1. Description of Business and Recent Developments Radian Group Inc. Notes to Consolidated Financial Statements In this Note 1, we provide an overview of our business and a discussion of current business conditions, certain regulatory  considerations and our holding company liquidity . Also set forth below in this Note 1 is an overview of certain risks and  uncertainties facing Radian Group Inc. (“Radian Group”) and our subsidiaries. We are a credit enhancement company with a primary strategic focus on domestic, residential mortgage insurance on  first-lien loans (“first-liens”).  We currently have two operating business segments—mortgage insurance and financial guaranty .  Prior to January 1, 2011, we also had a third segment—financial services. Our mortgage insurance segment provides insurance coverage, principally through private mortgage insurance, and risk  management services to mortgage lending institutions.  We provide these products and services mainly through our wholly- owned subsidiary, Radian Guaranty Inc. (“Radian Guaranty”). Private mortgage insurance protects mortgage lenders from all or  a portion of default-related losses on residential mortgage loans made to home buyers who generally make downpayments of  less than 20% of the home’s purchase price. Private mortgage insurance also facilitates the sale of these mortgage loans in the  secondary mortgage market, most of which are sold to Freddie Mac and Fannie Mae.  We refer to Freddie Mac and Fannie Mae  together as “Government Sponsored Enterprises” or “GSEs.”  Our mortgage insurance segment currently of fers primary mortgage insurance coverage on residential first-liens.  At  December 31, 2012, primary insurance on first-liens comprised approximately  94.5% of our $36.4 billion total direct risk in  force (“RIF”). Prior to 2009, we also wrote pool mortgage insurance, which at  December 31, 2012, comprised approximately  5.0% of our total direct RIF . We also provided other forms of credit enhancement on residential mortgage assets.  These  products included mortgage insurance on second-lien mortgages (“second-lien”), credit enhancement on net interest mar gin  securities (“NIMS”), and primary mortgage insurance on international mortgages (collectively , we refer to the risk associated  with these transactions as “non-traditional”).  We stopped writing non-traditional business in 2007, other than a small amount of  international mortgage insurance, which we discontinued writing in 2008. In the aggregate, our non-traditional RIF was  $148.0  million as of December 31, 2012, representing less than 1% of our total direct RIF . Our financial guaranty segment has provided direct insurance and reinsurance on credit-based risks through Radian  Asset  Assurance Inc. (“Radian Asset Assurance”), a wholly-owned subsidiary of Radian Guaranty . We have provided financial  guaranty credit protection in several forms, including through the issuance of financial guaranty policies, by insuring the  obligations under one or more credit default swaps (“CDS”) and through the reinsurance of both types of obligations. In 2008,  we ceased writing or assuming new financial guaranty business and since then, we have significantly reduced our financial  guaranty operations. In addition, we have been proactive in continuing to reduce our financial guaranty exposures through  commutations in order to mitigate uncertainty , maximize the ultimate capital available for our mortgage insurance business and  accelerate access to that capital.  Our financial services segment consisted mainly of our ownership interests in Credit-Based  Asset Servicing and  Securitization LLC (“C-BASS”), which was a credit-based consumer asset business that we wrote of f completely in 2007 and  Sherman Financial Group LLC (“Sherman”), a consumer asset and servicing firm specializing in credit card and bankruptcy- plan consumer assets. C-BASS filed for Chapter 1 1 bankruptcy protection on November 12, 2010 and was subsequently  liquidated. Our equity interest in C-BASS, and a related note receivable from C-BASS that had also been previously written  off, were extinguished as part of the C-BASS liquidation. On May 3, 2010, we sold all of our remaining interest in Sherman. Financial Services Financial Guaranty Mortgage Insurance Business Overview 168