Book Value Measurements

The drivers of the year-to-date increase in shareholders’ equity, operating shareholders’ equity and adjusted book value were: (1) the issuance of common shares as described below, and (2) the re-assumption of previously ceded unearned premium reserve and related commutation gains, both of which were offset in part by loss development, dividends and share repurchases. Shareholders’ equity was also affected by net fair value losses on credit derivatives and the consolidation of FG VIEs, which do not affect operating shareholders’ equity or adjusted book value. The present value of new business development, as well as the additional future earnings from the reassumptions of previously ceded books of business in the first quarter 2012, increased adjusted book value, which includes the estimated future earnings on the Company’s in-force book of business.

Per share amounts declined due to an additional 13.4 million common shares outstanding following the issuance of common shares to settle the forward purchase contracts that constituted a portion of the Company’s 2009 equity units. The purchase price was $12.85 per share, for a total of $172.5 million. This was offset in part by the repurchase of 2.1 million common shares at an average price of $11.76 per share or $24.3 million.
Table 5: Reconciliation of Shareholders’ Equity to
Operating Shareholders’ Equity and

Adjusted Book Value 1
(amounts in millions, except per share amounts)
  As of

June 30,


December 31,

Shareholders’ equity $ 4,724.1 $ 4,651.6
Less after-tax adjustments:
Effect of consolidating FG VIEs (339.3 ) (405.2 )
Non-credit impairment unrealized fair value gains (losses) on credit

(862.2 ) (498.0 )
Fair value gains (losses) on CCS 28.8 35.0
Unrealized gain (loss) on investment portfolio excluding foreign

exchange effect
  386.2     318.4  
Operating shareholders' equity 5,510.6 5,201.4
After-tax adjustments:
Less: Deferred acquisition costs 170.9 174.1
Plus: Net present value of estimated net future credit derivative revenue 258.2 302.3
Plus: Net unearned premium reserve on financial guaranty contracts in

excess of expected loss to be expensed
  3,516.1     3,658.0  
Adjusted book value $ 9,114.0   $ 8,987.6  
Shares outstanding at the end of period 194.0 182.2

Per share:
Shareholders’ equity $ 24.36 $ 25.52
Operating shareholders' equity 28.41 28.54
Adjusted book value 46.99 49.32


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