Our financial guaranty portfolio has experienced losses as a result of the most recent economic downturn and is susceptible  to further deterioration, which could have a material adverse effect on the capital adequacy of Radian Guaranty. During the third quarter of 2008, Radian Group contributed its ownership interest in Radian  Asset Assurance to Radian  Guaranty. While this reorganization has provided Radian Guaranty with substantial regulatory capital and dividends, it also  makes the capital adequacy of our mortgage insurance business dependent, to a significant degree, on the successful run-of f of  our financial guaranty business. If our financial guaranty portfolio performs significantly worse than anticipated, including if  we are required to establish (or increase) statutory reserves on defaulted obligations that we have insured, or if we make net  commutation payments to terminate insured financial guaranty obligations in excess of the then established statutory reserves  for such obligations, the statutory capital of Radian Guaranty also would be negatively impacted.  A decrease in the capital  support derived from our financial guaranty business could, therefore, lead to Radian Guaranty’ s inability to continue to write  new mortgage insurance business.  We have guaranteed structured finance obligations that expose us to a variety of complex credit risks, and indirectly , to  market, political and other risks beyond those that generally apply to financial guarantees of public finance obligations.  We  have insured and reinsured certain asset-backed transactions and securitizations secured by one or a few classes of assets, such  as residential mortgages, auto loans and leases and other consumer assets, both funded and synthetic.  We have also insured  obligations under CDS, including CDOs of several asset classes, such as corporate debt,  TruPs, RMBS, CMBS and other ABS  obligations. As discussed in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of  Operations—Results of Operations—Financial Guaranty—Credit Performance/Credit Quality ,” we have experienced credit  deterioration in our financial guaranty structured finance portfolio, including our insured portfolio of  TruPs CDOs and CMBS  CDOs, as a result of the most recent economic downturn.  The timing and amount of losses associated with our structured  finance insured portfolio are dif ficult to predict accurately and could have a material adverse ef fect on our financial condition  and operating results. We also have significant exposure to public finance obligations that also are susceptible to default in an economic  downturn. Historically, our financial guaranty public finance business was focused on smaller , regional, lower investment grade  issuers and structures that were uneconomical for other financial guarantors to insure.  As a result, compared to other monoline  financial guarantors, a greater percentage of our total exposure is concentrated in sectors such as healthcare, long-term care and  education, which have historically had higher default rates than other public finance sectors.  These credits, which generally  cover smaller, more rural and specialized issuers, tend to be lower rated and more susceptible to default in an economic  downturn. Our public finance insured portfolio continues to experience stress from the general economic downturn and slow  economic recovery. More hospitals have been experiencing decreases in patient revenues as a result of a significant decline in  patient volumes, increased charity care and limited increases in commercial and government reimbursements. Many healthcare  institutions are reporting that further expense reduction ef forts are unrealistic and that operating losses are expected as  healthcare inflation outpaces weak revenue growth. Further , long-term care facilities have been generally experiencing  gradually declining occupancies, reduced debt service coverage mar gins and slowly eroding cash positions. If these trends  continue, it could result in further credit deterioration and require increases in our net claim liability related to our healthcare  and long-term care credits.  We expect the negative trend in the public finance sector to continue through at least the end of  2013 and most likely into  2014, due to the slow economic recovery, federal funding reductions (including the end of federal stimulus revenues and  potential sequestration), expected Medicare cuts and continued stress on tax-based revenue receipts (in particular where tax  revenues are derived from the value of real estate, as discussed below).  We expect these collective factors to continue to strain  the ability of government entities to maintain balanced budgets and adequate liquidity to meet near -term financial obligations.  We may continue to experience further credit deterioration and municipal defaults in our government-related insured credits,  which could require increases in our net claim liability with respect to these credits.  We have seen credit deterioration in our insured portfolio of other tax supported bond transactions, in particular , those that  are payable from real estate tax revenues derived from the value of real estate in narrowly defined districts or from special  assessments for improvements on certain properties. Declining property values have reduced the assessed value of the tax base  in these jurisdictions, resulting in reduced tax revenues being available to pay interest and principal on these insured bonds.  We  may experience further credit deterioration in these transactions, which would increase the likelihood that we will be required to  make claim payments with respect to these bonds, especially those from special districts. 67