SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2006
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission File Number: 1-12644

Financial Security Assurance Holdings Ltd.
(Exact name of registrant as specified in its charter)

New York	13-3261323
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

31 West 52nd Street
New York, New York 10019
(Address of principal executive offices)

(212) 826-0100
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

At November 9, 2006, there were 33,276,017 outstanding shares of Common Stock of the registrant (excludes 241,978 shares of treasury stock).

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Financial Statements (unaudited)
	Financial Security Assurance Holdings Ltd. and Subsidiaries
	Consolidated Balance Sheets (unaudited)	1
	Consolidated Statements of Operations and Comprehensive Income (unaudited)	2
	Consolidated Statement of Changes in Shareholders’ Equity (unaudited)	3
	Consolidated Statements of Cash Flows (unaudited)	4
	Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION
Item 6.	Exhibits	35
SIGNATURES		36

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FINANCIAL SECURITY ASSURANCE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except share data)

	September 30, 2006			December 31, 2005
ASSETS
Bonds at fair value (amortized cost of $4,449,925 and $4,219,344)		$	4,624,063		$	4,382,037
Equity securities at fair value (cost of $54,517 and $54,370)		54,534			54,370
Short-term investments		70,153			182,645
Variable interest entities’ bonds at fair value (amortized cost of $1,128,563 and $1,155,832)		1,129,170			1,155,992
Variable interest entities’ short-term investment portfolio		24,229			2,674
Financial products bond portfolio at fair value (amortized cost of $14,807,836 and $11,754,330)		14,873,750			11,827,824
Financial products short-term investment portfolio		717,852			1,015,509
Financial products trading portfolio at fair value		47,959			—
Total investment portfolio		21,541,710			18,621,051
Assets acquired in refinancing transactions:
Bonds at fair value (amortized cost of $48,887 and $65,865)		48,402			68,421
Securitized loans		250,634			296,965
Other		59,072			102,487
Total assets acquired in refinancing transactions		358,108			467,873
Total investments		21,899,818			19,088,924
Cash		99,740			20,117
Deferred acquisition costs		342,727			335,129
Prepaid reinsurance premiums		947,877			865,192
Reinsurance recoverable on unpaid losses		36,304			36,339
Other assets		1,321,867			1,655,941
TOTAL ASSETS		$	24,648,333		$	22,001,642
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY
Deferred premium revenue		$	2,538,415		$	2,375,059
Losses and loss adjustment expenses		220,507			205,718
Guaranteed investment contracts and variable interest entities’ debt		17,309,423			14,947,118
Deferred federal income taxes		281,361			231,265
Notes payable		430,000			430,000
Accrued expenses, other liabilities and minority interest		809,640			989,580
TOTAL LIABILITIES AND MINORITY INTEREST		21,589,346			19,178,740
COMMITMENTS AND CONTINGENCIES
Common stock (200,000,000 shares authorized; 33,517,995 issued; par value of $.01 per share)		335			335
Additional paid-in capital—common		905,190			905,190
Accumulated other comprehensive income (net of deferred income taxes of $85,263 and $84,123)		158,447			156,229
Accumulated earnings