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

The following table shows our mortgage insurance reserve for losses and LAE by category at the end of each period indicated: 

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(1) Primarily represents ceded losses on captive transactions and Smart Home. 

(2) Does not include second-lien premium deficiency reserve. 

(In thousands) 

Reserves for losses by category: 

Prime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alt-A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A minus and below. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reinsurance recoverable (1). . . . . . . . . . . . . . . . . . . . . . . Total primary reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pool insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total first-lien reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second-lien and other (2). . . . . . . . . . . . . . . . . . . . . . . . . Total reserve for losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

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Deteriorating markets in California and Florida, where non-prime and non-traditional mortgage products such as adjustable rate mortgages and interest-only loans were prevalent and where home prices have fallen significantly , have resulted in significant losses in our mortgage insurance business. During the prolonged period of rising home prices that preceded the current downturn in the U.S. housing market, very few mortgage delinquencies and claims were attributable to insured loans in California, despite the significant growth during this period of riskier , non-traditional mortgage products in this state. As mortgage credit performance in California and Florida has deteriorated, given the size of these markets, our loss experience has been significantly af fected and will continue to be negatively af fected if conditions do not improve or continue to deteriorate. Approximately 20% of our primary mortgage insurance RIF at December 31, 2012 was concentrated in the states of California and Florida. 

See Note 12 for information regarding our financial guaranty claim liabilities. 

11. Reserve for Premium Deficiency 

The PDR in our mortgage insurance business at December 31, 2012 and 2011 relates to our second-lien business. 

The following table reconciles our mortgage insurance segment’ s beginning and ending second-lien PDR for the periods indicated: 

(In thousands) 

Balance at January 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Incurred losses recognized in loss reserves. . . . . . . . . . . . . . . . . . . . . . . Premiums recognized in earned premiums. . . . . . . . . . . . . . . . . . . . . . . Changes in underlying assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion of discount and other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

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