Radian (RDN) 8-K Radian Group--form 8-K

Exhibit 99.1

Quarterly

Operating Supplement

First Quarter 2004

Quarterly Operating Supplement

Table of Contents

	Page
Introductory Note	2
Company Profile	2
Company Information	2
Key Financial Highlights	3
Segment Information–Financial Guaranty	4
Statutory Income Statements	5
Statutory Balance Sheets	6
Gross Premiums Written by Product	7
Total Claims-Paying Resources and Leverage Ratios	7
Investment Portfolio Highlights	8
Insured Portfolio Highlights	9
Management Team	13
Safe Harbor Statement	14

1 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Table of Contents

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Quarterly Operating Supplement

March 31, 2004

Introductory Note

Radian Reinsurance Inc. was merged with and into Radian Asset Assurance Inc. effective as of June 1, 2004. All current year information presented herein is as of and/or for the quarter ended March 31, 2004 and does not take into account the effects of this merger.

Company Profile

Radian Asset Assurance Inc., founded in 1985 and rated AA by Fitch Ratings and Standard & Poor’s and Aa3 by Moody’s, provides credit enhancement to the holders of debt obligations and asset-backed securities. As a direct writer of financial guaranty insurance for municipal bonds, asset-backed securities and structured transactions, the Company plays an important role in extending the benefits of insurance to a broad range of institutions and securities issuers.

Radian Asset Assurance Inc. is a subsidiary of Radian Group Inc. (NYSE: RDN), a global credit enhancement provider headquartered in Philadelphia, with significant operations in New York City and London.

Company Information
Radian Asset Assurance Inc.	Contact:
335 Madison Avenue	John C. DeLuca
New York, New York 10017	Senior Vice President, Market Development
1 877 337.4925 (within the U.S.)	1 212 984.9222
1 212 983.3100	john.deluca@radian.biz

2 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Introductory Note / Company Profile / Company Information

Quarterly Operating Supplement

Radian Group Inc. and Subsidiaries

Key Financial Highlights* ($ Thousands)

	Quarter ended March 31, 2004
	Mortgage Insurance		Financial Services		Financial Guaranty			Total
Net premiums written	$	205,669	$	—	$	(24,241	)	$	181,428
Net premiums earned	$	207,116	$	—	$	36,304		$	243,420
Net investment income		28,513		48		21,144			49,705
Equity in net income/(loss) of affiliates		—		33,402		(920	)		32,482
Other income		5,486		2,874		40			8,400
Total revenues		241,115		36,324		56,568			334,007
Provision for losses		98,123		—		16,644			114,767
Policy acquisition costs		17,142		—		5,141			22,283
Other operating expenses		37,746		3,979		11,434			53,159
Interest expense		5,503		724		3,427			9,654
Total expenses		158,514		4,703		36,646			199,863
Gain/(loss) on disposition of investments		24,122		3,173		(619	)		26,676
Change in fair value of derivative instruments		4,426		49		172			4,647
Net gains/(losses)		28,548		3,222		(447	)		31,323
Pretax income		111,149		34,843		19,475			165,467
Income tax provision		30,647		12,195		2,615			45,457
Net income	$	80,502	$	22,648	$	16,860		$	120,010
Total assets	$	3,929,574	$	304,921	$	2,306,598		$	6,541,093
Deferred policy acquisition costs		79,092		—		121,999			201,091
Reserve for losses		521,102		—		265,013			786,115
Unearned premiums		92,228		—		564,081			656,309
Equity	$	1,905,233	$	250,212	$	1,188,040		$	3,343,485

* Reported on a GAAP basis.

3 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Key Financial Highlights

Quarterly Operating Supplement

Radian Group Inc. and Subsidiaries

Segment Information–Financial Guaranty ($ Thousands)

	Quarter ended March 31, 2004
	As Reported			Impact of Clawback			As Adjusted Excluding Clawback
Net premiums written	$	(24,241	)	$	(96,417	)	$	72,176
Net premiums earned	$	36,304		$	(24,892	)	$	61,196
Net investment income		21,144			—			21,144
Equity in net loss of affiliates		(920	)		—			(920	)
Other income		40			—			40
Total revenues		56,568			(24,892	)		81,460
Provision for losses		16,644			—			16,644
Policy acquisition costs		5,141			(9,766	)		14,907
Other operating expenses		11,434			—			11,434
Interest expense		3,427			—			3,427
Total expenses		36,646			(9,766	)		46,412
Loss on disposition of investments		(619	)		—			(619	)
Change in fair value of derivative instruments		172			(791	)		963
Net (losses)/gains		(447	)		(791	)		344
Pretax income		19,475			(15,917	)		35,392
Income tax provision		2,615			(5,571	)		8,186
Net income	$	16,860		$	(10,346	)	$	27,206

The above schedule shows the Financial Guaranty Segment, on a GAAP basis, as reported (Column 1) and adjustments (Column 2) to reflect the income statement impact of the recapture (referred to above as the clawback) of business previously ceded to Radian Reinsurance Inc. by one of the primary insurer customers of the Financial Guaranty Segment. The adjusted numbers are shown in Column 3. The impact of the clawback (Column 2) reflects the clawback of business ceded to Radian Reinsurance Inc. in prior periods. This clawback will only affect the first quarter (and, as a result, the year-to-date periods) of 2004. Accordingly, management believes that Column 3 provides useful information to investors by presenting a more meaningful basis of comparison for the Financial Guaranty Segment’s future results.

4 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Segment Information–Financial Guaranty

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Statutory Income Statements ($ Thousands)

	Quarter ended
	March 31 2004			March 31 2003
Revenues
Gross premiums written	$	29,344		$	47,028
Reinsurance premiums ceded		(2,838	)		(7,780	)
Net premiums written		26,506			39,248
Increase in unearned premiums		(2,991	)		(10,125	)
Premiums earned		23,515			29,123
Net investment income		8,239			6,893
Net realized gain on sale of investments		2,688			1,188
Net investment gains		10,927			8,081
Other (expense) income		(1,084	)		1,483
Total revenues		33,358			38,687
Expenses
Losses and loss adjustment expenses incurred		116,450			6,279
Commissions incurred		(688	)		2,703
Other underwriting expenses		11,847			9,887
Total expenses		127,609			18,869
(Loss) income before income taxes		(94,251	)		19,818
Federal and foreign income tax (benefit) expense		(34,107	)		2,280
Net (loss) income	$	(60,144	)	$	17,538
Financial Ratios
Loss and LAE Ratio		495.2	%		21.6	%
Underwriting Expense Ratio		42.1	%		32.1	%
Combined Ratio		537.3	%		53.7	%

On January 14, 2004, Radian Asset Assurance Inc. (the “Company”) announced it would have claims from a single manufactured housing transaction that the Company reinsured from an affiliate of the Company. The Company received its first default notice related to this transaction on January 27, 2004. The Company established $111.25 million in loss reserves for this transaction on a Statutory basis in 2004 (recorded on a GAAP basis in 2003), which represented the total exposure on this transaction. The Company expects losses to be paid out over the next several years. During the first quarter of 2004, the Company received $65.0 million in capital from its ultimate parent, Radian Group Inc., to offset (on an after-tax basis) the effect of this default on the Company.

5 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Statutory Income Statements

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Statutory Balance Sheets ($ Thousands)

	March 31 2004		December 31 2003
Assets
Long-term bonds	$	763,009	$	670,790
Preferred stock		35,006		32,252
Common stock		70,582		74,204
Cash and short-term investments		39,037		67,333
Receivable for securities		—		515
Total Investments		907,634		845,094
Investment income due and accrued		9,236		9,722
Premiums receivable		10,736		12,805
Funds held by reinsured companies		73		73
Current federal income tax recoverable		33,276		609
Net deferred tax asset		1,509		1,130
Other assets		8		—
Total Assets	$	962,472	$	869,433
Liabilities
Contingency reserve	$	64,308	$	59,462
Losses and loss adjustment expenses		126,992		19,847
Reinsurance payable on paid losses and loss adjustment expenses		3,566		2,434
Unearned premiums		301,169		298,178
Provision for reinsurance		179		284
Payable to affiliates		446		18,076
Payable for securities		1,910		2,962
Ceded reinsurance premiums payable		1,218		1,395
Federal and foreign income taxes payable		—		3,642
Funds held under reinsurance treaties		4,331		6,696
Accrued expenses and other liabilities		6,434		3,463
Total Liabilities		510,553		416,439
Policyholders’ Surplus
Common stock		15,000		15,000
Additional paid-in capital		391,714		326,714
Unassigned funds		45,205		111,280
Total Policyholders’ Surplus		451,919		452,994
Total Liabilities and Policyholders’ Surplus	$	962,472	$	869,433
Qualified Statutory Capital	$	516,227	$	512,456

On January 14, 2004, Radian Asset Assurance Inc. (the “Company”) announced it would have claims from a single manufactured housing transaction that the Company reinsured from an affiliate of the Company. The Company received its first default notice related to this transaction on January 27, 2004. The Company established $111.25 million in loss reserves for this transaction on a Statutory basis in 2004 (recorded on a GAAP basis in 2003), which represented the total exposure on this transaction. The Company expects losses to be paid out over the next several years. During the first quarter of 2004, the Company received $65.0 million in capital from its ultimate parent, Radian Group Inc., to offset (on an after-tax basis) the effect of this default on the Company.

Effective April 30, 2003, the Company entered into an assumption reinsurance agreement, with regard to its Trade Credit business, with an affiliated company (Radian Reinsurance Inc.) whereby the Company reversed assumed unearned premiums of $21.5 million and loss and loss adjustment reserves of $38.2 million. This transaction had no impact on premiums earned or losses and loss adjustment expenses incurred.

6 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Statutory Balance Sheets

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Gross Premiums Written by Product ($ Thousands)

	1st Qtr 2004			1st Qtr 2003		% Change
Public Finance Direct	$	8,186		$	10,844	–24.5	%
Structured Finance Direct		20,502			16,578	23.7	%
Public Finance Reinsurance		(1,318	)		2,780	–147.4	%
Structured Finance Reinsurance		1,974			4,556	–56.7	%
Trade Credit Reinsurance		—			12,271	–100.0	%
	$	29,344		$	47,029	–37.6	%

Total Claims-Paying Resources and Leverage Ratios

($ Thousands except ratios)

	March 31 2004		December 31 2003		% Change
Capital and Surplus	$	451,919	$	452,994	0	%
Contingency Reserve		64,308		59,462	8	%
Qualified Statutory Capital		516,227		512,456	1	%
Unearned Premium Reserve		301,169		298,178	1	%
Loss and Loss Expense Reserves		126,992		19,847	540	%
Total Policyholders’ Reserves		944,388		830,481	14	%
Present Value of Future Installment Premiums		178,996		190,266	–6	%
Reinsurance and Soft Capital Facilities		200,000		200,000	0	%
Total Claims-Paying Resources	$	1,323,384	$	1,220,747	8	%
Total Debt Service (Principal and Interest) Outstanding	$	29,596,027	$	28,961,961	2	%
Capital Leverage Ratio1		57:1		57:1
Claims-Paying Ratio2		22:1		24:1

1 Capital Leverage Ratio: Total debt service/Qualified statutory capital.

2 Claims-Paying Ratio: Total debt service/Total claims-paying resources.

7 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Gross Premiums /Total Claims-Paying Resources

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Investment Portfolio Highlights

Asset Quality

As of March 31, 2004, the book value of our investment portfolio was $896.9 million, with an average duration of 5.2 years.

Asset Class

Our conservative portfolio is invested primarily in fixed-income securities. Our primary objective is to achieve total return, with a secondary objective of maximizing after-tax income.

8 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Investment Portfolio Highlights

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Insured Portfolio Highlights ($ Thousands)

Geographic Diversification

State	Net Par (3/31/2004)		Percent of total		Net Par (12/31/2003)		Percent of total
New York	$	1,316,927	6.1	%	$	1,279,650	6.1	%
Pennsylvania		1,195,022	5.6	%		1,218,444	5.9	%
Texas		1,127,179	5.3	%		1,081,670	5.2	%
California		743,638	3.5	%		695,664	3.4	%
Florida		692,396	3.3	%		708,912	3.4	%
Colorado		510,893	2.4	%		511,114	2.5	%
Connecticut		446,262	2.1	%		447,951	2.2	%
Illinois		390,272	1.8	%		395,050	1.9	%
Ohio		356,846	1.7	%		357,977	1.7	%
Massachusetts		352,237	1.7	%		352,506	1.7	%
Total of top ten states		7,131,672	33.5	%		7,048,938	34.0	%
Total of other states		4,331,634	20.4	%		4,343,800	21.0	%
Domestic structured finance		9,400,294	44.2	%		8,918,367	43.0	%
International		402,127	1.9	%		406,482	2.0	%
Total	$	21,265,727	100.0	%	$	20,717,587	100.0	%

9 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Insured Portfolio Highlights

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Insured Portfolio Highlights ($ Thousands)

Sector Breakout

Public Finance	Net Par (3/31/2004)		Percent of total		Net Par (12/31/2003)		Percent of total
Healthcare	$	2,688,566	12.6	%	$	2,603,369	12.5	%
General Obligations		2,490,217	11.6	%		2,460,205	11.9	%
Education		1,964,955	9.2	%		1,939,787	9.4	%
Long-Term Care		1,053,303	5.0	%		1,054,633	5.1	%
Utilities		839,111	4.0	%		890,419	4.3	%
Tax-Backed		766,185	3.6	%		757,979	3.7	%
Other Public Finance		671,818	3.2	%		680,833	3.3	%
Transportation		402,746	1.9	%		405,082	1.9	%
Second-To-Pay Muni Wrap		387,730	1.8	%		387,730	1.8	%
Housing		169,447	0.8	%		183,462	0.9	%
Investor-Owned Utilities		57,938	0.3	%		57,308	0.3	%
Subtotal Public Finance	$	11,492,016	54.0	%	$	11,420,807	55.1	%
Structured Finance	Net Par (3/31/2004)		Percent of total		Net Par (12/31/2003)		Percent of total
Collateralized Debt Obligations	$	7,393,393	34.7	%	$	6,720,501	32.5	%
Asset-Backed – Mortgage and MBS		972,375	4.6	%		975,114	4.7	%
Asset-Backed – Consumer		841,861	4.0	%		981,871	4.7	%
Asset-Backed – Commercial and Other		356,249	1.7	%		397,647	1.9	%
Other Structured Finance		209,833	1.0	%		221,647	1.1	%
Subtotal Structured Finance	$	9,773,711	46.0	%	$	9,296,780	44.9	%
Total	$	21,265,727	100.0	%	$	20,717,587	100.0	%

10 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Insured Portfolio Highlights

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Insured Portfolio Highlights ($ Thousands)

Rating Distribution

Rating*	Net Par (3/31/2004)		Percent of total		Net Par (12/31/2003)		Percent of total
AAA	$	5,597,234	26.4	%	$	4,998,370	24.1	%
AA		3,064,437	14.4	%		3,072,299	14.8	%
A		3,578,309	16.8	%		3,652,262	17.6	%
BBB		7,543,977	35.5	%		7,625,867	36.8	%
Investment Grade		405,630	1.9	%		406,110	2.0	%
Below Investment Grade		666,929	3.1	%		634,814	3.1	%
Not Rated		409,211	1.9	%		327,865	1.6	%
Total	$	21,265,727	100.0	%	$	20,717,587	100.0	%

* Indicated category reflects highest rating of the three rating agencies.

11 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Insured Portfolio Highlights

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Insured Portfolio Highlights ($ Thousands)

10 Largest Public Finance Exposures

	Net Par (3/31/2004)		Percent of total Net Par		Rating*
New York, New York GO	$	184,223	0.87	%	A+
Muni Leveraged Lease		145,377	0.68	%	A
Virgin Islands Pub Fin Auth		124,255	0.58	%	BBB
Jefferson Cnty Ala Sewer		106,168	0.50	%	A
Second-To-Pay Muni Wrap		90,000	0.42	%	AAA
Second-To-Pay Muni Wrap		90,000	0.42	%	AAA
Second-To-Pay Muni Wrap		88,000	0.41	%	AAA
Interlocken Consolidated Metropolitan District		83,640	0.39	%	BBB–
Long Island Univ – New York St Dorm Auth		81,393	0.38	%	BBB–
Orlando Regional Health Systems Florida		78,558	0.37	%	A–
Total top ten	$	1,071,614	5.02	%

10 Largest Structured Finance Exposures

	Net Par (3/31/2004)		Percent of total Net Par		Rating*
European Static Synthetic CDO	$	270,900	1.27	%	AAA
U.S. Static Synthetic CDO		270,000	1.27	%	AAA
U.S. Static Synthetic CDO		270,000	1.27	%	AA
European Static Synthetic CDO		258,184	1.21	%	AAA
CDO of ABS		257,529	1.21	%	AA
U.S. Static Synthetic CDO		252,051	1.19	%	AA
U.S. Static Synthetic CDO		250,000	1.18	%	AA+
U.S. Static Synthetic CDO		250,000	1.18	%	AAA
U.S. Static Synthetic CDO		243,200	1.14	%	AAA
European RMBS		225,000	1.06	%	AA
Total top ten	$	2,546,864	11.98	%

* Indicated category reflects highest rating of the three rating agencies.

12 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Insured Portfolio Highlights

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Management Team

Martin A. Kamarck

President

David J. Beidler

Senior Vice President, Senior Counsel

Sally B. Campbell

Senior Vice President, Public Finance

John C. DeLuca

Senior Vice President, Market Development

Bonita Z. Dorland

Senior Vice President, Chief Risk Officer

Paul C. Larsen

Vice President, Managing Director of Client and Portfolio Management

Anna M. Laudon

Vice President, Managing Director of Asset Backed Securities

Andrew C.J. Poole

Managing Director, Radian Asset Assurance Ltd. & Radian Representatives Ltd.

Jack Praschnik

Senior Vice President, Global Strategies

Andrew Reid

Vice President, Managing Director of Global Markets

Patrick Rossi

Senior Vice President, Controller

Jeffrey C. Salton

Senior Vice President, Operations and Analysis

Hao Wu

Vice President, Managing Director of Financial Products

13 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Radian Asset Assurance Inc.Management Team

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Safe Harbor Statement

All statements in this document that address operating performance, events or developments that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management’s current views and assumptions with respect to future events.

The forward-looking statements involve risks and uncertainties including the following:

changes in general financial and political conditions, such as extended national or regional economic recessions, changes in housing values, changes or volatility in interest rates, or other political instability; changes in investor perception of the strength of private mortgage insurers or financial guaranty providers, and risks faced by the businesses, municipalities or pools of assets covered by Radian’s insurance; the loss of significant customers with whom Radian has a concentration of its insurance in force; rising delinquencies in mortgage loans insured by Radian resulting from increased consolidation of mortgage lenders and servicers; increased severity or frequency of losses associated with certain Radian products that are riskier than traditional mortgage insurance and municipal guaranty insurance policies; material changes in persistency rates of Radian’s mortgage insurance policies; downgrades of the insurance financial-strength ratings assigned by the major ratings agencies to Radian’s operating subsidiaries; intense competition from others and from alternative products to private mortgage insurance and financial guaranty insurance; changes in the business practices of Fannie Mae and Freddie Mac; legislative and regulatory changes affecting demand for private mortgage insurance and financial guaranty insurance; changes in claims against mortgage insurance products resulting from the aging of Radian’s mortgage insurance policies; changes in Radian’s ability to maintain sufficient reinsurance capacity in an increasingly concentrated reinsurance market; vulnerability to the performance of Radian’s strategic investments; and the loss of executive officers or other key personnel.

Investors are also directed to other risks discussed in documents filed by Radian with the SEC, including the factors detailed in our annual report on Form 10-K for the year ended December 31, 2003 in the section immediately preceding Part I of the report.

Radian does not intend to and disclaims any duty or obligation to update or revise any forward-looking statements made in this document to reflect new information, future events or for any other reason.

14 Quarterly Operating Supplement for the Period Ended March 31, 2004 /Safe Harbor Statement