Full Description

Radian Group Inc. is a credit enhancement company. The Company operates in three business segments: mortgage insurance, financial guaranty and financial services. The mortgage insurance business provides credit protection for mortgage lenders and other financial services companies on residential mortgage assets. The financial guaranty business provides insurance and reinsurance of municipal bonds, structured finance transactions and other credit-based risks, and provides credit protection on various asset classes through financial guarantees and credit default swaps (CDS). The financial services business consists of its interests in Sherman Financial Group LLC (Sherman), a consumer asset and servicing firm specializing in credit card and bankruptcy-plan consumer assets.

Mortgage Insurance Business

The Company’s mortgage insurance business provides credit-related insurance coverage, principally through private mortgage insurance, and risk management services to mortgage lending institutions located throughout the United States and in limited countries outside the United States. It provides these products and services mainly through its wholly owned subsidiaries, Radian Guaranty Inc. (Radian Guaranty), Radian Insurance Inc. (Radian Insurance) and Amerin Guaranty Corporation (Amerin Guaranty). The Company’s mortgage insurance segment, through Radian Guaranty, offers private mortgage insurance coverage on first-lien residential mortgages. It has used Radian Insurance to provide credit enhancement for mortgage-related capital market transactions and to write credit insurance on mortgage-related assets, such as international insurance transactions. The Company insured net interest margin securities (NIMS) and second-lien mortgages through Radian Insurance and second-lien in Amerin Guaranty.

The Company writes its pool insurance in the form of credit enhancement on residential mortgage loans underlying residential mortgage-backed securities, whole loan sales and other structured transactions. It writes mortgage insurance on an individual loan basis, which is referred to as flow business, and insures multiple mortgages in a single transaction, which is referred to as structured business. In flow transactions, mortgages are insured as they are originated, while in structured deals, it provides insurance on mortgages after they have been originated and closed. The Company provides other forms of credit enhancement on residential mortgage assets. In addition to insuring first-lien mortgages, it also provides primary or modified pool insurance on second-lien mortgages.

The Company provides credit enhancement on NIMS bonds. A NIMS bond represents the securitization of a portion of the excess cash flow and prepayment penalties from a mortgage-backed security comprised mostly of subprime mortgages. The Company has a delegated underwriting program with a number of customers. The delegated underwriting program enables it to meet lenders demands for insurance coverage by insuring loans that meet agreed-upon underwriting guidelines. The mortgage insurance business also utilizes its underwriting skills to provide an outsourced underwriting service to its customers known as contract underwriting.

Financial Guaranty Business

The Company’s financial guaranty business provides direct insurance and reinsurance on credit-based risks through Radian Asset Assurance, a wholly owned subsidiary of Radian Guaranty, and through Radian Asset Assurance’s wholly owned subsidiary, Radian Asset Assurance Limited (RAAL), located in the United Kingdom. Financial guaranty insurance provides a guaranty to the holder of a financial obligation of full and timely payment of principal and interest when due.

The products offered by the financial guaranty business include public finance, structured finance and reinsurance. Insurance of public finance obligations, including tax-exempt and taxable indebtedness of states, counties, cities, special service districts, other political subdivisions and tribal finance and for enterprises, such as airports, public and private higher education and healthcare facilities, and for project finance and private finance initiative assets in sectors, such as schools, healthcare and infrastructure projects.

Insurance of structured finance obligations, including collateralized debt obligations (CDOs) and asset-backed securities (ABS), consisting of funded and non-funded synthetic executions that are payable from or tied to the performance of a specific pool of assets. Reinsurance of domestic and international public finance obligations, including those issued by sovereign and sub-sovereign entities, as well as reinsurance of structured finance obligations.

Financial Services Business

Its financial services segment includes its 46% interest in Credit-Based Asset Servicing and Securitization LLC (C-BASS), a mortgage investment company. C-BASS is engaged as a mortgage investment and servicing company specializing in the credit risk of subprime single-family residential mortgages. C-BASS ceased purchasing mortgages and mortgage securities and its securitization activities during the year ended December 31, 2007. Sherman is a consumer asset and servicing firm specializing in charged-off and bankruptcy plan consumer assets, which are unsecured, that Sherman purchases at deep discounts from national financial institutions and retail corporations and subsequently seeks to collect. In addition, Sherman originates subprime credit card receivables, through its subsidiary CreditOne and has a range of other similar ventures related to consumer assets.

The Company competes with Genworth Financial Inc., MGIC, PMI Mortgage Insurance Co., Republic Mortgage Insurance Company, CMG Mortgage Insurance Company and United Guaranty Corporation.