Radian Group—Long-Term Liquidity Needs Mortgage Insurance After giving effect to the exchange of a portion of our long-term debt maturing in 2015, which settled in January 2013,  our most significant needs for liquidity beyond the next 12 months are: (i) the repayment of the principal amount of our  outstanding long-term debt, including $54.8 million of outstanding debt due in 2015, $195.2 million of outstanding debt due in  June 2017 and an additional $450 million of convertible debt due in November 2017; (ii) additional capital contributions to our  mortgage insurance subsidiaries; and (iii) potential payments to the U.S. Department of the  Treasury resulting from the  examination of our 2000 through 2007 federal tax returns by the IRS.  We regularly consider various measures to improve our  capital and liquidity position, as well as our debt maturity profile.  We have repurchased and exchanged, prior to maturity , some  of our outstanding debt, and in the future, we may , from time to time, seek to redeem, repurchase or exchange for other  securities, prior to maturity, some or all of our outstanding debt in the open market, through private transactions, pursuant to  one or more tender offers, or through any combination of the foregoing, as circumstances may allow . The timing or amount of  any potential transactions, which may or may not occur , will depend on a number of factors, including our capital and liquidity  needs. If necessary, we may seek to refinance all or a portion of our long-term debt, which we may not be able to do on  favorable terms, if at all. As of the balance sheet date, certain of our insurance subsidiaries, including Radian Guaranty , have incurred net operating  losses (“NOLs”) that could not be carried-back and utilized on a separate company tax return basis.  As a result, we are not  currently obligated to reimburse these subsidiaries for their separate company NOL  carryforward. However, if in a future period  our consolidated NOL is fully utilized before a subsidiary has utilized its share of NOL  on a separate entity basis, then Radian  Group may be obligated to fund such subsidiary’ s share of our consolidated tax liability to the IRS. Currently , we do not expect  to fund material obligations under the provisions described in this paragraph with regard to subsidiary NOLs incurred to date. In light of Radian Group’s long- and short-term needs, we are considering various options to increase our capital and  liquidity position, such as incurring additional debt, issuing additional equity or selling assets, which we may not be able to do  on favorable terms, if at all. Accordingly, we expect to meet the long-term liquidity needs of Radian Group with a combination  of: (i) available cash and marketable securities; (ii) private or public issuances of debt or equity securities, which we may not be  able to do on favorable terms, if at all; (iii) cash received under expense-sharing arrangements with our subsidiaries; (iv) the  potential sale of assets; and (v) dividends from our subsidiaries, to the extent available. See “Part I. Item 1A .  Risk Factors — Radian Group’s sources of liquidity may be insufficient to fund its obligations. ”  As of December 31, 2012, our mortgage insurance segment maintained claims paying resources of $4.3 billion (which  includes contingency reserves, policyholders’ surplus, unearned premium reserves and loss reserves), including the statutory  surplus of Radian Asset Assurance of $1.1 billion.  The principal demands for liquidity in our mortgage insurance business include the payment of claims and loss mitigation  transactions, operating expenses (including those allocated from Radian Group) and taxes.  The principal sources of liquidity in  our mortgage insurance business are capital contributions from Radian Group, insurance premiums, net investment income, and  cash dividends from Radian  Asset Assurance. Our mortgage insurance business has incurred significant losses over the past five  years due to the housing and related credit market downturns.  We believe that the operating cash flows generated by each of our  mortgage insurance subsidiaries will provide these subsidiaries with a portion of the funds necessary to satisfy their claim  payments and operating expenses for the foreseeable future. Current and projected shortfalls are expected to be funded from  sales of marketable securities held by our mortgage insurance subsidiaries and from maturing fixed-income investments. The amount, if any, and timing of Radian Asset Assurance’s dividend paying capacity will depend, in part, on the  performance of our insured financial guaranty portfolio, including the establishment of, or change in, statutory reserves, as well  as the amount we pay to commute transactions. If the exposure in our financial guaranty business is reduced on an accelerated  basis through the recapture or settlement of business from the primary customers in our financial guaranty reinsurance business  or otherwise, we may have the ability to pay dividends to our mortgage insurance business more quickly and in a greater  amount. However, if the performance of our financial guaranty portfolio deteriorates materially , Radian Asset Assurance may  have limited or no capacity to pay dividends to Radian Guaranty . In the event of a default giving rise to a claim payment  obligation in our financial guaranty business, the statutory capital of Radian  Asset Assurance (and consequently Radian  Guaranty) would be reduced in an amount equal to the present value of our expected future net claim liability (net of taxes) for  such transactions. Any significant reduction in statutory capital could also reduce Radian  Asset Assurance’s capacity to pay  dividends to Radian Guaranty and Radian  Asset Assurance could be restricted from paying dividends altogether without prior  approval from the NYSDFS. 140