In our mortgage insurance business, we use reinsurance as part of our risk distribution strategy, including to manage our capital position and risk profile. Premiums are ceded under the Single Premium QSR Program, the QSR Program and the Excess-of-Loss Program.



	Year Ended December 31,
(In thousands)	2018				2017			2016
Net premiums written—insurance:
Direct	$	1,082,285			$	1,032,735		$	1,000,111
Assumed	6,901			(1)	25			29
Ceded (2)	(98,165		)		(214,343		)	(266,306		)
Net premiums written—insurance	$	991,021			$	818,417		$	733,834
Net premiums earned—insurance:
Direct	$	1,066,864			$	990,016		$	999,093
Assumed	6,904			(1)	28			35
Ceded (2)	(67,047		)		(57,271		)	(77,359		)
Net premiums earned—insurance	$	1,006,721			$	932,773		$	921,769

2016 Single Premium QSR Agreement. In the first quarter of 2016, in order to proactively manage the risk and return profile of Radian Guaranty’s insured portfolio and continue managing its capital position under the PMIERs financial requirements in a cost-effective manner, Radian Guaranty entered into the 2016 Single Premium QSR Agreement with a panel of third-party reinsurers. Under the 2016 Single Premium QSR Agreement, effective January 1, 2016, Radian Guaranty began ceding the following Single Premium IIF and NIW, subject to certain conditions:

Radian Guaranty receives a 25% ceding commission for premiums ceded pursuant to this transaction. Radian Guaranty also receives a profit commission, provided that the loss ratio on the loans covered under the agreement generally remains below 55%. Losses on the ceded risk above this level reduce Radian Guaranty’s profit commission on a dollar-for-dollar basis.

The agreement is scheduled to terminate on December 31, 2027; however, Radian Guaranty has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of January 1, 2020, or at the end of any calendar quarter thereafter, which would result in Radian Guaranty reassuming the related RIF in exchange for a net payment from the reinsurer calculated in accordance with the terms of the agreement.

Effective December 31, 2017, we amended the 2016 Single Premium QSR Agreement to increase the amount of ceded risk on performing loans under the agreement from 35% to 65% for the 2015 through 2017 vintages. As of the effective date, the result of this amendment increased the amount of risk ceded on Single Premium Policies, including for the purposes of calculating any future ceding commissions and profit commissions that Radian Guaranty will earn. It also increased the future amounts of our ceded premiums and ceded losses. RIF ceded under the 2016 Single Premium QSR Agreement was $6.3 billion as of December 31, 2018, compared to $6.9 billion and $3.8 billion as of December 31, 2017 and 2016, respectively.

2018 Single Premium QSR Agreement. In October 2017, we entered into the 2018 Single Premium QSR Agreement with a panel of third-party reinsurers. Under the 2018 Single Premium QSR Agreement, we expect to cede 65% of our Single Premium NIW beginning with the business written in January 2018, subject to certain conditions that may affect the amount ceded, including a limitation on ceded premiums written equal to $335 million for policies issued between January 1, 2018 and December 31, 2019. Notwithstanding this limitation, the parties may mutually agree to amend the agreement, including with respect to any limitations on the amounts of insurance that may be ceded.

Radian Guaranty receives a 25% ceding commission for premiums ceded pursuant to this transaction. Radian Guaranty also receives an annual profit commission based on the performance of the loans subject to the agreement, provided that the loss ratio on the subject loans is below 56% for that calendar year. Radian Guaranty may discontinue ceding new policies under the agreement at the end of any calendar quarter.

The agreement is scheduled to terminate on December 31, 2029. However, Radian Guaranty may terminate this agreement prior to the scheduled date if one or both of the GSEs no longer grant full credit for the reinsurance. Radian Guaranty also has the option, based on certain conditions and subject to a termination fee, to terminate the agreement as of January 1, 2022, or at the end of any calendar quarter thereafter. Termination of the agreement would result in Radian Guaranty reassuming the related RIF in exchange for a net payment from the reinsurer calculated in accordance with the terms of the agreement. RIF ceded under the 2018 Single Premium QSR Agreement was $1.9 billion as of December 31, 2018.

In 2012, Radian Guaranty entered into the QSR Program with a third-party reinsurance provider. Radian Guaranty has ceded the maximum amount permitted under the QSR Program and is no longer ceding NIW under this program. RIF ceded under the QSR Program was $0.9 billion, $1.2 billion and $1.6 billion as of December 31, 2018, 2017 and 2016, respectively.



	Single Premium QSR Program						QSR Program
	Year Ended December 31,						Year Ended December 31,
(In thousands)	2018		2017		2016		2018		2017		2016
Ceded premiums written (1)	$	74,876	$	193,517	$	233,206	$	13,486	$	19,356	$	28,097
Ceded premiums earned (1)	44,286		27,284		29,808		19,660		28,503		42,515
Ceding commissions written	29,745		55,333		66,153		3,890		5,536		8,019
Ceding commissions earned (2)	22,097		13,774		15,303		11,349		13,122		16,573
Ceded losses	4,574		2,490		2,262		512		771		1,858

In November 2018, Radian Guaranty entered into a fully collateralized reinsurance agreement with Eagle Re, an unaffiliated special purpose reinsurer domiciled in Bermuda. This reinsurance agreement provides for up to $434.0 million of aggregate excess-of-loss reinsurance coverage for the applicable percentage of mortgage insurance losses on new defaults on an existing portfolio of eligible Monthly Premium Policies issued between January 1, 2017 and January 1, 2018, with an initial RIF of $9.1 billion. In addition, Radian Guaranty entered into a separate excess-of-loss reinsurance agreement for up to $21.4 million of coverage, representing a pro rata share of the credit risk alongside the risk assumed by Eagle Re on those Monthly Premium Policies.

Radian Guaranty and its affiliates have retained the first-loss layer of $204.9 million of aggregate losses. Eagle Re and a separate third-party reinsurer provide 90% and 10% coverage, respectively, on the mezzanine layer of up to $214.1 million of losses (in excess of the retained losses of $204.9 million). Eagle Re also provides 100% coverage on the next layer of $241.4 million of aggregate losses. Radian Guaranty and its affiliates will then retain losses in excess of the outstanding reinsurance coverage amount. The aggregate excess of loss reinsurance coverage decreases over a ten-year period as the principal balances of the underlying covered mortgages decrease and as claims are paid by Eagle Re. The outstanding reinsurance coverage amount will stop amortizing if certain thresholds are reached, such as if the reinsured mortgages were to experience an elevated level of delinquencies or certain credit enhancement tests were not maintained. Radian Guaranty has rights to terminate the reinsurance agreement upon the occurrence of certain events, including an option to terminate on or after November 25, 2023.

Eagle Re financed its coverage by issuing mortgage insurance-linked notes in an aggregate amount of $434.0 million to unaffiliated investors. The notes mature on November 25, 2028, but are subject to earlier termination by Eagle Re, upon Radian Guaranty’s exercise of its rights to terminate the reinsurance agreement. The notes are non-recourse to any assets of Radian Guaranty or its affiliates. The proceeds of the notes have been deposited into a reinsurance trust account for the benefit of Radian Guaranty, and are required to be the source of reinsurance claim payments to Radian Guaranty and principal repayments on the mortgage insurance-linked notes. Funds in the reinsurance trust account are required to be invested in U.S. government money market funds, cash or U.S. Treasury securities at all times.

The reinsurance premium due to Eagle Re is calculated by multiplying the outstanding reinsurance coverage amount at the beginning of a period by a coupon rate, which is the sum of one-month LIBOR plus a contractual risk margin, and then subtracting actual investment income collected on the assets in the reinsurance trust during the preceding month. As a result, the premiums we pay will vary based on (i) the spread between LIBOR and the rates on the investments held by the reinsurance trust and (ii) the outstanding amount of reinsurance coverage. Radian Guaranty will also pay an additional annual premium to reimburse Eagle Re for expenses in connection with the issuance of the Notes and Eagle Re’s annual anticipated operating expenses, which are not expected to be material. If the reinsurance agreement is not terminated after five years from issuance, the reinsurance premium’s risk margin payable to Eagle Re increases by 50%.

In connection with our excess of loss reinsurance agreement with Eagle Re, we concluded that (i) the risk transfer requirements for reinsurance accounting were met as Eagle Re is assuming significant insurance risk and has a reasonable possibility of a significant loss; and (ii) Eagle Re is a variable interest entity (“VIE”). Based on the accounting guidance that addresses VIEs, because Radian does not have: (i) the power to direct the activities of Eagle Re that most significantly affect its economic performance or (ii) the obligation to absorb losses or the right to receive benefits from Eagle Re that potentially could be significant to Eagle Re, we have not consolidated Eagle Re in our consolidated financial statements. We have also concluded that the reinsurance agreement contains an embedded derivative, which we have accounted for separately as a freestanding derivative. See Note 2 for additional accounting policy information.

Although the risk transfer requirements for reinsurance accounting have been met and there is also no recourse to Radian Guaranty by the holders of the mortgage insurance-linked notes, reinsurance does not relieve us of our obligations to our policyholders. In the event the VIE is unable to meet its obligations to us, our insurance subsidiaries would be liable to make claims payments to our policyholders. In the event that all of the assets in the reinsurance trust (consisting of U.S. government money market funds, cash or U.S. Treasury securities) have become worthless and the VIE is unable to make its payments to us, our maximum potential loss would be the amount of mortgage insurance claim payments for losses on the insured policies, net of the aggregate reinsurance payments already received, up to the full $434.0 million aggregate excess-of-loss reinsurance coverage amount. In the same scenario, the related embedded derivative of $1.1 million, currently recorded in other assets, would no longer have value.

Eagle Re represents our only variable interest entity as of December 31, 2018. The following table presents Eagle Re’s total assets as well as Radian Guaranty’s maximum exposure to loss associated with Eagle Re, each as of December 31, 2018.

Although we use reinsurance as one of our risk management tools, reinsurance does not relieve us of our obligations to our policyholders. In the event the reinsurers are unable to meet their obligations to us, our insurance subsidiaries would be liable for any defaulted amounts. However, in all of our reinsurance transactions, the reinsurers have established a trust to help

secure our potential cash recoveries. In addition, for the Single Premium QSR Program, Radian Guaranty holds amounts received from ceded premiums written to collateralize the reinsurers’ obligations, which is reported in reinsurance funds withheld on our consolidated balance sheets. Any loss recoveries and profit commissions to Radian Guaranty related to the Single Premium QSR Program are expected to be realized from this account.