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 March 31, 2001

                                       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, SUITE 500
                       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 / /

Number of shares of Common Stock, $.01 par value, outstanding as of May 1, 2001:
13,358,610 shares.

<PAGE>

                               TRIAD GUARANTY INC.

                                      INDEX
                                                                           Page
                                                                          Number
Part I. Financial Information:                                            ------

Item 1. Financial Statements:

   Consolidated Balance Sheets as of March 31, 2001 (Unaudited)
       and December 31, 2000................................................. 3

   Consolidated Income Statements for the Three Month
       Periods Ended March 31, 2001 and 2000 (Unaudited)..................... 4

   Consolidated Statements of Cash Flow for the Three Month
       Periods Ended March 31, 2001 and 2000 (Unaudited)....................  5

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

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

Part II. Other Information:

Item 6. Exhibits and Reports on Form 8-K.....................................15

   Signatures................................................................15









1
<PAGE>
                               TRIAD GUARANTY INC.
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                              March 31,    December 31,
                                                                2001           2000
                                                            ------------   ------------
Assets
Invested assets:
<S>                                                         <C>            <C>
Fixed maturities, available-for-sale, at fair value ....... $221,510,903   $203,924,652
Equity securities, available-for-sale, at fair value.......   11,417,024     11,088,525
Short-term investments.....................................   12,481,567     17,012,080
                                                            ------------   ------------
                                                             245,409,494    232,025,257

Cash.......................................................      383,136      1,512,578
Real estate................................................      428,866         99,482
Accrued investment income..................................    3,135,560      2,896,977
Deferred policy acquisition costs..........................   23,684,688     22,815,422
Prepaid federal income taxes ..............................   49,954,666     49,374,666
Property and equipment.....................................   10,039,636      9,234,757
Reinsurance recoverable....................................      739,447          5,587
Other assets...............................................   10,098,961     10,411,877
                                                            ------------   ------------
Total assets............................................... $343,874,454   $328,376,603
                                                            ============   ============
Liabilities and stockholders' equity Liabilities:
    Losses and loss adjustment expenses.................... $ 16,060,386   $ 14,986,988
    Unearned premiums......................................    7,072,618      6,933,259
    Amounts payable to reinsurer ..........................      739,669      1,288,712
    Current taxes payable..................................       85,061         85,062
    Deferred income taxes..................................   66,048,633     60,651,647
    Unearned ceding commission.............................    3,184,146      1,481,691
    Long-term debt.........................................   34,468,680     34,467,285
    Accrued interest on debt...............................      583,722      1,274,972
    Accrued expenses and other liabilities.................    4,044,168      7,375,503
                                                            ------------   ------------
Total liabilities..........................................  132,287,083    128,545,119
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 13,356,610 shares at March 31, 2001
      and 13,351,694 at December 31, 2000..................      133,566        133,517
    Additional paid-in capital.............................   62,848,965     62,723,667
    Accumulated other comprehensive income, net of
      income tax liability of $1,683,421 at March 31,
      2001 and $1,262,863 at December  31, 2000............    3,132,101      2,351,065
    Deferred compensation..................................    (205,947)       (135,041)
    Retained earnings......................................  145,678,686    134,758,276
                                                            ------------   ------------
Total stockholders' equity.................................  211,587,371    199,831,484
                                                            ------------   ------------
Total liabilities and stockholders' equity................. $343,874,454   $328,376,603
                                                            ============   ============
</TABLE>

                             See accompanying notes.

                                       2
<PAGE>
                               TRIAD GUARANTY INC.
                         CONSOLIDATED INCOME STATEMENTS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                            Three Months Ended
                                                                 March 31
                                                        ---------------------------
                                                           2001           2000
Revenue:
Premiums written:
<S>                                                    <C>              <C>
   Direct............................................   $21,792,862     $18,007,841
   Assumed...........................................         1,685           3,840
   Ceded.............................................    (1,982,804)       (948,409)
                                                       ------------     -----------
Net premiums written.................................    19,811,743      17,063,272
Change in unearned premiums..........................      (128,835)         81,176
                                                       ------------     -----------
Earned premiums......................................    19,682,908      17,144,448
Net investment income................................     3,476,665       2,925,993
Realized investment gains............................       451,767         777,881
Other income.........................................     1,867,000           5,740
                                                       ------------     -----------
                                                         25,478,340      20,854,062
Losses and expenses:
Losses and loss adjustment expenses..................     2,199,449       1,570,781
Reinsurance recoveries...............................         3,599          25,357
                                                       ------------     -----------
Net losses and loss adjustment expenses..............     2,203,048       1,596,138
Interest expense on debt.............................       692,645         692,538
Amortization of deferred policy acquisition costs....     2,334,277       2,000,147
Other operating expenses (net).......................     4,351,504       4,111,183
                                                       ------------     -----------
                                                          9,581,474       8,400,006
                                                       -------------    ------------
Income before income taxes...........................    15,896,866      12,454,056
Income taxes:
   Current...........................................            28              --
   Deferred..........................................     4,976,428       3,802,540
                                                       ------------     -----------
                                                          4,976,456       3,802,540
                                                       ------------     -----------
Net income...........................................  $ 10,920,410     $ 8,651,516
                                                       ============     ===========

Earnings per common and common equivalent share:
   Basic.............................................     $ .82            $ .65
                                                       ============     ===========
    Diluted...........................................    $ .79            $ .63
                                                       ============     ===========

Shares used in computing earnings per common
   and common equivalent share:
   Basic............................................     13,354,873      13,309,961
                                                       ============     ===========
   Diluted..........................................     13,830,431      13,655,901
                                                       ============     ===========
</TABLE>


                             See accompanying notes.

                                       4
<PAGE>
                               TRIAD GUARANTY INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                                      March 31
                                                             ---------------------------
                                                               2001              2000
Operating activities

<S>                                                          <C>             <C>
Net income.................................................  $10,920,410     $ 8,651,516
Adjustments to reconcile net income to net cash
 provided by operating activities:
   Loss and unearned premium reserves......................    1,212,757        (370,463)
   Accrued expenses and other liabilities..................   (3,331,335)     (3,334,844)
   Current taxes payable...................................           (1)              --
   Amounts due to/from reinsurer...........................   (1,293,428)         (1,660)
   Accrued investment income...............................     (238,583)       (301,927)
   Policy acquisition costs deferred.......................   (3,203,544)     (2,790,930)
   Amortization of policy acquisition costs................    2,334,277       2,000,147
   Net realized investment gains ..........................     (451,767)       (777,881)
   Provision for depreciation..............................      517,955         184,045
   Accretion of discount on investments....................     (632,486)       (262,067)
   Deferred income taxes...................................    4,976,428       3,802,540
   Prepaid federal income tax..............................     (580,000)     (1,146,000)
   Unearned ceding commission..............................    1,702,455         (42,099)
   Real estate acquired in claim settlement................     (329,384)             --
   Accrued interest on debt................................     (691,250)       (691,250)
   Other assets............................................      323,441         119,213
   Other operating activities..............................       25,323          22,506
                                                             -----------     -----------
Net cash provided by operating activities..................   11,261,268       5,060,846
Investing activities
  Securities available-for-sale:
    Purchases - fixed maturities...........................  (26,251,653)    (11,741,828)
    Sales - fixed maturities...............................   10,735,307       3,377,678
    Purchases - equities...................................   (1,511,816)       (603,291)
    Sales - equities.......................................    1,404,926       1,187,739
  Purchase of property and equipment.......................   (1,322,834)     (1,034,173)
                                                             -----------     -----------
Net cash used in investing activities......................  (16,946,070)     (8,813,875)

Financing activities
Proceeds from exercise of stock options....................       24,847          45,375
                                                             -----------     -----------
Net cash provided by financing activities..................       24,847          45,375
                                                             -----------     -----------
Net change in cash and short-term investments..............   (5,659,955)     (3,707,654)
Cash and short-term investments at beginning of period.....   18,524,658      14,124,219
                                                             -----------     -----------
Cash and short-term investments at end of period...........  $12,864,703     $10,416,565
                                                             ===========     ===========

Supplemental schedule of cash flow information:
 Cash paid during the period for:
    Income taxes and United States Mortgage Guaranty Tax
       and Loss Bonds......................................  $   580,028     $ 1,146,000
    Interest...............................................  $ 1,382,500     $ 1,382,500
</TABLE>

                             See accompanying notes.

                                       5

<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2000
                                   (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 to protect the lender  against  loss from  defaults on low down  payment
residential mortgage loans.


NOTE  2 -- BASIS OF PRESENTATION

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance with generally accepted accounting principles 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 generally  accepted  accounting  principles  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 month period ended March 31, 2001
are not necessarily  indicative of the results that may be expected for the year
ending  December 31, 2001. For further  information,  refer to the  consolidated
financial  statements and footnotes  thereto included in the Triad Guaranty Inc.
annual report on form 10-K for the year ended December 31, 2000.


NOTE 3 -- CONSOLIDATION

     The consolidated  financial  statements include Triad Guaranty Inc. and its
wholly-owned   subsidiaries.   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.

                                       6
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2001
                                   (Unaudited)

     INSURANCE  IN  FORCE,  DIVIDEND  RESTRICTIONS,   AND  STATUTORY  RESULTS  -
Insurance  regulations  limit the writing of mortgage  guaranty  insurance to an
aggregate amount of insured risk no greater than twenty-five  times the total of
statutory capital and surplus and the statutory  contingency reserve. The amount
of net risk for  insurance in force at March 31, 2001 and December 31, 2000,  as
presented  below,  was  computed by applying the various  percentage  settlement
options to the insurance in force amounts based on the original  insured  amount
of the loan. Triad's ratio is as follows:

                                     March 31,             December 31,
                                       2001                    2000

Net risk........................   $3,878,129,205         $3,738,596,850
                                   ==============         ==============
Statutory capital and surplus...     $ 99,136,694          $ 101,045,355
Statutory contingency reserve...      160,966,961            150,762,722
                                   --------------         --------------
Total...........................     $260,103,655          $ 251,808,077
                                   ==============         ==============
Risk-to-capital ratio...........        14.9-to-1              14.8-to-1
                                   ==============         ==============


     Triad  and  its  wholly-owned   subsidiaries,   Triad  Guaranty   Assurance
Corporation  and Triad Re Insurance  Corporation,  are each required under their
respective  domiciliary  states'  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  $5,000,000.  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.

     Net income as determined in accordance with statutory  accounting practices
was  $15,182,103  for the three months ended March 31, 2001 and  $47,830,174 for
the year ended December 31, 2000.

     At March 31, 2001 and December 31, 2000,  the amount of Triad's equity that
could be paid out in dividends to stockholders  was $15,420,766 and $17,329,427,
respectively,  which was the  earned  surplus of Triad on a  statutory  basis on
those dates.

                                       7
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2001
                                   (Unaudited)


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. 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.


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  employee  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,  and 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 is divided  into 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 month periods ended March 31, 2001 and 2000,  the Company's  comprehensive
income was $11.7 million and $9.7 million, respectively.













                                       8
<PAGE>

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

RESULTS OF OPERATIONS

     Net  income for the first  three  months of 2001  increased  26.2% to $10.9
million  compared  to $8.7  million  for the first  three  months of 2000.  This
improvement is attributable primarily to a 14.8% increase in earned premiums, an
18.8%  increase  in  net  investment   income,   and   nonrecurring   income  of
approximately  $1.9 million related to an incentive  payment received due to the
voluntary cancellation of an excess of loss reinsurance contract.

     Net income per share on a diluted  basis  increased  24.6% to $0.79 for the
first  three  months of 2001  compared  to $0.63  per share for the first  three
months of 2000. Operating earnings per share were $0.77 for the first quarter of
2001 compared to $0.60 for the first  quarter of 2000.  For the first quarter of
2001,   operating   earnings  per  share  includes  $0.09  attributable  to  the
nonrecurring  income related to the  cancellation of the  reinsurance  contract.
Operating  earnings  exclude  net  realized  investment  gains of  approximately
$452,000 and $778,000 in the first three months of 2001 and 2000, respectively.

     Net new  insurance  written was $2.4  billion for the first three months of
2001 as compared to $749 million for the first three months of 2000, an increase
of 227%.  Net new  insurance  written  in the  first  quarter  of 2001  included
approximately $1.4 billion of traditional flow production and approximately $1.0
billion  related to a structured  bulk  transaction.  The Company also  produced
approximately  $181 million of new  insurance  written on seasoned  loans in the
first  quarter of 2001 as  compared  to  approximately  $22  million in the same
period of 2000.  The increase in new  insurance  written from  traditional  flow
production  was  primarily the result of new and  expanding  relationships  with
national lenders and a lower interest rate environment which increased refinance
activity.  According  to industry  data,  Triad's  national  market share of net
primary new insurance  written,  which  excludes $1.0 billion in new  production
associated with Triad's bulk  transaction in the first quarter of 2001, was 2.9%
for the first three  months of 2001  compared to 2.3% for the first three months
of 2000.  Total direct  insurance in force  reached  $16.9  billion at March 31,
2001, compared to $13.4 billion at March 31, 2000, an increase of 26.1%.

     Total direct premiums written were $21.8 million for the first three months
of 2001,  an  increase of 21.0%  compared  to $18.0  million for the first three
months of 2000. Net premiums written  increased by 16.1% to $19.8 million in the
first  three  months of 2001  compared  to $17.1  million for the same period of
2000.  Earned  premiums  increased  14.8% to $19.7  million  for the first three
months of 2001 from  $17.1  million  for the first  three  months of 2000.  This
growth in written and earned premiums  resulted from both new insurance  written
and strong  growth in insurance in force.  Growth in written  premium was offset
somewhat by the increase in ceded premium written. Driven primarily by increases
in  risk-sharing  arrangements  and excess of loss  reinsurance,  ceded  premium
written  increased  109% to $2.0  million  for the  first  three  months of 2001

                                       9
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATION -- CONTINUED


compared to $950,000  for the first three months of 2000.  Approximately  28% of
new  insurance  written (52%  excluding the bulk  transaction)  during the first
quarter  of  2001  is  subject  to  captive   mortgage   reinsurance  and  other
risk-sharing  arrangements compared to 42% of new insurance written in the first
quarter of 2000. Management anticipates ceded premiums will continue to increase
as a result of the expected increase in risk-sharing programs.

     Refinance  activity was 18.1% of new insurance written (33.6% excluding the
bulk  transaction)  in the first  quarter of 2001 compared to 12.7% of insurance
written  in the first  quarter  of 2000,  reflecting  the  decline  in  mortgage
interest rates. Persistency,  or the amount of insurance in force remaining from
one year prior,  was 81.4% at March 31, 2001,  compared to 82.6% at December 31,
2000,  and 82.5% at March 31, 2000.  Sales under the Company's  monthly  premium
plan  represented  98.6% of new  insurance  written  (97.4%  excluding  the bulk
transaction)  in the first  quarter of 2001 compared to 93.8% in the same period
of 2000.

     Net investment  income for the first three months of 2001 was $3.5 million,
an 18.8%  increase  over $2.9  million in the first three  months of 2000.  This
increase in investment  income is the result of growth in the average book value
of invested  assets by $44.0 million to $234.3  million at March 31, 2001,  from
$190.3 million at March 31, 2000. The growth in invested  assets is attributable
to normal  operating  cash flow.  The pre-tax yield on average  invested  assets
increased  slightly to 5.9% for the first three  months of 2001,  as compared to
5.8% for the first three months of 2000. The  portfolio's  tax-equivalent  yield
was 8.1% for the first  quarter  of 2001  versus  7.7% for the first  quarter of
2000. Based on amortized cost,  approximately 69% and 70% of the Company's fixed
maturity  portfolio  at March 31, 2001 and 2000,  respectively,  was composed of
state and municipal tax-preferred securities.

     In the  first  quarter  of  2001  the  Company  recognized  a  nonrecurring
incentive  payment  of  approximately  $1.9  million  related  to the  voluntary
cancellation of an excess of loss reinsurance contract maintained by the Company
with a non-affiliated  reinsurer. This payment is accounted for as other income.
Also, in the first quarter of 2001 the Company entered into a new agreement with
a non-affiliated  reinsurer to provide excess of loss reinsurance coverage under
terms similar to the cancelled agreement.

     Net losses and loss  adjustment  expenses (net of  reinsurance  recoveries)
increased by 38.0% in the first quarter of 2001 to $2.2 million compared to $1.6
million for the same period of 2000.  This increase  reflects the growing amount
of the Company's  insurance in force and the resulting  recognition of a greater
amount of insurance in force reaching its highest claim frequency years.

     The Company's loss ratio (the ratio of incurred losses to earned  premiums)
was  11.2%  for the  first  quarter  of 2001 as  compared  to 9.3% for the first

                                       10
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATION -- CONTINUED


quarter of 2000 and 10.6% for all of 2000.  The Company's  favorable  loss ratio
reflects the low level of delinquencies  compared to the number of insured loans
and the fact  that as of March  31,  2001,  approximately  74% of the  Company's
insurance in force was  originated in the last 36 months.  Management  believes,
based upon its experience and industry  data,  that claims  incidence for it and
other private mortgage  insurers is generally highest in the third through sixth
years after loan  origination.  Although the claims  experience on new insurance
written in previous  years has been quite  favorable,  the  Company  expects its
incurred  losses to  increase  as a greater  amount  of its  insurance  in force
reaches its  anticipated  highest  claim  frequency  years.  Due to the inherent
uncertainty of future premium levels,  losses,  economic  conditions,  and other
factors that impact  earnings,  it is  impossible  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 16.7% to
$2.3 million in the first three months of 2001  compared to $2.0 million for the
first three months of 2000. The increase in amortization reflects both a growing
balance of deferred policy  acquisition  costs to amortize as the Company builds
its total insurance in force and higher  cancellations due to refinance activity
in the first quarter of 2001.

     Other  operating  expenses  increased  5.8% to $4.4  million  for the first
quarter of 2001  compared  to $4.1  million  for the same  period in 2000.  This
increase  in  expenses  is  primarily  attributable  to  personnel,   technology
amortization  and  equipment  costs  required to support the  Company's  product
development,  system enhancements,  and geographic expansion.  The expense ratio
(ratio of underwriting  expenses to net premiums  written) for the first quarter
of 2001 was 33.7%  compared to 35.8% for the first quarter of 2000 and 33.7% for
all of 2000.

     The  effective  tax rate for the  first  three  months of 2001 was 31.3% as
compared to 30.5% for the first  three  months of 2000.  Management  expects the
Company's effective tax rate to remain about the same 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, expenses, and taxes.

     The Company generated positive cash flow from operating  activities for the
first  quarter of 2001 of $11.3  million  compared to $5.1  million for the same
period of 2000. The increase in Triad's  operating cash flow reflects  increases
in  premiums  and  investment  income,   nonrecurring   income  related  to  the
cancellation of the excess of loss reinsurance contract,  and a decrease in paid
losses that more than offset the increase in operating expenses.

                                       11
<PAGE>

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


     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 cash  dividends,  management  fees, and interest  payments
under surplus notes.  The insurance laws of the State of Illinois impose certain
restrictions  on dividends from Triad.  These  restrictions,  based on statutory
accounting  practices,  include requirements that dividends may be paid only out
of statutory  earned  surplus and limit the amount of dividends that may be paid
without  prior  approval of the  Illinois  Insurance  Department.  The  Illinois
Insurance  Department permits expenses of the parent company to be reimbursed by
Triad in the form of management fees.

     Consolidated  invested  assets  were  $245.4  million  at March  31,  2001,
compared to $232.0 million at December 31, 2000.  Fixed maturity  securities and
equity  securities  classified as  available-for-sale  totaled $232.9 million at
March 31,  2001.  Net  unrealized  investment  gains were $1.1 million on equity
securities  and $3.7  million on fixed  maturity  securities  at March 31, 2001.
Based on fair value, the fixed maturity portfolio consisted of approximately 69%
municipal securities,  24% corporate securities, 6% U.S. government obligations,
and 1% mortgage-backed bonds at March 31, 2001.

     The Company's loss reserves were $16.1 million at March 31, 2001,  compared
to $15.0  million  at  December  31,  2000.  This  growth  is the  result of the
increases in new  insurance  written and the maturing of the  Company's  risk in
force.  Consistent with industry practices,  the Company does not establish loss
reserves for future  claims on insured loans which are not currently in default.
The Company's  delinquency ratio, the ratio of delinquent insured loans to total
insured  loans,  was 0.65% at March 31, 2001,  compared to 0.60% at December 31,
2000.

     Total  stockholders'  equity increased to $211.6 million at March 31, 2001,
from $199.8 million at December 31, 2000. This increase resulted  primarily from
net income of $10.9  million  for the first  quarter of 2001 and net  unrealized
gains and losses on invested assets classified as available-for-sale of $781,000
(net of income tax).

     Triad's total statutory  policyholders'  surplus decreased to $99.1 million
at March 31, 2001, from $101.0 million at December 31, 2000.  Triad's  statutory
earned  surplus  decreased to $15.4 million at March 31, 2001 from $17.3 million
at December 31, 2000. The decrease in Triad's statutory  policyholders'  surplus
and  statutory  earned  surplus  resulted  from the  adoption  of new  statutory
accounting  principles  that went into  effect on January  1,  2001.  Absent the
adoption of these new principles,  total statutory  policyholders  surplus would
have increased to $105.7 million at March 31, 2001, and statutory earned surplus

                                       12
<PAGE>

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


would have  increased to  approximately  $22.0  million at March 31, 2001,  both
resulting  from  increases in statutory net income greater than increases in the
statutory  contingency reserve. The balance in the statutory contingency reserve
was $161.0 million at March 31, 2001, compared to $150.8 million at December 31,
2000.

     Triad's  ability  to write  insurance  depends  on the  maintenance  of its
claims-paying  ability  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
March 31, 2001,  Triad's  risk-to-capital  ratio was  14.9-to-1,  as compared to
14.8-to-1  at December 31, 2000,  and  13.5-to-1  for the industry as a whole at
December 31, 1999, the latest industry data available.

     During the first  quarter of 2001,  Triad  received  its initial  financial
strength rating of Aa3 from Moody's Investors Service.  Triad is also rated "AA"
by both Standard & Poor's Rating Services and Fitch, Inc.

















                                       13
<PAGE>


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


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:  interest  rates may  increase  from their  current  levels;  housing
transactions  and mortgage  issuance  may  decrease  for many reasons  including
changes in interest rates or economic conditions; the Company's market share may
change as a result of changes in underwriting  criteria, or competitive products
or rates;  the amount of new  insurance  written could be 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;  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;  rating  agencies  may revise
methodologies  for determining the Company's  claims-paying  ability ratings and
may  revise  or  withdraw  the  assigned  ratings  at  any  time;  decreases  in
persistency,  which are affected by loan refinancings in periods of low interest
rates,  may have an adverse  effect on  earnings;  the  amount of new  insurance
written  and the  growth of  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 industry, including the type, structure, and
pricing of products and services offered by the Company and its competitors; the
Company's  performance  may be  impacted  by changes in the  performance  of the
financial markets and general economic conditions. 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. Accordingly, actual results
may differ from those set forth in the forward- looking statements. Attention is
also directed to other risk factors set forth in documents  filed by the Company
with the Securities and Exchange Commission.












                                       14

<PAGE>




PART II

ITEM 1.  LEGAL PROCEEDINGS - None

ITEM 2.  CHANGES IN SECURITIES - 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.                A.  EXHIBITS - None

                       B.  REPORTS ON FORM 8-K - None









                                   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: May 14, 2001
                                         /s/ Michael R. Oswalt
                                         -----------------------
                                         Michael R. Oswalt
                                         Senior Vice President and Controller,
                                         Principal Accounting Officer