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changes in general economic and political conditions, including high unemployment rates and continued weakness in the U.S. housing and mortgage credit markets, the U.S. economy reentering a recessionary period, a significant downturn in the global economy, a lack of meaningful liquidity in the capital or credit markets, changes or volatility in interest rates or consumer confidence and changes in credit spreads, each of which may be accelerated or intensified by, among other things, further actual or threatened downgrades of U.S. credit ratings;

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changes in the way customers, investors, regulators or legislators perceive the strength of private mortgage insurers or financial guaranty providers, in particular in light of developments in the private mortgage insurance and financial guaranty industries in which certain of our former competitors have ceased writing new insurance business and have been placed under supervision or receivership by insurance regulators;

•	catastrophic events or economic changes in geographic regions, including governments and municipalities, where our mortgage insurance or financial guaranty insurance exposure is more concentrated;

•	our ability to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs, including in particular, the repayment of our debt due in February 2013 and additional capital contributions that may be required to support our mortgage insurance business;

•	a further reduction in, or prolonged period of depressed levels of, home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards, general reduced housing demand in the U.S., and potential risk retention requirements established under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act");

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our ability to maintain an adequate risk-to-capital position and surplus requirements in our mortgage insurance business including, if necessary, our ability to write new mortgage insurance while maintaining a capital position that is in excess of risk-based capital limitations imposed in certain states, either through waivers of these limitations or through use of another mortgage insurance subsidiary;

•	our ability to continue to effectively mitigate our mortgage insurance and financial guaranty losses;

•	the ability of our primary insurance customers in our financial guaranty reinsurance business to provide appropriate surveillance and to mitigate losses adequately with respect to our assumed insurance portfolio;

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a more rapid than expected decrease in the level of insurance rescissions and claim denials from the current elevated levels which have reduced our paid losses and resulted in a significant reduction in our loss reserves, including a decrease resulting from successful challenges to previously rescinded policies or claim denials, or caused by the government-sponsored entities ("GSEs") intervening in mortgage insurers' loss mitigation practices, including settlements of disputes;

•	the negative impact our insurance rescissions and claim denials may have on our relationships with customers and potential customers, including the potential loss of business and the heightened risk of disputes and litigation;

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•	the need, in the event that we are unsuccessful in defending our rescissions or denials, to increase our loss reserves for, and reassume risk on, rescinded or denied loans, and to pay additional claims;

•	any disruption in the servicing of mortgages covered by our insurance policies and poor servicer performance;

•	adverse changes in the severity or frequency of losses associated with certain products that we formerly offered that are riskier than traditional mortgage insurance or financial guaranty insurance policies;

•	a decrease in persistency rates of our mortgage insurance policies, which has the effect of reducing our premium income without a corresponding decrease in incurred losses;

•	an increase in the risk profile of our existing mortgage insurance portfolio due to the refinancing of existing mortgage loans for only the most qualified borrowers in the current mortgage and housing market;

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changes in the criteria for assigning credit or similar ratings, further downgrades or threatened downgrades of, or other ratings actions with respect to, our credit ratings or the ratings assigned by the major rating agencies to any of our rated insurance subsidiaries at any time, including in particular, the credit ratings of Radian Group Inc. ("Radian Group") and the financial strength ratings assigned to Radian Guaranty Inc. ("Radian Guaranty");

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heightened competition for our mortgage insurance business from others such as the Federal Housing Administration (the "FHA"), the Department of Veterans Affairs ("VA") and other private mortgage insurers (in particular, the FHA and those private mortgage insurers that have been assigned higher ratings from the major rating agencies, that may have access to greater amounts of capital than we do, or new entrants to the industry that are not burdened by legacy obligations);

•	changes in the charters or business practices of, or rules or regulations applicable to, Federal National Mortgage Association ("Fannie Mae") and Freddie Mac, the largest purchasers of mortgage loans that we insure, and our ability to remain an eligible provider to both Fannie Mae and Freddie Mac;

•	changes to the current system of housing finance, including the possibility of a new system in which private mortgage insurers are not required or their products are significantly limited in scope;

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the effect of the Dodd-Frank Act on the financial services industry in general and on our mortgage insurance business in particular, including whether and to what extent loans with mortgage insurance are considered "qualified residential mortgages" for purposes of the Dodd-Frank Act securitization provisions or "qualified mortgages" for purposes of the ability to repay provisions of the Dodd-Frank Act, and the possibility that the ultimate definitions of "qualified residential mortgages" and "qualified mortgages" could reduce the size of the mortgage market and potentially reduce the number of insurable loans;

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the application of existing federal or state consumer, lending, insurance, tax, securities and other applicable laws and regulations, or changes in these laws and regulations or the way they are interpreted, including, without limitation: (i) the outcome of existing, or the possibility of additional, lawsuits or investigations; and (ii) legislative and regulatory changes (a) impacting the demand for private mortgage insurance, (b) limiting or restricting our use of (or increasing requirements for) additional capital and the products we may offer, (c) affecting the form in which we execute credit protection, or (d) impacting our existing financial guaranty portfolio;

•	the amount and timing of potential payments or adjustments associated with federal or other tax examinations;

•	the possibility that we may fail to estimate accurately the likelihood, magnitude and timing of losses in connection with establishing loss reserves for our mortgage insurance or financial guaranty businesses or premium deficiencies for our mortgage insurance business, or to estimate accurately the fair value amounts of derivative instruments in determining gains and losses on these instruments;

•	volatility in our earnings caused by changes in the fair value of our assets and liabilities carried at fair value, including our derivative instruments, and our need to reevaluate the possibility of a premium deficiency in our mortgage insurance business on a quarterly basis;

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•	our ability to realize the tax benefits associated with our gross deferred tax assets, which will depend on our ability to generate sufficient sustainable taxable income in future periods;

•	changes in accounting principles, rules and guidance, or their interpretation, from the Securities and Exchange Commission or the Financial Accounting Standards Board; and

•	legal and other limitations on amounts we may receive from our subsidiaries as dividends or through our tax- and expense-sharing arrangements with our subsidiaries.

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In January 2012, we made further progress in our strategic objective of reducing our financial guaranty risk by entering into a three-part transaction (the "Assured Transaction") with subsidiaries of Assured Guaranty Ltd. (collectively, “Assured”) that included the commutation of $13.8 billion of financial guaranty net par outstanding that was reinsured by Radian Asset Assurance (the "Assured Commutation"), the ceding of $1.8 billion of direct public finance business (the "Assured Cession") and an agreement to sell Municipal and Infrastructure Assurance Corporation (the "FG Insurance Shell"), a New York domiciled financial guaranty insurance company licensed to conduct business in 37 states and the District of Columbia. We expect to complete the sale of the FG Insurance Shell in the second quarter of 2012, subject to regulatory approval. The Assured Transaction reduced our financial guaranty net par outstanding by 22.5% and has provided a statutory capital benefit to Radian Asset Assurance and Radian Guaranty of approximately $93.5 million at March 31, 2012. The following table provides the impact of the Assured Transaction on our unaudited condensed consolidated financial statements in the first quarter of 2012. While we received a statutory capital benefit as a result of this transaction as discussed above, under GAAP this transaction resulted in a realized loss, and therefore, a reduction in retained earnings.

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During the first quarter of 2012, three credit default swap ("CDS") counterparties in our financial guaranty business exercised their termination rights with respect to 20 corporate collateralized debt obligations ("CDOs") that we insured (the "First Quarter 2012 CDO Terminations"), which further reduced our financial guaranty net par outstanding by $8.3 billion. In addition, on May 2, 2012, an additional corporate CDO counterparty exercised its termination right with respect to two corporate CDOs with an aggregate net par outstanding of $0.9 billion.

•	During the first quarter of 2012, we executed a "Modified Dutch Auction” tender offer (the “Tender Offer”) to purchase $146.5 million of our 2013 Notes, as discussed in more detail below in this Note 1 under “Holding Company Liquidity.”

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On April 1, 2012, Radian Guaranty entered into a quota share reinsurance agreement with a third-party reinsurance provider. Through this quota share reinsurance agreement, Radian Guaranty has agreed to cede 20% of its new insurance written beginning with the business written in the fourth quarter of 2011. As of April 1, 2012, the amount ceded pursuant to this transaction was $532 million of Radian Guaranty's RIF. The amount of risk that may ultimately be ceded is expected to be between $1.25 billion and $1.6 billion. At a 25 to 1 risk-to-capital ratio, the equivalent capital benefit associated with ceding this amount of risk will be between $50 million and $62.5 million. Radian Guaranty has the ability, at its option, to commute on December 31, 2014, two-thirds of the reinsurance ceded as part of this transaction.

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On April 11, 2012, Radian Asset Assurance agreed with one of its derivative counterparties (the "Counterparty") to commute: (1) Radian Asset Assurance's largest single asset-backed securities ("ABS") exposure related to a directly insured tranche of an extremely distressed CDO of ABS transaction (the “CDO of ABS Transaction”), with $450.2 million of net par outstanding as of March 31, 2012, for which we expected to pay claims for substantially all of the net par outstanding; and (2) its credit protection through CDS on six directly insured trust preferred securities ("TruPs") CDO transactions, representing $699.0 million of net par outstanding as of March 31, 2012 (the “Terminated TruPs CDOs”). In consideration for these commutations, Radian Asset Assurance paid $210.0 million (the "Commutation Amount"), a significant portion of which (the "LPV Initial Capital") has been deposited with a limited purpose vehicle (an "LPV") to cover the Counterparty's potential future losses on the TruPs bonds underlying the Terminated TruPs CDOs (the "Terminated TruPs Bonds"). The commutations described in this paragraph are referred to herein as the “Commutation Transactions.”

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•	On May 1, 2012, Radian Asset Assurance received approval from the New York Department of Financial Services to release $55 million of contingency reserves, which will benefit Radian Guaranty's statutory surplus by an equal amount.

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•	Potential adverse effects of the failure or significant delay of the U.S. economy to fully recover from the most recent recession and prolonged economic downturn, including ongoing uncertainty in the housing and related credit markets and high unemployment, which could increase our mortgage insurance or financial guaranty losses beyond existing expectations. (See Notes 7, 8 and 9).

•	Potential adverse effects if there are adverse developments with respect to our estimate related to the likelihood, magnitude and timing of losses in connection with establishing loss reserves or premium deficiency reserves for our mortgage insurance or financial guaranty businesses. (See Notes 7, 8 and 9).

•	Potential adverse effects on us if the capital and liquidity levels of Radian Group or our regulated subsidiaries' statutory capital levels are deemed inadequate to support current business operations and strategies.

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Potential adverse effects if Radian Guaranty's regulatory risk-based capital position fails to comply with applicable state statutory or regulatory risk-based capital requirements, including if waivers or similar relief from the states that impose such statutory or regulatory risk-based capital requirements are not obtained or are revoked. These risks include the possibility that: (i) insurance regulators or the GSEs may limit or cause Radian Guaranty to cease writing new mortgage insurance; (ii) the GSEs may terminate or otherwise restrict Radian Guaranty's or Radian Mortgage Assurance's eligibility to insure loans purchased by the GSEs; (iii) Radian Guaranty's customers may decide not to insure loans with Radian Guaranty or may otherwise limit the type or amount of business done with Radian Guaranty; and (iv) state or federal regulators could pursue regulatory actions or proceedings, including possible supervision or receivership actions, against us in the future. (See Note 12 for additional information regarding our statutory capital).

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•	Potential adverse effects if we fail to comply with applicable debt covenants, which could result in a default under our long-term debt and accelerate our obligation to repay our outstanding debt. Regulatory action that results in the appointment of a receiver for one or more of our significant insurance subsidiaries could constitute an event of default under our long-term debt.

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Factors adversely affecting Radian Group's capital and liquidity that could cause Radian Group to have insufficient sources of capital and liquidity to meet all of its expected obligations in the near-term, including the $103.5 million outstanding principal amount remaining on our 2013 Notes that mature in February 2013, our failure to estimate accurately the likelihood and potential effects of the various risks and uncertainties described in this report, as well as potential regulatory, legal or other changes to our tax- or expense-allocation agreements among Radian Group and its subsidiaries.

•	Potential adverse effects resulting from the final determination or settlement of tax audits and examinations and any potential related litigation, as well as changes in tax laws, rates, regulations and policies, or interpretations of any of the foregoing that could have a material impact on our tax liabilities, tax assets and our results of operations or financial condition.

•	Potential adverse effects from legislative efforts to reform the housing finance market, including the possibility that new federal legislation could reduce or eliminate the requirement for private mortgage insurance or place additional significant obligations or restrictions on mortgage insurers.

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Potential adverse effects on our businesses as a result of the implementation of regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), including whether and to what extent loans with mortgage insurance are considered "qualified residential mortgages" for purposes of the Dodd-Frank Act securitization provisions or "qualified mortgages" for purposes of the “ability to repay” provisions of the Dodd-Frank Act, and potential obligations to post collateral on our existing insured derivatives portfolio.

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Our businesses have been significantly affected by, and our future success may depend upon, legislative and regulatory developments impacting the housing finance industry. The GSEs are the primary beneficiaries of the majority of our mortgage insurance policies, and the Federal Housing Authority ("FHA") remains our primary competitor outside of the private mortgage insurance industry. The GSEs' federal charters generally prohibit them from purchasing any mortgage with a loan amount that exceeds 80% of a home's value, unless that mortgage is insured by a qualified insurer or the mortgage seller retains at least a 10% participation in the loan or agrees to repurchase the loan in the event of a default. As a result, high-loan-to-value ("LTV") mortgages purchased by the GSEs generally are insured with private mortgage insurance. Changes in the charters or business practices of the GSEs, including pursuing new products for purchasing high-LTV loans that are not insured by private mortgage insurance, could reduce the number of mortgages they purchase that are insured by us and consequently diminish our franchise value. In September 2008, the Federal Housing Finance Agency ("FHFA") was appointed as the conservator of the GSEs to control and direct the operations of the GSEs. The continued role of the conservator may increase the likelihood that the business practices of the GSEs will be changed in ways that may have a material adverse effect on us. In particular, if the private mortgage insurance industry does not have the ability, due to capital constraints, to continue to write sufficient business to meet the needs of the GSEs, the GSEs may seek alternatives other than private mortgage insurance to conduct their business.

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(1)	Represents NIMS derivative assets related to consolidated NIMS VIEs. Also includes common stock warrants. Because none of these investments represent financial guaranty contracts that we issued, they cannot become liabilities, and therefore, do not represent additional par exposure.

(2)	Represents the fair value of an interest rate swap included in the consolidation of one of our financial guaranty transactions. The notional amount of the interest rate swap does not represent additional par exposure, and therefore, is excluded from this table. See Note 5 for information on our maximum exposure to loss from our consolidated financial guaranty transactions.

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(1)	Includes the net fair value liability recorded within derivative assets and derivative liabilities, and the net fair value liabilities included in our consolidated VIEs.

(2)	Includes NIMS VIE debt and NIMS derivative assets.

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Level I	—    Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level II	—    Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities; and

Level III	—    Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

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(1)	Excludes certain assets and liabilities for which we do not develop quantitative unobservable inputs. The fair value estimates for these assets and liabilities are developed using third-party pricing information, generally without adjustment.

(2)	Represents the range of our CDS spread that a typical market participant might use in the valuation analysis.

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(1)	Comprising broadly diversified domestic equity mutual funds included within Level I and various preferred and common stocks invested across numerous companies and industries included within Levels II and III.

(2)	Comprising short-term commercial paper ($20.0 million) and short-term CDs ($1.7 million) included within Level II, and lottery annuities ($1.1 million) and TruPs held by consolidated VIEs ($6.0 million) included within Level III.

(3)	Does not include fixed-maturities held to maturity ($2.7 million) and other invested assets ($60.3 million), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.

(4)	Comprising manufactured housing loan collateral related to two consolidated financial guaranty VIEs.

(5)	Comprising consolidated debt related to NIMS VIEs ($8.6 million) and amounts related to financial guaranty VIEs ($246.6 million).

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(1)	Comprising broadly diversified domestic equity mutual funds included within Level I and various preferred and common stocks invested across numerous companies and industries included within Levels II and III.

(2)	Comprising short-term commercial paper within Committed Preferred Custodial Trust Securities ("CPS") trusts ($150.0 million) and short-term CDs ($1.6 million) included within Level II, and lottery annuities ($1.6 million) and TruPs held by consolidated VIEs ($5.2 million) included within Level III.

(3)	Does not include fixed-maturities held to maturity ($2.6 million) and other invested assets ($61.0 million), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.

(4)	Comprising manufactured housing loan collateral related to two consolidated financial guaranty VIEs.

(5)	Comprising consolidated debt related to NIMS VIEs ($9.4 million) and amounts related to financial guaranty VIEs ($218.8 million).

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(1)	Includes unrealized gains (losses) relating to assets and liabilities still held as follows: $(2.9) million for investments, $0.6 million for other assets, $(82.2) million for derivative liabilities, and $(36.3) million for VIE debt.

(2)	Transfers are recognized at the end of the period as the availability of market observed inputs change from period to period.

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(1)	Includes unrealized gains (losses) relating to assets and liabilities still held as follows: $6.8 million for investments, $(2.0) million for NIMS derivative assets, $0.8 million for other assets, $229.2 million for derivative liabilities, and $83.7 million for VIE debt.

(2)	Transfers are recognized at the end of the period as the availability of market observed inputs change from period to period.

(1)	Included in Level II of the fair value hierarchy.

(2)	Included in Level III of the fair value hierarchy.

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(1)	The difference between the carrying amounts of the net asset/liability position and maximum exposure related to VIEs is primarily due to the difference between the face amount of the obligation and the recorded fair values, which includes an adjustment for our non-performance risk. The maximum exposure is based on the net par amount of our insured obligation as of the reporting date.

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(1)	The difference between the carrying amounts of the net asset/liability position and maximum exposure related to VIEs is primarily due to the difference between the face amount of the obligation and the recorded fair values, which includes an adjustment for our non-performance risk. The maximum exposure is based on the net par amount of our insured obligation as of the reporting date.

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(1)	Comprising broadly diversified domestic equity mutual funds ($97.7 million fair value) and various preferred and common stocks invested across numerous companies and industries ($13.5 million fair value).

(1)	Comprising broadly diversified domestic equity mutual funds ($116.0 million fair value) and various preferred and common stocks invested across numerous companies and industries ($12.4 million fair value).

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(1)

Our largest concentrations of foreign government securities as of March 31, 2012 and December 31, 2011, were Germany ($27.5 million and $42.6 million fair value, respectively) and Japan ($58.2 million and $28.0 million fair value, respectively). As of March 31, 2012 and December 31, 2011, nearly all of our foreign government securities were rated A or higher by a Nationally Recognized Statistical Rating Organization ("NRSRO"). As of March 31, 2012 and December 31, 2011, our trading portfolio included no securities of five Eurozone countries (Portugal, Ireland, Italy, Greece and Spain, collectively, the "Stressed Eurozone Countries") whose sovereign obligations have been under stress due to economic uncertainty, potential restructuring and ratings downgrades, or securities of any other countries under similar stress.

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(1)	Actual maturities may differ as a result of calls before scheduled maturity.

(2)	RMBS, CMBS and Other ABS are shown separately, as they are not due at a single maturity date.

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(1)	Related to ceded losses on captive reinsurance transactions and Smart Home. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Off-Balance Sheet Arrangements" for additional information regarding our Smart Home transactions.

(2)	Related to underlying defaulted loans with a most recent date of default notice in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, that default would be considered a current year default.

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(1)	Related to claims from policies in which we were in a first loss position and would have paid the claim absent the rescission or denial.

(2)	Related to claims from policies in which we were in a second loss position. These rescissions or denials may not have resulted in a claim payment obligation due to deductibles and other exposure limitations included in our policies.

(3)	Includes an amount related to a small number of submitted claims that were subsequently withdrawn by the insured.

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(1)

Projected net cumulative rescission/denial rates represent the ratio of claims rescinded or denied to claims received (by claim count). Rescissions and denials are net of actual reinstatements, plus our current estimate for expected reinstatements of previously rescinded or denied claims. These amounts represent the cumulative rates for each quarter as of March 31, 2012. Until all of the claims received during the periods shown have been internally resolved, the rescission/denial rates for each quarter will be subject to change. These rates also will remain subject to change based on differences between estimated and actual reinstatements of previously rescinded policies or denied claims.

(2)

The percentage of claims resolved for each quarter presented in the table above, represents the number of claims that have been internally resolved as a percentage of the total number of claims received for that specific quarter. A claim is considered internally resolved when it is either paid or it is concluded that the claim should be denied or rescinded, though such denials or rescissions could be challenged and, potentially reinstated or overturned, respectively. For the fourth quarter of 2011 and the first quarter of 2012, a significant portion of claims received for those quarters have not been internally resolved; therefore, we do not believe the cumulative rescission/denial rates for those periods are presently meaningful and therefore they are not presented.

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(1)	Risk in force is net of risk ceded through reinsurance contracts and also excludes risk in force on defaulted loans.

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On December 30, 2011, a putative class action under RESPA titled White v. PNC Financial Services Group was filed in the United States District Court for the Eastern District of Pennsylvania. In this case, Radian Guaranty has insured the loan of one of the plaintiffs. Radian Guaranty intends to move to dismiss the complaint on a number of grounds. However, the action has been stayed pending a decision in the Edwards case.

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On March 12, 2012, a putative class action under RESPA titled Lucas E. McCarn v. HSBC USA, Inc., et al. was filed in the United States District Court for the Eastern District of California. Radian Guaranty has moved to dismiss this lawsuit for lack of standing because it did not insure the plaintiff's loan. This action has also been stayed pending a decision in the Edwards case. As in the Samp case, the court has agreed to consider Radian Guaranty's motion to dismiss notwithstanding the stay pending the decision in the Edwards case.

•	On April 5, 2012, a putative class action under RESPA titled Riddle v. Bank of America Corporation, et al. was filed in the United States District Court for the Eastern District of Pennsylvania. Radian Guaranty intends to move to dismiss this lawsuit for lack of standing because it did not insure the plaintiff's loan.

•	On April 5, 2012, a putative class action under RESPA titled Manners, et al. v. Fifth Third Bank, et al. was filed in the United States District Court for the Eastern District of Pennsylvania. Radian Guaranty intends to move to dismiss this lawsuit for lack of standing because it did not insure any of the plaintiffs' loans.

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•	On April 19, 2012, a putative class action under RESPA titled Rulison v. ABN AMRO Mortgage Group, Inc., et al was filed in the United States District Court for the Southern District of New York. Radian Guaranty intends to move to dismiss this lawsuit for lack of standing because it did not insure the plaintiff's loan.

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Public Finance—Insurance of public finance obligations, including tax-exempt and taxable indebtedness of states, counties, cities, special service districts, other political subdivisions, enterprises such as public and private higher education institutions and health care facilities and infrastructure, project finance and private finance initiative assets in sectors such as airports, education, healthcare and other infrastructure projects;

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Structured Finance—Insurance of structured finance obligations, including collateralized debt obligations ("CDOs") and asset-backed securities ("ABS"), consisting of funded and non-funded (referred to herein as "synthetic") executions that are payable from or tied to the performance of a specific pool of assets or covered reference entities. Examples of the pools of assets that collateralize or underlie structured finance obligations include corporate loans, bonds or other borrowed money, residential and commercial mortgage loans, trust preferred securities ("TruPs"), diversified payment rights ("DPRs"), a variety of consumer loans, equipment receivables, real and personal property leases, or a combination of asset classes or securities backed by one or more of these pools of assets;

•	Reinsurance—Reinsurance of domestic and international public finance obligations, including those issued by sovereign and sub-sovereign entities, and structured finance obligations.

•	the commutation of $13.8 billion of financial guaranty net par outstanding that was reinsured by Radian Asset Assurance (the "Assured Commutation");

•	the ceding of $1.8 billion of public finance business (the "Assured Cession"); and

•	an agreement to sell Municipal and Infrastructure Assurance Corporation (the "FG Insurance Shell"), a New York domiciled financial guaranty insurance company with licenses to conduct business in 37 states and the District of Columbia. We are awaiting regulatory approval to complete the sale of the FG Insurance Shell, and expect to receive such approval in the second quarter of 2012.

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Defaults.  Our first-lien primary default rate at March 31, 2012, was 14.1%, compared to 15.2% at December 31, 2011. Our primary default inventory comprised 103,027 loans at March 31, 2012, compared to 110,861 loans at December 31, 2011. Our primary default inventory continued to decline in April 2012. The reduction in our default inventory has been the result of the total number of defaulted loans that have cured ("cures"), claim payments on defaulted loans, and insurance rescissions and claim denials collectively exceeding the total number of new defaults on insured loans. Despite this positive trend, our overall primary default rates continue to remain elevated compared to historical levels due to continued high unemployment and weakness in the U.S. housing and mortgage credit markets. We believe that a return to sustained profitability in our mortgage insurance business is dependent upon both a further reduction in the number of new defaults and an increase in the number of cures, particularly coming from our older delinquent loans. Based on our projections, which are subject to significant risks and uncertainties, we expect improvement in the 2012 operating results of our mortgage insurance business compared to 2011, and while we expect an operating loss for our mortgage insurance business in 2012, we expect to achieve marginal operating profitability in our mortgage insurance business in 2013. We are projecting a 15% decrease in new defaults in 2012 compared to 2011, which compares to an 18% decrease in new defaults in 2011 compared to 2010. During the first quarter of 2012, new defaults decreased 20% compared to new defaults in the first quarter of 2011, while new defaults in the first quarter of 2011 decreased 28% compared to new defaults in the first quarter of 2010.

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Provision for Losses.  Our mortgage insurance provision for losses for the first quarter of 2012 was $234.7 million, and consisted primarily of reserves established on new defaults. In addition, our provision for losses has been impacted by an increase in the weighted average rate at which defaulted loans are expected to move to claim (the "default to claim rate"), due to a greater than anticipated impact from the aging of underlying defaulted loans. With continuing declines in home values, persistently high unemployment and delays by servicers in either modifying loans or foreclosing on properties, the time it has taken to cure or otherwise resolve a delinquent loan has been prolonged. Consequently, in recent years, our default inventory has experienced an increase in its weighted average age, and because we apply higher estimated default to claim rates on our older delinquent loans, this has resulted in higher reserves. Our assumed aggregate weighted average default to claim rate (which incorporates the expected impact of rescissions and denials) was approximately 46% and 43% as of March 31, 2012 and December 31, 2011, respectively. For the remainder of 2012, we anticipate that the default to claim rates will be similar to that assumed in our first quarter 2012 loss reserve estimates.

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Claims Paid.  Total mortgage insurance claims paid in the first quarter of 2012 were $218.2 million. Foreclosure backlogs, servicer delays and loan modification programs have reduced the number of defaults going to claim. In addition, we are reviewing substantially all of the claims we receive for compliance with our insurance policies, which has slowed our internal claims payment process and has resulted in a significant increase in the number of denials in recent periods. While this increasing trend has the effect of reducing claims paid in current periods, we expect a significant portion of denials to be resubmitted and ultimately paid, and as such, our loss and claims paid estimates reflect this expectation. We currently expect total claims paid in 2012 to increase throughout the year, and to total approximately $1.1 billion for 2012.

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New Insurance Written.  We wrote $6.5 billion of new mortgage insurance in the first quarter of 2012, compared to $2.6 billion of insurance written in the corresponding period of 2011. The increase in the three months ended March 31, 2012, compared to the corresponding period of 2011, is mainly attributable to an increase in the penetration rate of private mortgage insurance in the overall insured mortgage market, as well as an increase in our share of the private mortgage market. While the private mortgage insurance industry has made progress in recapturing business from the Federal Housing Administration ("FHA"), the FHA's market share remains historically high. We have been more aggressively marketing our product offerings that favorably compete with the FHA in order to gain market share back from the FHA. In the second quarter of 2011, we implemented a series of changes to our underwriting guidelines and rates, including a more efficient underwriting process for loans conforming to the GSEs guidelines, lower premium rates for mortgage insurance paid directly by borrowers and an expansion of our “jumbo” loan program, all of which has had a positive impact on our 2012 new insurance written.

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Statutory Capital. Under state insurance regulations, Radian Guaranty is required to maintain minimum surplus levels and, in certain states, a minimum amount of statutory capital relative to the level of risk in force, or “risk-to-capital.” Sixteen states (the risk-based capital or “RBC States”) currently have a statutory or regulatory risk-based capital requirement (a "Statutory RBC Requirement"), the most common of which (imposed by 11 of the RBC States) is a requirement that a mortgage insurer's risk-to-capital ratio may not exceed 25 to 1. Radian Guaranty's risk-to-capital ratio improved to 20.6 to 1 as of March 31, 2012, compared to 21.5 to 1 at December 31, 2011, primarily as a result of an increase in its statutory surplus resulting from the release of contingency reserves at Radian Asset Assurance due to the Assured Transaction. We currently project, based on various assumptions that are subject to inherent uncertainty and require significant judgment by management, that Radian Guaranty's risk-to-capital ratio will increase and, absent any further capital support, exceed 25 to 1 in the second half of 2012. We actively manage Radian Guaranty's risk-to-capital position in various ways, including: (1) through reinsurance arrangements; (2) by seeking opportunities to reduce our risk exposure through commutations or other negotiated transactions; (3) by contributing additional capital from Radian Group Inc. ("Radian Group") to our mortgage insurance subsidiaries; and (4) by monetizing gains in our investment portfolio through open market sales of securities. Radian Group had unrestricted cash and liquid investments of $363.7 million at March 31, 2012 that may be used to further support Radian Guaranty's risk-to-capital position. Depending on the extent of our future statutory incurred losses in our regulated mortgage insurance subsidiaries and in Radian Asset Assurance, as well as the level of new insurance written ("NIW") and other factors, the amount of capital contributions required for Radian Guaranty to remain in compliance with the Statutory RBC Requirements could be substantial and could exceed amounts maintained at Radian Group. Radian Asset Assurance establishes statutory incurred losses only upon the event of default of the underlying credit obligations.

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Net Par Outstanding.  Our financial guaranty segment's net par outstanding was $44.6 billion as of March 31, 2012, compared to $69.2 billion at December 31, 2011. This reduction in net par outstanding was primarily due to the Assured Transaction and the First Quarter 2012 CDO Terminations, as well as the amortization or scheduled maturity of our insured portfolio and prepayments of public finance transactions. We expect our net par outstanding will continue to decrease as our financial guaranty portfolio matures and as we seek to proactively reduce our financial guaranty net par outstanding.

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Credit Performance.  The percentage of internally rated AAA credits in our insured portfolio increased to 48.6% of our net par outstanding at March 31, 2012, from 44.9% at December 31, 2011. In addition, the percentage of internally rated BBB credits increased from 22.0% to 27.6% of our net par outstanding over the past quarter. The BIG exposure increased to 9.5% of our total portfolio as of March 31, 2012, from 5.9% as of December 31, 2011. These changes in the rating mix of financial guaranty's insured portfolio were primarily due to the Assured Transaction and the removal of primarily AAA rated par due to the First Quarter 2012 CDO Terminations. After giving effect to the Commutation Transactions, which were all rated BIG, the percentage of our insured portfolio rated BIG exposure has declined from 9.5% to 7.2%.

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Public Finance. Our public finance insured portfolio continues to experience some stress from the general economic downturn and slow economic recovery. As of March 31, 2012, approximately 9.9% of our total financial guaranty segment's public finance net par outstanding consisted of credits rated BIG, compared to 4.5% as of December 31, 2011. The percentage of AA or A rated public finance credits declined from 47.5% to 20.8% between December 31, 2011 and March 31, 2012. These rating shifts in our portfolio mix were primarily caused by the Assured Transaction, which reduced the public finance portfolio by $15.0 billion and removed 45% of public finance net par outstanding from our insured portfolio. The percentage of our total net par outstanding to public finance obligations decreased from 47.6% to 39.0% of our total net par outstanding between December 31, 2011 and March 31, 2012.

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Structured Finance. The percentage of internally rated AAA credits in our structured finance portfolio declined to 74.6% at March 31, 2012, from 79.5% at December 31, 2011, mainly due to the First Quarter 2012 CDO Terminations. In addition, the percentage of BIG exposure increased to 9.3% of our total structured finance portfolio as of March 31, 2012, compared to 7.1% as of December 31, 2011 as a result of these terminations. The First Quarter 2012 CDO Terminations also reduced the net par outstanding of the corporate CDOs scheduled to mature in 2012, 2013 and 2014 by 63%, 29% and 31%, respectively.

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(1)

Represents the present value of our estimated credit loss payments (net of estimated recoveries) for those transactions for which we currently anticipate paying net losses, calculated using a discount rate of approximately 2.4%, which represents our current investment yield. Substantially all of our current present value of estimated credit loss payments on our Financial Guaranty Derivatives and VIEs represents the negotiated net claim payment on the Commutation Transactions paid in April 2012.

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(1)

Represents the provision for losses attributable to loans that were in default as of the beginning of each period indicated, including: (a) the change in reserves for loans that were in default status (including pending claims) as of both the beginning and end of each period indicated, (b) the net impact to provision for losses from loans that were in default as of the beginning of each period indicated but were either a cure, a prepayment, a paid claim or a rescission or denial during the period indicated, and (c) the impact to our IBNR reserve during the period related to changes in actual and estimated reinstatements of previously rescinded policies and denied claims.

(2)	Includes the effect of reinsurance recoveries from captive and Smart Home transactions (including a $27 million write-down of Smart Home recoverables for the quarter ended March 31, 2012), second-lien activity, LAE and other miscellaneous loss-related activity.

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(1)	Related to claims from policies in which we were in a first loss position and would have paid the claim absent the rescission or denial.

(2)	Related to claims from policies in which we were in a second loss position. These rescissions or denials may or may not have resulted in a claim payment obligation due to deductibles and other exposure limitations included in our policies.

(3)	Includes an amount related to a small number of submitted claims that were subsequently withdrawn by the insured.

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(1)

Projected net cumulative rescission/denial rates represent the ratio of claims rescinded or denied to claims received (by claim count). Rescissions and denials are net of actual reinstatements, plus our current estimate for expected reinstatements of previously rescinded or denied claims. These amounts represent the cumulative rates for each quarter as of March 31, 2012. Until all of the claims received during the periods shown have been internally resolved, the rescission/denial rates for each quarter will be subject to change. These rates also will remain subject to change based on differences between estimated and actual reinstatements of previously rescinded policies or denied claims.

(2)

The percentage of claims resolved for each quarter presented in the table above, represents the number of claims that have been internally resolved as a percentage of the total number of claims received for that specific quarter. A claim is considered internally resolved when it is either paid or it is concluded that the claim should be denied or rescinded, though such denials or rescissions could be challenged and, potentially reinstated or overturned, respectively. For the fourth quarter of 2011 and first quarter of 2012, a significant portion of claims received for those quarters have not been internally resolved; therefore, we do not believe the cumulative rescission/denial rates for those periods are presently meaningful and therefore they are not presented.

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(1)	FICO credit scoring model.

(2)	LTV ratios: The ratio of the original loan amount to the original value of the property.

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(1)	Included in primary insurance amounts.

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(1)	Amounts reflected are compiled on a monthly basis consistent with reports received from loan servicers. The number of new defaults and cures presented includes the following number of monthly defaults that defaulted and cured within the periods indicated:

(2)	Includes those charged to a deductible or captive.

(3)	Net of any previously rescinded policies that were reinstated during the period. Such reinstated rescissions may ultimately result in a paid claim.

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(4)	Net of any denied claims that were reinstated during the period. Such previously denied but reinstated claims are generally reviewed for possible rescission prior to any claim payment.

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(1)	Represents the weighted average default to claim rate before consideration of estimated rescissions and denials for each

(2)	Net of estimate of rescissions and denials.

(1)	Calculated as total reserves divided by total defaults.

(2)	If calculated before giving effect to deductibles and stop losses in pool transactions, the pool reserve per default at March 31, 2012, December 31, 2011, and March 31, 2011, would be $27,299, $25,402 and $29,745, respectively.

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(1)	Net of reinsurance recoveries.

(2)	Calculated without giving effect to the impact of terminations of captive reinsurance transactions and first- and second-lien transactions.

(3)	Before reinsurance recoveries.

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(1)	Represents ceded losses on captive transactions and Smart Home.

(2)	Does not include second-lien premium deficiency reserve ("PDR").

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(1)	Insurance in force ("IIF") on captives as a percentage of total IIF.

(2)	RIF on captives as a percentage of total RIF.

(3)	Reflects the impact of terminations of captive reinsurance transactions and first- and second-lien transactions.

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(1)	Represents our exposure to the aggregate outstanding principal on insured obligations.

(2)	A claim liability is recorded on the balance sheet when there is evidence that deterioration has occurred and the net present value of our expected losses for a particular policy exceeds the unearned premium reserve for that policy. The claim liability reported is net of estimated salvage and subrogation, which may result in a net claim asset.

(3)	Represents either the net (asset) liability recorded within derivative assets or derivative liabilities for derivative contracts, or the net (asset) liability recorded within VIE debt and other financial statement line items for financial guaranty consolidated VIEs.

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(4)	Includes $1.8 billion and $3.0 billion at March 31, 2012 and December 31, 2011, respectively, of tax supported revenue bonds.

(5)	Legally defeased bond issuances where our financial guaranty policy is not extinguished, but cash or securities in an amount sufficient to pay remaining obligations under such bonds have been deposited in an escrow account for the benefit of the bond holders.

(6)	Represents other types of municipal obligations, including human service providers, second-to-pay international public finance, non-profit institutions, project finance accommodations and stadiums, none of which individually constitutes a material amount of our financial guaranty net par outstanding.

(7)

Includes $2.9 billion and $3.2 billion at March 31, 2012 and December 31, 2011, respectively, of international public finance insured obligations (which includes sovereign debt), of which $117.9 million and $119.0 million at March 31, 2012 and December 31, 2011, respectively, of such obligations were in five Stressed Eurozone Countries. We had no exposure to Ireland at either March 31, 2012 or December 31, 2011.

(8)	Represents other types of structured finance obligations, including DPRs, collateralized guaranteed investment contracts or letters of credit, foreign commercial assets and life insurance securitizations, none of which individually constitutes a material amount of our financial guaranty net par outstanding.

•	We provided credit protection on a CDO of ABS transaction with $450.2 million net par outstanding at March 31, 2012, which was commuted pursuant to the Commutation Transactions in April 2012. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Summary—Financial Guaranty" above for detail regarding the Commutation Transactions.

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We have reinsured several primary financial guaranty insurers' obligations with respect to $225.4 million in net par outstanding at March 31, 2012, related to Jefferson County, Alabama (the "County”) sewer warrants (the "Obligations"). The County's sewer system operations have generated sufficient revenues since the beginning of 2009 to pay interest on its outstanding debt, as well as regularly scheduled annual installments of principal in February of 2010, 2011 and 2012, primarily due to historically low prevailing interest rates on the County's variable rate obligations. We believe a number of factors continue to adversely affect the performance of our insured obligations, including the County's highly leveraged capital position, the sub-par performance of the sewer facilities, the possibility that the County will be unable to generate sufficient revenues to make regularly scheduled payments of principal and interest on the Obligations if interest rates increase, and the filing by the County on November 9, 2011, of a petition for bankruptcy (the “Bankruptcy Petition”) under Chapter 9 of the U.S. Bankruptcy Code (the “Bankruptcy Code”) with the U.S. Bankruptcy Court in the Northern District of Alabama (the “Bankruptcy Court”).

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(1)

Reflects the amount of principal subordination (expressed as a percentage of the principal of the total collateral pool) remaining beneath our insured TruPs bond, after giving effect to paydowns or redemptions (“amortization”) of collateral and actual defaults and assuming no recoveries of principal on the defaulted TruPs. Notwithstanding this principal subordination, it is possible that the remaining performing collateral in these transactions will not generate sufficient cash to pay interest on our insured TruPs bonds. In this event, we may be required to make a claim payment in respect of interest, even on transactions where subordination remains to cover principal payments.

(2)	Reflects the amount of principal subordination (expressed as a percentage of the principal of the total collateral pool) remaining beneath our insured TruPs bond, after giving effect to deferrals of interest payments on the TruPs collateral, as well as amortization and actual defaults, assuming no recoveries of principal on the defaulted or deferred TruPs.

(3)	Internally generated interest coverage ratio for each TruPs bond equal to the gross interest collections on the TruPs collateral minus transaction expenses as a percentage of the sum of hedge payments and interest payable on the TruPs bond and securities senior to, or pari passu with, the TruPs bond.

(4)	The transactions with a CDS Termination Date prior to the TruPs CDO Maturity Date provide for automatic annual one-year extensions (absent written notifications from our counterparty) until the TruPs CDO Maturity Date.

(5)	Pursuant to the terms of our CDS contracts covering these TruPs bonds, we could be required to pay our counterparties the outstanding par on our insured TruPs bond on the scheduled termination date of our CDS contract. For more information regarding this potential liquidity risk, see "Results of Operations—Liquidity and Capital Resources."

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(1)	Cash item.

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(1)	Moody's outlook for Radian Group and all our rated insurance subsidiaries is currently Negative.

(2)	S&P's outlook for Radian Group and all our rated insurance subsidiaries is currently Negative.

(3)	Rating has been withdrawn.

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Level I	—    Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level II	—    Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities; and

Level III	—    Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

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•	first, we define a tranche on the CDX index (defined below) that equates to the risk profile of our specific transaction (we refer to this tranche as an "equivalent-risk tranche");

•	second, we determine the fair premium amount on the equivalent-risk tranche for those market participants engaged in trading on the CDX index (we refer to each of these participants as a "typical market participant"); and

•	third, we adjust the fair premium amount for a typical market participant to account for the difference between the non-performance or default risk of a typical market participant and the non-performance or default risk of a financial guarantor of similar credit quality to us (in each case, we refer to the risk of non-performance as "non-performance risk").

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•	the extent and the duration of the decline in value;

•	the reasons for the decline in value (e.g., credit event, interest related or market fluctuations); and

•	the financial position, access to capital and near term prospects of the issuer, including the current and future impact of any specific events.

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(1)	Includes VIE debt of $8.6 million and NIMS derivative assets of $1.7 million.

(2)	Includes TruPs, CDOs of CMBS, CDOs of ABS and other non-corporate CDOs.

(3)	Includes net VIE liabilities of $71.3 million and net derivative liabilities of $159.4 million.

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On December 30, 2011, a putative class action under RESPA titled White v. PNC Financial Services Group was filed in the United States District Court for the Eastern District of Pennsylvania. In this case, Radian Guaranty has insured the loan of one of the plaintiffs. Radian Guaranty intends to move to dismiss the complaint on a number of grounds. However, the action has been stayed pending a decision in the Edwards case.

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On March 12, 2012, a putative class action under RESPA titled Lucas E. McCarn v. HSBC USA, Inc., et al. was filed in the United States District Court for the Eastern District of California. Radian Guaranty has moved to dismiss this lawsuit for lack of standing because it did not insure the plaintiff's loan. This action has also been stayed pending a decision in the Edwards case. As in the Samp case, the court has agreed to consider Radian Guaranty's motion to dismiss notwithstanding the stay pending the decision in the Edwards case.

•	On April 5, 2012, a putative class action under RESPA titled Riddle v. Bank of America Corporation, et al. was filed in the United States District Court for the Eastern District of Pennsylvania. Radian Guaranty intends to move to dismiss this lawsuit for lack of standing because it did not insure the plaintiff's loan.

•	On April 5, 2012, a putative class action under RESPA titled Manners, et al. v. Fifth Third Bank, et al. was filed in the United States District Court for the Eastern District of Pennsylvania. Radian Guaranty intends to move to dismiss this lawsuit for lack of standing because it did not insure any of the plaintiffs' loans.

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•	On April 19, 2012, a putative class action under RESPA titled Rulison v. ABN AMRO Mortgage Group, Inc., et al was filed in the United States District Court for the Southern District of New York. Radian Guaranty intends to move to dismiss this lawsuit for lack of standing because it did not insure the plaintiff's loan.

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