8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) September 15, 2004

Radian Group Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

1-11356	23-2691170
(Commission File Number)	(IRS Employer Identification No.)
1601 Market Street, Philadelphia, Pennsylvania	19103
(Address of Principal Executive Offices)	(Zip Code)

215-564-6600

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On September 15, 2004, we posted on our website a quarterly operating supplement for the second quarter of 2004 showing financial information, prepared on a statutory accounting basis, for our financial guaranty business. The quarterly operating supplement also contains other information about us. The quarterly operating supplement is furnished as Exhibit 99.1. This information is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor is it incorporated by reference in any filing under the Securities Act of 1933 unless we expressly incorporate it by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

99.1 Radian Asset Assurance Inc. – Quarterly Operating Supplement, Second Quarter 2004

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	RADIAN GROUP INC.
Date: September 15, 2004	By:	/s/ Howard S. Yaruss
		Howard S. Yaruss
		Secretary

EX-99.1

Exhibit 99.1

Quarterly                                   

Operating Supplement             

Second Quarter 2004               

Quarterly

Operating

Supplement

Table of Contents

	Page
Introductory Note	2
Company Profile	2
Company Information	2
Key Financial Highlights	3
Segment Information–Financial Guaranty	4
Statutory Income Statements	5
Statutory Balance Sheets	6
Gross Premiums Written by Product	7
Total Claims-Paying Resources and Leverage Ratios	7
Investment Portfolio Highlights	8
Insured Portfolio Highlights	9
Explanatory Notes	12
Management Team	13
Safe Harbor Statement	14

1 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Table of Contents

Quarterly

Operating

Supplement

Radian Asset Assurance Inc.

Quarterly Operating Supplement

June 30, 2004

Introductory Note

Radian Reinsurance Inc. (“Radian Reinsurance”) was merged with and into Radian Asset Assurance Inc. effective as of June 1, 2004. All financial information presented herein is as if the merger had occurred on January 1, 2003.

Company Profile

Radian Asset Assurance Inc., founded in 1985 and rated AA by Standard & Poor’s and Fitch Ratings and Aa3 by Moody’s, provides credit enhancement to the holders of debt obligations and asset-backed securities. As a direct writer of financial guaranty insurance for municipal bonds, asset-backed securities and structured transactions, the Company plays an important role in extending the benefits of insurance to a broad range of institutions and securities issuers.

Radian Asset Assurance Inc. is a subsidiary of Radian Group Inc. (NYSE: RDN), a global credit enhancement provider headquartered in Philadelphia, with significant operations in New York City and a presence in London.

Company Information
Radian Asset Assurance Inc.	Contact:
335 Madison Avenue	John C. DeLuca
New York, New York 10017	Senior Vice President, Market Development
1 877 337.4925 (within the U.S.)	1 212 984.9222
1 212 983.3100	john.deluca@radian.biz

2 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Introductory Note / Company Profile / Company Information

Quarterly

Operating

Supplement

Radian Group Inc. and Subsidiaries

Key Financial Highlights* ($ Thousands)

	Six months ended June 30, 2004
	Mortgage Insurance		Financial Services		Financial Guaranty			Total
Net premiums written .	$	442,128	$	—	$	70,569		$	512,697
Net premiums earned	$	406,603	$	—	$	96,066		$	502,669
Net investment income		58,216		74		42,294			100,584
Equity in net income/(loss) of affiliates		—		85,287		(633	)		84,654
Other income		11,220		3,722		854			15,796
Total revenues		476,039		89,083		138,581			703,703
Provision for losses		199,162		—		32,165			231,327
Policy acquisition costs		34,219		—		19,436			53,655
Other operating expenses		74,198		8,315		23,070			105,583
Interest expense		10,412		1,310		6,296			18,018
Total expenses		317,991		9,625		80,967			408,583
Gains on sales of investments		28,223		2,599		1,141			31,963
Change in fair value of derivative instruments		3,214		35		1,410			4,659
Total gains		31,437		2,634		2,551			36,622
Pretax income		189,485		82,092		60,165			331,742
Income tax provision		52,298		28,732		10,199			91,229
Net income	$	137,187	$	53,360	$	49,966		$	240,513
Total assets	$	3,910,910	$	314,756	$	2,305,046		$	6,530,712
Deferred policy acquisition costs		79,359		—		128,149			207,508
Reserve for losses and loss adjustment expenses		527,059		—		248,316			775,375
Unearned premiums		128,190		—		598,499			726,689
Equity	$	1,907,478	$	255,175	$	1,183,041		$	3,345,694

* Reported on a GAAP basis.

3 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Key Financial Highlights

Quarterly

Operating

Supplement

Radian Group Inc. and Subsidiaries

Segment Information–Financial Guaranty ($ Thousands)

	Six months ended June 30, 2004
	As Reported			Impact of Clawback			As Adjusted Excluding Clawback
Net premiums written	$	70,569		$	(96,417	)	$	166,986
Net premiums earned	$	96,066		$	(24,892	)	$	120,958
Net investment income		42,294			—			42,294
Equity in net loss of affiliates		(633	)		—			(633	)
Other income		854			—			854
Total revenues		138,581			(24,892	)		163,473
Provision for losses		32,165			—			32,165
Policy acquisition costs		19,436			(9,766	)		29,202
Other operating expenses		23,070			—			23,070
Interest expense		6,296			—			6,296
Total expenses		80,967			(9,766	)		90,733
Gains on sales of investments		1,141			—			1,141
Change in fair value of derivative instruments		1,410			(791	)		2,201
Total gains /(losses)		2,551			(791	)		3,342
Pretax income		60,165			(15,917	)		76,082
Income tax provision		10,199			(5,571	)		15,770
Net income	$	49,966		$	(10,346	)	$	60,312

The above schedule shows the Financial Guaranty Segment, on a GAAP basis, as reported (Column 1) and adjustments (Column 2) to reflect the income statement impact of the recapture (referred to above as the clawback) of business previously ceded to the Company by one of the primary insurer customers of the Financial Guaranty Segment. The adjusted numbers are shown in Column 3. The impact of the clawback (Column 2) reflects the clawback of business ceded to the Company in prior periods. This clawback affected the first quarter (and, as a result, the year-to-date periods) of 2004. Accordingly, management believes that Column 3 provides useful information to investors by presenting a more meaningful basis of comparison for the Financial Guaranty Segment’s past and future results.

4 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Segment Information–Financial Guaranty

Quarterly

Operating

Supplement

Radian Asset Assurance Inc.

Statutory Income Statements* ($Thousands)

	Quarter ended						Six months ended
	June 30 2004			June 30 2003			June 30 2004			June 30 2003
Revenues
Gross premiums written	$	82,752		$	84,772		$	39,558		$	170,505
Reinsurance premiums ceded		(1,203	)		(2,624	)		(2,564	)		(3,471	)
Net premiums written		81,549			82,148			36,994			167,034
(Increase) decrease in unearned premiums		(39,287	)		(20,918	)		51,160			(51,099	)
Premiums earned		42,262			61,230			88,154			115,935
Net investment income		20,437			19,237			41,015			38,342
Net realized gain on sale of investments		2,280			2,462			7,281			6,350
Net investment gains		22,717			21,699			48,296			44,692
Other (expense) income		(3,323	)		(1,481	)		(6,053	)		60
Total revenues		61,656			81,448			130,397			160,687
Expenses
Losses and loss adjustment expenses incurred		(3,847	)		12,815			112,507			22,571
Commissions incurred		8,499			15,417			(17,096	)		34,712
Other underwriting expenses		17,073			17,989			33,563			29,723
Total expenses		21,725			46,221			128,974			87,006
Income before income taxes		39,931			35,227			1,423			73,681
Federal and foreign income tax expense (benefit)		4,793			4,225			(17,500	)		9,216
Net income	$	35,138		$	31,002		$	18,923		$	64,465
Financial Ratios
Loss and LAE Ratio		–9.1	%		20.9	%		127.6	%		19.5	%
Underwriting Expense Ratio		31.4	%		40.7	%		44.5	%		38.6	%
Combined Ratio		22.3	%		61.6	%		172.1	%		58.1	%

* See Explanatory Notes on page 12.

5 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Statutory Income Statements

Quarterly

Operating

Supplement

Radian Asset Assurance Inc.

Statutory Balance Sheets* ($ Thousands)

	June 30 2004		December 31 2003
Assets
Long-term bonds	$	1,816,550	$	1,662,554
Preferred stock		30,824		32,252
Common stock		70,792		74,204
Cash and short-term investments		55,518		143,729
Receivable for securities		3,455		515
Total Investments		1,977,139		1,913,254
Investment income due and accrued		25,178		23,652
Premiums receivable		21,964		21,653
Funds held by reinsured companies		736		952
Current federal income tax recoverable		—		4,924
Net deferred tax asset		3,607		3,019
Other assets		3,194		2,317
Total Assets	$	2,031,818	$	1,969,771
Liabilities
Contingency reserve	$	225,255	$	321,312
Losses and loss adjustment expenses		115,202		62,850
Reinsurance payable on paid losses and loss adjustment expenses		3,809		6,059
Unearned premiums		659,326		710,486
Provision for reinsurance .		91		284
Payable to affiliates		6,359		25,350
Payable for securities		6,940		2,962
Ceded reinsurance premiums payable		1,233		1,742
Federal and foreign income taxes payable		1,194		—
Accrued expenses and other liabilities		10,232		15,652
Total Liabilities		1,029,641		1,146,697
Policyholders’ Surplus
Common stock		15,000		15,000
Additional paid-in capital		593,214		528,214
Unassigned funds		393,963		279,860
Total Policyholders’ Surplus		1,002,177		823,074
Total Liabilities and Policyholders’ Surplus	$	2,031,818	$	1,969,771
Qualified Statutory Capital	$	1,227,432	$	1,144,386

* See Explanatory Notes on page 12.

6 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Statutory Balance Sheets

Quarterly

Operating

Supplement

Radian Asset Assurance Inc.

Gross Premiums Written by Product* ($ Thousands)

	2nd Qtr 2004		2nd Qtr 2003		Percent Change		YTD 2004			YTD 2003		Percent Change
Public Finance Direct	$	17,679	$	10,891	62.3	%	$	25,865		$	21,735	19.0	%
Structured Finance Direct		35,702		22,354	59.7	%		57,153			39,461	44.8	%
Public Finance Reinsurance		16,773		24,001	–30.1	%		36,897			47,607	–22.5	%
Structured Finance Reinsurance		8,292		13,615	–39.1	%		17,296			28,298	–38.9	%
Trade Credit Reinsurance		4,306		13,911	–69.0	%		(1,236	)		33,404	–103.7	%
		82,752		84,772	–2.4	%		135,975			170,505	–20.3	%
Impact of Recapture		—		—				(96,417	)		—
	$	82,752	$	84,772	–2.4	%	$	39,558		$	170,505	–76.8	%

Total Claims-Paying Resources and Leverage Ratios*

($ Thousands except ratios)

	June 30 2004		December 31 2003		Percent Change
Capital and Surplus	$	1,002,177	$	823,074	22	%
Contingency Reserve		225,255		321,312	–30	%
Qualified Statutory Capital		1,227,432		1,144,386	7	%
Unearned Premium Reserve		659,326		710,486	–7	%
Loss and Loss Expense Reserves		115,202		62,850	83	%
Total Policyholders’ Reserves		2,001,960		1,917,722	4	%
Present Value of Future Installment Premiums		339,211		444,368	–24	%
Reinsurance and Soft Capital Facilities		245,000		275,000	–11	%
Total Claims-Paying Resources.	$	2,586,171	$	2,637,090	–2	%
Total Debt Service
(Principal and Interest) Outstanding	$	98,761,065	$	117,817,484	–16	%
Capital Leverage Ratio 1.		80:1		103:1
Claims-Paying Ratio 2		38:1		45:1

* See Explanatory Notes on page 12.

1 Capital Leverage Ratio: Total debt service/Qualified statutory capital.

2 Claims-Paying Ratio: Total debt service/Total claims-paying resources.

7 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Gross Premiums / Total Claims-Paying Resources

Quarterly

Operating

Supplement

Radian Asset Assurance Inc.

Investment Portfolio Highlights

Asset Quality

As of June 30, 2004, the book value of our investment portfolio was $2.0 billion, with an average duration of 6.3 years.

Asset Class

Our conservative portfolio is invested primarily in fixed-income securities. Our primary objective is to achieve total return, with a secondary objective of maximizing after-tax income.

8 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Investment Portfolio Highlights

Quarterly

Operating

Supplement

Radian Asset Assurance Inc.

Insured Portfolio Highlights* ($ Millions)

Geographic Diversification

State	Net Par Outstanding (6/30/2004)		Percent of total Net Par		Net Par Outstanding (12/31/2003)		Percent of total Net Par
California	$	4,992	7.8	%	$	6,255	8.1	%
New York		4,284	6.6	%		4,930	6.4	%
Texas		3,473	5.4	%		3,727	4.9	%
Florida		2,705	4.2	%		3,132	4.1	%
Pennsylvania		2,657	4.1	%		2,950	3.8	%
Illinois		2,608	4.0	%		2,702	3.5	%
Massachusetts		1,671	2.6	%		2,235	2.9	%
New Jersey		1,331	2.1	%		2,137	2.8	%
Washington		1,184	1.8	%		1,354	1.8	%
Ohio		1,127	1.8	%		1,179	1.5	%
Top ten states subtotal		26,032	40.4	%		30,601	39.8	%
Total of other states		17,298	26.8	%		20,000	26.0	%
Domestic structured finance		17,038	26.4	%		19,782	25.7	%
International		4,116	6.4	%		6,531	8.5	%
Total	$	64,484	100.0	%	$	76,914	100.0	%

* See Explanatory Notes on page 12.

9 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Insured Portfolio Highlights

Quarterly

Operating

Supplement

Radian Asset Assurance Inc.

Insured Portfolio Highlights* ($ Millions)

Sector Breakout

Public Finance	Gross Par Outstanding (6/30/2004)		Percent of total Gross Par		Net Par Outstanding (6/30/2004)		Percent of total Net Par		Gross Par Outstanding (12/31/2003)		Percent of total Gross Par		Net Par Outstanding (12/31/2003)		Percent of total Net Par
General Obligations	$	12,913	19.4	%	$	12,880	20.0	%	$	14,431	18.3	%	$	14,387	18.7	%
Healthcare		7,781	11.7	%		7,781	12.1	%		8,874	11.2	%		8,874	11.5	%
Utilities		6,402	9.6	%		6,271	9.7	%		8,057	10.2	%		7,925	10.3	%
Transportation		5,091	7.7	%		5,091	7.9	%		7,214	9.1	%		7,213	9.4	%
Tax Backed		3,821	5.8	%		3,817	5.9	%		4,373	5.6	%		4,373	5.7	%
Education		3,557	5.4	%		3,557	5.5	%		3,818	4.8	%		3,818	5.0	%
Investor Owned Utilities		1,662	2.5	%		1,662	2.6	%		2,234	2.8	%		2,234	2.9	%
Other Public Finance		1,448	2.2	%		1,194	1.8	%		1,530	1.9	%		1,276	1.7	%
Long Term Care		1,142	1.7	%		1,142	1.8	%		1,149	1.5	%		1,149	1.5	%
Housing		853	1.3	%		853	1.3	%		1,376	1.8	%		1,376	1.8	%
Second-To-Pay Municipal Wrap		789	1.2	%		789	1.2	%		793	1.0	%		793	1.0	%
Subtotal Public Finance	$	45,459	68.5	%	$	45,037	69.8	%	$	53,849	68.2	%	$	53,418	69.5	%
Structured Finance	Gross Par Outstanding (6/30/2004)		Percent of total Gross Par		Net Par Outstanding (6/30/2004)		Percent of total Net Par		Gross Par Outstanding (12/31/2003)		Percent of total Gross Par		Net Par Outstanding (12/31/2003)		Percent of total Net Par
Collateralized Debt Obligations	$	11,956	18.0	%	$	11,956	18.5	%	$	10,187	12.9	%	$	10,187	13.2	%
Asset Backed – Consumer		3,058	4.6	%		3,058	4.8	%		7,060	8.9	%		7,060	9.2	%
Asset Backed – Mortgage and MBS		3,265	4.9	%		1,773	2.8	%		3,723	4.7	%		2,116	2.7	%
Asset Backed – Commercial and Other		1,766	2.7	%		1,766	2.7	%		3,153	4.0	%		3,153	4.1	%
Other Structured Finance		898	1.3	%		894	1.4	%		1,010	1.3	%		980	1.3	%
Subtotal Structured Finance	$	20,943	31.5	%	$	19,447	30.2	%	$	25,133	31.8	%	$	23,496	30.5	%
Total	$	66,402	100.0	%	$	64,484	100.0	%	$	78,982	100.0	%	$	76,914	100.0	%

Rating Distribution

Rating**	Gross Par Outstanding (6/30/2004)		Percent of total Gross Par		Net Par Outstanding (6/30/2004)		Percent of total Net Par		Gross Par Outstanding (12/31/2003)		Percent of total Gross Par		Net Par Outstanding (12/31/2003)		Percent of total Net Par
AAA	$	12,044	18.1	%	$	10,595	16.4	%	$	12,936	16.4	%	$	11,372	14.8	%
AA		15,181	22.9	%		15,072	23.4	%		17,306	21.9	%		17,186	22.3	%
A		21,340	32.1	%		21,040	32.6	%		26,986	34.2	%		26,660	34.7	%
BBB		14,471	21.8	%		14,415	22.4	%		17,905	22.7	%		17,862	23.2	%
Investment Grade		460	0.7	%		460	0.7	%		600	0.7	%		600	0.8	%
Below Investment Grade		1,608	2.4	%		1,608	2.5	%		1,284	1.6	%		1,273	1.7	%
Not Rated		1,298	2.0	%		1,294	2.0	%		1,965	2.5	%		1,961	2.5	%
Total	$	66,402	100.0	%	$	64,484	100.0	%	$	78,982	100.0	%	$	76,914	100.0	%

  * See Explanatory Notes on page 12.

** Indicated category reflects highest rating of the three rating agencies.

10 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Insured Portfolio Highlights

Quarterly

Operating

Supplement

Radian Asset Assurance Inc.

Insured Portfolio Highlights* ($ Millions)

10 Largest Public Finance Exposures

	Net Par Outstanding (6/30/2004)		Percent of total Net Par		Rating 1
California State GO	$	404	0.63	%	A3
New York, New York GO		363	0.56	%	A+
Long Island Power Authority New York		328	0.51	%	A–
New York & New Jersey Port Authority		323	0.50	%	AA–
Jefferson County Alabama Gas & Sewer		297	0.46	%	A
New York City Muni Water Finance		296	0.46	%	AA
Illinois State GO		289	0.45	%	AA
Metropolitan Transportation Authority New York		288	0.45	%	A
Houston Airport System		267	0.41	%	A1
Chicago, Illinois GO		258	0.40	%	A+
Total	$	3,113	4.83	%

10 Largest Structured Finance Exposures

	Net Par Outstanding (6/30/2004)		Percent of total Net Par		Rating2
U.S. Static Synthetic CDO	$	450	0.70	%	AAA
CDO of ABS		390	0.60	%	AA
U.S. Static Synthetic CDO		381	0.59	%	AAA
U.S. Static Synthetic CDO		365	0.57	%	AAA
U.S. Static Synthetic CDO		350	0.54	%	BB+3
U.S. Static Synthetic CDO		340	0.53	%	AA
European Static Synthetic CDO		288	0.44	%	AAA
U.S. Static Synthetic CDO		285	0.44	%	AA
U.S. Static Synthetic CDO		250	0.39	%	AAA
U.S. Static Synthetic CDO		250	0.39	%	AA
Total	$	3,349	5.19	%

* See Explanatory Notes on page 12.

1 Indicated category reflects highest rating of the three rating agencies.

2 Indicated category reflects highest rating of the three rating agencies. Represents lowest attachment point of transactions.

3 Represents lowest attachment point of transaction. The majority of the transaction attaches at AAA/AA levels.

11 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Insured Portfolio Highlights

Quarterly

Operating

Supplement

Radian Asset Assurance Inc.

Explanatory Notes

1. Effective January 31st, 2004, one of the primary insurer customers of Radian Asset Assurance Inc. (the “Company”) exercised its right to recapture business that it previously ceded to the Company. In connection with the recapture, the Company has returned approximately $16.4 billion of par in force and approximately $96.4 million of statutory unearned premium reserves to the primary insurer. In addition, the Company has been reimbursed by the primary insurer for policy acquisition costs of approximately $31.0 million. The Company has also reimbursed the primary insurer approximately $7.5 million for case reserves which were net of $4.0 million of salvage.

2. In May 2004, Moody’s provided the Company with an initial insurance financial strength rating of “Aa3.” Concurrently therewith, in anticipation of the merger of Radian Reinsurance with and into the Company (which became effective on June 1, 2004), Moody’s downgraded Radian Reinsurance’s insurance financial strength rating to “Aa3” from “Aa2.” Effective June 1, 2004, the Company and Radian Reinsurance were merged, with the Company as the surviving entity. The merged company is rated “Aa3” by Moody’s, “AA” (negative outlook) by S&P and “AA” (outlook stable) by Fitch. As a result of this downgrade, two of the primary insurer customers of the financial guaranty reinsurance business have the right to recapture an aggregate of $20.3 billion of par in force ceded to the Company, including $147.3 million of written premiums as of June 30, 2004. The Company is currently negotiating with these customers regarding whether the recapture rights will be exercised and cannot provide any assurance as to the outcome of these negotiations.

3. Gross and net written premiums for the six months ended June 30, 2004 decreased $131 million compared to the same period of 2003. This decrease was the result of the recapture of $96 million of previously written premiums in the first quarter of 2004 and a $34 million reduction in trade credit premiums resulting from the Company novating business to an affiliate.

4. Premiums earned for the second quarter of 2004 were $42 million versus $61 million for the same period of 2003, a decline of $19 million. This decline is primarily due to the novation of the trade credit business to an affiliate.

5. Loss and loss adjustment expenses incurred for the six months ended June 30, 2004 were $90 million higher than the comparable period of 2003 primarily due to the establishment of a $111 million reserve on a statutory basis (recorded on a GAAP basis in 2003) pertaining to a single manufactured housing transaction.

6. Commission expenses for the quarter ended June 30, 2004 were $7 million lower than the $15 million incurred for the same period of 2003 due to lower assumed premiums written. For the first six months of 2004, commission expenses were $52 million lower than the same period of 2003. The recapture resulted in a reduction to commission expenses of $31 million. The remainder of the reduction in commission expenses is a result of lower assumed premiums written in the financial guaranty and trade credit products.

7. The contingency reserve decreased $96 million to $225 million at June 30, 2004 primarily as a result of the recapture.

8. Loss and loss adjustment expense reserves increased by $52 million to $115 million at June 30, 2004 primarily resulting from the establishment of a $111 million reserve on a statutory basis (recorded on a GAAP basis in 2003) for a single manufactured housing transaction, offset by a $17 million reduction in trade credit loss reserves novated by the Company to an affiliated company and by $42 million of loss payments.

9. Unearned premiums were $51 million lower at June 30, 2004 as compared to December 31, 2003 as a result of the $96 million recapture of financial guaranty business by one of the Company’s primary insurers.

10. Additional paid-in capital increased $65 million as the result of a capital contribution related to the manufactured housing transaction for which the $111 million reserve was established.

12 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Explanatory Notes

Quarterly

Operating

Supplement

Radian Asset Assurance Inc.

Management Team

Martin A. Kamarck

President

David J. Beidler

Senior Vice President, Senior Counsel

Sally B. Campbell

Senior Vice President, Public Finance

John C. DeLuca

Senior Vice President, Market Development

Bonita Z. Dorland

Senior Vice President, Chief Risk Officer

Paul C. Larsen

Vice President, Managing Director of Client and Portfolio Management

Anna M. Laudon

Vice President, Managing Director of Asset Backed Securities

Andrew C.J. Poole

Managing Director, Radian Asset Assurance Ltd. & Radian Representatives Ltd.

Jack Praschnik

Senior Vice President, Global Strategies

Andrew Reid

Vice President, Managing Director of Global Markets

Patrick Rossi

Senior Vice President, Controller

Jeffrey C. Salton

Senior Vice President, Operations and Analysis

Hao Wu

Vice President, Managing Director of Financial Products

13 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Radian Asset Assurance Inc. Management Team

Quarterly

Operating

Supplement

Radian Asset Assurance Inc.

Safe Harbor Statement

All statements in this document that address operating performance, events or developments 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 U.S. Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management’s current views and assumptions with respect to future events.

The forward-looking statements involve risks and uncertainties including the following:

changes in general financial and political conditions, such as extended national or regional economic recessions, changes in housing values, changes or volatility in interest rates, or other political instability; changes in investor perception of the strength of private mortgage insurers or financial guaranty providers, and risks faced by the businesses, municipalities or pools of assets covered by Radian’s insurance; the loss of significant customers with whom Radian has a concentration of its insurance in force; rising delinquencies in mortgage loans insured by Radian resulting from increased consolidation of mortgage lenders and servicers; increased severity or frequency of losses associated with certain Radian products that are riskier than traditional mortgage insurance and municipal guaranty insurance policies; material changes in persistency rates of Radian’s mortgage insurance policies; downgrades of the insurance financial-strength ratings assigned by the major ratings agencies to Radian’s operating subsidiaries; intense competition from others and from alternative products to private mortgage insurance and financial guaranty insurance; changes in the business practices of Fannie Mae and Freddie Mac; legislative and regulatory changes affecting demand for private mortgage insurance and financial guaranty insurance; changes in claims against mortgage insurance products resulting from the aging of Radian’s mortgage insurance policies; changes in Radian’s ability to maintain sufficient reinsurance capacity in an increasingly concentrated reinsurance market; vulnerability to the performance of Radian’s strategic investments; and the loss of executive officers or other key personnel.

Investors are also directed to other risks discussed in documents filed by Radian with the SEC, including the factors detailed in our annual report on Form 10-K for the year ended December 31, 2003 in the section immediately preceding Part I of the report.

Radian does not intend to and disclaims any duty or obligation to update or revise any forward-looking statements made in this document to reflect new information, future events or for any other reason.

14 Quarterly Operating Supplement for the Period Ended June 30, 2004 / Safe Harbor Statement