Background . Radian Group has been incorporated as a business corporation under the laws of the State of Delaware since  1991. Our principal executive offices are located at 1601 Market Street, Philadelphia, Pennsylvania 19103, and our telephone  number is (215) 231-1000. Additional Information . Our website address is www.radian.biz. Copies of our Annual Reports on Form 10-K, Quarterly  Reports on Form 10-Q, Current Reports on Form 8-K, as well as any amendments to those reports, are available free of char ge  through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and  Exchange Commission (the “SEC”). In addition, copies of our guidelines of corporate governance, code of business conduct  and ethics (which includes the code of ethics applicable to our chief executive of ficer, principal financial officer and principal  accounting officer) and the governing charters for each committee of our board of directors are available free of char ge on our  website, as well as in print, to any stockholder upon request. Information contained or referenced on our website is not  incorporated by reference into, and does not form a part of, this report. Our mortgage insurance segment provides insurance coverage, principally through private mortgage insurance, and risk  management services to mortgage lending institutions.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 down payments 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.  Traditional types of private mortgage insurance include “primary mortgage insurance” and “pool insurance.”  We  currently offer only primary mortgage insurance. In the past, we also of fered pool insurance on a limited basis.  Primary Mortgage Insurance. Primary mortgage insurance provides protection against mortgage defaults at a specified  coverage percentage. When there is a valid claim under primary mortgage insurance, the maximum liability is determined by  multiplying the claim amount, which consists of the unpaid loan principal, plus past due interest (which is capped at a  maximum of two years) and certain expenses associated with the default, by the coverage percentage. Claims may be settled for  the maximum liability or for other amounts. See “Mortgage Insurance—Claims Management” below . We provide primary mortgage insurance on a flow basis and we have also provided primary mortgage insurance on a  “structured” basis (in which we insure a group of individual loans). In flow transactions, mortgages typically are insured as they  are originated, while in structured transactions, we typically provide insurance on a group of mortgages after they have been  originated. A portion of our structured business has been written in a “second loss” position, meaning that we are not required to  make a payment until a certain aggregate amount of losses have already been recognized on a given set of loans. Most of our  structured mortgage insurance transactions involved non-prime mortgages (non-prime mortgages include  Alternative-A (“Alt- A”), A minus and B/C mortgages, each of which are discussed below under “Mortgage Insurance—Direct Risk in Force— Mortgage Characteristics”) and mortgages with higher than average loan balances.  A single structured mortgage insurance  transaction may be provided on a primary basis or , as discussed below, on a pool basis; and some structured transactions  include both primary and pool insured mortgages. Included in our primary mortgage insurance is modified pool insurance,  which differs from standard pool insurance in that it includes an exposure limit on each individual loan, as well as an aggregate  limit of loss for the entire pool of loans. We wrote $37.1 billion and $15.5 billion of first-lien primary mortgage insurance in  2012 and 2011, respectively. All of  our primary mortgage insurance written during  2012 and 2011 was written on a flow basis. Primary insurance on first-liens  made up $34.4 billion or 94.9% of our total direct first-lien insurance RIF at  December 31, 2012, compared to $30.7 billion or  93.7% at December 31, 2011. Pool Insurance. We have not written pool insurance since 2008. Prior to that, we wrote pool insurance on a limited basis.  Pool insurance differs from primary insurance in that our maximum liability on each loan is not limited to a specific coverage  percentage on that individual mortgage. Instead, an aggregate exposure limit, or “stop loss” (generally between 1% and 10%),  is applied to the initial aggregate loan balance on a group or “pool” of mortgages. In addition to a stop loss, many of our pool  policies were written in a second loss position. We believe the stop loss and second loss features have been important in  limiting our ultimate liability on individual pool transactions. 8 1.  Traditional Risk A. Business II.  Mortgage Insurance