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, 2000

                                       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, 2000:
13,313,194 shares.


<PAGE>





                               TRIAD GUARANTY INC.

                                      INDEX
                                                                           Page
                                                                          Number
Part I. Financial Information:

   Item 1. Financial Statements:

   Consolidated Balance Sheets as of March 31, 2000 (Unaudited)
            and December 31, 1999.............................................3

   Consolidated Income Statements for the Three Month
            Periods Ended March 31, 2000 and 1999 (Unaudited).................4

   Consolidated Statements of Cash Flow for the Three Month
            Periods Ended March 31, 2000 and 1999 (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..................................14

   Signatures................................................................14


                                        2

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

                                                           March 31,     December 31,
                                                             2000            1999
                                                         ------------   ------------
<S>                                                      <C>            <C>
Assets
Invested assets:
Fixed maturities, available-for-sale, at fair value .....$175,159,377   $164,579,416
Equity securities, available-for-sale, at fair value.....  12,883,068     13,075,648
Short-term investments...................................   9,065,258     13,908,666
                                                         ------------   ------------
                                                          197,107,703    191,563,730

Cash.....................................................   1,351,307        215,553
Real estate..............................................     145,515        145,515
Accrued investment income................................   2,893,539      2,591,612
Deferred policy acquisition costs........................  20,697,659     19,906,877
Prepaid federal income taxes ............................  36,561,666     35,415,666
Property and equipment...................................   6,765,390      5,915,262
Prepaid reinsurance premium..............................      37,161         34,227
Reinsurance recoverable..................................       8,037         29,980
Other assets.............................................   7,202,917      7,322,130
                                                         ------------   ------------
Total assets.............................................$272,770,894   $263,140,552
                                                         ============   ============

Liabilities and stockholders' equity
Liabilities:
    Losses and loss adjustment expenses.................. $14,459,127   $ 14,751,348
    Unearned premiums....................................   6,753,048      6,831,290
    Amounts payable to reinsurer ........................     298,625        319,294
    Current taxes payable................................      70,272         70,272
    Deferred income taxes................................  46,101,587     41,750,341
    Unearned ceding commission...........................     358,422        400,521
    Long-term debt.......................................  34,463,266     34,461,979
    Accrued interest on debt.............................     583,722      1,274,972
    Accrued expenses and other liabilities...............   2,873,235      6,208,079
                                                         ------------   ------------
Total liabilities........................................ 105,961,304    106,068,096
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 13,313,194 shares at March 31, 2000
      and 13,303,194 at December 31, 1999................     133,132        133,032
    Additional paid-in capital...........................  62,168,087     61,972,312
    Accumulated other comprehensive income, net of
      income tax asset of $1,997,960 at March 31, 2000
      and $2,546,666 at December  31, 1999...............  (3,704,750)    (4,723,775)
    Deferred compensation................................    (198,696)       (69,414)
    Retained earnings.................................... 108,411,817     99,760,301
                                                         ------------   ------------
Total stockholders' equity............................... 166,809,590    157,072,456
                                                         ------------   ------------
Total liabilities and stockholders' equity...............$272,770,894   $263,140,552
                                                         ============   ============
</TABLE>

                             See accompanying notes.

                                      3
<PAGE>

                               TRIAD GUARANTY INC.
                         CONSOLIDATED INCOME STATEMENTS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                              Three Months Ended
                                                                   March 31
                                                         --------------------------
                                                            2000           1999
                                                            ----           ----
<S>                                                     <C>             <C>
Revenue:
Premiums written:
   Direct.............................................. $18,007,841     $15,107,637
   Assumed.............................................       3,840           5,632
   Ceded...............................................    (948,409)       (267,008)
                                                        -----------     -----------
Net premiums written...................................  17,063,272      14,846,261
Change in unearned premiums............................      81,176         140,139
                                                        -----------     -----------
Earned premiums........................................  17,144,448      14,986,400
Net investment income..................................   2,925,993       2,448,978
Realized investment gains..............................     777,881         857,001
Other income...........................................       5,740           4,309
                                                        -----------     -----------
                                                         20,854,062      18,296,688
Losses and expenses:
Losses and loss adjustment expenses....................   1,570,781       2,922,006
Reinsurance recoveries.................................      25,357          (6,955)
                                                        -----------     -----------
Net losses and loss adjustment expenses................   1,596,138       2,915,051
Interest expense on debt...............................     692,538         692,438
Amortization of deferred policy acquisition costs......   2,000,147       1,716,465
Other operating expenses (net).........................   4,111,183       3,552,158
                                                        -----------     -----------
                                                          8,400,006       8,876,112
                                                        -----------     -----------
Income before income taxes.............................  12,454,056       9,420,576
Income taxes:
   Current.............................................         - -          12,684
   Deferred............................................   3,802,540       2,828,638
                                                        -----------     -----------
                                                          3,802,540       2,841,322
                                                        -----------     -----------
Net income............................................. $ 8,651,516     $ 6,579,254
                                                        ===========     ===========

Earnings per common and
   common equivalent share:
   Basic............................................... $   .65         $   .49
                                                       ============     ===========
   Diluted............................................. $   .63         $   .48
                                                       ============     ===========

Shares used in computing earnings
   per common and common equivalent share:
   Basic...............................................  13,309,961      13,358,268
                                                       ============     ===========
   Diluted.............................................  13,655,901      13,687,648
                                                       ============     ===========
</TABLE>

                             See accompanying notes


                                        4

<PAGE>
                               TRIAD GUARANTY INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                                      March 31
                                                           ----------------------------
                                                               2000            1999
                                                               ----            ----
<S>                                                        <C>              <C>
Operating activities
Net income................................................ $ 8,651,516      $ 6,579,254
Adjustments to reconcile net income to net
 cash provided by operating activities:
   Loss and unearned premium reserves.....................    (370,463)       2,147,660
   Accrued expenses and other liabilities.................  (3,334,844)      (1,906,674)
   Current taxes payable..................................         - -           12,683
   Accrued investment income..............................    (301,927)        (148,850)
   Policy acquisition costs deferred......................  (2,790,930)      (2,924,922)
   Amortization of policy acquisition costs...............   2,000,147        1,716,465
   Net realized investment gains .........................    (777,881)        (857,001)
   Provision for depreciation.............................     184,045          182,457
   Accretion of discount on investments...................    (262,067)        (270,204)
   Deferred income taxes..................................   3,802,540        2,828,638
   Prepaid federal income tax.............................  (1,146,000)             - -
   Real estate acquired in claim settlement...............         - -         (145,515)
   Accrued interest on debt...............................    (691,250)        (691,250)
   Other assets...........................................     119,213          (55,128)
   Other operating activities.............................     (21,253)          28,490
                                                           -----------      -----------
Net cash provided by operating activities.................   5,060,846        6,496,103
Investing activities
  Securities available-for-sale:
    Purchases - fixed maturities.......................... (11,741,828)      (9,737,219)
    Sales - fixed maturities..............................   3,377,678        9,648,176
    Purchases - equities..................................    (603,291)      (1,090,302)
    Sales - equities......................................   1,187,739        1,429,224
  Purchases of other invested assets......................         - -       (3,000,000)
  Purchase of property and equipment......................  (1,034,173)        (706,945)
                                                           -----------      -----------
Net cash used in investing activities.....................  (8,813,875)      (3,457,066)
Financing activities
Purchase and subsequent retirement of common stock........         - -       (2,602,187)
Proceeds from exercise of stock options...................      45,375          137,899
                                                           -----------      -----------
Net cash provided by (used in) financing activities.......      45,375       (2,464,288)
                                                           -----------      -----------
Net change in cash and short-term investments.............  (3,707,654)         574,749
Cash and short-term investments at beginning of period....  14,124,219        6,329,392
                                                           -----------      -----------
Cash and short-term investments at end of period.......... $10,416,565      $ 6,904,141
                                                           ===========      ===========
Supplemental schedule of cash flow information
Cash paid during the period for:
    Income taxes and United States Mortgage
      Guaranty Tax and Loss Bonds......................... $ 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, 2000
are not necessarily  indicative of the results that may be expected for the year
ending  December 31, 2000. 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, 1999.


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

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

                                        6

<PAGE>


                               TRIAD GUARANTY INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
                                 March 31, 2000
                                   (Unaudited)

risk for  insurance  in force at March  31,  2000  and  December  31,  1999,  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
                                           2000                1999

Net risk...........................   $3,323,158,366      $3,218,850,073
                                      ==============      ==============
Statutory capital and surplus......   $   97,369,506      $   94,602,027
Statutory contingency reserve......      122,412,748         113,813,344
                                      --------------      --------------
Total..............................   $  219,782,254      $  208,415,371
                                      ==============      ==============
Risk-to-capital ratio..............      15.1-to-1           15.4-to-1
                                      ==============      ==============


     Triad is  required  under  the  Illinois  Insurance  Code (the  "Code")  to
maintain minimum statutory capital and surplus of $5,000,000. In addition, Triad
Guaranty  Assurance  Corporation is required under the Code to maintain  minimum
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   Triad's   statutory   surplus  as  regards
policyholders,  or (b)  Triad's  statutory  net  income  for the  calendar  year
preceding the date of the dividend.

     Net income as determined in accordance with statutory  accounting practices
was  $12,297,934  for the three months ended March 31, 2000 and  $40,019,488 for
the year ended December 31, 1999.

     At March 31, 2000 and December 31, 1999,  the amount of Triad's equity that
could be paid out in dividends to stockholders  was $13,653,579 and $10,886,099,
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. 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.


                                        7

<PAGE>


                               TRIAD GUARANTY INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
                                 March 31, 2000
                                   (Unaudited)

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,  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, 2000 and 1999,  the Company's  comprehensive
income was $9.7 million and $5.2 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 2000  increased  31.5% to $8.7
million  compared  to $6.6  million  for the first  three  months of 1999.  This
improvement is attributable  primarily to a 14.4% increase in earned premiums, a
19.5% increase in net investment  income,  and a 45.2% decrease in loss and loss
adjustment expenses.

     Net income per share on a diluted  basis  increased  31.8% to $0.63 for the
first  three  months of 2000  compared  to $0.48  per share for the first  three
months of 1999. Operating earnings per share were $0.60 for the first quarter of
2000 compared to $0.44 for the first quarter of 1999. Operating earnings exclude
net  realized  investment  gains of  approximately  $778,000 and $857,000 in the
first three months of 2000 and 1999, respectively.

     Net new  insurance  written was $749  million for the first three months of
2000 as compared to $1.3  billion for the first three months of 1999, a decrease
of 43.7%. The Company also produced  approximately  $22 million of new insurance
written  on  seasoned  loans  in the  first  quarter  of  2000  as  compared  to
approximately  $5  million  in the same  period  of 1999.  The  decrease  in new
insurance  written was primarily the result of declines in the industry mortgage
insurance  market.  Driven  by a higher  interest  rate  environment,  the total
industry net new mortgage  insurance written market decreased 34.6% in the first
quarter of 2000 as compared  the first  quarter of 1999.  According  to industry
data,  Triad's  national market share of net new insurance  written was 2.3% for
the first three  months of 2000  compared to 2.7% for the first three  months of
1999.  Total direct  insurance in force reached $13.4 billion at March 31, 2000,
compared to $11.7 billion at March 31, 1999, an increase of 14.5%.

     Total direct premiums written were $18.0 million for the first three months
of 2000,  an  increase of 19.2%  compared  to $15.1  million for the first three
months of 1999. Net premiums written  increased by 14.9% to $17.1 million in the
first  three  months of 2000  compared  to $14.8  million for the same period of
1999.  Earned  premiums  increased  14.4% to $17.1  million  for the first three
months of 2000 from  $15.0  million  for the first  three  months of 1999.  This
growth in written and earned premiums  resulted from both new insurance  written
and an  improvement  in the Company's  persistency.  Approximately  41.9% of new
insurance  written during 2000 is subject to captive  mortgage  reinsurance  and
other  risk-sharing  arrangements  compared to 22.9% of new insurance written in
1999.  Ceded premiums for the first quarter of 2000,  which includes third party
reinsurance  arrangements as well as captive reinsurance  agreements,  increased
255% over the same period of 1999.  This  increase  in ceded  premiums is due to
more insurance being written under  risk-sharing  arrangements and the Company's
purchase of additional excess of loss reinsurance to meet rating agency capital

                                        9

<PAGE>


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


guidelines for expected levels of insurance growth. Management anticipates ceded
premiums  will  continue  to increase  as a result of the  expected  increase in
risk-sharing programs.

     Refinance  activity was 12.7% of new insurance written in the first quarter
of 2000  compared to 39.8% of  insurance  written in the first  quarter of 1999,
reflecting  the rise in interest  rates since  early 1999.  Persistency,  or the
amount of insurance in force  remaining from one year prior,  was 80.8% at March
31, 2000,  compared to 68.3% at March 31, 1999,  and 77.1% at December 31, 1999.
Persistency  for the first  quarter of 2000  improved to an  annualized  rate of
90.1% reflecting the trend of rising interest rates and declining cancellations.
Sales  under  the  Company's  monthly  premium  plan  represented  93.8%  of new
insurance  written in the first  quarter of 2000  compared  to 96.9% in the same
period of 1999.

     Net investment  income for the first three months of 2000 was $2.9 million,
a 19.5%  increase  over $2.4  million in the first  three  months of 1999.  This
increase in investment  income is the result of growth in the average book value
of invested  assets by $18.3 million to $190.3  million at March 31, 2000,  from
$172.0 million at March 31, 1999. The growth in invested  assets is attributable
to normal operating cash flow. The yield on average invested assets increased to
6.2% for the first three months of 2000, as compared to 5.7% for the first three
months of 1999. This increase in yield is a result of increased investments into
higher yielding  intermediate  term securities.  The portfolio's  tax-equivalent
yield was 7.7% for the first  quarter of 2000 versus 7.8% for the first  quarter
of 1999.  Based on amortized  cost,  approximately  70% or $128.4 million of the
Company's  fixed maturity  portfolio at March 31, 2000 was composed of state and
municipal tax-preferred securities as compared to 70% or $107.3 million at March
31, 1999.

     The Company's loss ratio (the ratio of incurred losses to earned  premiums)
was 9.3% for the  first  quarter  of 2000 as  compared  to 19.5%  for the  first
quarter of 1999 and 11.1% for all of 1999.  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,  2000  approximately  79% 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.

     Net losses and loss  adjustment  expenses (net of  reinsurance  recoveries)
decreased by 45.2% in the first quarter of 2000 to $1.6 million compared to $2.9
million for the same period of 1999.  This decrease is reflective of the current


                                       10

<PAGE>


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



strong economy and the Company's  improvement in its  delinquency  ratio and the
number of reported delinquent loans.

     Amortization  of deferred  policy  acquisition  costs increased by 16.5% to
$2.0 million in the first three months of 2000  compared to $1.7 million for the
first three  months of 1999.  The  increase in  amortization  reflects a growing
balance of deferred policy  acquisition  costs to amortize as the Company builds
its total insurance in force.

     Other  operating  expenses  increased  15.7% to $4.1  million for the first
quarter of 2000  compared  to $3.6  million  for the same  period in 1999.  This
increase in expenses  is  primarily  attributable  to  advertising,  production,
personnel,  technology  enhancements,  geographic  expansion,  and the research,
development,  and implementation costs associated with risk-sharing  structures.
The expense ratio (ratio of underwriting  expenses to net premiums  written) for
the first  quarter of 2000 was 35.8%  compared to 35.5% for the first quarter of
1999 and 34.5% for all of 1999.

     The  effective  tax rate for the  first  three  months of 2000 was 30.5% as
compared to 30.2% for the first  three  months of 1999.  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.

     Standard and Poor's  Corporation  in March 2000 affirmed the "AA" Financial
Strength and  counterparty  credit rating of Triad. In addition,  the "A" issuer
credit rating and senior debt rating of the Company were also confirmed.

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 2000 of $5.1  million  compared  to $6.5  million for the same
period of 1999. The decrease in Triad's  operating cash flow reflects  increases
in shared  premiums due to  risk-sharing  agreements,  paid losses,  taxes,  and
underwriting  expenses  that  more than  offset  the  growth in new and  renewal
premiums.

     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.

                                       11

<PAGE>


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


     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 as of the end of the preceding fiscal year 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  $197.1  million  at March  31,  2000,
compared to $191.6 million at December 31, 1999.  Fixed maturity  securities and
equity  securities  classified as  available-for-sale  totaled $188.0 million at
March 31,  2000.  Net  unrealized  investment  gains were $1.5 million on equity
securities,  and net  unrealized  investment  losses were $7.2  million on fixed
maturity securities at March 31, 2000. The fixed maturity portfolio consisted of
approximately  70%  municipal  securities,  23%  corporate  securities,  6% U.S.
government obligations, and 1% mortgage-backed bonds at March 31, 2000.

     The Company's loss reserves were $14.5 million at March 31, 2000,  compared
to $14.8  million at December  31,  1999.  The loss  reserves at March 31, 2000,
reflect the Company's  decline in delinquent  loans from the levels  reported at
December 31, 1999.  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 reserves per delinquent loan were $21,300 at
March 31,  2000,  compared  to $21,400  at  December  31,  1999.  The  Company's
delinquency ratio, the ratio of delinquent insured loans to total insured loans,
was 0.61% at March 31, 2000, compared to 0.64% at December 31, 1999.

     Total  stockholders'  equity increased to $166.8 million at March 31, 2000,
from $157.1 million at December 31, 1999. This increase resulted  primarily from
net income of $8.7  million for the first  quarter of 2000 and the change in net
unrealized gains and losses on invested assets classified as  available-for-sale
of $1.0 million (net of income tax).

     Triad's total statutory  policyholders'  surplus increased to $97.4 million
at March 31,  2000,  from $94.6  million at December  31,  1999.  This  increase
resulted  primarily  from  statutory  net income of $12.3  million  offset by an
increase in the statutory contingency reserve of $8.6 million. Triad's statutory
earned surplus was $13.7 million at March 31, 2000, compared to $10.9 million at
December 31, 1999, reflecting, primarily, growth in statutory net income greater
than the increase in the statutory contingency reserve.  Approximately  $534,000
and $1.0  million  of the  statutory  earned  surplus  for March 31,  2000,  and
December 31, 1999,  respectively,  was  attributable  to unrealized  gains.  The
balance in the  statutory  contingency  reserve was $122.4  million at March 31,
2000, compared to $113.8 million at December 31, 1999.

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


     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, 2000,  Triad's  risk-to-capital  ratio was  15.1-to-1,  as compared to
15.4-to-1  at December 31, 1999,  and  14.8-to-1  for the industry as a whole at
December 31, 1999, the latest industry data available.

     The  Company is  undertaking  modifications  and  upgrades  to enhance  its
computer systems and  technological  capabilities.  The Company expects to incur
approximately $5.7 million for this system conversion and upgrade (approximately
$5.1 million in  capitalized  costs have been  incurred for the project  through
March 31, 2000) and is funding the project through cash flow from operations.

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  insurance  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.


                                       13

<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

                  Exhibit                     Description
                  -------                     -----------
                     27                   Financial Data Schedule

         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 12, 2000
                                         /s/ Michael R. Oswalt
                                         -------------------------
                                         Michael R. Oswalt
                                         Senior Vice President and Controller,
                                         Principal Accounting Officer












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