Radian Reports Fourth Quarter and Full Year 2012 Financial Results

  Radian Reports Fourth Quarter and Full Year 2012 Financial Results

 – Writes $37.1 billion of new MI business in 2012, compared to $15.5 billion
                                  in 2011 –

– Risk-to-capital ratio of 20.8:1; Expects to remain below 25:1 through 2013 –

Business Wire

PHILADELPHIA -- February 11, 2013

Radian Group Inc. (NYSE: RDN) today reported a net loss for the quarter ended
December 31, 2012, of $177.3 million, or $1.34 per diluted share, which
included minimal net gains on investments and combined net gains from the
change in fair value of derivatives and other financial instruments as well as
an income tax provision of $20.5 million. This compares to a net loss for the
quarter ended December 31, 2011, of $121.5 million, or $0.92 per diluted
share, which included net gains on investments of $38.9 million, 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.
The net loss for the full year 2012 was $451.5 million, or $3.41 per diluted
share, which included net gains on investments of $184.9 million and combined
net loss from the change in fair value of derivatives and other financial
instruments of $226.3 million as well as an income tax provision of $7.3
million. This compares to net income for the year ended December 31, 2011, of
$302.2 million, or $2.26 per diluted share, which included net gains on
investments of $202.2 million and combined net gains from the change in fair
value of derivatives and other financial instruments of $821.7 million as well
as an income tax provision of $66.4 million. Book value per share at December
31, 2012, was $5.51.

“In 2012, we took advantage of every opportunity to position Radian for future
success, including growing our volume of new, high-quality mortgage insurance
business each quarter, reducing our portfolio of delinquent loans by 16%,
maintaining a competitive risk-to-capital ratio and reducing our financial
guaranty exposure by 51%,” said Chief Executive Officer S.A. Ibrahim.
“Although our fourth quarter results were impacted by the continuing challenge
of our legacy portfolio, our ability to write new, profitable business remains
undiminished.”

Ibrahim added, “We hit the ground running in 2013 with $4 billion of new
business written in January and another decline in our delinquent loan
inventory, which better positions Radian for a return to operating
profitability.”

CAPITAL AND LIQUIDITY UPDATE

  *Radian Guaranty’s risk-to-capital ratio was 20.8:1 as of December 31,
    2012, compared to 20.1:1 as of September 30, 2012, and 21.5:1 as of
    December 31, 2011.

       *The change in the risk-to-capital ratio from September 30, 2012, was
         primarily driven by operating losses and an increase to the company’s
         gross risk in force resulting from strong, new mortgage insurance
         business volume, partially offset by external and intercompany
         reinsurance which decreased net risk in force.
       *The company expects to remain below a 25:1 risk-to-capital ratio
         through 2013 including, if necessary, by contributing from currently
         available holding company funds.
       *In order to proactively manage its risk-to-capital position, Radian
         Guaranty entered into two quota share reinsurance agreements in 2012
         with the same third-party reinsurance provider. As of December 31,
         2012, a total of $1.9 billion was ceded under those agreements.
       *The company also managed risk to capital through a new intercompany
         reinsurance agreement, which reduced Radian Guaranty’s net risk in
         force by $2.6 billion in the fourth quarter.
       *As of December 31, 2012, Radian Guaranty’s statutory capital was $926
         million compared to $843 million a year ago.

  *Radian Group maintains approximately $336 million of currently available
    liquidity, before the repayment this month of $79 million of outstanding
    debt. After completion of the company’s debt exchange in January, the
    company has approximately $55 million of outstanding debt due in June
    2015, with the balance of debt maturing in 2017.

FOURTH QUARTER AND FULL YEAR HIGHLIGHTS

  *New mortgage insurance written (NIW) was $11.7 billion for the quarter,
    compared to $10.6 billion in the third quarter of 2012 and $6.5 billion in
    the prior-year quarter. Radian wrote an additional $4 billion in NIW in
    January 2013, compared to $2 billion in January 2012.

       *The product mix of Radian’s NIW in 2012 shifted to an increased level
         of monthly premium business. Of the $37.1 billion in new business
         written in 2012, 65 percent was written with monthly premiums and 35
         percent with single premiums. This compares to a mix of 59 percent
         monthly premiums and 41 percent single premiums in 2011.
       *The Home Affordable Refinance Program (HARP) accounted for $2.9
         billion of insurance not included in Radian Guaranty’s NIW total for
         the quarter. This compares to $2.7 billion in the third quarter of
         2012 and $0.7 billion in the prior-year quarter. As of December 31,
         2012, approximately 9 percent of the company’s total primary mortgage
         insurance risk in force had successfully completed a HARP refinance.
       *NIW continued to consist of loans with excellent risk
         characteristics, with 76 percent consisting of loans with FICO scores
         of 740 or greater.

  *The mortgage insurance provision for losses was $306.9 million in the
    fourth quarter of 2012, compared to $171.8 million in the third quarter
    and $333.3 million in the prior-year period. Mortgage insurance loss
    reserves were approximately $3.1 billion as of December 31, 2012, which
    was up slightly from $3.0 billion as of September 30, 2012, and down from
    $3.2 billion as of December 31, 2011. First-lien reserves per primary
    default were $29,510 as of December 31, 2012, compared to $28,561 as of
    September 30, 2012, and $26,007 as of December 31, 2011.
  *The total number of primary delinquent loans decreased by 2 percent in the
    fourth quarter from the third quarter of 2012, and by 16 percent from the
    fourth quarter of 2011. In addition, the total number of primary
    delinquent loans decreased by 2 percent in January. The primary mortgage
    insurance delinquency rate decreased to 12.1 percent in the fourth quarter
    of 2012, compared to 12.6 percent in the third quarter and 15.2 percent in
    the fourth quarter of 2011. The company’s primary risk in force on
    defaulted loans was $4.3 billion in the fourth quarter, compared to $4.4
    billion in the third quarter and $5.2 billion in the fourth quarter of
    2011.
  *Total mortgage insurance claims paid were $263.4 million in the fourth
    quarter, compared to $272.4 million in the third quarter and $291.6
    million in the fourth quarter of 2011. The company expects mortgage
    insurance net claims paid for the full-year 2013 of $900 million to $1.0
    billion.
  *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 dividends over time.

       *As of December 31, 2012, Radian Asset had approximately $1.1 billion
         in statutory surplus with an additional $700 million in claims-paying
         resources.
       *In November, Radian Asset agreed to the commutation of its remaining
         reinsurance risk from Financial Guaranty Insurance Corporation
         (FGIC), which reduced the company’s total reinsurance portfolio by 13
         percent. The commutation of the $822 million reinsurance portfolio
         was completed in January 2013.
       *Last week, Radian Asset received regulatory approval to release $61
         million of contingency reserves, which will benefit Radian Guaranty's
         statutory capital position. The reserve release was based on a
         reduction in Radian Asset’s net par outstanding, resulting from the
         maturing of exposures and other terminations of coverage. The company
         had anticipated the majority of the reserve release and has included
         its impact in its projections of Radian Guaranty's risk-to-capital
         during 2013.

  *Radian Asset has paid a total of $384 million in dividends to Radian
    Guaranty since 2008, and expects to pay another dividend of approximately
    $35 million in 2013.
  *Since June 30, 2008, Radian Asset has successfully reduced its total net
    par exposure by 71 percent to $33.7 billion as of December 31, 2012,
    including large declines in many of the riskier segments of the portfolio.

CONFERENCE CALL

Radian will discuss these items in its conference call today, Monday, February
11, 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.biz. The call may also be accessed by dialing 800-230-1092 inside
the U.S., or 612-234-9960 for international callers, using passcode 280218 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 280218.

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.biz.

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, 2012
Exhibit D:   Segment Information Quarter Ended December 31, 2011
Exhibit E:   Segment Information Year Ended December 31, 2012
Exhibit F:   Segment Information Year Ended December 31, 2011
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 by Product
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, QSR and Persistency
             

                                                 
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Income
Exhibit A
                                                    
                      Quarter Ended                 Year Ended
                      December 31                   December 31
(In thousands
except per-share      2012          2011           2012          2011
data)
                                                                   
Revenues:
Net premiums          $ 217,743     $ 193,433     $ 686,630     $ 707,247 
written - insurance
                                                                   
Net premiums earned   $ 193,875      $ 184,413      $ 738,982      $ 756,025
- insurance
Net investment        23,112         38,694         114,337        163,520
income
Net gains on          6,351          38,866         184,888        202,177
investments
Net impairment
losses recognized     (3         )   (1,171     )   (3         )   (1,202    )
in earnings
Change in fair
value of derivative   2,912          69,769         (144,025   )   628,395
instruments
Net (losses) gains
on other financial    (1,815     )   32,429         (82,269    )   193,329
instruments
Gain on sale of       —              —              7,708          —
affiliate
Other income          1,627         1,551         5,790         5,599     
Total revenues        226,059       364,551       825,408       1,947,843 
                                                                   
Expenses:
Provision for         305,797        355,984        959,171        1,296,521
losses
Change in reserve
for premium           (1,464     )   (665       )   41             (7,092    )
deficiency
Policy acquisition    10,098         12,796         61,876         52,763
costs
Other operating       55,896         38,397         196,672        175,810
expenses
Interest expense      12,583        14,197        51,832        61,394    
Total expenses        382,910       420,709       1,269,592     1,579,396 
                                                                   
Equity in net
(loss) income of      —             —             (13        )   65        
affiliates
                                                                   
Pretax (loss)         (156,851   )   (56,158    )   (444,197   )   368,512
income
Income tax            20,451        65,381        7,271         66,362    
provision
                                                                   
Net (loss) income     $ (177,302 )   $ (121,539 )   $ (451,468 )   $ 302,150 
                                                                   
Diluted net (loss)
income per share      $ (1.34    )   $ (0.92    )   $ (3.41    )   $ 2.26    
(1)
                                                                             
(1) Weighted
average shares
outstanding (in
thousands)
                                                                             
Weighted average
common shares           132,525        132,369        132,533        132,372
outstanding
Increase in
weighted average
shares-common stock    —            —            —            1,491   
equivalents-diluted
basis
Weighted average       132,525      132,369      132,533      133,863 
shares outstanding
                                                                             

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)             2012            2011
                                                                  
Assets:
Cash and investments                              $ 5,208,199     $ 5,846,168
Deferred policy acquisition costs                 88,202          139,906
Deferred income taxes, net                        —               15,975
Reinsurance recoverables                          89,204          157,985
Derivative assets                                 13,609          17,212
Other assets                                      503,986        479,519
Total assets                                      $ 5,903,200    $ 6,656,765
                                                                  
Liabilities and stockholders' equity:
Unearned premiums                                 $ 648,682       $ 637,372
Reserve for losses and loss adjustment expenses   3,149,936       3,310,902
Reserve for premium deficiency                    3,685           3,644
Long-term debt                                    663,571         818,584
VIE debt                                          108,858         228,240
Derivative liabilities                            266,873         126,006
Other liabilities                                 325,270        349,726
Total liabilities                                 5,166,875      5,474,474
                                                                  
Common stock                                      151             151
Additional paid-in capital                        1,075,320       1,074,513
Retained (deficit) earnings                       (355,241    )   96,227
Accumulated other comprehensive income            16,095         11,400
Total common stockholders’ equity                 736,325        1,182,291
Total liabilities and stockholders’ equity        $ 5,903,200    $ 6,656,765
                                                                  
Book value per share                              $ 5.51          $ 8.88
                                                                    

                                                             
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended December 31, 2012
Exhibit C
                                                                 
                                 Mortgage        Financial
(In thousands)                   Insurance       Guaranty        Total
Revenues:
Net premiums written -           $ 217,044      $ 699          $ 217,743   
insurance
                                                                 
Net premiums earned -            179,486         14,389          193,875
insurance
Net investment income            12,814          10,298          23,112
Net gains on investments         1,447           4,904           6,351
Net impairment losses            —               (3          )   (3          )
recognized in earnings
Change in fair value of          (298        )   3,210           2,912
derivative instruments
Net losses on other financial    (864        )   (951        )   (1,815      )
instruments
Other income                     1,588          39             1,627       
Total revenues                   194,173        31,886         226,059     
                                                                 
Expenses:
Provision for losses             306,895         (1,098      )   305,797
Change in reserve for premium    (1,464      )   —               (1,464      )
deficiency
Policy acquisition costs         7,469           2,629           10,098
Other operating expenses         44,661          11,235          55,896
Interest expense                 2,099          10,484         12,583      
Total expenses                   359,660        23,250         382,910     
                                                                 
Pretax (loss) income             (165,487    )   8,636           (156,851    )
Income tax provision             12,279         8,172          20,451      
                                                                 
Net (loss) income                $ (177,766  )   $ 464          $ (177,302  )
                                                                 
Cash and investments             $ 3,118,153     $ 2,090,046     $ 5,208,199
Deferred policy acquisition      38,478          49,724          88,202
costs
Total assets                     3,575,427       2,327,773       5,903,200
Unearned premiums                382,413         266,269         648,682
Reserve for losses and loss      3,083,608       66,328          3,149,936
adjustment expenses
VIE Debt                         9,875           98,983          108,858
Derivative liabilities           —               266,873         266,873
                                                                             

                                                             
Radian Group Inc. and Subsidiaries
Segment Information
Quarter Ended December 31, 2011
Exhibit D
                                                                 
                                 Mortgage        Financial
(In thousands)                   Insurance       Guaranty        Total
Revenues:
Net premiums written -           $ 194,009      $ (576      )   $ 193,433   
insurance
                                                                 
Net premiums earned -            167,000         17,413          184,413
insurance
Net investment income            20,350          18,344          38,694
Net gains on investments         27,755          11,111          38,866
Net impairment losses            (1,171      )   —               (1,171      )
recognized in earnings
Change in fair value of          (696        )   70,465          69,769
derivative instruments
Net (losses) gains on other      (457        )   32,886          32,429
financial instruments
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    (665        )   —               (665        )
deficiency
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      52,094          87,812          139,906
costs
Total assets                     3,470,103       3,186,662       6,656,765
Unearned premiums                233,446         403,926         637,372
Reserve for losses and loss      3,247,900       63,002          3,310,902
adjustment expenses
VIE Debt                         9,450           218,790         228,240
Derivative liabilities           —               126,006         126,006
                                                                             

                                                              
Radian Group Inc. and Subsidiaries
Segment Information
Year Ended December 31, 2012
Exhibit E
                                                                  
                                    Mortgage       Financial
(In thousands)                      Insurance      Guaranty       Total
Revenues:
Net premiums written - insurance    $ 806,305     $ (119,675 )   $ 686,630  
                                                                  
Net premiums earned - insurance     702,385        36,597         738,982
Net investment income               63,191         51,146         114,337
Net gains on investments            103,666        81,222         184,888
Net impairment losses recognized    —              (3         )   (3         )
in earnings
Change in fair value of             (330       )   (143,695   )   (144,025   )
derivative instruments
Net losses on other financial       (3,491     )   (78,778    )   (82,269    )
instruments
Gain on sale of affiliate           —              7,708          7,708
Other income                        5,516         274           5,790      
Total revenues                      870,937       (45,529    )   825,408    
                                                                  
Expenses:
Provision for losses                921,507        37,664         959,171
Change in reserve for premium       41             —              41
deficiency
Policy acquisition costs            34,131         27,745         61,876
Other operating expenses            152,448        44,224         196,672
Interest expense                    7,454         44,378        51,832     
Total expenses                      1,115,581     154,011       1,269,592  
                                                                  
Equity in net loss of affiliates    —              (13        )   (13        )
                                                                  
Pretax loss                         (244,644   )   (199,553   )   (444,197   )
Income tax (benefit) provision      (30,045    )   37,316        7,271      
                                                                  
Net loss                            $ (214,599 )   $ (236,869 )   $ (451,468 )
                                                                             

                                                               
Radian Group Inc. and Subsidiaries
Segment Information
Year Ended December 31, 2011
Exhibit F
                                                                   
                                      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   (1,202     )   —             (1,202    )
earnings
Change in fair value of derivative    (632       )   629,027       628,395
instruments
Net gains on other financial          3,864          189,465       193,329
instruments
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         (7,092     )   —             (7,092    )
deficiency
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 (loss) income                  (560,758   )   929,270       368,512
Income tax provision (benefit)        83,157        (16,795   )   66,362    
                                                                   
Net (loss) income                     $ (643,915 )   $ 946,065    $ 302,150 
                                                                             

                                                      
Radian Group Inc. and Subsidiaries
Financial Guaranty Supplemental Information
Exhibit G
                                                         
                               Quarter Ended             Year Ended
                               December 31               December 31
(In thousands)                 2012        2011         2012        2011
                                                                      
Net Premiums Earned:
Public finance direct          $ 10,723     $ 11,673     $ 43,727     $ 40,797
Public finance reinsurance     2,492        4,638        13,434       25,942
Structured direct              657          312          1,527        2,093
Structured reinsurance         515          795          173          3,434
Trade credit reinsurance       2           (5       )   —           35
Net Premiums Earned -          14,389       17,413       58,861       72,301
insurance
Impact of commutations         —           —           (22,264  )   2,829
Total Net Premiums Earned -    $ 14,389    $ 17,413    $ 36,597    $ 75,130
insurance
                                                                      
Refundings included in         $ 7,956     $ 8,459     $ 33,985    $ 27,187
earned premium
                                                                      
Net premiums earned -          $ 5,652     $ 10,054    $ 28,693    $ 41,743
derivatives (1)
                                                                      
Claims paid                    $ 5,465     $ 5,392     $ 34,338    $ 11,427
                                                                        

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

The impact of the Assured Transaction for the Year Ended December 31, 2012,
was as follows:

                                                                
(In millions)
Statement of Operations
Decrease in premiums written                                      $ (119.8 )
Decrease in premiums earned                                       $ (22.2  )
Increase in change in fair value of derivative instruments—gain   1.4
Gain on sale of affiliate                                         7.7
Increase in amortization of policy acquisition costs              (15.7    )
Decrease in pre-tax income                                        $ (28.8  )
                                                                  
Balance Sheet
Decrease in:
Cash                                                              $ 93.6
Deferred policy acquisition costs                                 26.2
Accounts and notes receivable                                     1.1
Derivative assets                                                 0.6
Unearned premiums                                                 71.6
Derivative liabilities                                            2.1
Increase in other assets                                          19.1
                                                                           

                                                            
Radian Group Inc. and Subsidiaries
Financial Guaranty Supplemental Information
Exhibit H
                                                               
                                          December 31          December 31
($ in thousands, except ratios)           2012                 2011
                                                               
Statutory Information:
                                                               
Capital and surplus                       $ 1,144,112          $ 974,874
Contingency reserve                       300,138             421,406
Qualified statutory capital               1,444,250            1,396,280
                                                               
Unearned premium reserve                  256,920              448,669
Loss and loss expense reserve             (53,441      )       161,287
Total statutory policyholders' reserves   1,647,729            2,006,236
                                                               
Present value of installment premiums     114,292             148,641
Total statutory claims paying resources   $ 1,762,021         $ 2,154,877
                                                               
Net debt service outstanding              $ 42,526,289        $ 88,202,630
                                                               
Capital leverage ratio (1)                29                   63
Claims paying leverage ratio (2)          24                   41
                                                               
Net par outstanding by product:
Public finance direct                     $ 9,796,131          $ 13,838,427
Public finance reinsurance                5,542,217            19,097,057
Structured direct                         17,615,383           34,760,869
Structured reinsurance                    787,758             1,492,859
Total (3)                                 $ 33,741,489  (4)   $ 69,189,212
                                                                 

    
(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.
      Included in public finance net par outstanding is $1.0 billion and $1.4
      billion at December 31, 2012 and December 31, 2011, respectively, for
(3)   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.
      Reductions in par caused by the following: $15.6 billion in connection
(4)   with the Assured Transaction, $10.2 billion in connection with the CDO
      terminations, and $1.2 billion in connection with the Commutation
      Transactions.
      


Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit I
                                                       
             Quarter Ended                                Year Ended
             December 31                                  December 31
             2012                  2011                  2012                  2011
($ in        $           %         $          %         $           %         $           %
millions)
Primary
new                                                                                      
insurance
written
Prime        $ 11,657     99.9  %   $ 6,532     99.9  %   $ 37,041     99.9  %   $ 15,499     99.9  %
Alt-A        —            —         2           —         2            —         2            —
A minus      6          0.1      3         0.1      18         0.1      9          0.1   
and below
Total Flow   $ 11,663   100.0 %   $ 6,537   100.0 %   $ 37,061   100.0 %   $ 15,510   100.0 %
                                                                                              
Total
primary
new
insurance
written by
FICO score
>=740        $ 8,838      75.8  %   $ 5,051     77.3  %   $ 28,151     75.9  %   $ 12,142     78.3  %
680-739      2,519        21.6      1,364       20.9      7,994        21.6      3,192        20.6
620-679      306          2.6       121         1.8       916          2.5       175          1.1
<=619        —          —        1         —        —          —        1          —     
Total Flow   $ 11,663   100.0 %   $ 6,537   100.0 %   $ 37,061   100.0 %   $ 15,510   100.0 %
                                                                                              
Percentage
of primary
new
insurance
written
Monthly      65       %             57      %             65       %             59       %
premiums
Single       35       %             43      %             35       %             41       %
premiums
                                                                                              
Refinances   44       %             46      %             40       %             39       %
LTV
95.01% and   1.5      %             2.3     %             1.4      %             1.9      %
above
90.01% to    40.5     %             37.7    %             41.2     %             36.3     %
95.00%
ARMS
Less than    <1%                    <1%                   <1%                    <1%
5 years
5 years      1.1      %             3.2     %             1.9      %             4.8      %
and longer
                                                                                              
                                                                                              


Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit J
                                                  
                             December 31             December 31
                             2012                    2011
($ in millions)              $            %         $            %
                                                                
Primary insurance in force
Flow                         $ 129,079     92.0  %   $ 113,438     89.9  %
Structured                   11,284      8.0      12,747      10.1  
Total Primary                $ 140,363   100.0 %   $ 126,185   100.0 %
                                                                   
Prime                        $ 123,437     87.9  %   $ 106,407     84.3  %
Alt-A                        10,447        7.5       12,344        9.8
A minus and below            6,479       4.6      7,434       5.9   
Total Primary                $ 140,363   100.0 %   $ 126,185   100.0 %
                                                                   
Primary risk in force
Flow                         $ 31,891      92.8  %   $ 27,937      91.0  %
Structured                   2,481       7.2      2,755       9.0   
Total Primary                $ 34,372    100.0 %   $ 30,692    100.0 %
                                                                   
Flow
Prime                        $ 28,898      90.6  %   $ 24,401      87.3  %
Alt-A                        1,852         5.8       2,200         7.9
A minus and below            1,141       3.6      1,336       4.8   
Total Flow                   $ 31,891    100.0 %   $ 27,937    100.0 %
                                                                   
Structured
Prime                        $ 1,450       58.5  %   $ 1,610       58.4  %
Alt-A                        552           22.2      625           22.7
A minus and below            479         19.3     520         18.9  
Total Structured             $ 2,481     100.0 %   $ 2,755     100.0 %
                                                                   
Total
Prime                        $ 30,348      88.3  %   $ 26,011      84.8  %
Alt-A                        2,404         7.0       2,825         9.2
A minus and below            1,620       4.7      1,856       6.0   
Total Primary                $ 34,372    100.0 %   $ 30,692    100.0 %
                                                                         


Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit K


                               December 31            December 31
                                 2012                     2011
($ in millions)                  $          %           $          %
Total primary risk in force                                       
by FICO score
Flow
>=740                            $ 16,448     51.6  %     $ 12,242     43.8  %
680-739                            9,686      30.4          9,205      32.9
620-679                            4,918      15.4          5,503      19.8
<=619                             839      2.6         987      3.5   
Total Flow                       $ 31,891   100.0 %     $ 27,937   100.0 %
                                                                             
Structured
>=740                            $ 661        26.6  %     $ 732        26.6  %
680-739                            716        28.9          802        29.1
620-679                            661        26.6          738        26.8
<=619                             443      17.9        483      17.5  
Total Structured                 $ 2,481    100.0 %     $ 2,755    100.0 %
                                                                             
Total
>=740                            $ 17,109     49.8  %     $ 12,974     42.3  %
680-739                            10,402     30.3          10,007     32.6
620-679                            5,579      16.2          6,241      20.3
<=619                             1,282    3.7         1,470    4.8   
Total Primary                    $ 34,372   100.0 %     $ 30,692   100.0 %
                                                                             
Total primary risk in force
by LTV
85.00% and below                 $ 3,292      9.6   %     $ 2,772      9.0   %
85.01% to 90.00%                   13,134     38.2          11,861     38.6
90.01% to 95.00%                   13,303     38.7          10,735     35.0
95.01% and above                  4,643    13.5        5,324    17.4  
Total                            $ 34,372   100.0 %     $ 30,692   100.0 %
                                                                             
Total primary risk in force
by policy year
2005 and prior                   $ 5,657      16.5  %     $ 6,887      22.4  %
2006                               2,735      8.0           3,172      10.3
2007                               6,059      17.6          6,960      22.7
2008                               4,582      13.3          5,206      17.0
2009                               2,021      5.9           2,656      8.7
2010                               1,726      5.0           2,244      7.3
2011                               2,956      8.6           3,567      11.6
2012                              8,636    25.1        —        —     
Total                            $ 34,372   100.0 %     $ 30,692   100.0 %
                                                                             
Primary risk in force on         $ 4,320                  $ 5,198
defaulted loans
                                                                             


Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit L


                         December 31                December 31
($ in millions)            2012                         2011
                           $              %           $            %
Percentage of primary                                             
risk in force
   Refinances             32     %                     32     %
      ARMS
      Less than 5            4      %                     5      %
      years
      5 years and            5      %                     7      %
      longer
                                                                             
Pool risk in force
Prime                      $ 1,411          76.9  %     $ 1,601        77.4  %
Alt-A                        104            5.7           122          5.9
A minus and below           319         17.4        345       16.7  
Total                      $ 1,834       100.0 %     $ 2,068     100.0 %
                                                                             
Total pool risk in
force by policy year
      2005 and prior       $ 1,663          90.7  %     $ 1,852        89.6  %
      2006                   76             4.1           92           4.4
      2007                   85             4.6           103          5.0
      2008                  10          0.6         21        1.0   
Total pool risk in         $ 1,834       100.0 %     $ 2,068     100.0 %
force
                                                                             
Other risk in force
      Second-lien
      1st loss             $ 81                         $ 102
      2nd loss               13                           29
      NIMS                   14                           19
      1st loss-Hong
      Kong primary          40                         64     
      mortgage
      insurance
Total other risk in        $ 148                       $ 214    
force
                                                                             
Risk to capital
ratio-Radian Guaranty        20.8:1 (1)                   21.5:1
only
Risk to capital
ratio-Mortgage               29.9:1 (1)                   30.9:1
Insurance combined
                                                                             
(1) Preliminary



Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit M


               Quarter Ended                     Year Ended
                 December 31                         December 31
($ in            2012            2011              2012            2011
thousands)
Net claims
paid
Prime            $ 171,727         $ 152,202         $ 638,820         $ 796,940
Alt-A              43,806            36,934            165,776           257,448
A minus and       26,982          30,035          112,216         164,429   
below
Total
primary            242,515           219,171           916,812           1,218,817
claims paid
Pool               20,360            33,140            92,206            178,610
Second-lien       555             2,370           8,598           11,331    
and other
Subtotal           263,430           254,681           1,017,616         1,408,758
Impact of
first-lien         —                 36,903            —                 75,101
terminations
Impact of
captive            —                 —                 (148      )       (1,166    )
terminations
Impact of
second-lien       —               —               —               16,550    
terminations
Total            $ 263,430        $ 291,584        $ 1,017,468      $ 1,499,243 
                                                                                   
Average
claim paid
(1)
Prime            $ 48.0            $ 49.9            $ 48.6            $ 49.6
Alt-A              56.3              58.6              57.9              60.7
A minus and        36.7              40.4              37.7              40.2
below
Total
primary            47.6              49.6              47.8              50.0
average
claims paid
Pool               73.0              72.2              67.9              76.2
Second-lien        11.1              19.9              25.1              25.8
and other
Total            $ 48.6            $ 50.9            $ 48.7            $ 51.9
                                                                                   
Average
primary          $ 50.0            $ 52.4            $ 50.4            $ 54.6
claim paid
(2) (3)
Average
total claim      $ 50.8            $ 53.4            $ 51.1            $ 56.0
paid (2) (3)
                                                                                   
Loss ratio -       171.0     %       198.6     %       131.2     %       189.8     %
GAAP basis
Expense
ratio - GAAP      29.0      %      22.3      %      26.6      %      24.7      %
basis
                  200.0     %      220.9     %      157.8     %      214.5     %
                                                                                   
Reserve for
losses by
category
Prime            $ 1,739,968       $ 1,748,412
Alt-A              564,719           612,423
A minus and        361,533           370,806
below
Reinsurance
recoverable       83,238          151,569   
(4)
Total
primary            2,749,458         2,883,210
reserves
Pool              323,403         353,583   
insurance
Total 1st
lien               3,072,861         3,236,793
reserves
Second lien        7,237             11,070
Other             3,510           37        
Total            $ 3,083,608      $ 3,247,900 
reserves
                                                                                   
1st lien
reserve per
default (5)
Primary
reserve per      $ 29,510          $ 26,007
primary
default
Primary
reserve per
primary            26,408            24,637
default
excluding
IBNR
Pool reserve
per pool           17,821            16,305
default (6)
Total 1st
lien reserve       27,605            24,420
per default
                                                                                   

    
(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.
      If calculated before giving effect to deductibles and stop losses in
(6)   pool transactions, the pool reserve per default at December 31, 2012 and
      December 31, 2011, would be $28,125 and $25,402, respectively.
      


Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit N


                                 December 31   December 31
                                   2012            2011
Default Statistics
Primary Insurance:
                                                            
Flow
Prime
Number of insured loans            630,094         569,190
Number of loans in default         55,483          65,238
Percentage of loans in default     8.81     %      11.46    %
                                                            
Alt-A
Number of insured loans            37,754          44,355
Number of loans in default         11,798          14,481
Percentage of loans in default     31.25    %      32.65    %
                                                            
A minus and below
Number of insured loans            35,150          40,884
Number of loans in default         11,211          13,560
Percentage of loans in default     31.89    %      33.17    %
                                                            
Total Flow
Number of insured loans            702,998         654,429
Number of loans in default         78,492          93,279
Percentage of loans in default     11.17    %      14.25    %
                                                            
Structured
Prime
Number of insured loans            37,528          41,248
Number of loans in default         5,371           6,308
Percentage of loans in default     14.31    %      15.29    %
                                                            
Alt-A
Number of insured loans            16,315          18,484
Number of loans in default         4,207           5,563
Percentage of loans in default     25.79    %      30.10    %
                                                            
A minus and below
Number of insured loans            14,157          15,477
Number of loans in default         5,099           5,711
Percentage of loans in default     36.02    %      36.90    %
                                                            
Total Structured
Number of insured loans            68,000          75,209
Number of loans in default         14,677          17,582
Percentage of loans in default     21.58    %      23.38    %
                                                            
Total Primary Insurance
Prime
Number of insured loans            667,622         610,438
Number of loans in default         60,854          71,546
Percentage of loans in default     9.12     %      11.72    %
                                                            
Alt-A
Number of insured loans            54,069          62,839
Number of loans in default         16,005          20,044
Percentage of loans in default     29.60    %      31.90    %
                                                            
A minus and below
Number of insured loans            49,307          56,361
Number of loans in default         16,310          19,271
Percentage of loans in default     33.08    %      34.19    %
                                                            
Total Primary
Number of insured loans            770,998         729,638
Number of loans in default         93,169          110,861
Percentage of loans in default     12.08    %      15.19    %
                                                            
Pool insurance
Number of loans in default         18,147          21,685
                                                            


Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit O


                Quarter Ended                   Year Ended
                  December 31                       December 31
($ in             2012            2011            2012          2011
thousands)
                                                               
Net Premiums
Written
Primary and
Pool              $ 216,609         $ 193,670       $ 804,371       $ 715,125
Insurance
Second-lien         429               537             1,874           2,314
(1)
International      6               (198    )      60            (175    )
Total Net
Premiums          $ 217,044        $ 194,009      $ 806,305      $ 717,264 
Written -
Insurance
                                                                              
Net Premiums
Earned
Primary and
Pool              $ 178,771         $ 166,233       $ 699,079       $ 673,869
Insurance
Second-lien         429               537             1,874           2,314
International      286             230           1,432         4,712   
Total Net
Premiums          $ 179,486        $ 167,000      $ 702,385      $ 680,895 
Earned -
Insurance
                                                                              
1st Lien
Captives
Premiums
ceded to          $ 5,371           $ 6,895         $ 23,416        $ 28,816
captives
% of total          2.8       %       3.9     %       3.2     %       4.1     %
premiums
IIF included
in captives         6.5       %       8.9     %
(1)
RIF included
in captives         6.3       %       8.8     %
(1)
                                                                              
Initial Quota
Share
Reinsurance
("QSR")
Transaction
QSR ceded
premiums          $ 10,296                          $ 52,151
written
% of premiums       4.3       %                       5.9     %
written
QSR ceded
premiums          $ 7,700                           $ 16,088
earned
% of premiums       4.0       %                       2.2     %
earned
Ceding            $ 2,574                           $ 13,038
commissions
RIF included      $ 1,525,840
in QSR (2)
                                                                              
Second QSR
Transaction
QSR ceded
premiums          $ 9,648                           $ 9,648
written
% of premiums       4.0       %                       1.1     %
written
QSR ceded
premiums          $ 504                             $ 504
earned
% of premiums       0.3       %                       0.1     %
earned
Ceding            $ 3,377                           $ 3,377
commissions
RIF included      $ 368,429
in QSR (2)
                                                                              
Persistency
(twelve             81.8      %       85.4    %
months ended
December 31)
                                                                              

    
      Radian reinsures the middle layer risk positions, while retaining a
(1)   significant portion of the total risk comprising the first loss and most
      remote risk positions.
(2)   Included in primary risk in force.
      

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 statement. These statements speak
only as of the date they were made, 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. We operate in a changing environment.
New risks emerge from time to time and it is not possible for us to predict
all risks that may affect us. 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 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.

The GSEs and state insurance regulators impose various capital requirements on
our insurance subsidiaries. These include risk-to-capital ratios, risk-based
capital measures and surplus requirements that potentially limit the amount of
insurance that each of our insurance subsidiaries may write. The GSEs and our
state insurance regulators also possess significant discretion with respect to
our insurance subsidiaries. Our failure to maintain adequate levels of
capital, among other things, could lead to intervention by the various
insurance regulatory authorities or the GSEs, which could materially and
adversely affect our business, business prospects and financial condition.

Under state insurance regulations, 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 impose a
statutory or regulatory risk-based capital requirement (the “Statutory RBC
Requirement”), the most common of which requires that a mortgage insurer’s
risk-to-capital ratio not exceed 25 to 1. In some of the RBC States (the “MPP
States”), Radian Guaranty is required to maintain a minimum policyholder
position (the “MPP Requirement”). Unless an RBC State grants a waiver or other
form of relief, if a mortgage insurer is not in compliance with the Statutory
RBC Requirement 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 2012 and 2011, the RBC
States accounted for approximately 54.3% and 50.5%, respectively, of Radian
Guaranty’s total primary new insurance written.

As of December31, 2012, Radian Guaranty’s risk-to-capital ratio was 20.8 to
1. Radian Guaranty’s risk-to-capital ratio has been negatively impacted in
recent years by operating losses. 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. Based on
our current projections, in the absence of any further risk-to-capital support
(which Radian Group expects to provide as discussed below), we anticipate that
Radian Guaranty would exceed the 25 to 1 risk-to-capital ratio requirement
during 2013.

Further, Radian Guaranty’s policyholder position was below the MPP Requirement
in two states as of the end of 2012. Each of these MPP States has issued to
Radian Guaranty a waiver of its MPP Requirement. These waivers allow Radian
Guaranty to continue writing new business in these states regardless of
whether the MPP Requirement has been met. One of these waivers has no
specified expiration date and the other expires on December 31, 2013.

Our mortgage insurance incurred losses are driven primarily by new mortgage
insurance defaults and adverse developments in the assumptions used to
determine our loss reserves. 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. Our
estimate of the rate at which we expect defaults will ultimately result in
paid claims (the “default to claim rate”) is a significant assumption in our
reserving methodology. Our assumed aggregate weighted average default to claim
rate (which incorporates the expected impact of rescissions and denials) was
approximately 47% and 43% for the years ending December31, 2012 and 2011,
respectively. Assuming all other factors remain constant, for each one
percentage point increase in our aggregate weighted average default to claim
rate as of December31, 2012, incurred losses would increase by approximately
$55 million. Radian Guaranty’s statutory capital would be reduced by the
after-tax impact of these incurred losses. Our level of incurred losses is
also dependent on our estimate of anticipated rescissions and denials,
including our estimate of the likely number of successful challenges to
previously rescinded policies or claim denials, among other assumptions. 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 adversely affect Radian Guaranty’s statutory
capital position.

If Radian Guaranty is not in compliance with a state’s applicable Statutory
RBC Requirement, it may be prohibited from writing new business in that state
until it is back in compliance or it receives a waiver of or similar relief
from 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 may reduce current
business levels) or impose restrictions on Radian Guaranty while its capital
position remained at such levels. The franchise value of our mortgage
insurance business would likely be significantly diminished if we were
prohibited from writing new business or restricted in the amount of new
business we could write in one or more states.

Radian Guaranty’s 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 successful
run-off of our financial guaranty business. Any decrease in the statutory
capital in our financial guaranty business would therefore have a negative
impact on Radian Guaranty’s capital position and its ability to remain in
compliance with the Statutory RBC Requirements. If our financial guaranty
portfolio performs worse than anticipated, including if we are required to
establish (or increase) statutory reserves on defaulted obligations that we
have insured, or if we make net commutation payments to terminate insured
financial guaranty obligations in excess of the then established statutory
reserves for such obligations, the statutory capital of Radian Guaranty also
would be negatively impacted.

We actively manage Radian Guaranty’s capital position in various ways,
including: (1) through internal and external 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 subsidiaries; and (4) by realizing
gains in our investment portfolio through open market sales of securities.
Radian Group had unrestricted cash and liquid investments of $375.6 million as
of December31, 2012, which amount includes approximately $38.7 million of
future expected corporate expenses and interest payments that have been
accrued for and paid by certain subsidiaries to Radian Group as of that date.
Radian Group currently has $79.4 million of outstanding debt due in February
2013, $54.8 million of outstanding debt due in 2015, $195.2 million of
outstanding debt due in June 2017 and an additional $450 million of
convertible debt due in November 2017. We intend to maintain Radian Guaranty’s
risk to capital below 25:1 throughout 2013, including, if necessary by making
contributions to Radian Guaranty from Radian Group’s remaining available
liquidity. Depending on the extent of our future statutory incurred losses in
our mortgage insurance subsidiaries and in Radian Asset Assurance, as well as
the level of new insurance written and other factors, 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
available at Radian Group.

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 certain loans insured by Radian Guaranty, 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. In addition, we
must obtain prior approval from one or both of the GSEs to enter into new, or
to modify existing, reinsurance arrangements. If we are limited in, or
prohibited from, using reinsurance 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 has exceeded its Statutory
RBC Requirement, and we have a waiver application pending in Idaho. Currently,
Radian Guaranty has waivers or similar relief from the following RBC States:
Kentucky, Wisconsin, Arizona, Missouri, North Carolina, California and Texas.
Waivers that were previously granted to Radian Guaranty from Illinois, New
Jersey and Florida expired at the end of 2012, and we currently are pursuing a
renewal of the waivers from these states. Certain of the existing waivers
contain conditions, including requirements that Radian Guaranty’s
risk-to-capital ratio may not exceed a revised maximum ratio, ranging from 30
to 1 up to 35 to 1. There can be no assurance that: (1) Radian Guaranty will
be granted a waiver in Idaho or Oregon, or a renewal of the waivers that have
expired in Illinois, New Jersey and Florida; (2) 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) for any waiver granted, it
will be renewed or extended after its original expiration date; or (4)
additional requirements will not be imposed as a condition to such waivers or
their renewal or extension and, if so, whether we will be able to comply with
such conditions.

In addition to filing for waivers in the RBC States, we intend to write new
first-lien mortgage insurance business in Radian Mortgage Assurance Inc.
(“RMAI”) 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. RMAI is a wholly-owned subsidiary of Radian Guaranty and is
licensed to write mortgage insurance in each of the fifty states and the
District of Columbia. Fannie Mae has approved RMAI to write new mortgage
insurance business in any RBC State where Radian Guaranty would be prohibited
from writing new business if it were not in compliance with the state’s
Statutory RBC Requirement, without a waiver or other similar relief under the
Fannie Mae Approval. The Fannie Mae Approval expires on December31, 2013.
Freddie Mac also has approved RMAI as a limited mortgage insurer to write
business in those RBC States for which we have been denied a waiver. On
December20, 2012, Freddie Mac amended this approval to extend it for an
additional one year period that will expire on December31, 2013 (the Freddie
Mac Approval, and together with the Fannie Mae Approval, the “GSE Approvals”).
Pursuant to the Freddie Mac Approval, RMAI currently is eligible to write
business in New York, Ohio, Iowa, Kansas, and, subject to certain conditions,
Oregon and Idaho.

The GSE Approvals are temporary and are conditioned upon our compliance with a
broad range of conditions and restrictions, including without limitation,
minimum capital and liquidity requirements, a maximum risk-to-capital ratio of
20 to 1 for RMAI, restrictions on the payment of dividends and restrictions on
affiliate transactions involving Radian Guaranty or RMAI. Under the GSE
Approvals, Radian Group is required to contribute $50 million of additional
capital to Radian Guaranty (which would then be contributed to RMAI) if Radian
Guaranty exceeds a 25:1 risk-to-capital ratio, or if it fails to satisfy an
MPP requirement in a state where it has not obtained a waiver or other similar
relief. The Freddie Mac Approval also includes a condition specifying the time
frame by which Radian Guaranty will evaluate and resolve claims. There can be
no assurance that: (1)we will be able to comply with the conditions imposed
by the GSEs’ approval for RMAI; (2)the GSEs will not revoke or terminate
their approvals, which they generally have the authority to do at any time;
(3)the approvals will be renewed or extended after their expiration dates; or
(4)additional requirements will not be imposed as a condition to such
on-going approvals, including their renewal or extension.

The GSE Approvals are limited to the RBC States. It is possible that if Radian
Guaranty were not able to comply with the Statutory RBC Requirements of one or
more states, the insurance regulatory authorities in states other than the RBC
States could prevent Radian Guaranty from continuing to write new business in
such states. If this were to occur, we would need to seek approval from the
GSEs to expand the scope of their approvals to allow RMAI to write business in
states other than the RBC States.

Our existing capital resources may not be sufficient to successfully manage
Radian Guaranty’s capital position. Our ability to utilize waivers and RMAI to
continue to write business if Radian Guaranty’s capital position is not in
compliance with 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 or other
risk-to-capital support or relief could be necessary, which we may not have
the ability to provide. Further, regardless of the waivers and the GSEs’
approval of RMAI, 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 incurred 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 RMAI, 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.

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

  *changes in general economic and political conditions, including high
    unemployment rates and weakness in the U.S. housing and mortgage credit
    markets, a significant downturn in the U.S. or global economies, 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, legislative activity or inactivity or 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 certain geographic regions,
    including those affecting governments and municipalities, where our
    mortgage insurance exposure is more concentrated or where we have
    financial guaranty exposure;
  *our ability to maintain sufficient holding company liquidity to meet our
    short- and long-term liquidity needs, including in particular, the
    repayment of our long-term debt and additional capital contributions that
    may be required to support our mortgage insurance business;
  *a reduction in, or prolonged period of depressed levels of, home mortgage
    originations due to reduced liquidity in the lending market, tighter
    underwriting standards, and general reduced housing demand in the U.S.,
    which may be exacerbated by regulations impacting home mortgage
    originations, including requirements established under the Dodd-Frank Wall
    Street Reform and Consumer Protection Act (the “Dodd-Frank Act”);
  *the potential adverse impact on the mortgage origination market and on
    private mortgage insurers due to increased capital requirements for
    mortgage loans under proposed interagency rules to implement the third
    Basel Capital Accord (“Basel III”), including in particular, the
    possibility that loans insured by the Federal Housing Administration
    (“FHA”) will receive a more favorable regulatory capital treatment than
    loans with private mortgage insurance;
  *our ability to maintain an adequate risk-to-capital position, minimum
    policyholder position and other surplus requirements for Radian Guaranty
    Inc. (“Radian Guaranty”), our principal mortgage insurance subsidiary,
    including if necessary, our ability to write new mortgage insurance while
    maintaining a capital position that is in excess of risk-based capital
    limitations imposed in certain states, either through waivers of these
    limitations or through use of another mortgage insurance subsidiary, and
    the possibility that state regulators could pursue regulatory actions or
    proceedings, including possible supervisory or receivership actions,
    against Radian Guaranty, in the event Radian Guaranty’s capital position
    is not in compliance with levels that are acceptable to such regulators;
  *our ability to continue to effectively mitigate our mortgage insurance and
    financial guaranty losses;
  *a more rapid than expected decrease in the current elevated levels of
    mortgage insurance rescissions and claim denials, which have reduced our
    paid losses and resulted in a significant reduction in our loss reserves,
    including a decrease in rescissions or denials resulting from an increase
    in the number of successful challenges to previously rescinded policies or
    claim denials, or caused by the government-sponsored entities (“GSEs”)
    intervening in mortgage insurers’ loss mitigation practices, including
    settlements of disputes regarding loss mitigation activities;
  *the negative impact our mortgage insurance rescissions and claim denials
    or claim curtailments 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, denials or claim curtailments, to increase our loss reserves
    for, and reassume risk on, rescinded loans, and to pay additional claims,
    including amounts previously curtailed;
  *any disruption in the servicing of mortgages covered by our insurance
    policies, as well as poor servicer performance;
  *adverse changes in the severity or frequency of losses associated with
    certain products that we formerly offered (and which remain in our insured
    portfolio) that are riskier than traditional mortgage insurance or
    financial guaranty insurance policies;
  *a decrease in the persistency rates of our mortgage insurance policies,
    which has the effect of reducing our premium income;
  *heightened competition for our mortgage insurance business from others
    such as the FHA, the Department of Veterans Affairs (“VA”) and other
    private mortgage insurers (in particular, the FHA and those private
    mortgage insurers that have been assigned higher ratings than we have,
    that may have access to greater amounts of capital than we do, or that are
    new entrants to the industry and are therefore 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 effect or 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 may be considered “qualified residential mortgages” for purposes
    of the Dodd-Frank Act securitization provisions;
  *the application of existing federal or state laws and regulations, or
    changes in these laws and regulations or the way they are interpreted,
    including, without limitation: (i) the resolution 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 the products we may offer
    or increasing the amount of capital we are required to hold, (c) affecting
    the form in which we execute credit protection, or (d) otherwise impacting
    our existing businesses;
  *the amount and timing of potential payments or adjustments associated with
    federal or other tax examinations;
  *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
    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;
  *our ability to realize some or all of 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 GAAP or statutory accounting principles, rules and guidance, or
    their interpretation; 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, 2011, Item 1A of Part II of our Quarterly Reports on Form
10-Q filed in 2012, and subsequent reports and registration statements filed
from time to time with the U.S. Securities and Exchange Commission.

Contact:

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