - 14,908

62,589 22,645 85,234 79,989 20,489 100,478 Change in net deferred premium revenue (14,677) (12,379) (27,057) (41,550) (13,473) (55,023)

47,912 10,266 58,177 38,439 7,016 45,455 Fee income and other - - - 59 - 59

6,636 729 7,365 4,302 692 4,994 2,285 2,109 4,394 4,232 1,592 5,824

18,663 3,142 21,805 16,731 1,395 18,126 Underwriting profit 20,328$ 4,286$ 24,614$ 13,233$ 3,337$ 16,570$

13.9% 7.1% 12.7% 11.2% 9.9% 11.0%43.7% 51.1% 45.0% 54.5% 42.6% 52.7%57.6% 58.3% 57.7% 65.7% 52.4% 63.7%

Reinsurance premiums assumed

Operating expenses

AGP (U.S. dollars in millions)

Underwriting expense ratio

Net losses and loss adjustment expenses

Total premiums written

Net premiums written

Net premiums earned

Loss and loss expense ratioUnderwriting expense ratio

Three Months Ended 9/30/2007 Three Months Ended 9/30/2006

Combined ratio

Acquisition costs, net

U.S. Public FinanceU.S. Structured Finance

Income statement: (U.S. dollars in thousands)Gross premiums written

International Finance

Combined ratio

Loss and loss expense ratio

Total premiums written

Net premiums written

Net premiums earned

Operating expenses

Net losses and loss adjustment expensesAcquisition costs, net

AGP (U.S. dollars in millions)

Nine Months Ended 9/30/2007 Nine Months Ended 9/30/2006

Gross premiums writtenReinsurance premiums assumed

U.S. Public FinanceU.S. Structured FinanceInternational Finance

Income statement: (U.S. dollars in thousands)

7

Summary Financial Information - U.S. GAAP Basis(Unaudited)

9/30/20071 12/31/20061

Book value attributable to common shareholders 21.00$ 21.31$ Deferred premium revenue 12.59 11.04 Prepaid reinsurance premiums (1.36) (0.83) Deferred acquisition costs (1.49) (1.30) Net deferred premium revenue 9.74 8.91 NPVFIP 10.13 7.95 Adjusted book value 40.86$ 38.17$

Actual (excluding restricted shares) 64,169,788 64,136,364

9/30/2007 9/30/20062 9/30/2007 9/30/20062

Weighted Average Basic 64,158,647 58,068,074 64,143,792 50,151,261 Weighted Average Diluted 64,255,689 58,094,902 64,321,482 50,160,203

Operating Income Per Common ShareBasic 0.72$ 0.55$ 2.13$ 2.09$ Diluted 0.72 0.55 2.12 2.09

Basic (1.40)$ 0.49$ (0.42)$ 1.63$ Diluted3 (1.40) 0.49 (0.42) 1.63

Declared 0.02$ -$ 0.06$ -$ Paid 0.02 - 0.06 -

Notes:

3Because we reported net losses for the three and the nine months ended September 30, 2007, under GAAP we cannot take into consideration dilutive securities when calculating a net loss per share.

Nine Months Ended

Per Actual Shares Outstanding

Common Shares Outstanding

As of

1Based on the total common shares issued and outstanding at the end of the period (excludes restricted share awards).

Net (Loss) Income Per Common Share

Dividends Per Common Share

Common Shares Outstanding

Three Months Ended

2Based on 46,127,245 common shares outstanding immediately prior to our initial public offering.

8

Interim Condensed Consolidated Statements of Operations(Unaudited)(U.S. dollars in thousands)

9/30/2007 9/30/2006 9/30/2007 9/30/2006

RevenuesTotal premiums written 110,780$ 85,570$ 286,399$ 275,396$ Ceded premiums (25,546) 14,908 (54,343) 1,156 Net premiums written 85,234 100,478 232,056 276,552 Change in net deferred premium revenue (27,057) (55,023) (73,308) (137,743)

58,177 45,455 158,748 138,809 Net investment income 31,621 21,835 88,009 53,026 Net realized gains (losses) on investments 8 (156) (1,534) (16,556)

(142,975) (3,216) (172,079) (6,765) Fee income and other - 59 85 2,290

Total revenues (53,169) 63,977 73,229 170,804 Expenses

Net losses and loss adjustment expenses 7,365 4,994 9,592 11,323 Acquisition costs, net 4,394 5,824 12,143 13,048 Operating expenses 25,604 20,861 76,227 55,448

Total expenses 37,363 31,679 97,962 79,819 Income before income tax and minority interest (90,532) 32,298 (24,733) 90,985

Income tax (benefit) expense (9,885) 2,747 (9,174) 2,559 Income before minority interest (80,647) 29,551 (15,559) 88,426

Minority interest 805 1,139 2,723 6,877 Net (loss) income (81,452) 28,412 (18,282) 81,549

Dividends on perpetual non-cumulative preference shares 8,409 - 8,409 - Net (loss) income available to common shareholders (89,861)$ 28,412$ (26,691)$ 81,549$

financial instrumentsNet realized and unrealized (losses) on derivative

Three Months Ended Nine Months Ended

Net premiums earned

9

Interim Condensed Consolidated Balance Sheets(Unaudited)(U.S. dollars in thousands)

9/30/2007 12/31/2006

2,322,462$ 1,736,462$ 49,317 221,901

Total investments 2,371,779 1,958,363 204,557 202,548 17,671 16,515

107,278 93,809 98,362 59,983 27,975 12,936 83,425 88,616 11,529 11,529 28,220 18,182 2,650 11,976

31,693 22,357 Total assets 2,985,139$ 2,496,814$

181,385$ 178,517$ 907,592 795,906 166,376 5,117 24,784 13,952

- 5,435 71,982 77,351

Total liabilities 1,352,119 1,076,278 39,000 54,016

246,593 - 992,840 988,444 367,243 397,781 (12,656) (19,705)

Total shareholders' equity 1,594,020 1,366,520 Total liabilities, minority interest and shareholders' equity 2,985,139$ 2,496,814$

Accounts payable, accrued expenses and other liabilities

Minority interest - redeemable preferred shares of subsidiary

Retained earnings

Payable for investments purchased

Other assets

Liabilities and Shareholders' EquityLiabilities

Unpaid losses and loss adjustment expensesDeferred premium revenue

Accumulated other comprehensive income

Shareholders' EquityPaid in capital, Series A perpetual non-cumulative preference sharesPaid in capital, Common shares

Reinsurance premiums payable

Reinsurance balances recoverable on unpaid lossesPremiums receivable

Intangible assets - acquired licensesDeferred income tax assetDerivative assets

Derivative liabilities

Cash and cash equivalentsAccrued investment incomeDeferred acquisition costsPrepaid reinsurance premiums

Debt securities available for sale, at fair valueShort-term investments, at fair value

Investments

As of

Assets

10

Investment PortfolioAs of September 30, 2007(U.S. dollars in thousands)

Distribution by Security TypeMarket % ofValue Market Value

Debt Securities:MBS/ABS 1,370,199$ 53.2% 1,377,758$ U.S. Government 294,867 11.4% 296,115 Corporate 646,109 25.1% 650,078 Non-U.S. Sovereign 10,912 0.4% 10,847 States & Political Subs 375 0.0% 372 Total LT Fixed Maturity 2,322,462 90.1% 2,335,170

Short-term investments

Cash and cash equivalents 204,557 7.9% 204,557 Short-term investments 49,317 1.9% 49,492

Total 2,576,336$ 100.0% 2,589,219$

Quality DistributionMarket % ofValue Market Value

AAA 1,718,176$ 66.7%AA 575,990 22.4%A 271,113 10.5%BBB 11,057 0.4%BB & below - 0.0%Not Rated - 0.0%Total 2,576,336$ 100.0%Average credit quality AA+

MaturityMarket % ofValue Market Value

Within 1 Year 253,874$ 9.9%1 to 5 Years 594,189 23.1%5 to 10 Years 317,181 12.3%Due after 10 Years 40,894 1.6%Mortgage and asset-backed securities 1,370,199 53.2%

Total 2,576,336$ 100.0%

Yield to Maturity @ Book Value 5.1%Yield to Maturity @ Market Value 5.4%Duration (years) 3.4

Amortized Cost

11

Claims Paying Resources(U.S. dollars in millions)

9/30/2007 12/31/2006

Claims paying resources1

Policyholders' surplus 1,722$ 1,371$ Contingency reserve 32 21

Qualified statutory capital 1,753 1,392 Deferred premium revenue2 720 656 Loss & loss adjustment expense reserves3

88 82 Total policyholders surplus & reserves 2,561 2,130

Soft capital 200 200 Net present value of installment premiums 730 573

Total claims paying resources 3,491$ 2,902$

Notes:1

2

3 Loss & loss adjustment expense reserves for XLFA is U.S. GAAP based and net of unpaid losses and loss expense recoverable.

Deferred premium revenue for XLFA is U.S. GAAP based and net of prepaid reinsurance premiums and DAC.

XLFA numbers are our estimate of U.S. statutory as the company files Bermuda statutory financial statements.

As of

12

Unpaid Losses and Loss Adjustment Expenses(U.S. dollars in thousands)

Case Reserves

Unallocated Reserves

Case Reserves


Case Reserves


Case Reserves


69,382$ 77,986$ 85,351$ 93,166$ 85,351$ 93,166$ 85,351$ 93,166$

(52,316) (16,901) (70,842) (17,774) (70,842) (17,774) (70,842) (17,774)

17,066 61,085 14,509 75,392 14,509 75,392 14,509 75,392

Current year - 14,307 - 2,700 - 5,891 - 12,129 Prior years 651 - (3,501) - (3,664) - (2,537) -

(3,208) - (380) - (375) - (1,533) -

14,509 75,392 10,628 78,092 10,470 81,283 10,439 87,521

70,842 17,774 70,000 17,206 65,565 17,210 65,561 17,864

85,351$ 93,166$ 80,628$ 95,298$ 76,035$ 98,493$ 76,000$ 105,385$

3,208$ 380$ 375$ 1,533$ 183,115 46,379 100,571 158,748

1.8% 0.8% 0.4% 1.0%

Increase (decrease) in net losses and loss expenses incurred in respect of losses incurred in:

Year Ended Nine Months EndedThree Months Ended Six Months Ended

Unpaid losses and loss expenses recoverableNet unpaid losses and loss expense at beginning of year

3/31/2007 6/30/2007 9/30/2007

Less net losses and loss expenses paid

12/31/2006

Ratio of net losses and loss expenses paid to premiums earned

Unpaid losses and loss expenses recoverableGross unpaid losses and loss expenses at end of period

Net losses and loss expenses paidNet premiums earned

Net unpaid losses and loss expense at end of period

Gross unpaid losses and loss expenses at beginning of year

13

Net Premiums Earned(Unaudited)(U.S. dollars in thousands, except per share data)

Net Premiums Earned9/30/2007 9/30/2006 9/30/2007 9/30/2006

10,742$ 8,497$ 36,970$ 38,798$ 424 445 1,006 671

Total public finance premiums earned 11,166 8,942 37,976 39,469

2,868 1,473 4,031 5,531 23,671 16,848 61,386 46,868

Total structured finance premiums earned 26,539 18,320 65,417 52,399

8,075 3,876 18,798 9,070 12,398 14,316 36,557 37,870

Total international finance premiums earned 20,473 18,193 55,356 46,940

Total upfront premiums earned 21,684 13,846 59,799 53,398 Total installment premiums earned 36,493 31,609 98,949 85,411 Net premiums earned 58,177$ 45,455$ 158,748$ 138,809$

Effect of Refundings, Calls and Other Accelerations9/30/2007 9/30/2006 9/30/2007 9/30/2006

58,177$ 45,455$ 158,748$ 138,809$

(5,031) (400) (12,042) (25,600) 53,146$ 45,055$ 146,707$ 113,209$ 4,846$ 274$ 10,910$ 22,742$ 0.08 0.00 0.17 0.45


Nine Months EndedThree Months Ended

Net income per diluted share effect of refundings Effect of refundings, calls and other accelerations

Upfront premiums earned

Net premiums earned Earned premium recognized from refundings, calls and other accelerations

Upfront premiums earned Installment premiums earned

Upfront premiums earned Installment premiums earned

U.S. Structured Finance

Core net premiums earned

Three Months Ended

Installment premiums earned

U.S. Public Finance

Nine Months Ended

14

Financial Guarantee Production - Current Quarter(Unaudited)(U.S. dollars in millions)

9/30/2007 9/30/2006 9/30/2007 9/30/2006 9/30/2007 9/30/2006

24.8$ 26.0$ 1.3$ 0.4$ 26.1$ 26.4$ 1.7 4.3 0.0 - 1.7 4.3

Total premiums written 26.4 30.2 1.3 0.4 27.7 30.6 34.2 17.0 0.4 0.4 34.6 17.5

7.0 1.8 0.5 - 7.5 1.8 23.2 16.0 2.2 1.9 25.4 17.9

Total premiums written 30.1 17.8 2.8 1.9 32.9 19.7 52.4 39.6 - - 52.4 39.6

18.0 4.5 16.5 14.4 34.5 18.9 13.6 12.6 2.1 3.7 15.7 16.3

Total premiums written 31.6 17.0 18.6 18.2 50.1 35.2 46.6 23.2 7.5 10.9 54.2 34.2

49.7 32.2 18.3 14.8 68.0 47.1 38.4 32.9 4.3 5.6 42.8 38.5

Total premiums written 88.1$ 65.1$ 22.6$ 20.5$ 110.8$ 85.6$ 133.2$ 79.9$ 7.9$ 11.4$ 141.1$ 91.3$

Three Months Ended

Adjusted gross premiums

Upfront premiums written / assumedInstallment premiums written / assumed

Consolidated FGFinancial Guarantee

Reinsurance

U.S. Public Finance

Financial Guarantee Insurance

Upfront premiums written / assumedU.S. Structured Finance


Installment premiums written / assumed





Grand Total


15

Financial Guarantee Production - Year to Date(Unaudited)(U.S. dollars in millions)

9/30/2007 9/30/2006 9/30/2007 9/30/2006 9/30/2007 9/30/2006

76.5$ 99.9$ 2.2$ 0.7$ 78.7$ 100.6$ 1.5 4.3 0.0 - 1.6 4.3

Total premium writtens 78.0 104.1 2.2 0.7 80.2 104.8 88.8 125.9 1.2 1.9 90.0 127.8

13.6 8.2 1.1 - 14.7 8.2 63.7 46.3 5.4 6.7 69.2 53.0

Total premium writtens 77.4 54.5 6.5 6.7 83.9 61.2 152.3 99.2 - 1.2 152.3 100.4

50.0 43.2 29.4 22.2 79.4 65.3 37.4 33.4 5.5 10.6 42.9 44.0

Total premium writtens 87.4 76.6 34.9 32.7 122.3 109.3 125.3 102.5 25.9 28.1 151.2 130.6

140.1 151.3 32.6 22.9 172.8 174.2 102.7 83.9 11.0 17.3 113.6 101.2

Total premium writtens 242.8$ 235.2$ 43.6$ 40.2$ 286.4$ 275.4$ 366.4$ 327.6$ 27.1$ 31.3$ 393.5$ 358.9$

Consolidated FGFinancial Guarantee

InsuranceFinancial Guarantee

Reinsurance

Nine Months Ended


U.S. Public Finance

Grand Total

Upfront premium writtens / assumedInstallment premium writtens / assumed









16

U.S. Public Finance New Issuance(U.S. dollars in millions)

MarketInsured Share

Issued Insured Percent Insured Percent

2007 By QuarterThird 92,393$ 50,177$ 54.3% 3,978$ 7.9%Second 123,125 52,892 43.0% 3,852 7.3%First 107,203 50,756 47.3% 2,352 4.6%

Fourth 120,900 57,789 47.8% 2,732 4.7%Third 87,358 43,059 49.3% 3,110 7.2%Second 109,620 52,491 47.9% 5,018 9.6%First 69,649 37,252 53.5% 3,986 10.7%

2006 387,527 190,591 49.2% 14,846 7.8%2005 408,266 233,046 57.1% 12,004 5.2%2004 359,716 195,422 54.3% 9,816 5.0%2003 383,559 189,709 49.5% 9,734 5.1%

Note:Source of data is the Bond Buyer.

Full Year

Total New Issue Market Par Value Par Value Insured by XLCA

2006 By Quarter

17

Debt Service and Premium Amortization

(U.S. dollars in millions)

Debt Service (Principal and Interest)

Scheduled Net Debt Service Amortization

Principal & Interest

Outstanding $ 230,473

4th Quarter 2007 $ 4,948 225,525 2008 21,109 204,416 2009 13,399 191,017 2010 11,829 179,188 2011-2015 67,067 112,121 2016-2020 33,304 78,817 2021-2025 24,823 53,994 2026 and thereafter 53,994 0

$ 230,473

(U.S. dollars in thousands)

Net Premium Amortization

U.S. GAAP Deferred Premium1

Scheduled Amortization of

Deferred Premium1

Scheduled Installment Premiums

Earned

Scheduled Net Premiums

Earned $ 809,230

4th Quarter 2007 791,462 $ 17,768 $ 36,007 $ 53,775 2008 727,945 63,517 129,640 193,157 2009 670,630 57,315 121,595 178,911 2010 619,844 50,786 95,703 146,489 2011-2015 406,112 213,732 332,743 546,475 2016-2020 250,385 155,727 158,845 314,571 2021-2025 143,136 107,249 106,945 214,195 2026 and thereafter 0 143,136 233,279 376,415

$ 809,230 $ 1,214,757 $ 2,023,987

Note:1Net of prepaid reinsurance premiums

18

Insured Portfolio - Insurance Segment Par Outstanding(U.S. dollars in millions)

12/31/2004 12/31/2005 12/31/2006

Net Net Net Gross % Net %

General Obligation 7,795$ 13,273$ 19,853$ 27,364$ 44.6% 26,222$ 45.7%Utility 4,927 6,602 9,091 12,267 20.0% 11,312 19.7%Transportation 3,157 3,659 6,051 6,782 11.1% 5,768 10.1%Higher Education 1,842 3,469 4,771 6,102 10.0% 5,987 10.4%Non Ad Valorem 2,252 3,416 5,253 6,882 11.2% 6,217 10.8%Other 1,180 881 1,087 1,906 3.1% 1,865 3.3%

Total U.S. Public Finance 21,153 31,300 46,106 61,304 100.0% 57,371 100.0%

Pooled Debt Obligations 8,789 13,440 24,194 42,650 56.0% 40,368 58.5%Consumer ABS 12,927 8,726 9,962 12,717 16.7% 11,276 16.3%Financial Products 3,558 5,207 5,779 7,672 10.1% 6,414 9.3%Power & Utility 3,736 4,113 5,184 5,294 6.9% 4,903 7.1%Commercial ABS 3,540 1,826 1,688 4,497 5.9% 3,227 4.7%Other 603 1,191 2,099 3,365 4.4% 2,830 4.1%

Total U.S. Structured Finance 33,153 34,503 48,905 76,195 100.0% 69,018 100.0%

Power & Utility 896 2,091 3,322 5,306 22.0% 3,761 20.0%Infrastructure - 917 3,205 4,393 18.2% 2,541 13.5%Transportation 945 1,344 2,245 2,856 11.9% 1,862 9.9%Pooled Debt Obligations 1,143 1,017 1,699 4,042 16.8% 3,944 21.0%Future Flow 1,197 2,116 1,672 2,114 8.8% 1,809 9.6%Financial Products - - - 242 1.0% 242 1.3%Consumer ABS 350 348 461 422 1.8% 404 2.1%Other 337 283 1,249 4,704 19.5% 4,236 22.5%

Total International Finance 4,868 8,116 13,853 24,080 100.0% 18,800 100.0%

59,174$ 73,919$ 108,864$ 161,579$ 145,190$

35.7% 42.3% 42.4% 39.5%56.0% 46.7% 44.9% 47.5%

8.2% 11.0% 12.7% 12.9%International Finance

Total Par Outstanding

Percent of Net Par OutstandingU.S. Public Finance

U.S Public Finance:

U.S. Structured Finance:

International Finance:


As of

Par Value Outstanding

As of9/30/2007

19

Insured Portfolio - Reinsurance Segment Par Outstanding(U.S. dollars in millions)

12/31/2004 12/31/2005 12/31/2006


1,420$ 1,437$ 1,308$ 1,320$ 60.1% 1,320$ 60.1%294 294 141 151 6.9% 151 6.9%234 232 279 279 12.7% 279 12.7%300 300 300 287 13.1% 287 13.1%96 96 96 146 6.7% 146 6.7%12 11 16 15 0.7% 15 0.7%


318 191 39 19 1.1% 19 1.1%1,138 672 278 102 5.8% 102 6.0%

174 167 291 339 19.3% 339 19.9%- - - - - - -

303 208 234 362 20.6% 362 21.2%417 1,085 1,161 933 53.2% 885 51.8%

Total U.S. Structured Finance 2,350 2,323 2,003 1,755 100% 1,707 100.0%

510 802 1,342 1,906 36.8% 1,906 37.6%284 288 700 897 17.3% 897 17.7%367 494 631 715 13.8% 675 13.3%59 31 15 12 0.2% 12 0.2%15 14 - 161 3.1% 150 3.0%

893 842 890 822 15.9% 822 16.2%244 23 14 5 0.1% 5 0.1%682 784 1,413 660 12.7% 602 11.9%

Total International Finance 3,054 3,278 5,005 5,178 100.0% 5,070 100.0%

7,760$ 7,971$ 9,148$ 9,131$ 8,974$

30.4% 29.7% 23.4% 24.5%30.3% 29.1% 21.9% 19.0%39.4% 41.1% 54.7% 56.5%

U.S. Public Finance:

As of As of9/30/2007

Par Value

General ObligationUtilityTransportationHigher EducationNon Ad ValoremOther

U.S. Structured Finance:Pooled Debt ObligationsConsumer ABSFinancial ProductsPower & UtilityCommercial ABS

Pooled Debt Obligations

Financial Products

Other

International Finance:Power & UtilityInfrastructureTransportation

Future Flow


Consumer ABSOther


Percent of Net Par Outstanding

20

Insured Portfolio - Combined Insurance and Reinsurance Segment Par Outstanding(U.S. dollars in millions)

12/31/2004 12/31/2005 12/31/2006


9,215$ 14,710$ 21,161$ 28,684$ 45.2% 27,542$ 46.2%5,221 6,896 9,232 12,418 19.6% 11,463 19.2%3,391 3,891 6,330 7,061 11.1% 6,047 10.2%2,142 3,769 5,071 6,389 10.1% 6,274 10.5%2,348 3,512 5,349 7,028 11.1% 6,363 10.7%1,192 892 1,103 1,921 3.0% 1,880 3.2%


9,109 13,631 23,480 42,668 54.7% 40,387 57.1%14,065 9,398 10,240 12,820 16.4% 11,378 16.1%3,732 5,374 6,070 8,011 10.3% 6,754 9.5%3,736 4,113 5,184 5,294 6.8% 4,903 6.9%3,843 2,034 2,674 4,859 6.2% 3,589 5.1%1,018 2,276 3,260 4,298 5.5% 3,714 5.3%

Total U.S. Structured Finance 35,503 36,826 50,908 77,950 100.0% 70,725 100.0%

1,406 2,893 4,664 7,212 24.6% 5,667 23.7%284 1,205 3,905 5,289 18.1% 3,438 14.4%

1,312 1,838 2,876 3,571 12.2% 2,538 10.6%1,202 1,048 1,714 4,055 13.9% 3,956 16.6%1,212 2,130 1,672 2,275 7.8% 1,959 8.2%

893 842 890 1,065 3.6% 1,065 4.5%594 371 475 427 1.5% 409 1.7%

1,019 1,067 2,662 5,364 18.3% 4,838 20.3%Total International Finance 7,922 11,394 18,858 29,258 100.0% 23,870 100.0%

66,934$ 81,891$ 118,012$ 170,710$ 154,164$

35.1% 41.1% 40.9% 38.6%53.0% 45.0% 43.1% 45.9%11.8% 13.9% 16.0% 15.5%


Consumer ABSOther


Percent of Net Par Outstanding

TransportationPooled Debt ObligationsFuture FlowFinancial Products

Other

International Finance:Power & UtilityInfrastructure

Consumer ABSFinancial ProductsPower & UtilityCommercial ABS

Non Ad ValoremOther

U.S. Structured Finance:Pooled Debt Obligations

UtilityGeneral Obligation

TransportationHigher Education

As of

Par Value9/30/2007


As of

21

Insured Portfolio - Summary of Below Investment Grade (BIG) Exposures(U.S. dollars in millions)

As of 9/30/2007

Net Par Outstanding

62$ 2 - 1 - -

Total U.S. Public Finance 65

5 2 - 9

401 9

Total U.S. Structured Finance 426

- -

163 - - - - -

Total International Finance 163

654$

0.4%

U.S. Public Finance:General ObligationUtilityTransportation

Pooled Debt Obligations

Higher EducationNon Ad ValoremOther


Consumer ABSFinancial ProductsPower & UtilityCommercial ABSOther

International Finance:Power & UtilityInfrastructureTransportationPooled Debt Obligations

Total Below Investment Grade

Based on S&P ratings if available and internal SCA ratings if no S&P rating is available.

BIG as a percentage of net par outstanding

Future FlowFinancial ProductsConsumer ABSOther

Note:

22

Insured Portfolio - Insurance Par Written by Bond Type(U.S. dollars in millions)

Gross % Net % Gross % Net % Gross % Net %

5,380$ 26.6% 4,914$ 26.2% 7,763$ 15.5% 7,226$ 15.6% 6,112$ 12.1% 6,081$ 12.9%783 3.9% 703 3.8% 2,623 5.2% 2,459 5.3% 2,441 4.8% 2,359 5.0%122 0.6% 119 0.6% 384 0.8% 276 0.6% 2,728 5.4% 2,456 5.2%409 2.0% 409 2.2% 1,088 2.2% 1,088 2.3% 1,386 2.7% 1,374 2.9%442 2.2% 420 2.2% 1,157 2.3% 1,040 2.2% 1,977 3.9% 1,890 4.0%

1,416 7.0% 1,416 7.6% 1,596 3.2% 1,596 3.4% 534 1.1% 493 1.0%Total U.S. Public Finance 8,551 42.3% 7,980 42.6% 14,610 29.2% 13,684 29.5% 15,178 30.0% 14,653 31.1%

5,388 26.6% 4,855 25.9% 18,750 37.4% 17,417 37.5% 13,746 27.2% 13,080 27.8%1,063 5.3% 985 5.3% 5,729 11.4% 5,020 10.8% 6,868 13.6% 6,355 13.5%

561 2.8% 561 3.0% 1,699 3.4% 1,699 3.7% 3,136 6.2% 2,748 5.8%27 0.1% 26 0.1% 277 0.6% 248 0.5% 1,827 3.6% 1,779 3.8%

1,456 7.2% 1,362 7.3% 1,818 3.6% 1,691 3.6% 1,140 2.3% 1,005 2.1%417 2.1% 392 2.1% 800 1.6% 728 1.6% 1,153 2.3% 927 2.0%

Total U.S. Structured Finance 8,911 44.1% 8,183 43.7% 29,072 58.0% 26,805 57.7% 27,870 55.1% 25,894 55.0%

583 2.9% 529 2.8% 1,220 2.4% 1,069 2.3% 1,237 2.4% 1,012 2.2%19 0.1% 19 0.1% 19 0.0% 19 0.0% 2,432 4.8% 2,094 4.4%13 0.1% 2 0.0% 54 0.1% 43 0.1% 1,126 2.2% 996 2.1%

412 2.0% 401 2.1% 2,220 4.4% 2,150 4.6% 1,059 2.1% 1,041 2.2%- - - - 350 0.7% 282 0.6% - - - - - - - - 300 0.6% 300 0.6% - - - - - - - - 73 0.1% 73 0.2% 123 0.2% 123 0.3%

1,727 8.5% 1,615 8.6% 2,170 4.3% 2,041 4.4% 1,536 3.0% 1,254 2.7%Total International Finance 2,754 13.6% 2,567 13.7% 6,406 12.8% 5,977 12.9% 7,513 14.9% 6,520 13.9%

20,217$ 100.0% 18,730$ 100.0% 50,089$ 100.0% 46,466$ 100.0% 50,561$ 100.0% 47,067$ 100.0%

Power & Utilities

Year Ended 12/31/2006Par Written

Three Months Ended 9/30/2007


OtherCommercial ABSPower & UtilityFinancial ProductsConsumer ABS

Future FlowPooled Debt ObligationsTransportationInfrastructure

Total Par Written

OtherConsumer ABSFinancial Products

Pooled Debt ObligationsU.S. Structured Finance:

OtherNon Ad ValoremHigher EducationTransportation

Nine Months Ended 9/30/2007



Par Written Par Written

23

Insured Portfolio - Reinsurance Par Written by Bond Type(U.S. dollars in millions)


1$ 0.2% 1$ 0.2% 84$ 11.2% 84$ 11.2% 53$ 3.3% 53$ 3.3%25 7.5% 25 7.5% 25 3.4% 25 3.4% 19 1.2% 19 1.2%

(50) -15.1% (50) -15.1% - - - - 50 3.1% 50 3.1%- - - - - - - - - - - - 50 15.1% 50 15.1% 50 6.7% 50 6.7% - - - - - - - - - - - - 6 0.4% 6 0.4%

Total U.S. Public Finance 26 7.7% 26 7.7% 159 21.3% 159 21.3% 128 7.9% 128 7.9%

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

150 45.2% 150 45.2% 150 20.1% 150 20.1% 100 6.2% 100 6.2%- - - - - - - - - - - -

Total U.S. Structured Finance 150 45.2% 150 45.2% 150 20.1% 150 20.1% 100 6.2% 100 6.2%

156 47.1% 156 47.1% 321 43.1% 321 43.1% 317 19.6% 317 19.6%- - - - 115 15.4% 115 15.4% 398 24.6% 398 24.6%- - - - - - - - 11 0.7% 11 0.7%- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 34 2.1% 34 2.1%- - - - - - - - - - - - - - - - - - - - 632 39.0% 632 39.0%

Total International Finance 156 47.1% 156 47.1% 436 58.6% 436 58.6% 1,392 85.9% 1,392 85.9%

332$ 100.0% 332$ 100.0% 745$ 100.0% 745$ 100.0% 1,620$ 100.0% 1,620$ 100.0%

Par Written




Financial ProductsConsumer ABSPooled Debt Obligations


Total Par Written

OtherConsumer ABSFinancial ProductsFuture FlowPooled Debt ObligationsTransportationInfrastructurePower & Utility

Nine Months Ended 9/30/2007 Year Ended 12/31/2006Par Written

Three Months Ended 9/30/2007Par Written


OtherCommercial ABSPower & Utility

24

Insured Portfolio - Combined Insurance and Reinsurance Par Written by Bond Type(U.S. dollars in millions)


5,380$ 26.2% 4,914$ 25.8% 7,846$ 15.4% 7,309$ 15.5% 6,165$ 11.8% 6,134$ 12.6%808 3.9% 728 3.8% 2,648 5.2% 2,484 5.3% 2,460 4.7% 2,378 4.9%72 0.4% 69 0.4% 384 0.8% 276 0.6% 2,778 5.3% 2,506 5.1%

409 2.0% 409 2.1% 1,088 2.1% 1,088 2.3% 1,386 2.7% 1,374 2.8%492 2.4% 470 2.5% 1,207 2.4% 1,090 2.3% 1,977 3.8% 1,890 3.9%

1,416 6.9% 1,416 7.4% 1,596 3.1% 1,596 3.4% 540 1.0% 499 1.0%Total U.S. Public Finance 8,577 41.7% 8,006 42.0% 14,769 29.1% 13,843 29.3% 15,306 29.3% 14,781 30.4%

5,388 26.2% 4,855 25.5% 18,750 36.9% 17,417 36.9% 13,746 26.3% 13,080 26.9%1,063 5.2% 985 5.2% 5,729 11.3% 5,020 10.6% 6,868 13.2% 6,355 13.1%

561 2.7% 561 2.9% 1,699 3.3% 1,699 3.6% 3,136 6.0% 2,748 5.6%27 0.1% 26 0.1% 277 0.5% 248 0.5% 1,827 3.5% 1,779 3.7%

1,606 7.8% 1,512 7.9% 1,968 3.9% 1,841 3.9% 1,240 2.4% 1,105 2.3%417 2.0% 392 2.1% 800 1.6% 728 1.5% 1,153 2.2% 927 1.9%

Total U.S. Structured Finance 9,061 44.1% 8,333 43.7% 29,222 57.5% 26,955 57.1% 27,970 53.6% 25,994 53.4%

739 3.6% 685 3.6% 1,541 3.0% 1,390 2.9% 1,554 3.0% 1,329 2.7%19 0.1% 19 0.1% 134 0.3% 134 0.3% 2,830 5.4% 2,492 5.1%13 0.1% 2 0.0% 54 0.1% 43 0.1% 1,137 2.2% 1,007 2.1%

412 2.0% 401 2.1% 2,220 4.4% 2,150 4.6% 1,059 2.0% 1,041 2.1%- - - - 350 0.7% 282 0.6% - - - - - - - - 300 0.6% 300 0.6% 34 0.1% 34 0.1%- - - - 73 0.1% 73 0.2% 123 0.2% 123 0.3%

1,727 8.4% 1,615 8.5% 2,170 4.3% 2,041 4.3% 2,168 4.2% 1,886 3.9%Total International Finance 2,910 14.2% 2,723 14.3% 6,842 13.5% 6,413 13.6% 8,905 17.1% 7,912 16.3%

20,548$ 100.0% 19,061$ 100.0% 50,834$ 100.0% 47,211$ 100.0% 52,181$ 100.0% 48,687$ 100.0%

Power & Utility

Year Ended 12/31/2006Par Written

Three Months Ended 9/30/2007


OtherCommercial ABSPower & UtilityFinancial ProductsConsumer ABS

Future FlowPooled Debt ObligationsTransportationInfrastructure

Total Par Written

OtherConsumer ABSFinancial Products

Pooled Debt ObligationsU.S. Structured Finance:


Nine Months Ended 9/30/2007




25

Insured Portfolio - Profile by Geographic Distribution(U.S. dollars in millions)

Gross % Net %

New York 19,624$ 11.5% 18,162$ 11.8%California 14,502 8.5% 13,140 8.5%Florida 4,592 2.7% 4,029 2.6%Texas 4,471 2.6% 4,205 2.7%Delaware 4,446 2.6% 3,840 2.5%Illinois 4,045 2.4% 3,893 2.5%Alabama 3,536 2.1% 2,783 1.8%Massachusetts 3,317 1.9% 3,226 2.1%New Jersey 2,900 1.7% 2,810 1.8%Pennsylvania 2,801 1.6% 2,801 1.8%

64,236 37.6% 58,890 38.2%

28,986 17.0% 26,963 17.5%48,082 28.2% 44,293 28.7%

141,304 82.8% 130,147 84.4%

United Kingdom 13,330 7.8% 10,819 7.0%Australia 2,952 1.7% 2,012 1.3%Ireland 2,060 1.2% 2,011 1.3%Turkey 1,270 0.7% 1,060 0.7%Spain 1,212 0.7% 809 0.5%Canada 1,053 0.6% 764 0.5%Chile 995 0.6% 956 0.6%New Zealand 806 0.5% 750 0.5%Netherlands 732 0.4% 704 0.5%Italy 691 0.4% 461 0.3%Norway 628 0.4% 139 0.1%Mexico 596 0.3% 562 0.4%France 458 0.3% 458 0.3%Brazil 331 0.2% 264 0.2%Japan 318 0.2% 300 0.2%Portugal 282 0.2% 273 0.2%Luxembourg 276 0.2% 269 0.2%Egypt 153 0.1% 148 0.1%Guatemala 125 0.1% 125 0.1%Qatar 100 0.1% 96 0.1%Panama 96 0.1% 96 0.1%El Salvador 39 0.0% 39 0.0%Costa Rica 9 0.0% 9 0.0%

28,512 16.7% 23,123 15.0%Internationally Diversified 895 0.5% 895 0.6%

29,407 17.2% 24,017 15.6%170,710$ 100.0% 154,164$ 100.0%

Non-United States

Subtotal

Subtotal

Other States & TerritoriesNationally DiversifiedTotal United States

As of 9/30/2007Par Value Outstanding

Total Par OutstandingTotal Non-United States

Geographic DistributionUnited States

26

Insured Portfolio - Distribution by Rating(U.S. dollars in millions)

Net Par Outstanding % Net Par Outstanding %

$ 63,086 40.9% $ 34,559 29.3% 20,153 13.1% 17,846 15.1% 40,024 26.0% 35,226 29.9% 30,247 19.6% 29,889 25.3% 654 0.4% 492 0.4%

Net par outstanding $ 154,164 100.0% $ 118,012 100.0%

1

9/30/2007 12/31/2006As of

Distribution by Ratings1

AAAAAABBBBelow investment grade

Note:Based on S&P ratings if available and internal SCA ratings if no S&P rating is available.

27

Insured Portfolio - CDO Exposure by Rating and Year of Issue(U.S. dollars in millions)


$ 43,234 97.4% $ 22,481 86.6% 919 2.1% 2,529 9.8% 244 0.5% 821 3.2% 6 0.0% 113 0.4% 5 0.0% 3 0.0%

Total par outstanding $ 44,407 100.0% $ 25,947 100.0%


$ 605 1.4% $ 966 3.7% 1,356 3.1% 1,989 7.7% 1,165 2.6% 1,212 4.7% 1,445 3.2% 1,820 7.0% 6,251 14.1% 6,173 23.8% 13,921 31.3% 13,787 53.1% 19,665 44.3% - -

1 Based on S&P ratings if available and internal SCA ratings if no S&P rating is available.

2001 and prior20022003

2007 year to date200620052004

Note:

ABBBBelow investment grade

Distribution of CDO Exposure by Year of Issue

AAAAA

9/30/2007As of

12/31/2006Distribution by Ratings of CDO Exposure1

28

Insured Portfolio - 25 Largest Public Finance Credits(U.S. dollars in millions)

Obligor Name Net Par Outstanding

1 State of New Jersey - Annual Appropriation 858$ 2 City of New York - GO 857 3 Private Municipal CDS Transaction 833 4 Jefferson County, Alabama - Water/Sewer Revenue 811 5 East Bay Municipal Utility District, California - Water/Sewer Revenue 755 6 State of California - GO 737 7 State of New York - Annual Appropriation 721 8 Commonwealth of Massachusetts - GO 690 9 State of Wisconsin - Annual Appropriation 689 10 Private Municipal CDS Transaction 625 11 South Carolina Transportation Infrastructure Bank - State Gas and Motor Vehicle Tax 620 12 Private Municipal CDS Transaction 595 13 Commonwealth of Puerto Rico - GO 585 14 LCOR Alexandria LLC - Pre-Insured Federal Lease Backed 580 15 State of California - Sales Tax 562 16 City of Houston, Texas - Water/Sewer Revenue 528 17 Denver International Airport - General Revenue 517 18 Chicago O'Hare International Airport - General Revenue 501 19 San Francisco International Airport - General Revenue 432 20 Bay Area Toll Authority, California - Toll Revenue 425 21 Port Authority of New York and New Jersey - General Revenue 414 22 Miami International Airport - General Revenue 403 23 Long Island Power Authority - Electric Revenue 401 24 City of Detroit, Michigan - Annual Appropriation 385 25 Metropolitan Water District of Southern California - Water/Sewer Revenue 383 Total Net Par Outstanding of the 25 Largest Public Finance Credits 14,907$

Total Portfolio Net Par Outstanding 154,164$ % of Total Portfolio 9.7%

As of 9/30/07

29

Insured Portfolio - Top 10 Structured Finance Servicer Exposures(U.S. dollars in millions)

Servicer Name1 Net Par Outstanding

1 Countrywide Financial Corporation 3,435$ 2 Servicer X2 2,537 3 GMAC Mortgage Corporation 1,344 4 Cendant Corporation 1,250 5 Americredit Financial Services, Inc. 1,166 6 IndyMac Bank. F.S.B. 1,077 7 Option One 669 8 EDC Portfolio Management Transaction 600 9 Servicer Y2 540 10 DriveTime Automotive Group, Inc. 442 Total $ 13,060

Notes:1Servicer may be an operating subsidiary of the named entity.2Servicer not revealed due to confidentiality.

As of 9/30/2007

30

Reconciliation of Non-GAAP Measures

Core Net Premiums Earned

Core net premiums earned, which is a non-GAAP financial measure, is defined as net premiums earned excluding the impact of refundings, calls and other accelerations. We believe core net premiums earned is a useful measure for management, equity analysts and investors because the presentation of core net premiums excludes the impact of refundings, calls and other accelerations that management cannot control or predict.

Operating Income and Core Income

While operating income and core income are not substitutes for net income computed in accordance with GAAP, they are useful measures of performance used by management, equity analysts and investors. We believe operating income and core income enhance the understanding of our results of operations by highlighting the underlying profitability of our business. Operating income measures net (loss) income available to common shareholders, as determined in accordance with GAAP, excluding net realized gains (losses) on investments and the after-tax impact of net realized and unrealized gains (losses) on derivative financial instruments, and expenses related to XL Capital's secondary offering of SCA's shares. In addition, in determining operating income, we have made an adjustment to the amount of dividends on our perpetual non-cumulative preference shares reported in accordance with GAAP during the period to reflect the amount of such dividends that would be attributable to the period as if such dividends were accrued ratably over the period. Core income represents operating income excluding the after-tax impact of refundings, calls and other accelerations. The definitions of operating income and core income used by the Company may differ from definitions of operating earnings and core earnings used by other financial guarantors.

Net realized gains and (losses) on investments and the after-tax impact of net realized and unrealized gains and losses on derivative financial instruments (which principally consist of credit derivatives we issue and interest rate swap contracts we guarantee) are excluded from operating income because they are heavily influenced by, and fluctuate, in part according to, market interest rates, credit spreads and other factors that management cannot control or predict. Although the investment of premiums to generate investment income (loss) and realized gains (losses) on investments is an integral part of our operations, the determination to realize gains (losses) on investments is independent of the underwriting process. In addition, under applicable GAAP accounting requirements, losses can be created as the result of other than temporary declines in value without actual realization. In this regard, certain users of our financial information, including certain rating agencies, evaluate earnings before tax and net gains (losses) on investments to understand the profitability of the recurring sources of income without the effects of these two variables. Furthermore, these users believe that, for many companies, the timing of the realization of gains (losses) on investments is largely opportunistic. In addition, with respect to credit derivatives and guaranteed interest rate swap contracts discussed above, because we generally hold such contracts to maturity and, accordingly, will not realize the periodic effect of the changes in fair value of these instruments, therefore, we exclude such changes from operating income (similar to other companies in the financial guarantee industry) as the changes in fair value each quarter are not indicative of underlying business performance of our operations. In regard to the adjustment discussed above relating to dividends on our perpetual non-cumulative preference shares, while such dividends are non-cumulative and are at the discretion of the board of directors, we anticipate that such dividends will be declared and we believe that this adjustment better correlates the cost of this capital to the benefits derived there from during the period. Also, in determining operating income for the three- and nine- month periods ended September 30, 2007, we excluded from operating income expenses incurred by the Company in connection with the secondary offering of our common shares by XL Capital as such expenses are not related to the conduct of the Company’s business.

Adjusted Gross Premiums

Adjusted gross premiums is a non-GAAP measure of new business production that management uses to evaluate our business because it provides comparability between upfront premiums and installment premiums, unlike U.S. GAAP total premiums written. Because adjusted gross premiums includes premiums due on future on installment business written in the period, management believes it provides an additional, useful measure of new business production than only U.S. GAAP total premiums written.

Management uses this measure to review trends in new business written because it views this method as providing comparability between business written on an upfront premium basis and business written on an installment basis. This measure is viewed by management as an essential component of information necessary to assess forward-looking earnings potential, which is substantially dependent on the size of our in-force book of business.

Management also compares our adjusted gross premiums production to industry figures on a quarterly basis and uses this measure to assess employee productivity, as well as our market share and competitive position. Also, AGP is considered among other factors when determining compensation to employees. In addition to presenting total premiums written, we believe that disclosure of adjusted gross premiums enables investors and other users of our financial information to analyze our performance in a manner similar to the way in which management analyzes performance. In this regard, we believe that providing only a GAAP presentation of total premiums written makes it more difficult for users of our financial information to evaluate our underlying business. Also, we believe that analysts, investors and rating agencies who follow us and our subsidiaries include these items in their analyses for the same reasons, and they request that we and our subsidiaries provide this non-GAAP financial information on a regular basis.

In summary, we believe that presenting both GAAP and the aforementioned non-GAAP financial measures enable investors and other users of our financial information to analyze our performance in a manner similar to how our management analyzes performance. Also, as stated above, we believe that analysts, investors and rating agencies that follow us (and the financial guarantee insurance industry as a whole) include these items in their analyses for the same reasons previously discussed, and they request that we provide this non-GAAP financial information on a regular basis.

Adjusted Book Value

Adjusted Book Value (“ABV”) represents GAAP book value attributable to common shareholders plus the after-tax effects of deferred premium revenue, net of prepaid reinsurance premiums and deferred acquisition costs, plus the after-tax effect of the net present value of future installment premiums. Since the Company expects these items to affect future results and, in general, they do not require any additional future performance obligation on the Company's part, ABV provides an indication of the Company's value in the absence of any new business activity. While ABV is not a substitute for GAAP book value, the Company believes the presentation of ABV provides another useful measure of the value of the Company for management, equity analysts and investors. The net present value of future installment premiums included in ABV may differ materially from actual future installment premiums collected due to changes in market interest rates, refinancing activity, pre-payment speeds, defaults and other factors that management cannot control or predict.

This Operating Supplement contains the presentation of AGP, core net premiums earned, operating income, core income and ABV. These measures are "non-GAAP financial measures" as defined in Regulation G. The reconciliations of total premiums written to AGP; net premiums earned to core net premiums earned; net (loss) income available to common shareholders to operating income and core income; and total shareholders' equity to common shareholders' equity and ABV (the most directly comparable GAAP financial measures) presented on the following page are in accordance with Regulation G.

We present our operations in the way we believe will be most meaningful and useful to investors, analysts, rating agencies and others who use our financial information in evaluating our performance. These non-GAAP financial measures are included herein because investors in SCA-insured bonds and other users of our financial information consider such measures important in analyzing our financial performance.

31

Reconciliation of Non-GAAP Measures(Unaudited)(U.S. dollars in millions)

Reconciliation of Total Premiums Written to Adjusted Gross Premiums9/30/2007 9/30/2006 9/30/2007 9/30/2006

Total upfront premiums written 68.0$ 47.1$ 172.8$ 174.2$ Total installment premiums written 42.8 38.5 113.6 101.2 Total premiums written 110.8 85.6 286.4 275.4 Present value of future installments 30.3 5.7 107.1 83.5 Adjusted gross premiums 141.1$ 91.3$ 393.5$ 358.9$

Reconciliation of Net Premiums Earned to Core Net Premiums Earned9/30/2007 9/30/2006 9/30/2007 9/30/2006

Net premiums earned 58.2$ 45.5$ 158.7$ 138.8$ Earned premium recognized from refundings, calls and other accelerations (5.0) (0.4) (12.0) (25.6) Core net premiums earned 53.1$ 45.1$ 146.7$ 113.2$

Reconciliation of Net (Loss) Income to Operating Income and Core Income9/30/2007 9/30/2006 9/30/2007 9/30/2006

Net (loss) income available to common shareholders (89.9)$ 28.4$ (26.7)$ 81.5$ Effect of: Expenses incurred in secondary offering (0.1) - 0.8 - Perpetual non-cumulative preference share dividend 4.3 - - - Net realized (gains) losses on investments (0.0) 0.2 1.5 16.6 Net realized and unrealized losses on derivative financial instruments 131.7 3.2 160.8 6.8 Operating Income 46.0$ 31.8$ 136.5$ 104.9$ Effect of refundings, calls and other accelerations (4.9) (0.3) (10.9) (22.7) Core Income 41.1$ 31.5$ 125.6$ 82.1$

Reconciliation of Total Shareholders' Equity to Common Shareholders' Equity and Adjusted Book Value (ABV)9/30/2007 12/31/2006

Total shareholders' equity 1,594.0$ 1,366.5$ Series A perpetual non-cumulative preference shares (246.6) - Common shareholders' equity 1,347.4 1,366.5 After-tax value of: Deferred premium revenue 807.8 708.4 Present value of future installment premiums 650.0 509.8 Deferred acquisition costs (95.5) (83.5) Prepaid reinsurance premiums (87.6) (53.4) Adjusted book value 2,622.1$ 2,447.8$

As of

Three Months Ended


Nine Months Ended


32

Insured Portfolio Par Written By Bond Type(U.S. dollars in millions)

Gross Net Gross Net

General Obligation 7,763$ 1,944$ 4,706$ 665$ Higher Education 1,088 290 1,138 180 Non Ad Valorem 1,157 307 1,036 218 Other 1,596 399 534 67 Transportation 384 75 2,682 379 Utility 2,623 778 2,152 365

Total U.S. Public Finance 14,610 3,794 12,247 1,873

Commercial ABS 1,818 327 1,923 310 Consumer ABS 5,729 1,356 6,707 978 Financial Products 1,699 427 1,743 319 Other 800 173 402 40 Pooled Debt Obligations 18,750 4,409 8,627 1,406 Power & Utility 277 69 994 144

Total U.S. Structured Finance 29,072 6,761 20,395 3,197

Consumer ABS 73 18 123 31 Future Flow 350 24 - - Infrastructure 19 5 1,505 169 Other 2,470 618 1,441 251 Pooled Debt Obligations 2,220 555 287 29 Power & Utilities 1,220 290 819 127

54 12 754 80 Total International Finance 6,406 1,522 4,928 687

50,089$ 12,077$ 37,570$ 5,757$ Total Par Written





Transportation

Nine Months Ended 9/30/2007 Nine Months Ended 9/30/2006

33

Insured Portfolio Par Outstanding by XLCA Categories(U.S. dollars in millions)

Gross Net

Asset-Backed SecuritiesAuto 2,314$ 406$ Commercial ABS - Other 2,783 227 Consumer ABS - Other 318 51 Consumer Mortgage 9,984 1,772 Credit Card 524 53 Fleet Financing 1,650 165 Pre-Insured 485 108 Equipment Lease/Loans 317 79

Total Asset-Backed Securities 18,374 2,862

General Obligation & Appropriation 27,463 4,308 Higher Education - Private 3,253 424 Higher Education - Public 2,849 476 Housing & Public Buildings 17 4 Non Ad Valorem 6,882 1,198 Pre-Insured 1,371 244 Revenue Secured - Other 518 76 Transportation 6,782 942 Utility - Public 12,267 2,074

Total U.S. Public Finance 61,403 9,747

Collateralized Debt ObligationsCDO - Arbitrage Cash Flow 34,489 6,197 CDO - Market Value 1,027 197 CDO - Synthetic 10,747 2,240 CFO - Collateralized Fund Obligation 429 43

Total Collateralized Debt Obligations 46,692 8,677

Structured Single RiskBank Product 2,594 113 Financial / Insurance 551 62 Future Flow 2,114 138 GIC 4,770 881 Global Infrastructure - Other 4,426 520 Housing & Public Buildings 882 88 Power & Utility - Other 439 57 Pre-Insured 4,719 963 Sovereign 725 52 Specialized Risk - Other 255 26 Transportation 3,352 367 Utility - Private 9,487 1,179 Utility - Public 674 57 Whole Business Securitization 123 16

Total Structured Single Risk 35,110 4,519 161,579$ 25,805$ Total Par Outstanding



As of 9/30/2007

34

Insured Portfolio - Geographic Distribution(U.S. dollars in millions)

Gross % Net %

Geographic DistributionUnited States

California 12,385$ 7.7% 1,410$ 5.5%New York 12,104 7.5% 2,007 7.8%Delaware 4,136 2.6% 678 2.6%Alabama 3,249 2.0% 340 1.3%Texas 2,983 1.8% 381 1.5%Florida 2,797 1.7% 941 3.6%Illinois 2,675 1.7% 310 1.2%Pennsylvania 2,373 1.5% 322 1.2%Massachusetts 2,282 1.4% 266 1.0%New Jersey 2,144 1.3% 235 0.9%

Subtotal 47,129 29.2% 6,890 26.7%

Other States & Territories 90,170 55.8% 15,380 59.6%Nationally Diversified 200 0.1% 21 0.1%United States 137,499 85.1% 22,291 86.4%

Non-United States

United Kingdom 10,240 6.3% 1,520 5.9%Australia 2,558 1.6% 405 1.6%Ireland 2,060 1.3% 515 2.0%Turkey 1,270 0.8% 76 0.3%Spain 1,207 0.7% 129 0.5%New Zealand 806 0.5% 68 0.3%Canada 782 0.5% 66 0.3%Netherlands 732 0.5% 183 0.7%Chile 728 0.5% 135 0.5%Italy 617 0.4% 39 0.1%Mexico 446 0.3% 37 0.1%Norway 576 0.4% 73 0.3%Brazil 320 0.2% 21 0.1%Japan 318 0.2% 51 0.2%Portugal 282 0.2% 19 0.1%Luxembourg 276 0.2% 69 0.3%Egypt 153 0.1% 11 0.0%Guatemala 125 0.1% 13 0.0%Qatar 100 0.1% 25 0.1%Panama 96 0.1% 20 0.1%El Salvador 39 0.0% 4 0.0%Costa Rica 9 0.0% 1 0.0%

Subtotal 23,738 14.7% 3,480 13.5%Internationally Diversified 342 0.2% 34 0.1%

Total Non-United States 24,080 14.9% 3,514 13.6%161,579$ 100% 25,805$ 100%

As of 9/30/2007



35

Insured Portfolio - Distribution by Rating(U.S. dollars in millions)

As of9/30/2007

Net Par Outstanding %

$ 12,327 47.8% 3,456 13.4% 5,761 22.3% 4,211 16.3% 51 0.2%

Net Par Outstanding $ 25,805 100.0%

1

BBB

Based on S&P ratings if available and internal XLCA ratings if no S&P rating is available.

Note:

Distribution by Ratings1

AAAAAA

Below investment grade

36

Insured Portfolio - 10 Largest Credits within Each Business Area(U.S. dollars in millions)

Gross % Net %

Asset-Backed Securities:Countrywide Home Equity Loan Trust 2006D 1,050$ 0.6% 105$ 0.4%Private Credit Card Transaction 1,000 0.6% 100 0.4%Americredit Automobile Receivables Trust 2007-A-X 926 0.6% 160 0.6%Greenpoint Mortgage Funding Trust 2006-HE1 894 0.6% 121 0.5%Countrywide Home Equity Loan Trust 2006-S7 844 0.5% 176 0.7%Option One Mortgage Loan Trust 2007-HL1 669 0.4% 167 0.6%Canada Account Regional Jets Synthetic Risk Transfer 600 0.4% 22 0.1%Cendant Rental Car (AESOP) Funding Series 2006-2 600 0.4% 60 0.2%GreenPoint Mortgage Funding Trust 2007-HE1 557 0.3% 139 0.5%Secondary Alt-A Mortgage Transaction 507 0.3% 127 0.5%

Total 7,647 4.7% 1,176 4.6%Total ABS Portfolio 18,374 11.4% 2,862 11.1%

Structured Single Risk:XLAF Municipal Investment Agreement Program 4,755 2.9% 880 3.4%Southern Gas Network, UK 1,265 0.8% 59 0.2%JP Morgan Bank 1,031 0.6% 23 0.1%Railcorp Rolling Stock PPP 995 0.6% 193 0.7%Thames Water Utilities Ltd. 937 0.6% 214 0.8%Pre-Insured PFI Transaction 724 0.4% 68 0.3%Newcastle Hospitals PFI Project 686 0.4% 43 0.2%Inspired (South Lanarkshire School Project) Scotland 684 0.4% 87 0.3%Atlantide S.R.L. (Region of Lazio, Italy) 617 0.4% 39 0.1%Dalrymple Bay Coal Terminal (DBCT), Australia 598 0.4% 60 0.2%

Total 12,292 7.6% 1,664 6.4%Total SSR Portfolio 35,110 21.7% 4,519 17.5%

Public Finance:Jefferson County, AL - Water/Sewer Revenue 1,230 0.8% 104 0.4%State of California - Sales Tax 1,000 0.6% 100 0.4%State of Wisconsin - Annual Appropriation 945 0.6% 94 0.4%State of Texas - GO 900 0.6% 225 0.9%State of California - GO 859 0.5% 105 0.4%State of Florida - GO 850 0.5% 212 0.8%East Bay Municipal Utility District, CA - Water/Sewer Revenue 814 0.5% 140 0.5%State of New York - Annual Appropriation 771 0.5% 79 0.3%City and County of San Francisco, CA International Airport - Gener 770 0.5% 77 0.3%City of Houston, TX - Water/Sewer Revenue 653 0.4% 65 0.3%

Total 8,791 5.4% 1,202 4.7%Total Public Finance Portfolio 61,403 38.0% 9,747 37.8%

Collateralized Debt Obligations:Secondary Market Cashflow CDO 1,800 1.1% 205 0.8%Secondary Market Cashflow CDO 1,335 0.8% 207 0.8%Secondary Market Cashflow CDO 1,320 0.8% 132 0.5%Secondary Market Cashflow CDO 1,290 0.8% 322 1.2%Secondary Market Cashflow CDO 1,192 0.7% 207 0.8%Secondary Market Cashflow CDO 1,076 0.7% 183 0.7%Private Synthetic CDO 1,050 0.6% 105 0.4%Secondary Market Cashflow CDO 1,000 0.6% 180 0.7%Secondary Market Cashflow CDO 959 0.6% 206 0.8%Secondary Market Synthetic CDO 950 0.6% 238 0.9%

Total 11,971 7.4% 1,985 7.7%Total CDO Portfolio 46,692 28.9% 8,677 33.6%

161,579$ 100% 25,805$ 100%

As of 9/30/2007Par Value Outstanding

Grand Total

37

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THIRD QUARTER 2007 OPERATING SUPPLEMENTlibrary.corporate-ir.net/library/19/198/198015/items/269926/3Q 2007...Fundamental strength in triple-A rated financial guarantee ... Summary