Ratings Radian Group and our principal operating subsidiaries have been assigned the ratings provided in the chart below . We  believe that ratings often are considered by others in assessing our credit strength and the financial strength of our insurance  subsidiaries and, historically, they also have been a significant factor in determining Radian Guaranty’ s eligibility with the  GSEs. See  “ Part I. Item 1A. Risk Factors— We could lose our eligibility status with the GSEs, causing Freddie Mac and Fannie  Mae to decide not to purchase mortgages insured by us, which would significantly impair our mortgage insurance franchise ”  and “ Our current credit ratings and the insurance financial strength ratings assigned to our mortgage insurance or financial  guaranty subsidiaries could weaken our competitive position. ” MOODY’S (1) S&P (2) Radian Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Caa2 CCC+ Radian Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ba3 B- Radian Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (3) RMAI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ba3 B- Radian Asset Assurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ba1 B+ (1)  Moody’s outlook for Radian Group and all our rated insurance subsidiaries is currently Negative. (2)  S&P’s outlook for Radian Group and all our rated insurance subsidiaries is currently Negative. (3)  Not currently rated. Critical Accounting Policies Securities and Exchange Commission guidance defines Critical  Accounting Policies as those that require the application  of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the ef fect  of matters that are inherently uncertain and that may change in subsequent periods. In preparing our consolidated financial  statements in accordance with GAAP , management has made estimates, assumptions and judgments that af fect the reported  amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses  during the reporting periods. In preparing these financial statements, management has utilized available information, including  our past history, industry standards and the current and projected economic and housing environment, among other factors, in  forming its estimates, assumptions and judgments, giving due consideration to materiality . Because the use of estimates is  inherent in GAAP, actual results could differ from those estimates. In addition, other companies may utilize dif ferent estimates,  which may impact comparability of our results of operations to those of companies in similar businesses.  A summary of the  accounting policies that management believes are critical to the preparation of our consolidated financial statements is set forth  below. Reserve for Losses We establish reserves to provide for losses and LAE and the estimated costs of settling claims in both our mortgage  insurance and financial guaranty segments in accordance with the accounting standard regarding accounting and reporting by  insurance enterprises. Although this standard specifically excludes mortgage insurance from its guidance relating to the reserve  for losses, we establish reserves for mortgage insurance using the guidance contained in this standard, supplemented with other  accounting guidance as described below, due to the lack of specific guidance for mortgage insurance. Estimating the loss reserves in both our mortgage insurance and financial guaranty business segments involves significant  reliance upon assumptions and estimates with regard to the likelihood, magnitude and timing of each potential loss.  The  models, assumptions and estimates we use to establish loss reserves may not prove to be accurate, especially during an  extended economic downturn or a period of extreme market volatility and uncertainty , as has existed for the last several years.  As such, we cannot be certain that our reserve estimate will be adequate to cover ultimate losses on incurred defaults. 143