Radian Group Inc. Notes to Consolidated Financial Statements - (Continued) 2. Significant Accounting Policies Basis of Presentation Use of Estimates  Reserve for Losses and LAE Management believes that it will be able to maintain adequate liquidity to meet Radian Group’ s short-term liquidity needs  and accordingly, management has prepared these financial statements on the basis that Radian Group will continue to operate  as a going concern. However, in light of the risks and uncertainties mentioned above, we may be unable to continue to execute  on our plan as discussed above under “ Capital Preservation and Liquidity Management Initiatives ,” which could have a  material adverse effect on our financial position (including holding company liquidity), statutory capital, results of operations  and cash flows. Our failure to maintain adequate levels of capital, among other things, could lead to intervention by the various  insurance regulatory authorities, which could materially and adversely af fect our business, business prospects, financial  condition and our ability to continue as a going concern.  Our consolidated financial statements are prepared in accordance with GAAP  and include the accounts of all wholly- owned subsidiaries. Companies in which we, or one of our subsidiaries, exercise significant influence (generally ownership  interests ranging from 20% to 50%), are accounted for in accordance with the equity method of accounting.  VIEs for which we  are the primary beneficiary are consolidated, as described in Note 6.  All intercompany accounts and transactions, and  intercompany profits and losses, have been eliminated.  The preparation of financial statements in conformity with GAAP  requires us to make estimates and assumptions that  affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the financial  statements and the reported amounts of revenues and expenses during the reporting periods.  While the amounts included in our  consolidated financial statements include our best estimates and assumptions, actual results may vary materially . We establish reserves to provide for losses and LAE and the estimated costs of settling claims in both our mortgage  insurance and financial guaranty segments in accordance with the accounting standard regarding accounting and reporting by  insurance enterprises. Although this standard specifically excludes mortgage insurance from its guidance relating to the reserve  for losses, we establish reserves for mortgage insurance using the guidance contained in this standard, supplemented with other  accounting guidance as described below, due to the lack of specific guidance for mortgage insurance. Estimating the loss reserves in both our mortgage insurance and financial guaranty business segments involves significant  reliance upon assumptions and estimates with regard to the likelihood, magnitude and timing of each potential loss.  The  models, assumptions and estimates we use to establish loss reserves may not prove to be accurate, especially during an  extended economic downturn or a period of extreme market volatility and uncertainty , as has existed for the last several years.  As such, we cannot be certain that our reserve estimate will be adequate to cover ultimate losses on incurred defaults. Commutations, recaptures and other negotiated terminations of our insured risks in both our mortgage insurance and  financial guaranty segments provide us with an opportunity to exit exposures for an agreed upon payment, or payments, often  at an amount less than the previously estimated ultimate liability . Once all exposures relating to such policies are extinguished,  all reserves for losses and LAE and other balances relating to the insured or reinsured policy generally are eliminated. Upon  completion of a commutation, recapture or other negotiated termination, all such related balances, including deferred policy  acquisition costs and unearned premiums, are reversed, with any remaining net gain or loss typically recorded through  provision for losses. We take into consideration the specific contractual and economic terms for each individual agreement  when accounting for our commutations, recaptures or other negotiated terminations, which may result in dif ferences in the  accounting between transactions, or between the statutory financial statements of our insurance subsidiaries and our financial  statements presented on a GAAP basis. 178