Radian Reports Second Quarter 2014 Financial Results

  Radian Reports Second Quarter 2014 Financial Results

      – Reports net income of $175 million or $0.78 per diluted share –

    – Total number of primary delinquent loans decline 38% year-over-year;
                       delinquency rate falls to 5.8% –

  – Acquires Clayton Holdings, a leading provider of outsourced mortgage and
                           real estate solutions –

Business Wire

PHILADELPHIA -- August 7, 2014

Radian Group Inc. (NYSE: RDN) today reported net income for the quarter ended
June 30, 2014, of $174.8 million, or $0.78 per diluted share, which included
net gains on investments of $47.2 million and combined gains from the change
in fair value of derivatives and other financial instruments of $55.6 million.
This compares to a net loss for the quarter ended June 30, 2013, of $33.2
million, or $0.19 per diluted share, which included net losses on investments
of $130.3 million and combined net gains from the change in fair value of
derivatives and other financial instruments of $87.7 million. Book value per
share at June 30, 2014, was $8.29.

Adjusted pretax operating income for the quarter ended June 30, 2014, was
$74.2 million, consisting of $92.9 million of income from the mortgage
insurance segment and a loss of $18.7 million from the financial guaranty
segment. This compares to adjusted pretax operating income for the quarter
ended June 30, 2013, of $16.2 million, consisting of $15.9 million of income
from the mortgage insurance segment and $0.3 million of income from the
financial guaranty segment.

“I am pleased with the solid financial performance and strong credit trends
for our mortgage insurance business in the second quarter, as well as the
successful closing of our Clayton acquisition,” said Chief Executive Officer
S.A. Ibrahim. “We believe that there is continued growth and opportunity ahead
for our mortgage insurance business, and we are positioning Radian to leverage
our risk management expertise as well as our new industry-leading mortgage and
real estate services for the next phase in the evolution of the U.S. housing
finance markets.”

CAPITAL AND LIQUIDITY UPDATE

Radian Guaranty’s risk-to-capital ratio was 18.7:1 as of June 30, 2014. Radian
Group maintains approximately $770 million of currently available liquidity.

  *The improvement in the risk-to-capital ratio from March 31, 2014, was
    primarily driven by the company’s net income, partially offset by an
    increase to net risk in force.
  *Current holding company liquidity was approximately $770 million after an
    investment of $20 million in July 2014, to capitalize a newly formed,
    wholly owned insurance subsidiary of Radian Group. The strategic objective
    of this investment is to offer mortgage insurance-related products, which
    are currently in a developmental stage.
  *As of June 30, 2014, Radian Guaranty’s statutory capital was $1.5 billion
    compared to $1.4 billion at March 31, 2014, and $1.2 billion a year ago.
  *In 2012, Radian Guaranty entered into two quota share reinsurance
    agreements with the same third-party reinsurance provider, in order to
    proactively manage its risk-to-capital position. On April 1, 2013, Radian
    reduced the amount of new business ceded under these reinsurance
    agreements on a prospective basis from 20 percent to 5 percent. As of June
    30, 2014, a total of $2.7 billion of risk in force had been ceded under
    those agreements. Radian has the option to recapture a portion of the
    ceded risk outstanding on each of December 31, 2014 and December 31, 2015.

SECOND QUARTER HIGHLIGHTS

  *New mortgage insurance written (NIW) was $9.3 billion during the quarter,
    compared to $6.8 billion in the first quarter of 2014 and $13.4 billion in
    the prior-year quarter. Radian wrote an additional $3.9 billion in NIW in
    July 2014, compared to $5.3 billion in July 2013.

       *The Home Affordable Refinance Program (HARP) accounted for $0.5
         billion of insurance not included in Radian Guaranty’s NIW total for
         the quarter. This compares to $0.6 billion in the first quarter of
         2014 and $2.4 billion in the prior-year quarter. As of June 30, 2014,
         more than 11 percent of the company’s total primary mortgage
         insurance risk in force had successfully completed a HARP refinance.
       *Of the $9.3 billion in new business written in the second quarter of
         2014, 76 percent was written with monthly premiums and 24 percent
         with single premiums. This compares to a mix of 67 percent monthly
         premiums and 33 percent single premiums in the second quarter of
         2013.
       *NIW continued to consist of loans with excellent risk
         characteristics.

  *The mortgage insurance provision for losses was $64.3 million in the
    second quarter of 2014, compared to $49.2 million in the first quarter of
    2014, and $136.4 million in the prior-year period.

       *The loss ratio in the second quarter was 31.6 percent, compared to
         24.7 percent in the first quarter of 2014 and 68.9 percent in the
         second quarter of 2013.
       *Mortgage insurance loss reserves were $1.7 billion as of June 30,
         2014, compared to $1.9 billion as of March 31, 2014, and $2.7 billion
         as of June 30, 2013.
       *Primary reserves (excluding IBNR and other reserves) per default were
         $26,024 as of June 30, 2014. This compares to primary reserves per
         default of $26,509 as of March 31, 2014, and $27,293 as of June 30,
         2013.

  *The total number of primary delinquent loans decreased by 8 percent in the
    second quarter from the first quarter of 2014, and by 38 percent from the
    second quarter of 2013. In addition, the total number of primary
    delinquent loans declined by 2 percent in July 2014. Additional details
    related to the company’s delinquency inventory in July 2014 may be found
    on Slide 21 of the second quarter presentation slides. The primary
    mortgage insurance delinquency rate decreased to 5.8 percent in the first
    quarter of 2014, compared to 6.3 percent in the first quarter of 2014, and
    9.7 percent in the second quarter of 2013.
  *Total mortgage insurance claims paid were $240.3 million in the second
    quarter, compared to $306.9 million in the first quarter of 2014, and
    $326.4 million in the second quarter of 2013. Claims paid in the second
    quarter of 2014 exclude approximately $35 million of claims processed in
    the quarter in accordance with the terms of the Freddie Mac Agreement, for
    which no cash payment was necessary. The company expects mortgage
    insurance net claims paid in the $900 million to $1.0 billion range for
    the full-year 2014.
  *Other operating expenses were $65.6 million in the second quarter,
    compared to $59.9 million in the first quarter of 2014, and $61.0 million
    in the second quarter of 2013. The second quarter included $6.7 million of
    Clayton-related acquisition expenses. In both the first and second
    quarters, long-term compensation expenses were $13.6 million. While the
    component of the long-term incentive expenses that resulted from the stock
    price movement decreased to $0.1 million in the second quarter of 2014
    compared to $7.8 million in the first quarter of 2014, this decrease was
    offset in the second quarter primarily by the recognition of expense
    related to certain of our annual long-term incentive award grants made in
    the second quarter.
  *On June 30, 2014, Radian completed the acquisition of Clayton Holdings
    LLC. This transaction is consistent with Radian’s growth and
    diversification strategy to pursue opportunities to provide mortgage and
    real estate products and services to the mortgage finance market. Radian
    Group paid aggregate cash consideration, including working capital
    adjustments, of approximately $312 million to purchase all of the
    outstanding equity interests in Clayton.

       *Summary financial information representing unaudited quarterly
         historical details for Clayton may be found in press release Exhibit
         N.
       *Results of operations for Clayton will be reported in a new Mortgage
         and Real Estate Services financial segment beginning in the third
         quarter of 2014.

  *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 June 30, 2014, Radian Asset had approximately $1.2 billion in
         statutory surplus. Following the previously disclosed extraordinary
         dividend payment from Radian Asset to Radian Guaranty of $150.0
         million in July 2014, Radian Asset had approximately $1.0 billion in
         statutory surplus with an additional $0.4 billion in claims-paying
         resources.
       *The company increased loss reserves related to its exposure to Puerto
         Rico by $11.1 million during the quarter and, as of June 30, 2014,
         maintains $12.0 million of total loss reserves on its Puerto Rico
         exposure. An overview of the company’s Puerto Rico exposure may be
         found under Company Statements in the Investors section of Radian’s
         website: http://www.radian.biz/page?name=CompanyStatements
       *Since June 30, 2008, Radian Asset has successfully reduced its total
         net par exposure by 82 percent to $20.2 billion as of June 30, 2014,
         including large declines in many of the riskier segments of the
         portfolio.

RECENT EVENTS

  *On July 10^th, the Federal Housing Finance Agency (FHFA) issued proposed
    Private Mortgage Insurer Eligibility Requirements (PMIERs), which were
    developed by Fannie Mae and Freddie Mac (GSEs), for public comment. The
    proposed PMIERs are intended to provide revised requirements that the GSEs
    will impose on private mortgage insurers (MIs), including Radian Guaranty,
    to remain eligible insurers of loans purchased by the GSEs. Radian will
    provide commentary to the FHFA on several areas of the proposed PMIERs
    during the public comment period, which is scheduled to end on September
    8, 2014. Additional information on the proposed PMIERs may be found on
    Radian’s website at www.radian.biz/pmiers.
  *After receiving approval from the New York Department of Financial
    Services in July, Radian Asset paid an extraordinary dividend to Radian
    Guaranty of $150 million. Radian Asset expects to request an additional
    extraordinary dividend in 2015.

CONFERENCE CALL

Radian will discuss second quarter financial results in its conference call
today, Thursday, August 7, 2014 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 800.230.1096 inside the U.S., or 612.332.0345 for
international callers, using passcode 332755 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 332755.

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.

NON-GAAP FINANCIAL MEASURE

Radian believes that adjusted pretax operating income (a non-GAAP measure)
facilitates evaluation of the company’s fundamental financial performance and
provides relevant and meaningful information to investors about the ongoing
operating results of the company. On a consolidated basis, this measure is not
recognized in accordance with accounting principles generally accepted in the
United States of America (GAAP) and should not be viewed as an alternative to
a GAAP measure of performance. The measure described below has been
established in order to increase transparency for the purpose of evaluating
the company’s core operating trends and enable more meaningful comparisons
with Radian’s competitors.

Adjusted pretax operating income is defined as earnings excluding the impact
of certain items that are not viewed as part of the operating performance of
the company’s primary activities, or not expected to result in an economic
impact equal to the GAAP measure. See Exhibit E or Radian’s website for a
description of these items, as well as a reconciliation of adjusted pretax
operating income (loss) to pretax income (loss).

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 Operations
Exhibit B:     Net Income (Loss) Per Share
Exhibit C:     Condensed Consolidated Balance Sheets
Exhibit D:     Segment Information Quarter Ended June 30, 2014 and
               Quarter Ended June 30, 2013
Exhibit E:     Reconciliation of Consolidated Non-GAAP Financial Measure
Exhibit F:     Mortgage Insurance Supplemental Information
               New Insurance Written
Exhibit G:     Mortgage Insurance Supplemental Information
               Insurance in Force and Risk in Force by Product
Exhibit H:     Mortgage Insurance Supplemental Information
               Risk in Force by FICO, LTV and Policy Year
Exhibit I:     Mortgage Insurance Supplemental Information
               Pool and Other Risk in Force, Risk-to-Capital
Exhibit J:     Mortgage Insurance Supplemental Information
               Claims, Reserves and Reserve per Default
Exhibit K:     Mortgage Insurance Supplemental Information
               Default Statistics
Exhibit L:     Mortgage Insurance Supplemental Information
               Captives, QSR and Persistency
Exhibit M:     Financial Guaranty Supplemental Information
Exhibit N:     Clayton Selected Financial Information
               


Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Exhibit A

                      Quarter Ended               Six Months Ended
                       June 30,                     June 30,
(In thousands,
except per share       2014         2013           2014         2013
amounts)
                                                                  
Revenues:
Net premiums written   $ 222,367    $ 251,229     $ 436,073    $ 458,414  
- insurance
                                                                  
Net premiums earned    $ 214,114     $ 213,124      $ 419,779     $ 405,712
- insurance
Net investment           25,737        27,615         49,966        54,488
income
Net gains (losses)       47,219        (130,254 )     111,670       (135,759 )
on investments
Change in fair value
of derivative            57,477        86,535         107,563       (81,135  )
instruments
Net (losses) gains
on other financial       (1,909  )     1,188          (1,211  )     (4,487   )
instruments
Other income            1,817       2,234        2,944       4,005    
Total revenues          344,455     200,442      690,711     242,824  
                                                                  
Expenses:
Provision for losses     69,343        140,291        124,152       272,350
Change in reserve
for premium              383           1,251          849           622
deficiency
Policy acquisition       8,421         10,006         17,035        27,201
costs
Other operating          65,551        60,981         125,460       141,081
expenses
Interest expense        22,348      19,420       42,275      35,301   
Total expenses          166,046     231,949      309,771     476,555  
                                                                  
Equity in net (loss)    —           —            (13     )    1        
income of affiliates
                                                                  
Pretax income (loss)     178,409       (31,507  )     380,927       (233,730 )
Income tax provision    3,576       1,665        3,335       (13,058  )
(benefit)
                                                                  
Net income (loss)      $ 174,833    $ (33,172  )   $ 377,592    $ (220,672 )
                                                                  
Diluted net income     $ 0.78       $ (0.19    )   $ 1.71       $ (1.40    )
(loss) per share
                                                                             
For Trend Information, refer to our Quarterly Financial Statistics on Radian’s
website.
                                                                             


Radian Group Inc. and Subsidiaries
Net Income (Loss) Per Share
Exhibit B

The calculation of basic and diluted net income (loss) per share was as
follows:

                           Quarter Ended            Six Months Ended
                            June 30,                  June 30,
(In thousands, except per   2014       2013          2014       2013
share amounts)
Net income (loss)—basic     $ 174,833   $ (33,172 )   $ 377,592   $ (220,672 )
Adjustment for dilutive
Convertible Senior Notes     5,503      —           10,958     —        
due 2019 (1)
Net income (loss)—diluted   $ 180,336   $ (33,172 )   $ 388,550   $ (220,672 )
                                                                  
Average common shares         182,583     171,783       177,903     158,180
outstanding—basic
Dilutive effect of
Convertible Senior Notes      7,599       —             8,306       —
due 2017 (2)
Dilutive effect of
Convertible Senior Notes      37,736      —             37,736      —
due 2019
Dilutive effect of
stock-based compensation     2,861      —           2,822      —        
arrangements (3)
Adjusted average common
shares                       230,779    171,783     226,767    158,180  
outstanding—diluted
                                                                  
Net income (loss) per       $ 0.96      $ (0.19   )   $ 2.12      $ (1.40    )
share—basic
Net income (loss) per       $ 0.78      $ (0.19   )   $ 1.71      $ (1.40    )
share—diluted
                                                                  

      As applicable, includes coupon interest, amortization of discount and
(1)  fees, and other changes in income or loss that would result from the
      assumed conversion.
      Does not include the anti-dilutive impact of 6,403,559 and 6,256,973
      shares, respectively, for the three and six months ended June 30, 2014
(2)   due to capped call transactions related to the Convertible Senior Notes
      due 2017. Such transactions were designed to offset the potential
      dilution of the notes up to a stock price of approximately $14.11 per
      share.
      For the three and six months ended June 30, 2014, 1,483,800 shares of
(3)   our common stock equivalents issued under our stock-based compensation
      arrangements were not included in the calculation of diluted net income
      (loss) per share as of such dates because they were anti-dilutive.
      

                                                              
Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Exhibit C
                                                                 
                                                 June 30,        December 31,
(In thousands, except per share amounts)         2014            2013
                                                                 
Assets:
Cash and investments                             $ 5,006,221     $ 4,977,542
Deferred policy acquisition costs                  60,776          66,926
Deferred income taxes, net                         —               17,902
Reinsurance recoverables                           24,752          46,846
Goodwill and other intangible assets, net          296,948         2,300
Derivative assets                                  22,033          16,642
Other assets                                      521,821       493,533   
Total assets                                     $ 5,932,551    $ 5,621,691 
                                                                 
Liabilities and stockholders’ equity:
Unearned premiums                                $ 781,660       $ 768,871
Reserve for losses and loss adjustment             1,749,435       2,185,421
expenses
Long-term debt                                     1,192,397       930,072
VIE debt                                           93,631          94,645
Derivative liabilities                             200,227         307,185
Other liabilities                                 330,954       395,852   
Total liabilities                                 4,348,304     4,682,046 
                                                                 
Common stock                                       209             191
Additional paid-in capital                         1,707,655       1,454,297
Retained deficit                                   (174,634  )     (552,226  )
Accumulated other comprehensive income            51,017        37,383    
Total common stockholders’ equity                 1,584,247     939,645   
Total liabilities and stockholders’ equity       $ 5,932,551    $ 5,621,691 
                                                                 
Shares outstanding, end of period                  191,014         173,100
                                                                 
Book value per share                             $ 8.29          $ 5.43
                                                                             


Radian Group Inc. and Subsidiaries
Segment Information
Exhibit D (page 1 of 5)

Summarized financial information concerning our operating segments and
reconciliations to consolidated pretax income (loss) and consolidated net
income (loss), as of and for the periods indicated, is as follows:


                                          Quarter Ended June 30, 2014
(In thousands)                             Mortgage   Financial    Total
                                           Insurance   Guaranty
Net premiums written - insurance           $ 221,947   $ 420        $ 222,367
Net premiums earned - insurance            $ 203,646   $ 10,468      $ 214,114
Net premiums earned on derivatives (1)       —           3,346         3,346
Net investment income                        15,271      10,466        25,737
Other income                                1,626      191         1,817
Total revenues                              220,543    24,471      245,014
                                                                     
Provision for losses                         64,265      5,078         69,343
Estimated present value of net credit        180         11,279        11,459
losses incurred (1)
Change in reserve for premium deficiency     383         —             383
Policy acquisition costs                     6,746       1,675         8,421
Other operating expenses                     49,607      9,212         58,819
Interest expense                            6,405      15,943      22,348
Total expenses                              127,586    43,187      170,773
                                                                     
Adjusted pretax operating income (loss)    $ 92,957    $ (18,716 )   $ 74,241
                                                                     

                      
                        At June 30, 2014
                        Mortgage      Financial     Mortgage and
(In thousands)          Insurance    Guaranty     Real Estate   Total
                                                    Services (2)
Cash and investments    $ 2,747,960   $ 2,240,149   $   18,112     $ 5,006,221
Deferred policy           26,443        34,333          —            60,776
acquisition costs
Goodwill and other
intangible assets,        2,266         —               294,682      296,948
net
Total assets              3,153,482     2,438,418       340,651      5,932,551
Unearned premiums         597,860       183,800         —            781,660
Reserve for losses
and loss adjustment       1,714,681     34,754          —            1,749,435
expenses
VIE Debt                  3,237         90,394          —            93,631
Derivative                —             200,227         —            200,227
liabilities
                                                                     

(1)  Please see Exhibit E (page 1 of 2) for the definition of this line item.
(2)   Primarily comprising the acquisition of Clayton Holdings, effective June
      30, 2014.
      


Radian Group Inc. and Subsidiaries
Segment Information
Exhibit D (page 2 of 5)

                                        Six Months Ended June 30, 2014
(In thousands)                           Mortgage   Financial    Total
                                         Insurance   Guaranty
Net premiums written - insurance         $ 434,900   $ 1,173      $ 436,073 
Net premiums earned - insurance          $ 402,408   $ 17,371      $ 419,779
Net premiums earned on derivatives (1)     —           6,791         6,791
Net investment income                      29,292      20,674        49,966
Other income                              2,683      261         2,944   
Total revenues                            434,383    45,097      479,480 
                                                                   
Provision for losses                       113,425     10,727        124,152
Estimated present value of net credit      319         10,778        11,097
losses incurred (1)
Change in reserve for premium              849         —             849
deficiency
Policy acquisition costs                   13,763      3,272         17,035
Other operating expenses                   99,965      18,763        118,728
Interest expense                          11,777     30,498      42,275  
Total expenses                            240,098    74,038      314,136 
                                                                   
Equity in net loss of affiliates          —          (13     )    (13     )
                                                                   
Adjusted pretax operating income         $ 194,285   $ (28,954 )   $ 165,331 
(loss)
                                                                             

(1)  Please see Exhibit E (page 1 of 2) for the definition of this line item.
      

                               
Radian Group Inc. and
Subsidiaries

Segment Information

Exhibit D (page 3 of 5)
                                 
                                 Quarter Ended June 30, 2013
                                 Mortgage       Financial     
(In thousands)                   Insurance       Guaranty        Total
Net premiums written -           $ 251,159      $ 70           $ 251,229   
insurance
Net premiums earned -            $ 197,952       $ 15,172        $ 213,124
insurance
Net premiums earned on           —               4,857           4,857
derivatives (1)
Net investment income            15,266          12,349          27,615
Other income                     2,159          75             2,234       
Total revenues                   215,377        32,453         247,830     
                                                                             
Provision for losses             136,410         3,881           140,291
Estimated present value of net
credit losses (recoveries)       323             (618        )   (295        )
incurred (1)
Change in reserve for premium    1,251           —               1,251
deficiency
Policy acquisition costs         6,501           3,505           10,006
Other operating expenses         51,295          9,686           60,981
Interest expense                 3,704          15,716         19,420      
Total expenses                   199,484        32,170         231,654     
                                                                             
Adjusted pretax operating        $ 15,893       $ 283          $ 16,176    
income
                                                                             
Cash and investments             $ 2,962,997     $ 2,403,636     $ 5,366,633
Deferred policy acquisition      29,138          41,289          70,427
costs
Total assets                     3,431,444       2,622,556       6,054,000
Unearned premiums                483,303         229,403         712,706
Reserve for losses and loss      2,690,861       25,629          2,716,490
adjustment expenses
VIE Debt                         10,963          95,804          106,767
Derivative liabilities           —               350,576         350,576
                                                                             

(1)  Please see Exhibit E (page 1 of 2) for the definition of this line item.
      

                                     


Radian Group Inc. and Subsidiaries

Segment Information

Exhibit D (page 4 of 5)
                                       
                                       Six Months Ended June 30, 2013
                                       Mortgage     Financial   
(In thousands)                         Insurance     Guaranty      Total
Net premiums written - insurance       $ 468,445    $ (10,031 )   $ 458,414 
Net premiums earned - insurance        $ 380,944     $ 24,768      $ 405,712
Net premiums earned on derivatives     —             9,849         9,849
(1)
Net investment income                  30,368        24,120        54,488
Other income                           3,871        134          4,005     
Total revenues                         415,183      58,871       474,054   
                                                                             
Provision for losses                   268,366       3,984         272,350
Estimated present value of net
credit losses (recoveries) incurred    24            (3,463    )   (3,439    )
(1)
Change in reserve for premium          622           —             622
deficiency
Policy acquisition costs               18,233        8,968         27,201
Other operating expenses               117,075       24,006        141,081
Interest expense                       6,373        28,928       35,301    
Total expenses                         410,693      62,423       473,116   
                                                                             
Equity in net income of affiliates     —            1            1         
                                                                             
Adjusted pretax operating income       $ 4,490      $ (3,551  )   $ 939     
(loss)
                                                                             

(1)  Please see Exhibit E (page 1 of 2) for the definition of this line item.
      


Radian Group Inc. and Subsidiaries

Segment Information

Exhibit D (page 5 of 5)

Reconciliation of Adjusted Pretax Operating Income (Loss) to Consolidated
Pretax Income (Loss)
and Consolidated Net Income (Loss)
                                                 
                        Quarter Ended               Six Months Ended
                        June 30,                    June 30,
                        2014        2013          2014        2013
Adjusted pretax
operating income
(loss):
Mortgage Insurance      $ 92,957      $ 15,893      $ 194,285     $ 4,490
Financial Guaranty      (18,716   )   283          (28,954   )   (3,551     )
Total adjusted pretax   74,241       16,176       165,331      939        
operating income
                                                                             
Change in fair value
of derivative           57,477        86,535        107,563       (81,135    )
instruments
Less: Estimated
present value of net
credit (losses)         (11,459   )   295           (11,097   )   3,439
recoveries incurred
(1)
Less: Net premiums
earned on derivatives   3,346        4,857        6,791        9,849      
(1)
Change in fair value
of derivative           65,590       81,383       111,869      (94,423    )
instruments expected
to reverse over time
Net gains (losses) on   47,219        (130,254  )   111,670       (135,759   )
investments
Net (losses) gains on
other financial         (1,909    )   1,188         (1,211    )   (4,487     )
instruments
Acquisition-related     (6,732    )   —            (6,732    )   —          
expenses (1)
Consolidated pretax     178,409       (31,507   )   380,927       (233,730   )
income (loss)
Income tax provision    3,576        1,665        3,335        (13,058    )
(benefit)
Consolidated net        $ 174,833    $ (33,172 )   $ 377,592    $ (220,672 )
income (loss)
                                                                             

(1)  Please see Exhibit E (page 1 of 2) for the definition of this line item.
      

On a consolidated basis, “adjusted pretax operating income (loss)” is a
measure not determined in accordance with GAAP. Total adjusted pretax
operating income (loss) is not a measure of total profitability, and therefore
should not be viewed as a substitute for GAAP pretax income (loss). Our
definition of adjusted pretax operating income (loss) may not be comparable to
similarly-named measures reported by other companies. See Exhibit E for
additional information on our consolidated non-GAAP financial measure.


Radian Group Inc. and Subsidiaries
Reconciliation of Consolidated Non-GAAP Financial Measure
Exhibit E (page 1 of 2)

Use of Non-GAAP Financial Measure. In addition to the traditional GAAP
financial measures, we have presented a non-GAAP financial measure for the
consolidated company, “adjusted pretax operating income (loss),” among our key
performance indicators to evaluate our fundamental financial performance. This
non-GAAP financial measure aligns with the way the Company’s business
performance is evaluated by both management and the board of directors. This
measure has been established in order to increase transparency for the
purposes of evaluating our core operating trends and enabling more meaningful
comparisons with our peers. Although on a consolidated basis “adjusted pretax
operating income (loss)” is a non-GAAP financial measure, we believe this
measure aids in understanding the underlying performance of our operations.
Our senior management, including our Chief Executive Officer (the Company’s
chief operating decision maker), uses adjusted pretax operating income (loss)
as our primary measure to evaluate the fundamental financial performance of
the Company’s business segments and to allocate resources to the segments.
Management’s use of this measure as its primary measure to evaluate segment
performance began with the quarter ended March 31, 2014. Accordingly, for
comparison purposes, we also present the applicable measures from the
corresponding periods of 2013 on a basis consistent with the current year
presentation.

Adjusted pretax operating income (loss) adjusts GAAP pretax income (loss) to
remove the effects of net gains (losses) on investments and other financial
instruments, acquisition-related expenses, amortization of intangible assets
and net impairment losses recognized in earnings. It also excludes gains and
losses related to changes in fair value estimates on insured credit
derivatives and instead includes the impact of changes in the present value of
insurance claims and recoveries on insured credit derivatives, based on our
ongoing insurance loss monitoring, as well as premiums earned on insured
credit derivatives.

Although adjusted pretax operating income (loss) excludes certain items that
have occurred in the past and are expected to occur in the future, the
excluded items represent those that are: (1) not viewed as part of the
operating performance of our primary activities; or (2) not expected to result
in an economic impact equal to the GAAP measure. These adjustments, along with
the reasons for their treatment, are described below.

      
          Change in fair value of derivative instruments. Gains and losses
          related to changes in the fair value of insured credit derivatives
          are subject to significant fluctuation based on changes in interest
          rates, credit spreads (of both the underlying collateral as well as
          our credit spread), credit ratings and other market, asset-class and
          transaction-specific conditions and factors that may be unrelated or
    (1)   only indirectly related to our obligation to pay future claims. With
          the exception of the estimated present value of net credit (losses)
          recoveries incurred and net premiums earned on derivatives,
          discussed in items 2 and 3 below, we believe these gains and losses
          will reverse over time and consequently these changes are not
          expected to result in economic gains or losses. Therefore, these
          gains and losses are excluded from our calculation of adjusted
          pretax operating income (loss).
          
          Estimated present value of net credit (losses) recoveries incurred.
          The change in present value of insurance claims we expect to pay or
          recover on insured credit derivatives represents the amount of the
          change in credit derivatives from item 1, above, that we expect to
    (2)   result in an economic loss or recovery based on our ongoing loss
          monitoring analytics. Therefore, this item is expected to have an
          economic impact and is included in our calculation of adjusted
          pretax operating income (loss). Also included in this item is the
          expected recovery of miscellaneous operating expenses associated
          with our consolidated VIEs.
          
          Net premiums earned on derivatives. The net premiums earned on
          insured credit derivatives are classified as part of the change in
          fair value of derivative instruments discussed in item 1 above.
    (3)   However, since net premiums earned on derivatives are considered
          part of our fundamental operating activities, these premiums are
          included in our calculation of adjusted pretax operating income
          (loss).
          
          Net gains (losses) on investments and other financial instruments.
          The recognition of realized investment gains or losses can vary
          significantly across periods as the activity is highly discretionary
          based on the timing of individual securities sales due to such
          factors as market opportunities, our tax and capital profile and
          overall market cycles. Unrealized investment gains and losses arise
    (4)   primarily from changes in the market value of our investments that
          are classified as trading. These valuation adjustments may not
          necessarily result in economic gains or losses. We do not view them
          to be indicative of our fundamental operating activities. Trends in
          the profitability of our fundamental operating activities can be
          more clearly identified without the fluctuations of these realized
          and unrealized gains or losses. Therefore, these items are excluded
          from our calculation of adjusted pretax operating income (loss).
          
          Acquisition-related expenses. Acquisition-related expenses represent
          the costs incurred to effect an acquisition of a business (i.e., a
          business combination). Because we pursue acquisitions on a limited
          and selective basis and not in the ordinary course of our business,
    (5)   we do not view acquisition-related expenses as a consequence of a
          primary business activity. Therefore, we do not consider these
          expenses to be part of our operating performance and they are
          excluded from our calculation of adjusted pretax operating income
          (loss).
          
          Amortization of intangible assets. Amortization of intangible assets
          represents the periodic expense required to amortize the cost of
    (6)   intangible assets over their estimated useful lives. These charges
          are not viewed as part of the operating performance of our primary
          activities and therefore are excluded from our calculation of
          adjusted pretax operating income (loss).
          
          Net impairment losses recognized in earnings. The recognition of net
          impairment losses on investments can vary significantly in both size
          and timing, depending on market credit cycles. Intangible assets
          with an indefinite useful life are also periodically reviewed for
    (7)   potential impairment and impairment adjustments are made whenever
          appropriate. We do not view impairment losses on investments or
          intangibles to be indicative of our fundamental operating
          activities. Therefore, these losses are excluded from our
          calculation of adjusted pretax operating income (loss).
          

Total adjusted pretax operating income (loss) is not a measure of total
profitability, and therefore should not be viewed as a substitute for GAAP
pretax income (loss). Our definition of adjusted pretax operating income
(loss) may not be comparable to similarly-named measures reported by other
companies.

Radian Group Inc. and Subsidiaries
Reconciliation of Consolidated Non-GAAP Financial Measure
Exhibit E (page 2 of 2)

The following table provides a reconciliation of our non-GAAP financial
measure for the consolidated company, adjusted pretax operating income (loss),
to the most comparable GAAP measure, pretax income (loss).


                                                 
                        Quarter Ended               Six Months Ended
                        June 30,                    June 30,
(In thousands)          2014         2013          2014         2013
Adjusted pretax
operating income
(loss):
Mortgage Insurance      $ 92,957      $ 15,893      $ 194,285     $ 4,490
Financial Guaranty      (18,716   )   283          (28,954   )   (3,551     )
Total adjusted pretax   74,241       16,176       165,331      939        
operating income
                                                                             
Change in fair value
of derivative           57,477        86,535        107,563       (81,135    )
instruments
Less: Estimated
present value of net
credit (losses)         (11,459   )   295           (11,097   )   3,439
recoveries incurred
(1)
Less: Net premiums
earned on derivatives   3,346        4,857        6,791        9,849      
(1)
Change in fair value
of derivative           65,590       81,383       111,869      (94,423    )
instruments expected
to reverse over time
                                                                             
Net gains (losses) on   47,219        (130,254  )   111,670       (135,759   )
investments
Net (losses) gains on
other financial         (1,909    )   1,188         (1,211    )   (4,487     )
instruments
Acquisition-related     (6,732    )   —            (6,732    )   —          
expenses (1)
Pretax income (loss)    $ 178,409    $ (31,507 )   $ 380,927    $ (233,730 )
                                                                             

(1) Please see Exhibit E (page 1 of 2) for the definition of this line item.


                                                       
Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit F
                                                          
             Quarter Ended June 30,                       Six Months Ended June 30,
             2014                 2013                   2014                  2013
($ in        $          %         $           %         $           %         $           %
millions)
Primary
new                                                                                      
insurance
written
Prime        $ 9,321     100.0 %   $ 13,376     100.0 %   $ 16,128     100.0 %   $ 24,281     100.0 %
Alt -A and
A minus      1         —        1          —        2          —        2          —     
and below
Total Flow   $ 9,322   100.0 %   $ 13,377   100.0 %   $ 16,130   100.0 %   $ 24,283   100.0 %
                                                                                                    
Total
primary
new
insurance
written by
FICO score
>=740        $ 5,769     61.9  %   $ 9,666      72.3  %   $ 10,114     62.7  %   $ 17,876     73.6  %
680-739      2,927       31.4      3,256        24.3      4,968        30.8      5,654        23.3
620-679      626       6.7      455        3.4      1,048      6.5      753        3.1   
Total Flow   $ 9,322   100.0 %   $ 13,377   100.0 %   $ 16,130   100.0 %   $ 24,283   100.0 %
                                                                                                    
Percentage
of primary
new
insurance
written
Monthly      76      %             67       %             75       %             66       %
premiums
Single       24      %             33       %             25       %             34       %
premiums
                                                                                                    
Refinances   13      %             34       %             15       %             40       %
LTV
95.01% and   0.2     %             2.3      %             0.5      %             2.1      %
above
90.01% to    53.9    %             44.8     %             53.0     %             42.5     %
95.00%
85.01% to    34.5    %             37.5     %             34.5     %             38.3     %
90.00%
85.00% and   11.4    %             15.4     %             12.0     %             17.1     %
below
                                                                                                    


Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit G
                                                    
                                 June 30,              June 30,
                                 2014                  2013
($ in millions)                  $           %         $           %
Primary insurance in force (1)
Flow                             $ 155,604   94.3  %   $ 140,776   93.0  %
Structured                       9,385      5.7      10,596     7.0   
Total Primary                    $ 164,989  100.0 %   $ 151,372  100.0 %
                                                                   
Prime                            $ 151,865   92.0  %   $ 135,818   89.7  %
Alt-A                            8,014       4.9       9,557       6.3
A minus and below                5,110      3.1      5,997      4.0   
Total Primary                    $ 164,989  100.0 %   $ 151,372  100.0 %
                                                                   
Primary risk in force (1)
Flow                             $ 39,139    94.8  %   $ 34,842    93.7  %
Structured                       2,131      5.2      2,355      6.3   
Total Primary                    $ 41,270   100.0 %   $ 37,197   100.0 %
                                                                   
Flow
Prime                            $ 36,861    94.2  %   $ 32,099    92.1  %
Alt-A                            1,411       3.6       1,696       4.9
A minus and below                867        2.2      1,047      3.0   
Total Flow                       $ 39,139   100.0 %   $ 34,842   100.0 %
                                                                   
Structured
Prime                            $ 1,263     59.3  %   $ 1,385     58.8  %
Alt-A                            452         21.2      515         21.9
A minus and below                416        19.5    455        19.3  
Total Structured                 $ 2,131    100.0 %   $ 2,355    100.0 %
                                                                   
Total
Prime                            $ 38,124    92.4  %   $ 33,484    90.0  %
Alt-A                            1,863       4.5       2,211       6.0
A minus and below                1,283      3.1      1,502      4.0   
Total Primary                    $ 41,270   100.0 %   $ 37,197   100.0 %
                                                                   

(1) Includes amounts related to the Freddie Mac Agreement.



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

                                  June 30,                June 30,
                                   2014                     2013
($ in millions)                    $             %         $          %
Total primary risk in force by
FICO score
Flow
>=740                              $ 22,633       57.8  %   $ 19,120   54.9  %
680-739                            11,469         29.3      10,258     29.4
620-679                            4,414          11.3      4,700      13.5
<=619                              623           1.6      764       2.2   
Total Flow                         $ 39,139      100.0 %   $ 34,842  100.0 %
                                                                       
Structured
>=740                              $ 576          27.0  %   $ 632      26.8  %
680-739                            609            28.6      678        28.8
620-679                            560            26.3      623        26.5
<=619                              386           18.1     422       17.9  
Total Structured                   $ 2,131       100.0 %   $ 2,355   100.0 %
                                                                       
Total
>=740                              $ 23,209       56.2  %   $ 19,752   53.1  %
680-739                            12,078         29.3      10,936     29.4
620-679                            4,974          12.1      5,323      14.3
<=619                              1,009         2.4      1,186     3.2   
Total Primary                      $ 41,270      100.0 %   $ 37,197  100.0 %
                                                                       
Total primary risk in force by
LTV
95.01% and above                   $ 3,835        9.3   %   $ 4,349    11.7  %
90.01% to 95.00%                   18,637         45.1      15,154     40.8
85.01% to 90.00%                   14,963         36.3      13,996     37.6
85.00% and below                   3,835         9.3      3,698     9.9   
Total                              $ 41,270      100.0 %   $ 37,197  100.0 %
                                                                       
Total primary risk in force by
policy year
2005 and prior                     $ 3,927        9.5   %   $ 5,073    13.6  %
2006                               2,157          5.2       2,526      6.8
2007                               4,890          11.8      5,650      15.2
2008                               3,660          8.9       4,277      11.5
2009                               1,267          3.1       1,706      4.6
2010                               1,068          2.6       1,433      3.8
2011                               2,051          5.0       2,549      6.9
2012                               7,229          17.5      8,157      21.9
2013                               10,965         26.6      5,826      15.7
2014                               4,056         9.8      —         —     
Total                              $ 41,270      100.0 %   $ 37,197  100.0 %
                                                                       
Primary risk in force on           $ 2,270  (1)           $ 3,624
defaulted loans
                                                                       

(1) Excludes risk related to loans subject to the Freddie Mac Agreement.



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

                              June 30,                  June 30,
($ in millions)                2014                       2013
                               $              %         $           %
Pool risk in force                                                  
Prime                          $ 1,229          79.0  %   $ 1,346      77.5  %
Alt-A                          64               4.1       90           5.2
A minus and below              262           16.9     301        17.3  
Total                          $ 1,555       100.0 %   $ 1,737    100.0 %
                                                                       
Total pool risk in force by
policy year
2005 and prior                 $ 1,479          95.1  %   $ 1,599      92.1  %
2006                           13               0.8       58           3.3
2007                           62               4.0       75           4.3
2008                           1             0.1      5          0.3   
Total pool risk in force       $ 1,555       100.0 %   $ 1,737    100.0 %
                                                                       
Other risk in force
Second-lien
1st loss                       $ 50                       $ 71
2nd loss                       15                         11
NIMS                           5                          14
1st loss-Hong Kong primary     16                        29      
mortgage insurance
Total other risk in force      $ 86                      $ 125   
                                                                       
Risk to capital ratio-Radian   18.7    :1 (1)           19.7    :1
Guaranty only
Risk to capital
ratio-Mortgage Insurance       22.1    :1 (1)           25.9    :1
combined
                                                                       
(1) Preliminary


Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit J
                                                  
                     Quarter Ended                   Six Months Ended
                     June 30,                        June 30,
($ in thousands)     2014           2013            2014         2013
                                                                   
Net claims paid
Prime                $ 159,335       $ 217,878       $ 354,053     $ 418,395
Alt-A                37,368          46,059          83,559        95,150
A minus and below    26,675         33,213         59,961       60,699    
Total primary        223,378         297,150         497,573       574,244
claims paid
Pool                 16,362          28,610          47,225        59,559
Second-lien and      511            614            1,238        2,498     
other
Subtotal             240,251         326,374         546,036       636,301
Impact of captive    —              —              1,156        —         
terminations
Total                $ 240,251      $ 326,374      $ 547,192    $ 636,301 
                                                                   
Average claim paid
(1)
Prime                $ 46.3          $ 46.0          $ 45.1        $ 47.4
Alt-A                55.9            52.5            55.4          56.1
A minus and below    37.8            34.1            37.2          35.6
Total primary
average claims       46.4            45.1            45.3          46.9
paid
Pool                 63.4            74.9            61.3          74.2
Second-lien and      16.5            11.8            18.7          18.2
other
Total                $ 47.0          $ 46.5          $ 46.2        $ 48.3
                                                                   
Average primary      $ 47.4          $ 47.2          $ 46.7        $ 49.2
claim paid (2)
Average total        $ 48.0          $ 48.5          $ 47.5        $ 50.4
claim paid (2)
                                                                   
Loss ratio - GAAP    31.6        %   68.9        %   28.2      %   70.4      %
basis
Expense ratio -      27.7        %   29.2        %   28.3      %   35.5      %
GAAP basis
                     59.3        %   98.1        %   56.5      %   105.9     %
                                                                   
Reserve for losses
by category
Prime                $ 701,718       $ 1,301,362
Alt-A                323,490         448,053
A minus and below    174,922         272,755
IBNR and other       326,821         284,844
LAE                  50,071          55,234
Reinsurance          22,458         58,427      
recoverable (3)
Total primary        1,599,480      2,420,675   
reserves
Pool insurance       104,424         227,827
IBNR and other       4,621           31,191
LAE                  4,180          6,096       
Total pool           113,225        265,114     
reserves
Total 1st lien       1,712,705      2,685,789   
reserves
Second lien and      1,976          5,072       
other
Total reserves       $ 1,714,681    $ 2,690,861 
                                                                   
1st lien reserve
per default (4)
Primary reserve
per primary          26,024          27,293
default excluding
IBNR and other
Pool reserve per
pool default         12,836          15,378
excluding IBNR and
other
                                                                   

(1)  Net of reinsurance recoveries and without giving effect to captive
      terminations.
(2)   Before reinsurance recoveries and without giving effect to captive
      terminations.
(3)   Represents ceded losses on captive transactions and quota share
      reinsurance transactions, and Smart Home in 2013.
      If calculated before giving effect to deductibles and stop losses in
(4)   pool transactions, this would be $21,514 and $29,846 at June 30, 2014
      and 2013, respectively.
      


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

                                June 30,        December 31,    June 30,
                                 2014             2013             2013    
Default Statistics
Primary Insurance:
                                                                   
Prime
Number of insured loans          756,344          741,554          711,042
Number of loans in default       30,012           37,932           50,575
Percentage of loans in default   3.97    %        5.12    %        7.11    %
                                                                   
Alt-A
Number of insured loans          41,399           44,905           49,745
Number of loans in default       9,299            11,209           13,731
Percentage of loans in default   22.46   %        24.96   %        27.60   %
                                                                   
A minus and below
Number of insured loans          37,719           40,930           45,680
Number of loans in default       9,593            11,768           13,951
Percentage of loans in default   25.43   %        28.75   %        30.54   %
                                                                   
Total Primary
Number of insured loans          845,534   (1 )   839,249   (1 )   806,467
Number of loans in default       48,904    (2 )   60,909    (2 )   78,257
Percentage of loans in default   5.78    %        7.26    %        9.70    %
                                                                   
Pool insurance
Number of loans in default       8,461            11,921           15,212
                                                                   

(1)  Includes 10,072 and 11,860 insured loans subject to the Freddie Mac
      Agreement at June 30, 2014 and December 31, 2013, respectively.
      Excludes 5,238 and 7,221 loans subject to the Freddie Mac Agreement that
(2)   are in default at June 30, 2014 and December 31, 2013, respectively, as
      we no longer have claims exposure on these loans.
      


Radian Group Inc. and Subsidiaries
Mortgage Insurance Supplemental Information
Exhibit L
                                                    
                       Quarter Ended                   Six Months Ended
                       June 30,                        June 30,
($ in thousands)       2014           2013            2014        2013
                                                                    
1st Lien Captives
Premiums ceded to      $ 3,314         $ 4,787         $ 6,822      $ 9,939
captives
% of total premiums    1.5         %   2.2         %   1.6      %   2.4      %
Insurance in force
included in captives   3.3         %   5.2         %
(1)
Risk in force
included in captives   3.1         %   5.0         %
(1)
                                                                    
Initial Quota Share
Reinsurance (“QSR”)
Transaction
QSR ceded premiums     $ 5,046         $ 5,900         $ 10,350     $ 12,022
written
% of premiums          2.1         %   2.2         %   2.2      %   2.3      %
written
QSR ceded premiums     $ 6,803         $ 7,662         $ 13,610     $ 15,495
earned
% of premiums earned   3.1         %   3.6         %   3.1      %   3.8      %
Ceding commissions     $ 1,262         $ 1,475         $ 2,588      $ 3,005
Risk in force          $ 1,234,975     $ 1,421,096
included in QSR (2)
                                                                    
Second QSR
Transaction
QSR ceded premiums     $ 8,072         $ 7,580         $ 15,365     $ 24,020
written
% of premiums          3.4         %   2.8         %   3.3      %   4.7      %
written
QSR ceded premiums     $ 7,197         $ 4,283         $ 13,782     $ 7,121
earned
% of premiums earned   3.3         %   2.0         %   3.2      %   1.7      %
Ceding commissions     $ 2,825         $ 2,653         $ 5,378      $ 8,407
Risk in force          $ 1,447,088     $ 1,046,041
included in QSR (2)
                                                                    
Persistency (twelve
months ended June      83.1        %   80.3        %
30)
                                                                    

      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.
      

                                                
Radian Group Inc. and
Subsidiaries
Financial Guaranty
Supplemental
Information
Exhibit M
                                                                           
                         Quarter Ended             Six Months Ended
                         June 30,                  June 30,
(In thousands)           2014        2013         2014        2013
                                                                           
Total Premiums Earned    $ 10,468     $ 15,172     $ 17,371     $ 27,215
- insurance
Impact of commutations   —           —           —           (2,447   )
and reinsurance
Net Premiums Earned -    $ 10,468    $ 15,172    $ 17,371    $ 24,768 
insurance
                                                                           
Refundings included in   $ 6,073     $ 10,288    $ 8,190     $ 15,041 
earned premium
                                                                           
Claims paid              $ (75    )   $ 2,825     $ 2,958     $ 44,683  (1)
                                                                           

                                                        
                                          June 30,         December 31,
($ in thousands, except ratios)           2014             2013
                                                                        
Statutory Information:
                                                                        
Capital and surplus                       $ 1,186,121      $ 1,198,034
Contingency reserve                       279,713         263,963      
Qualified statutory capital               1,465,834        1,461,997
                                                                        
Unearned premium reserve                  183,335          195,303
Loss and loss expense reserve             (179,135     )   (180,168     )
Total statutory policyholders’ reserves   1,470,034        1,477,132
                                                                        
Present value of installment premiums     79,345          90,852       
Total statutory claims paying resources   $ 1,549,379     $ 1,567,984  
                                                                        
Net debt service outstanding              $ 26,957,481    $ 30,778,401 
                                                                        
Capital leverage ratio (2)                18               21
Claims paying leverage ratio (3)          17               20
                                                                        
Net par outstanding by product:
Public finance direct                     $ 7,502,390      $ 8,051,124
Public finance reinsurance                4,313,878        4,383,643
Structured direct                         7,939,848        10,872,379
Structured reinsurance                    493,014         547,733      
Total (4)                                 $ 20,249,130    $ 23,854,879 

    
(1)   Primarily related to commutation of reinsurance business.
(2)   The capital leverage ratio is derived by dividing net debt service
      outstanding by qualified statutory capital.
(3)   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 $0.7 billion and $0.9
      billion at June 30, 2014 and December 31, 2013, respectively, for
(4)   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.


Clayton Holdings LLC and Subsidiaries
Selected Financial Information (Unaudited)
Exhibit N

The selected financial information presented below represents unaudited
quarterly historical information for the businesses of Clayton Holdings LLC
(“Clayton”) acquired on June 30, 2014.

                                                                                       
             2012                      2013                                                2014
(In          Qtr 3       Qtr 4        Qtr 1       Qtr 2       Qtr 3       Qtr 4        Qtr 1       Qtr 2
thousands)
Services     $ 32,514     $ 31,524     $ 37,041     $ 39,115     $ 32,718     $ 25,593     $ 28,043     $ 36,347
revenue
Cost of      18,951      19,251      20,173      22,028      18,015      14,957      15,469      19,956
services
Gross
profit on    $ 13,563    $ 12,273    $ 16,868    $ 17,087    $ 14,703    $ 10,636    $ 12,574    $ 16,391
services
                                                                                                          

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,” “seek,” “strategy,” “future,” likely” 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 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:

  *changes in general economic and political conditions, including
    unemployment rates, changes in the U.S. housing and mortgage credit
    markets (including declines in home prices and property values), the
    performance of the U.S. or global economies, the amount of liquidity in
    the capital or credit markets, changes or volatility in interest rates or
    consumer confidence and changes in credit spreads, all of which may be
    impacted by, among other things, legislative activity or inactivity
    (including legislative changes impacting the obligations of the public or
    sovereign entities that our financial guaranty business insures), actual
    or threatened downgrades of U.S. government credit ratings, or actual or
    threatened defaults on U.S. government obligations;
  *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 the fact that certain of our former
    competitors have ceased writing new insurance business and have been
    placed under supervision or receivership by insurance regulators;
  *catastrophic events, municipal and sovereign or sub-sovereign bankruptcy
    filings or other economic changes in geographic regions 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;
  *a reduction in, or prolonged period of depressed levels of, home mortgage
    originations due to reduced liquidity in the lending market, tighter
    underwriting standards, or 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");
  *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, and
    an adequate minimum policyholder position and surplus for our insurance
    subsidiaries that provide reinsurance or capital support to Radian
    Guaranty;
  *Radian Guaranty's ability to comply within the applicable transition
    period with the financial requirements of the Private Mortgage Insurance
    Eligibility Requirements ("PMIERs") when adopted, which, based on the
    recently issued proposed PMIERs, may require us to contribute a
    substantial portion of our holding company cash and investments to Radian
    Guaranty, and could depend on our ability to, among other things: (1)
    successfully monetize Radian Asset Assurance Inc. ("Radian Asset
    Assurance"), a direct subsidiary of Radian Guaranty, or otherwise utilize
    the capital at Radian Asset Assurance in a manner that complies with the
    PMIERs; and (2) obtain reinsurance for a portion of our mortgage insurance
    risk-in-force in a manner that is compliant with the PMIERS. The amount of
    capital or capital relief that may be required to comply with the PMIERs
    also may be impacted by the performance of our mortgage insurance
    business, including our level of defaults, the losses we incur on new and
    existing defaults and the amount and credit characteristics of new
    business we write, among other factors. Contributing a substantial portion
    of our holding company cash and investments to Radian Guaranty would leave
    Radian Group Inc. ("Radian Group") with less liquidity to satisfy its
    obligations, and we may not be successful in monetizing or otherwise
    utilizing the capital of Radian Asset Assurance or in obtaining qualifying
    reinsurance for our mortgage insurance risk-in-force on terms that are
    acceptable to us, if at all. In the event we are unable to successfully
    execute these or similar transactions or strategies, or such transactions
    are not available on terms that are acceptable to us, we may be required
    or we may decide to seek additional capital by incurring additional debt,
    by issuing additional equity, or by selling assets, which we may not be
    able to do on favorable terms, if at all. The ultimate form of the PMIERs
    and the timeframe for their implementation remain uncertain;
  *changes in the charters or business practices of, or rules or regulations
    applicable to, the GSEs, including the adoption of the PMIERs, which in
    their current proposed form: (1) would require Radian Guaranty to hold
    significantly more capital than is currently required and could negatively
    impact our returns on equity; (2) could limit the type of business that
    Radian Guaranty and other private mortgage insurers are willing to write,
    which could reduce our NIW; (3) could increase the cost of private
    mortgage insurance, including as compared to the Federal Housing
    Administration's ("FHA") pricing, or result in the emergence of other
    forms of credit enhancement; and (4) could require changes to our business
    practices that may result in substantial additional costs in order to
    achieve and maintain compliance with the PMIERs;
  *our ability to continue to effectively mitigate our mortgage insurance and
    financial guaranty losses;
  *a more rapid than expected decrease in the 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 net rescissions or denials resulting from an increase in the
    number of successful challenges to previously rescinded policies or claim
    denials (including as part of one or more settlements of disputed
    rescissions or denials), or by Fannie Mae or Freddie Mac (the
    "Government-Sponsored Enterprises" or the "GSEs") intervening in or
    otherwise limiting our loss mitigation practices, including settlements of
    disputes regarding loss mitigation activities;
  *the negative impact that our loss mitigation activities may have on our
    relationships with our customers and potential customers, including the
    potential loss of current or future business and the heightened risk of
    disputes and litigation;
  *the need, in the event that we are unsuccessful in defending our loss
    mitigation activities, to increase our loss reserves for, and reassume
    risk on, rescinded or cancelled loans or denied claims, 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 a small part
    of our insured portfolio) that are riskier than traditional mortgage
    insurance or financial guaranty insurance policies;
  *a substantial decrease in the persistency rates of our mortgage insurance
    policies, which has the effect of reducing our premium income on our
    monthly premium policies and could decrease the profitability of our
    mortgage insurance business;
  *heightened competition for our mortgage insurance business from others
    such as the FHA, the U.S. Department of Veterans Affairs and other private
    mortgage insurers, including with respect to other private mortgage
    insurers, those that have been assigned higher ratings than we have, that
    may be perceived as having a greater ability to comply with the PMIERs,
    that may have access to greater amounts of capital than we do, that are
    less dependent on capital support from their subsidiaries than we are or
    that are new entrants to the industry, and therefore, are not burdened by
    legacy obligations;
  *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 private
    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 (including in
    particular investigations and litigation relating to captive reinsurance
    arrangements under the Real Estate Settlement Procedures Act of 1974);
    (ii) changes to the Mortgage Guaranty Insurers Model Act (the "Model Act")
    being considered by the National Association of Insurance Commissioners
    that could include more stringent capital and other requirements for
    Radian Guaranty in states that adopt the new Model Act in the future; and
    (iii) 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 or future prospects;
  *the amount and timing of potential payments or adjustments associated with
    federal or other tax examinations, including adjustments proposed by the
    Internal Revenue Service resulting from the examination of our 2000
    through 2007 tax years, which we are currently contesting;
  *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, a significant portion of our investment portfolio and certain
    of our long-term incentive compensation awards;
  *our ability to realize some or all of the tax benefits associated with our
    gross deferred tax assets, which will depend, in part, on our ability to
    generate sufficient sustainable taxable income in future periods;
  *changes in accounting principles generally accepted in the United States
    of America or statutory accounting principles, rules and guidance, or
    their interpretation;
  *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;
  *our ability to fully realize the benefits anticipated from our recent
    acquisition of Clayton Holdings LLC ("Clayton"), which may be impeded by,
    among other things, a loss of customers and/or employees; the potential
    inability to successfully incorporate Clayton's business into Radian
    Group; and the potential distraction of management time and attention in
    connection with the post-acquisition process; and
  *the possibility that we may need to impair the estimated fair value of
    goodwill established in connection with our acquisition of Clayton, the
    valuation of which requires the use of significant estimates and
    assumptions with respect to the estimated future economic benefits arising
    from certain assets acquired in the transaction such as the value of
    expected future cash flows of Clayton, Clayton's workforce, expected
    synergies with our other affiliates and other unidentifiable intangible
    assets.

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, 2013 and in our subsequent reports and registration
statements filed from time to time with the U.S. Securities and Exchange
Commission. We caution you not to place undue reliance on these
forward-looking statements, which are current only as of the date on which we
issued this press release. We do not intend to, and we disclaim any duty or
obligation to, update or revise any forward-looking statements to reflect new
information or future events or for any other reason.

Contact:

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