Each transaction began with the formation of an unaf filiated, offshore reinsurance company . We then entered into an  agreement with the Smart Home reinsurer to cede to the reinsurer a portion of the risk (and premium) associated with a  portfolio of loans. Each class of notes relates to the loss coverage levels on the reinsured portfolio and is assigned a rating by  one or more of the three major rating agencies.  We do not hold any of the credit-linked notes issued as part of this structure;  therefore, we have no significant variable interests in the structures and are not required to consolidate them under this standard.  As a provider of credit enhancement, we have entered into insurance contracts with  VIEs and derivative contracts with  counterparties in which we have provided credit protection directly on variable interests by  VIEs or, in some cases, obtained the  contractual rights of our counterparties with respect to the  VIEs. See Note 6 of Notes to Consolidated Financial Statements for  more information. Radian Group and its subsidiaries have purchased all of the CPS issued by custodial trusts with which one of its  subsidiaries had previously entered into contingent capital transactions. During the first quarter of 2012, Radian Group and its  subsidiaries converted the custodial trusts to corporations that are now wholly-owned consolidated subsidiaries of Radian  Group. Prior to the conversion of the trusts to corporations, these trusts had been accounted for as  VIEs. As of December 31, 2011, the amount of short-term investments and our maximum exposure for this  VIE were $150  million. The maximum exposure was based on our carrying amounts of the investments.  The amount of income and expense  associated with these trusts was immaterial during 2012 and 201 1.  Radian Group serves as the holding company for our insurance subsidiaries and does not have any significant operations  of its own. Radian Group’s principal liquidity demands for the next 12 months are expected to include: (i) the payment of  corporate expenses; (ii) interest payments on our outstanding long-term debt; (iii) the repayment of $79.4 million of principal  amount remaining of our 2013 Notes (which was repaid at maturity on February 15, 2013); (iv) capital support for our  mortgage insurance subsidiaries;and (v) the payment of dividends on our common stock.  In addition to existing available cash and marketable securities, Radian Group’ s principal sources of cash include  dividends from Radian Guaranty (to the extent permitted under applicable laws and regulations) and payments made to Radian  Group under tax- and expense-sharing arrangements with our subsidiaries, as discussed below . Radian Guaranty’s ability to pay  dividends to Radian Group is subject to various conditions imposed by the GSEs and rating agencies and by insurance  regulations requiring insurance department approval. In general, dividends in excess of prescribed limits are deemed  “extraordinary” and require insurance department approval. In light of operating losses in Radian Guaranty , we do not  anticipate that it will be permitted under applicable insurance laws to issue dividends to Radian Group for the foreseeable  future. To the extent Radian Asset Assurance is permitted to pay future dividends, these dividends will be paid to its direct  parent, Radian Guaranty, and not to Radian Group. Radian Group had immediately available, directly or through an unregulated direct subsidiary , unrestricted cash and  liquid investments of $375.6 million at December 31, 2012, prior to the repayment of the 2013 Notes on February 15, 2013.  We expect to fund Radian Group’ s short-term liquidity needs with: (i) existing cash and marketable securities; and  (ii) cash received under the expense-sharing arrangements with our subsidiaries.  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.  At December 31, 2012, we did not have the intent to sell any debt securities classified as held to maturity or available for  sale and in an unrealized loss position. We determined that it is more likely than not that we will have the ability to hold the  securities until recovery or maturity . 137 Liquidity and Capital Resources Radian Group—Short-Term Liquidity Needs  CPS Financial Guaranty VIEs