News

02/23/2012

Radian Reports Fourth Quarter and Full Year 2011 Financial Results

– Risk-to-capital ratio of 21.5:1 with approximately $480 million of available holding company liquidity –

–Writes $6.5 billion of new MI business in the fourth quarter; earns #1 market share position–

PHILADELPHIA--(BUSINESS WIRE)--Feb. 23, 2012-- Radian Group Inc. (NYSE: RDN) today reported a net loss for the quarter ended December 31, 2011, of $121.5 million, or $0.92 per diluted share, which included combined net gains from the change in fair value of derivatives and other financial instruments of $102.2 million and an income tax provision of $65.4 million. This compares to a net loss for the quarter ended December 31, 2010, of $1.1 billion, or $8.55 per diluted share. Net income for the full year 2011 was $302.2 million, or $2.26 per diluted share, which included combined net gains from the change in fair value of derivatives and other financial instruments of $821.7 million. This compares to a net loss of $1.8 billion, or $15.74 per diluted share, for the prior year. The fourth quarter and year ended December 31, 2010, included the establishment of a valuation allowance against the company’s deferred tax asset and significant fair value losses as described below. Book value per share at December 31, 2011, was $8.88.

“Our financial results in the fourth quarter and for the full-year 2011 were impacted by the challenges of our legacy portfolio as well as the macroeconomic environment,” said Chief Executive Officer S.A. Ibrahim. “That said, we believe the credit environment is stabilizing and we remain encouraged by the steady improvement in our number of primary delinquent loans, which declined by 12% from 2010, and by our ability to capture the leading market share of outstanding credit quality business.”

Mr. Ibrahim continued, “Over the past two years, we have taken meaningful actions to improve the financial flexibility and the operating performance of the company. We have positioned Radian with a growing and diversified customer base to capture more high-quality mortgage insurance business. We are off to a strong start in 2012 with $2 billion of new business written in January and a decline in delinquent loans.”

CAPITAL AND LIQUIDITY UPDATE

-			Radian Guaranty’s risk-to-capital ratio was 21.5:1 as of December 31, 2011, compared to 21.4:1 at September 30, 2011, and 16.8:1 at December 31, 2010. A $100 million capital contribution from Radian Group is included in Radian Guaranty’s December 31, 2011, statutory capital position.
-			Radian Group maintains approximately $480 million of currently available liquidity. Earlier today, the company announced the commencement of a “modified Dutch auction” tender offer, to repurchase a portion of its $250 million of debt maturing in February 2013 at a discount to face value.
-			In the event Radian Guaranty is no longer in compliance with the risk-based capital requirements of certain states, the company is preparing to continue writing new business in those states through state-specific waivers or similar relief, or by using Radian Mortgage Assurance Inc. (RMAI), a wholly owned subsidiary of Radian Guaranty. Radian is in the process of finalizing agreements with Fannie Mae and Freddie Mac to use RMAI as an eligible mortgage insurer, subject to certain conditions, and is expecting to announce the details of those agreements in the near term. In addition to the $17 million of existing capital in RMAI, Radian Group will contribute $50 million of additional capital to RMAI in the event that Radian Guaranty were to exceed a 25:1 risk-to-capital level.

FOURTH QUARTER HIGHLIGHTS

• New mortgage insurance written (NIW) increased to $6.5 billion, compared to $4.1 billion in the third quarter and $3.8 billion in the fourth quarter of 2010. In addition, the Home Affordable Refinance Program (HARP) accounted for $656.8 million of insurance not included in Radian Guaranty’s NIW total for the quarter. NIW continued to consist of loans with excellent risk characteristics, and the company held the leading position in the private mortgage insurance industry with an estimated 31 percent market share in the fourth quarter of 2011. Radian wrote an additional $2 billion in NIW in January 2012, compared to $1.1 billion in January 2011.
• The net loss for the fourth quarter was $121.5 million.

						-			The net loss was impacted by the pre-tax gain recognized on derivatives and other financial instruments of $102.2 million. The unrealized gain resulted mainly from a widening of Radian’s credit spread that reduced the fair value of the company’s derivative liabilities.
						-			The net loss was also impacted by an income tax provision of $65.4 million. The income tax provision is due primarily to a re-measurement of the company’s uncertain tax positions related to its portfolio of REMIC residuals.
						-			Results for the comparable fourth quarter and year-ended 2010 periods included a non-cash, GAAP accounting charge of $841.5 million related to establishing a valuation allowance against substantially all of the company’s net deferred tax asset as well as a pre-tax loss from the change in fair value of derivatives and other financial instruments of $237.7 million for the quarter and $770.4 million for the year.

• The mortgage insurance provision for losses was $333.3 million in the fourth quarter of 2011, compared to $426.3 million in the prior-year period. Mortgage insurance loss reserves were approximately $3.2 billion as of December 31, 2011, which was essentially flat to the third quarter of 2011, and down from $3.5 billion as of December 31, 2010. First-lien reserves were $26,007 per primary default as of December 31, 2011, compared to $25,346 as of September 30, 2011, and $23,374 a year ago.
• The total number of primary delinquent loans increased slightly in the fourth quarter compared to the third quarter of 2011, and decreased by 12 percent compared to the fourth quarter of 2010. As the company disclosed last week, the total number of primary delinquencies declined 1 percent from December 2011 to January 2012.
• Mortgage insurance claims paid were $291.6 million ($254.7 million excluding the impact from first-lien terminations), compared to $392.9 million a year ago. For the full-year 2011, total mortgage insurance claims paid were $1.5 billion, compared to $1.3 billion for the year-ended December 31, 2010. The company continues to expect mortgage insurance claims paid of approximately $1.3 billion for the full-year 2012.
• Radian Asset Assurance Inc. continues to serve as an important source of capital support for Radian Guaranty and is expected to continue to provide Radian Guaranty with cash infusions over time.

						-			As of December 31, 2011, Radian Asset had approximately $1.0 billion in statutory surplus with an additional $1.2 billion in claims-paying resources.
						-			Radian Asset is expected to pay an ordinary dividend of approximately $50 million to Radian Guaranty in 2012.

RECENT EVENT

• As previously disclosed, on January 24, 2012, Radian Asset entered into a three-part transaction with subsidiaries of Assured Guaranty Ltd. that included the commutation of a $13.8 billion portfolio reinsured by Radian Asset; the ceding of $1.8 billion of public finance business; and an agreement to sell Municipal and Infrastructure Assurance Corporation for $91 million, subject to regulatory approval. The transaction is expected to positively impact Radian Asset’s, and thus the primary mortgage insurance subsidiary Radian Guaranty’s, statutory capital in the first quarter of 2012 by $100 million.

CONFERENCE CALL

The company will discuss each of these items in its conference call today, Thursday, February 23, 2012, at 10:00 a.m. Eastern time. The conference call will be broadcast live over the Internet at http://www.radian.biz/page?name=Webcasts or at www.radian.com. The call may also be accessed by dialing (800) 230-1059 inside the U.S., or (612) 234-9959 for international callers, using passcode 232387 or by referencing Radian.

A replay of the webcast will be available on the Radian website approximately two hours after the live broadcast ends for a period of one year. A replay of the conference call will be available approximately two and a half hours after the call ends for a period of two weeks, using the following dial-in numbers and passcode: (800) 475-6701 inside the U.S., or (320) 365-3844 for international callers, passcode 232387.

In addition to the information provided in the company's earnings news release, other statistical and financial information, which is expected to be referred to during the conference call, will be available on Radian's website under Investors >Quarterly Results, or by clicking on http://www.radian.biz/page?name=QuarterlyResults.

ABOUT RADIAN

Radian Group Inc. (NYSE: RDN), headquartered in Philadelphia, provides private mortgage insurance and related risk mitigation products and services to mortgage lenders nationwide through its principal operating subsidiary, Radian Guaranty Inc. These services help promote and preserve homeownership opportunities for homebuyers, while protecting lenders from default-related losses on residential first mortgages and facilitating the sale of low-downpayment mortgages in the secondary market. Additional information may be found at www.radian.com.

FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS (Unaudited)

For trend information on all schedules, refer to Radian’s quarterly financial statistics at http://www.radian.biz/page?name=FinancialReportsCorporate.

Exhibit A: Condensed Consolidated Statements of Income

Exhibit B: Condensed Consolidated Balance Sheets

Exhibit C: Segment Information Quarter Ended December 31, 2011

Exhibit D: Segment Information Quarter Ended December 31, 2010

Exhibit E: Segment Information Year Ended December 31, 2011

Exhibit F: Segment Information Year Ended December 31, 2010

Exhibit G: Financial Guaranty Supplemental Information

Exhibit H: Financial Guaranty Supplemental Information

Exhibit I: Mortgage Insurance Supplemental Information

New Insurance Written

Exhibit J: Mortgage Insurance Supplemental Information

Insurance in Force and Risk in Force

Exhibit K: Mortgage Insurance Supplemental Information

Risk in Force by FICO, LTV and Policy Year

Exhibit L: Mortgage Insurance Supplemental Information

Primary, Pool and other Risk in Force

Exhibit M: Mortgage Insurance Supplemental Information

Claims, Reserves and Reserve Per Default

Exhibit N: Mortgage Insurance Supplemental Information

Default Statistics

Exhibit O: Mortgage Insurance Supplemental Information

Net Premiums Written and Earned, Captives and Persistency

Exhibit P: Mortgage Insurance Supplemental Information

Modified Pool

Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Exhibit A
		Quarter Ended December 31								Year Ended December 31
(In thousands except per-share data)		2011				2010				2011				2010
Revenues:
Net premiums written - insurance		$	193,433			$	201,672			$	707,247			$	691,881
Net premiums earned - insurance		$	184,413			$	220,082			$	756,025			$	825,733
Net investment income		38,694				38,229				163,520				178,760
Net gains (losses) on investments		38,866				(69,524		)		202,177				139,944
Net impairment losses recognized in earnings		(1,171		)		—				(1,202		)		(90		)
Change in fair value of derivative instruments		69,769				(185,935		)		628,395				(558,712		)
Net gains (losses) on other financial instruments		32,429				(51,799		)		193,329				(211,681		)
Gain on sale of affiliate		—				—				—				34,815
Other income		1,551				3,042				5,599				8,696
Total revenues		364,551				(45,905		)		1,947,843				417,465
Expenses:
Provision for losses		355,984				415,809				1,296,521				1,739,244
Change in reserve for premium deficiency		(665		)		(14,664		)		(7,092		)		(14,621		)
Policy acquisition costs		12,796				10,750				52,763				53,469
Other operating expenses		38,397				48,669				175,810				191,942
Interest expense		14,197				13,226				61,394				41,777
Total expenses		420,709				473,790				1,579,396				2,011,811
Equity in net income of affiliates		—				—				65				14,668
Pretax income (loss)		(56,158		)		(519,695		)		368,512				(1,579,678		)
Income tax provision		65,381				612,922				66,362				226,189
Net income (loss)		$	(121,539	)		$	(1,132,617	)		$	302,150			$	(1,805,867	)
Diluted net income (loss) per share (1)		$	(0.92	)		$	(8.55	)		$	2.26			$	(15.74	)

(1) Weighted average shares outstanding (in thousands)
Weighted average common shares outstanding		132,369			82,434			132,372			82,505
Increase in weighted average shares - common stock offering		—			50,000			—			32,192
Increase in weighted average shares-common stock equivalents-diluted basis		—			—			1,491			—
Weighted average shares outstanding		132,369			132,434			133,863			114,697

For Trend Information, refer to our Quarterly Financial Statistics on Radian's (RDN) website.

Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Exhibit B
		December 31				December 31
(In thousands, except per-share data)		2011				2010
Assets:
Cash and investments		$	5,846,168			$	6,680,630
Deferred policy acquisition costs		139,906				148,326
Deferred income taxes, net		15,975				27,531
Reinsurance recoverables		157,985				244,894
Derivative assets		17,212				26,212
Other assets		479,519				493,294
Total assets		$	6,656,765			$	7,620,887
Liabilities and stockholders' equity:
Unearned premiums		$	637,372			$	686,364
Reserve for losses and loss adjustment expenses		3,310,902				3,596,735
Reserve for premium deficiency		3,644				10,736
Long-term debt		818,584				964,788
VIE debt		228,240				520,114
Derivative liabilities		126,006				723,579
Other liabilities		349,726				258,791
Total liabilities		5,474,474				6,761,107
Common stock		151				150
Additional paid-in capital		1,074,513				1,071,080
Retained earnings (deficit)		96,227				(204,926		)
Accumulated other comprehensive income (loss)		11,400				(6,524		)
Total common stockholders’ equity		1,182,291				859,780
Total liabilities and stockholders’ equity		$	6,656,765			$	7,620,887
Book value per share		$	8.88			$	6.46

Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended December 31, 2011
Exhibit C
		Mortgage				Financial
(In thousands)		Insurance				Guaranty				Total
Revenues:
Net premiums written - insurance		$	194,009			$	(576	)		$	193,433
Net premiums earned - insurance		167,000				17,413				184,413
Net investment income		20,350				18,344				38,694
Net gains on investments		27,755				11,111				38,866
Net impairment losses recognized in earnings		(1,171		)		—				(1,171		)
Change in fair value of derivative instruments		(696		)		70,465				69,769
Net gains (losses) on other financial instruments		(457		)		32,886				32,429
Other income		1,488				63				1,551
Total revenues		214,269				150,282				364,551
Expenses:
Provision for losses		333,293				22,691				355,984
Change in reserve for premium deficiency		(665		)		—				(665		)
Policy acquisition costs		9,400				3,396				12,796
Other operating expenses		28,093				10,304				38,397
Interest expense		1,944				12,253				14,197
Total expenses		372,065				48,644				420,709
Pretax (loss) income		(157,796		)		101,638				(56,158		)
Income tax provision (benefit)		110,315				(44,934		)		65,381
Net (loss) income		$	(268,111	)		$	146,572			$	(121,539	)
Cash and investments		$	3,210,279			$	2,635,889			$	5,846,168
Deferred policy acquisition costs		52,094				87,812				139,906
Total assets		3,470,103				3,186,662				6,656,765
Unearned premiums		233,446				403,926				637,372
Reserve for losses and loss adjustment expenses		3,247,900				63,002				3,310,902
VIE Debt		9,450				218,790				228,240
Derivative liabilities		—				126,006				126,006

Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended December 31, 2010
Exhibit D
		Mortgage				Financial				Financial
(In thousands)		Insurance				Guaranty				Services				Total
Revenues:
Net premiums written - insurance		$	200,549			$	1,123			$	—			$	201,672
Net premiums earned - insurance		200,569				19,513				—				220,082
Net investment income		22,469				15,760				—				38,229
Net losses on investments		(41,544		)		(27,980		)		—				(69,524		)
Net impairment losses recognized in earnings		—				—				—				—
Change in fair value of derivative instruments		26,642				(212,577		)		—				(185,935		)
Net losses on other financial instruments		(3,373		)		(48,426		)		—				(51,799		)
Gain on sale of affiliate		—				—				—				—
Other income		1,916				65				1,061				3,042
Total revenues		206,679				(253,645		)		1,061				(45,905		)
Expenses:
Provision for losses		426,288				(10,479		)		—				415,809
Change in reserve for premium deficiency		(14,664		)		—				—				(14,664		)
Policy acquisition costs		7,041				3,709				—				10,750
Other operating expenses		37,610				11,009				50				48,669
Interest expense		4,748				8,478				—				13,226
Total expenses		461,023				12,717				50				473,790
Pretax (loss) income		(254,344		)		(266,362		)		1,011				(519,695		)
Income tax provision		424,782				187,787				353				612,922
Net (loss) income		$	(679,126	)		$	(454,149	)		$	658			$	(1,132,617	)
Cash and investments		$	4,037,578			$	2,643,052			$	—			$	6,680,630
Deferred policy acquisition costs		41,939				106,387				—				148,326
Total assets		4,801,953				2,818,934				—				7,620,887
Unearned premiums		197,260				489,104				—				686,364
Reserve for losses and loss adjustment expenses		3,524,971				71,764				—				3,596,735
VIE Debt		141,006				379,108				—				520,114
Derivative liabilities		—				723,579				—				723,579

Radian Group Inc. and Subsidiaries
Segment Information
Year Ended December 31, 2011
Exhibit E
		Mortgage				Financial
(In thousands)		Insurance				Guaranty				Total
Revenues:
Net premiums written - insurance		$	717,264			$	(10,017	)		$	707,247
Net premiums earned - insurance		680,895				75,130				756,025
Net investment income		93,678				69,842				163,520
Net gains on investments		126,205				75,972				202,177
Net impairment losses recognized in earnings		(1,202		)		—				(1,202		)
Change in fair value of derivative instruments		(632		)		629,027				628,395
Net gains on other financial instruments		3,864				189,465				193,329
Other income		5,369				230				5,599
Total revenues		908,177				1,039,666				1,947,843
Expenses:
Provision for losses		1,293,857				2,664				1,296,521
Change in reserve for premium deficiency		(7,092		)		—				(7,092		)
Policy acquisition costs		36,051				16,712				52,763
Other operating expenses		132,225				43,585				175,810
Interest expense		13,894				47,500				61,394
Total expenses		1,468,935				110,461				1,579,396
Equity in net income of affiliates		—				65				65
Pretax income (loss)		(560,758		)		929,270				368,512
Income tax provision (benefit)		83,157				(16,795		)		66,362
Net income (loss)		$	(643,915	)		$	946,065			$	302,150

Radian Group Inc. and Subsidiaries
Segment Information
Year Ended December 31, 2010
Exhibit F
		Mortgage				Financial				Financial
(In thousands)		Insurance				Guaranty				Services				Total
Revenues:
Net premiums written - insurance		$	699,909			$	(8,028	)		$	—			$	691,881
Net premiums earned - insurance		$	739,631			$	86,102			$	—			$	825,733
Net investment income		104,030				74,730				—				178,760
Net gains on investments		84,004				55,940				—				139,944
Net impairment losses recognized in earnings		(90		)		—				—				(90		)
Change in fair value of derivative instruments		32,381				(591,093		)		—				(558,712		)
Net losses on other financial instruments		(48,137		)		(163,544		)		—				(211,681		)
Gain on sale of affiliate		—				—				34,815				34,815
Other income		7,208				364				1,124				8,696
Total revenues		919,027				(537,501		)		35,939				417,465
Expenses:
Provision for losses		1,730,801				8,443				—				1,739,244
Change in reserve for premium deficiency		(14,621		)		—				—				(14,621		)
Policy acquisition costs		36,102				17,367				—				53,469
Other operating expenses		141,172				50,520				250				191,942
Interest expense		11,668				30,109				—				41,777
Total expenses		1,905,122				106,439				250				2,011,811
Equity in net income of affiliates		—				78				14,590				14,668
Pretax (loss) income		(986,095		)		(643,862		)		50,279				(1,579,678		)
Income tax provision		157,082				51,509				17,598				226,189
Net (loss) income		$	(1,143,177	)		$	(695,371	)		$	32,681			$	(1,805,867	)

Radian Group Inc. and Subsidiaries
Financial Guaranty Supplemental Information
Exhibit G
		Quarter Ended December 31								Year Ended December 31
(In thousands)		2011				2010				2011				2010
Net Premiums Earned:
Public finance direct		$	11,673			$	13,898			$	40,797			$	54,734
Public finance reinsurance		4,638				4,362				25,942				25,297
Structured direct		312				443				2,093				2,498
Structured reinsurance		795				815				3,434				3,544
Trade credit reinsurance		(5		)		(5		)		35				46
Net Premiums Earned - insurance		17,413				19,513				72,301				86,119
Impact of commutations		—				—				2,829				(17		)
Total Net Premiums Earned - insurance		$	17,413			$	19,513			$	75,130			$	86,102
Refundings included in earned premium		$	8,459			$	7,442			$	27,187			$	35,782
Net premiums earned - derivatives (1)		$	10,054			$	11,259			$	41,753			$	46,431
Claims paid:
Trade credit reinsurance		$	36			$	13			$	379			$	1,091
Financial Guaranty		5,356				6,536				11,048				64,032
Total		$	5,392			$	6,549			$	11,427			$	65,123

(1) Included in change in fair value of derivative instruments.

Radian Group Inc. and Subsidiaries
Financial Guaranty Supplemental Information
Exhibit H
		December 31				December 31
($ in thousands, except ratios)		2011				2010
Statutory Information:
Capital and surplus		$	974,874			$	1,049,664
Contingency reserve		421,406				392,589
Qualified statutory capital		1,396,280				1,442,253
Unearned premium reserve		448,669				517,516
Loss and loss expense reserve		161,287				70,129
Total statutory policyholders' reserves		2,006,236				2,029,898
Present value of installment premiums		148,641				202,386
Soft capital facilities		—				—
Total statutory claims paying resources		$	2,154,877			$	2,232,284
Net debt service outstanding		$	88,202,630			$	101,168,759
Capital leverage ratio (1)		63				70
Claims paying leverage ratio (2)		41				45
Net par outstanding by product:
Public finance direct		$	13,838,427			$	15,727,252
Public finance reinsurance		19,097,057				21,907,290
Structured direct		34,760,869				39,315,801
Structured reinsurance		1,492,859				1,805,295
Total (3)		$	69,189,212			$	78,755,638

(1)		The capital leverage ratio is derived by dividing net debt service outstanding by qualified statutory capital.
(2)		The claims paying leverage ratio is derived by dividing net debt service outstanding by total statutory claims paying resources.
(3)		Included in public finance net par outstanding is $1.4 billion and $1.9 billion at December 31, 2011 and December 31, 2010, respectively, for legally defeased bond issues where our financial guaranty policy has not been extinguished but cash or securities have been deposited in an escrow account for the benefit of bondholders.

Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit I
		Quarter Ended														Year Ended
		December 31														December 31
		2011							2010							2011							2010
($ in millions)		$				%			$				%			$				%			$				%
Primary new insurance written
Prime		$	6,532			99.9	%		$	3,779			99.9	%		$	15,499			99.9	%		$	11,553			100.0	%
Alt-A		2				—			—				—			2				—			—				—
A minus and below		3				0.1	%		2				0.1	%		9				0.1	%		5				—
Total Flow		$	6,537			100.0	%		$	3,781			100.0	%		$	15,510			100.0	%		$	11,558			100.0	%
Total primary new insurance written by FICO score
>=740		$	5,051			77.3	%		$	3,112			82.3	%		$	12,142			78.3	%		$	9,294			80.4	%
680-739		1,364				20.9	%		669				17.7	%		3,192				20.6	%		2,261				19.6	%
620-679		121				1.8	%		—				—			175				1.1	%		3				—
<=619		1				—			—				—			1				—			—				—
Total Flow		$	6,537			100.0	%		$	3,781			100.0	%		$	15,510			100.0	%		$	11,558			100.0	%
Percentage of primary new insurance written
Refinances		46		%					58		%					39		%					42		%
LTV
95.01% and above		2.3		%					0.7		%					1.9		%					0.4		%
90.01% to 95.00%		37.7		%					29.9		%					36.3		%					29.5		%
ARMS
Less than 5 years		0.1		%					0.1		%					0.1		%					0.1		%
5 years and longer		3.2		%					4.1		%					4.8		%					5.3		%

Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit J
		December 31							December 31
		2011							2010
($ in millions)		$				%			$				%
Primary insurance in force
Flow		$	113,438			89.9	%		$	115,532			89.2	%
Structured		12,747				10.1	%		14,034				10.8	%
Total Primary		$	126,185			100.0	%		$	129,566			100.0	%
Prime		$	106,407			84.3	%		$	106,466			82.2	%
Alt-A		12,344				9.8	%		14,542				11.2	%
A minus and below		7,434				5.9	%		8,558				6.6	%
Total Primary		$	126,185			100.0	%		$	129,566			100.0	%
Primary risk in force
Flow		$	27,937			91.0	%		$	28,397			90.3	%
Structured		2,755				9.0	%		3,064				9.7	%
Total Primary		$	30,692			100.0	%		$	31,461			100.0	%
Flow
Prime		$	24,401			87.3	%		$	24,213			85.3	%
Alt-A		2,200				7.9	%		2,618				9.2	%
A minus and below		1,336				4.8	%		1,566				5.5	%
Total Flow		$	27,937			100.0	%		$	28,397			100.0	%
Structured
Prime		$	1,610			58.4	%		$	1,788			58.4	%
Alt-A		625				22.7	%		702				22.9	%
A minus and below		520				18.9	%		574				18.7	%
Total Structured		$	2,755			100.0	%		$	3,064			100.0	%
Total
Prime		$	26,011			84.8	%		$	26,001			82.6	%
Alt-A		2,825				9.2	%		3,320				10.6	%
A minus and below		1,856				6.0	%		2,140				6.8	%
Total Primary		$	30,692			100.0	%		$	31,461			100.0	%

Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit K
		December 31							December 31
		2011							2010
($ in millions)		$				%			$				%
Total primary risk in force by FICO score
Flow
>=740		$	12,242			43.8	%		$	11,039			38.9	%
680-739		9,205				33.0	%		9,849				34.7	%
620-679		5,503				19.7	%		6,359				22.4	%
<=619		987				3.5	%		1,150				4.0	%
Total Flow		$	27,937			100.0	%		$	28,397			100.0	%
Structured
>=740		$	732			26.6	%		$	825			26.9	%
680-739		802				29.1	%		892				29.1	%
620-679		738				26.8	%		815				26.6	%
<=619		483				17.5	%		532				17.4	%
Total Structured		$	2,755			100.0	%		$	3,064			100.0	%
Total
>=740		$	12,974			42.3	%		$	11,864			37.7	%
680-739		10,007				32.6	%		10,741				34.1	%
620-679		6,241				20.3	%		7,174				22.8	%
<=619		1,470				4.8	%		1,682				5.4	%
Total Primary		$	30,692			100.0	%		$	31,461			100.0	%
Total primary risk in force by LTV
85.00% and below		$	2,772			9.0	%		$	2,816			8.9	%
85.01% to 90.00%		11,861				38.6	%		12,102				38.5	%
90.01% to 95.00%		10,735				35.0	%		10,506				33.4	%
95.01% and above		5,324				17.4	%		6,037				19.2	%
Total		$	30,692			100.0	%		$	31,461			100.0	%
Total primary risk in force by policy year
2005 and prior		$	6,887			22.4	%		$	8,145			25.9	%
2006		3,172				10.3	%		3,690				11.7	%
2007		6,960				22.7	%		8,072				25.7	%
2008		5,206				17.0	%		5,935				18.9	%
2009		2,656				8.7	%		3,099				9.8	%
2010		2,244				7.3	%		2,520				8.0	%
2011		3,567				11.6	%		—				—
Total		$	30,692			100.0	%		$	31,461			100.0	%

Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit L
		December 31							December 31
($ in millions)		2011							2010
		$				%			$				%
Percentage of primary risk in force
Refinances		32		%					31		%
LTV
95.01% and above		17		%					19		%
90.01% to 95.00%		35		%					33		%
ARMS
Less than 5 years		5		%					6		%
5 years and longer		7		%					7		%
Pool risk in force
Prime		$	1,601			77.4	%		$	1,828			74.5	%
Alt-A		122				5.9	%			165			6.7	%
A minus and below		345				16.7	%			460			18.8	%
Total		$	2,068			100.0	%		$	2,453			100.0	%
Total pool risk in force by policy year
2005 and prior		$	1,852			89.6	%		$	2,038			83.1	%
2006		92				4.4	%		179				7.3	%
2007		103				5.0	%		190				7.7	%
2008		21				1.0	%		46				1.9	%
Total pool risk in force		$	2,068			100.0	%		$	2,453			100.0	%
Other risk in force
Second-lien
1st loss		$	102						$	114
2nd loss		29							79
NIMS		19							136
International
1st loss-Hong Kong primary mortgage insurance		64							126
Credit default swaps		—							—
Total other risk in force		$	214						$	455
Risk to capital ratio-Radian Guaranty only		21.5							16.8

Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit M
		Quarter Ended								Year Ended
		December 31								December 31
($ in thousands)		2011				2010				2011				2010
Net claims paid
Prime		$	152,202			$	226,106			$	796,940			$	691,922
Alt-A		36,934				81,681				257,448				308,113
A minus and below		30,035				50,593				164,429				180,078
Total primary claims paid		219,171				358,380				1,218,817				1,180,113
Pool		33,140				30,882				178,610				147,667
Second-lien and other		2,370				3,644				11,331				20,630
Subtotal		254,681				392,906				1,408,758				$	1,348,410
Impact of first-lien terminations		36,903				—				75,101				223,099
Impact of captive terminations		—				(323,716		)		(1,166		)		(324,365		)
Impact of second-lien terminations		—				—				16,550				10,834
Total		$	291,584			$	69,190			$	1,499,243			$	1,257,978
Average claim paid (1)
Prime		$	49.9			$	47.0			$	49.6			$	44.6
Alt-A		58.6				59.8				60.7				57.5
A minus and below		40.4				39.4				40.2				37.6
Total primary average claims paid		49.6				48.0				50.0				46.0
Pool		72.2				68.5				76.2				71.7
Second-lien and other		19.9				32.8				25.8				35.3
Total		$	50.9			$	49.0			$	51.9			$	47.7
Average primary claim paid (2) (3)		$	52.4			$	51.7			$	54.6			$	52.5
Average total claim paid (2) (3)		$	53.4			$	52.4			$	56.0			$	53.6
Loss ratio - GAAP basis		198.6		%		212.5		%		189.8		%		234.0		%
Expense ratio - GAAP basis		22.3		%		22.3		%		24.7		%		24.0		%
		220.9		%		234.8		%		214.5		%		258.0		%
Reserve for losses by category
Prime		$	1,748,412			$	1,607,741
Alt-A		612,423				687,960
A minus and below		370,806				413,137
Reinsurance recoverable (4)		151,569				223,254
Total primary reserves		2,883,210				2,932,092
Pool insurance		353,583				566,565
Total 1st lien reserves		3,236,793				3,498,657
Second lien		11,070				26,161
Other		37				153
Total reserves		$	3,247,900			$	3,524,971
1st lien reserve per default (5)
Primary reserve per primary default		$	26,007			$	23,374
Pool reserve per pool default (6)		16,305				17,456
Total 1st lien reserve per default		24,420				22,158

(1)		Calculated net of reinsurance recoveries and without giving effect to the impact of first-lien, second-lien and captive terminations.
(2)		Calculated without giving effect to the impact of terminations of captive reinsurance and first- and second-lien transactions.
(3)		Before reinsurance recoveries.
(4)		Represents ceded losses on captive transactions and Smart Home.
(5)		Calculated as total reserves divided by total defaults.
(6)		If calculated before giving effect to deductibles and stop losses in pool transactions, the pool reserve per default at December 31, 2011, and December 31, 2010, would be $25,402 and $28,265, respectively.

Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit N
		December 31			December 31
		2011			2010
Default Statistics
Primary Insurance:
Flow
Prime
Number of insured loans		569,190			584,213
Number of loans in default		65,238			71,196
Percentage of loans in default		11.46	%		12.19	%
Alt-A
Number of insured loans		44,355			51,765
Number of loans in default		14,481			17,934
Percentage of loans in default		32.65	%		34.65	%
A minus and below
Number of insured loans		40,884			47,044
Number of loans in default		13,560			16,401
Percentage of loans in default		33.17	%		34.86	%
Total Flow
Number of insured loans		654,429			683,022
Number of loans in default		93,279			105,531
Percentage of loans in default		14.25	%		15.45	%
Structured
Prime
Number of insured loans		41,248			42,131
Number of loans in default		6,308			6,735
Percentage of loans in default		15.29	%		15.99	%
Alt-A
Number of insured loans		18,484			20,234
Number of loans in default		5,563			6,635
Percentage of loans in default		30.10	%		32.79	%
A minus and below
Number of insured loans		15,477			16,716
Number of loans in default		5,711			6,569
Percentage of loans in default		36.90	%		39.30	%
Total Structured
Number of insured loans		75,209			79,081
Number of loans in default		17,582			19,939
Percentage of loans in default		23.38	%		25.21	%
Total Primary Insurance
Prime
Number of insured loans		610,438			626,344
Number of loans in default		71,546			77,931
Percentage of loans in default		11.72	%		12.44	%
Alt-A
Number of insured loans		62,839			71,999
Number of loans in default		20,044			24,569
Percentage of loans in default		31.90	%		34.12	%
A minus and below
Number of insured loans		56,361			63,760
Number of loans in default		19,271			22,970
Percentage of loans in default		34.19	%		36.03	%
Total Primary
Number of insured loans		729,638			762,103
Number of loans in default		110,861			125,470
Percentage of loans in default		15.19	%		16.46	%
Pool insurance
Number of loans in default		21,685			32,456

Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit O
		Quarter Ended December 31								Year Ended December 31
		2011				2010				2011				2010
Net Premiums Written (In thousands)
Primary and Pool Insurance		$	193,670			$	199,610			$	715,125			$	698,078
Second-lien (1)		537				647				2,314				1,535
International		(198		)		292				(175		)		296
Total Net Premiums Written - Insurance		$	194,009			$	200,549			$	717,264			$	699,909
Net Premiums Earned (In thousands)
Primary and Pool Insurance		$	166,233			$	198,196			$	673,869			$	727,484
Second-lien (1)		537				646				2,314				2,501
International		230				1,727				4,712				9,646
Total Net Premiums Earned - Insurance		$	167,000			$	200,569			$	680,895			$	739,631
Net premiums earned - derivatives (In thousands) (2)		$	—			$	276			$	—			$	692
1st Lien Captives
Premiums ceded to captives (In thousands)		$	6,895			$	8,834			$	28,816			$	83,384
% of total premiums		3.9		%		4.2		%		4.1		%		10.2		%
NIW subject to captives (In thousands)		—				—				—				129
% of primary NIW		—				—				—				<1%
IIF included in captives (3)		8.9		%		10.6		%
RIF included in captives (3)		8.8		%		10.4		%
Persistency (twelve months ended December 31)		85.4		%		81.8		%

(1)		Reflects the impact of second-lien terminations.
(2)		Included in change in fair value of derivative instruments.
(3)		Radian reinsures the middle layer risk positions, while retaining a significant portion of the total risk comprising the first loss and most remote risk positions.

Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Modified Pool (1)
Exhibit P
		December 31							December 31
($ in millions)		2011							2010
		$				%			$				%
Modified pool risk in force by policy year
2005 and prior		$	194			71.9	%		$	186			64.4	%
2006		31				11.5	%		41				14.2	%
2007		39				14.4	%		55				19.0	%
2008		6				2.2	%		7				2.4	%
Total		$	270			100.0	%		$	289			100.0	%
Modified pool risk in force by product
Prime		$	80			29.6	%		$	74			25.6	%
Alt-A		172				63.7	%		197				68.2	%
A minus and below		18				6.7	%		18				6.2	%
Total		$	270			100.0	%		$	289			100.0	%
Modified pool insurance in force by product
Prime		$	920			31.2	%		$	671			22.2	%
Alt-A		1,890				64.0	%		2,216				73.1	%
A minus and below		143				4.8	%		143				4.7	%
Total		$	2,953			100.0	%		$	3,030			100.0	%
Reserve for losses - modified pool (in thousands)		$	63,582						$	87,218
Default Statistics:
Modified pool:
Total modified pool
Number of insured loans		17,468							15,487
Number of loans in default		3,461							4,009
Percentage of loans in default		19.81		%					25.89		%

(1) Included in primary insurance amounts.

FORWARD-LOOKING STATEMENTS

All statements in this press release that address events, developments or results that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the United States (“U.S.”) Private Securities Litigation Reform Act of 1995. In most cases, forward-looking statements may be identified by words such as “anticipate,” “may,” “will,” “could,” “should,” “would,” “expect,” “intend,” “plan,” “goal,” “contemplate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” or the negative or other variations on these words and other similar expressions. These statements, which may include, without limitation, projections regarding our future performance and financial condition, are made on the basis of management’s current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking information. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements, including:

Losses in our mortgage insurance and financial guaranty businesses have reduced Radian Guaranty's statutory surplus and increased Radian Guaranty's risk-to-capital ratio; additional losses in these businesses, without a corresponding increase in new capital or capital relief, would further negatively impact this ratio, which could limit Radian Guaranty's ability to write new insurance and increase restrictions and requirements placed on Radian Guaranty.

We and our insurance subsidiaries are subject to comprehensive, detailed regulation by the insurance departments in the various states where our insurance subsidiaries are licensed to transact business. These regulations are principally designed for the protection of our insured policyholders rather than for the benefit of investors. Insurance laws vary from state to state, but generally grant broad supervisory powers to state agencies or officials to examine insurance companies and enforce rules or exercise discretion affecting almost every significant aspect of the insurance business, including the power to revoke or restrict an insurance company's ability to write new business.

Freddie Mac and Fannie Mae (collectively, the “GSEs”) and state insurance regulators impose various capital requirements as well as capital and risk-based measurements on our insurance subsidiaries. These include risk-to-capital ratios, risk-based capital measures and surplus requirements that limit the amount of insurance that each of our insurance subsidiaries may write. The GSEs and our insurance regulators possess significant discretion with respect to our insurance subsidiaries, and failure to maintain adequate levels of capital could lead to intervention by the various insurance regulatory authorities, which could materially and adversely affect our business, business prospects and financial condition.

Under state insurance regulations, Radian Guaranty Inc. (“Radian Guaranty”) is required to maintain minimum surplus levels and, in certain states, a minimum amount of statutory capital relative to the level of risk in force (“RIF”), or “risk-to-capital.” Sixteen states (the risk-based capital or “RBC States”) currently have a statutory or regulatory risk-based capital requirement (a “Statutory RBC Requirement”) the most common of which (imposed by 11 of the RBC States) is a requirement that a mortgage insurer's risk-to-capital ratio may not exceed 25 to 1. Unless an RBC State grants a waiver or other form of relief, if a mortgage insurer is not in compliance with the applicable risk-based capital requirements of an RBC State, it may be prohibited from writing new mortgage insurance business in that state. Radian Guaranty's domiciliary state, Pennsylvania, is not one of the RBC States. In 2011, the RBC States accounted for approximately 50.5% of Radian Guaranty's total primary new insurance written.

If Radian Guaranty is not in compliance with the applicable Statutory RBC Requirement in any RBC State, it would be prohibited from writing new business in that state until it is back in compliance or it receives a waiver of the requirement from the applicable state insurance regulator, as discussed in more detail below. In those states that do not have a Statutory RBC Requirement, it is not clear what actions the applicable state regulators would take if a mortgage insurer fails to meet the Statutory RBC Requirement established by another state. Accordingly, if Radian Guaranty fails to meet the Statutory RBC Requirement in one or more states, it could be required to suspend writing business in some or all of the states in which it does business. In addition, the GSEs and our mortgage lending customers may decide not to conduct new business with Radian Guaranty (or reduce current business levels) or impose restrictions on Radian Guaranty while its risk-to-capital ratio remained at elevated levels. The franchise value of our mortgage insurance business would likely be significantly diminished if Radian Guaranty was prohibited from writing new business or restricted in the amount of new business it could write in one or more states.

As a result of ongoing incurred losses, Radian Guaranty's risk-to-capital ratio is 21.5 to 1 as of December 31, 2011, which includes the benefit of a $100 million capital contribution from Radian Group to Radian Guaranty in February 2012 that was accrued as of December 31, 2011. Based on our current projections, Radian Guaranty's risk-to-capital ratio is expected to continue to increase and, absent any future capital contributions from Radian Group, exceed 25 to 1 in 2012. The ultimate amount of losses and the timing of these losses will depend in part on general economic conditions and other factors, including the health of credit markets, home prices and unemployment rates, all of which are difficult to predict and beyond our control. In addition, establishing loss reserves in our businesses requires significant judgment by management with respect to the likelihood, magnitude and timing of anticipated losses. This judgment has been made more difficult in the current period of prolonged economic uncertainty. If the actual losses we ultimately realize are in excess of the loss estimates we use in establishing loss reserves, we may be required to take unexpected charges to income, which could hurt our capital position and increase Radian Guaranty's risk-to-capital position.

Radian Guaranty's risk-to-capital position also is dependent on the performance of our financial guaranty portfolio. During the third quarter of 2008, we contributed our ownership interest in Radian Asset Assurance to Radian Guaranty. While this reorganization provided Radian Guaranty with substantial regulatory capital and dividends, it also makes the capital adequacy of our mortgage insurance business dependent, to a significant degree, on the performance of our financial guaranty business. If the performance of our financial guaranty portfolio deteriorates materially, including if we are required to establish (or significantly increase) one or more significant statutory reserves on defaulted obligations that we insure, or if we make net commutation payments to terminate insured obligations in excess of the then posted statutory reserves for such obligations, the statutory capital of Radian Guaranty also would be negatively impacted. Any decrease in the capital support from our financial guaranty business would have a negative impact on Radian Guaranty's risk-to-capital position and its ability to remain in compliance with the Statutory RBC Requirements.

We actively manage Radian Guaranty's risk-to-capital position in various ways, including: (1) through reinsurance arrangements; (2) by seeking opportunities to reduce our risk exposure through commutations or other negotiated transactions; (3) by contributing additional capital from Radian Group to our mortgage insurance operations; and (4) by monetizing gains in our investment portfolio through open market sales of securities. After the $100 million contribution to Radian Guaranty effective for the fourth quarter of 2011, Radian Group currently has unrestricted cash and liquid investments of $482.8 million (before giving consideration to Radian Group’s tender offer commenced on February 23, 2012) which may be used to further support Radian Guaranty's risk-to-capital position. Depending on the extent of our future losses, the amount of capital contributions required for Radian Guaranty to remain in compliance with the Statutory RBC Requirements could be substantial and could exceed amounts maintained at Radian Group. See “Radian Group's sources of liquidity may be insufficient to fund its obligations.”

Our ability to continue to reduce Radian Guaranty's risk through affiliated reinsurance arrangements may be limited. These arrangements are subject to regulation by state insurance regulators who could decide to limit, or require the termination of, such arrangements. In addition, certain of these affiliated reinsurance companies currently are operating at or near minimum capital levels and have required, and may continue to require, additional capital contributions from Radian Group in the future. One of these affiliated insurance companies, which provides reinsurance to Radian Guaranty for coverage in excess of 25% of each loan, is a sister company of Radian Guaranty, and therefore, any contributions to this insurer would not be consolidated with Radian Guaranty's capital for purposes of calculating Radian Guaranty's risk-to-capital position. If we are limited in, or prohibited from, using inter-company insurance arrangements to reduce Radian Guaranty's risk, it would adversely affect Radian Guaranty's risk-to-capital position.

In order to maximize our financial flexibility, we have applied for waivers or similar relief for Radian Guaranty in each of the RBC States. Of the 16 RBC states, New York does not possess the regulatory authority to grant waivers and Iowa, Kansas and Ohio have declined to grant waivers to Radian Guaranty. In addition, Oregon has indicated that it will not consider our waiver application until such time that Radian Guaranty exceeds the 25 to 1 limit. Of the remaining 11 RBC States, Radian Guaranty has received waivers or similar relief from the following six states: Illinois; New Jersey; Kentucky; Wisconsin; Arizona; and Missouri. Radian Guaranty has applications pending in the five remaining RBC States. There can be no assurance: (1) that Radian Guaranty will be granted a waiver in any of the remaining RBC States; (2) that for any waiver granted, such regulator will not revoke or terminate the waiver, which the regulator generally has the authority to do at any time; (3) that for any waiver granted, it will be renewed or extended after its original expiration date; or (4) regarding what, if any, requirements may be imposed as a condition to such waivers, and whether we would be able to comply with any such conditions.

In addition to filing for waivers in the RBC States, we intend to write new first-lien mortgage insurance business in our wholly-owned subsidiary, Radian Mortgage Assurance, in any RBC State that does not permit Radian Guaranty to continue writing insurance while it is out of compliance with applicable Statutory RBC Requirements. Radian Mortgage Assurance is a subsidiary of Radian Guaranty and is licensed to write mortgage insurance in each of the fifty states. We have requests pending with the GSEs to have Radian Mortgage Assurance approved as an eligible mortgage insurer for purposes of writing business in any RBC State where Radian Guaranty is prohibited from writing new mortgage business if it were to exceed the Statutory RBC Requirement without a waiver or other similar relief. We are in the process of finalizing the terms of the approvals with both Fannie Mae and Freddie Mac. We expect that the GSE’s approvals will be conditioned upon our compliance with a broad range of conditions and restrictions that may include, without limitation, minimum capital and liquidity requirements, a $50 million capital contribution by Radian Group to Radian Mortgage Assurance upon Radian Guaranty exceeding the applicable Statutory RBC Requirements of any RBC State for which a waiver or other relief is not obtained, a maximum risk-to-capital ratio for Radian Mortgage Assurance, restrictions on payment of dividends and requirements governing the manner in which Radian Guaranty and Radian Mortgage Assurance conduct affiliate transactions. Any conditions or restrictions included in the GSE approvals could limit our financial flexibility and could make it more difficult for Radian Group to meet its obligations in the future. For risks associated with Radian Group's available liquidity, see “Radian Group's sources of liquidity may be insufficient to fund its obligations” below.

In the third quarter of 2011, two longstanding competitors, RMIC and PMI, ceased writing new mortgage insurance commitments. In October 2011, RMIC was placed into runoff, and in early 2012, RMIC was placed under the supervision of the insurance department of its domiciliary state. PMI ceased writing new mortgage insurance commitments in August 2011 when it was placed under the supervision, and later under the control of, the insurance department of its domiciliary state. In the fourth quarter of 2011, PMI's parent company filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. Both Fannie Mae and Freddie Mac suspended RMIC, PMI and a PMI subsidiary as approved mortgage insurers. We are uncertain how such events, including the actions taken by the GSEs, will impact the status of Radian Guaranty's on-going request for waivers.

Our existing capital resources may not be sufficient to successfully manage Radian Guaranty's risk-to-capital ratio. Our ability to use waivers and Radian Mortgage Assurance to allow Radian Guaranty to continue to write business with a risk-to-capital position in excess of the Statutory RBC Requirements is subject to conditions that we may be unable to satisfy. As a result, even if we are successful in implementing this strategy, additional capital contributions could be necessary, which we may not have the ability to provide. Further, regardless of whether the waivers or Radian Mortgage Assurance are available to us, we may choose to use our existing capital at Radian Group to maintain compliance with the Statutory RBC Requirements. Depending on the extent of our future mortgage insurance losses along with other factors, the amount of capital contributions that may be required to maintain compliance with the Statutory RBC Requirements could be significant and could exceed all of our remaining available capital. In the event we contribute a significant amount of Radian Group's available capital to Radian Guaranty and Radian Mortgage Assurance, our financial flexibility would be significantly reduced, making it more difficult for Radian Group to meet its obligations in the future, including future principal payments on our outstanding debt. For risks associated with Radian Group's available liquidity, see “Radian Group's sources of liquidity may be insufficient to fund its obligations.”

Radian Group’s sources of liquidity may be insufficient to fund its obligations.

Radian Group serves as the holding company for our insurance subsidiaries and does not have any significant operations of its own. Radian Group’s principal liquidity demands include funds for: (i) the payment of certain corporate expenses; (ii) interest payments on our outstanding debt; (iii) repayment of the principal amount of our outstanding debt, including $250 million in principal due in each of 2013 and 2015, and $450 million in principal due in 2017; (iv) potential capital support for our mortgage insurance subsidiaries; (v) potential payments to the Internal Revenue Service ("IRS") resulting from the examination by the IRS for the 2000 through 2007 tax years; and (vi) the payment of dividends on our common stock. Radian Group had immediately available, directly or through an unregulated direct subsidiary, unrestricted cash and marketable securities of $482.8 (before giving consideration to Radian Group’s tender offer commenced on February 23, 2012) million at December 31, 2011.

Dividends from Radian Guaranty and permitted payments to Radian Group under tax- and expense-sharing arrangements with our subsidiaries are Radian Group’s principal sources of cash. Radian Guaranty's ability to pay dividends to Radian Group is subject to various conditions imposed by the GSEs and rating agencies, and by insurance regulations requiring insurance department approval. In general, dividends in excess of prescribed limits are deemed “extraordinary” and require insurance regulatory approval. In light of ongoing losses in Radian Guaranty, we do not anticipate that it will be permitted under applicable insurance laws to issue dividends to Radian Group for the foreseeable future. To the extent Radian Asset Assurance is able to declare dividends, these dividends will be paid to Radian Guaranty, and not to Radian Group. The expense-sharing arrangements between Radian Group and our insurance subsidiaries, as amended, have been approved by applicable state insurance departments, but such approval may be changed at any time.

In light of on-going losses in our mortgage insurance business, Radian Group may be required to make additional capital contributions to Radian Guaranty in order to support Radian Guaranty's ability to continue writing insurance in the RBC States. Radian Group contributed approximately $30 million and $100 million to Radian Guaranty in November 2011 and February 2012, respectively and completed a series of internal transactions in order to benefit Radian Guaranty's statutory risk-based capital requirements in certain states. In December 2011, Radian Group contributed its ownership interest in Radian Mortgage Assurance to Radian Guaranty, which equaled approximately $17 million, and Radian Guaranty sold its minority ownership interest in Enhance Financial Services Group Inc. ("EFSG"), the parent company of Commonwealth Mortgage Assurance Company of Texas ("CMAC of Texas"), to Radian Group for approximately $6 million. Radian Guaranty's risk-to-capital ratio was approximately 21.5 to 1 as of December 31, 2011, after giving effect to all of these transactions, including the $100 million February 2012 contribution, which was accrued for in Radian Guaranty's statutory capital as of December 31, 2011. See “Losses in our mortgage insurance and financial guaranty businesses have reduced Radian Guaranty's statutory surplus and increased Radian Guaranty's risk-to-capital ratio; additional losses in these businesses, without a corresponding increase in new capital or capital relief, would further negatively impact this ratio, which could limit Radian Guaranty's ability to write new insurance and increase restrictions and requirements placed on Radian Guaranty.” Radian Group also could be required to provide capital support for our other mortgage insurance subsidiaries if additional capital is required pursuant to insurance laws and regulations, by the GSEs or the rating agencies.

Radian Group's U.S. Consolidated federal income tax returns, which include the federal tax returns of our wholly-owned subsidiary, CMAC of Texas, are under examination by the IRS for tax years 2000 through 2007. We are currently contesting proposed adjustments resulting from the IRS examination of these tax years. Effective December 2011, Radian Group and CMAC of Texas entered into an Assumption and Indemnification Agreement with regard to these proposed adjustments. Through this agreement, Radian Group agreed to indemnify CMAC of Texas for any tax payments ultimately due to the IRS for the proposed adjustments, which relate to the recognition of certain tax losses and deductions that were generated through our investment in a portfolio of residual interests in Real Estate Mortgage Investment Conduits (“REMICs”) currently held by CMAC of Texas. This indemnification was made in lieu of an immediate capital contribution to CMAC of Texas that otherwise would have been required for CMAC of Texas to maintain its minimum statutory surplus requirements in light of remeasurement as of December 31, 2011 of uncertain tax positions related to the portfolio of REMICs . There remains significant uncertainty with regard to the amount and timing of any resolution with the IRS, and we are currently contesting the proposed adjustments related to the REMICs.

Radian Group’s sources of available liquidity may not be sufficient for Radian Group to fund its obligations. We may be required to seek capital by incurring additional debt, by issuing additional equity or by selling assets, any of which we may be unable to do on favorable terms, if at all. The need to raise additional capital or the failure to make timely payments on our obligations could have a material adverse effect on our financial condition and operating results.

Other risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements including the following:

• changes in general economic and political conditions, including high unemployment rates and continued weakness in the U.S. housing and mortgage credit markets, the U.S. economy reentering a recessionary period, a significant downturn in the global economy, a lack of meaningful liquidity in the capital or credit markets, changes or volatility in interest rates or consumer confidence and changes in credit spreads, each of which may be accelerated or intensified by, among other things, further actual or threatened downgrades of U.S. credit ratings;
• changes in the way customers, investors, regulators or legislators perceive the strength of private mortgage insurers or financial guaranty providers, in particular in light of developments in the private mortgage insurance and financial guaranty industries in which certain of our former competitors have ceased writing new insurance business and have been placed under supervision or receivership by insurance regulators;
• catastrophic events or economic changes in geographic regions, including governments and municipalities, where our mortgage insurance or financial guaranty insurance exposure is more concentrated;
• our ability to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs, including in particular, repayment of our debt due in February 2013 and additional capital contributions that may be required to support our mortgage insurance business;
• a further reduction in, or prolonged period of depressed levels of, home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards, general reduced housing demand in the U.S., and potential risk retention requirements established under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act");
• our ability to maintain an adequate risk-to-capital position and surplus requirements in our mortgage insurance business in light of ongoing losses in this business and potential further deterioration and losses in our financial guaranty portfolio, including, if necessary, our ability write new mortgage insurance in excess of risk-based capital limitations imposed in certain states;
• our ability to continue to effectively mitigate our mortgage insurance and financial guaranty losses;
• the ability of our primary insurance customers in our financial guaranty reinsurance business to provide appropriate surveillance and to mitigate losses adequately with respect to our assumed insurance portfolio;
• a more rapid than expected decrease in the level of insurance rescissions and claim denials from the current elevated levels which have reduced our paid losses and resulted in a significant reduction in our loss reserves, including a decrease resulting from successful challenges to previously rescinded policies or claim denials, or caused by the GSEs intervening in mortgage insurers' rescission practices or rescission settlement practices;
• the negative impact our insurance rescissions and claim denials may have on our relationships with customers and potential customers, including the potential loss of business and the heightened risk of disputes and litigation;
• the need, in the event that we are unsuccessful in defending our rescissions or denials, to increase our loss reserves for, and reassume risk on, rescinded or denied loans, and to pay additional claims;
• the concentration of our mortgage insurance business among a relatively small number of large customers;
• any disruption in the servicing of mortgages covered by our insurance policies and poor servicer performance;
• adverse changes in severity or frequency of losses associated with certain products that we formerly offered that are riskier than traditional mortgage insurance or financial guaranty insurance policies;
• a decrease in persistency rates of our mortgage insurance policies, which has the effect of reducing our premium income without a corresponding decrease in incurred losses;
• an increase in the risk profile of our existing mortgage insurance portfolio due to the refinancing of existing mortgage loans for only the most qualified borrowers in the current mortgage and housing market;
• changes in the criteria for assigning credit or similar ratings, further downgrades or threatened downgrades of, or other ratings actions with respect to, our credit ratings or the ratings assigned by the major rating agencies to any of our rated insurance subsidiaries at any time, including in particular, the credit ratings of Radian Group Inc. ("Radian Group") and the financial strength ratings assigned to Radian Guaranty Inc. ("Radian Guaranty");
• heightened competition for our mortgage insurance business from others such as the Federal Housing Administration (the "FHA"), the Veteran's Administration and other private mortgage insurers (in particular, the FHA and those private mortgage insurers that have been assigned higher ratings from the major rating agencies, that may have access to greater amounts of capital than we do, or new entrants to the industry that are not burdened by legacy obligations);
• changes in the charters or business practices of, or rules or regulations applicable to, Federal National Mortgage Association ("Fannie Mae") and Freddie Mac, the largest purchasers of mortgage loans that we insure, and our ability to remain an eligible provider to both Fannie Mae and Freddie Mac;
• changes to the current system of housing finance, including the possibility of a new system in which private mortgage insurers are not required or their products are significantly limited in scope;
• the effect of the Dodd-Frank Act on the financial services industry in general, and on our mortgage insurance and financial guaranty businesses in particular, including whether and to what extent loans with mortgage insurance are considered "qualified residential mortgages" for purposes of the Dodd-Frank Act securitization provisions or "qualified mortgages" for purposes of the ability to repay provisions of the Dodd-Frank Act and potential obligations to post collateral on our existing insured derivatives portfolio;
• the application of existing federal or state consumer, lending, insurance, tax, securities and other applicable laws and regulations, or changes in these laws and regulations or the way they are interpreted, including, without limitation: (i) the outcome of existing, or the possibility of additional, lawsuits or investigations; and (ii) legislative and regulatory changes (a) impacting the demand for private mortgage insurance, (b) limiting or restricting our use of (or increasing requirements for) additional capital and the products we may offer, (c) affecting the form in which we execute credit protection, or (d) impacting our existing financial guaranty portfolio;
• the amount and timing of potential payments or adjustments associated with IRS tax audits or due to changes in interpretations of applicable tax laws, regulations and policies;
• the possibility that we may fail to estimate accurately the likelihood, magnitude and timing of losses in connection with establishing loss reserves for our mortgage insurance or financial guaranty businesses or premium deficiencies for our mortgage insurance business, or to estimate accurately the fair value amounts of derivative instruments in determining gains and losses on these instruments;
• volatility in our earnings caused by changes in the fair value of our assets and liabilities carried at fair value, including our derivative instruments, and our need to reevaluate the possibility of a premium deficiency in our mortgage insurance business on a quarterly basis;
• our ability to realize the tax benefits associated with our gross deferred tax assets, which will depend on our ability to generate sufficient sustainable taxable income in future periods;
• changes in accounting principles, rules and guidance, or their interpretation, from the Securities and Exchange Commission or the Financial Accounting Standards Board; and
• legal and other limitations on amounts we may receive from our subsidiaries as dividends or through our tax- and expense-sharing arrangements with our subsidiaries.

For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2010 and in Item 1A of Part II of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

Source: Radian Group Inc.

Radian Group Inc.
Emily Riley, 215-231-1035
emily.riley@radian.com