Ladies and gentlemen, thank you for standing by and welcome to Radian's second quarter 2008 earnings conference call. At this time, all phone participants are in a listen-only mode. Later, there will be an opportunity for your questions. Instructions will be given at that time. (Operator instructions) As a reminder, today’s conference is being recorded. I would now like to turn the conference over to Terri Williams-Perry of Investor Relations. Please go ahead.

Good morning and welcome to Radian's second quarter 2008 conference call. By now, you should have all received our press release which contains the financial results for the quarter. If you have not yet received this, you may obtain it from our Investor Relations website at www.radian.biz. During this morning’s call, you will receive prepared remarks from S.A. Ibrahim, Radian’s Chief Executive Officer; and Bob Quint, Chief Financial Officer. Also on hand for the Q&A portion of the call are Teresa Bryce, President of Radian Guaranty; Steve Cooke, President of Radian Asset Assurance; and Scott Theobald, Senior Vice President of Risk Management. Before we begin with our prepared remarks, I would like to remind you that any forward-looking statements that we make this morning should be considered in conjunction with the cautionary statement set forth in the Safe Harbor statements included with our webcast slides and the statements contained in our SEC filings. These are available on the Investor Relations website at www.radian.biz. I would now turn the call over to S.A.

Thank you, Terry. Good morning and thank you all for joining us today to review Radian's second quarter financial results. I am going to share some views on Radian’s position and will comment on our second quarter. As always, Bob Quint will follow with more financial details after which we will take your questions. Before anything else, I would like to discuss our capital situation. As I said on last quarter’s earnings call, we were exploring various internal and external capital raising alternatives. We continue to believe that we have adequate claims-paying resources in both our mortgage insurance and financial guaranty businesses. So, the objective of the capital raise was to take advantage of opportunities to write profitable new business, improve our risk-to-capital ratios, address counter-party perceptions about our capital strength, and to position us to better manage through the prolonged economic uncertainty. I am pleased to say that we now believe that Radian can meet these objectives by moving our financial guaranty entity Radian Asset under our mortgage insurance entity Radian Guaranty. Radian Asset has significant excess capital. Additionally, Radian Asset is writing minimal new business and this means that more excess capital will likely be released over time. As of June 30, 2008, Radian Asset Assurance had just under $1 billion of statutory surplus and just under $500 million of contingency reserves for a total of $1.5 billion of qualified statutory capital and an additional $1.5 billion in statutory claims-paying resources for a total of $3 billion. Moreover, Radian has minimal exposure to vulnerable asset classes in its Financial Guaranty business. This internally generated capital support that is incremental over time to Radian Guaranty significantly exceeds the capital we were considering to raise externally with the additional benefit of not diluting our shareholders and will translate into a…

Thank you, S.A., and good morning. I will be updating you on the P&L activity and trends for the second quarter of 2008 and our financial position as of June 30, 2008. For the last several quarters, due to the deteriorating credit environment, we have been performing an analysis of our first lien book of domestic mortgages insurance business to test for a potential premium deficiency. We had booked a premium deficiency on our second lien book back in the third quarter of 2007. Premium deficiency exists when the present value of the expected future results of the existing business is negative, i.e., future expected premiums are less than the sum of future excepted losses and expenses offset by our loss reserve. This exercise includes our best estimate of future losses in an unpredictable environment. This quarter, we updated our loss projections using cumulative HPA decline of 8% nationally on an OFHEO basis over 2008 and 2009. These assumptions are consistent with those that set forth by economy.com. Based on the resulting projection, we booked a GAAP Premium deficiency of $421.8 million on our first lien book in the second quarter. This premium deficiency front loads to the current period much of the expected P&L impact of future projected losses. Based on the fact that we believe 2008 will be the peak year for incurred losses, the P&L impact of such losses would likely have been booked in the third or maybe fourth quarter of 2008 anyway. Of course, the results are subject to change if our projections change, which would generally be due to changes in our macroeconomics expectation. To put further context to the loss projection that led to this premium deficiency, we are expecting a total of approximately $5.9 billion of gross losses on our existing first…

Thank you, Bob. Operator, we are now ready to take questions.

(Operator instructions) We’ll go to Steve Stelmach with the FBR Capital Markets. Please go ahead.

Hi, good morning.

Good morning.

S.A., you mentioned that you potentially may opportunistically raise capital in certain environments. Can you just give us an idea what it would take for you guys to actually contemplate a capital raise of some sort and then what sort of form will that take, is that just monetizing Sherman or are there other avenues that are available to you at this point?

Steve, when I said that we would be opportunistically open to raising capital, first of all, I also said that we believe that we are strongly capitalized based on the move of our Financial Guaranty entity into our MI entity, Radian Guaranty. So we do not have any immediate pressing need for capital based on the way we look at the picture. That said, the environment is fraught with uncertainty going forward and we believe that there may be opportunities for us to write more profitable MI business. And that said, until the environment out there is fraught with uncertainty, I think it’s wise to say that we have to be opportunistic in looking for capital.

Okay. That’s helpful. But then on Radian Asset, presumably that is sort of -- is in hibernation right now. Can you give us an idea what sort of capital relief that is going to provide if it’s stops writing business or it’s sort of hibernating? Is there an annual number we should be thinking about in terms of capital available to Radian Guaranty?

Well, Steve, from a regulatory standpoint, the company has $960 million in debt surplus. Now, we took the ordinary dividend recently of $107 million and there is an expectation that if things continue the way they have, there will be a regular ordinary dividend capacity that we would look to achieve. And the other thing that may happen is that maybe proactive management of the current risk enforced that may enable us to take further dividend.

Okay, so maybe just to clarify, the $960 at Radian Asset, that is all included in Radian Guaranty's risk-to-capital ratio currently, is that correct?

No, but it will be once the --

Once it moves?

Contributes, yes.

Got you. And then presumably risk-to-capital ratio will improve further if Radian Asset exposures wind down?

As the stat surplus grows and that stat surplus can grow generally by earnings or the release of contingency reserve, that ratio will be helped by that surplus, yes.

Okay, so it migrate higher is what I'm trying to get to, the capital?

Well, obviously there are a lot of components to that. That component will go up, but the risk-to-capital is -- it can be driven by the MI results as well or the risk in MI.

Okay, but all else equal, the Radian Asset should be helping going forward. It should be an additional benefit going forward. Is that fair to say or no?

That's fair if all things perform as expected.

Got you. Okay, great. And then what was – Bob, you mentioned minimum capital need, I'm presuming minimal cash needs at group. Could you just sort of quantify minimal relative to the current $50 million in cash?

Yes, negligible. We reduced our common dividend to an annualized amount of about $800,000, so that's the only need for cash at the holding company that is evident in the near term.

Great. Alright guys, thanks very much.

Thank you.

We'll go to David Hochstim with Buckingham Research Group. Please go ahead.

Hi. I wonder is it possible at this point to say provide any color on the ALT A claims that you're reviewing in terms of underwriting lapses or the legitimate problem loans, is it pretty dramatic increase in delinquencies and obviously claims that you're looking at there?

David first of all, congratulations on your new company, and I will ask Teresa Bryce, the President of our MI business to answer your question.

David, good morning. First of all, I would say that we've done a lot in the loss management area and I think that's what you're getting at here. And it's not related to Alt A claims, although that certainly got a significant component of it, and we are actively looking at claims as they come in. We have doubled our staff in the loss management area over the last year and we have increased the number of revisions [ph] and denials that we’re seeing as a result of the significant focus in what we call a special investigative unit on those claims.

And David, I can't let your question go by without commenting that we have been the only company over the last two years to disclose our Alt A exposure. And if you look at our Alt A exposure and the default associated with our Alt A, they compare favorably to some of our peers. David Hochstim – Buckingham : esearch Group:

And it should also be viewed in the context of where Alt A is prevalent, which is California, Florida, Nevada, Arizona. So there's an interplay of both geography and underwriting. David Hochstim – Buckingham : All right, thanks. esearch Group: All right, thanks.

And we'll go to Michael Grasher with Piper Jaffray. Please go ahead.

Good morning everyone. I just wanted to follow up with a couple of questions here. Bob, you were talking about the peak losses, I think it was $5.9 billion with a 6.2% unemployment worked in. Where does that get you in terms of your peak risk-to-capital, everything else I guess given as you model?

It's a little bit higher than it is now, Mike, but it is well within any of the regulatory requirement and it is at levels that we think are very appropriate and conservative. Michael Grasher – Piper Jaffray: Okay, so you’re talking mid-teens or lower?

Yes, in that range. Michael Grasher – Piper Jaffray: Okay, fair enough. And then S.A, I wonder if you could give us a little bit more detail or background on some of the conversations you’ve had with both the rating agencies as well as the GSEs.

I’d be delighted to, but I will give Teresa Bryce, who's the President of our mortgage insurance entity and in close and frequent conversations with both the GSEs and the rating agencies the opportunity to answer the question.

Good morning. We’ve been having continuous dialog with the GSEs, our regulators and the rating agency, and we think those have been very productive conversations. We continue to keep them up to speed on the activities that we’re doing around the business, around underwriting guidelines, around pricing and we believe that those continue to be fruitful conversations.

And in addition to the MI business, we have conversations with regulators for our financial guaranty business and you can be the judge of the result of those conversations based on our dividend that we pulled out of our financial guaranty business. Michael Grasher – Piper Jaffray: Fair enough. And then would you characterize the conversations or the agencies as having different concerns or are they pretty much the same both ways?

I would say that generally the concerns have been pretty consistent. Michael Grasher – Piper Jaffray: Okay, thank you.

We got Amanda Lynam with Goldman Sachs. Please go ahead. Donna Halverstadt – Goldman Sachs: Hi, it’s actually Donna Halverstadt. Two quick questions for you. You said that the only cash needed at the whole co was really for your common dividend which presumes that the tax and expense sharing arrangement continues to work as it has been. What have the regulators said about that? Are you comfortable that that will continue to work?

Well, the regulators are aware of the agreement and have approved them, so we’re expecting them to continue. Donna Halverstadt – Goldman Sachs: Okay. And the other thing I wanted to ask about was the amendment to the credit facility? Your release said that it’s effective upon satisfaction of certain conditions, just curious what those conditions are. And then secondly, I was curious if any of the financial covenants have changed and if you could update us on where you stand relative to each of the financial covenants?

The financial covenants did not change with this amendment and what is required are just a couple of minor items that we think will be completed very shortly. Donna Halverstadt – Goldman Sachs: Okay, one quick follow-up. With respect to the net worth requirement that was 1.75 billion [ph] plus or 75% of sales of securities, it was supposed to be without giving effect to any gain or loss of sale on Radian Asset, does the move of Radian Asset to underneath Radian Guaranty play into that at all?

No, that shouldn’t create any kind of gain or loss. Donna Halverstadt – Goldman Sachs: Okay, great. Thank you.

Sure.

We'll go to James Gilligan with Equity Group Investments. Please go ahead. James Gilligan – Equity Group Investments: Yes, hi guys, a couple of questions, just some clarifications on some of your points here. On your HPA assumption, in your supplement materials, you say negative 8%. Where is that today?

On a scale basis, there’s only been a very small negative so far, James.

And James, as you would expect, that 8% is nationally, so it clearly varies from geography to geography. James Gilligan – Equity Group Investments: Okay, that’s great. Another clarifying question, on your second loss, you said you had about 772 risk in force. In a prior call, I think it might have been either the first quarter or the fourth quarter, you talked about the seconds in kind of two buckets, one performing well and one performing not so well. Is that 772 still divided into two buckets, and if so, what’s the sort of relative size of those two groups?

It’s about half and half, it’s been half and half. But I think the good news on seconds is we’ve really seen sort of all around the performance stabilize in terms of delinquencies claims, so we’re pretty confident that we’re in the range that we have booked right now. James Gilligan – Equity Group Investments: Okay, and then just one more. Post amendment, you might have answered this and I apologize if I missed it, what’s the liquidity in the bank agreement?

Well, the total commitment will be $150 million and it'll be fully drawn. So, we are going to pay $200 million down to $150 million and then the commitment gets reduced to $150 million. James Gilligan – Equity Group Investments: Okay. Thanks guys.

We'll go to Sean Farad [ph] with Deutsche Bank. Please go ahead. Connor Ryan – Deutsche Bank: Hi, this is Connor Ryan calling. I was just curious to what effect you guys are seeing from potential recapture or what effect you could see going forward?

Are you talking about financial guaranty recapture? Connor Ryan – Deutsche Bank:

Well, to date, [ph] majority of our assumed business is subject to downgrade and was subject to downgrade once we were downgraded by the agencies. To date, there has been only a minimal amount of recapture, although that is an open-ended option that the entities that we reinsure have retained.

As Bob pointed out earlier, should a recapture event occur, it would release capital faster.

Yes. What would happen if there was a recapture is we pay back on our premium reserve so it wouldn’t affect capital in that regard, but it would potentially free up contingency reserve, which would in turn improve our dividend capability sooner. So, that would be the impact. But as Steve said, we're not counting on that happening, although it’s open-ended, the other financial guarantors have their own issues and we’re not sure that any of the recapture will happen. Connor Ryan – Deutsche Bank: Okay. Just to follow up on that real quick though, not assuming that this is what would happen, but I was just curious, could there be a situation where you could be left with the risk that was not performing as well or was not expected to perform as well going forward whereas a lot of big good business could be recaptured?

Our teams have reinsurance agreements specifically structured so as not to permit adverse selection or cherry picking in that regard. Connor Ryan – Deutsche Bank: Okay.

It’s really all or non-proposition in large part. Connor Ryan – Deutsche Bank: Okay, great. Thank you very much.

We’ll go to Maria Panganiban with New York Life. Please go ahead.

The Sherman dividend that we received in the past, yes.

Is there an expectation of further dividend from Sherman this year?

Is there an expectation of further dividend from Sherman this year?

There may very will be more dividend from Sherman over the rest of the year, yes.

But is there like a set number or is that something that they declare on a quarterly basis?

But is there like a set number or is that something that they declare on a quarterly basis?

It will be declared. It's not set, yes, but there is an expectation that if things continue as they have, there will likely be a dividend paid.

How much have they paid this year in total?

How much have they paid this year in total?

We've got $19.5 million so far.

Now, in terms of -- if you could just remind us what the annual interest payments are at the holding company for debt service?

Now, in terms of -- if you could just remind us what the annual interest payments are at the holding company for debt service?

About $55 million or so, but that gets charged out to the sub, so it’s not a holding company obligation.

And then the final question is, is there still existing dividend capacity from the financial guaranty business for 2008?

And then the final question is, is there still existing dividend capacity from the financial guaranty business for 2008?

Not for 2008.

And is there difference in the calculation of -- in terms of the formula, calculation of what you may be eligible for in 2009? If you could just remind us what the formula is in terms of calculation of potential dividend payment?

And is there difference in the calculation of -- in terms of the formula, calculation of what you may be eligible for in 2009? If you could just remind us what the formula is in terms of calculation of potential dividend payment?

Typically [ph] dependent basically based on the lesser of 10% of your policy holder surplus or your net adjusted net income and it depends on what the company's situation is at that point in time, which is the driver.

I’m sorry, net investment income and --?

I’m sorry, net investment income and --?

Adjusted net investment income and policyholder surplus, those are the two measures and it's the lesser 10% of surplus you’re adjusting.

So if you think in terms of where the surplus is now at $960 million, 10% of that would be $96 million.

Okay. Thank you very much.

Okay. Thank you very much.

We’ll go to Jay Abrams with FMS Bonds. Please go ahead. Jay Abrams – FMS Bonds: Hi. I’m interested how the Radian Asset move, how that and the dividends that you’re taking from there, how it’s going to affect the ability of Radian Asset to meet any future claims? And also what kind of capability are you retaining there to monitor and remediate their insured portfolio?

Well, let me answer your questions in two parts that was posed. First, the taking out of any dividend from the company assumes that there is sufficient capital that remains to support remaining business within the company. So there’s nothing about the dividend that will be taken out over a period of time that will compromise that at all. Secondly, with respect to surveillance or remediation, we still maintain a large risk management department within the company. It's our largest department out there and will continue to actively survey and engage in active remediation and loss mitigation on the financial guaranty side as we have always done. Jay Abrams – FMS Bonds: Do you expected anytime that Radian Asset will start to write new business or is it going to be mostly a run-off scenario?

We are writing very little new business now, not inconsistent with many players within the industry, and expect that to continue. Jay Abrams – FMS Bonds: Okay. Thank you.

We got Pamela Brill with Allstate. Please go ahead.

Good morning. You have provided the reinsured progression towards attachment in Exhibit O of your release. Could you provide, with respect to Smart Home, any more detail of which deals fall into which progression bucket, which deals do you expect to attach and how much offset each deal has provided?

We provided the information in summary form and I think that’s what we would expect to provide.

Okay. Thank you.

You're welcome.

And we’ve go to Amanda Lynam with Goldman Sachs. Go ahead please. Donna Halverstadt – Goldman Sachs: Just one other follow up on credit facility related to defined terms. Can you tell us where the ratios of debt-to-cap and fixed charge coverage ratio as defined in that agreement stood at the end of the quarter? Thank you.

We’re in compliance. The exact number we can get for you, if you like, but we're in compliance on all financial covenants. Donna Halverstadt – Goldman Sachs: Yes. That will be great. We'll call you back later for that. Thank you.

Okay.

Let’s go with Mike Grandall with Key Colony Fund. Please go ahead. Mike Grandall – Key Colony Fund: Yes, two questions please. Could you explain in relationship to your paid deficiency reserve or premium deficiency reserve, what bucket of your business or segment of your business that applied to and why it stopped there and didn't go further or how that decision was made, and could you also help us understand with the claims paid coming in below your expectations, what were are some of the drivers there?

I'll do the premium deficiency and then Teresa can do the claims. This is our entire first lien domestic mortgage insurance book of business. So, it’s not splitting it up into any buckets or anything like that. This is a whole book of business as of June 30, 2008 and we do this future projection on estimated losses and premiums and expenses, and that’s how that calculation is done. Mike Grandall – Key Colony Fund: By saying it's your entire first-lien book of business, do you mean your flow business, your Alt A business, your A minus business, all of that?

Everything on the books as of June 30 on a first-lien basis domestic. Mike Grandall – Key Colony Fund: Okay. Thank you.

And then with respect to the other part of your question, I've spoken a little bit earlier about what we’ve done in terms of loss mitigation. And just to go into a little bit more detail about that, we’ve been working actively with the servicers to try to decrease the amount of claims or the amount that we have to pay out. And as a result to that, we’ve increased our retention workout significantly. We’ve been involved in more loan modifications. We've been involved in an increase in short sales which is also been a benefit. We have taken on activities that have increased borrower contact which is a big driver of trying to do successful loss management including our partnership with consumer credit counseling services of Delaware Valley, which has significantly increased our ability to contact and make contact with customers. We’ve also put out a borrower website, we notify borrowers that are in default about that website and it tells them information about what possible steps can be taken to try to re-mediate their situation. In addition to that, we've recently joined the Hope Now initiative so we're continuing to take a very active position in loss management and that has had a significant impact on the reduction in the actual claims paid. Mike Grandall – Key Colony Fund: Did you mention the increase in rescissions year-over-year sequentially due the fraud or anything?

It's hard to actually say a number with respect to fraud. What I can say is that we have added up the number of claims that where we are dealing with respect to both fraud and whether or not they met the underwriting criteria at the time, and we have seen an increase in the number of rescissions as a result of that.

From a broader perspective, I think I believe maybe two years ago, on one of these calls, we had talked about the fact that we were starting to make significant investments in our loss mitigation capability because we wanted to position ourselves for the market that was coming. And we, in that period, both added significantly, we about doubled our staffing in that area, we upgraded their capabilities, we brought in new talent, we pioneered partnership relationships with servicers and outside agencies. And all of that was very timely and we believe has resulted in significant loss reductions and we are very pleased with that. Mike Grandall – Key Colony Fund: Great. Thank you.

Then we'll go to Peter Lardis [ph] with Trident. Please go ahead. Peter Lardis – Trident: Hello. Actually I was interested in your experience in terms of the major problems there at California, Florida, Arizona and Nevada. What kind of delinquency ratios are you seeing because the concern I have is that when you listen to what Fannie Mae and Freddie Mac and the others have said, they've said that the last quarter has been one of the worst they've seen, and if anything July is actually worse than the last quarter was. And I know that in terms of the way your system works, as you're paying claims that basically arose from mortgages that went delinquent maybe six months ago or longer. What exactly has been the first window of payment, has that shrunk at all, are you seeing claims coming into the pipeline faster? And second, what is your experience now with delinquency rates in your portfolio in these problem states?

Peter, I'll ask -- I'll turn the answer over to Scott Theobald who is the head of our MI risk management.

Good morning. Consistent with other participants we're finding that California, Florida, and Arizona of course are driving our portfolio of default rates as well. These are all states that are correcting after a rapid house price appreciation and use of alternative mortgage products. There is some good news in this though. We're seeing in the 2005 to 2007 vintages, we are actually seeing deceleration in default rate in these states. Of course the 2006 book still hasn't shown any signs of peaking, but overall, we're seeing a deceleration in these states. Peter Lardis – Trident: In terms of the window for claims payment, because clearly there is six-month delay or something before you actually have to pay claims. Has that window changed very much?

I don't believe that that has changed. The process for these things to move through the system has stayed pretty consistent. If anything it may have moved out a little bit in terms of loss mitigation efforts that the servicers and others have tried to be engage in, but I don't think we've seen significant movement. Peter Lardis – Trident: Okay, thank you.

Peter, as you would expect, I think there's a lot more pressure on the servicers to try and avoid foreclosures. So each -- and as well as there's a lot of pressure on everybody in the system to subject defaults or delinquencies to a lot more analysis and that takes more time. So as a result of that, there may have been some lengthening out of the process but for good reasons. Peter Lardis – Trident: Okay. Thank you.

Mr. Ibrahim, I will return the call back to you for closing comments.

Okay. Thank you operator. At this time, I would like to thank all of you for participating in our investor call. We look forward to seeing you on our third quarter call later this year. Thank you.

Ladies and gentlemen that concludes your conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.