Radian (RDN) 8-K Results of Operations and Financial Condition

Exhibit 99.1

Quarterly

Operating Supplement

Third Quarter 2005

Quarterly Operating Supplement

Table of Contents

	Page
Introductory Note	2
Company Profile	2
Company Information	2
Consolidated GAAP Income Statements	3
Consolidated GAAP Balance Sheets	4
Statutory Information	5
Total Claims-Paying Resources and Leverage Ratios	5
Consolidated Gross Premiums Written by Product	6
Consolidated Net Premiums Earned by Product	6
Consolidated Net Unearned Premium Amortization and Estimated Future Installment Premiums	6
Consolidated Selected Loss Information	7
Consolidated Selected Derivative Information	8
Consolidated Investment Portfolio Highlights	9
Consolidated Insured Portfolio Highlights	10
Consolidated CDO Exposure	14
Consolidated Explanatory Notes	15
Safe Harbor Statement	16

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Table of Contents

1

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Quarterly Operating Supplement

September 30, 2005

Introductory Note

This operating supplement presents financial information for Radian Asset Assurance Inc. and its consolidated subsidiaries on a GAAP basis, and includes selected information prepared on a statutory accounting basis. The financial information for Radian Asset Assurance Inc. contained in operating supplements prior to the Second Quarter 2005 was prepared on a statutory accounting basis.

Radian Reinsurance Inc. (“Radian Reinsurance”) was merged with and into Radian Asset Assurance Inc. effective as of June 1, 2004. All financial information presented herein is as if the merger had occurred on January 1, 2004.

Company Profile

Radian Asset Assurance Inc., founded in 1985 and rated AA by Standard & Poor’s, a division of The McGraw-Hill Companies (“S&P”) and Fitch Ratings and Aa3 by Moody’s Investor Services (“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, Radian Asset Assurance Inc. 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 risk management company headquartered in Philadelphia with significant operations in both New York 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

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Introductory Note /Company Profile /Company Information

2

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated GAAP Income Statements*($ Thousands)

(Unaudited)

	Quarter ended						Nine months ended
	September 30 2005			September 30 2004			September 30 2005			September 30 2004
Revenues
Gross premiums written	$	78,091		$	73,767		$	155,241		$	139,795
Ceded premiums written		(227	)		(713	)		(3,057	)		(3,283	)
Net premiums written		77,864			73,054			152,184			136,512
Increase (decrease) in unearned premiums		22,509			16,602			(2,740	)		(9,691	)
Premiums earned		55,355			56,452			154,924			146,203
Net investment income		22,289			21,389			65,194			62,792
Gain on sale of investments		3,036			1,131			8,152			6,988
Change in fair value of derivative instruments		41,628			5,734			39,376			6,988
Total revenues		122,308			84,706			267,646			222,971
Expenses
Losses and loss adjustment expenses		10,454			12,412			25,370			42,054
Policy acquisition costs		13,030			12,047			39,187			29,911
Other operating expenses		18,085			13,078			46,991			34,975
Other expense		3,935			2,725			10,004			7,821
Total expenses		45,504			40,262			121,552			114,761
Income before income taxes		76,804			44,444			146,094			108,210
Income tax expense		23,067			12,410			36,019			24,360
Net income	$	53,737		$	32,034		$	110,075		$	83,850

* See Consolidated Explanatory Notes on page 15.

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 / Consolidated GAAP Income Statements

3

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated GAAP Balance Sheets* ($ Thousands)**

(Unaudited)

	September 30 2005		December 31 2004
Assets
Investments:
Fixed maturity securities, available for sale, at market (amortized cost $2,008,139 and $1,929,921)	$	2,068,847	$	2,008,416
Trading securities, at market (cost $16,360 and $16,848)		22,966		22,436
Common stock, at market (cost $931)		1,049		1,049
Short-term investments		112,466		112,452
Total Investments		2,205,328		2,144,353
Cash and cash equivalents		16,043		14,017
Accrued interest and dividends receivable		25,538		28,211
Premiums and other receivables		42,865		49,638
Deferred policy acquisition costs		138,194		141,944
Prepaid reinsurance premiums		2,072		1,846
Reinsurance recoverable on unpaid losses		2,556		2,235
Prepaid federal income taxes		11,495		10,978
Credit derivatives		57,490		25,309
Other assets		15,716		12,368
Total Assets	$	2,517,297	$	2,430,899
Liabilities and Shareholder’s Equity
Liabilities
Losses and loss adjustment expenses	$	191,087	$	216,202
Reinsurance payable on paid losses and loss adjustment expenses		4,687		6,417
Unearned premiums		618,959		623,677
Deferred federal income taxes		80,625		75,926
Federal income taxes payable		1,408		5,943
Payable to affiliates		8,241		9,686
Accrued expenses and other liabilities		48,941		20,682
Total Liabilities		953,948		958,533
Shareholder’s Equity
Common stock – $150 par value
Authorized, issued and outstanding – 100,000 shares		15,000		15,000
Additional paid-in capital		590,579		590,579
Retained earnings		912,069		801,994
Accumulated other comprehensive income		45,701		64,793
Total Shareholder’s Equity		1,563,349		1,472,366
Total Liabilities and Shareholder’s Equity	$	2,517,297	$	2,430,899

* See Consolidated Explanatory Notes on page 15.

** Except share amounts.

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Consolidated GAAP Balance Sheets

4

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Statutory Information*($ Thousands except ratios)

	Quarter ended				Percent Change		Nine months ended				Percent Change
	September 30 2005		September 30 2004				September 30 2005		September 30 2004
Statutory Net Income	$	23,669	$	6,102	287.9	%	$	89,565	$	25,025	257.9%

Statutory Ratios

	Quarter ended				Nine months ended
	September 30 2005		September 30 2004		September 30 2005		September 30 2004
Loss and Loss Adjustment Expense Ratio	–3.0	%	6.8	%	–1.3	%	88.9	%
Underwriting Expense Ratio	41.2	%	44.4	%	50.2	%	44.5	%
Combined Ratio	38.2	%	51.2	%	48.9	%	133.4	%

Total Claims-Paying Resources and Leverage Ratios*

($ Thousands except ratios)

	September 30 2005		December 31 2004
Capital and Surplus	$	1,061,858	$	1,003,748
Contingency Reserve		282,389		251,674
Qualified Statutory Capital		1,344,247		1,255,422
Unearned Premium Reserve		709,391		694,611
Loss and Loss Expense Reserves		60,561		87,332
Total Policyholders’ Reserves		2,114,199		2,037,365
Present Value of Future Installment Premiums		282,472		251,242
Reinsurance and Soft Capital Facilities		150,000		245,000
Total Claims-Paying Resources	$	2,546,671	$	2,533,607
Net Debt Service (Principal and Interest) Outstanding	$	103,121,732	$	101,499,932
Capital Leverage Ratio1		77:1		81:1
Claims-Paying Ratio2		40:1		40:1

* See Consolidated Explanatory Notes on page 15.

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

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

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Statutory Information / Total Claims-Paying Resources

5

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated Gross Premiums Written by Product*($ Thousands)

	Quarter ended				Percent Change		Nine months ended						Percent Change
	September 30 2005		September 30 2004				September 30 2005			September 30 2004
Public Finance Direct	$	22,540	$	10,006	125.3	%	$	51,286		$	35,871		43.0	%
Structured Finance Direct		19,948		23,749	–16.0	%		52,608			79,053		–33.5	%
Public Finance Reinsurance		23,374		19,305	21.1	%		61,354			56,202		9.2	%
Structured Finance Reinsurance		3,092		6,407	–51.7	%		16,355			23,813		–31.3	%
Trade Credit Reinsurance		9,137		14,300	–36.1	%		28,380			41,273		–31.2	%
		78,091		73,767	5.9	%		209,983			236,212		–11.1	%
Impact of Recapture		—		—				(54,742	)		(96,417	)	43.2	%
	$	78,091	$	73,767	5.9	%	$	155,241		$	139,795		11.0	%

Consolidated Net Premiums Earned by Product*($ Thousands)

	Quarter ended				Percent Change		Nine months ended						Percent Change
	September 30 2005		September 30 2004				September 30 2005			September 30 2004
Public Finance Direct	$	7,651	$	7,327	4.4	%	$	24,667		$	19,516		26.4	%
Structured Finance Direct		20,108		19,911	1.0	%		57,098			57,391		–0.5	%
Public Finance Reinsurance		10,058		9,725	3.4	%		25,661			30,810		–16.7	%
Structured Finance Reinsurance		4,544		7,285	–37.6	%		15,563			24,948		–37.6	%
Trade Credit Reinsurance		12,994		12,204	6.5	%		36,474			38,430		–5.1	%
		55,355		56,452	–1.9	%		159,463			171,095		–6.8	%
Impact of Recapture		—		—				(4,539	)		(24,892	)	81.8	%
	$	55,355	$	56,452	–1.9	%	$	154,924		$	146,203		6.0	%

Consolidated Net Unearned Premium Amortization and Estimated Future Installment Premiums**

As of September 30, 2005

($ Millions)

	Ending Net Unearned Premiums		Unearned Premium Amortization		Future Installments		Total Premium Earnings
2005	$	579.6	$	37.3	$	9.2	$	46.5
2006		502.3		77.3		75.2		152.5
2007		444.7		57.6		62.0		119.6
2008		395.0		49.7		45.1		94.8
2009		355.2		39.8		38.1		77.9
2005 – 2009		355.2		261.7		229.6		491.3
2010 – 2014		208.8		146.4		75.0		221.4
2015 – 2019		106.8		102.0		16.2		118.2
2020 – 2024		43.3		63.5		9.8		73.3
After 2025		0.0		43.3		9.3		52.6
Total		—	$	616.9	$	339.9	$	956.8

* See Consolidated Explanatory Notes on page 15.

** This table depicts the expected amortization of the unearned premium for the existing financial guaranty portfolio, assuming no advance refundings as of September 30, 2005. Expected maturities will differ from contractual maturities because borrowers have the right to call or repay financial guaranty obligations. Unearned premium amounts are net of prepaid reinsurance.

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Consolidated: Gross Premiums Written / Net Premiums Earned / Net Unearned Premium

6

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated Selected Loss Information*

($ Thousands)

Components of Claims Paid and Incurred Losses and Loss Adjustment Expenses

	Quarter ended					Nine months ended
	September 30 2005			September 30 2004		September 30 2005		September 30 2004
Claims Paid
Trade Credit	$	3,454		$	3,262	$	13,101	$	28,163
Financial Guaranty		(201	)		7,469		11,284		23,890
Conseco Finance Corp		7,443			8,225		23,393		23,307
		10,696			18,956		47,778		75,360
Impact of Recapture		—			—		—		7,488
Total	$	10,696		$	18,956	$	47,778	$	82,848
Incurred Losses and Loss Adjustment Expenses
Trade Credit	$	6,684		$	6,009	$	13,738	$	20,319
Financial Guaranty		3,770			6,403		11,632		21,735
Total	$	10,454		$	12,412	$	25,370	$	42,054

Components of Losses and Loss Adjustment Expense Reserves

	September 30 2005		December 31 2004
Financial Guaranty
Case	$	57,621	$	91,905
Allocated non-specific		20,750		9,750
Unallocated non-specific		58,163		56,748
		136,534		158,403
Trade Credit and Other
Case		21,107		26,587
IBNR		33,446		31,212
		54,553		57,799
Total	$	191,087	$	216,202

* See Consolidated Explanatory Notes on page 15.

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Consolidated Selected Loss Information

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Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated Selected Derivative Information

($ Millions)

	September 30 2005			December 31 2004
Notional value	$	19,377.5		$	12,500.0
Gross gains	$	81.8		$	74.9
Gross losses		24.3			49.6
Net gains	$	57.5		$	25.3
Balance at January 1	$	25.3		$	(16.1	)
Net gains		38.4			29.7
Settlements of derivatives contracts
Defaults		—			—
Recoveries		(6.2	)		(4.0	)
Payments		—			18.6
Early termination receipts		—			(2.9	)
Balance at end of period	$	57.5		$	25.3

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Consolidated Selected Derivative Information

8

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated Investment Portfolio Highlights

Asset Quality

As of September 30, 2005, the book value of our investment portfolio was $2.2 billion, with an average duration of 6.6 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.

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Consolidated Investment Portfolio Highlights

9

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated Insured Portfolio Highlights*

($ Millions)

Geographic Diversification

State	Net Par Outstanding (9/30/2005)		Percent of total Net Par		Net Par Outstanding (12/31/2004)		Percent of total Net Par
California	$	4,832	6.8	%	$	5,243	7.9	%
New York		4,796	6.7	%		4,516	6.8	%
Texas		3,434	4.8	%		3,375	5.1	%
Pennsylvania		2,750	3.9	%		2,690	4.0	%
Florida		2,702	3.8	%		2,623	3.9	%
Illinois		2,445	3.4	%		2,589	3.9	%
Massachusetts		1,919	2.7	%		1,709	2.6	%
New Jersey		1,850	2.6	%		1,565	2.3	%
Washington		1,385	2.0	%		1,208	1.8	%
Colorado		1,161	1.6	%		1,142	1.7	%
Top ten states – public finance subtotal		27,274	38.3	%		26,660	40.0	%
Total of other states – public finance		16,466	23.1	%		17,800	26.7	%
Domestic structured finance		21,861	30.7	%		17,520	26.2	%
International		5,633	7.9	%		4,771	7.1	%
Total	$	71,234	100.0	%	$	66,751	100.0	%

* See Consolidated Explanatory Notes on page 15.

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Consolidated Insured Portfolio Highlights

10

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated Insured Portfolio Highlights*

($ Millions)

Sector Breakout

Public Finance	Gross Par Outstanding (9/30/2005)		Percent of total Gross Par		Net Par Outstanding (9/30/2005)		Percent of total Net Par		Gross Par Outstanding (12/31/2004)		Percent of total Gross Par		Net Par Outstanding (12/31/2004)		Percent of total Net Par
General Obligations	$	14,426	19.8	%	$	14,404	20.2	%	$	13,612	19.8	%	$	13,586	20.3	%
Healthcare		8,276	11.4	%		8,276	11.6	%		8,191	11.9	%		8,191	12.3	%
Utilities		5,625	7.8	%		5,513	7.7	%		6,144	9.0	%		6,014	9.0	%
Transportation		4,684	6.4	%		4,684	6.6	%		5,059	7.4	%		5,059	7.6	%
Tax Backed		4,148	5.7	%		4,144	5.8	%		4,475	6.5	%		4,471	6.7	%
Education		3,375	4.6	%		3,375	4.7	%		3,601	5.3	%		3,601	5.4	%
Investor Owned Utilities		1,461	2.0	%		1,461	2.1	%		1,728	2.5	%		1,728	2.6	%
Long Term Care		1,186	1.6	%		1,186	1.7	%		1,126	1.6	%		1,126	1.7	%
Other Public Finance		1,146	1.6	%		891	1.3	%		1,451	2.1	%		1,196	1.8	%
Housing		599	0.8	%		599	0.8	%		693	1.0	%		694	1.0	%
Second-To-Pay Municipal Wrap		507	0.7	%		507	0.7	%		708	1.0	%		708	1.1	%
Subtotal Public Finance	$	45,433	62.4	%	$	45,040	63.2	%	$	46,788	68.1	%	$	46,374	69.5	%
Structured Finance	Gross Par Outstanding (9/30/2005)		Percent of total Gross Par		Net Par Outstanding (9/30/2005)		Percent of total Net Par		Gross Par Outstanding (12/31/2004)		Percent of total Gross Par		Net Par Outstanding (12/31/2004)		Percent of total Net Par
Collateralized Debt Obligations	$	20,204	27.7	%	$	20,204	28.4	%	$	13,156	19.2	%	$	13,156	19.7	%
Asset Backed – Consumer		1,678	2.3	%		1,678	2.4	%		2,728	4.0	%		2,728	4.1	%
Asset Backed – Commercial and Other		1,481	2.0	%		1,481	2.1	%		1,783	2.6	%		1,783	2.7	%
Other Structured Finance		1,450	2.0	%		1,450	2.0	%		912	1.3	%		912	1.3	%
Asset Backed – Mortgage and MBS		2,587	3.6	%		1,381	1.9	%		3,328	4.8	%		1,798	2.7	%
Subtotal Structured Finance	$	27,400	37.6	%	$	26,194	36.8	%	$	21,907	31.9	%	$	20,377	30.5	%
Total	$	72,833	100.0	%	$	71,234	100.0	%	$	68,695	100.0	%	$	66,751	100.0	%
Rating Distribution
Rating**	Gross Par Outstanding (9/30/2005)		Percent of total Gross Par		Net Par Outstanding (9/30/2005)		Percent of total Net Par		Gross Par Outstanding (12/31/2004)		Percent of total Gross Par		Net Par Outstanding (12/31/2004)		Percent of total Net Par
AAA	$	20,699	28.4	%	$	19,492	27.4	%	$	13,403	19.5	%	$	11,881	17.8	%
AA		14,900	20.4	%		14,812	20.8	%		15,989	23.3	%		15,880	23.8	%
A		19,892	27.3	%		19,588	27.5	%		21,941	32.0	%		21,635	32.4	%
BBB		14,271	19.6	%		14,271	20.0	%		14,009	20.4	%		14,002	21.0	%
Investment Grade		565	0.8	%		565	0.8	%		422	0.6	%		422	0.6	%
Below Investment Grade		1,158	1.6	%		1,158	1.6	%		1,602	2.3	%		1,602	2.4	%
Not Rated		1,348	1.9	%		1,348	1.9	%		1,329	1.9	%		1,329	2.0	%
Total	$	72,833	100.0	%	$	71,234	100.0	%	$	68,695	100.0	%	$	66,751	100.0	%

* See Consolidated Explanatory Notes on page 15.

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

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Consolidated Insured Portfolio Highlights

11

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated Insured Portfolio Highlights*

($ Millions)

10 Largest Public Finance Exposures

	Net Par Outstanding (9/30/2005)		Percent of total Net Par		Rating1
New York, New York GO	$	643	0.9	%	A+
Port Authority of New York & New Jersey		474	0.7	%	AA–
California State GO		357	0.5	%	A
Massachusetts State GO		340	0.5	%	AA
Long Island Power Authority New York		317	0.4	%	A–
New York City Muni Water Finance		309	0.4	%	AA+
Illinois State GO		276	0.4	%	AA
Jefferson County Alabama Gas & Sewer		275	0.4	%	A
Metropolitan Transportation Authority New York		274	0.4	%	A
Commonwealth of Puerto Rico GO		249	0.3	%	BBB
Total	$	3,514	4.9	%
10 Largest Structured Finance Exposures
	Net Par Outstanding (9/30/2005)		Percent of total Net Par		Rating2
Second to Pay CDO Wrap	$	450	0.6	%	AAA
UK Static Synthetic Investment Grade CDO		450	0.6	%	AAA
Global Static Synthetic Investment Grade CDO		400	0.6	%	AAA
US Static Synthetic Investment Grade CDO		400	0.6	%	AAA
UK Static Synthetic Investment Grade CDO		400	0.6	%	AAA
UK Static Synthetic Investment Grade CDO		400	0.6	%	AAA
US Static Synthetic Investment Grade CDO		400	0.6	%	AAA
US Static Synthetic Investment Grade CDO		400	0.6	%	AAA
CDO of ABS		390	0.5	%	AA
Global CDO of ABS		390	0.5	%	AAA
Total	$	4,080	5.8	%

* See Consolidated Explanatory Notes on page 15.

¹ Indicated category reflects highest rating of the three rating agencies.

² Indicated category reflects highest rating of the three rating agencies. Represents lowest attachment point of transactions.

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Consolidated Insured Portfolio Highlights

12

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated Insured Portfolio Highlights*

($ Millions)

Net Debt Service Amortization

	Scheduled Net Debt Service Amortization as of 9/30/2005		Ending Net Debt Service Outstanding
2005	$	1,383	$	101,799
2006		5,656		96,143
2007		7,167		88,976
2008		6,165		82,811
2009		8,037		74,774
2010 – 2014		27,460		47,314
2015 – 2019		17,508		29,806
2020 – 2024		13,008		16,798
After 2024		16,798		—
Total	$	103,182

* See Consolidated Explanatory Notes on page 15.

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Consolidated Insured Portfolio Highlights

13

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated CDO Exposure*($ Millions)

Total CDO Exposure

	Net Par Outstanding (9/30/2005)		Percent of Total CDO Net Par		Net Par Outstanding (12/31/2004)		Percent of Total CDO Net Par
Direct	$	18,973	93.9	%	$	11,704	89.0	%
Assumed		1,231	6.1	%		1,452	11.0	%
Total	$	20,204	100.0	%	$	13,156	100.0	%
Total CDO Portfolio Rating Distribution
	Net Par Outstanding (9/30/2005)		Percent of Total CDO Net Par		Net Par Outstanding (12/31/2004)		Percent of Total CDO Net Par
AAA	$	15,739	77.9	%	$	8,474	64.4	%
AA		2,481	12.2	%		2,612	19.9	%
A		558	2.8	%		790	6.0	%
BBB		1,145	5.7	%		619	4.7	%
Below Investment Grade		161	0.8	%		521	4.0	%
Not Rated		120	0.6	%		140	1.0	%
Total	$	20,204	100.0	%	$	13,156	100.0	%
Direct CDO Underlying Asset Types
	Net Par Outstanding (9/30/2005)		Percent of Total CDO Net Par		Net Par Outstanding (12/31/2004)		Percent of Total CDO Net Par
Corporates	$	17,548	92.5	%	$	10,577	90.4	%
ABS		1,425	7.5	%		1,127	9.6	%
Total	$	18,973	100.0	%	$	11,704	100.0	%

* All direct CDO deals are synthetic. $16,126 million of direct CDO net par outstanding, representing 85.0% of net par outstanding, was comprised of static deals as of 9/30/05. $2,847 million of direct CDO net par outstanding, representing 15.0% of net par outstanding, was comprised of managed deals as of 9/30/05.

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Consolidated CDO Exposure

14

Quarterly Operating Supplement

Radian Asset Assurance Inc.

Consolidated Explanatory Notes

1. The accompanying unaudited GAAP financial information includes the accounts of Radian Asset Assurance Inc. (the “Company” or “Radian Asset”), Radian Asset Assurance Limited, Radian Financial Products Limited, Van-American Companies, Inc. and Asset Recovery Solutions.

These unaudited consolidated financial statements do not include all of the information and disclosures required by generally accepted accounting principles. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, including the Report of Independent Registered Public Accounting Firm for the Company for the year ended December 31, 2004, as filed in accordance with 15c2-12 of the Securities Exchange Act of 1934.

2. In May 2004, Moody’s provided Radian Asset with an initial insurance financial strength rating of Aa3. Concurrently, and in anticipation of the merger of Radian Reinsurance with and into Radian Asset, Moody’s downgraded the insurance financial strength rating of Radian Reinsurance from Aa2 to Aa3. As a result of this downgrade, two of the primary insurer customers had the right to recapture previously written business ceded to Radian Reinsurance. One of these customers agreed, without cost to or concessions by the Company, to waive its recapture rights. Effective February 28, 2005, the remaining primary insurer customer with recapture rights recaptured approximately $7.4 billion of par in-force that it had ceded to Radian Reinsurance, including $54.7 million of premiums written through the recapture date, $4.5 million of which already had been treated as earned under GAAP and was required to be recorded as an immediate reduction of earned premium at the time of recapture. Also, in connection with the recapture in the first quarter of 2005, the Company was reimbursed for policy acquisition costs of approximately $17.1 million for which the carrying value under GAAP was $18.8 million. This required the Company to write-off policy acquisition costs of $1.7 million. The aggregate result of the recapture was a reduction in pre-tax income of $6.2 million. In March 2005, without cost to or concessions by the Company, this customer waived its remaining right to recapture an additional $5.2 billion of par in force that it had ceded to the Company through December 31, 2004.

In October 2002, S&P downgraded the insurance financial strength rating of Radian Reinsurance, before its merger with and into Radian Asset from AAA to AA. As a result of this downgrade, effective January 31, 2004, one of the primary insurer customers of Radian Reinsurance exercised its right to recapture approximately $16.4 billion of par in force, including $96.4 million of written premiums with a GAAP carrying value of approximately $71.5 million. The entire impact of this recapture was reflected as a reduction of written premiums in the first quarter of 2004. Because the Company, in accordance with GAAP, already had reflected $24.9 million of these recaptured written premiums as having been earned, the Company was required to record the entire $24.9 million reduction in earned premiums in the first quarter of 2004. Also, in connection with the recapture in the first quarter of 2004, the Company was reimbursed for policy acquisition costs of approximately $31.0 million for which the carrying value under GAAP was $21.3 million. In addition, the Company also reimbursed the primary insurer approximately $7.5 million for case reserves which were net of $4.0 million of salvage. Finally, the Company took a charge of $0.8 million for mark-to-market adjustments related to certain insurance policies associated with the recapture. The sum of the above adjustments resulted in an immediate reduction of pre-tax income of $15.9 million. Without cost to or concessions by the Company, the remaining primary insurer customers with recapture rights agreed not to exercise those rights with respect to the October 2002 downgrade by S&P.

3. For the year to date period of 2005, policy acquisition costs were $9.3 million higher than the same period of 2004. The February 28, 2005 recapture resulted in a $1.7 million increase in policy acquisition costs, as compared to the January 31, 2004 recapture which resulted in a $9.7 million reduction.

4. Change in fair value of derivative instruments for the year to date period of 2005 was $39.4 million as compared to $7.0 million for the 2004 period. This increase is primarily the result of overall tightening of credit spreads.

5. The liability for losses and loss adjustment expenses decreased $25.1 million to $191.1 million at September 30, 2005 from $216.2 million at December 31, 2004. This decrease is primarily the result of $23.4 million of claims paid pertaining to Conseco Finance Corp. (“Conseco”)

6. Unearned premiums were $4.7 million lower at September 30, 2005 compared to December 31, 2004 primarily as a result of the February 28, 2005 recapture of financial guaranty business by one of the Company’s primary insurer customers.

7. The statutory loss and loss adjustment expense ratio for the nine months ended September 30, 2004 reflects the establishment of a $111.3 million reserve on a statutory basis (recorded on a GAAP basis in 2003) pertaining to Conseco.

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Consolidated Explanatory Notes

15

Quarterly Operating Supplement

Safe Harbor Statement

All statements made in this document that address 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, as well as Radian’s prospects as a whole, are subject to risks and uncertainties, including the following: changes in general financial and political conditions such as extended national or regional economic recessions (or expansions), changes in housing values, population trends and changes in household formation patterns, changes in unemployment rates, 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 a customer 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; heightened competition from other insurance providers and from alternative products to private mortgage insurance and financial guaranty insurance; changes in the business practices of Fannie Mae and Freddie Mac; the application of existing federal or state consumer lending, insurance and other applicable laws and regulations, or unfavorable changes in these laws and regulations or the way they are interpreted or applied, including: (i) the possibility of private lawsuits or investigations by state insurance departments and state attorneys general alleging that services offered by the mortgage insurance industry, such as captive reinsurance, pool insurance and contract underwriting, are violative of the Real Estate Settlement Procedures Act and/or similar state regulations (particularly in light of public reports that some state insurance departments may review or investigate captive reinsurance arrangements used in the mortgage insurance industry), (ii) the outcome of private lawsuits that have been brought against us and other mortgage insurers under the Fair Credit Reporting Act or (iii) legislative and regulatory changes affecting demand for private mortgage insurance or financial guaranty insurance; the possibility that we may fail to estimate accurately the likelihood, magnitude and timing of losses in connection with establishing loss reserves for our mortgage insurance or financial guaranty businesses or to estimate accurately the fair value amounts of derivative financial guaranty contracts in determining gains and losses on these contracts; changes in accounting guidance from the SEC or the Financial Accounting Standards Board regarding income recognition and the treatment of loss reserves in the mortgage insurance or financial guaranty industries; changes in claims against mortgage insurance products resulting from the aging of Radian’s mortgage insurance policies; vulnerability to the performance of Radian’s strategic investments; international expansion of our mortgage insurance and financial guaranty businesses into new markets and risks associated with our international business activities; 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, 2004 in the section immediately preceding Part I of the report. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which this information was publicly released. 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.

Quarterly Operating Supplement for the Period Ended Sept. 30, 2005 /Safe Harbor Statement

16