249 (d) The NAIC adopted Statement of Statutory  Accounting Principles (“SSAP”) No. 101,  Income Taxes, A Replacement of  SSAP No. 10R and SSAP No. 10  (“SSAP 101”) effective January 1, 2012. Under SSAP 101, the benefit to statutory capital  allowed for certain deferred tax assets will be eliminated if the reporting entity does not meet the minimum capital and reserve  requirements for the state of domicile. Prior to January 1, 2012, we followed SSAP  No. 10R,  Income Taxes - Revised, A  Temporary Replacement of SSAP No. 10 , under which we only included a provision for current income taxes as a component of  net income. Deferred taxes, subject to certain limitations, were recorded in the ST AT balance sheets with any changes thereto  recognized via a change in statutory surplus.  The company did not experience a material impact to overall statutory capital as a  result of the adoption of SSAP  101. (e) Under STAT, investment grade fixed-maturity investments are valued at amortized cost and below investment grade  securities are carried at the lower of amortized cost or market value. Under GAAP , those investments that the statutory  insurance entities do not have the ability or intent to hold to maturity are considered to be either available for sale or trading  securities and are recorded at fair value, with the unrealized gain or loss recognized, net of tax, as an increase or decrease to  stockholders’ equity or current operations, as applicable.  (g) Under STAT, the accounting standard regarding share-based payment is not applicable, with regard to the recognition  and measurement of stock option issuances. Expenses related to stock options are reflected on our GAAP  financial statements  in accordance with this standard.  (f) Under STAT, certain assets, designated as non-admitted assets, are char ged directly against statutory surplus. Such  assets are reflected on our GAAP financial statements.  (c) Under STAT, insurance policy acquisition costs are charged against operations in the year incurred. Under GAAP ,  such costs, other than those incurred in connection with the origination of derivative contracts, are deferred and amortized.  (b) In accordance with New York insurance law, financial guaranty insurance companies are required to establish a  contingency reserve in the amount prescribed by legislation. Such legislation requires that, for financial guaranty policies, each  insurer must establish a contingency reserve equal to the greater of  50% of premiums written or a stated percentage of the  principal guaranteed, ratably over 15 to 20 years dependent upon the category of obligation insured. Contingency reserves may  be discontinued if the total reserve established for all categories of obligations exceeds the sum of the stated percentages for  such categories multiplied by the unpaid principal guaranteed.  The contingency reserve may be released with regulatory  approval to the extent that losses in any calendar year exceed a pre-determined percentage of earned premiums for such year ,  with the percentage threshold dependent upon the category of obligation insured. Such reserves may also be released, subject to  regulatory approval in certain instances, upon demonstration that the reserve amount is excessive in relation to the outstanding  obligations. Reinsurers are required to establish a contingency reserve equal to their proportionate share of the reserve  established by the ceding company. Also under STAT, case reserves are required to be established in the year in which a default  occurs based on the guarantor’s best estimate of ultimate loss payment, rather than when the probability weighted expected net  cash out flows exceed unearned premium reserves.  (a) Under STAT, mortgage guaranty insurance companies are required each year to establish a contingency reserve equal  to 50% of premiums earned in such year . Such amount must be maintained in the contingency reserve for  10 years, after which  time it is released to unassigned surplus. Prior to 10 years, the contingency reserve may be reduced with regulatory approval to  the extent that losses in any calendar year exceed  35% of earned premiums for such year .  The differences between the statutory financial statements and financial statements presented on a GAAP  basis represent  differences between GAAP and Statutory Accounting Principles (“STAT”) for the following reasons:  We prepare our statutory financial statements in accordance with the accounting practices required or permitted, if  applicable, by the insurance departments of the respective states of domicile of our insurance subsidiaries. Required statutory  accounting practices include a variety of publications of the National  Association of Insurance Commissioners (“NAIC”) as  well as state laws, regulations and general administrative rules. In addition, insurance departments have the right to permit  other specific practices that may deviate from prescribed practices.  We did not use any such permitted practices during the  years ended December 31, 2012, or 2011. Radian Group Inc. Notes to Consolidated Financial Statements - (Continued)