Ladies and gentlemen, thank you for standing by. Welcome to Radian’s Fourth Quarter 2008 Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions) And as a reminder, this conference is being recorded. I would now turn the conference over to Ms. Terri Williams-Perry of Investor Relations. Please go ahead.

Good morning, and welcome to Radian’s fourth 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; Bob Quint, Chief Financial Officer; and, Teresa Bryce, President of Radian Guaranty. Also on hand for the Q&A portion of the call are Dave Beidler, President of Radian Asset Assurance; and, Scott Theobald, Executive Vice President and Chief Risk Officer of Radian Guaranty. 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 statements set forth in the Safe Harbor statement included with our webcast slides and update risk factors detailed in our Form 8-K filed this morning. The webcast slides and Form 8-K are available on our Investor Relations website. I would now turn the call over to S.A.

Thank you, Terri, and good morning. I will open today with an overview of this quarter’s financial results and I will then update you on our capital and liquidity positions and our business operations. I will close with a commentary on industry trends and an overview of the external environment. Bob will follow me with a detailed financial review and Teresa will provide an update on our core Mortgage Insurance business and the steps we are taking to help us get through this difficult period and to best position the business for the future. We will then open the call to your questions. Beginning with our earnings, earlier today we reported a fourth quarter net loss of $250.4 million, or $3.11 per share. Our results were largely impacted by our mortgage loss provision – Mortgage Insurance loss provision of $551 million, reflecting higher delinquency comps and a fair value loss of $218 million caused by widening corporate spreads. These results were offset by a significant reduction in the premium deficiency reserve. Bob will provide further details in a few moments. Our book value at the end of the end of the quarter was $25.06 and we had cash and investments of $6.1 billion. In our Mortgage Insurance business, we have $5.2 billion in claims paying resources. We told you last quarter that we were focusing on reducing our credit risk exposure in Financial Guaranty. In the fourth quarter, we were successful in advancing this objective as well as in reducing certain non-traditional Mortgage Insurance exposures such as international and second liens. Moving on to the update, I would like to address four important items on the call this morning – our capital position and how Financial Guaranty continues to serve as an important source; our liquidity position; our core Mortgage…

Thank you, S. A. I will be updating you on the P&L activity trends for the fourth quarter of 2008 and our financial position as of December 31st, 2008. In the second quarter, we booked GAAP premium deficiency reserve on our entire domestic first lien mortgage insurance book. We’ve update this analysis for the fourth quarter, which results in no first lien PDR as of 12/31/08 and a net reduction of the $150 million liability in the fourth quarter. Clearly, the macroeconomic factors we’ve considered in the past such as unemployment and HPA will be worse than what we had been expecting. However, actual claims to-date have been consistently lower than what we have been projecting. As we’ve mentioned in the past, there is uncertainty with regard to future losses including both the potential negative impact of further macroeconomic events and a potential positive impact of government and (inaudible) action aimed at reducing foreclosures and stabilizing the credit market. We believe that future losses in our portfolio will be less sensitive to further HPA declines and more sensitive to unemployment. Our analysis this quarter includes a loss forecast that is based on recent loss trends and provides what we believe is a reasonable estimate of future losses in this uncertain environment. It does not project unemployment and HPA per se but incorporates the negative results we are experiencing as a result of the macroeconomic stress and allows for these trends to worsen throughout 2009. The results of these projections are presented on webcast slide number nine. Please note that the over claim frequency in the current book of business is estimated to be 15.35. Expenses for the quarter contain a $12 million reclassification from operating expenses to loss and loss adjustment expenses that represents the cost related to our loss…

Thank you, Bob. Good morning. I would like to begin by highlighting a concept that you heard S. A. reference and that I will reference many times as well, quality. Our focus at Radian Guaranty continues to be writing high-quality new business, and it is the quality of our portfolio that will position us to be successful in the long term. As S. A. presented earlier, credit quality continues to improve. Our prime business increased to 99.6% during the fourth quarter, up from 98.4% in the third quarter. In comparison, our prime business was 77% during the fourth quarter of 2007. High quality new business was our focus in 2008 and it will continue to be our focus for 2009. To continue this trend, we will concentrate on two interconnected initiatives – our recently increased sales force and lender diversification. Leveraging our sales force is key to forging relationships with diverse quality lenders and these lenders are key to originating high quality new business. Through these initiatives we generated over $5 billion in primary new insurance written in the period with over 57% from borrowers with FICO scores equal to or greater than 740. In addition, the average LTV was 90% in the fourth quarter. With recent pricing changes this business is expected to be more professional as well. The pace of change in 2008 was unlike that in any other market that we have experienced and we continue to face challenges ahead. We are committed to maintaining our prime base product mix and ensuring appropriate risk adjusted returns by making necessary guideline changes and pricing adjustment. These modifications are based on our constant review of the housing marketplace and real-time adjustments to our models to improve the profitability of new business on an ongoing basis. We continue to see…

Thank you, Teresa. Before moving to your question, I would like to close by reiterating that Radian continues to have adequate claims paying resources in both our Mortgage Insurance and our Financial Guaranty businesses. We have strong cash reserves at the Group level and we continue to maintain a high quality and stable market share, which will best position us for the long term. Furthermore, Radian remains uniquely positioned to benefit from our Financial Guaranty business as a continuing source of capital support for our Mortgage Insurance business. Operator, you may now open the lines for questions.

Thank you. (Operator instructions) And we’ll go to the line of Steve Stelmach with FBR Capital Markets. Please go ahead.

Hi good morning.

Good morning, Steve.

Good morning.

Just real quickly on the new insurance written, is given your current capacity and your appetite, is the fourth quarter a pretty good run rate in terms of NIW or would you expect that go higher, lower of the course 2009?

I think that it’s approximately in that same range.

Okay. And if you were to receive some TARP fund, how would we think about that number going forward?

Well, I think that the first thing is obviously last year we were quite focused on underwriting guidelines and trying to make sure that we were writing business at the appropriate risk levels. So, if we were to get government capital, then I think we will want to make sure that we are maintaining sort of the right underwriting and risk parameters. So, within that it sort of depends on sort of what the market is within that. But obviously it would mean that we wouldn’t have to consider restricting business down the road and we would be able to continue writing within those guidelines.

In other words, Steve, we would not compromise our commitment to credit quality, but with TARP funds we would seek opportunities to grow share as long as we can preserve our quality.

That makes sense. And then just lastly on that, based on your discussions with policy makers, where does it stand now in terms of receiving TARP capital? And I realize dealing with the government tends to be a pretty fluid situation, but in terms of timing, potential size, could you just give us some color on that as well?

Steve, it’s a very – as you just said, it’s very difficult with the government to estimate any hard timing. The biggest positive statement to come out was the statement that Director Lockhart issued recently where he strongly endorsed the government supporting the mortgage insurance industry and made a statement about the vital role of the mortgage insurance industry. And we get the impression that there is a lot of sympathy for that statement at various levels on Congress and in the Treasury circles, but as you know, there is a handover from the older administration to the new administration going on, there is a lot of issues with banks and other things being dealt with. So, it’s very hard to estimate size and timing. All we can say is we are encouraged by Director Lockhart’s statement.

And then just lastly, you did mention some improvement or seeing signs of improvement in some vintages. Could you just elaborate on that a little bit?

For that we will turn the – we will turn to Scott Theobald for an answer. Scott?

What we are seeing is we are seeing some piece of results in kind of the states that are problematic. However, we are also seeing some issues in states like California, Florida, Arizona, Nevada that still continue to experience problems at this point. We are not seeing that turnaround yet in those states.

Okay. And then on a vintage basis, have you seen that turn I guess into the ’05-’06 book or is that still deteriorating as well?

It’s still deteriorating. We are not seeing a consistent kind of turnaround recovery yet.

Okay. Thank you very much for the color.

And next we’ll go to the line of Mike Grasher with Piper Jaffray. Please go ahead.

Thanks very much. A couple of questions, first of all, I guess on the competitive landscape, let’s say – I don’t know if you can comment on any new entrants or decisions or rumors or and then the existing competition helpful, everybody working together, problematic or not?

Let me see if I can answer both of your questions. First, you know there has always been talk about can a potential entry from new entrants with a lot of capital, and while that is possible, let me point to a couple of factors that will either inhibit it or slow it down. First, my understanding is that the GSEs have said that new entrants would have to have significantly strong credit rating, and from my understanding from the credit rating agencies is capital is only one requirement to award somebody a high credit rating, they have to have demonstrable experience in terms of book of business and experience in managing credit risk. Second, the GSEs have been very strong supporters of the existing mortgage insurance industry as evidenced by various statements made and as evidences by their actions in continuing to support the industry. And I don’t see that, in my opinion, changing in the near future, and part of that support means helping us to continue to be viable and do business and do the new business that is around us. So, while it’s possible, these are the factors that could slow or inhibit entry. Second, in terms of the competitive landscape, we are still very competitive in terms of competing for new business and I am glad to say that we at Radian have been pretty successful in that arena in competing for our share of high quality business as evidenced by trends that you are all aware of, but in terms of working with the Hill and working with regulators, on the other hand, we’ve been extremely – we’ve been working very closely together because we believe that we share a common mission and a common view in making sure that the value of the mortgage insurance industry is well understood. We, together, insure roughly $200 billion in mortgages, which is a burden that would fall to the taxpayers, otherwise. And we as an industry are very, very focused on making sure everybody understands that.

Okay. Thanks for that color. And I did have a followup Teresa with regard to the Performing Loan Modification Program that you mentioned. Can you elaborate a little bit more in terms of how you plan to address or I guess market this program?

Well, I think we are still in the process of developing that and rolling that to our lenders, probably over the next 30 days or so. But obviously it goes to this whole issue of now right now borrowers who are looking to get help and it may an imminent – it’s pretty obvious that they are going to default at some point particularly with respect to ARM adjustments and those kinds of things that we are trying to encourage them to get help early on. They are often calling their servicers now and being told they have to be in default to get help, and we don’t think that’s really the right answer on a go forward basis. So, we are trying to do that, which would also then stem sort of what we are seeing in terms of additional defaults coming through where someone is really just trying to get help and they think that’s the only way to get help. We are going to start the program as a pilot so that we can sort of make sure we know how to make it work and then move forward with it. At the same time, as I mentioned, we are working with the GSEs and the other MIs to work through operational issues related to dong performing mods on the GSEs’ portfolio as well. So those really are dovetailing at this point.

Okay. And then maybe just a followup question here with regard to this impact on capital, would seem to be if it’s a performing loan there would be no impact, one way or the other.

That’s right. I mean really what we are trying to avoid is folks feeling like they have to default, which does have an impact on capital.

Right.

Because this – right, then it becomes part of the reserve, so we are trying to stem that issue.

Okay. Thanks very much.

You are welcome.

And next we’ll go to the line of Mark DeVries with Barclays Capital. Please go ahead.

Yes, thanks. Can you provide us any color on -- if you have any new detail on the government’s refi plan is going to work for the above 80 LTV loans. It sounds like what they are talking about [ph] closing is essentially rolling these loans over – the ones that had a MI already to the existing insurers. Is that correct?

Yes, that’s actually what we are working with them on in terms of the operational piece of it that I was talking about where as it’s been discussed with us, if the loan was over 80% when it was originated and so currently has MI then what would be looking to do is to have them either they would modify or refinance the loan and keep the existing insurance with the existing insurer in place. To the extent that the loan was 80 or less at the time it was originated and so therefore does not have MI on it then they would be able to modify or refi those without obtaining insurance assuming that the value is now over 80.

And I assume they would also – they would maintain it at the original premium rate. It would be treated at the original loan to value, is that correct.

That’s our understanding, yes.

Okay. And – but it sounded like the way it was worded is that, that can't be objective. Obviously the risk is – there is no risk if you are having to just reinsure the same loan you already had because you are exposed to it, but let’s say for example you have to take on some of Triad’s business, right, and you are taking on business at a higher effective LTV and the original premium, how are they thinking about working that or are they going to try and ensure that no one has to take on someone else’s risk in this process?

Our understanding is that we only would take on our own risk, so essentially we wouldn’t take on any additional risk that we don’t currently have now. So, we really view this as a positive because it means that we can really deal with some of the defaulted loans that are in our portfolio now, and put those borrowers in a position where they are more likely to cure and less likely to default in the future and go to claims. And on the performing loans, the same thing that I said about our own sort of looking at doing a performing mod program. We believe that those would keep those out of default.

And part of the broader policy for us seems to be just get mortgage rates as well – effective mortgage rates as well as possible and obviously the risk based price increases that you guys have made as an industry have made that harder. Has there been any conversations about potentially rolling some of those back to get the effective rate to the end borrower lower?

No, because I mean first of all as an industry we really can't talk about that kind of issue, but I think that when we look at it we really made adjustments based on what we think the appropriate pricing is for the risk that we are taking in this environment. And we continue to monitor that and take a look at it. And if you look at what others have done I think they’ve been doing the same kind of thing. So, I mean there haven’t been any conversations or any pressure from the GSEs or the government for us to adjust our pricing.

Okay. Thank you.

(Operator instructions) And we’ll go to the line of Donna Halverstadt with Goldman Sachs. Please go ahead.

Good morning. Most of my main questions have been asked, but I had a – do have a couple that I wanted to ask. With respect to Radian’s obligation to repay certain amounts to Radian Guaranty during ’09, the number that you last disclosed was $72 million and then you disclosed up to $522 million for 2010. Are those numbers still current or can you update those numbers for us?

The numbers will be updated, they are right in that range, but they will be updated in our 10-K, but they haven’t changed materially.

Okay. And can you give us a feel for how that $72 million may play out a quarterly basis during ’09?

It’s all in the fourth quarter, so – because it relates to the tax return, so it’s a fourth quarter event.

Okay. So that would be true for 2010 as well, would all be 4Q?

That’s right.

Okay, great. And then the bit [ph] of dividends that were received from Sherman, were those capped or did you use that to pay down a little bit of the revolver?

Those were capped.

Okay. So the revolver still – you still have – what’s the current outstanding on that revolver?

It’s $100 million.

Okay, alright. And thinking about the investment portfolio, how that may change over the course of ’09, what’s your expectations--?

Probably not significantly. I mean very attuned to the liquidity needs of the operating companies so we’ve moved a lot into short term investments to handle the expected claim payments. The general makeup of the portfolio is not expected to change materially.

But how much do you expect – even if the makeup doesn’t change, do you expect there will be a material net reduction as you pay claims over the course of the year? Or do you think the--?

Yes, I mean to the extent there is negative cash flow but -- and there would be if you think about the claim payments guidance that we have given, there would be some reduction in the portfolio and that would come from the short term investments that we’ve moved for that – just for that purpose.

Okay. And then actually I guess that was it. Thank you.

Welcome.

And next we’ll go to the line of Brian Monteleone [ph] with Barclays Capital. Please go ahead.

Yes, thanks. Hey, Bob, in the risk factors that you just put out in the 8-K this morning, I think you disclosed that there is a $132 million of tax payments due the (inaudible) subs in October of ’09 and an additional $502.3 million due in October of 2010. What happens if Radian Group Inc. doesn’t have that cash to make those tax payments back to the subsidiaries?

Well, certainly for ’09, with the cash we have currently that shouldn’t be an issue. In 2010, again it’s a late 2010 projected payment, so it is projected at this point, it’s not definitive, and those tax sharing arrangements are regulatorily reviewed and it would require dealing with the regulator and we have to work through it as best we can, but we do expect that or hopeful that by that time we will have ample cash to make the payment.

Okay. Then just one other statement from the risk factors was that Radian is expected to incur significant additional losses in 2009. Can you give us kind of frame of reference, is that relative to the $2 billion – the $2.1 billion of incurred losses from ’08 or can you help us kind of understand how you are thinking about that?

No, I think it’s just a general statement, which isn’t too hard to make in this environment, so it doesn’t speak to the relative level compared to last year. It’s going to depend on a lot of things, obviously delinquencies, et cetera, but I think we were – we are able to give our best estimate of claims guidance, which will increase certainly from the $916 million paid in 2008.

Thanks.

And next we’ll go the line of George Urban [ph] with RBS. Please go ahead. George Urban – RBS: Hey guys. Hey, thanks a lot. It’s been really good. Most questions I got, but, Bob, can you just go over the approximate hold co. cash position at 12/31/08? And then just the last question just to confirm there is no change to the expense sharing arrangements? Thanks.

Yes, no change to the expense sharing arrangements of any note. And hold co. cash was – the number $375 million that I gave was current, so it’s more today than 13/31/08. 12/31/08 was a little bit higher. George Urban – RBS: Thanks.

And at this time I am showing no further questions in queue. I will turn it back over to the speakers for closing remarks.

Thank you, operator, and I would like to thank everybody for having participated in our call, and look forward to talking to you again next quarter. Thanks.

And ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You many now disconnect.