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## Radian Group Inc. Notes to Consolidated Financial Statements - (Continued) 

 Radian Mortgage Insurance is required to maintain a minimum statutory surplus of $20 million to remain an authorized reinsurer in all states. Radian Mortgage Insurance received capital contributions totaling $60 million in 2012 to improve its risk-to-capital position in conjunction with the transfer of risk under the intercompany reinsurance agreement executed in 2012. 

Radian Mortgage Insurance had no contingency reserves at December 31, 2012, 2011 or 2010. Radian Mortgage Insurance’s statutory net income (loss) and statutory policyholders’  surplus as of and for the years ended December 31, 2012, 2011 and 2010 were as follows: 

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CMAC of Texas’ ability to declare dividends on its common stock is restricted by certain provisions of the insurance laws of the State of Texas, its state of domicile. The insurance laws of the State of Texas limit the maximum amount of dividends that may be paid from positive unassigned surplus by an insurer without prior approval by the Texas Insurance Commissioner. 

Under such test, CMAC of Texas may pay dividends during any 12-month period in an amount equal to the greater of: (i) 10% of the preceding year-end statutory policyholders’ unassigned surplus; or (ii) the preceding year-end statutory net income. In accordance with such restrictions, no dividends may be paid by CMAC of Texas in 2013, without prior regulatory approval. 

CMAC of Texas is required to maintain a minimum statutory surplus of $20 million to remain an authorized reinsurer in all states. 

Radian Group’s U.S. Consolidated federal income tax returns, which include CMAC of Texas’s federal tax returns, were under examination by the IRS for tax years 2000 through 2007. We are currently contesting proposed adjustments resulting from the IRS examination of these tax years. Ef fective December 31, 2011, Radian Group and CMAC of Texas entered into an Assumption and Indemnification Agreement with regard to these proposed adjustments. Through this agreement, Radian Group agreed to indemnify CMAC of Texas for any tax payments ultimately due to the IRS for the proposed adjustments, which relate to the recognition of certain tax losses and deductions that were generated through our investment in a portfolio of non- economic REMIC residual interests currently held by CMAC of Texas. This indemnification was in lieu of an immediate capital contribution that otherwise would have been needed from Radian Group to CMAC of Texas, based on an estimate for this potential liability, in order for CMAC of Texas to maintain its minimum statutory surplus requirements. There remains significant uncertainty with regard to the amount and timing of any resolution with the IRS. See Note 15 for further information regarding the examination by the IRS for the 2000 through 2007 tax years. 

CMAC of Texas had no contingency reserves at December 31, 2012, 2011 or 2010. CMAC of Texas’s statutory net income (loss) and statutory policyholders’ surplus as of and for the years ended December 31, 2012, 2011 and 2010 were as follows: 

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Radian Asset Assurance’s ability to pay dividends to its parent, Radian Guaranty , is restricted by certain provisions of the insurance laws of New York, its state of domicile. Under the New York insurance laws, Radian Asset Assurance may only pay dividends from statutory earned surplus. Without the prior approval from the NYSDFS, Radian Asset Assurance can only pay a dividend, which when totaled with all other dividends declared or distributed by it during the preceding 12 months, is the lesser of 10% of its statutory surplus to policyholders, as shown by its last statement on file with the NYSDFS, or 100% of statutory adjusted net investment income. In July 2012, June 2011 and June 2010, Radian Asset Assurance paid dividends of $54.0 million, $53.4 million and $69.2 million, respectively, to Radian Guaranty. We expect that Radian Asset Assurance will have the capacity to pay another ordinary dividend to Radian Guaranty in the third quarter of 2013 of approximately $35 million. As of December 31, 2012, Radian Asset Assurance maintained claims paying resources of $1.8 billion, which for our financial guaranty business includes statutory surplus of $1.1 billion, plus contingency reserves, unearned premium reserves, the present value of installment premiums and loss and LAE reserves. 

