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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