Schedule II—Financial Information of Registrant

Balance Sheets

Parent Company Only



	December 31,
($ in thousands, except share and per share amounts)	2011			2010
Assets
Investments
Trading securities—at fair value	$	387,239		$	482,873
Short-term investments—at fair value	177,116			333,687
Other invested assets	25,000			25,000
Cash	453			1,945
Restricted cash	1,060			1,835
Investment in subsidiaries, at equity in net assets (1)	1,591,914			1,027,499
Debt issuance costs	8,414			9,804
Due from affiliates, net	2,451			7,306
Property and equipment, at cost (less accumulated depreciation of $46,998 and $44,729)	2,017			3,755
Other assets	35,474			20,886
Total assets	$	2,231,138		$	1,914,590
Liabilities and Stockholders’ Equity
Accounts payable and accrued expenses	$	123,665		$	31,734
Accrued interest payable	7,558			8,594
Long-term debt	818,584			964,788
Federal income taxes—current and deferred (1)	99,040			49,644
Total liabilities	1,048,847			1,054,760
Common stockholders’ equity
Common stock: par value $.001 per share; 325,000,000 shares authorized; 150,666,446 and 150,507,853 shares issued at December 31, 2011 and 2010, respectively; 133,199,159 and 133,049,213 shares outstanding at December 31, 2011 and 2010, respectively	151			150
Treasury stock, at cost: 17,467,287 and 17,458,640 shares at December 31, 2011 and 2010, respectively	(892,052		)	(892,012		)
Additional paid-in capital	1,966,565			1,963,092
Retained earnings (deficit)	96,227			(204,926		)
Accumulated other comprehensive income (loss)	11,400			(6,524		)
Total common stockholders’ equity	1,182,291			859,780
Total liabilities and stockholders’ equity	$	2,231,138		$	1,914,540

_______________________


(1)	See Note A

See Supplemental Notes.

Radian Group Inc.

Schedule II—Financial Information of Registrant

Statements of Operations

Parent Company Only



	Year Ended December 31,
(In thousands)	2011			2010			2009
Revenues:
Net investment income	$	15,890		$	8,626		$	222
Net gains on investments	24,603			61,120			280
Net gains on other financial instruments	1,085			2,496			11,970
Other income	3			220			280
Total revenues	41,581			72,462			12,752
Expenses:
Interest expense	16,132			1,911			—
Total expenses	16,132			1,911			—
Income before income taxes	25,449			70,551			12,752
(Benefit) provision for income taxes (1)	(201,741		)	(209,235		)	7,563
Equity in net income (loss) of affiliates (1)	74,960			(2,085,653		)	(153,068		)
Net income (loss)	$	302,150		$	(1,805,867	)	$	(147,879	)

_______________________


(1)	See Note A

See Supplemental Notes.

Radian Group Inc.

Schedule II—Financial Information of Registrant

Statements of Cash Flows

Parent Company Only



	Year Ended December 31,
(In thousands)	2011			2010			2009
Cash flows from operating activities:
Net income (loss)	$	302,150		$	(1,805,867	)	$	(147,879	)
Adjustments to reconcile net income (loss) to net cash provided (used in) by operating activities:
Net gains on other investments	(24,603		)	(61,120		)	(280		)
Gain on the repurchase of long-term debt	—			(2,496		)	(11,970		)
Equity in undistributed net (income) loss of subsidiaries and affiliates (1)	(400,561		)	2,049,175			258,483
Increase (decrease) in federal income taxes (1)	49,396			(274,778		)	11,968
Distributions from subsidiaries and affiliates	—			—			74,369
Change in other assets	13,384			35,797			6,041
Change in accounts payable and accrued expenses	90,895			(20,711		)	8,403
Net cash provided by (used in) operating activities	30,661			(80,000		)	199,135
Cash flows from investing activities:
Sales/redemptions of fixed-maturity investments available for sale	—			4,083			3,924
Sales/redemptions of trading securities	151,840			57,989			—
Purchases of trading securities	(32,825		)	(455,724		)	—
Sales/redemptions of short term investments, net	156,665			(230,392		)	(51,159		)
Purchases of other invested assets	—			(25,000		)	—
Purchases of property and equipment, net	(523		)	(1,367		)	(2,390		)
Capital contributions to subsidiaries and affiliates	(145,987		)	(423,146		)	(5,600		)
Capital distributions from subsidiaries and affiliates	7			268,530			—
Net cash provided by (used) in investing activities	129,177			(805,027		)	(55,225		)
Cash flows from financing activities:
Dividends paid	(1,330		)	(1,202		)	(827		)
Issuance of long-term debt	—			391,310			—
Paydown of other borrowings	—			—			(100,000		)
Redemption of long-term debt	(160,000		)	(29,348		)	(45,622		)
Proceeds from issuance of common stock	—			525,887			—
Net cash (used in) provided by financing activities	(161,330		)	886,647			(146,449		)
(Decrease) increase in cash	(1,492		)	1,620			(2,539		)
Cash, beginning of year	1,945			325			2,864
Cash, end of year	$	453		$	1,945		$	325

_______________________


(1)	See Note A

See Supplemental Notes.

Radian Group Inc.

Schedule II—Financial Information of Registrant

Parent Company Only

Supplemental Notes

Note A

The Radian Group Inc. (the “Parent Company”) financial statements represent the stand-alone financial statements of the Parent Company. These financial statements have been prepared on the same basis and using the same accounting policies as described in the consolidated financial statements included herein, except that the Parent Company uses the equity-method of accounting for its majority owned subsidiaries. Refer to the Parent Company's consolidated financial statements for additional information.

Revisions to Prior Periods

In preparing the Parent Company stand-alone financial statements for the year ended December 31, 2011, we identified an error in the historical presentation of the provision (benefit) for income taxes and equity in net income (loss) of affiliates. While the impact is not considered material, we have revised the prior period financial statements. The revision decreases the 2010 benefit for income taxes and equity in net loss of affiliates by $79.7 million. In addition, this revision had the effect of increasing our investment in subsidiaries balance and our net federal income tax liability as of December 31, 2010. Within the 2010 statement of cash flows, this revision resulted in reductions to the adjustment for equity in undistributed net (income) loss of subsidiaries and affiliates and increase (decrease) in federal income taxes. There was no impact to net income (loss) or total common stockholders' equity for the period ended December 31, 2010.

Certain other prior balances have been reclassified to conform to the current period presentation.

Note B

Included in short-term investments at December 31, 2011 and 2010, is $27.7 million and $19.4 million, respectively, of restricted funds required to support estimated tax payments to Radian Asset Assurance. We also had $1.1 million and $0.9 million at December 31, 2011 and 2010, respectively, of restricted cash held as collateral for our insurance trust agreement for our health insurance policy.

Note C

The Parent Company provides certain services to its subsidiaries. The Parent Company allocates to its subsidiaries corporate income and expense it incurs in the capacity of supporting those subsidiaries, based on either an allocated percentage of time spent or internally allocated capital. All operating expenses and interest expense, except for the discount amortization attributable to the senior convertible notes issued in November 2010, have been allocated to the subsidiaries for 2011, 2010 and 2009. Total operating expenses and interest expense allocated to subsidiaries for 2011, 2010 and 2009, were $100.7 million, $105.2 million and $115.8 million, respectively. Amounts charged to the subsidiaries for operating expenses are based on actual cost, without any mark-up, except for the amounts charged to subsidiaries outside the U.S. for which a reasonable mark-up is charged. The Parent Company considers these charges fair and reasonable. The subsidiaries reimburse the Parent Company for these costs in a timely manner, which has the impact of improving the cash flows of the Parent Company and reducing dividends to the Parent Company.

Note D

During 2011, the Parent Company did not receive any dividends from its subsidiaries. During 2010 and 2009, the Parent Company received a $268.5 million capital distribution and a $74.4 million dividend, respectively, from subsidiaries.

During 2011, the Parent Company made capital contributions of $146 million to its subsidiaries, which includes contributions related to tax payments. In December 2011, the Parent Company contributed its ownership interest in Radian Mortgage Assurance to Radian Guaranty, which totaled approximately $17 million. Also in December 2011, Radian Guaranty sold its ownership interest in EFSG to the Parent Company for approximately $6 million. In February 2012, the Parent Company contributed $100 million to Radian Guaranty.

During 2010, the Parent Company contributed $322 million to Radian Guaranty and $101 million to CMAC of Texas.

In October 2009, the Parent Company satisfied its obligation to pay approximately $98 million to Radian Guaranty by transferring its equity interest in Sherman to Radian Guaranty, which required no cash payment.

Note E

During 2010, the Parent Company repurchased $31.9 million, of outstanding principal amount of our 7.75% debentures due June 2011. In November 2010, the Parent Company issued $450 million principal amount of 3.0% convertible senior notes due November 2017, at a discount to par. The convertible senior notes are convertible into shares of our common stock.

The maturities of our long-term debt in future years are as follows:



($ in thousands)
2012	$	—
2013	252,267
2014	—
2015	249,819
2016	—
Thereafter	316,498
	$	818,584

Note F

The net investment income for 2011 reflects a full year of income earned on the reinvested proceeds received from our issuance of common stock in May 2010 and the issuance of our convertible debt in November 2010.

The net gains on investments for 2011 reflect unrealized gains on certain bonds in our portfolio. Net gains on investments for 2010 reflected unrealized market gains relating to our unconsolidated CPS, substantially all of which were purchased by the Parent Company during 2010.