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11/02/2010

Radian Reports Third Quarter 2010 Financial Results

- Diluted net income per share of $0.84 includes impact of gains on derivatives and other financial instruments -
- Mortgage insurance delinquencies declined for third consecutive quarter -
- Stabilizing credit environment continued for financial guaranty business -

PHILADELPHIA, Nov 02, 2010 (BUSINESS WIRE) --

Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended September 30, 2010, of $112.2 million, or $0.84 per diluted share, which included a pre-tax gain from the change in fair value of derivatives of $229.8 million, or $1.12 per share on an after-tax basis. This compares to a net loss of $70.5 million, or $0.86 per diluted share, for the prior-year third quarter. Book value per share at September 30, 2010, was $14.53.

"The signs of credit trend stabilization continued for our businesses, including the third straight quarter of declining mortgage insurance delinquencies, despite the challenge of an uncertain economy," said Chief Executive Officer S.A. Ibrahim. "We are also pleased that Radian maintained its 21 percent market share of high-quality business as the private mortgage insurance industry continued to slowly recapture market share from the FHA."

THIRD QUARTER HIGHLIGHTS

  • The risk-to-capital ratio for Radian Guaranty Inc., the company's primary mortgage insurance subsidiary, was 17.2:1 at September 30, 2010, compared to 17.9:1 at June 30, 2010, and 16.1:1 at September 30, 2009.
  • The number of primary and pool delinquent loans decreased by 5.8 percent and 2.0 percent, respectively, from the second quarter of 2010, which was the third consecutive quarterly decline in delinquent loans. In addition, thenumberdelinquencies declined slightly in October.
  • The mortgage insurance provision for losses was $347.8 million in the third quarter of 2010, and mortgage insurance loss reserves were approximately $3.5 billion as of September 30, 2010, compared to a mortgage insurance provision for losses of $427.6 million in the second quarter of 2010, and mortgage insurance loss reserves of approximately $3.7 billion as of June 30, 2010. As of September 30, 2010, total first-lien reserves were $22,870 per default for primary and $25,278 per default for pool. For the prior-year period, total first-lien reserves were $21,205 per default for primary and $13,572 per default for pool. The reserve per default totals exclude defaults for which reserves have not been established due to the presence of a deductible.
  • Consistent with Radian's strategy of actively managing its legacy portfolio and reducing non-core risk, the company terminated two structured mortgage insurance transactions in the quarter that eliminated 4,325 loans from its delinquent inventory and reduced primary risk in force by $188 million. The payment of $142.7 million to terminate the transactions was slightly less than the company's loss reserve for the terminated loans.
  • Total mortgage insurance claims paid were $494.2 million for the third quarter. Excluding the $142.7 million impact from the termination of the two structured transactions, claims paid were $351.5 million, which consisted of $347.0 million of first-liens and $4.5 million of second-liens. The company expects mortgage insurance claims paid of approximately $420 million in the fourth quarter of 2010 and approximately $1.7 billion for the full-year 2011.
  • New mortgage insurance written (NIW) increased to $3.2 billion in the third quarter, compared to $2.7 billion in the second quarter, and continued to consist of loans with excellent risk characteristics. The company maintained a market share of 21 percent.
  • 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 September 30, 2010, Radian Asset had approximately $1.1 billion in statutory surplus with an additional $1.3 billion in claims-paying resources.
    • Signs of credit trend stabilization continued in the quarter for certain assets, including the company's TruPs CDO portfolio.
    • Radian Asset again received regulatory approval to release contingency reserves in its financial guaranty portfolio, which also strengthened Radian Guaranty's statutory capital position. The $42 million reserve release in the quarter was based on a reduction in the company's net par outstanding, resulting from the maturing of exposures and other terminations of coverage.
    • Radian Asset is expected to pay an ordinary dividend of approximately $65 million to Radian Guaranty in June 2011.
    • In addition, the financial guaranty segment reported net income of $187.2 million, which included gains on derivatives and other financial instruments.

CONFERENCE CALL

Radian will discuss each of these items in its conference call today, Tuesday, November 2, 2010 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 800-230-1074 inside the U.S., or 612-288-0340 for international callers, using passcode 174686 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 174686.

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 September 30, 2010
Exhibit D: Segment Information Quarter Ended September 30, 2009
Exhibit E: Segment Information Nine Months Ended September 30, 2010
Exhibit F: Segment Information Nine Months Ended September 30, 2009
Exhibit G: Financial Guaranty Supplemental Information -
For the Quarter and Nine Months Ended and as of September 30, 2010
Exhibit H: Financial Guaranty Supplemental Information -
For the Quarter and Nine Months Ended and as of September 30, 2010
Exhibit I: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September 30, 2010
New Insurance Written and Risk Written
Exhibit J: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September 30, 2010
Insurance in Force and Risk in Force
Exhibit K: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September 30, 2010
Risk in Force by LTV and Policy Year and other Risk in Force
Exhibit L: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September 30, 2010
Claims Paid, Reserves and Reserve per Default
Exhibit M: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September 30, 2010
Default Statistics
Exhibit N: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September 30, 2010
Net Premiums Written and Earned, Smart Home, Captives and Persistency
Exhibit O: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of September 30, 2010
Reinsurance Progression Toward Attachment - Summary by Book Year
Exhibit P: Mortgage Insurance Supplemental Information -
For the Quarter Ended and as of September 30, 2010
Modified Pool
Exhibit Q: Mortgage Insurance Supplemental Information -
For the Quarter and Nine Months Ended and as of September 30, 2010
Alt-A Risk in Force
Exhibit R: Impact of Mortgage Insurance Terminations -
For the Quarter Ended and as of September 30, 2010
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Exhibit A
Quarter Ended Nine Months Ended
September 30 September 30
2010 2009 2010 2009
(In thousands, except per-share data)
Revenues:
Net premiums written - insurance $ 174,807 $ (38,060 ) (1 ) $ 490,209 $ 280,597 (1 )
Net premiums earned - insurance $ 203,937 $ 209,487 $ 605,651 $ 614,331
Net investment income 46,554 54,032 140,531 163,566
Change in fair value of derivative instruments 229,783 (30,857 ) (372,777 ) (42,955 )
Net gains on other financial instruments 99,140 96,508 49,586 175,962
Net impairment losses recognized in earnings (34 ) (3 ) (90 ) (873 )
Gain on sale of affiliate - - 34,815 -
Other income 1,951 2,467 5,654 10,487
Total revenues 581,331 331,634 463,370 920,518
Expenses:
Provision for losses 344,389 404,904 1,323,435 864,408
Provision for premium deficiency 8,628 (31,569 ) 43 (77,569 )
Policy acquisition costs 11,054 14,193 42,719 54,114
Other operating expenses 43,052 54,034 143,273 161,271
Interest expense 9,502 11,296 28,551 35,890
Total expenses 416,625 452,858 1,538,021 1,038,114
Equity in net income of affiliates - 7,946 14,668 23,608
Pretax (loss) income 164,706 (113,278 ) (1,059,983 ) (93,988 )
Income tax (benefit) provision 52,521 (42,828 ) (386,733 ) (37,976 )
Net (loss) income $ 112,185 $ (70,450 ) $ (673,250 ) $ (56,012 )
Diluted net (loss) income per share (2) $ 0.84 $ (0.86 ) $ (6.20 ) $ (0.69 )
(1) Includes the reversal of $185.6 million of premiums written related to the commutation of $9.8 billion Financial Guaranty net par outstanding in July 2009.
(2) Weighted average shares outstanding (In thousands)
Weighted average common shares outstanding 82,324 81,749 82,417 81,761
Increase in weighted average shares-common stock offering 50,000 - 26,191 -
Increase in weighted average shares-common stock equivalents-diluted basis 1,196 - - -
Weighted average shares outstanding 133,520 81,749 108,608 81,761
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
September 30 December 31 September 30
(In thousands, except per-share data) 2010 2009 2009
Assets:
Cash and investments $ 6,438,904 $ 6,214,376 $ 6,466,527
Investment in affiliates 133 121,480 112,034
Deferred policy acquisition costs 146,475 160,281 158,813
Deferred income taxes, net 728,230 440,948 351,575
Reinsurance recoverables 586,370 628,572 597,067
Derivative assets 26,995 68,534 153,136
Receivable for securities sold 134,538 5,141 89,935
VIE assets 115,704 - -
Other assets 405,302 436,974 435,325
Total assets $ 8,582,651 $ 8,076,306 $ 8,364,412
Liabilities and stockholders' equity:
Unearned premiums $ 707,265 $ 823,621 $ 872,375
Reserve for losses and loss adjustment expenses 3,592,973 3,578,982 3,512,999
Reserve for premium deficiency 25,399 25,357 9,291
Long-term debt 664,901 698,222 698,703
VIE debt 496,293 296,080 328,986
Derivative liabilities 530,688 238,697 394,386
Payable for securities purchased 282,477 28,921 29,031
Other liabilities 351,035 381,432 377,771
Total liabilities 6,651,031 6,071,312 6,223,542
Common stock 150 100 100
Additional paid-in capital 1,004,079 473,759 477,503
Retained earnings 928,025 1,602,143 1,694,219
Accumulated other comprehensive loss (634 ) (71,008 ) (30,952 )
Total common stockholders' equity 1,931,620 2,004,994 2,140,870
Total liabilities and stockholders' equity $ 8,582,651 $ 8,076,306 $ 8,364,412
Book value per share $ 14.53 $ 24.22 $ 25.91

Radian Group Inc. and Subsidiaries

Segment Information

Quarter Ended September 30, 2010

Exhibit C

Mortgage Financial
(In thousands) Insurance Guaranty Total
Revenues:
Net premiums written - insurance $ 174,419 $ 388 $ 174,807
Net premiums earned - insurance $ 181,731 $ 22,206 $ 203,937
Net investment income 26,658 19,896 46,554
Change in fair value of derivative instruments 6,772 223,011 229,783
Net gains on other financial instruments 55,735 43,405 99,140
Net impairment losses recognized in earnings (34 ) - (34 )
Gain on sale of affiliate - - -
Other income 1,870 81 1,951
Total revenues 272,732 308,599 581,331
Expenses:
Provision for losses 347,800 (3,411 ) 344,389
Provision for premium deficiency 8,628 - 8,628
Policy acquisition costs 6,444 4,610 11,054
Other operating expenses 31,690 11,362 43,052
Interest expense 3,251 6,251 9,502
Total expenses 397,813 18,812 416,625
Pretax income (loss) (125,081 ) 289,787 164,706
Income tax provision (benefit) (50,090 ) 102,611 52,521
Net income (loss) $ (74,991 ) $ 187,176 $ 112,185
Cash and investments $ 3,722,189 $ 2,716,715 $ 6,438,904
Deferred policy acquisition costs 37,144 109,331 146,475
Total assets 5,110,581 3,472,070 8,582,651
Unearned premiums 199,764 507,501 707,265
Reserve for losses and loss adjustment expenses 3,504,181 88,792 3,592,973
VIE debt 156,811 339,482 496,293
Derivative liabilities 178 530,510 530,688

Radian Group Inc. and Subsidiaries

Segment Information

Quarter Ended September 30, 2009

Exhibit D

Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written - insurance $ 149,000 $ (187,060 ) $ - $ (38,060 )
Net premiums earned - insurance $ 186,859 $ 22,628 $ - $ 209,487
Net investment income 33,822 20,209 1 54,032
Change in fair value of derivative instruments 6,678 (37,535 ) - (30,857 )
Net gains on other financial instruments 38,583 57,925 - 96,508
Net impairment losses recognized in earnings (3 ) - - (3 )
Other income 2,299 97 71 2,467
Total revenues 268,238 63,324 72 331,634
Expenses:
Provision for losses 376,488 28,416 - 404,904
Provision for premium deficiency (31,569 ) - - (31,569 )
Policy acquisition costs 8,672 5,521 - 14,193
Other operating expenses 39,440 18,877 (4,283 ) 54,034
Interest expense 3,739 7,557 - 11,296
Total expenses 396,770 60,371 (4,283 ) 452,858
Equity in net income of affiliates - - 7,946 7,946
Pretax (loss) income (128,532 ) 2,953 12,301 (113,278 )
Income tax (benefit) provision (45,912 ) (1,245 ) 4,329 (42,828 )
Net (loss) income $ (82,620 ) $ 4,198 $ 7,972 $ (70,450 )
Cash and investments $ 4,093,265 $ 2,373,262 $ - $ 6,466,527
Deferred policy acquisition costs 30,528 128,285 - 158,813
Total assets 5,231,755 3,015,532 117,125 8,364,412
Unearned premiums 266,122 606,253 - 872,375
Reserve for losses and loss adjustment expenses 3,387,740 125,259 - 3,512,999
VIE debt 328,986 - - 328,986
Derivative liabilities 17,018 377,368 - 394,386

Radian Group Inc. and Subsidiaries

Segment Information

Nine Months Ended September 30, 2010

Exhibit E

Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written - insurance $ 499,360 $ (9,151 ) $ - $ 490,209
Net premiums earned - insurance $ 539,062 $ 66,589 $ - $ 605,651
Net investment income 81,561 58,970 - 140,531
Change in fair value of derivative instruments 5,739 (378,516 ) - (372,777 )
Net gains (losses) on other financial instruments 80,784 (31,198 ) - 49,586
Net impairment losses recognized in earnings (90 ) - - (90 )
Gain on sale of affiliate - - 34,815 34,815
Other income 5,292 299 63 5,654
Total revenues 712,348 (283,856 ) 34,878 463,370
Expenses:
Provision for losses 1,304,513 18,922 - 1,323,435
Provision for premium deficiency 43 - - 43
Policy acquisition costs 29,061 13,658 - 42,719
Other operating expenses 103,562 39,511 200 143,273
Interest expense 6,920 21,631 - 28,551
Total expenses 1,444,099 93,722 200 1,538,021
Equity in net income of affiliates - 78 14,590 14,668
Pretax (loss) income (731,751 ) (377,500 ) 49,268 (1,059,983 )
Income tax (benefit) provision (267,700 ) (136,278 ) 17,245 (386,733 )
Net (loss) income $ (464,051 ) $ (241,222 ) $ 32,023 $ (673,250 )

Radian Group Inc. and Subsidiaries

Segment Information

Nine Months Ended September 30, 2009

Exhibit F

Mortgage Financial Financial
(In thousands) Insurance Guaranty Services Total
Revenues:
Net premiums written - insurance $ 465,878 $ (185,281 ) $ - $ 280,597
Net premiums earned - insurance $ 534,789 $ 79,542 $ - $ 614,331
Net investment income 97,465 66,098 3 163,566
Change in fair value of derivative instruments (28,455 ) (14,500 ) - (42,955 )
Net gains on other financial instruments 64,250 111,712 - 175,962
Net impairment losses recognized in earnings (850 ) (23 ) - (873 )
Other income 9,865 316 306 10,487
Total revenues 677,064 243,145 309 920,518
Expenses:
Provision for losses 840,974 23,434 - 864,408
Provision for premium deficiency (77,569 ) - - (77,569 )
Policy acquisition costs 22,332 31,782 - 54,114
Other operating expenses 110,724 54,619 (4,072 ) 161,271
Interest expense 12,052 23,838 - 35,890
Total expenses 908,513 133,673 (4,072 ) 1,038,114
Equity in net income of affiliates - - 23,608 23,608
Pretax (loss) income (231,449 ) 109,472 27,989 (93,988 )
Income tax (benefit) provision (73,048 ) 25,004 10,068 (37,976 )
Net (loss) income $ (158,401 ) $ 84,468 $ 17,921 $ (56,012 )
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2010
Exhibit G
Quarter Ended Nine Months Ended
(In thousands) September 30 September 30
2010 2009 2010 2009
Net Premiums Earned:
Public finance direct $ 12,603 $ 9,363 $ 40,836 $ 35,750
Public finance reinsurance 7,826 11,071 20,935 38,297
Structured direct 895 1,321 2,055 5,156
Structured reinsurance 882 834 2,729 15,130
Trade credit reinsurance - 39 51 174
Net Premiums Earned - insurance 22,206 22,628 66,606 94,507
Impact of commutations - - (17 ) (14,965 )
Total Net Premiums Earned - insurance $ 22,206 $ 22,628 $ 66,589 $ 79,542
Refundings included in earned premium $ 8,602 $ 8,553 $ 28,340 $ 32,076
Net premiums earned - derivatives (1) $ 11,335 $ 13,173 $ 35,172 $ 40,790
Claims paid:
Trade credit reinsurance $ (6 ) $ 41 $ 1,078 $ 912
Financial Guaranty 32,298 84,976 57,496 123,761
Total $ 32,292 $ 85,017 $ 58,574 $ 124,673

Impact of adoption of amendment to accounting standard regarding VIEs on January 1, 2010:
(In millions)
Balance Sheet Increase (Decrease):
Investments $ 89.4
Other assets 121.0
VIE debt 321.0
Derivative liabilities (128.6 )
Derivative liabilities-VIE 17.4
Other liabilities 0.6
Income Statement Increase (Decrease):
Net investment income $ 2.7
Net (losses) gains on other financial instruments (60.9 )
Change in fair value of derivative instruments 57.5
Other income 3.9
Other operating expenses 2.0
Interest expense 1.2
(1) Included in change in fair value of derivative instruments.
Radian Group Inc.
Financial Guaranty Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2010
Exhibit H
($ in thousands, except ratios) September 30 December 31 September 30
2010 2009 2009

Statutory Information:
Capital and surplus $ 1,056,140 $ 1,062,637 $ 939,880
Contingency reserve 374,944 366,108 494,058
Qualified statutory capital 1,431,084 1,428,745 1,433,938
Unearned premium reserve 534,356 595,819 616,788
Loss and loss expense reserve 76,936 128,754 57,259
Total statutory policyholders' reserves 2,042,376 2,153,318 2,107,985
Present value of installment premiums 217,341 260,662 274,655
Soft capital facilities 150,000 150,000 150,000
Total statutory claims paying resources $ 2,409,717 $ 2,563,980 $ 2,532,640
Net debt service outstanding $ 100,702,721 $ 110,207,923 $ 112,780,855
Capital leverage ratio (1) 70 77 79
Claims paying leverage ratio (2) 42 43 45
Net par outstanding by product:
Public finance direct $ 16,312,594 $ 17,536,616 $ 18,081,562
Public finance reinsurance 22,030,001 24,180,588 24,664,615
Structured direct 39,680,382 43,528,366 44,258,529
Structured reinsurance 1,854,456 2,174,433 2,324,867
Total (3) $ 79,877,433 $ 87,420,003 $ 89,329,573

Reserve for losses and LAE-GAAP Basis:
Financial Guaranty $ 84,341 $ 121,833 $ 117,585
Trade Credit 4,451 6,611 7,674
Total $ 88,792 $ 128,444 $ 125,259

(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 $1.8 billion, $2.2 billion and $2.4 billion at September 30, 2010, December 31, 2009 and September 30, 2009, respectively, for legally defeased bond issues where our financial guaranty policy has not been extinguished but cash or securities have been deposited in an escrow account for the benefit of bondholders. The accounting standard for financial guarantee insurance contracts requires that these contracts continue to be accounted for as outstanding contracts despite the elimination of substantially all risk.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2010
Exhibit I
Quarter Ended Nine Months Ended
($ in millions) September 30 September 30
2010 % 2009 % 2010 % 2009 %

Primary new insurance written
Flow $ 3,226 100.0 % $ 3,446 100.0 % $ 7,777 100.0 % $ 14,555 100.0 %
Total Primary $ 3,226 100.0 % $ 3,446 100.0 % $ 7,777 100.0 % $ 14,555 100.0 %
Total
Prime $ 3,225 100.0 % $ 3,441 99.9 % $ 7,774 100.0 % $ 14,530 99.8 %
Alt-A - - 1 - - - 11 0.1 %
A minus and below 1 - 4 0.1 % 3 - 14 0.1 %
Total Flow $ 3,226 100.0 % $ 3,446 100.0 % $ 7,777 100.0 % $ 14,555 100.0 %

Total primary new insurance written by FICO score

Total
>=740 $ 2,621 81.2 % $ 2,570 74.6 % $ 6,182 79.5 % $ 10,464 71.9 %

680-739

 605 18.8 % 831 24.1 % 1,592 20.5 % 3,822 26.3 %

620-679

 - 0.0 % 45 1.3 % 3 0.0 % 268 1.8 %
<=619 - - - - - - 1 -
Total Flow $ 3,226 100.0 % $ 3,446 100.0 % $ 7,777 100.0 % $ 14,555 100.0 %

Percentage of primary new insurance written
Refinances 44 % 30 % 34 % 43 %
95.01% LTV and above 0.2 % 0.3 % 0.3 % 0.1 %
ARMs
Less than 5 years 0.1 % 0.1 % 0.1 % 0.1 %
5 years and longer 5.3 % 2.3 % 5.8 % 0.9 %

Primary risk written
Flow $ 741 100.0 % $ 756 100.0 % $ 1,811 100.0 % $ 3,130 100.0 %
Total Primary $ 741 100.0 % $ 756 100.0 % $ 1,811 100.0 % $ 3,130 100.0 %
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2010
Exhibit J
($ in millions) September 30 September 30
2010 % 2009 %

Primary insurance in force
Flow $ 116,971 88.9 % $ 122,912 79.9 %
Structured 14,587 11.1 % 30,876 20.1 %
Total Primary $ 131,558 100.0 % $ 153,788 100.0 %
Prime $ 107,469 81.7 % $ 113,518 73.8 %
Alt-A 15,204 11.6 % 30,012 19.5 %
A minus and below 8,885 6.7 % 10,258 6.7 %
Total Primary $ 131,558 100.0 % $ 153,788 100.0 %

Primary risk in force
Flow $ 28,790 90.1 % $ 30,388 88.0 %
Structured 3,179 9.9 % 4,131 12.0 %
Total Primary $ 31,969 100.0 % $ 34,519 100.0 %
Flow
Prime $ 24,413 84.8 % $ 25,253 83.1 %
Alt-A 2,743 9.5 % 3,257 10.7 %
A minus and below 1,634 5.7 % 1,878 6.2 %
Total Flow $ 28,790 100.0 % $ 30,388 100.0 %
Structured
Prime $ 1,865 58.7 % $ 2,152 52.1 %
Alt-A 727 22.9 % 1,305 31.6 %
A minus and below 587 18.4 % 674 16.3 %
Total Structured $ 3,179 100.0 % $ 4,131 100.0 %
Total
Prime $ 26,278 82.2 % $ 27,405 79.4 %
Alt-A 3,470 10.9 % 4,562 13.2 %
A minus and below 2,221 6.9 % 2,552 7.4 %
Total Primary $ 31,969 100.0 % $ 34,519 100.0 %

Total primary risk in force by FICO score
Flow
>=740 $ 10,865 37.7 % $ 10,449 34.4 %

680-739

 10,109 35.1 % 11,002 36.2 %

620-679

 6,620 23.0 % 7,561 24.9 %
<=619 1,196 4.2 % 1,376 4.5 %
Total Flow $ 28,790 100.0 % $ 30,388 100.0 %
Structured
>=740 $ 869 27.3 % $ 1,114 27.0 %

680-739

 927 29.2 % 1,314 31.8 %

620-679

 840 26.4 % 1,083 26.2 %
<=619 543 17.1 % 620 15.0 %
Total Structured $ 3,179 100.0 % $ 4,131 100.0 %
Total
>=740 $ 11,734 36.7 % $ 11,563 33.5 %

680-739

 11,036 34.6 % 12,316 35.7 %

620-679

 7,460 23.3 % 8,644 25.0 %
<=619 1,739 5.4 % 1,996 5.8 %
Total Primary $ 31,969 100.0 % $ 34,519 100.0 %

Percentage of primary risk in force
Refinances 31 % 31 %
95.01% LTV and above 20 % 21 %
ARMs
Less than 5 years 6 % 8 %
5 years and longer 8 % 8 %
Pool risk in force
Prime $ 1,848 74.2 % $ 1,973 70.3 %
Alt-A 170 6.8 % 284 10.1 %
A minus and below 472 19.0 % 549 19.6 %
Total $ 2,490 100.0 % $ 2,806 100.0 %
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2010
Exhibit K
($ in millions) September 30 September 30
2010 % 2009 %

Total primary risk in force by LTV
85.00% and below $ 2,831 8.9 % $ 3,556 10.3 %
85.01% to 90.00% 12,239 38.3 % 12,690 36.7 %
90.01% to 95.00% 10,619 33.2 % 11,142 32.3 %
95.01% and above 6,280 19.6 % 7,131 20.7 %
Total $ 31,969 100.0 % $ 34,519 100.0 %

Total primary risk in force by policy year

2005 and prior

 $ 8,539 26.6 % $ 10,140 29.4 %

2006

 3,852 12.0 % 4,650 13.4 %

2007

 8,395 26.3 % 9,823 28.4 %

2008

 6,189 19.4 % 6,887 20.0 %

2009

 3,249 10.2 % 3,019 8.8 %

2010

 1,745 5.5 % - -
Total $ 31,969 100.0 % $ 34,519 100.0 %

Total pool risk in force by policy year

2005 and prior

 $ 2,053 82.4 % $ 2,280 81.2 %

2006

 191 7.7 % 241 8.6 %

2007

 198 8.0 % 227 8.1 %

2008

 48 1.9 % 58 2.1 %
Total pool risk in force $ 2,490 100.0 % $ 2,806 100.0 %

Other risk in force
Second-lien
1st loss $ 133 $ 184
2nd loss 71 100
NIMs 157 418
International

1st loss-Hong Kong primary mortgage insurance

 153 316
Credit default swaps 121 3,132
Total other risk in force $ 635 $ 4,150
Risk to capital ratio-Radian Guaranty only 17.2:1 16.1:1
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2010
Exhibit L
Quarter Ended Nine Months Ended
($ in thousands) September 30 September 30
2010 2009 2010 2009
Claims paid
Prime $ 175,809 $ 96,788 $ 465,816 $ 231,374
Alt-A 80,371 60,759 226,432 147,892
A minus and below 44,456 40,814 129,485 109,904
Total primary claims paid 300,636 198,361 821,733 489,170
Pool 46,313 11,771 116,785 22,768
Second-lien and other 4,513 10,790 16,986 51,735
Subtotal 351,462 220,922 955,504 563,673
Impact of first-lien terminations 142,750 - 223,099 -
Impact of captive terminations (22 ) (107,747 ) (649 ) (107,747 )
Impact of second-lien terminations - 22,323 10,834 87,323
Total $ 494,190 $ 135,498 $ 1,188,788 $ 543,249
Average claim paid (1)
Prime $ 41.5 $ 43.8 $ 43.6 $ 43.1
Alt-A 54.3 56.2 56.7 54.6
A minus and below 35.0 38.9 37.0 38.8
Total primary claims paid 43.0 45.7 45.2 44.8
Pool 77.3 38.8 72.6 33.5
Second-lien and other 43.0 42.5 35.9 42.3
Total $ 45.7 $ 45.1 $ 47.1 $ 44.0
Average primary claim paid before reinsurance recoveries $ 51.8 $ 47.9 $ 52.9 $ 46.3
Average total claim paid before reinsurance recoveries $ 53.7 $ 47.1 $ 54.0 $ 45.2
Loss ratio - GAAP Basis 191.4 % 201.2 % 242.0 % 156.7 %
Expense ratio - GAAP Basis 21.0 % 25.7 % 24.6 % 24.8 %
212.4 % 226.9 % 266.6 % 181.5 %
Reserve for losses by category
Prime $ 1,394,997 $ 1,125,684
Alt-A 615,279 922,420
A minus and below 391,945 454,844
Reinsurance recoverable 559,562 (2 ) 591,857
Total primary reserves 2,961,783 3,094,805
Pool insurance 523,833 211,399
Total 1st lien reserves 3,485,616 3,306,204
Second-lien 18,468 81,462
Other 97 74
Total reserves $ 3,504,181 $ 3,387,740
1st lien reserve per default (3)
Primary reserve per primary default $ 22,870 $ 21,205
Pool reserve per pool default 25,278 13,572
Total 1st lien reserve per default 23,202 20,469
(1) Calculated net of reinsurance recoveries and without giving effect to the impact of first-lien, second-lien and captive terminations.
(2) Reinsurance recoverable on ceded losses related to captives ($462 million) and Smart Home ($97 million).
(3) Excludes defaults for which reserves have not been established because they were associated with transactions where no claim payment was anticipated primarily due to deductibles or where a partial reserve has been recorded that is less than the gross calculated reserve due to the presence of a deductible.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2010
Exhibit M
September 30 December 31 September 30
2010 2009 2009

Default Statistics
Primary insurance:
Flow

Prime
Number of insured loans 592,120 614,590 621,794
Number of loans in default 73,523 78,130 69,287
Percentage of loans in default 12.42% 12.71% 11.14%

Alt-A
Number of insured loans 54,089 60,616 62,860
Number of loans in default 19,116 22,177 21,563
Percentage of loans in default 35.34% 36.59% 34.30%

A minus and below
Number of insured loans 48,929 53,932 55,657
Number of loans in default 17,248 20,911 19,885
Percentage of loans in default 35.25% 38.77% 35.73%
Total Flow
Number of insured loans 695,138 729,138 740,311
Number of loans in default 109,887 121,218 110,735
Percentage of loans in default 15.81% 16.62% 14.96%
Structured

Prime
Number of insured loans 43,856 52,629 60,931
Number of loans in default 6,627 7,520 8,496
Percentage of loans in default 15.11% 14.29% 13.94%

Alt-A
Number of insured loans 20,879 43,615 74,911
Number of loans in default 6,905 15,295 25,098
Percentage of loans in default 33.07% 35.07% 33.50%

A minus and below
Number of insured loans 17,146 19,287 19,861
Number of loans in default 6,630 7,965 7,669
Percentage of loans in default 38.67% 41.30% 38.61%
Total Structured
Number of insured loans 81,881 115,531 155,703
Number of loans in default 20,162 30,780 41,263
Percentage of loans in default 24.62% 26.64% 26.50%
Total Primary Insurance

Prime
Number of insured loans 635,976 667,219 682,725
Number of loans in default 80,150 85,650 77,783
Percentage of loans in default 12.60% 12.84% 11.39%

Alt-A
Number of insured loans 74,968 104,231 137,771
Number of loans in default 26,021 37,472 46,661
Percentage of loans in default 34.71% 35.95% 33.87%

A minus and below
Number of insured loans 66,075 73,219 75,518
Number of loans in default 23,878 28,876 27,554
Percentage of loans in default 36.14% 39.44% 36.49%
Total Primary Insurance
Number of insured loans 777,019 844,669 896,014
Number of loans in default (1) 130,049 151,998 151,998
Percentage of loans in default 16.74% 17.99% 16.96%
Pool insurance:
Number of loans in default (2) 31,832 36,397 36,889

(1) Includes an estimated 542, 3,302 and 6,052 defaults at September 30, 2010, December 31, 2009 and September 30, 2009, respectively, for which reserves have not been established because they were associated with transactions where no claim payment was anticipated primarily due to deductibles or where a partial reserve has been recorded that is less than the gross calculated reserve due to the presence of a deductible.

(2) Includes an estimated 11,109, 18,033 and 21,313 defaults at September 30, 2010, December 31, 2009 and September 30, 2009, respectively, for which reserves have not been established because they were associated with transactions where no claim payment was anticipated primarily due to deductibles or where a partial reserve has been recorded that is less than the gross calculated reserve due to the presence of a deductible.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter and Nine Months Ended and as of September 30, 2010
Exhibit N
Quarter Ended Nine Months Ended
September 30 September 30
2010 2009 2010 2009

Net Premiums Written (In thousands)
Primary and Pool Insurance $ 173,805 $ 169,180 $ 498,468 $ 483,872
Second-lien (1) 609 (1,493 ) 888 (750 )
International (1) 5 (18,687 ) 4 (17,244 )

Total Net Premiums Written - Insurance

 $ 174,419 $ 149,000 $ 499,360 $ 465,878

Net Premiums Earned (In thousands)
Primary and Pool Insurance $ 178,554 $ 182,582 $ 529,288 $ 517,770
Second-lien 610 1,264 1,855 4,649
International 2,567 3,013 7,919 12,370
Total Net Premiums Earned - Insurance $ 181,731 $ 186,859 $ 539,062 $ 534,789

SMART HOME (In millions)
Ceded Premiums Written and Earned $ 2.5 $ 2.4 $ 7.4 $ 8.0
Net premiums earned - derivatives (In thousands) (2) $ 137 $ 234 $ 416 $ 1,787

1st Lien Captives
Premiums ceded to captives (In thousands) $ 24,392 $ 30,942 $ 74,550 $ 102,976
% of total premiums 11.9 % 14.3 % 12.2 % 16.4 %
NIW subject to captives (In thousands) $ - $ 144,302 $ 129 $ 1,615,653
% of primary NIW - 4.2 % <1% 11.1 %
IIF included in captives (3) 28.9 % 29.9 %
RIF included in captives (3) 30.0 % 33.6 %
Persistency (twelve months ended September 30) 78.9 % (4 ) 87.0 %
September 30 September 30
2010 2009
SMART HOME
% of Primary RIF included in Smart Home Transactions (3) 3.2 % 3.4 %
(1) Reflects the impact of second-lien and international 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.
(4) Impacted by the termination of transactions in 2009 and 2010.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of September 30, 2010
Exhibit O
Reinsurance Progression Toward Attachment - Summary by Book Year (1)
September 30 December 31
($ in millions) 2010 2009

Book Year (2):

Original Book
RIF

Progression
to
Attachment
Point

Gross
Current
RIF

Ceded
Current
RIF(3)

Net
Current
RIF

Ever-to-
Date
Incurred
Losses

Reinsurance
Benefit (4)

Gross
Current
RIF

Ceded
Current
RIF(3)

Net
Current
RIF

Ever-to-
Date
Incurred
Losses

Reinsurance
Benefit (4)

Pre-2006 0-50 % $ 300 $ 49 $ 251 $ 142 $ 375 $ 62 $ 313 $ 142
Pre-2006 50-75 % 249 153 96 87 325 185 140 86
Pre-2006 75-99 % 474 228 246 135 557 231 326 127
Pre-2006 Attached 1,563 436 1,127 445 $ 164 1,673 452 1,221 381 $ 139
Pre-2006 Total $ 21,398 $ 2,586 $ 866 $ 1,720 $ 809 $ 164 $ 2,930 $ 930 $ 2,000 $ 736 $ 139
2006 0-50 % $ 1 $ - $ 1 $ - $ 1 $ - $ 1 $ -
2006 50-75 % 1 - 1 - 16 1 15 1
2006 75-99 % 12 1 11 1 13 1 12 1
2006 Attached 1,540 187 1,353 446 $ 169 1,695 242 1,453 355 $ 163
2006 Total $ 2,760 $ 1,554 $ 188 $ 1,366 $ 447 $ 169 $ 1,725 $ 244 $ 1,481 $ 357 $ 163
2007 0-50 % $ - $ - $ - $ - $ 1 $ - $ 1 $ -
2007 50-75 % - - - - 12 1 11 -
2007 75-99 % 8 1 7 - 15 1 14 1
2007 Attached 3,195 370 2,825 599 $ 233 3,446 391 3,055 437 $ 191
2007 Total $ 4,305 $ 3,203 $ 371 $ 2,832 $ 599 $ 233 $ 3,474 $ 393 $ 3,081 $ 438 $ 191
2008 0-50 % $ 164 $ 10 $ 154 $ 5 $ 298 $ 22 $ 276 $ 6
2008 50-75 % 24 1 23 1 149 8 141 6
2008 75-99 % 78 11 67 4 1,454 166 1,288 56
2008 Attached 1,629 186 1,443 127 $ 28 159 14 145 19 $ 11
2008 Total $ 2,381 $ 1,895 $ 208 $ 1,687 $ 137 $ 28 $ 2,060 $ 210 $ 1,850 $ 87 $ 11
2009 0-50 % $ 253 $ 12 $ 241 $ 1 $ 284 $ 12 $ 272 $ -
2009 50-75 % - - - - - - - -
2009 75-99 % - - - - - - - -
2009 Attached - - - - $ - - - - - $ -
2009 Total $ 288 $ 253 $ 12 $ 241 $ 1 $ - $ 284 $ 12 $ 272 $ - $ -
Quota Share 0-50 % $ - $ - $ - $ - $ - $ - $ - $ -
Quota Share 50-75 % - - - - - - - -
Quota Share 75-99 % - - - - - - - -
Quota Share Attached 94 30 64 25 $ 10 102 33 69 37 $ 17
Quota Share Total $ 313 $ 94 $ 30 $ 64 $ 25 $ 10 $ 102 $ 33 $ 69 $ 37 $ 17

Total Captive (Including Quota Share)

 $ 31,445 $ 9,585 $ 1,675 $ 7,910 $ 2,018 $ 604 $ 10,575 $ 1,822 $ 8,753 $ 1,655 $ 521
SmartHome 0-50 % $ 30 $ 13 $ 17 $ 14 $ 32 $ 14 $ 18 $ 12
SmartHome 50-75 % - - - - 71 29 42 23
SmartHome 75-99 % 65 29 36 26 - - - -
SmartHome Attached 938 456 483 463 $ 135 1,029 492 537 435 $ 143
Total SmartHome $ 3,900 $ 1,033 $ 498 $ 536 $ 503 $ 135 $ 1,132 $ 535 $ 597 $ 470 $ 143
(1) Data is presented in aggregate for all trusts for captives with risk in force at each period end only. Actual trust attachment points and exit points vary by individual contract. The attachment point is calculated at the contract/deal level and is based on Total Incurred Losses which are defined as claims paid ever-to-date plus loss reserves.
(2) Book year figures may include loans from additional periods pursuant to reinsurance agreement terms and conditions.
(3) Risk ceded to reinsurers based on individual contract terms.
(4) Captive Benefit is defined as ceded reserves at period end plus ever-to-date claims paid by the trust for captives with risk in force at period end only. Reinsurance benefit at September 30, 2010 and December 31, 2009 excludes $0.6 million and $71 million of recoveries recognized from the terminations of certain captive reinsurance agreements during the first nine months of 2010 and for the year ended December 31, 2009, respectively.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of September 30, 2010
Modified Pool
Exhibit P
($ in millions) September 30 September 30
2010 % 2009 %

Primary risk in force by policy year

2005 and prior

 $ 190 63.8 % $ 280 33.9 %

2006

 43 14.4 % 208 25.2 %

2007

 58 19.5 % 330 39.9 %

2008

 7 2.3 % 8 1.0 %
Total $ 298 100.0 % $ 826 100.0 %

Primary risk in force by product

Prime

 $ 75 25.2 % $ 150 18.1 %

Alt-A

 205 68.8 % 653 79.1 %

A minus and below

 18 6.0 % 23 2.8 %

Total

 $ 298 100.0 % $ 826 100.0 %

Primary insurance in force by product

Prime

 $ 696 22.1 % $ 2,884 16.7 %

Alt-A

 2,310 73.3 % 14,082 81.7 %

A minus and below

 147 4.6 % 268 1.6 %
Total $ 3,153 100.0 % $ 17,234 100.0 %

Default Statistics:
Primary Insurance:

Total modified pool (1)

Number of insured loans

 15,988 80,832

Number of loans in default

 4,081 23,876

Percentage of loans in default

 25.53 % 29.54 %
(1) Impacted by the termination of transactions in 2009 and 2010.
Radian Group Inc.
Mortgage Insurance Supplemental Information
For the Quarter Ended and as of September 30, 2010
ALT-A
Exhibit Q
($ in millions) September 30
2010 % 2009 %

Primary risk in force by FICO score

>=740

 $ 849 24.5 % $ 1,121 24.6 %

680-739

 1,662 47.9 % 2,202 48.2 %

660-679

 502 14.5 % 666 14.6 %

620-659

 431 12.4 % 543 11.9 %

<=619

 26 0.7 % 30 0.7 %
Total $ 3,470 100.0 % $ 4,562 100.0 %

Primary risk in force by LTV
85.00% and below $ 644 18.6 % $ 1,195 26.2 %
85.01% to 90.00% 1,589 45.8 % 1,880 41.2 %
90.01% to 95.00% 989 28.5 % 1,175 25.8 %
95.01% and above 248 7.1 % 312 6.8 %
Total $ 3,470 100.0 % $ 4,562 100.0 %

Primary risk in force by policy year

2005 and prior

 $ 1,188 34.3 % $ 1,428 31.3 %

2006

 719 20.7 % 1,010 22.1 %

2007

 1,354 39.0 % 1,886 41.4 %

2008

 208 6.0 % 237 5.2 %

2009

 1 - 1 -
Total $ 3,470 100.0 % $ 4,562 100.0 %
Radian Group Inc.
Impact of Mortgage Insurance Terminations
For the Quarter Ended and as of September 30, 2010
Exhibit R
($ in millions)
September 30
As Reported Impact of Prior to
September 30 Mortgage Insurance Mortgage Insurance
2010 Terminations Terminations

Primary insurance in force
Prime $ 107,469 $ - $ 107,469
Alt-A 15,204 3,642 18,846
A minus and below 8,885 - 8,885
Total Primary $ 131,558 $ 3,642 $ 135,200

Primary risk in force

Prime

 $ 26,278 $ - $ 26,278

Alt-A

 3,470 188 3,658

A minus and below

 2,221 - 2,221
Total Primary $ 31,969 $ 188 $ 32,157

Primary insurance in force-modified pool (1)
Prime $ 696 $ - $ 696
Alt-A 2,310 3,004 5,314
A minus and below 147 - 147
Total Primary $ 3,153 $ 3,004 $ 6,157

Primary risk in force-modified pool (1)
Prime $ 75 $ - $ 75
Alt-A 205 150 355
A minus and below 18 - 18
Total Primary $ 298 $ 150 $ 448

Default Statistics:
Total Primary Insurance

Prime
Number of insured loans 635,976 - 635,976
Number of loans in default 80,150 - 80,150
Percentage of loans in default 12.60 % - 12.60 %

Alt-A
Number of insured loans 74,968 10,152 85,120
Number of loans in default 26,021 4,325 30,346
Percentage of loans in default 34.71 % 42.60 % 35.65 %

A minus and below
Number of insured loans 66,075 - 66,075
Number of loans in default 23,878 - 23,878
Percentage of loans in default 36.14 % - 36.14 %
Total Primary Insurance
Number of insured loans 777,019 10,152 787,171
Number of loans in default 130,049 4,325 134,374
Percentage of loans in default 16.74 % 42.60 % 17.07 %
Total modified pool insurance (1)
Number of insured loans 15,988 8,756 24,744
Number of loans in default 4,081 3,528 7,609
Percentage of loans in default 25.53 % 40.29 % 30.75 %
(1) Included in primary insurance.

FORWARD-LOOKING STATEMENTS

All statements in this report 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 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 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. These statements speak only as of the date of this news release, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties, including the following:

  • changes in general financial and political conditions, such as the failure or significant delay of the U.S. economy to recover from the most recent recession or the U.S. economy reentering a recessionary period following a brief period of stabilization or even growth, the lack of meaningful liquidity in the capital markets or in the credit markets, a prolonged period of high unemployment rates and limited home price appreciation or further depreciation (which has resulted in some borrowers voluntarily defaulting on their mortgages when their mortgage balances exceed the value of their homes), changes or volatility in interest rates or consumer confidence, changes in credit spreads, changes in the way investors perceive the strength of private mortgage insurers or financial guaranty providers, or investor concern over the credit quality and specific risks faced by the particular businesses, municipalities or pools of assets covered by our insurance;
  • catastrophic events or further economic changes in geographic regions where our mortgage insurance or financial guaranty insurance is more concentrated;
  • our ability to successfully execute upon our capital plan for our mortgage insurance business (which depends, in part, on the performance of our financial guaranty portfolio), and if necessary, to obtain additional capital to support new business writings in our mortgage insurance business and the long-term liquidity needs of our holding company;
  • a further decrease in the volume of home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards and the decrease in housing demand throughout the U.S.;
  • our ability to maintain adequate risk-to-capital ratios and surplus requirements in our mortgage insurance business in light of ongoing losses in this business and continued deterioration in our financial guaranty portfolio which, in the absence of new capital, may depend on our ability to execute strategies for which regulatory and other approvals are required and may not be obtained;
  • our ability to continue to effectively mitigate our mortgage insurance and financial guaranty losses;
  • reduced opportunities for loss mitigation in markets where housing values do not appreciate or continue to decline;
  • a decrease in the level of future insurance rescissions and claim denials from the current elevated levels, which rescissions and denials have materially mitigated our paid losses and resulted in a significant reduction in our loss reserves;
  • the negative impact our insurance rescissions and claim denials may have on our relationships with customers, including the potential loss of customers and heightened risk of disputes and litigation; and, in the event that we are unsuccessful in defending our rescissions or denials, the need to reestablish loss reserves for, and reassume risk on, rescinded loans and pay additional claims;
  • the concentration of our mortgage insurance business among a relatively small number of large customers;
  • disruption in the servicing of mortgages covered by our insurance policies;
  • the aging of our mortgage insurance portfolio and changes in severity or frequency of losses associated with certain of our products that are riskier than traditional mortgage insurance or financial guaranty insurance policies;
  • the performance of our insured portfolio of higher risk loans, such as Alternative-A ("Alt-A") and subprime loans, and of adjustable rate products, such as adjustable rate mortgages and interest-only mortgages;
  • a decrease in persistency rates of our mortgage insurance policies;
  • an increase in the risk profile of our existing mortgage insurance portfolio due to mortgage refinancing in the current housing market;
  • 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 (in particular, the credit rating of Radian Group Inc. and the financial strength ratings assigned to Radian Guaranty Inc.);
  • heightened competition for our mortgage insurance business from others such as the Federal Housing Administration and the Veterans' Administration or other private mortgage insurers (in particular, the FHA and those private mortgage insurers that have been assigned higher ratings from the major rating agencies or new entrants to the industry);
  • changes in the charters or business practices of Federal National Mortgage Association ("Fannie Mae") and Freddie Mac (together, the "GSEs"), the largest purchasers of mortgage loans that we insure, and our ability to remain an eligible provider to both Freddie Mac and Fannie Mae;
  • 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 services are significantly limited in scope;
  • the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the financial services industry in general, and on our mortgage insurance and financial guaranty businesses in particular;
  • 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) affecting demand for private mortgage insurance, (b) limiting or restricting our use of (or requirements for) additional capital and the products we may offer, or (c) affecting the form in which we execute credit protection or affecting our existing financial guaranty portfolio;
  • 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 our mortgage insurance and financial guaranty businesses in determining gains and losses on these contracts;
  • 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;
  • volatility in our earnings caused by changes in the fair value of our derivative instruments and our need to reevaluate the possibility of a premium deficiency in our mortgage insurance business on a quarterly basis;
  • changes in accounting guidance 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 review the "Risk Factors" detailed in Item 1A of Part II of our Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2010, and June 30, 2010, and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission.

FINANCIAL AND OPERATIONAL NOTES

The net per share impact of $1.12, on an after tax basis, resulting from the change in fair value of derivatives of $229.8 million, was derived by applying a 35% statutory tax rate.

SOURCE: Radian Group Inc. 

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