FORM 10-Q
                               ------------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

                For the quarterly period ended September 30, 2003

                                       or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

                 For the transition period from ______ to _____


                         Commission File Number 0-22342


                               TRIAD GUARANTY INC.
             (Exact name of registrant as specified in its charter)

       DELAWARE                                        56-1838519
(State of Incorporation)                (I.R.S. Employer Identification Number)


                            101 SOUTH STRATFORD ROAD
                       WINSTON-SALEM, NORTH CAROLINA 27104
                    (Address of principal executive offices)

                                 (336) 723-1282
              (Registrant's telephone number, including area code)
                         ------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes /X/ No / /

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
described in Exchange Act Rule 12b-2) Yes /X/ No/ /

Number of shares of Common Stock, $.01 par value,  outstanding as of October 31,
2003: 14,431,138 shares.



<PAGE>


                               TRIAD GUARANTY INC.

                                      INDEX
                                                                           Page
                                                                         Number
Part I. Financial Information:

      Item 1. Financial Statements:

      Consolidated Balance Sheets as of September 30, 2003 (Unaudited)
               and December 31, 2002........................................  3

      Consolidated Statements of Income for the Three and Nine Months
               Ended September 30, 2003 and 2002 (Unaudited)...............   4

      Consolidated Statements of Cash Flows for the Nine Months
               Ended September 30, 2003 and 2002 (Unaudited)...............   5

      Notes to Consolidated Financial Statements...........................   6

      Item 2. Management's Discussion and Analysis of Financial Condition
               and Results of Operations...................................   9

      Item 3. Quantitative and Qualitative Disclosures about Market Risk...  21

      Item 4. Controls and Procedures......................................  21

Part II. Other Information:

      Item 1. Legal Proceedings...........................................   22

      Item 2. Changes in Securities and Use of Proceeds....................  22

      Item 3. Defaults Upon Senior Securities..............................  22

      Item 4. Submission of Matters to a Vote of Security Holders.......... .22

      Item 5. Other Information............................................  22

      Item 6. Exhibits and Reports on Form 8-K.............................  22






                                       2
<PAGE>
                               TRIAD GUARANTY INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                                                                               September 30       December 31
(Dollars in thousands except per share information)                                2003              2002
                                                                               -------------     ------------
                                                                               (Unaudited)
<S>                                                                            <C>                <C>
Assets
Invested assets:
     Fixed maturities, available-for-sale, at fair value                       $  325,173         $  298,470
    Equity securities, available-for-sale, at fair value                           12,207             10,808
    Short-term investments                                                         48,337             35,303
                                                                               ----------         ----------
                                                                                  385,717            344,581

Cash                                                                                4,271                233
Real estate                                                                           211              1,561
Accrued investment income                                                           3,982              3,088
Deferred policy acquisition costs                                                  29,864             28,997
Prepaid federal income taxes                                                       92,691             77,786
Property and equipment                                                              9,242              9,533
Reinsurance recoverable                                                             1,047                396
Other assets                                                                       22,742             16,711
                                                                               ----------         ----------
Total assets                                                                   $  549,767         $  482,886
                                                                               ==========         ==========

Liabilities and stockholders' equity
Liabilities:
    Losses and loss adjustment expenses                                        $   25,522         $   21,360
    Unearned premiums                                                              14,516              8,539
    Amounts payable to reinsurer                                                    3,041              3,415
    Current taxes payable                                                           1,221                598
    Deferred income taxes                                                         108,154             94,241
    Unearned ceding commission                                                        849              1,386
    Long-term debt                                                                 34,484             34,479
    Accrued interest on debt                                                          584              1,275
    Accrued expenses and other liabilities                                          6,256              8,186
                                                                               ----------         ----------
Total liabilities                                                                 194,627            173,479
Commitments and contingent liabilities - Note 4 Stockholders' equity:
    Preferred stock, par value $.01 per share --- authorized
      1,000,000 shares; no shares issued and outstanding                              ---                ---
    Common stock, par value $.01 per share --- authorized
      32,000,000 shares; issued and outstanding 14,430,395 shares
      at September 30, 2003 and 14,159,601 shares at December 31, 2002                144                142
    Additional paid-in capital                                                     87,244             80,169
    Accumulated other comprehensive income, net of income tax
      liability of $5,603 at September 30, 2003 and $4,646 at
      December 31, 2002                                                            10,406              8,634
    Deferred compensation                                                          (1,304)              (658)
    Retained earnings                                                             258,650            221,120
                                                                               ----------         ----------
Total stockholders' equity                                                        355,140            309,407
                                                                               ----------         ----------
Total liabilities and stockholders' equity                                     $  549,767         $  482,886
                                                                               ==========         ==========
</TABLE>
                             See accompanying notes.

                                       3
<PAGE>
                               TRIAD GUARANTY INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                               Three Months Ended              Nine Months Ended
                                                                  September 30                    September 30
                                                          ----------------------------    ---------------------------
                                                              2003              2002          2003            2002
                                                          -----------     -----------     -----------     -----------
(Dollars in thousands except per share information)
<S>                                                       <C>             <C>             <C>             <C>
Revenue:
Premiums written:
   Direct                                                 $    40,448     $    33,199     $  112,352      $    90,821
   Assumed                                                          -               1               2               3
   Ceded                                                       (7,329)         (4,919)        (19,715)        (12,761)
                                                          -----------     -----------     -----------     -----------
Net premiums written                                           33,119          28,281          92,639          78,063
Change in unearned premiums                                    (2,796)           (930)         (5,918)           (678)
                                                          -----------     -----------     -----------     -----------
Earned premiums                                                30,323          27,351          86,721          77,385

Net investment income                                           4,229           4,156          12,895          11,873
Net realized investment (losses) gains                            763            (446)          1,528          (2,674)
Other income                                                        4              15              20              57
                                                          -----------     -----------     -----------     -----------
                                                               35,319          31,076         101,164          86,641
                                                          -----------     -----------     -----------     -----------
Losses and expenses:
Losses and loss adjustment expenses                             6,056           4,390          16,703           9,787
Reinsurance recoveries                                             (3)              2              (5)              -
                                                          -----------     -----------     -----------     -----------
Net losses and loss adjustment expenses                         6,053           4,392          16,698           9,787

Interest expense on debt                                          693             693           2,079           2,078
Amortization of deferred policy acquisition costs               5,315           3,377          12,757           9,423
Other operating expenses (net of acquisition costs
   deferred)                                                    5,528           5,587          16,537          17,420
                                                          -----------     -----------     -----------     -----------
                                                               17,589          14,049          48,071          38,708
                                                          -----------     -----------     -----------     -----------
Income before income taxes                                     17,730          17,027          53,093          47,933
Income taxes:
   Current                                                        181             167             534             499
   Deferred                                                     5,002           5,095          15,029          14,341
                                                          -----------     -----------     -----------     -----------
                                                                5,183           5,262          15,563          14,840
                                                          -----------     -----------     -----------     -----------
Net income                                                $    12,547     $    11,765     $    37,530     $    33,093
                                                          ===========     ===========     ===========     ===========
Earnings per common and common equivalent share:
   Basic
                                                          $       .87     $       .83     $      2.63     $      2.36
                                                          ===========     ===========     ===========     ===========
   Diluted
                                                          $       .86     $       .82     $      2.59     $      2.31
                                                          ===========     ===========     ===========     ===========
Shares used in computing earnings per common and
   common equivalent share:
   Basic                                                   14,352,980      14,139,212      14,284,781      14,031,088
                                                          ===========     ===========     ===========     ===========
   Diluted                                                 14,558,548      14,373,988      14,470,056      14,322,151
                                                          ===========     ===========     ===========     ===========
</TABLE>
                             See accompanying notes.

                                       4
<PAGE>
                               TRIAD GUARANTY INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                              Nine Months Ended
                                                                                 September 30
                                                                          ------------------------
(Dollars in thousands)                                                       2003           2002
                                                                          ---------      ---------
<S>                                                                       <C>            <C>
Operating activities
Net income                                                                $  37,530      $  33,093
Adjustments to reconcile net income to net cash provided
  by operating activities:
    Loss, loss adjustment expenses and unearned premium reserves             10,139          2,841
    Accrued expenses and other liabilities                                   (1,930)        (4,314)
    Current taxes payable                                                       623            619
    Amounts due to/from reinsurer                                            (1,084)          (236)
    Accrued investment income                                                  (894)           (87)
    Policy acquisition costs deferred                                       (13,624)       (12,712)
    Amortization of policy acquisition costs                                 12,757          9,423
    Net realized investment losses (gains)                                   (1,528)         2,674
    Provision for depreciation                                                2,132          2,138
    Accretion of discount on investments                                     (2,852)        (3,389)
    Deferred income taxes                                                    15,029         14,341
    Prepaid federal income taxes                                            (14,905)       (10,907)
    Unearned ceding commission                                                 (537)          (702)
    Real estate acquired in claim settlement                                  1,350           (824)
    Accrued interest on debt                                                   (691)          (691)
    Other assets                                                             (2,517)          (813)
    Other operating activities                                                  512            298
                                                                          ---------      ---------
Net cash provided by operating activities                                    39,510         30,752

Investing activities
Securities available-for-sale:
  Purchases - fixed maturities                                              (82,157)       (62,700)
  Sales - fixed maturities                                                   58,538         34,376
  Purchases - equities                                                       (1,744)        (2,140)
  Sales - equities                                                              914          1,625
Net change in short-term investments                                        (13,034)        (6,055)
Purchases of property and equipment                                          (1,842)        (1,252)
                                                                          ---------      ---------
Net cash used in investing activities                                       (39,325)       (36,146)

Financing activities
Proceeds from exercise of stock options                                       3,853          5,372
                                                                          ---------      ---------
Net cash provided by financing activities                                     3,853          5,372
                                                                          ---------      ---------
Net change in cash                                                            4,038            (22)
Cash at beginning of period                                                     233            853
                                                                          ---------      ---------
Cash at end of period                                                     $   4,271      $     831
                                                                          =========      =========

Supplemental schedule of cash flow information
 Cash paid during the period for:
  Income taxes and United States Mortgage Guaranty
    Tax and Loss Bonds                                                    $  15,723      $  11,536
  Interest                                                                    2,765          2,765
</TABLE>

                             See accompanying notes.

                                       5
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003
                                   (Unaudited)

NOTE 1 -- THE COMPANY

     Triad Guaranty Inc. (the "Company") is a holding company which, through its
wholly-owned   subsidiary,   Triad  Guaranty  Insurance  Corporation  ("Triad"),
provides  private mortgage  insurance  coverage in the United States to mortgage
lenders  and  investors  to protect  the lender or  investor  against  loss from
defaults on low down payment residential mortgage loans.


NOTE  2 -- ACCOUNTING POLICIES AND BASIS OF PRESENTATION

BASIS  OF  PRESENTATION  - The  accompanying  unaudited  consolidated  financial
statements have been prepared in accordance with accounting principles generally
accepted in the United  States for interim  financial  information  and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not  include  all  of the  information  and  footnotes  required  by  accounting
principles  generally  accepted  in the  United  States for  complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating  results for the three and nine months ended  September 30,
2003 are not necessarily  indicative of the results that may be expected for the
year  ending  December  31,  2003.  For  further   information,   refer  to  the
consolidated  financial  statements and footnotes  thereto included in the Triad
Guaranty Inc. annual report on Form10-K for the year ended December 31, 2002.

STOCK OPTIONS - The Company  grants stock options to employees and directors for
a fixed  number of shares  with an exercise  price equal to or greater  than the
fair value of the shares at the date of grant.  The Company  accounts  for stock
option  grants  using  the  intrinsic  value  method  prescribed  in  Accounting
Principles Board Opinion No. 25,  Accounting for Stock Issued to Employees,  and
accordingly, recognizes no compensation expense for the stock option grants.

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
options  is  amortized  to  expense  over  the  options'  vesting  period.   Had
compensation  expense for stock  options  been  recognized  using the fair value
method on the grant date, net income and earnings per share on a pro forma basis
would have been (in thousands, except for earnings per share information):


                                     Three Months Ended    Nine Months Ended
                                         September 30,       September 30,
                                     ------------------    -----------------
                                        2003      2002      2003       2002
                                     ----------------------------------------

  Net income - as reported           $ 12,547  $ 11,765   $ 37,530   $ 33,093
  Net income - pro forma             $ 12,408  $ 11,565   $ 37,046   $ 32,471
  Earnings per share - as reported:
     Basic                           $  0.87   $   0.83   $  2.63    $   2.36
     Diluted                         $  0.86   $   0.82   $  2.59    $   2.31
  Earnings per share - pro forma:
     Basic                           $  0.86   $   0.82   $  2.59    $   2.31
     Diluted                         $  0.85   $   0.80   $  2.56    $   2.27

                                       6
<PAGE>
                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003
                                   (Unaudited)

NOTE 3 -- CONSOLIDATION

     The consolidated  financial  statements include Triad Guaranty Inc. and its
wholly-owned  subsidiary,  Triad Guaranty Insurance Corporation  ("Triad"),  and
Triad's  wholly-owned  subsidiaries,  Triad Guaranty  Assurance  Corporation and
Triad Re Insurance Corporation  (collectively referred to as "the Company"). All
significant intercompany accounts and transactions have been eliminated.


NOTE 4 -- COMMITMENTS AND CONTINGENT LIABILITIES

REINSURANCE  - Triad  assumes  and cedes  certain  premiums  and losses  from/to
reinsurers under various reinsurance  agreements.  Reinsurance  contracts do not
relieve Triad from its obligations to policyholders. Failure of the reinsurer to
honor its obligation could result in losses to Triad;  consequently,  allowances
are established for amounts when deemed uncollectible.

INSURANCE IN FORCE,  DIVIDEND  RESTRICTIONS,  AND STATUTORY  RESULTS - Insurance
regulations  generally  limit the writing of mortgage  guaranty  insurance to an
aggregate amount of insured risk no greater than 25 times the total of statutory
capital and surplus and the  statutory  contingency  reserve.  The amount of net
risk for  insurance  in force at September  30, 2003 and  December 31, 2002,  as
presented  below,  was  computed by applying the various  percentage  settlement
options and  applicable  stop-loss  parameters to the insurance in force amounts
based on the original insured amount of the loan. Triad's ratio is as follows:

                                             September 30,    December 31,
                                                 2003             2002
                                             -----------      ----------
(Dollars in thousands)
Net risk.................................    $ 6,209,900      $ 5,534,420
                                             ===========      ===========
Statutory capital and surplus............    $   122,401      $  112,874

Statutory contingency reserve............        289,503         245,006
                                             -----------      ----------
Total....................................    $   411,904       $ 357,880
                                             ===========      ===========
Risk-to-capital ratio....................      15.1-to-1       15.5-to-1
                                             ===========      ===========

     Triad  and  its  wholly-owned   subsidiaries,   Triad  Guaranty   Assurance
Corporation  and Triad Re Insurance  Corporation,  are each required under their
respective  domiciliary  state's  insurance  code to maintain a minimum level of
statutory capital and surplus. Triad, an Illinois domiciled insurer, is required
under the Illinois  Insurance  Code (the "Code") to maintain  minimum  statutory
capital and surplus of $5 million.  The Code  permits  dividends to be paid only
out of  earned  surplus  and  also  requires  prior  approval  of  extraordinary
dividends.  An extraordinary dividend is any dividend or distribution of cash or
other property,  the fair value of which,  together with that of other dividends
or distributions made within a period of twelve consecutive months,  exceeds the
greater of (a) ten percent of statutory surplus as regards policyholders, or (b)
statutory net income for the calendar year preceding the date of the dividend.

                                       7
<PAGE>
                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2003
                                   (Unaudited)


     Net income as determined in accordance with statutory accounting principles
was $51.0 million and $44.7 million for the nine months ended September 30, 2003
and 2002, respectively, and $61.8 million for the year ended December 31, 2002.

     At September 30, 2003 and December 31, 2002,  the amount of Triad's  equity
that could be paid out in dividends to stockholders  was $38.7 million and $29.2
million,  respectively,  which was the earned  surplus  of Triad on a  statutory
basis on those dates.

LOSS  RESERVES - The  Company  establishes  loss  reserves  to  provide  for the
estimated  costs of  settling  claims  with  respect to loans  reported to be in
default  and loans in  default  which  have not been  reported  to the  Company.
Reserves are established by management  using estimated claim rates  (frequency)
and claim amounts  (severity) to estimate ultimate losses. The reserving process
gives effect to current economic  conditions and profiles  delinquencies by such
factors as policy year, geography, chronic late payment characteristics and age.
Due to the  inherent  uncertainty  in  estimating  reserves  for losses and loss
adjustment  expenses,  there can be no assurance that the reserves will prove to
be adequate to cover ultimate loss development.

LITIGATION  - A class action  lawsuit has been filed  against the Company in the
ordinary course of the Company's  business  alleging that contract  underwriting
and captive  reinsurance  violate the Real Estate Settlement  Procedures Act. In
the opinion of management,  the ultimate  resolution of this pending  litigation
will not have a material adverse effect on the financial  position or results of
operations of the Company.


NOTE 5 - - EARNINGS PER SHARE

     Basic and  diluted  earnings  per  share are based on the  weighted-average
daily  number of  shares  outstanding.  For  diluted  earnings  per  share,  the
denominator   includes   the   dilutive   effect   of  stock   options   on  the
weighted-average  shares  outstanding.  There  are no  other  reconciling  items
between the  denominator  used in basic earnings per share and diluted  earnings
per share.  The numerator used in basic earnings per share and diluted  earnings
per share is the same for all periods presented.


NOTE 6 - - COMPREHENSIVE INCOME

     Comprehensive income consists of net income and other comprehensive income.
For the Company,  other comprehensive  income is composed of unrealized gains or
losses on available-for-sale securities, net of income tax. For the three months
ended September 30, 2003 and 2002, the Company's  comprehensive  income was $8.7
million and $19.3 million, respectively. For the nine months ended September 30,
2003 and 2002,  the Company's  comprehensive  income was $39.3 million and $43.6
million, respectively.


NOTE 7 - - INCOME TAXES

     Income tax  expense  differs  from the amounts  computed  by  applying  the
Federal statutory income tax rate to income before income taxes primarily due to
tax-exempt  interest  that the Company earns from its  investments  in municipal
bonds.

                                       8

<PAGE>

 ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS


     Management's  Discussion and Analysis of Financial Condition and Results of
Operations analyzes the consolidated  financial condition,  changes in financial
position,  and results of operations  for the three month and nine month periods
ended  September  30,  2003,  as compared  to the same  periods in 2002 of Triad
Guaranty Inc. The discussion supplements Management's Discussion and Analysis of
Financial Condition and Results of Operations and Item 1 in Form 10-K and should
be read in conjunction with the interim financial statements and notes contained
herein.

RESULTS OF OPERATIONS

     Net  income  for the first  nine  months of 2003  increased  13.4% to $37.5
million  or $2.59 per  diluted  share  compared  to $33.1  million  or $2.31 per
diluted share in the first nine months of 2002. Net income for the third quarter
of 2003  increased  6.6% to $12.5  million or $0.86 per diluted share from $11.8
million  or  $0.82  per  diluted  share  in the  third  quarter  of  2002.  This
improvement  in net income was led by an increase in earned  premiums  partially
offset by increases in net losses and loss adjustment  expenses and amortization
of deferred policy  acquisition  costs.  Net income for the first nine months of
2003 includes $1.5 million of net realized investment gains while net income for
the first nine months of 2002 included  $2.7 million of net realized  investment
losses.  For the third quarter of 2003 and 2002, net income includes $763,000 of
net realized  investment gains and $446,000 of net realized  investment  losses,
respectively.

PRODUCTION AND IN FORCE

     Total insurance written was $15.3 billion for the first nine months of 2003
compared  to $9.7  billion  for the first nine  months of 2002,  an  increase of
57.7%. For the third quarter of 2003,  total insurance  written was $6.7 billion
compared  to $3.5  billion  for the  comparable  period of 2002,  an increase of
91.9%.  Total  insurance  written  includes  insurance  written  attributable to
traditional flow production and to structured bulk transactions.

     Traditional  flow  insurance  written  in the  first  nine  months  of 2003
increased  57.9% to $13.3  billion from $8.4 billion in the first nine months of
2002.  For the  third  quarter  of  2003,  traditional  flow  insurance  written
increased  68.3% to $5.0 billion from $3.0 billion for the comparable  period of
2002.  This increase was primarily  the result of expanding  relationships  with
national lenders, strong demand for risk-sharing  arrangements and other product
offerings,  and a lower  interest rate  environment  that  contributed to a very
strong refinance market.

     Insurance  written  in the  first  nine  months  of  2003  attributable  to
structured  bulk  transactions  totaled $1.9 billion  ($1.6 billion in the third
quarter)  compared to $1.2 billion  ($478  million in the third  quarter) in the
first nine months of 2002.  Structured bulk transactions are generally initiated
by secondary mortgage market  participants who wish to use mortgage insurance as
a credit  enhancement.  The Company competes against other mortgage  insurers as
well as other forms of credit enhancement  provided by capital markets for these
transactions.  Insurance  written  attributed to structured bulk transactions is
likely to vary  significantly  from period to period due to the relatively small
number of transactions that encompass this market (as opposed to the traditional
flow market),  competitiveness with other mortgage insurers,  the attractiveness
in  the  marketplace  of  mortgage   insurance  versus  other  forms  of  credit
enhancements, and the changing loan composition and underwriting criteria of the
market.  Although  terms vary, the bulk market can be broadly  categorized  into
three different  segments or tiers depending on the risk  characteristics of the

                                       9
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED

loans comprising a transaction.  The loan  characteristics of the three segments
are: 1) predominantly  high credit quality,  low LTV, fully  underwritten  loans
that may have niche  characteristics  such as  non-conforming  loan balances and
concentrations  such as  geography,  transaction  purpose or occupancy  type; 2)
loans that generally have high credit quality and low to moderate LTVs that have
been underwritten with reduced or streamlined  documentation;  and, 3) generally
fully  underwritten loans with credit impaired borrowers (FICO credit score less
than 575). In general, the Company believes that its bulk business originated in
segments  2 and 3 will  report a higher  default  rate  than its flow  business.
However,  the Company  believes  that the lower LTV's  associated  with its bulk
business will ultimately  generate  proportionately  lower claim rates and lower
levels  of  severity  than its flow  business.  The  Company  enters  into  bulk
transactions  primarily in the first two segments  mentioned above. At September
30, 2003,  approximately 5% of the Company's  insurance in force attributable to
structured bulk transactions is categorized in segment 3.

     The Company  periodically  enters into  structured  transactions  involving
loans that have insurance  effective dates within the current  reporting  period
but for which  detailed  loan  information  regarding  the insured  loans is not
provided by the issuer of the  transaction  until later.  When this occurs,  the
Company  accrues  due  premium  in the  reporting  period  based on each  loan's
insurance effective date; however,  the loans are not reflected in the Company's
inforce, insurance written, and related data totals (collectively referred to as
"statistical  account  totals")  until the loan level  detail is reported to the
Company.  Approximately  $1.0 billion of the $1.6  billion of insurance  written
attributable  to structured  bulk  transactions in the third quarter of 2003 had
effective  dates of coverage in the second quarter of 2003 but due to this delay
in the reporting of detailed loan  information  regarding the insured loans, the
loans were not reflected in the Company's  statistical  account totals until the
third quarter. At September 30, 2003, the Company had approximately $1.2 billion
of structured  transactions  with  effective  dates within the third quarter for
which loan level detail had not been  received and therefore are not included in
the  statistical  account totals  herein.  These amounts will be reported in the
statistical  account  totals  during the fourth  quarter of 2003 once loan level
detail is provided to the Company by the issuer of the transaction.  The Company
has  properly  included in premium  written and  premium  earned the  respective
amounts due and earned by the Company  during the third  quarter of 2003 related
to this insurance.

     Consolidation   within  the  mortgage   origination  industry  and  Triad's
continued  focus on national  lenders have  resulted in a greater  percentage of
production  volume  being  concentrated  among  a  smaller  customer  base.  The
Company's ten largest  customers were  responsible  for 75% of traditional  flow
insurance  written in the first nine  months of 2003  compared  to 73% in all of
2002.  The Company's two largest  customers  generated 58% of  traditional  flow
insurance  written in the first nine  months of 2003  compared  to 53% in all of
2002. The loss of one or more of these major  customers could have a significant
adverse effect on the Company's business.

     According  to  industry  data,  Triad's  national  market  share of net new
primary  insurance  written,  which includes  insurance written on a traditional
flow basis as well as that attributed to structured bulk transactions, increased
to 4.7%  for the  first  nine  months  and 5.4% for the  third  quarter  of 2003
compared to 3.6% and 4.0% for the respective  periods of 2002.  Triad's national
market share of net new primary  insurance  written on a traditional  flow basis
was 5.1% for both the first  nine  months of 2003 and the third  quarter of 2003
compared to 4.2% and 4.3% for the  respective  periods of 2002.  Net new primary
insurance written excludes insurance placed upon loans more than 12 months after
loan  origination,  insurance  placed  upon  loans  already  covered  by primary
mortgage  insurance,  and insurance  placed upon loans where lender  exposure is
effectively reduced below defined minimums.

                                       10
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED

     Total direct  insurance in force  reached  $29.3  billion at September  30,
2003,  compared to $25.4  billion at December  31,  2002,  and $25.0  billion at
September 30, 2002. Significant refinance activity in 2002 and in the first nine
months  of  2003  resulted  in  a  high  level  of  policy   cancellations  that
substantially  offset the impact that the high level of insurance written had on
in force growth. As a result,  insurance in force increased by only $3.9 billion
in the first nine months of 2003, even though insurance  written during the same
period was $15.3 billion.

     Refinance  activity  increased to 55.6% of total  insurance  written (54.6%
excluding  structured bulk  transactions)  in the first nine months of 2003 from
37.4% of total insurance written (37.0% excluding  structured bulk transactions)
in the first  nine  months of 2002.  This  increase  reflected  the  record  low
interest rate  environment  that prevailed during the first nine months of 2003.
Refinance  activity  was  54.6%  of total  insurance  written  (52.3%  excluding
structured bulk  transactions) in the third quarter of 2003 compared to 33.0% of
total insurance  written (31.2% excluding  structured bulk  transactions) in the
same  period of 2002.  Persistency,  or the  percentage  of  insurance  in force
remaining  from 12 months  prior,  was 49.0% at September  30, 2003  compared to
60.9% at December 31, 2002,  and 61.3% at September 30, 2002.  The high level of
refinance  activity and the resulting  decrease in  persistency is reflective of
the low interest rate  environment  that has been in place during the past year.
The annualized quarterly  persistency run rate for the third quarter of 2003 was
19.3%  compared to 33.6% for the second  quarter of 2003 and 57.9% for the third
quarter of 2002. Changes in interest rates generally take a few months to affect
persistency.  During  the  third  quarter  of 2003,  interest  rates  moderately
increased  from the record low levels seen in June and July.  If these  interest
rate levels persist or if interest rates increase further,  the Company believes
that  persistency  should show modest  improvement in the fourth quarter of 2003
(this would be primarily reflected in the quarterly run rate). However, if rates
decline from current levels,  persistency could remain at the low levels seen in
the first nine months of the year.

     The Company  defines  persistency  as the  percentage of insurance in force
remaining  from 12 months  prior.  Run off,  defined as cancelled or  terminated
policies,  of production  originated during the past 12 months is not considered
in the Company's calculation of persistency.  The Company calculates persistency
by determining  the run off over the prior 12 months of each  individual  policy
year  (exclusive  of  current  year  production).  This  method  of  calculating
persistency may vary from that of other mortgage insurers.  The Company believes
that its calculation presents an accurate measure of the percentage of insurance
in force  remaining  from 12  months  prior.  The  Company's  current  method of
calculating  persistency is consistent with the methodology  used by the Company
in prior years.

     FICO  credit  scores  are  one of  the  factors  used  by  the  Company  in
determining  credit risk.  The  following  table  presents the FICO credit score
distribution  of the  Company's  insurance  in force at  September  30, 2003 and
December 31, 2002.


--------------------------------------------------------------------------------
                          Percent of Insurance In Force

                                    September 30, 2003      December 31, 2002
                                    ------------------      -----------------

-Credit score less than 575                1.2%                    0.9%
Credit score between 575 and 619           4.8%                    4.8%
Credit score greater than 619             94.0%                   94.3%
--------------------------------------------------------------------------------

                                       11
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


As the table shows,  the Company insures some loans that have FICO credit scores
below 575. The Company  believes that these loans have a higher  probability  of
loss than a loan with a FICO credit  score of 575 or greater.  The Company  does
not expect loans with FICO scores less than 575 to become a significant  portion
of its insurance in force.

REVENUES

     Total direct premiums written were $112.4 million for the first nine months
of 2003,  an increase of 23.7% from $90.8 million for the  comparable  period of
2002.  Direct premiums  written for the third quarter of 2003 increased 21.8% to
$40.4  million  from $33.2  million in the third  quarter of 2002.  Net premiums
written  increased  by 18.7% to $92.6  million in the first nine  months of 2003
from $78.1 million for the comparable  period of 2002. Net premiums  written for
the third quarter of 2003 increased 17.1% to $33.1 million from $28.3 million in
the third quarter of 2002.  Contributing to the increase in premiums written for
the third  quarter  and for the  first  nine  months  of 2003  were  significant
writings  under the Company's  annual  premium  payment plan. The annual premium
payment plan requires a first-year  premium paid at mortgage loan closing,  with
the entire  amount  reported  as premium  written.  This is in  contrast  to the
Company's monthly premium payment plan which involves,  in general,  the payment
of one or two months'  premium at mortgage  loan  closing,  with the  associated
amounts reported as premium  written.  During the first nine months of 2003, 32%
of total  insurance  written  (38%  during  the  third  quarter)  was  under the
Company's annual premium payment plan compared to 17% of total insurance written
during the first nine months of 2002 (15% during the third quarter).

     The difference  between direct premiums written and net premiums written is
primarily  attributable  to ceded  premium.  Driven by an increase in  insurance
subject to lender  risk-sharing  arrangements,  ceded premiums written increased
54.5% to $19.7  million for the first nine months of 2003 from $12.8 million for
the first nine months of 2002.  Ceded  premiums  written in the third quarter of
2003 were $7.3 million  compared to $4.9 million for the same period of 2002, an
increase of 49.0%. The Company also continues to maintain $125 million of excess
of loss reinsurance  coverage for which the payment is included in ceded premium
written. The Company's premium cede rate (the ratio of ceded premiums written to
total direct premiums written) was 17.5% in the first nine months of 2003 (18.1%
in the third  quarter)  compared  to 14.1% in the first nine  months of 2002 and
14.8% in the third quarter of 2002. The Company's  premium cede rate for captive
reinsurance  (the ratio of ceded  premiums  written  under  captive  reinsurance
arrangements  to total  direct  premiums  written)  was 15.1% in the first  nine
months of 2003 (15.8% in the third quarter)  compared to 12.0% in the first nine
months of 2002 (12.7% in the third  quarter).  The average premium cede rate for
direct   premiums   written  subject  to  the  Company's   captive   reinsurance
arrangements  was 35.0% for the first  nine  months of 2003  (36.5% in the third
quarter)  compared to 36.3% in the first nine months of 2002 (36.2% in the third
quarter).  Approximately  $6.0  billion  of  insurance  written,  or 45% of flow
insurance  written (39% of total  insurance  written  including  structured bulk
transactions),  during the first nine months of 2003 was subject to risk-sharing
arrangements  compared  to $4.4  billion of  insurance  written,  or 53% of flow
insurance  written (46% including  structured  bulk  transactions),  in the same
period of 2002.  Through  September 30, 2003,  structured bulk transactions have
not  been  subject  to  captive  mortgage   reinsurance  or  other  risk-sharing
arrangements.  Approximately  47% of direct  insurance  in force is  subject  to
risk-sharing  arrangements  at September 30, 2003,  compared to 43% at September
30,  2002.   This  increase  in  insurance  in  force  subject  to  risk-sharing

                                       12
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED

     arrangements  is due primarily to the increased  market  penetration of the
Company's  risk-sharing  arrangements  and the high level of refinance  activity
during  the  past  twelve  months,   as  policies   previously  not  subject  to
risk-sharing  arrangements  refinanced and new policies issued that were subject
to  risk-sharing  arrangements.   Management  anticipates  ceded  premiums  will
continue  to  increase  as a result of the  expected  increase  in  risk-sharing
programs.

     Under the Company's excess of loss lender  risk-sharing  arrangements,  the
reinsurer may elect a risk band with a flexible entry and exit point. One of the
Company's  competitors  announced  that  effective  April 1,  2003,  it will not
participate in excess of loss  risk-sharing  arrangements  where the net premium
cede rate is  greater  than 25% ("deep  ceded").  According  to recent  articles
published in Inside Mortgage  Finance,  two of the Company's  other  competitors
have  recently  announced  that they will limit the amount of premium  they will
cede under captive  arrangements.  The Company  believes  that its  risk-sharing
arrangements provide valuable reinsurance  protection and potentially reduce the
risk of volatility in the Company's  earnings.  The Company plans to continue to
participate in excess of loss  risk-sharing  arrangements,  including deep ceded
arrangements. It is uncertain at this time what impact, if any, the competitors'
decisions,  as described  above,  will have on the Company's direct insurance in
force subject to risk-sharing arrangements and the Company's market share.

     Earned premiums  increased 12.1% to $86.7 million for the first nine months
of 2003 from $77.4 million for the comparable  period of 2002.  Earned  premiums
for the third  quarter  of 2003  increased  10.9% to $30.3  million  from  $27.4
million in the third quarter of 2002. The variance  between net written premiums
and earned  premiums for the first nine months of 2003 and for the third quarter
of 2003 is due to the  significant  writings  of the  Company's  annual  premium
product and the related increase in the unearned premium reserve.  The Company's
unearned premium liability increased to $14.5 million at September 30, 2003 from
$11.7 million at June 30, 2003, $8.6 million at March 31, 2003, and $8.5 billion
at December 31, 2002.  Direct written  premium from the annual  premium  product
represented 18.6% of direct premium written for the third quarter of 2003, 17.5%
of direct  premium  written for the second  quarter of 2003,  and 7.9% of direct
premium  written for the first quarter of 2003. For all of 2002,  direct written
premium  from the annual  premium  product  represented  7.0% of direct  premium
written.  The growth in written and earned premiums  resulted from strong levels
of new insurance  written offset by the impact of a declining  persistency  rate
due to a high  level  of  mortgage  refinancings  and by the  increase  in ceded
premiums.

     Net investment  income for the first nine months of 2003 was $12.9 million,
an 8.6%  increase  over  $11.8  million in the first  nine  months of 2002.  Net
investment income for the third quarter of 2003 was $4.2 million, an increase of
1.8% from $4.2 million in the third quarter of 2002. This increase is the result
of  growth  in the  average  book  value of  invested  assets by 19.2% to $350.3
million at September 30, 2003 from $294.0  million at September 30, 2002,  which
is attributable to the investment of normal  operating cash flow. The percentage
increase in net investment income was much lower than the percentage increase in
invested assets primarily due to a decrease in the Company's  investment yields.
The  pre-tax  yield on  average  invested  assets,  calculated  on the  basis of
amortized cost,  decreased to 4.9% for the first nine months of 2003 compared to
5.4%  for  the  first  nine  months  of  2002.  The  portfolio's  tax-equivalent
yield-to-maturity was 7.2% for the first nine months of 2003 versus 7.9% for the
first nine months of 2002.  The decrease in yield reflects the low interest rate
environment for new money  investments  made over the past several  quarters and
the disposal of a number of higher  yielding  securities  during the past twelve
months to enhance the overall quality of the portfolio.  The  portfolio's  yield
was also affected by a higher percentage of the fixed income portfolio  invested
in municipal  securities and a higher percentage  invested at low yielding money
market rates.  Based on fair value,  approximately  84% and 79% of the Company's
fixed  maturity  portfolio at  September  30, 2003 and 2002,  respectively,  was
composed of state and municipal tax-preferred  securities.  Approximately 96% of

                                       13
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


the Company's  fixed maturity  portfolio,  based on fair value, at September 30,
2003  was  either a U.S.  government  or U.S.  agency  obligation  or was  rated
investment  grade  by at  least  one  nationally  recognized  securities  rating
organization   compared  to  approximately  95%  at  September  30,  2002.  U.S.
government,  U.S. agency, and investment grade securities generally have a lower
yield, in return for less default risk, than securities  rated below  investment
grade.

     The Company  reported $1.5 million of net realized  investment gains in the
first nine months of 2003 and $2.7 million of net realized  investment losses in
the same period of 2002.  For the third  quarter of 2003,  the Company  reported
$763,000 of net realized  investment  gains compared to $446,000 of reported net
realized  investment  losses in the third quarter of 2002. The Company  actively
monitors investment securities considered to be at risk for impairment. When the
Company determines that a decline in the value of a security below its amortized
cost is  other-than-temporary,  an impairment loss has occurred. In the event of
impairment,  the Company  writes down the cost basis of the security to its fair
value and  recognizes  a  realized  loss for the  amount of the  writedown.  Net
realized  gains of $1.5  million  during the first nine months of 2003  included
approximately $780,000 of impairment writedowns.  Net realized gains of $763,000
during the third quarter of 2003  included an impairment  writedown on an equity
in the pharmaceutical sector of approximately $165,000.

LOSSES AND EXPENSES

     Net losses and loss  adjustment  expenses (net of  reinsurance  recoveries)
increased  by 70.6% in the first nine months of 2003 to $16.7  million from $9.8
million for the same  period of 2002.  Net losses and loss  adjustment  expenses
were $6.1 million in the third  quarter of 2003  compared to $4.4 million in the
third quarter of 2002,  an increase of 37.8%.  The growth of net losses and loss
adjustment  expenses reflects an increase in both paid losses and reserves.  The
increase was  anticipated in the current year and is reflective of the Company's
overall  growth  of  insurance  in  force,  relative  growth  of  the  Company's
participation in the bulk market, and the cumulative effect of job losses on the
economy.  Net paid losses and loss adjustment expenses were $12.5 million in the
first nine months of 2003  compared to $7.7  million in the first nine months of
2002.  Net paid losses and loss  adjustment  expenses  were $4.9  million in the
third  quarter  of 2003,  up from $3.0  million  in the third  quarter  of 2002.
Average  severity  (direct paid losses divided by number of claims paid) for the
first nine months of 2003 was  approximately  $22,800  compared with $21,900 for
the  respective  period of 2002. The following  table provides  detail on direct
paid losses from traditional flow business and structured bulk business.

--------------------------------------------------------------------------------
                               Direct Paid Losses
       (In Thousands)
                            Three Months Ending      Nine Months Ending
                               September 30,           September 30,
                           2003         2002         2003          2002
-------------------------------------------------------------------------
       Flow              $3,983       $2,909      $10,984        $7,373
       Bulk                 841            -        1,211             -
                         ------       ------      -------        ------
       Total             $4,824       $2,909      $12,195        $7,373
-------------------------------------------------------------------------

     The Company's loss ratio (the ratio of incurred losses to earned  premiums)
was 19.3% for the first nine months of 2003 compared to 12.6% for the first nine
months of 2002 and 13.4% for all of 2002.  The loss ratio was 20.0% in the third
quarter of 2003 and 16.1% for the third  quarter of 2002.  The  increase  in the

                                       14
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


loss  ratio is  consistent  with  management's  expectations  given the  current
operating environment.

     As of September 30, 2003,  approximately 91% of the Company's  insurance in
force was  originated  in the last 36 months  compared to 80% at  September  30,
2002.  Management  believes,  based upon its experience and industry data,  that
claims incidence for traditional flow business is generally highest in the third
through sixth years after loan  origination.  Furthermore,  management  believes
that the  period  of  highest  claim  incidence  for  business  attributable  to
structured bulk transactions is earlier than that for traditional flow business.
The Company  expects its incurred  losses to increase as a greater amount of its
insurance  in force  reaches its  anticipated  highest  claim  frequency  years.
Furthermore,  changes in the  economic  environment  could  accelerate  paid and
incurred loss  development.  Due to the inherent  uncertainty  of future premium
levels, losses, economic conditions,  and other factors that affect earnings, it
is difficult  to predict with any degree of certainty  the impact of such higher
claim frequencies on future earnings.

     Amortization  of deferred  policy  acquisition  costs increased by 35.4% to
$12.8  million in the first nine months of 2003 from $9.4  million for the first
nine months of 2002.  For the third quarter of 2003, we recognized  $5.3 million
of  amortization,  a 32.5% increase over the $4.0 recorded in the second quarter
of 2003 and a 57.4% increase from $3.4 million in the third quarter of 2002. The
increase in amortization  reflects growth in deferred policy  acquisition  costs
related to the  expansion of the  Company's  insurance in force and  accelerated
amortization due to higher  cancellations  from refinance  activity in the first
nine months of 2003. The Company's model calculates the amortization of deferred
policy  acquisition  costs separately for each book year. The model  accelerates
the  amortization  of  deferred  policy  acquisition  costs  through  a  dynamic
adjustment when persistency for a book year is lower than a historical  baseline
level in order to match the  amortization  expense with the life of the policies
on which the acquisition costs were originally deferred.  Low persistency levels
during  the  first  nine  months  of  2003  and  2002   resulted  in  additional
amortization of deferred policy  acquisition  costs through dynamic  adjustments
totaling  $3.4  million  in the first nine  months of 2003 ($2.1  million in the
third  quarter) and  $890,000 in the first nine months of 2002  ($459,000 in the
third  quarter).  While the Company  believes that  persistency  may show slight
improvement  in the fourth quarter if interest rates remain at current levels or
rise, the Company  utilizes an annual  persistency  model in the  calculation of
amortization and does not expect to have significant improvement in amortization
of deferred policy acquisition costs in the fourth quarter of 2003.

     Other operating expenses decreased 5.1% to $16.5 million for the first nine
months of 2003 from $17.4  million  for the same  period of 2002.  For the third
quarter of 2003,  other  operating  expenses were $5.5 million  compared to $5.6
million in the third  quarter of 2002, a decrease of 1.1%.  The decline in other
operating expenses is primarily the result of operational  efficiencies achieved
through the use of technology.  The Company has made substantial  investments in
technology  that allows  increased  insurance  writings  without a  proportional
increase in operating expenses.  The expense ratio (ratio of the amortization of
deferred policy  acquisition costs and other operating  expenses to net premiums
written)  for the first nine months of 2003 was 31.6%  compared to 34.4% for the
first nine months of 2002 and 34.6% for all of 2002.  The expense  ratio for the
third quarter of 2003 was 32.7%  compared to 31.7% in the third quarter of 2002.

                                       15

<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


The expense  ratios for the first nine months of 2003 and for the third  quarter
of 2003 were positively  affected by the decrease in other operating expenses as
well as the  increase in net written  premium,  which was  impacted by increased
production of the annual premium product.  The expense ratios for the first nine
months of 2003 and  especially  for the third  quarter  of 2003 were  negatively
affected by the accelerated amortization of deferred policy acquisition costs.

     The effective tax rate for the first nine months of 2003 was 29.3% compared
to 31.0% for the first nine months of 2002. The effective tax rate for the third
quarter of 2003 was 29.2%  compared to 30.9% for the third quarter of 2002.  The
decrease in the effective tax rate is due primarily to an increase in tax-exempt
interest  resulting  from a  higher  percentage  of  assets  being  invested  in
tax-preferred securities. Management expects the Company's effective tax rate to
remain near current levels or decline  slightly as long as yields from new funds
invested  in  tax-preferred  securities  remain  favorable  in relation to fully
taxable securities.


LIQUIDITY AND CAPITAL RESOURCES

     The  Company's  sources of operating  funds  consist  primarily of premiums
written and investment  income.  Operating cash flow is applied primarily to the
payment of claims, interest, operating expenses, and taxes.

     The Company generated positive cash flow from operating  activities for the
first nine months of 2003 of $39.5  million  compared  to $30.8  million for the
same  period of 2002.  The  increase  in  operating  cash flow in the first nine
months of 2003  reflects  the growth in  premiums  and  investment  income and a
decrease in underwriting expenses paid offset partially by an increase in losses
paid.  The Company's  business does not routinely  require  significant  capital
expenditures   other  than  for   enhancements  to  its  computer   systems  and
technological  capabilities.  Positive  cash flows are invested  pending  future
payments of claims and expenses.  Cash flow shortfalls,  if any, could be funded
through  sales  of  short-term   investments  and  other  investment   portfolio
securities.

     The parent company's cash flow is dependent on interest income and payments
from Triad including  management fees and interest payments under surplus notes.
The Illinois  Insurance  Department permits expenses of the parent company to be
reimbursed by Triad in the form of management fees. Payment of dividends is also
permitted, although none have been paid to date.

     The insurance laws of the State of Illinois impose certain  restrictions on
dividends that Triad can pay the parent company.  These  restrictions,  based on
statutory accounting principles, include requirements that dividends may be paid
only out of statutory earned surplus and that limit the amount of dividends that
may be paid without prior approval of the Illinois Insurance Department.

     Consolidated  invested  assets were $385.7  million at  September  30, 2003
compared to $344.6  million at December 31, 2002.  This  increase was  primarily
attributable  to the Company's  operating cash flow for the first nine months of
2003.   Fixed   maturity   securities  and  equity   securities   classified  as
available-for-sale  totaled  $337.4  million at September  30, 2003  compared to
$309.3 million at December 31, 2002.  Contributing  to this increase in invested
assets and securities  classified as  available-for-sale  was an increase in net
unrealized  investment  gains on fixed maturity  securities from year-end levels
and a net unrealized  investment gain on equity securities at September 30, 2003
compared  to a net  unrealized  investment  loss  at  year-end.  Net  unrealized
investment  gains on fixed maturity  securities  were $15.0 million at September
30,  2003  compared  to $13.7  million at  December  31,  2002.  Net  unrealized
investment  gains on equity  securities  were  $975,000  at  September  30, 2003
compared to a net unrealized  investment  loss of $458,000 at December 31, 2002.

                                       16
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


Based on fair value, the fixed maturity portfolio consisted of approximately 84%
municipal  securities,   11%  corporate  securities,   and  5%  U.S.  government
obligations  at September 30, 2003  compared to a  composition  of 81% municipal
securities,  15% corporate  securities,  and 4% U.S.  government  obligations at
December 31, 2002.

     The Company's loss and loss adjustment  expense reserves were $25.5 million
at September 30, 2003  compared to $21.4 million at December 31, 2002.  Loss and
loss adjustment  expense reserves are established for all insured loans reported
as delinquent to the Company by the loan servicer. Reserves also are established
for  estimated  losses  incurred on notices of default  not yet  reported by the
servicer.  Consistent  with industry  practices,  the Company does not establish
loss  reserves  for future  claims on insured  loans that are not  currently  in
default.  The growth in loss  reserves is the result of the increase in reported
defaults.  The Company  expects  loss  reserves  and the number of flow and bulk
loans in default to  continue  to grow,  reflecting  the growth and aging of its
insurance in force.

     The following  table shows default  statistics as of September 30, 2003 and
December 31, 2002:

--------------------------------------------------------------------------------
                               Default Statistics
--------------------------------------------------------------------------------
                                                    September 30,   December 31,
                                                         2003          2002
                                                    ------------    ------------
 Number of insured loans in force                      221,053        190,480
 Number of loans in default                              3,700          2,379
 Percentage of loans in default (default rate)           1.67%          1.25%
 Number of insured loans in force excluding bulk loans 198,366        171,723
 Number of loans in default excluding bulk loans         2,675          2,120
 Percentage of loans in default excluding bulk loans     1.35%          1.23%
 Number of bulk loans in force                          22,687         18,757
 Number of bulk loans in default                         1,025            259
 Percentage of bulk loans in default                     4.52%          1.38%
-------------------------------------------------------------------------------

     The number of loans in default includes all reported delinquencies that are
three or more  payments  in  arrears  at the  reporting  date  and all  reported
delinquencies  that were  previously  three or more payments in arrears and have
not made payments to the current due date.  The increase in the default rate for
bulk business is primarily  attributable  to the maturing of the bulk  portfolio
and the higher expected  default rate as previously  mentioned.  Contributing to
changes in default rates is changes in the number of policies in force, which is
the  denominator  in the default  rate  calculation.  All else being  equal,  an
increase/decrease  in this number results in a  lower/higher  default rate. As a
result,  production levels as well as persistency have an effect on the reported
default rates.  The default  occurrence for both  traditional  flow business and
structured bulk business is consistent with management's expectation.

     Reserves  are  established  by  management   using  estimated  claim  rates
(frequency)  and claim  amounts  (severity)  to estimate  ultimate  losses.  The
reserving process  incorporates  numerous factors in a formula that gives effect
to current  economic  conditions and profiles  delinquencies  by such factors as

                                       17
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


policy year, geography, chronic late payment characteristics,  and the number of
months the policy has been in default. Because the estimate for loss reserves is
sensitive to the estimates of claims frequency and severity, management performs
sensitivity  analyses to test the  reasonableness of the best estimate generated
by the loss reserve process.  These sensitivity analyses allow management to use
alternative  assumptions  related to claims  frequency  and claims  severity  to
develop a range of reasonably possible loss reserve outcomes that can be used to
challenge  the  best  estimate.  The loss  reserve  estimation  process  and the
sensitivity  analyses  support the  reasonableness  of the best estimate of loss
reserves  recorded  as a  liability  in  the  financial  statements.  Management
periodically  reviews the loss reserve  process in order to improve its estimate
of  ultimate  losses on loans  currently  in  default.  Adjustments  to  reserve
estimates are reflected in the financial  statements in the periods in which the
adjustments are made.

     Triad cedes business to captive reinsurance  subsidiaries and/or affiliates
of  certain  mortgage  lenders  ("captives")  primarily  under  excess  of  loss
reinsurance agreements. Generally, reinsurance recoverables on loss reserves and
unearned  premiums  ceded to these captives are backed by trust funds or letters
of credit.

     Total  stockholders'  equity  increased to $355.1  million at September 30,
2003 from $309.4 million at December 31, 2002. This increase resulted  primarily
from net income of $37.5  million for the first nine months of 2003, an increase
in unrealized gains on investments,  net of tax, of $1.8 million, and additional
paid-in  capital of $5.9 million  resulting  from the exercise of employee stock
options and the related tax benefits.

     Triad's total statutory  policyholders' surplus increased to $122.4 million
at  September  30,  2003 from  $112.9  million at  December  31,  2002.  Triad's
statutory  earned surplus  increased to $38.7 million at September 30, 2003 from
$29.2  million  at  December  31,  2002.  The  increase  in  Triad's   statutory
policyholders'  surplus and statutory earned surplus resulted,  primarily,  from
statutory  net income of $51.0  million  and a change in  unrealized  investment
gains of  approximately  $1.5  million  which  exceeded  the net increase in the
statutory  contingency  reserve of $44.5  million.  The balance in the statutory
contingency  reserve was $289.5 million at September 30, 2003 compared to $245.0
million at December 31, 2002.

     Triad's  ability  to write  insurance  depends  on the  maintenance  of its
financial  strength  ratings and the adequacy of its capital in relation to risk
in force. A significant  reduction of capital or a significant  increase in risk
may impair Triad's  ability to write  additional  insurance.  A number of states
also generally limit Triad's  risk-to-capital  ratio to 25-to-1. As of September
30, 2003, Triad's  risk-to-capital  ratio was 15.1-to-1 compared to 15.5-to-1 at
December 31, 2002,  and to 11.0-to-1 for the industry as a whole at December 31,
2002,  the  latest  industry  data  available.   The  risk-to-capital  ratio  is
calculated  using net risk in force,  which takes into  account risk ceded under
reinsurance arrangements including captive risk-sharing  arrangements as well as
any applicable  stop-loss limits, as the numerator and statutory capital,  which
includes  statutory  policyholders'  surplus and the balance in the  contingency
reserve, as the denominator.  The decrease in Triad's  risk-to-capital  ratio is
due to a higher growth rate in statutory capital than that in net risk in force.

     Triad is rated "AA" by both Standard & Poor's  Ratings  Services  (S&P) and
Fitch Ratings (Fitch) and "Aa3" by Moody's Investors Service (Moody's).

     In July of 2003,  S&P  revised  its  rating  outlook  for the U.S.  private
mortgage  insurance  industry to  "Negative"  from  "Stable".  According to S&P,
industry  outlooks are  primarily  determined  by the expected  course of rating
actions during the next one to two years. S&P stated that they see little chance

                                       18
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


that  there  will be any  outlook  or rating  improvements  among  the  mortgage
insurers  in  the  next  one to  two  years,  but  they  do  see a  considerable
possibility that there will be some negative  revisions in outlooks and ratings.
In January  of 2003,  Fitch  revised  its rating  outlook  for the U.S.  private
mortgage  insurance industry to "Negative" from "Stable" (as referred to in Form
10-K). As of the filing of this Form 10-Q,  Fitch, S&P, and Moody's all report a
"Stable"  ratings  outlook for Triad.  A reduction  in the  Company's  rating or
outlook could adversely affect the Company's operations.

     Fannie Mae is in the  process of revising  its  approval  requirements  for
mortgage  insurers.  The new  requirements,  which have not yet been  finalized,
would require prior  approval by Fannie Mae for many of Triad's  activities  and
new products,  allow for other  approved  types of mortgage  insurers rated less
than  "AA," and give  Fannie  Mae  increased  rights to revise  the  eligibility
standards of mortgage insurers.  The final form the eligibility  guidelines will
take is unknown  at this  time,  but new  guidelines,  if issued,  could have an
adverse effect on the Company.

     The Office of  Federal  Housing  Enterprise  Oversight  (OFHEO)  issued its
risk-based  capital rules for Fannie Mae and Freddie Mac in the first quarter of
2002. The regulation  provides capital guidelines for Fannie Mae and Freddie Mac
in   connection   with  their  use  of  various   types  of  credit   protection
counterparties including a more preferential capital credit for insurance from a
"AAA"  rated  private  mortgage  insurer  than for  insurance  from a "AA" rated
private  mortgage  insurer.  The phase-in period for the new rules is ten years.
The Company  does not  believe the new rules had an adverse  impact on it in the
first nine months of 2003 nor that the new rules will have a significant adverse
impact on the Company in the  future.  However,  if the new  capital  guidelines
result in future  changes  to the  preferences  of Fannie  Mae and  Freddie  Mac
regarding their use of the various types of credit  enhancements or their choice
of mortgage  insurers  based on their credit  rating,  the  Company's  financial
condition could be significantly harmed.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

     Management's    Discussion   and   Analysis   and   this   Report   contain
forward-looking   statements  relating  to  future  plans,   expectations,   and
performance  which involve  various risks and  uncertainties,  including but not
limited to the following:

     o    interest rates may increase or decrease from their current levels;

     o    housing  transactions  requiring  mortgage  insurance may decrease for
          many  reasons   including   changes  in  interest  rates  or  economic
          conditions;

     o    the  Company's  market  share may  change as a result  of  changes  in
          underwriting criteria or competitive products or rates;

     o    the amount of insurance written could be adversely affected by changes
          in federal  housing  legislation,  including  changes  in the  Federal
          Housing  Administration  loan  limits  and  coverage  requirements  of
          Freddie Mac and Fannie Mae;

     o    the Company's  financial  condition and competitive  position could be
          affected by  legislation  impacting  the  mortgage  guaranty  industry
          specifically and the financial services industry in general;

     o    rating agencies may revise methodologies for determining the Company's
          financial  strength  ratings and may revise or withdraw  the  assigned
          ratings at any time;

                                       19

<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS - - CONTINUED


     o    decreases in persistency,  which are affected by loan  refinancings in
          periods of low interest rates, may have an adverse effect on earnings;

     o    the amount of  insurance  written and the growth in insurance in force
          or risk in  force as well as the  performance  of the  Company  may be

          adversely  impacted  by the  competitive  environment  in the  private
          mortgage  insurance  industry,  including  the  type,  structure,  and
          pricing  of  products  and  services  offered by the  Company  and its
          competitors;

     o    if the  Company  fails to  properly  underwrite  mortgage  loans under
          contract underwriting service agreements,  the Company may be required
          to assume the costs of repurchasing those loans;

     o    with consolidation  occurring among mortgage lenders and the Company's
          concentration  of insurance in force generated  through  relationships
          with significant lender customers,  the loss of a significant customer
          may have an adverse effect on earnings;

     o    the  Company's   performance   may  be  impacted  by  changes  in  the
          performance of the financial markets and general economic conditions;

     o    economic  downturns in regions where Triad's risk is more concentrated
          could  have  a  particularly   adverse  effect  on  Triad's  financial
          condition and loss development;

     o    OFHEO  risk-based  capital  rules could  severely  limit the Company's
          ability  to  compete  against  various  types  of  credit   protection
          counterparties, including "AAA" rated private mortgage insurers;

     o    changes in the  eligibility  guidelines  of Fannie Mae or Freddie  Mac
          could have an adverse effect on the Company;

     o    proposed regulation by the Department of Housing and Urban Development
          to exclude  packages of real  estate  settlement  services,  which may
          include any required mortgage insurance premium paid at closing,  from
          the anti-referral  provisions of the Real Estate Settlement Procedures
          Act could adversely affect the Company's earnings.

     Accordingly,  actual  results  may  differ  from  those  set  forth  in the
forward-looking statements. Attention also is directed to other risk factors set
forth  in  documents  filed by the  Company  with the  Securities  and  Exchange
Commission.
















                                       20
<PAGE>


ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Company's  market  risk  exposures  at  September  30,  2003  have not
materially changed from those identified at December 31, 2002.


ITEM 4.       CONTROLS AND PROCEDURES

     The Company's  management,  with the  participation  of the Company's Chief
Executive  Officer (CEO) and Chief  Financial  Officer (CFO),  has evaluated the
Company's  disclosure  controls and  procedures  (as defined in Rule 13a - 15(e)
under the  Securities  Exchange  Act of 1934,  as  amended) as of the end of the
period  covered  by  this  Quarterly  Report  on  Form  10-Q.  Based  upon  such
evaluation, the Company's management,  including the CEO and CFO, concluded that
such  disclosure  controls and  procedures  were  effective as of the end of the
period.

     Additionally,  the Company's management,  with the participation of the CEO
and CFO,  evaluated  whether any change in the Company's  internal  control over
financial  reporting that occurred  during the quarter covered by this Quarterly
Report on Form 10-Q materially  affected,  or is reasonably likely to materially
affect, the Company's internal control over financial  reporting.  Based on that
evaluation, there have been no such changes during such quarter.



















                                       21
<PAGE>




PART II

ITEM 1. LEGAL PROCEEDINGS - None

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None

ITEM 5. OTHER INFORMATION - None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

           (a) EXHIBITS

               31(i)  Certification  of  Chief  Executive  Officer  pursuant  to
               Exchange  Act  Rule  13a-14(a)  pursuant  to  section  302 of the
               Sarbanes-Oxley Act of 2002.

               31(ii)  Certification  of Chief  Financial  Officer  pursuant  to
               Exchange  Act  Rule  13a-14(a)  pursuant  to  section  302 of the
               Sarbanes-Oxley Act of 2002.

               32 Certification  of Chief Executive  Officer and Chief Financial
               Officer  pursuant to 18 U.S.C.  Section 1350, as adopted pursuant
               to Section 906 of the Sarbanes-Oxley Act of 2002.

           (b) REPORTS ON FORM 8-K

               On October 28, 2003,  the Company filed a current report on Items
               7 and 12 of Form 8-K  relating to the  issuance of its results of
               operations  for the third quarter ended  September 30, 2003 in an
               earnings release.


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                          TRIAD GUARANTY INC.

Date: November 14, 2003

                                         /s/ Kenneth S. Dwyer
                                         ------------------------------
                                         Kenneth S. Dwyer
                                         Vice President and controller,
                                         Principal Accounting Officer