III. Financial Guaranty A.  Business Our financial guaranty segment has provided direct insurance and reinsurance on credit-based risks through  Radian Asset  Assurance, a wholly-owned subsidiary of Radian Guaranty . Financial guaranty insurance typically provides an unconditional  and irrevocable guaranty to the holder of a financial obligation of the full and timely payment of principal and interest when  due. Financial guaranty insurance may be issued at the inception of an insured obligation or may be issued for the benefit of a  holder of an obligation in the secondary market.  We have provided financial guaranty credit protection in several forms, including through the issuance of a financial  guaranty insurance policy, by insuring the obligations under one or more CDS and through the reinsurance of both types of  obligations. Both a financial guaranty insurance policy and CDS can provide the purchaser of such credit protection with a  guaranty of the timely payment of interest and scheduled principal when due on a covered financial obligation. In addition, in  the case of most of our financial guaranty CDS, we provide credit protection for losses in excess of specified levels. Each of  these forms of credit enhancement require similar underwriting and surveillance of the insured risks. We historically offered the following financial guaranty products:  In 2008, we ceased writing new financial guaranty business and since then  we have significantly reduced our financial  guaranty operations and have reduced our financial guaranty exposures through commutations in order to mitigate uncertainty ,  maximize the ultimate capital available for our mortgage insurance business and accelerate our access to that capital.  In  furtherance of these objectives, in 2012 and to date in 2013, we engaged in the following transactions: Assured Commutation.   In January 2012, Radian Asset Assurance entered into a three-part transaction (the “Assured  Transaction”) with subsidiaries of  Assured Guaranty Ltd. (collectively “Assured”) that included the following: The Assured Transaction reduced our financial guaranty net par outstanding by approximately  22.5% and provided an  aggregate statutory capital benefit to Radian  Asset Assurance and Radian Guaranty of  $100.7 million as of December 31, 2012.  •  the sale of Municipal and Infrastructure  Assurance Corporation (the “FG Insurance Shell”), a New  York domiciled  financial guaranty insurance company with licenses to conduct business in 37 states and the District of Columbia that  Radian Asset Assurance had acquired in 2011. The sale of the FG Insurance Shell was completed in the second quarter  of 2012. •  the cession of $1.8 billion of direct public finance business to  Assured (the “Assured Cession”); and •  the commutation of $13.8 billion of financial guaranty net par outstanding that Radian  Asset Assurance reinsured from  Assured (the “Assured Commutation”); •  Public Finance —Insurance of public finance obligations, including tax-exempt and taxable indebtedness of states,  counties, cities, special service districts, other political subdivisions, enterprises such as public and private higher  education institutions and health care facilities and infrastructure, project finance and private finance initiative assets  in sectors such as airports, education, healthcare and other infrastructure projects;  •  Structured Finance —Insurance of structured finance obligations, including collateralized debt obligations (“CDOs”)  and asset-backed securities (“ABS”), consisting of funded and non-funded (referred to as “synthetic”) executions that  are payable from or tied to the performance of a specific pool of assets or covered reference entities. Examples of the  pools of assets that collateralize or underlie structured finance obligations include corporate loans, bonds or other  borrowed money, residential and commercial mortgage loans, trust preferred securities (“T ruPs”), diversified payment  rights (“DPRs”), a variety of consumer loans, equipment receivables, real and personal property leases or a  combination of asset classes or securities backed by one or more of these pools of assets; and •  Reinsurance —Reinsurance of domestic and international public finance obligations, including those issued by  sovereign and sub-sovereign entities, and structured finance obligations of the types described above. 25