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•	changes in general economic and political conditions, including unemployment rates, interest rates and changes in housing and mortgage credit markets, that impact the size of the insurable market and the credit performance of our insured portfolio;

•	changes in the way customers, investors, regulators or legislators perceive the performance and financial strength of private mortgage insurers;

•	Radian Guaranty’s ability to remain eligible under the PMIERs and other applicable requirements imposed by the FHFA and by the GSEs to insure loans purchased by the GSEs;

•	our ability to successfully execute and implement our capital plans and to maintain sufficient holding company liquidity to meet our short- and long-term liquidity needs;

•	our ability to successfully execute and implement our business plans and strategies, including plans and strategies that require GSE and/or regulatory approvals;

•	our ability to maintain an adequate level of capital in our insurance subsidiaries to satisfy existing and future state regulatory requirements;

•	changes in the charters or business practices of, or rules or regulations imposed by or applicable to the GSEs, including the GSEs’ interpretation and application of the PMIERs to our mortgage insurance business;

•	changes in the current housing finance system in the U.S., including the role of the FHA, the GSEs and private mortgage insurers in this system;

•	any disruption in the servicing of mortgages covered by our insurance policies, as well as poor servicer performance;

•	a significant decrease in the Persistency Rates of our mortgage insurance policies;

•	competition in our mortgage insurance business, including price competition and competition from the FHA, VA and other forms of credit enhancement;

•	the effect of the Dodd-Frank Act on the financial services industry in general, and on our businesses in particular;

•	the adoption of new laws and regulations, or changes in existing laws and regulations (including to the Dodd-Frank Act), or the way they are interpreted or applied;

•	the outcome of legal and regulatory actions, reviews, audits, inquiries and investigations that could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief that could require significant expenditures or have other effects on our business;

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•	the amount and timing of potential payments or adjustments associated with federal or other tax examinations, including deficiencies assessed by the IRS resulting from its examination of our 2000 through 2007 tax years, which we are currently contesting;

•	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 business;

•	volatility in our results of operations caused by changes in the fair value of our assets and liabilities, including a significant portion of our investment portfolio;

•	changes in GAAP or SAPP rules and guidance, or their interpretation;

•	our ability to attract and retain key employees;

•	legal and other limitations on dividends and other amounts we may receive from our subsidiaries; and

•	the possibility that we may need to impair the carrying value of goodwill established in connection with our acquisition of Clayton.

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Item 1.	Business.

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(1)	Adjusted pretax operating income is a non-GAAP financial measure. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Consolidated—Use of Non-GAAP Financial Measure” for a reconciliation of adjusted pretax operating income to the most comparable GAAP measure, pretax income from continuing operations.

(2)	Includes HARP volume.

(3)	Represents the net decrease in diluted shares resulting from our 2016 capital transactions, in each case as of the date of the completion of the respective transactions.

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•	general economic conditions (in particular, interest rates, home prices and unemployment);

•	the age of the loans insured;

•	the geographic dispersion of the properties securing the insured loans and the condition of local housing markets;

•	the quality of underwriting at loan origination; and

•	the credit characteristics of the borrower and the characteristics of the loans insured (including LTV, FICO, purpose of the loan, type of loan instrument, source of down payment, and type of underlying property securing the loan).

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(1)	Represents the borrower’s credit score at origination. In circumstances where there is more than one borrower, the FICO score for the primary borrower is utilized.

(2)	Average FICO at origination and original average LTV are weighted averages based on the unpaid principal balances of the underlying mortgage loans.

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(1)	pay the maximum liability and allow the insured lender to keep title to the property. The maximum liability is determined by multiplying (x) the claim amount (which consists of the unpaid loan principal, plus past due interest for a period of time specified in our Master Policies and certain expenses associated with the default) by (y) the applicable coverage percentage;

(2)	pay the amount of the claim required to make the lender whole (not to exceed our maximum liability), following an approved sale; or

(3)	pay the full claim amount and acquire title to the property.

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a review to determine compliance with applicable loan origination programs and our mortgage insurance policy requirements, including: (i) whether the loan qualified for insurance at the time the certificate of coverage was issued and (ii) whether the insured has satisfied its obligation in meeting all necessary conditions in order for us to pay a claim, including submitting all necessary documentation in connection with the claim (commonly referred to as “claim perfection”);

•	analysis and prompt processing to ensure that valid claims are paid in an accurate and timely manner;

•	responses to loss mitigation opportunities presented by the insured; and

•	management and disposal of acquired real estate.

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•	a failure to report information to us on a timely basis as required under our Master Policies;

•	a failure to pursue loss mitigation opportunities presented by borrowers, realtors and/or any other interested parties;

•	a failure to pursue loan modifications and/or refinancings through programs available to borrowers or an undue delay in presenting claims to us (including as a result of improper handling of foreclosure proceedings), which increases the interest or other components of a claim we are required to pay; and

•	a failure to initiate and diligently pursue foreclosure or other appropriate proceedings within the timeframe specified in our Master Policies.

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•	Arch U.S. MI;

•	Essent Guaranty Inc.;

•	Genworth Financial Inc.;

•	Mortgage Guaranty Insurance Corporation;

•	NMI Holdings, Inc.; and

•	United Guaranty Corp. (acquired by Arch Capital Group LLC in December 2016).

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(1)

Represents the percentage of total Services segment revenue for the each of the years ended December 31, 2016, 2015 and 2014, respectively. Percentages have been revised for all periods presented to reflect changes to align our segment reporting structure with recent changes in personnel reporting lines and management oversight related to contract underwriting performed on behalf of third parties. Revenue and expenses for this business are now reflected in the Services segment. As a result, for all periods presented, revenue for loan review, underwriting and due diligence increased. See Note 4 of Notes to Consolidated Financial Statements.

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•	Banks, credit unions, independent mortgage banks and other originators of mortgage loans;

•	RMBS/ABS issuers, securitization trusts, the GSEs, private equity, hedge funds, REITs, investment banks and other investors in mortgage-related debt instruments, whole loans and other securities;

•	SFR owners;

•	Mortgage servicers; and

•	Regulators and rating agencies involved in the mortgage, real estate and housing finance markets.

•	Loan Review, Underwriting and Due Diligence – American Mortgage Consultants, Inc., Digital Risk, LLC and Opus Capital Markets Consultants, LLC

•	Surveillance – Digital Risk, LLC, FTI Consulting, Inc., Pentalpha Surveillance LLC and TENA Companies, Inc.

•	Real Estate Valuation and Component Services – ClearCapital.com, Inc., CoreLogic, Inc., Pro Teck Valuation Services, First American and Black Knight Financial Services

•	REO Management – VRM Mortgage Services and Chronos Solutions LLC

•	EuroRisk – Deloitte LLP, PricewaterhouseCoopers LLP, Ernst & Young LLP, KPMG LLP and Situs Group, LLC

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•	At least 75% of our investment portfolio, based on market value, must consist of investment securities that are assigned a quality designation of NAIC 1 by the NAIC or equivalent ratings by a NRSRO (i.e., “A-” or better by S&P and “A3” or better by Moody’s);

•	A maximum of 25% of our investment portfolio, based on market value, may consist of investment securities that are assigned a quality designation of NAIC 2 by the NAIC or equivalent ratings by a NRSRO (i.e., “BBB+” to “BBB-” by S&P and “Baa1” to “Baa3” by Moody’s); and

•	A maximum of 10% of our investment portfolio, based on market value, may consist of investment securities that are assigned quality designations NAIC 3 through 6 or equivalent ratings by a NRSRO (i.e., “BB+” and below by S&P and “Ba1” and below by Moody’s).

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(1)	Consists of taxable state and municipal investments.

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(1)	Actual maturities may differ as a result of calls before scheduled maturity.

(2)	RMBS, CMBS and other ABS are shown separately, as they are not due at a single maturity date.

(3)	No stated maturity date.

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Radian Guaranty.  Radian Guaranty is our primary mortgage insurance company. Radian Guaranty is our only mortgage insurance company that is eligible to insure GSE loans. It is a monoline insurer, restricted to writing first-lien residential mortgage guaranty insurance. In addition to Pennsylvania, Radian Guaranty is authorized to write mortgage guaranty insurance (or in states where there is no specific authorization for mortgage guaranty insurance, the applicable line of insurance under which mortgage guaranty insurance is regulated) in each of the other 49 states, the District of Columbia and Guam. Radian Guaranty is a direct subsidiary of Radian Group.

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Radian Reinsurance. Radian Reinsurance is a licensed affiliated reinsurer that primarily provides reinsurance to Radian Guaranty. Radian Reinsurance is a direct subsidiary of Radian Group. In 2016, we also used Radian Reinsurance to participate in the front-end credit risk transfer pilot programs developed by Fannie Mae and Freddie Mac. See “Mortgage Insurance—Mortgage Insurance Business Overview—Mortgage Insurance Products—Non-Traditional Risk” for more information about these pilot programs.

•	Radian Insurance. Radian Insurance is our insurance subsidiary that is authorized in Hong Kong to insure our remaining Hong Kong insurance portfolio and also insures our other remaining Second-lien risk. Radian Insurance is a direct subsidiary of Radian Group.

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•	implementation of new minimum requirements for master insurance policies for loans the GSEs acquire that include, among other requirements, specific standards for loss mitigation and claims processing activities;

•	adoption of the PMIERs eligibility requirements for mortgage insurers, as discussed above; and

•	changes in guarantee fees and loan-level price adjustments charged by the GSEs.

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In 2009, the GSEs began offering HARP, a program which allows a borrower who is not delinquent to refinance his or her mortgage to a more stable or affordable loan if such borrower has been unable to take advantage of lower interest rates because his or her home has decreased in value. HARP, as subsequently modified by HARP 2, was extended to December 31, 2015, for loans that were originated or acquired by the GSEs by or before May 30, 2009. The program has again been extended and is now scheduled to terminate by September 30, 2017. In addition, the GSEs are planning to offer a new streamlined refinance offering to replace HARP. The new program is aimed at borrowers with high-LTVs and, similar to HARP, the new program is expected to offer refinance options for non-delinquent borrowers.

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In February 2009, the U.S. Treasury established HAMP as a program to modify certain loans to make them more affordable to borrowers, with the goal of reducing the number of foreclosures. Under HAMP, an eligible borrower’s monthly payments may be lowered by lowering interest rates, extending the term of the mortgage or deferring principal. The HAMP program ended December 31, 2016. HAMP has been replaced with the “Flex Modification” program that is expected to become effective in October 2017 and will offer payment relief similar to HAMP.

•	The U.S. Treasury also has developed uniform guidance for loan modifications to be used by participating servicers in the private sector. The GSEs have incorporated material aspects of these guidelines for loans that they own and loans backing securities that they guarantee.

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•	Asset-level disclosure requirements for ABS backed by residential mortgage loans, commercial mortgage loans, automobile loans or leases, re-securitizations of ABS backed by any of those asset types, and debt securities; and

•	A requirement that the transaction documents provide for the appointment of an “asset representations manager” to review the pool assets when certain trigger events occur.

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Item 1A.	Risk Factors.

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•	prevailing mortgage interest rates compared to the mortgage rates on our IIF, which affects the incentive for borrowers to refinance (i.e., lower current interest rates make it more attractive for borrowers to refinance and receive a lower interest rate);

•	applicable policies for mortgage insurance cancellation, along with the current value of the homes underlying the mortgages in our IIF;

•	the mix of business we write between Single Premium Policies (for which a lower Persistency Rate has a positive effect on future revenues) and those policies that provide for a premium stream in the future, such as our Monthly Premium Policies (for which a lower Persistency Rate has a negative effect on future revenues);

•	the credit policies of lenders, which may make it more difficult for homeowners to refinance loans; and

•	economic conditions that can affect a borrower’s decision to pay-off a mortgage earlier than required.

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•	eligibility requirements for a mortgage insurer to become and remain an approved eligible insurer for the GSEs;

•	the underwriting standards on mortgages they purchase;

•	policies or requirements that may result in a reduction in the number of mortgages they acquire;

•	the national conforming loan limit for mortgages they acquire;

•	the level of mortgage insurance required, including expanding the loans that are eligible for reduced insurance coverage;

•	the terms on which mortgage insurance coverage may be canceled before reaching the cancellation thresholds established by law;

•	the requirements for terms required to be included in master policies for the mortgage insurance policies they acquire;

•	the process for claim payments and requirements for actions to be taken that are intended to avoid or mitigate loss on insured mortgages that are in default;

•	the amount of LLPAs or guarantee fees (which may result in a higher cost to borrowers) that the GSEs charge on loans that require mortgage insurance; and

•	the degree of influence that the GSEs have over a mortgage lender’s selection of the mortgage insurer providing coverage.

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•	restrictions on mortgage credit due to changes in lender underwriting standards, more restrictive regulatory requirements such as the required ability-to-pay determination prior to extending credit, and the significantly reduced private securitization market;

•	home mortgage interest rates;

•	the health of the domestic economy generally, as well as specific conditions in regional and local economies;

•	housing affordability;

•	tax laws and policies, including the deductibility of mortgage insurance premiums and mortgage interest payments;

•	population trends, including the rate of household formation;

•	the rate of home price appreciation;

•	government housing policy encouraging loans to first-time homebuyers; and

•	the practices of the GSEs, including the extent to which the guaranty fees, LLPAs, credit underwriting guidelines and other business terms provided by the GSEs affect lenders’ willingness to extend credit for low down payment mortgages.

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•	governmental policy, including further decreases in the pricing of FHA insurance or changes in the terms of such insurance;

•	capital constraints of the private mortgage insurance industry;

•	the tightening by private mortgage insurers of underwriting guidelines based on risk concerns;

•	increases in the LLPAs charged by the GSEs on loans that require mortgage insurance and changes in the amount of guarantee fees for the loans that they acquire (which may result in higher cost to borrowers); and

•	the perceived operational ease of using FHA insurance compared to the products of private mortgage insurers.

•	lenders and other investors holding mortgages in their portfolio and self-insuring;

•	lenders using pass-through vehicles that take on the risk of loss for loans ultimately sold to the GSEs;

•	engaging in credit-linked note transactions or other structured risk transfer transactions in the capital markets;

•	risk sharing, risk transfer or using other risk mitigation techniques in conjunction with reduced levels of private mortgage insurance coverage; and

•	lenders originating mortgages using “piggyback” structures to avoid private mortgage insurance, such as a first-lien mortgage with an 80% LTV and a second mortgage with a 10%, 15% or 20% LTV, which could become more attractive because the tax deduction for mortgage insurance premiums has not been renewed beyond the 2016 tax year.

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•	Legislation or regulatory action impacting the charters or business practices of the GSEs;

•	Legislative reform of the U.S. housing finance system;

•	Legislation and regulation impacting the FHA and its competitive position versus private mortgage insurers;

•	State insurance laws and regulations that address, among other items, licensing of companies to transact business, claims handling, reinsurance requirements, premium rates, policy forms offered to customers and requirements for Risk-to-capital, minimum policyholder positions, reserves (including contingency reserves), surplus, reinsurance and payment of dividends;

•	The application of state, federal or private sector programs aimed at supporting borrowers and the housing market;

•	The application of RESPA, the FCRA and other laws to our businesses;

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The amendments to Regulation AB (commonly referred to as Regulation AB II) that were adopted by the SEC and introduce several new requirements related to public offerings of ABS, including public offerings of RMBS for which our Services business traditionally has provided due diligence and servicer surveillance services and new credit rating agency reform rules (the “NRSRO Rules”) adopted by the SEC that include new requirements applicable to providers of third-party due diligence services, such as our Services business, for both publicly and privately issued ABS;

•	The interpretation and application of the TRID rules requiring enhanced disclosures to consumers in connection with the origination of residential mortgage loans;

•	New federal standards and oversight for mortgage insurers, including as a result of the recommendation of the Federal Insurance Office of the U.S. Treasury that federal standards and oversight for mortgage insurers be developed and implemented;

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•	The implementation of new regulations under, or the potential repeal or amendment of provisions of, the Dodd-Frank Act; and

•	The implementation in the U.S. of the Basel III capital adequacy guidelines.

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Our Services revenue is dependent on a limited number of large customers that represent a significant proportion of our Services total revenues. The loss or reduction of business from one or more of these significant customers could adversely affect our revenues and results of operations. In addition, Radian Guaranty does business with many of these significant customers. In the event of a dispute between a significant customer and either of our business segments, the overall customer relationship for Radian could be negatively impacted.

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While Clayton is not a defendant in litigation arising out of the financial crisis involving the issuance of RMBS in connection with which it has provided services, it has been in the past, and may again be in the future, subpoenaed by various parties to provide documents and information related to such litigation, and there can be no assurance that Clayton will not be subject to future claims against it, whether in connection with such litigation or otherwise. It is possible that our exposure to potential liabilities resulting from our Services business, some of which may be material or unknown, could exceed amounts we can recover through indemnification claims.

Item 1B.	Unresolved Staff Comments.

Item 2.	Properties.

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Item 3.	Legal Proceedings.

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Item 4.	Mine Safety Disclosures.

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Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

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Item 6.	Selected Financial Data.

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(1)

For all periods presented, reflects changes to align our segment reporting structure with recent changes in personnel reporting lines and management oversight related to contract underwriting performed on behalf of third parties. Revenue and expenses for this business are now reflected in the Services segment. As a result, for all periods presented, Services revenue and cost of services have increased, with offsetting reductions in Mortgage Insurance other income and other operating expenses. See Note 4 of Notes to Consolidated Financial Statements for additional information.

(2)	Primarily represents the activity of Clayton, acquired June 30, 2014.

(3)

Radian completed the sale of Radian Asset Assurance to Assured on April 1, 2015, pursuant to the Radian Asset Assurance Stock Purchase Agreement. Until the April 1, 2015 sale date, the operating results of Radian Asset Assurance were classified as discontinued operations for all periods presented in our consolidated statements of operations. See Note 18 of Notes to Consolidated Financial Statements for additional information.

(4)	Diluted net income (loss) per share and average share information calculated in accordance with the accounting standard regarding earnings per share. See Note 3 of Notes to Consolidated Financial Statements.

(5)	Calculated using amounts determined under GAAP, using provision for losses to calculate the loss ratio and policy acquisition costs and other operating expenses to calculate the expense ratio, as percentages of net premiums earned—insurance.

(6)	Based on loan level detail. The Persistency Rate on a quarterly, annualized basis may be impacted by seasonality or other factors, and may not be indicative of full-year trends.

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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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•	increased our filed rates for lender-paid mortgage insurance;

•	adjusted our borrower-paid, filed rates, effective on April 7, 2016, which generally had the effect of decreasing our standard rates on higher FICO business, and raising our standard rates on lower FICO business where the FHA is already very competitive;

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continued to use the authority set forth in our rate filings to provide customized premiums for lender-paid, Single Premium mortgage insurance while maintaining our focus on our overall risk and return targets, and beginning in the third quarter of 2016, we elected to selectively participate in certain discounted Single Premium business that has been offered on an aggregated basis and is now priced at a level that is within our targeted returns; and

•	entered into the Single Premium QSR Transaction to proactively manage the risk and return profile of Radian Guaranty’s insured portfolio, which resulted in increasing our return on required capital for Single Premium Policies and decreasing the percentage of our Single Premium RIF, net of reinsurance ceded.

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•	the issuance of $350 million aggregate principal amount of Senior Notes due 2021;

•	the purchases of aggregate principal amounts of $30.1 million and $322.0 million, respectively, of our outstanding Convertible Senior Notes due 2017 and 2019;

•	the termination of the portion of the capped call transactions related to the purchased Convertible Senior Notes due 2017;

•	the completion of the share repurchase program announced in January 2016, by purchasing an aggregate of 9.4 million shares of Radian Group common stock for $100.2 million, including commissions;

•	the implementation of the Single Premium QSR Transaction, which had the effect of increasing the amount by which Radian Guaranty’s Available Assets exceed its Minimum Required Assets under the PMIERs Financial Requirements; and

•	the early redemption of the remaining $195.5 million aggregate principal amount of our Senior Notes due 2017.

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•	a net decrease in available holding company liquidity of $204.6 million, before the repayment of the Surplus Note described below;

•	a net decrease in long-term debt of $161.7 million; and

•	a net decrease in stockholders’ equity of $16.9 million.

•	increase in the amount of our RIF covered by reinsurance, and therefore, the amount of premiums and losses ceded;

•	reduction in net premiums written and earned;

•	reduction in other operating expenses by the amount of ceding commissions earned; and

•	improvement in Radian Guaranty’s return on required capital for its Single Premium mortgage insurance products as a result of the combination of the favorable impact to our PMIERs Financial Requirements and the expected ceded underwriting margin.

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NIW.  NIW is affected by the overall size of the mortgage origination market, the penetration percentage of private mortgage insurance into the overall mortgage origination market and our market share of the private mortgage insurance market. The overall mortgage origination market is influenced by macroeconomic factors such as household formation, household composition, home affordability, interest rates, housing markets in general, credit availability and the impact of various legislative and regulatory actions that may influence the housing and mortgage finance industries. The penetration percentage of private mortgage insurance is mainly influenced by the competitiveness of private mortgage insurance for GSE conforming loans compared to FHA and VA insured loans, and the relative percentage of mortgage originations that are for purchased homes versus refinances.

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Premiums.  The premium rates we charge for our insurance are based on a number of borrower, loan and property characteristics. Premiums on our mortgage insurance products are generally paid as Monthly Premiums or Single Premiums. In addition, premiums may be paid as a combination of an up-front premium at origination plus monthly renewals, or in some cases, as annual or other periodic premiums paid over multiple years.

•	Losses.  Incurred losses represent the estimated future claim payments on newly defaulted insured loans as well as any change in our claim estimates for existing defaults, including changes in the estimates we use to determine our losses, and estimates with respect to the likelihood, magnitude and timing of anticipated losses on defaulted loans. Other factors influencing incurred losses include:

-	The product mix of our total direct RIF (loans with higher risk characteristics generally result in more delinquencies and claims).

-	The average loan size (higher average loan amounts generally result in higher incurred losses).

-	The percentage of coverage on insured loans (higher percentages of insurance coverage generally correlate with higher incurred losses) and the presence of structural mitigants such as deductibles or stop losses.

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Changes in housing values (declines in housing values generally make it more difficult for borrowers to sell a home to avoid default or for the property to be sold to mitigate any claim, and also may negatively affect a borrower’s willingness to continue to make mortgage payments when the home value is less than the mortgage balance; conversely, increases in housing values tend to reduce the level of defaults as well as make it more likely that foreclosures will result in the loan being satisfied).

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The distribution of claims over the life cycle of a portfolio (historically, claims are relatively low during the first two years after a loan is originated and then increase over a period of several years before declining; however, several factors can impact and change this cycle, including the economic environment, the quality of the underwriting of the loan, characteristics of the mortgage loan, the credit profile of the borrower, housing prices and unemployment rates).

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Our ability to mitigate potential losses through Rescissions, Claim Denials, cancellations and Claim Curtailments on claims submitted to us. These actions all reduce our incurred losses. However, if these Loss Mitigation Activities are successfully challenged at rates that are higher than expected or we agree to settle disputes related to our Loss Mitigation Activities at levels above our expected losses, our incurred losses will increase. As our Legacy Portfolio has become a smaller percentage of our overall insured portfolio, there has been a decrease in the amount of Loss Mitigation Activity with respect to the claims we receive, and we expect this trend to continue.

-	Settlements such as the BofA Settlement Agreement, which establish certain limits on Loss Mitigation Activity. See Note 11 of Notes to Consolidated Financial Statements for additional information about the BofA Settlement Agreement.

-	The Freddie Mac Agreement, which establishes certain terms for the treatment of the loans subject to that agreement, including claim payments, Loss Mitigation Activity and insurance coverage, and capped Radian Guaranty’s claim exposure on such loans. See Note 11 of Notes to Consolidated Financial Statements for additional information.

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Other Operating Expenses.  Our other operating expenses are affected by the amount of NIW, as well as the amount of RIF. Additionally, during 2014 and 2015, our operating expenses had been impacted significantly by compensation expense associated with changes in the estimated fair value of certain of our long-term equity-based incentive awards that were settled in cash. The fair value of these awards, and associated compensation expense, were dependent, in large part, on our stock price at any given point in time. Now that substantially all of the cash-settled awards have vested, the expense volatility associated with these awards is not expected in the future.

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Third-Party Reinsurance.  We use third-party reinsurance in our mortgage insurance business to manage capital and risk. When we enter into a reinsurance agreement, the reinsurer receives a premium and, in exchange, agrees to insure an agreed upon portion of incurred losses. This arrangement has the impact of reducing our earned premiums but also reduces our net RIF, which provides capital relief to the insurance subsidiary ceding the RIF and reduces our incurred losses by any incurred losses ceded in accordance with the reinsurance agreement. In addition, we often receive ceding commissions from the reinsurer as part of the transaction, which reduces our operating expenses. See Note 8 of Notes to Consolidated Financial Statements for more information about our reinsurance arrangements.

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Services Revenue.  Our Services revenue is primarily derived from: (i) loan review, underwriting and due diligence services; (ii) surveillance services, including RMBS surveillance, loan servicer oversight, loan-level servicing compliance reviews and operational reviews of mortgage servicers and originators; (iii) real estate valuation and component services, providing outsourcing and technology solutions for the SFR and real estate markets, as well as outsourced solutions for appraisal, title and closing services; and (iv) REO management services. See “Item 1. Business—Services—Services Business Overview—Services Revenue Drivers” for additional information regarding current and expected future revenue drivers.

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Fixed-Price Contracts. Under a fixed-price contract, we agree to perform the specified services and deliverables for a pre-determined per-unit or per-file price. To the extent our actual direct and allocated indirect costs decrease or increase from the estimates upon which the price was negotiated, we will generate more or less profit, respectively, or could incur a loss. We use fixed-price contracts in our real estate valuation and component services, our loan review, underwriting and due diligence services as well as our title and closing review services. These contracts are also used in our surveillance business for our servicer oversight services and RMBS surveillance services, as well as in our REO management business.

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Time-and-Expense Contracts. Under a time-and-expense contract, we are paid a fixed hourly rate, and we are reimbursed for billable out-of-pocket expenses as work is performed. To the extent our actual direct labor costs decrease or increase in relation to the fixed hourly billing rates provided in the contract, we may generate more or less profit, respectively. However, since these contracts are generally short-term in nature, the risk is limited to the periods covered by the contracts. These contracts are used in our loan review, underwriting and due diligence and EuroRisk services offerings, as well as in the consulting services that we offer as part of our surveillance business.

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Percentage-of-Sale Contracts. Under percentage-of-sale contracts, we are paid a contractual percentage of the sale proceeds upon the sale of each property. To the extent the sale of a property is delayed or not consummated, or the sales proceeds are significantly less than originally estimated, we may generate less profit than anticipated, or could incur a loss. These contracts are only used for a portion of our REO management services and our real estate brokerage services. In addition, through the use of proprietary technology, property leads are sent to select clients. Our Services segment recognizes revenue for these transactions based on a percentage of the sale, upon the client’s successful closing on the property.

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Cost of Services. Our cost of services is primarily affected by our level of services revenue. Our cost of services primarily consists of employee compensation and related payroll benefits, including the cost of billable labor assigned to revenue-generating activities and, to a lesser extent, other costs of providing services such as travel and related expenses incurred in providing client services, costs paid to outside vendors, data acquisition costs and other compensation-related expenses to maintain software application platforms that directly support our businesses. The level of these costs may fluctuate if market rates of compensation change, or if there is decreased availability or a loss of qualified employees.

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Gross Profit on Services. In addition to the key factors affecting Services revenue and cost of services described above, our gross profit on services may fluctuate from period to period due to a shifting mix of services we provide due to changes in the relative demand for those services in the marketplace. Shifts in the business mix of our Services business can impact our gross profit because each product and service generally produces a different level of gross margin. These individual gross margins in turn can be impacted in any given period by factors such as the implementation of new regulatory requirements, our operating capacity, competition or other environmental factors.

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Operating Expenses. Our operating expenses primarily consist of salaries and benefits not classified as cost of services because they are related to employees, such as sales and corporate employees, that are not directly involved in providing client services. Operating expenses also include other selling, general and administrative expenses, depreciation, and allocations of corporate general and administrative expenses.

•	Radian Asset Assurance Stock Purchase Agreement. Radian completed the sale of Radian Asset Assurance to Assured on April 1, 2015, pursuant to the Radian Asset Assurance Stock Purchase Agreement. Until the April 1, 2015 sale date, the operating results of Radian Asset Assurance were classified as discontinued operations for all periods presented in our consolidated statements of operations.

•	Investment Income.  Investment income is determined primarily by the investment balances held and the average yield on our overall investment portfolio.

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Net Gains (Losses) on Investments.  The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on such factors as market opportunities, our tax and capital profile and overall market cycles that impact the timing of the sales of securities. Unrealized investment gains and losses arise primarily from changes in the market value of our investments that are classified as trading and these unrealized gains and losses are generally the result of changes in interest rates or credit spreads and may not necessarily result in economic gains or losses.

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Amortization and Impairment of Intangible Assets.  Amortization of intangible assets represents the periodic expense required to amortize the cost of intangible assets over their estimated useful lives. The periodic review of intangible assets for potential impairment may also impact consolidated results. Our intangible assets primarily relate to the acquisition of Clayton, and their valuation is based on management’s assumptions, which are inherently subject to risks and uncertainties. See Note 7 of Notes to Consolidated Financial Statements for additional information.

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(1)

For all periods presented, reflects changes to align our segment reporting structure with recent changes in personnel reporting lines and management oversight related to contract underwriting performed on behalf of third parties. Revenue and expenses for this business are now reflected in the Services segment. As a result, for all periods presented, Services revenue and cost of services have increased, with offsetting reductions in Mortgage Insurance other income and other operating expenses. See Notes 2 and 4 of Notes to Consolidated Financial Statements.

(2)	Includes the results of Clayton’s operations from the June 30, 2014 acquisition date.

(3)	See “—Use of Non-GAAP Financial Measure” below.

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(1)	All book value per share items above are calculated based on 206.9 million shares outstanding as of December 31, 2015, except for:

(a)	the net increase in shares outstanding, which represents the difference between: (i) total equity as of December 31, 2016 divided by the shares outstanding as of December 31, 2016 and (ii) total equity as of December 31, 2016 divided by the shares outstanding as of December 31, 2015; and

(b)	the December 31, 2016 book value per share, which was calculated based on 214.5 million shares outstanding as of December 31, 2016.

(2)	Includes the impact, net of related tax expense, of loss on induced conversion and debt extinguishment related to the series of capital management transactions completed in 2016, as further described in “—Overview—2016 and Other Recent Capital Management Developments.”

(3)

Reflects the combined net impact on equity and shares, respectively, from the series of capital management transactions completed in 2016, as further described in “—Overview—2016 and Other Recent Capital Management Developments.” The impact on equity shown above includes the impact of: (i) the extinguishment of Convertible Senior Notes due 2017 and 2019; (ii) the termination of the portion of the capped call transactions related to the purchased Convertible Senior Notes due 2017; and (iii) the shares repurchased under the completed share repurchase program, and excludes the loss on induced conversion and debt extinguishment, which is included in net income.

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(1)

Net gains (losses) on investments and other financial instruments. The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized investment gains and losses arise primarily from changes in the market value of our investments that are classified as trading securities. These valuation adjustments may not necessarily result in economic gains or losses.

(2)

Loss on induced conversion and debt extinguishment. Gains or losses on early extinguishment of debt and losses incurred to purchase our convertible debt prior to maturity are discretionary activities that are undertaken in order to take advantage of market opportunities to strengthen our financial and capital positions; therefore, we do not view these activities as part of our operating performance. Such transactions do not reflect expected future operations and do not provide meaningful insight regarding our current or past operating trends. Therefore, these items are excluded from our calculation of adjusted pretax operating income (loss).

(3)

Acquisition-related expenses. Acquisition-related expenses represent the costs incurred to effect an acquisition of a business (i.e., a business combination). Because we pursue acquisitions on a strategic and selective basis and not in the ordinary course of our business, we do not view acquisition-related expenses as a consequence of a primary business activity. Therefore, we do not consider these expenses to be part of our operating performance and they are excluded from our calculation of adjusted pretax operating income (loss).

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(4)

Amortization and impairment of intangible assets. Amortization of intangible assets represents the periodic expense required to amortize the cost of intangible assets over their estimated useful lives. Intangible assets with an indefinite useful life are also periodically reviewed for potential impairment, and impairment adjustments are made whenever appropriate. These charges are not viewed as part of the operating performance of our primary activities and therefore are excluded from our calculation of adjusted pretax operating income (loss).

(5)

Net impairment losses recognized in earnings. The recognition of net impairment losses on investments can vary significantly in both size and timing, depending on market credit cycles. We do not view these impairment losses to be indicative of our fundamental operating activities. Therefore, whenever these losses occur, we exclude them from our calculation of adjusted pretax operating income (loss).

(1)

The change in expected economic loss or recovery associated with our previously owned VIEs is included in adjusted pretax operating income above for the year ended December 31, 2014, although it represents amounts that are not included in net income. Therefore, for purposes of this reconciliation, net gains (losses) on investments and other financial instruments has been adjusted by income of $0.1 million for the year ended December 31, 2014, to reverse this item.

(2)	Acquisition-related expenses represent expenses incurred to effect the acquisition of a business, net of adjustments to accruals previously recorded for acquisition expenses.

(3)	Total adjusted pretax operating income consists of adjusted pretax operating income for each segment as follows:

(a)	Includes inter-segment expenses and revenues as disclosed in Note 4 of Notes to Consolidated Financial Statements.

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(1)

For all periods presented, reflects changes to align our segment reporting structure with recent changes in personnel reporting lines and management oversight related to contract underwriting performed on behalf of third parties. Revenue and expenses for this business are now reflected in the Services segment. As a result, for all periods presented, Services revenue, cost of services and operating expenses have increased, with offsetting reductions in Mortgage Insurance other income and other operating expenses. See Note 4 of Notes to Consolidated Financial Statements.

(2)	Our senior management uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of our business segments.

(3)	Net of ceded premiums written under the QSR Transactions and the Single Premium QSR Transaction. See Note 8 of Notes to Consolidated Financial Statements for more information.

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(1)	Layered risk exists when multiple high-risk attributes are combined within the same loan.

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(1)

In 2009, the GSEs began offering HARP, which allows a borrower who is not delinquent to refinance a mortgage if the borrower has been unable to take advantage of lower interest rates because the borrower’s home has decreased in value. We exclude HARP loans from our NIW for the period in which the refinance occurs. During 2016, new HARP loans accounted for $202.9 million of newly refinanced loans that were not included in Radian Guaranty’s NIW for the period, compared to $681.9 million for 2015. The HARP program deadline for refinancing is September 30, 2017. See “Item 1. Business—Regulation—Federal Regulation—Homeowner Assistance Programs” for more information.

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(1)	Represents inception-to-date losses incurred as a percentage of premium revenue.

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(1)	In 2016, represents the percentage of direct single premiums written, after consideration of the 35% Single Premium NIW ceded under the Single Premium QSR Transaction. See Note 8 of Notes to Consolidated Financial Statements for additional information.

(1)	Represents the percentage of single premium IIF, after giving effect to all reinsurance ceded.

(2)	The Persistency Rate for the 12 months ended December 31, 2016 decreased from 2015, primarily due to increased refinancing activity and the cancellations of Single Premium Policies. See “—Net Premiums Written and Earned,” below.

(3)	The Persistency Rate on a quarterly, annualized basis may be impacted by seasonality or other factors, and may not be indicative of full-year trends.

(4)	The Persistency Rate annualized based on the quarter ended December 31, 2016 decreased from 2015, primarily due to the volume of Single Premium Policies that were cancelled during the fourth quarter of 2016, which increased as compared to the same quarter in 2015.

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(1)	Represents the dollar amount and percentage, respectively, of Single Premium RIF, after giving effect to all reinsurance ceded.

(1)	Excludes risk related to loans subject to the Freddie Mac Agreement.

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(1)	“Fully Indexed” refers to loans where payment adjustments are equal to mortgage interest-rate adjustments.

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•	A decrease to net premiums earned of $29.8 million, net of accrued profit commission;

•	A decrease to operating expenses of $14.6 million, related to the ceding commission;

•	A decrease to provision for losses and amortization of deferred acquisition costs totaling $3.0 million; and

•	A net decrease to pretax income from continuing operations (and to adjusted pretax operating income) of $12.2 million.

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(1)	Related to defaulted loans with a most recent default notice dated in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, that default would be considered a current year default.

(2)	Related to defaulted loans with a default notice dated in a year earlier than the year indicated, which have been continuously in default since that time.

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(1)	Insured loans subject to the Freddie Mac Agreement are included in the denominator for all periods, and loans in default subject to the Freddie Mac Agreement are excluded from the numerator beginning in 2013, because since that time we no longer have claims exposure on those loans.

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(1)	Includes 5,850; 7,353; and 9,101 insured loans subject to the Freddie Mac Agreement at December 31, 2016, 2015 and 2014, respectively.

(2)	Excludes 1,639; 2,821; and 4,467 loans that are in default at December 31, 2016, 2015 and 2014, respectively, subject to the Freddie Mac Agreement, and for which we no longer have claims exposure.

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(1)	Includes those charged to a deductible or captive and, for 2015, claim payments related to the BofA Settlement Agreement.

(2)	Net of any previous Rescission and Claim Denials that were reinstated during the period (excluding activity related to the BofA Settlement Agreement). Such reinstated Rescissions and Claim Denials may ultimately result in a paid claim.

(3)	Includes Rescissions, Claim Denials and Reinstatements on the population of loans subject to the BofA Settlement Agreement. Rescissions and Claim Denials, net of (Reinstatements), related to the BofA Settlement Agreement prior to the Implementation Date represent such activities on loans that subsequently became subject to the BofA Settlement Agreement.

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(1)

Factors that impact the severity of a claim include, but are not limited to: (i) the size of the loan; (ii) the amount of mortgage insurance coverage placed on the loan; (iii) the amount of time between default and claim during which we are expected to cover interest (capped at two years under our Prior Master Policy and capped at three years under our 2014 Master Policy) and certain expenses; and (iv) the impact of certain loss management activities with respect to the loan.

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(1)	Net of reinsurance recoveries.

(2)	For 2015, includes the impact of the BofA Settlement Agreement from the Implementation Date.

(3)	Calculated without giving effect to the impact of the termination of captive transactions and settlements.

(4)	Before reinsurance recoveries.

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(1)	Represents total first-lien direct claims paid, excluding impact of reinsurance and LAE expenses and Freddie Mac Agreement.

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(1)

For all periods presented, reflects changes to align our segment reporting structure with recent changes in personnel reporting lines and management oversight related to contract underwriting performed on behalf of third parties. Revenue and expenses for this business are now reflected in the Services segment. As a result, for all periods presented, Services revenue, cost of services and operating expenses have increased, with offsetting reductions in Mortgage Insurance other income and other operating expenses. See Note 4 of Notes to Consolidated Financial Statements.

(2)	Reflects the results of operations of Clayton from the June 30, 2014 date of acquisition.

(3)	Our senior management uses adjusted pretax operating income (loss) as our primary measure to evaluate the fundamental financial performance of our business segments.

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(1)

In November 2016, we announced our intent to exercise our redemption option for the remaining Convertible Senior Notes due 2019, of which $68.0 million aggregate principal was outstanding at December 31, 2016 and is reflected in the table above as an expected payment in 2017. The redemption was settled on January 27, 2017. Radian elected to redeem all of the notes surrendered for conversion or redemption with cash from available liquidity. Settlement of the obligation was funded with $110.1 million in cash. See Note 21 of Notes to Consolidated Financial Statements for additional details.

(2)	For our Convertible Senior Notes due 2017, excludes the conversion premium amount that may be settled upon conversion in cash, shares of our common stock or a combination thereof, at our election.

(3)	Includes $300 million of Senior Notes due 2019 that may be redeemed, in whole or part at any time prior to maturity.

(4)	Includes $350 million and $350 million of Senior Notes due 2020 and 2021, respectively, that may be redeemed, in whole or part at any time prior to maturity.

(5)	Represents contractual payments for operating leases, with the exception of $0.2 million included for capital lease payment obligations in 2017.

(6)	Our reserve for losses and LAE reflects the application of accounting policies described below in “Critical Accounting Policies—Reserve for Losses and LAE.” The payments due by period are based on management’s estimates and assume that all of the loss reserves included in the table will result in claim payments, net of expected recoveries.

(7)	The timing of these potential payments is uncertain given the nature of the obligations.

•

Radian Guaranty and RMAI were parties to a cross-guaranty agreement that was terminated effective July 1, 2016. However, it remains in effect for insurance written prior to the termination date. This agreement provides that if either party fails to make a payment to a policyholder, then the other party will step in and make the payment. The obligations of both parties are unconditional and irrevocable; however, no payments may be made without prior approval by the Pennsylvania Insurance Department.

•	Radian Group and RMAI are parties to a guaranty agreement, which provides that Radian Group will make sufficient funds available to RMAI to ensure that RMAI has a minimum of $5 million of statutory policyholders’ surplus every calendar quarter. RMAI had $8.6 million of statutory policyholders’ surplus and no RIF exposure as of December 31, 2016.

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•

To allow our mortgage insurance customers to comply with applicable securities regulations for issuers of ABS (including MBS), we have been required, depending on the amount of credit enhancement we were providing, to provide: (i) audited financial statements for the insurance subsidiary participating in these transactions or (ii) a full and unconditional holding-company level guarantee for our insurance subsidiaries’ obligations in such transactions. Radian Group has guaranteed two structured transactions for Radian Guaranty with approximately $110.2 million of aggregate remaining credit exposure as of December 31, 2016.

•

Radian Group and RGRI are parties to an Assumption and Indemnification Agreement with regard to RGRI’s portion of the Deficiency Amounts relating to the IRS litigation. This indemnification agreement was made in lieu of an immediate capital contribution to RGRI that otherwise would have been required for RGRI to maintain its minimum statutory policyholders’ surplus requirements in light of the remeasurement as of December 31, 2011 of uncertain tax positions related to the portfolio of REMIC residual interests. See Note 10 of Notes to Consolidated Financial Statements for additional information regarding the IRS matter. We can provide no assurance regarding the outcome of this IRS matter, which may take several years to resolve. As such, there remains significant uncertainty with regard to the amount and timing of any potential payments under the indemnity agreement described above. See “Item 1A. Risk Factors—Resolution of our dispute with the IRS could adversely affect us.”

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(1)	the repayment of our outstanding long-term debt, consisting of:

•	$300 million principal amount of outstanding debt due in June 2019;

•	$350 million principal amount of outstanding debt due in June 2020;

•	$350 million principal amount of outstanding debt due in March 2021; and

(2)	potential additional capital contributions to our subsidiaries.

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(1)	Moody’s outlook for Radian Group and Radian Guaranty currently is Stable.

(2)	S&P’s outlook for Radian Group, Radian Guaranty and Radian Reinsurance currently is Stable.

(3)	Received February 2, 2017.

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Level I	—    Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level II	—    Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities; and

Level III	—    Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Level III inputs are used to measure fair value only to the extent that observable inputs are not available.

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•	the extent and the duration of the decline in value;

•	the reasons for the decline in value (e.g., credit event, interest related or market fluctuations); and

•	the financial position, access to capital and near term prospects of the issuer, including the current and future impact of any specific events.

•	whether there are cumulative losses from previous years;

•	future projections of taxable income within the applicable carryback and carryforward periods, including the sustainability of our forecasts of future taxable income under potential stress scenarios;

•	the degree of certainty regarding our projected incurred losses;

•	future reversals of existing taxable temporary differences; and

•	potential tax planning strategies.

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(1)	Total fixed-income securities include fixed-maturity investments available for sale, trading securities and short-term investments.

(2)	Change in value expressed as a percentage of the market value of the related fixed-income portfolio.

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Item 8.	Financial Statements and Supplementary Data.

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•	Loan Review, Underwriting and Due Diligence—Loan-level due diligence for various asset classes and securitizations, with a primary focus on the mortgage and RMBS markets, utilizing skilled professionals and proprietary technology, with offerings focused on credit underwriting, regulatory compliance and collateral valuation;

•	Surveillance—Monitoring of mortgage servicer and loan performance, with risk management and servicing oversight solutions that include RMBS surveillance, regulatory and operational loan level oversight, asset representation review and consulting services;

•

Real Estate Valuation and Component Services—Outsourced solutions offered through Green River Capital, Red Bell and ValuAmerica, primarily focused on the SFR market, including valuations, property inspections, title reviews, lease reviews, tax lien reviews and due diligence reviews for SFR and residential real estate markets, as well as outsourced solutions for appraisal, title and closing services;

•	REO Management—REO asset management services offered through Green River Capital, which include management of the entire REO disposition process for our clients; and

•	EuroRisk—Outsourced mortgage services in the United Kingdom and Europe, with offerings that include due diligence services, quality control reviews, valuation reviews and consulting services.

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Level I	—    Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level II	—    Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities; and

Level III	—    Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Level III inputs are used to measure fair value only to the extent that observable inputs are not available.

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•	whether there are cumulative losses from previous years;

•	future projections of taxable income within the applicable carryback and carryforward periods, including the sustainability of our forecasts of future taxable income under potential stress scenarios;

•	the degree of certainty regarding our projected incurred losses;

•	future reversals of existing taxable temporary differences; and

•	potential tax planning strategies.

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•	the extent and the duration of the decline in value;

•	the reasons for the decline in value (e.g., credit event, interest related or market fluctuations); and

•	the financial position, access to capital and near term prospects of the issuer, including the current and future impact of any specific events.

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(1)	As applicable, includes coupon interest, amortization of discount and fees, and other changes in income or loss that would result from the assumed conversion.

(2)	The following number of shares of our common stock equivalents issued under our stock-based compensation arrangements and convertible debt, if any, were not included in the calculation of diluted net income per share because they were anti-dilutive:

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(1)

Net gains (losses) on investments and other financial instruments. The recognition of realized investment gains or losses can vary significantly across periods as the activity is highly discretionary based on the timing of individual securities sales due to such factors as market opportunities, our tax and capital profile and overall market cycles. Unrealized investment gains and losses arise primarily from changes in the market value of our investments that are classified as trading securities. These valuation adjustments may not necessarily result in economic gains or losses.

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(2)

Loss on induced conversion and debt extinguishment. Gains or losses on early extinguishment of debt and losses incurred to purchase our convertible debt prior to maturity are discretionary activities that are undertaken in order to take advantage of market opportunities to strengthen our financial and capital positions; therefore, we do not view these activities as part of our operating performance. Such transactions do not reflect expected future operations and do not provide meaningful insight regarding our current or past operating trends. Therefore, these items are excluded from our calculation of adjusted pretax operating income (loss).

(3)

Acquisition-related expenses. Acquisition-related expenses represent the costs incurred to effect an acquisition of a business (i.e., a business combination). Because we pursue acquisitions on a strategic and selective basis and not in the ordinary course of our business, we do not view acquisition-related expenses as a consequence of a primary business activity. Therefore, we do not consider these expenses to be part of our operating performance and they are excluded from our calculation of adjusted pretax operating income (loss).

(4)

Amortization and impairment of intangible assets. Amortization of intangible assets represents the periodic expense required to amortize the cost of intangible assets over their estimated useful lives. Intangible assets with an indefinite useful life are also periodically reviewed for potential impairment, and impairment adjustments are made whenever appropriate. These charges are not viewed as part of the operating performance of our primary activities and therefore are excluded from our calculation of adjusted pretax operating income (loss).

(5)

Net impairment losses recognized in earnings. The recognition of net impairment losses on investments can vary significantly in both size and timing, depending on market credit cycles. We do not view these impairment losses to be indicative of our fundamental operating activities. Therefore, whenever these losses occur, we exclude them from our calculation of adjusted pretax operating income (loss).

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(1)

Reflects changes to align our segment reporting structure with recent changes in personnel reporting lines and management oversight related to contract underwriting performed on behalf of third parties. Revenue and expenses for this business are now reflected in the Services segment. As a result, for all periods presented, Services revenue, cost of services and other operating expenses have increased, with offsetting reductions in Mortgage Insurance other income and other operating expenses.

(2)	Net of ceded premiums written under the QSR Transactions and the Single Premium QSR Transaction. See Note 8 for additional information.

(3)	Excludes net gains on investments and other financial instruments of $30.8 million, not included in adjusted pretax operating income.

(4)	Includes inter-segment revenues and expenses as follows:

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(1)

Reflects changes to align our segment reporting structure with recent changes in personnel reporting lines and management oversight related to contract underwriting performed on behalf of third parties. Revenue and expenses for this business are now reflected in the Services segment. As a result, for all periods presented, Services revenue, cost of services and other operating expenses have increased, with offsetting reductions in Mortgage Insurance other income and other operating expenses.

(2)	Net of ceded premiums written under the QSR Transactions. See Note 8 for additional information.

(3)	Excludes net gains on investments and other financial instruments of $35.7 million, not included in adjusted pretax operating income.

(4)	Includes inter-segment revenues and expenses as follows:

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(1)

Reflects changes to align our segment reporting structure with recent changes in personnel reporting lines and management oversight related to contract underwriting performed on behalf of third parties. Revenue and expenses for this business are now reflected in the Services segment. As a result, for all periods presented, Services revenue, cost of services and other operating expenses have increased, with offsetting reductions in Mortgage Insurance other income and other operating expenses.

(2)	Includes the acquisition of Clayton, effective June 30, 2014.

(3)	Net of ceded premiums written under the QSR Transactions. See Note 8 for additional information.

(4)	Excludes net gains on investments and other financial instruments of $80.1 million, not included in adjusted pretax operating income.

(5)	Includes inter-segment revenues and expenses as follows:

(6)	Assets held for sale are not part of the Mortgage Insurance or Services segments.

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(1)	Includes inter-segment expenses and revenues as listed in the notes to the preceding tables.

(2)

The change in expected economic loss or recovery associated with our previously owned VIEs is included in adjusted pretax operating income above, although it represents amounts that are not included in net income. Therefore, for purposes of this reconciliation, net gains (losses) on investments and other financial instruments has been adjusted by income of $0.1 million for the year ended December 31, 2014 to reverse this item.

(3)	Acquisition-related expenses represent expenses incurred to effect the acquisition of a business, net of adjustments to accruals previously recorded for acquisition expenses.

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(1)	Comprising short-term certificates of deposit and commercial paper, included within Level II, and convertible notes of non-reporting issuers, included within Level III.

(2)	Does not include certain other invested assets ($1.2 million), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.

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(1)	Comprising short-term certificates of deposit and commercial paper.

(2)	Does not include certain other invested assets ($1.7 million), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value.

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(1)	Primarily consists of investments in Federal Home Loan Bank stock as required in connection with the memberships of Radian Guaranty and Radian Reinsurance in the Federal Home Loan Bank of Pittsburgh.

(1)	Primarily consists of a multi-sector exchange-traded fund.

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(2)	Net realized gains (losses) on equities available for sale for the years ended December 31, 2016 and 2015 represent the gross amount of losses and gains, respectively, realized for those periods.

(3)	During the second quarter of 2015, we sold equity securities in our portfolio and reinvested the proceeds in assets that qualify as PMIERs-compliant Available Assets, recognizing pretax gains of $69.2 million.

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(1)	Actual maturities may differ as a result of calls before scheduled maturity.

(2)	RMBS, CMBS, and Other ABS are shown separately, as they are not due at a single maturity date.

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(1)	Net of profit commission.

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•	20% of its existing performing Single Premium Policies written between January 1, 2012 and March 31, 2013;

•	35% of its existing performing Single Premium Policies written between April 1, 2013 and December 31, 2015; and

•	35% of its Single Premium NIW from January 1, 2016 to December 31, 2017, subject to a limitation on ceded premiums written equal to $195 million for policies issued between January 1, 2016 and December 31, 2017.

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(1)	Net of profit commission.

(2)	Includes amounts reported in policy acquisition costs and other operating expenses.

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(1)	Property and equipment at cost, less accumulated depreciation of $118.5 million and $106.9 million at December 31, 2016 and 2015, respectively. Depreciation expense was $11.7 million, $6.7 million and $4.2 million for the years ended December 31, 2016, 2015 and 2014 respectively.

(2)	Includes $49.7 million and $35.9 million in 2016 and 2015, respectively, related to our technology upgrade project.

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(1)	For the 2000 through 2007 calendar tax years, we petitioned the Tax Court to litigate the IRS Notices of Deficiency resulting from the examination of our 2000 through 2007 consolidated federal income tax returns. This litigation relates to the recognition of certain tax benefits associated with our investment in a portfolio of non-economic REMIC residual interests.

(2)	California, Florida, Georgia, New York, Ohio, Pennsylvania and New York City.

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(1)	Primarily related to expected payments under the Freddie Mac Agreement.

(2)	Represents ceded losses on captive transactions, the QSR Transactions and the Single Premium QSR Transaction.

(3)	Does not include our Second-lien PDR that is included in other liabilities.

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(1)	Related to ceded losses recoverable, if any, on captive reinsurance transactions, the QSR Transactions and the Single Premium QSR Transaction. See Note 8 for additional information.

(2)	Related to underlying defaulted loans with a most recent default notice dated in the year indicated. For example, if a loan had defaulted in a prior year, but then subsequently cured and later re-defaulted in the current year, that default would be considered a current year default.

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(1)	Represents reserves as of December 31, 2016 related to IBNR liabilities and expected development on claims paid related to the Freddie Mac Agreement. As described above, we paid an initial claim amount related to that agreement in 2013.

(2)

Represents total number of new default notices received in each calendar year as compiled monthly based on reports received from loan servicers. As reflected in our Default to Claim Rate assumptions, a significant portion of reported defaults generally do not result in a claim. In certain instances, a defaulted loan may cure, and then subsequently re-default in a later period. Consistent with our reserving practice, each new event of default is treated as a unique occurrence and therefore certain loans that cure and re-default may be included as a reported default in multiple periods.

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(1)	Calculated as follows:

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•	the $41.8 million market premium representing the excess of the fair value of the total consideration delivered to the sellers of the Convertible Senior Notes due 2017 and 2019 over the fair value of the common stock issuable pursuant to the original conversion terms of the purchased notes;

•	the $17.2 million difference between the fair value and the carrying value, net of unamortized issuance costs, of the liability component of the purchased notes; and

•	the $1.1 million impact of related transaction costs.

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•	the $35.5 million market premium representing the excess of the fair value of the total consideration delivered to the sellers of the Convertible Senior Notes due 2017 over the fair value of the common stock issuable pursuant to the original conversion terms of the purchased notes;

•	the $52.3 million difference between the fair value and the carrying value of the liability component of the purchased notes; and

•	the $4.1 million net impact of transaction costs and unamortized debt issuance costs on the purchased notes.

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1.

During any calendar quarter after December 31, 2010 (and only during such calendar quarter), if the last reported sale price of our common stock for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter, is greater than or equal to 130% of the applicable conversion price on each applicable trading day;

2.	During the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the notes (for each trading day during that measurement period) was less than 98% of the product of the last reported sale price of the common stock and the applicable conversion rate on such trading day; or

3.	Upon the occurrence of specified corporate events as described in the indenture for the notes.

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(1)	Included within long-term debt and is being amortized over the life of the convertible notes.

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•	Generally, all awards require the grantee to remain in service with us through the vesting period, except in the event of the grantee’s death, disability, retirement or upon a change of control (subject to certain conditions discussed below).

•	Generally, the awards vest immediately upon a grantee’s death or disability, or at the end of the performance or service period in the event of retirement.

•	Awards granted under the Equity Plans provide for “double trigger” vesting in the event of a change of control, meaning that awards will vest in connection with a change of control only in the event the grantee’s employment is terminated by us without cause or the grantee terminates employment for “good reason,” in each case within 90 days before or one year after the change of control.

•	Generally, effective July 9, 2015, the performance RSUs granted to executive officers include a one-year post-vesting holding period, such that the vested awards will not be convertible into shares (other than shares withheld to pay taxes due at vesting) until the one-year anniversary following the vesting date of the awards, except in the event of death or disability.

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(1)

For purposes of calculating compensation cost recognized, we generally consider time-vested awards effectively vested (and we recognize the full compensation costs) when grantees become retirement eligible. However, under the terms of our stock option awards granted in 2016, 2015, and 2014, legal vesting for retirement occurs when the grantee actually separates from service, with the exception of certain senior executives for whom vesting remains dependent on the stock price hurdle being met regardless of when the executive separates from service. Performance-based RSU awards granted in 2016, 2015, and 2014 provide that vesting remains dependent on the Company’s performance for the full term of the awards, notwithstanding the grantee’s earlier retirement.

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(1)	The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.

(2)

Volatility of Radian’s stock is used in the calculation of the grant date fair value of the portion of the awards based on TSR Measures, as described above. Volatility of Radian’s stock is not an applicable assumption for valuing the portion of the awards based on the cumulative growth in Radian’s book value per share. Volatility is determined at the date of grant using the historical share price volatility and the expected life of each award.

(3)	Average volatility of peer companies is used in the calculation of the grant date fair value of the portion of the awards based on the Relative TSR Measures, as described above.

(4)	A discount is applied to executive officer awards to reflect illiquidity during the one-year post-vesting holding period.

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(1)	We use the Monte Carlo valuation model in determining the grant date fair value of stock options issued to executives and non-executives using the assumptions noted in the following table:

(a)	The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.

(b)	Volatility is determined at the date of grant using historical share price volatility and expected life of each award.

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•	allows for the immediate eligibility of new hire participation and provides for the automatic enrollment of eligible employees;

•	provides for the immediate vesting of matching contributions (including existing unvested matching contributions attributable to prior periods) and the elimination of all restrictions (other than Radian Group’s Policy Regarding Securities Trading) on a participant’s ability to diversify his/her position in matching contributions; and

•	permits Radian Group to make discretionary, pro rata (based on eligible pay) cash allocations to each eligible participant’s account, with vesting upon completion of three years of service with us.

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(1)	Included in net gains (losses) on investments and other financial instruments on our consolidated statements of operations.

(2)	During the second quarter of 2015, we sold equity securities in our portfolio and reinvested the proceeds in assets that qualify as PMIERs-compliant Available Assets, recognizing pretax gains of $69.2 million.

(3)	For 2015, this amount represents the recognition of investment gains included in income from discontinued operations, net of tax, as a result of the completion of the sale of Radian Asset Assurance on April 1, 2015. Previously, pursuant to accounting standards, such investment gains had been deferred and recorded in AOCI.

(4)	Represents the unrealized holding gains (losses) arising during the period on investments recorded as assets held for sale, net of reclassification adjustments for net gains (losses) included in net income from discontinued operations.

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(1)	Excludes risk ceded through reinsurance contracts (to third parties and affiliates) and RIF on defaulted loans.

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(a)

Under SAPP, mortgage guaranty insurance companies are required each year to establish a contingency reserve equal to 50% of premiums earned in such year. Such amount must be maintained in the contingency reserve for 10 years, after which time it is released to unassigned surplus. Prior to 10 years, the contingency reserve may be reduced with regulatory approval to the extent that losses in any calendar year exceed 35% of earned premiums for such year.

(b)	Under SAPP, insurance policy acquisition costs are charged against operations in the year incurred. Under GAAP, such costs, other than those incurred in connection with the origination of derivative contracts, are deferred and amortized.

(c)

Under SAPP, income tax expense is calculated on the basis of amounts currently payable. Generally, DTAs are recognized under both SAPP and GAAP when it is more likely than not that the DTA will be realized. However, SAPP standards impose additional admissibility requirements whereby DTAs are only recognized to the extent they are expected to be recovered within a one- to three-year period subject to a capital and surplus limitation. Changes in DTAs and DTLs are recognized as a direct benefit or charge to unassigned surplus, whereas under GAAP changes in DTAs and DTLs, except for changes in unrealized gains and losses on available-for-sale securities, are recorded as a component of income tax expense.

(d)

Under SAPP, investment grade fixed-maturity investments are valued at amortized cost and below-investment grade securities are carried at the lower of amortized cost or market value. Under GAAP, those investments that the statutory insurance entities do not have the ability or intent to hold to maturity are considered to be either available for sale or trading securities and are recorded at fair value, with the unrealized gain or loss recognized, net of tax, as an increase or decrease to stockholders’ equity or current operations, as applicable.

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(e)	Under SAPP, certain assets, designated as non-admitted assets, are charged directly against statutory surplus. Such assets are reflected on our GAAP financial statements.

(f)

Prior to January 1, 2013, under SAPP, the accounting standard regarding share-based payments was not applicable, with regard to the recognition and measurement of stock option issuances. However, effective January 1, 2013, the NAIC adopted SSAP No. 104, Share-Based Payments (“SSAP 104”), on a prospective basis. Therefore, expenses related to stock options granted subsequent to the date of adoption of SSAP 104 are recognized under SAPP but expenses related to stock options granted prior to the date of adoption continue to not be recognized under SAPP. Expenses related to stock options, regardless of the date of grant, are reflected on our GAAP financial statements in accordance with this standard.

(g)

Under SAPP, premiums written on a multi-year basis are initially deferred as unearned premiums. A portion of the premium written, which corresponds to the insurance policy acquisition costs, is earned immediately and the remaining premiums written are earned over the policy term. Under GAAP, these premiums written on a multi-year basis are initially deferred as unearned premiums and are earned over the policy term.

(h)

Under SAPP, capital contributions satisfied by receipt of cash or readily marketable securities subsequent to the balance sheet date but prior to the filing of the statutory financial statement are treated as a recognized subsequent event and, as such, are considered an admitted asset based on the evidence of collection and approval of the domiciliary commissioner. Under GAAP, such capital contributions are treated as a non-recognized subsequent event.

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(1)

For all periods presented, reflects changes to align our segment reporting structure with recent changes in personnel reporting lines and management oversight related to contract underwriting performed on behalf of third parties. Revenue and expenses for this business are now reflected in the Services segment. As a result, for all periods presented, Services revenue and cost of services have increased, with offsetting reductions in other operating expenses.

(2)	Diluted net income per share is computed independently for each period presented. Consequently, the sum of the quarters may not equal the total net income per share for the year. For all calculations, the determination of whether potential common shares are dilutive or anti-dilutive is based on net income from continuing operations.

(3)	Services revenue for the first quarter of 2015 includes $0.1 million that had previously been included in other income.

(4)	Radian completed the sale of Radian Asset Assurance to Assured on April 1, 2015, pursuant to the Radian Asset Assurance Stock Purchase Agreement. Until the April 1, 2015 sale date, the operating results of Radian Asset Assurance were classified as discontinued operations for all periods presented in our consolidated statements of operations. See Note 18 for additional information.

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Item 9A.	Controls and Procedures.

Item 9B.	Other Information.

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Item 10.	Directors, Executive Officers and Corporate Governance.

Item 11.	Executive Compensation.

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

(1)	The table does not include information for equity compensation plans assumed by us in mergers, under which we do not grant additional awards.

(2)	These plans consist of our 1995 Equity Plan, 2008 Equity Plan, 2014 Equity Plan and our 2008 ESPP Plan.

(3)	Represents 2,839,738 non-qualified stock options and 234,174 shares of phantom stock issued under our 1995 Equity Plan and our 2008 Equity Plan and 3,208,454 RSUs issued under our 2008 Equity Plan. Of the RSUs included herein, 1,761,853 are performance-based stock-settled RSUs that could potentially pay out between 0% and 200% of this represented target.

(4)	The shares of phantom stock and RSUs were granted at full value, and therefore, have a weighted average exercise price of $0. Excluding shares of phantom stock and RSUs from this calculation, the weighted average exercise price of outstanding non-qualified stock options was $7.64 at December 31, 2016.

(5)	Includes 1,004,109 shares available for issuance under our 2014 Equity Plan and 1,030,164 shares available for issuance under our 2008 ESPP Plan, in each case as of December 31, 2016. In January 2017, we issued 74,684 shares from the shares available for issuance under our 2008 ESPP Plan. As a result, 955,480 shares currently remain available for issuance under the 2008 ESPP Plan.

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Item 13.	Certain Relationships and Related Transactions, and Director Independence.

Item 14.	Principal Accountant Fees and Services.

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Item 15.	Exhibits and Financial Statement Schedules.

1.	Financial Statements—See the “Index to Consolidated Financial Statements” included in Item 8 of this report for a list of the financial statements filed as part of this report.

Item 16.	Form 10-K Summary.

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(1)	Available for sale.

(2)	Includes foreign government and agency securities.

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•	Radian Group and RMAI are parties to a guaranty agreement, which provides that Radian Group will make sufficient funds available to RMAI to ensure that RMAI has a minimum of $5 million of statutory policyholders’ surplus every calendar quarter. RMAI had $8.6 million of statutory policyholders’ surplus and no RIF exposure as of December 31, 2016.

•

To allow our mortgage insurance customers to comply with applicable securities regulations for issuers of ABS (including MBS), we have been required, depending on the amount of credit enhancement we were providing, to provide: (i) audited financial statements for the insurance subsidiary participating in these transactions or (ii) a full and unconditional holding-company level guarantee for our insurance subsidiaries’ obligations in such transactions. Radian Group has guaranteed two structured transactions for Radian Guaranty with approximately $110.2 million of aggregate remaining credit exposure as of December 31, 2016.

•

Radian Group and RGRI are parties to an Assumption and Indemnification Agreement with regard to RGRI’s portion of the Deficiency Amounts relating to the IRS litigation. This indemnification agreement was made in lieu of an immediate capital contribution to RGRI that otherwise would have been required for RGRI to maintain its minimum statutory policyholders’ surplus requirements in light of the remeasurement as of December 31, 2011 of uncertain tax positions related to the portfolio of REMIC residual interests. See Note E for additional information.

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*	Filed herewith.

**	Furnished herewith.

+	Management contract, compensatory plan or arrangement.