Assured Guaranty (AGO) DEF 14ADefinitive proxy

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

(Amendment No.         )

Filed by the Registrant  ☒                              Filed by a Party other than the Registrant  ☐

Check the appropriate box:

Assured Guaranty Ltd.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

It is with great pleasure that we invite you to our 2020 Annual General Meeting of shareholders on Wednesday, May 6, 2020, 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 2019 financial performance was excellent. Our shareholders’ equity attributable to Assured Guaranty Ltd. per share, adjusted operating shareholder’s equity per share¹and adjusted book value per share¹ all reached record levels, at $71.18, $66.96 and $96.86, respectively. In addition, we will look back on 2019 as the year we took our first significant step to establish our asset management business, Assured Investment Management, by acquiring BlueMountain Capital Management, LLC, which we refer to as BlueMountain, and associated entities.

Some of the highlights from our year include:

The market rewarded us for our accomplishments with a 30% total shareholder return for the year, double last year’s return. We provide further detail about our 2019 accomplishments and our plans for the future in the Letter to Shareholders accompanying our 2019 Annual Report, which we encourage you to review.

Finally, a word about the COVID-19 pandemic and its consequences. We offer our support and well wishes for the safety of all affected. Assured Guaranty is operating well remotely, as contemplated in the business continuity plan that we test regularly, and we are providing the services and communications we normally would. We believe the benefits of our value proposition are clearly evident in the volatile market environment we are now experiencing. We have the financial strength to fulfill our commitments, and preserving that financial strength is our highest strategic priority.

Sincerely,

Francisco L. Borges		Dominic J. Frederico
Chairman of the Board		President and Chief Executive Officer

March 25, 2020

Assured Guaranty Ltd.

30 Woodbourne Avenue

Hamilton HM 08

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 6, 2020, at 1:00 p.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 25, 2020, which provides them with instructions on how to access the proxy materials and our 2019 annual report on the Internet, and if they prefer, how to request paper copies of these materials. At this writing, the novel Coronavirus responsible forCOVID-19 continues to spread and governments are taking various actions in response. If we postpone or change the time or location of our Annual General Meeting, we will issue a press release that we will make available on our website atwww.assuredguaranty.com/annualmeeting and file with the Securities and Exchange Commission (which we refer to as the SEC) as definitive additional proxy material. If you wish to receive a physical copy of any such press release, please contact our Secretary at generalcounsel@agltd.com or (441)279-5725.

Only shareholders of record, as shown by the transfer books of AGL, at the close of business on March 13, 2020, are entitled to notice of, and to vote at, the Annual General Meeting.

SHAREHOLDERS OF RECORD MAY VOTE UP UNTIL 4:00 P.M. EASTERN DAYLIGHT TIME ON MAY 5, 2020. 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 MAY 4, 2020.

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 onForm 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 together with its subsidiaries).

We intend to begin distribution of the Notice Regarding the Availability of Proxy Materials to shareholders on or about March 25, 2020.

ANNUAL GENERAL MEETING OF SHAREHOLDERS

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

At this writing, the novel Coronavirus responsible forCOVID-19 continues to spread and governments are taking various actions in response. If we postpone or change the time or location of our Annual General Meeting, we will issue a press release that we will make available on our website atwww.assuredguaranty.com/annualmeeting and file with the SEC as definitive additional proxy material. If you wish to receive a physical copy of any such press release, please contact our Secretary at generalcounsel@agltd.com or(441) 279-5725.

1

SUMMARY DIRECTOR INFORMATION

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

A: Audit; C: Compensation; ES: Environmental and Social Responsibility; F: Finance; NG: Nominating and Governance; RO: Risk Oversight; E: Executive.

  «: Chair;✓: Member

2

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 Board committee charter, are available on our website atwww.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 themselvesup-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 2019, the Board met five 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, 2019.

DIRECTOR INDEPENDENCE

In February 2020, 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 atwww.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 committee.

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

3

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

4

skills and attributes of Board members within the context of the currentmake-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.

The Nominating and Governance Committee will consider a shareholder’s recommendation for director but has no obligation to recommend such candidate 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 a candidate 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’sBye-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 2020 Annual General Meeting. With respect to the 2021 Annual General Meeting, AGL must receive such written notice on or prior to February 5, 2021. 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, an Environmental and Social Responsibility Committee, a Finance Committee, a Nominating and Governance Committee, a Risk Oversight Committee and an Executive Committee. All of the Board committees other than the Executive Committee are composed entirely of directors who are independent of our Company and management, as defined by the NYSE listing standards and as applied by the Board.

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

5

auditor. The Audit Committee is also responsible for the oversight of Company risks related to (i) financial reporting, accounting policies and reserving, (ii) legal, regulatory and compliance matters, (iii) information technology (including cybersecurity), (iv) workouts, emerging events, and counterparties, (v) outsourcing and people, and (vi) business continuity planning.

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

The Board has determined that each member of the Audit Committee satisfies the financial literacy requirements of the NYSE and is an audit committee financial expert, as that term is defined under Item 407(d) of the SEC’sRegulation 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 also responsible for the oversight of Company risks related to people, succession planning and compensation.

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

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

The Environmental and Social Responsibility Committee provides oversight and review of the Company’s significant strategies, policies and practices regarding environmental and social responsibilities. The Environmental and Social Responsibility Committee focuses on four principal subject areas: (i) environmental stewardship, including risks and opportunities posed by environmental issues; (ii) corporate social responsibility, including community engagement and corporate philanthropy; (iii) workforce equality and wellness, including diversity and inclusion; and (iv) stakeholder engagement. The Environmental and Social Committee was established after the May 2019 Board meeting and met in both of the succeeding quarters, in August and November 2019. Prior to the establishment of the Environmental and Social Responsibility Committee, the Nominating and Governance Committee was responsible for many such matters.

The Finance Committee of the Board of Directors oversees management’s investment of our Company’s investment portfolio, including in alternative investments, and is responsible for oversight of Company risks related to capital, liquidity, investments, financial market conditions, foreign currency, and rating agencies. 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, as well as the oversight of Company risks related to board qualification, corporate structure, governance, regulatory compliance and people. 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 and as applied by the Board.

6

The Risk Oversight Committee oversees management’s establishment and implementation of standards, controls, limits, guidelines and policies relating to risk appetite, risk assessment and enterprise risk management. The Risk Oversight Committee focuses on the underwriting, surveillance and workout of credit risks as well as the assessment, management and oversight of other Company enterprise risks, including, but not limited to, financial, legal, operational (including information technology, cybersecurity and vendor management) and other risks concerning our Company’s governance, 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’sBye-Laws, rules of the NYSE and applicable law and regulation and the Committee’s charter.

HOW ARE DIRECTORS COMPENSATED?

Our independent directors receive an annual retainer of $265,000 per year. We pay $145,000 of the retainer in restricted stock and $120,000 of the retainer in cash. A director also may elect to receive any or all of the cash portion of his or her annual retainer (plus the additional cash 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.

Our share ownership guidelines require that, before being permitted to dispose of any shares acquired as compensation from our Company, each independent director own Common Shares with a market value of at least $600,000, which amount is five times the maximum cash portion of the annual director retainer (exclusive of committee fees). (Prior to May 2019 the minimum was the greater of that amount or 25,000 shares.) 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. Seven independent directors meet our share ownership guidelines. Two independent directors (Mr. Leathes, who joined the Board in May 2013 and Ms. Omura, who joined the Board in May 2014) are accumulating Common Shares toward their ownership goals.

In addition to the annual retainer 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 was one extraordinary meeting of the Board in 2019 (to consider our acquisition of BlueMountain), but no attendance fee was paid for attendance at that meeting. We do not pay a fee for being a member, or attending meetings, of the Executive Committee.

In 2019, 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 our director compensation by comparing it against the compensation awarded to directors of companies in our executive compensation comparison group as

7

constituted before the addition of the four new companies as described under “Compensation Discussion and Analysis—Compensation Governance—Executive Compensation Comparison Group” on page 48 below, and which we refer to as the prior executive compensation comparison group. Cook also looked at a broader market segment using data from Cook’s report for compensation packages for public company independent directors for 2018, the most recent year for which such information was available. Cook found that the structure of our director compensation program was generally consistent with prior executive compensation comparison group policy and best practice design as recognized by the proxy advisory firms and investors, noting:

No changes were made to our independent director compensation program in 2019, although the director share ownership guideline was simplified pursuant to a recommendation from Cook. Cook observed that, with the increase of our stock price over the years, that portion of our independent stock ownership guideline requiring ownership of 25,000 common shares had the effect of increasing materially the dollar value of the requirement and was volatile, while the other portion of our guideline requiring ownership of common shares with a market value of at least five times the maximum cash portion of the annual director retainer was itself higher than the 75th percentile of prior executive compensation comparison group practice and consistent with the best practice identified by a major proxy advisory firm. Consequently, Cook recommended amending the guideline to remove the 25,000 common share floor, and we did so.

Cook found that the aggregate cost of our independent director compensation program approximates the 75th percentile of our prior executive compensation comparison group. Cook also found that, before considering the instances where our directors have chosen to receive a portion of their cash compensation in our common shares, our total per director compensation has a somewhat heavier weighting on cash compensation than that of our prior executive compensation comparison group.

DIRECTOR COMPENSATION

The following table sets forth our 2019 independent director compensation, including the compensation for the directors’ committee assignments as of such date.

8

The following table shows information related to independent director equity awards outstanding on December 31, 2019:

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 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 enterprise 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 and to risks related to Assured Investment Management. In addition, the Audit Committee of the Board of Directors is responsible for reviewing policies and

9

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 oversees cybersecurity risks and reviews compliance with legal and regulatory requirements. The Finance Committee of the Board of Directors oversees the investment of the Company’s investment portfolio (including alternative investments) 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. The Environmental and Social Responsibility Committee oversees risks related to the environment, sustainability and social responsibility, while each of the other Board committees have responsibility for risk assessment of such risks to the extent within their purview.

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, fromtime-to-time, most recently in February 2019, Cook performs a comprehensive 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 update most recently in February 2020 and concluded that our incentive plans, including the changes we made for 2020, 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.

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 ofRegulation 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 even if they are not required to be disclosed pursuant to Item 404 ofRegulation 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 ofRegulation 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 even if they are not required to be disclosed pursuant to Item 404 ofRegulation 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.

10

Our General Counsel identifies related person 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 2019, 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 8.48% and 5.67% of AGL’s Common Shares outstanding, respectively, as of March 13, 2020 (the record date for our Annual General Meeting), based on the amount of Common Shares they reported in their Schedule 13G filings as of the date set forth in such filing, and on the amount of Common Shares outstanding as of the record date. 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, 2019, Wellington Management managed approximately $1.95 billion of our investment assets, which is approximately 19% of our total fixed maturity and short-term investment portfolio, and BlackRock managed approximately $2.2 billion of our investment assets, which is approximately 22% of our total fixed maturity and short-term investment portfolio. In 2019, we incurred expenses of approximately $1.7 million related to our investment management agreement with Wellington Management and $1.9 million with respect to our investment management and investment reporting agreements with BlackRock.

From time to time, certain officers, directors, employees, their family members and related charitable foundations may make investments in various private funds, vehicles or accounts managed by our Company. These investments are available to those of our Company’s employees whom we have determined to have a status that reasonably permits us to offer them these types of investments in compliance with applicable laws. Generally, these investments are not subject to the management fees and performance allocations or incentive fees charged to other investors. Andrew Feldstein, our Chief Investment Officer and Head of Asset Management, is among our employees who invest in various private funds, vehicles or accounts managed by our Company.

DELINQUENT SECTION 16(A) REPORTS

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 2019.

11

PROPOSAL NO. 1:ELECTION OF DIRECTORS

OurBye-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 theBye-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.

12

Summary information about our director nominees and overall composition of our Board is provided in the matrix and graphs below. Further information about each director nominee may be found on the following pages.

13

NOMINEES FOR DIRECTOR

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

 

 

 

 

 

Qualifications:

Mr. Borges has expertise in finance arising from his experience structuring and marketing financial guaranty insurance, and in investment management. 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 and will be particularly useful as our Company expands its asset management business. Each of these areas is important to our business.

Biography:

Mr. Borges, age 68, 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 also chairs the board of trustees of the Knight Foundation and is a member of the board of trustees for the Millbrook School. He is also a member of the board of directors of Davis Selected Funds, where he serves on the Pricing Committee, and Jefferies Financial Group Inc., where he serves on the Audit Committee and the Nominating and Corporate 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 73, 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 served as a director for Harleysville Group, Inc. (NASDAQ: HGIC) and its majority shareholder, Harleysville Mutual Insurance Company, from 2004 through their 2012 merger/combination with Nationwide Mutual Insurance Company and served on an Advisory Board to Nationwide through April 2014. Mr. Buhl is 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.

14

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 67, has been a director of AGL since our 2004 initial public offering, and the President and Chief Executive Officer of AGL since 2003. During his tenure as President and Chief Executive Officer, our Company became the leading provider of municipal bond insurance and financial guaranties. Under his leadership, our Company completed its 2004 initial public offering and, in 2009, acquired the financial guaranty insurance company now named Assured Guaranty Municipal Corp., thereby bringing together the only two monoline bond insurers to continue writing financial guaranty policies before, during and after the 2008 financial crisis.

Mr. Frederico served as Vice Chairman of ACE Limited (now known as Chubb 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, during which period he oversaw the successful acquisition and integration of the domestic and international property casualty operations acquired by ACE Limited from CIGNA Corporation in July 1999 and the acquisition of Capital Re Corp., the predecessor company to our Company, in December 1999.

Prior to joining ACE Limited, Mr. Frederico spent 13 years working for various subsidiaries of the American International Group. His last position at the group was Senior Vice President and Chief Financial Officer of AIG Risk Management.

Bonnie L. Howard   Independent Director   Director Since:2012   Committee Memberships:       Risk Oversight (Chair)       Audit

 

 

 

 

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:

Bonnie L. Howard, age 66, 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 serves on the board of directors of Artisan Partners Fund, where she chairs the Audit Committee. Ms. Howard previously served on the board of directors of BMO Financial Corp., where she was a member of the Audit Committee, and the board of directors of BMO Harris Bank N.A., where she chaired the Directors’ Trust Committee and the Audit Committee, until April 2018.

15

Thomas W. Jones   Independent Director   Director Since:2015   Committee Memberships:       Audit       Compensation

 

 

 

 

 

Qualifications:

Mr. Jones’ background has given him extensive experience in investment management and in the operations of large financial institutions, which is valuable to the Board as our Company expands its asset management business. His previous service on the boards of other financial services companies and the Federal Reserve Bank of New York adds value to the Board and Board committee deliberations.

Biography:

Mr. Jones, age 70, became a director of AGL in August 2015. Mr. Jones is the founder and senior partner of venture capital firm TWJ Capital LLC. Prior to founding TWJ Capital in 2005, he was the chief executive officer of Global Investment Management at Citigroup, which included Citigroup Asset Management, Citigroup Alternative Investments, Citigroup Private Bank and Travelers Life & Annuity. Earlier, he held a series of positions at TIAA-CREF, including vice chairman and director, president and chief operating officer, and executive vice president and chief financial officer, and at John Hancock Mutual Life Insurance Company, where he rose to senior vice president and treasurer. He began his career in public accounting and management consulting, primarily at Arthur Young & Company (predecessor to Ernst & Young).

A trustee emeritus of Cornell University, Mr. Jones has served on numerous boards in the past, including those of the Federal Reserve Bank of New York (where he was vice chairman), Altria Group, Freddie Mac, Travelers Group, Fox Entertainment Group, Pepsi Bottling Group and TIAA-CREF. Mr. Jones has been designated Board Leadership Fellow by the National Association of Corporate Directors (NACD), and is a licensed Certified Public Accountant (CPA).

Patrick W. Kenny   Independent Director   Director Since:2004   Committee Memberships:       Compensation (Chair)       Nominating and Governance       Environmental and Social Responsibility       Executive

 

 

 

 

Qualifications:

Mr. Kenny has extensive insurance industry experience, including executive experience within the industry. In addition, the Board benefits from Mr. Kenny’s experience serving as a Board member of several Voya funds as our Company expands its asset management business, as well his experience as an accountant.

Biography:

Mr. Kenny, age 77, became a director of AGL upon completion of our 2004 initial public offering. He served as the President and Chief Executive Officer of the International Insurance Society in New York, an organization dedicated to fostering the exchange of ideas through a program of international seminars and sponsored research, from 2001 to 2009. From 1998 to 2001, Mr. Kenny served as executive vice president of Frontier Insurance Group, Inc. From 1995 to 1998, Mr. Kenny served as senior vice president of SS&C Technologies. From 1988 to 1994, Mr. Kenny served as Group Executive, Finance & Administration and Chief Financial Officer of Aetna Life & Casualty.

Until 2018, Mr. Kenny served on the board of directors of several Voya funds, where he was a member of the Audit Committee and the Chairperson of the Nominating and Governance Committee. Until December 2009, Mr. Kenny was a director and member of the Audit and the Compensation committees of Odyssey Re Holdings Corp. Mr. Kenny was also a director of the Independent Order of Foresters from 1997 to 2009.

16

Alan J. Kreczko   Independent Director   Director Since:2015   Committee Memberships:       Nominating and Governance       Finance       Environmental and Social     Responsibility (Chair)

 

 

 

 

 

Qualifications:

Mr. Kreczko’s lengthy service in senior legal and policy positions both in the federal government and in the insurance industry, as well as the global and governmental perspective he has gained, are valuable to the Board. Mr. Kreczko’s experience chairing The Hartford’s Environment Committee makes him particularly valuable as the chair of our Environmental and Social Responsibility Committee.

Biography:

Mr. Kreczko, age 68, became a director of AGL in August 2015. Mr. Kreczko retired from The Hartford Financial Services Group, Inc., which we refer to as The Hartford, on December 31, 2015, where he served as executive vice president and general counsel from June 2007 until June 2015. In that capacity, Mr. Kreczko oversaw the law department, government affairs, compliance and communications. Additionally he chaired The Hartford’s Environment Committee. From June 2015 until December 2015, he served as Special Advisor to the CEO.

Mr. Kreczko joined The Hartford in 2003 after 27 years in public service at the United States Department of State, where he held various senior positions. As the Acting Assistant Secretary of State for Population, Refugees and Migration, he led the department’s response to humanitarian crises in conflict situations, including Afghanistan, Timor, and West Africa. Before that, Mr. Kreczko served as special assistant to President Clinton and legal advisor to the National Security Council. Earlier, he participated in sensitive bilateral and multilateral negotiations as deputy general counsel to the Department of State and as legal advisor to the personal representatives for Middle East negotiations of Presidents Carter and Reagan. Mr. Kreczko is the Chair of the Boys and Girls Clubs of Hartford and serves on the board of directors of the Mark Twain House.

Simon W. Leathes   Independent Director   Director Since:2013   Committee Memberships:       Finance       Risk Oversight       Executive

 

 

 

 

 

Qualifications:

Mr. Leathes’ considerable experience in investment and risk management, as well the institutional knowledge gained through his directorship of our Company’s U.K. affiliate, is valuable to the Board and its committees.

Biography:

Mr. Leathes, age 72, joined the Board of AGL in May 2013. From 2012 to 2017, Mr. Leathes was anon-executive director of HSBC Bank plc and was a member of its Risk Committee and its Audit Committee; he was also anon-executive director and member of the Audit and Risk Committees of HSBC Trinkaus & Burkhardt AG. In December 2011, he became an independent,non-executive director of our Company’s U.K. insurance subsidiary, Assured Guaranty (Europe) plc. Mr. Leathes also served as an independent,non-executive director of our Company’s two other U.K. insurance subsidiaries: Assured Guaranty (UK) plc and Assured Guaranty (London) plc, until November 7, 2018 when they were consolidated into Assured Guaranty (Europe) plc. From 1996 to 2018, Mr. Leathes served as anon-executive director ofHSB-Engineering Insurance Ltd., a U.K. subsidiary of Munich Re, where he was the chairman of the Audit and Finance Committee.

Mr. Leathes served as Vice Chairman and Managing Director of Barclays Capital, the investment banking subsidiary of Barclays plc, from January 2001 until his retirement in December 2006. In addition, he served from 2001 to 2010 as anon-executive director of Kier Group plc, a company listed on the London Stock Exchange, where he also served as chairman of the Audit Committee and a member of the Remuneration and Nominations committees. Until June 2014, Mr. Leathes served as the chairman of the trustees of the Kier Group Pension Scheme.

17

Michael T. O’Kane   Independent Director   Director Since:2005   Committee Memberships:       Finance (Chair)       Audit

 

 

 

 

 

Qualifications:

Mr. O’Kane’s background has given him considerable experience in investment and risk management, both of which are key aspects of our business and are important to the Board and Board committee deliberation.

Biography:

Mr. O’Kane, age 74, became a director of AGL in August 2005. From 1986 until his retirement in August 2004, Mr. O’Kane was employed at TIAA-CREF (financial products) in a number of different capacities, most recently as Senior Managing Director, Securities Division. In that capacity, he oversaw approximately $120 billion of fixed income assets and approximately $3.5 billion of private equity fund investments.

From 2006 to 2013, Mr. O’Kane served as a director of Jefferies Group, Inc., where he was a member of the Audit, Compensation and Governance committees. In March 2013, Jefferies merged into Leucadia National Corporation, where Mr. O’Kane now serves as the lead director and as a member of the Compensation and the Nominating and Governance committees.

Yukiko Omura   Independent Director   Director Since:2014   Committee Memberships:       Finance       Risk Oversight

 

 

 

 

 

Qualifications:

Ms. Omura brings more than 30 years of international professional experience in the financial sector working in major financial centers of the world. Her global experience adds considerable value to the Board.

Biography:

Yukiko Omura, age 64, joined the Board of AGL in May 2014. She is anon-executive director of Nishimoto HD Co. Ltd. and anon-executive member of the Board of Directors of the Private Infrastructure Development Group, where she is chair of the Board of its subsidiary, GuarantCo. Ms. Omura is also anon-executive director of HSBC Bank Plc. Ms. Omura was a Supervisory Board Member of Amatheon Agri Holding N.V. until March 2018. She served as Undersecretary General and Vice President/COO of the International Fund for Agricultural Development (IFAD) until February 2012 and, prior to that, as Executive Vice President and CEO of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group.

Ms. Omura began her career as a project economist with the Inter-American Development Bank, working in the infrastructure sector. She then worked in senior positions at several major investment banks in Tokyo, New York and London over the course of her career, including JP Morgan, Lehman Brothers, UBS and Dresdner Bank. At UBS and Dresdner Bank, she was Managing Director and Head of Global Markets and Debt Division, Japan.

In 2002, Ms. Omura created the HIV/AIDS Prevention Fund, a charitable company based in London.

18

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 13, 2020, 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, which persons we refer as our named executive officers, and by the group comprising our directors, and those persons who, as of December 31, 2019, 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 1.69% of our Common Shares. The Common Shares beneficially owned by all directors, named executive officers and other executive officers as a group constitute approximately 3.82% of our outstanding Common Shares.

19

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 13, 2020, the record date for the Annual General Meeting. On March 13, 2020, 92,270,245 Common Shares were outstanding, including 40,455 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.

20

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

    CD&A ROADMAP

21

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 Compensation Committee assesses performance usingpre-established measures of success that are tied to our key business strategies. This approach encourages balanced performance, measured relative to financial andnon-financial goals as well as measures of shareholder value, and discourages excessive risk taking or undue leverage by avoiding too much emphasis on any one metric, or on short-term results.

In 2019, we exceeded every financial goal set by our Compensation Committee last year.

2019 Achievement Highlights

For 2019, our gross written premiums were $677 million, the highest in ten years, while our new business production in the insurance segment, anon-GAAP financial measure we refer to as PVP*, was $463 million, also the highest reported in ten years (when excluding our 2018 portfolio reinsurance transaction with SGI**). In 2019, our shareholders’ equity attributable to Assured Guaranty Ltd. per share, adjusted operating shareholder’s equity per share*and adjusted book value per share* all reached record levels, at $71.18, $66.96 and $96.86, respectively. In addition, we will look back on 2019 as the year we took our first significant step in establishing our asset management business, Assured Investment Management, by acquiring BlueMountain Capital Management, LLC, which we refer to as BlueMountain, and associated entities.

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

22

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 2019 performance year.

23

Our Total Shareholder Return

The market rewarded us for our accomplishments with a 30% total shareholder return for the year, double the previous year’s return.

The table and chart below depict the cumulative TSR in dollars on our Common Shares from December 31, 2014 through December 31, 2019, relative to the cumulative TSR of the Russell Midcap Financial Services Index, Standard & Poor’s 500 Stock Index and Standard & Poor’s 500 Financials Index over the same period. The table and chart depict the value on December 31 of each year from 2014 through 2019 of a $100 investment made on December 31, 2014, with all dividends reinvested:

Calculated from total returns published by Bloomberg.

As shown below, our cumulative TSR also exceeded the average cumulative TSR of our executive compensation comparison group over the last three and five years. Our executive compensation comparison group was revised this year and is described on pages 48 to 49 under “Compensation Governance—Executive Compensation Comparison Group.”

Total Shareholder Return Comparison

Calculated from total returns published by Bloomberg.

24

2019 Results Against Financial Performance Measure Targets

We exceeded all of the 2019 financial performance goals set by the Compensation Committee, in some instances by large amounts. The table below summarizes our 2019 results against the 2019 targets for the financial performance measures. The financial performance goals are explained in more detail under “Executive Compensation Program Structure and Process—Components of Our Executive Compensation Program—Cash Incentive Compensation” on pages 30 to 32 below.

Snapshot of Our CEO’s 2019 Compensation

For 2019, 89.3% of Mr. Frederico’s compensation constituted incentive compensation: 31.8% of his compensation was in the form of a performance-based cash incentive that was awarded based on measuring his performance against financial performance goals andnon-financial objectives set at the beginning of the year, and 57.5% was in the form of a long-term equity-based incentive, with 60% of that equity award dependent on performance relative to ourpre-established objectives. The allocation between his fixed and incentive compensation for the 2019 performance year was generally consistent with the 2018 performance year, while the portion of his incentive compensation comprising equity-based compensation increased from 54.2% to 57.5%.

Mr. Frederico received a compensation package for the 2019 performance year that was 6.0% higher than he received for the 2018 performance year.

25

Mr. Frederico’s compensation package for 2019 and 2018 were composed of the following:

The compensation package presented in the table above is different from theSEC-required disclosure in the Summary Compensation Table on page 53 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.

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.

The guiding principles of our program are:

26

We Align Pay With Performance

Our program rewards the performance of our most senior executives, who are directly responsible for our operational results, with a higher proportion of variable and performance-based compensation than it rewards lower level executives. We use a mix of variableat-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 anon-financial perspective, usingpre-established goals.

Our executive officers are eligible to receive an annual cash incentive, which is based on their performance againstpre-established goals over the previous year. They may also receive a long-term equity incentive, the majority of which is performance-based and cliff vests at the end of a three-year performance period, and the remainder 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 do not 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 incentives and shareholder interests.

For the 2019 performance year, we maintained the same structure for the compensation package for our executive officers as we did for the 2018 performance year:

Shareholder Outreach on Our Executive Compensation Program

For the past several years, we have actively engaged with our shareholders in order to obtain their feedback on our executive compensation program. In May 2018, after negative recommendations from the two leading proxy advisory firms, only 60% of the Common Shares voting approved oursay-on-pay proposal. Following that 2018say-on-pay vote, we sought to engage with our shareholders with respect to the changes we proposed to make to the executive compensation program in response to the recommendations from the two leading proxy advisory firms and thesay-on-pay result, and based on advice from Cook. As part of that process and our continued dialogue with shareholders, we contacted holders of an aggregate of over 77% of our Common Shares (which comprised every shareholder holding more than 0.16% of our outstanding shares). Based on the feedback from our shareholders and advice from Cook, we made a number of structural changes to our executive compensation program.

27

In May 2019, after we made these structural changes to our executive compensation program based on discussions with our shareholders and advice from Cook, investors holding over 93% of the Common Shares voting approved oursay-on-pay proposal at our Annual General Meeting.

In late 2019 and into early 2020, we again sought to engage with our shareholders with respect to compensation matters. We contacted holders of an aggregate of nearly 76% of our outstanding Common Shares (which comprised every shareholder holding more than 1.5% of our outstanding Common Shares) and offered to discuss our executive compensation program. Holders of approximately 5.5% of our outstanding Common Shares provided us with specific feedback on aspects of our executive compensation program in a conversation that included the chairman of our Compensation Committee, while the holders of 27.3% of our outstanding Common Shares specifically responded that they did not need to speak with us because they had no concerns about our executive compensation program. Given this recent feedback from our shareholders as well as the 93% approval of oursay-on-pay proposal last May, the Compensation Committee chose to maintain the current executive compensation program without any changes.

The Decision-Making Process

The Compensation Committee, composed solely of independent directors, is responsible for all decisions made on 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 conductsin-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 performance, risk management and leadership demonstrated by Mr. Frederico and the senior management team.

28

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

Components of Our Executive Compensation Program

For the 2019 performance year, the compensation package for the executive officers again 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 withat-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 caliber. The Compensation Committee does not guarantee salary adjustments on an annual basis; in fact, our CEO’s base salary was last adjusted in February 2017. Base salary is set toward the beginning of the year and is paid to the executive officers for ongoing performance throughout the year. For the 2019 performance year, the Compensation Committee established our executive officers’ base salaries in February 2019.

29

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 2019 performance year, the Compensation Committee determined the amount of the cash incentive compensation in February 2020.

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 certainpre-established performance targets; 67% is tied to the achievement of financial performance goals and 33% is tied to the achievement ofnon-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 anon-GAAP financial measure that is described on page 52 under“Non-GAAP Financial Measures.” Similar to the financial performance goals, thenon-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 thenon-financial objectives because it believes it is more appropriate to evaluate the level of achievement of all of thenon-financial objectives in their totality.

We provide a diagram of our formula for awarding our annual cash incentive compensation below:

The financial performance goals for 2019 for all the executive officers including Mr. Frederico, our CEO, are set out below. Thenon-financial objectives for Mr. Frederico are set out on pages 39 to 41 under “CEO Performance Review—Cash Incentive—Mr. Frederico’sNon-Financial Objectives”, while thenon-financial objectives for the executive officers other than Mr. Frederico are discussed on pages 43 to 45 under “Compensation Decisions of Other Executive Officers.” For the 2019 performance year, the financial performance goals and thenon-financial objectives for the named executive officers were established in February 2019 and the Compensation Committee determined the extent to which they had been satisfied in February 2020.

The financial goals are based onnon-GAAP financial measures and four of the five are labeled “core” to distinguish them from similarnon-GAAP financial measures. The four “core” measures have been adjusted to exclude the impact of consolidating variable interest entities, which we refer to as VIEs, while the similarnon-core measures have not been so adjusted. We include on page 52 under“Non-GAAP Financial Measures” a description of the adjustments we make to the most comparable GAAP financial measures to arrive at these measures.

30

2019 Financial Performance Measures

The Compensation Committee assigns each executive an Individual Target Cash Incentive Amount, which is calculated as a multiple of the executive officer’s base salary, and which we refer to as the Individual Target Cash Incentive Multiple. The amounts of the base salary and Individual Target Cash Incentive Multiples are set 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.

The Compensation Committee assigns an Individual Target Cash Incentive Multiple to each executive in the executive compensation program. The Compensation Committee assigned each of the named executive officers an Individual Target Cash Incentive Multiple of 2.0x, the same as last year. Last year, in response to the previous year’ssay-on-pay vote result and based on shareholder feedback and advice from Cook, the Compensation Committee had reduced Mr. Frederico’s multiple from 2.5x to 2.0x.

Then, for each executive officer, the Compensation Committee calculates and aggregates the weighted achievement scores for the financial performance goals and the individualnon-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 individualnon-financial objective.

The Compensation Committee may exercise negative discretion where the financial performance goal result, while above the target established by the Compensation Committee, is less than the prior year result. For the 2018 performance year, the Compensation Committee exercised this negative discretion with respect to both financial performance goals where the 2018 results were above 2018 targets but below 2017 actual results. For this year, the 2019 performance year, the Compensation Committee again exercised this negative discretion with respect to two financial performance goals where the 2019 results were above the 2019 targets but below the 2018 actual results. Our 2019 PVP was above the 2019 goal and also above the 2018 actual when PVP from the SGI reinsurance transactions is excluded, so the Compensation Committee did not view this as an instance where it would be appropriate to exercise its negative discretion.

Setting Financial Performance Goals

The Compensation Committee selected the five financial performance goal measurements in 2015 when, in consultation with Cook, it redesigned our process and formula for determining the amount of short-term cash incentive to award to our executives. At the time, the Compensation Committee considered the measures of value creation used by our then executive compensation comparison group and also the unique earnings model of the financial guaranty industry. The Compensation Committee reconsiders each year whether these measures are the appropriate ones to use in light of our Company’s business. The Compensation Committee believes our progress measured against these goals will, over the long term, result in optimal total shareholder return.

31

Each year the Compensation Committee sets our five financial performance goals at levels it views as challenging based on the projected operating results in our annual business plan. The goals and our business plan acknowledge the unique long-term nature of our financial guaranty insurance business and that the required accounting treatment and operations of a financial guaranty insurer are distinct from other insurance product lines.

32

Calculating Cash Incentive Compensation

Based on an executive officer’s weighted achievement scores for the financial performance goals and the individualnon-financial objectives, the individual payouts of the cash incentive for 2019 were calculated as follows: