Radian Guaranty Inc.’s risk-to-capital ratio was 16.9:1 at March 31, 2010, compared to a ratio of 15.4:1 at December 31, 2009, and 17.6:1 at March 31, 2009.

The mortgage insurance provision for losses was $529.1 million in the first quarter, which includes an increase in mortgage insurance reserves of $146.5 million since December 31, 2009, to $3.6 billion. This increase in reserves, when coupled with the decline in delinquent loans, strengthens Radian’s reserve per delinquency for both primary and pool loans. The reserve increase primarily resulted from an increase in our severity estimates and the continued aging of our default inventory.

The number of primary and pool delinquent loans decreased by 5.3 percent and 6.8 percent, respectively, from the fourth quarter of 2009. This included mortgage insurance terminations that reduced Radian’s primary delinquency count by 4,429 loans. Excluding this termination, the number of primary delinquent loans decreased by 2.4 percent from the fourth quarter of 2009, the first decline in nearly four years. In addition, the number of Radian’s primary delinquent loans declined slightly in April. Radian continues to expect a lower number of delinquent loans at the end of 2010 compared to year-end 2009.

The company continues to project sufficient holding company liquidity through 2012. As a result of losses generated in the quarter and in order to maintain the minimum surplus requirements for two subsidiaries that reinsure risk from Radian Guaranty, Radian Group contributed $56 million and Radian Guaranty contributed $30 million of capital to these subsidiaries.

Consistent with Radian’s strategy of actively managing the legacy portfolio and reducing non-core risk, the company terminated a set of structured transactions in the quarter that eliminated $102 million of its modified pool risk in force.

Total mortgage insurance claims paid were $357.3 million for the first quarter. Excluding the $80.1 million impact from first-lien terminations, the $10.8 million impact from second-lien terminations and net of proceeds received from captive terminations of $0.4 million, claims paid were $266.8 million, which consisted of $258.8 million of first-liens and $8.0 million of second-liens. For 2010, the company continues to expect mortgage insurance claims paid to be approximately $1.5 billion.

As a result of reduced mortgage industry origination volume and mortgage insurance penetration, new mortgage insurance written (NIW) was $1.9 billion in the quarter. NIW in the quarter continued to consist of loans with excellent risk characteristics, and the company maintained market share of more than 21 percent.

Combined losses recognized on derivatives and other financial instruments totaled $121.6 million in the quarter. This was primarily attributable to unrealized losses resulting from the significant tightening of Radian’s credit default swap spread, partially offset by investment portfolio gains.

Since the launch of the Home Affordable Modification Program (HAMP) last year, nearly 6,000 Radian-insured loans have been completed, including 1,769 loans in 2009 and 4,159 in the first quarter of 2010. As of March 31, 2010, more than 28,000 Radian-insured primary loans were pending completion of a modification program, including HAMP, which represents nearly 20 percent of Radian’s primary delinquencies. This compares to more than 22,000, or approximately 15 percent of primary delinquencies, as of December 31, 2009.

Radian Asset Assurance Inc. continues to serve as an important source of capital support for Radian Guaranty, the company’s mortgage insurance subsidiary, and is expected to continue to provide Radian Guaranty with cash infusions over time.

As of March 31, 2010, Radian Asset had approximately $1.0 billion in statutory surplus with an additional $1.5 billion in claims-paying resources.

In June, Radian Asset is expected to pay another ordinary dividend of approximately $70 million to Radian Guaranty.

changes in general financial and political conditions, such as the failure of the U.S. economy to recover from the most recent recession or the U.S. economy reentering a recessionary period following a brief period of stabilization or even growth, the lack of meaningful liquidity in the capital markets or in the credit markets, a prolonged period of high unemployment rates and limited home price appreciation or further depreciation (which has resulted in some borrowers voluntarily defaulting on their mortgages when their mortgage balances exceed the value of their homes), changes or volatility in interest rates or consumer confidence, changes in credit spreads, changes in the way investors perceive the strength of private mortgage insurers or financial guaranty providers, investor concern over the credit quality and specific risks faced by the particular businesses, municipalities or pools of assets covered by our insurance;

catastrophic events or further economic changes in geographic regions where our mortgage insurance or financial guaranty insurance is more concentrated;

our ability to successfully execute upon our capital plan for our mortgage insurance business (which depends, in part, on the performance of our financial guaranty portfolio), and if necessary, to obtain additional capital to support new business writings in our mortgage insurance business and the long-term liquidity needs of our holding company;

a further decrease in the volume of home mortgage originations due to reduced liquidity in the lending market, tighter underwriting standards and the decrease in housing demand throughout the U.S.;

our ability to maintain adequate risk-to-capital ratios and surplus requirements in our mortgage insurance business in light of ongoing losses in this business and continued deterioration in our financial guaranty portfolio which, in the absence of new capital, may depend on our ability to execute strategies for which regulatory and other approvals are required and may not be obtained;

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

reduced opportunities for loss mitigation in markets where housing values do not appreciate or continue to decline;

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

the concentration of our mortgage insurance business among a relatively small number of large customers;

disruption in the servicing of mortgages covered by our insurance policies;

the aging of our mortgage insurance portfolio and changes in severity or frequency of losses associated with certain of our products that are riskier than traditional mortgage insurance or financial guaranty insurance policies;

the performance of our insured portfolio of higher risk loans, such as Alternative-A (“Alt-A”) and subprime loans, and of adjustable rate products, such as adjustable rate mortgages and interest-only mortgages;

a decrease in persistency rates of our mortgage insurance policies;

an increase in the risk profile of our existing mortgage insurance portfolio due to mortgage refinancing in the current housing market;

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 (in particular, the credit rating of Radian Group Inc. and the financial strength ratings assigned to Radian Guaranty Inc.);

heightened competition for our mortgage insurance business from others such as the Federal Housing Administration and the Veterans’ Administration or other private mortgage insurers (in particular those that have been assigned higher ratings from the major rating agencies) or new entrants to the industry;

changes in the charters or business practices of 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 Freddie Mac and Fannie Mae;

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 services are significantly limited in scope;

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) affecting demand for private mortgage insurance, (b) limiting or restricting our use of (or requirements for) additional capital and the products we may offer, or (c) affecting the form in which we execute credit protection or affecting our existing financial guaranty portfolio;

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 our mortgage insurance and financial guaranty businesses in determining gains and losses on these contracts;

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;

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

changes in accounting guidance 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.

Revenues:

Net premiums written - insurance

Net premiums earned - insurance

Net investment income

Change in fair value of derivative instruments

Net (losses) gains on other financial instruments

Net impairment losses recognized in earnings

Other income

Total revenues

Expenses:

Provision for losses

Provision for premium deficiency

Policy acquisition costs

Other operating expenses

Interest expense

Total expenses

Equity in net income of affiliates

Pretax loss

Income tax benefit

Net loss

Diluted net loss per share (2)

Average common shares outstanding

Increase in shares-common stock equivalents-diluted basis

Weighted average shares outstanding

Assets:

Cash and investments

Investments in affiliates

Deferred policy acquisition costs

Deferred income taxes, net

Reinsurance recoverables

Derivative assets

Other assets

Total assets

Liabilities and stockholders’ equity:

Unearned premiums

Reserve for losses and loss adjustment expenses

Reserve for premium deficiency

Long-term debt

VIE debt

Derivative liabilities

Other liabilities

Total liabilities

Common stock

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Total common stockholders’ equity

Total liabilities and stockholders’ equity

Book value per share

(In thousands)

Revenues:

Net premiums written - insurance

Net premiums earned - insurance

Net investment income

Change in fair value of derivative instruments

Net losses on other financial instruments

Net impairment losses recognized in earnings

Other income

Total revenues

Expenses:

Provision for losses

Provision for premium deficiency

Policy acquisition costs

Other operating expenses

Interest expense

Total expenses

Equity in net income of affiliates

Pretax (loss) income

Income tax (benefit) provision

Net (loss) income

Cash and investments

Deferred policy acquisition costs

Total assets

Unearned premiums

Reserve for losses and loss adjustment expenses

Derivative liabilities

(In thousands)

Revenues:

Net premiums written - insurance

Net premiums earned - insurance

Net investment income

Change in fair value of derivative instruments

Net gains on other financial instruments

Net impairment losses recognized in earnings

Other income

Total revenues

Expenses:

Provision for losses

Provision for premium deficiency

Policy acquisition costs

Other operating expenses

Interest expense

Total expenses

Equity in net income of affiliates

Pretax (loss) income

Income tax (benefit) provision

Net (loss) income

Cash and investments

Deferred policy acquisition costs

Total assets

Unearned premiums

Reserve for losses and loss adjustment expenses

Derivative liabilities

Net Premiums Earned:

Public finance direct

Public finance reinsurance

Structured direct

Structured reinsurance

Trade credit reinsurance

Total Net Premiums Earned - insurance

Refundings included in earned premium

Claims paid:

Trade credit reinsurance

Financial Guaranty

Total

(In millions)

Balance Sheet Increase (Decrease):

Investments

Other assets

VIE debt

Derivative liabilities

Derivative liabilities-VIE

Other liabilities

Income Statement Increase (Decrease):

Net investment income

Net (losses) gains on other financial instruments

Change in fair value of derivative instruments

Other income

Other operating expenses

Interest expense

Statutory Information:

Capital and surplus

Contingency reserve

Qualified statutory capital

Unearned premium reserve

Loss and loss expense reserve

Total statutory policyholders’ reserves

Present value of installment premiums

Soft capital facilities

Total statutory claims paying resources

Net debt service outstanding

Capital leverage ratio (1)

Claims paying leverage ratio (2)

Net par outstanding by product:

Public finance direct

Public finance reinsurance

Structured direct

Structured reinsurance

Total (3)

Reserve for losses and LAE-GAAP Basis:

Financial Guaranty

Trade Credit

Total

Primary new insurance written

Flow

Total Primary

Total

Prime

Alt-A

A minus and below

Total Primary

Total primary new insurance written by FICO score

Total

>=740

680-739

620-679

Total Primary

Percentage of primary new insurance written

Refinances

95.01% LTV and above

ARMs

Less than 5 years

5 years and longer

Primary risk written

Flow

Total Primary

Primary insurance in force

Flow

Structured

Total Primary

Prime

Alt-A

A minus and below

Total Primary

Primary risk in force

Flow

Structured

Total Primary

Flow

Prime