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 June 30, 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 August 1,
2001: 13,684,872 shares.




<PAGE>


                               TRIAD GUARANTY INC.

                                      INDEX
                                                                            Page
                                                                          Number
Part I. Financial Information:

    Item 1. Financial Statements:

    Consolidated Balance Sheets as of June 30, 2001 (Unaudited)
        and December 31, 2000.................................................3

    Consolidated Income Statements for the Three and Six Month
        Periods Ended June 30, 2001 and 2000 (Unaudited)......................4

    Consolidated Statements of Cash Flow for the Six Month
        Periods Ended June 30, 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 4. Submission of Matters to a Vote of Security Holders..............16

    Item 6. Exhibits and Reports on Form 8-K.................................16

    Signatures...............................................................17








                                       2
<PAGE>
                               TRIAD GUARANTY INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              June 30,         December 31,
                                                                2001              2000
                                                           -------------     --------------
  Assets                                                   (Unaudited)
  Invested assets:
<S>                                                        <C>                <C>
  Fixed maturities, available-for-sale, at fair value ...  $ 234,547,759      $ 203,924,652
  Equity securities, available-for-sale, at fair value...     11,198,747         11,088,525
  Short-term investments.................................      8,986,177         17,012,080
                                                           -------------      -------------
                                                             254,732,683        232,025,257

  Cash...................................................        197,893          1,512,578
  Real estate............................................         98,410             99,482
  Accrued investment income..............................      3,136,853          2,896,977
  Deferred policy acquisition costs......................     24,879,562         22,815,422
  Prepaid federal income taxes ..........................     56,421,666         49,374,666
  Property and equipment.................................     10,749,015          9,234,757
  Reinsurance recoverable................................        387,469              5,587
  Other assets...........................................     11,636,116         10,411,877
                                                           -------------      -------------
  Total assets...........................................  $ 362,239,667      $ 328,376,603
                                                           =============      =============

  Liabilities and stockholders' equity
  Liabilities:
     Losses and loss adjustment expenses.................  $  16,508,974      $  14,986,988
     Unearned premiums...................................      6,722,137          6,933,259
     Amounts payable to reinsurer........................        741,156          1,288,712
     Current taxes payable...............................        177,663             85,062
     Deferred income taxes...............................     66,389,131         60,651,647
     Unearned ceding commission..........................      2,896,324          1,481,691
     Long-term debt......................................     34,470,103         34,467,285
     Accrued interest on debt............................      1,274,972          1,274,972
     Accrued expenses and other liabilities..............      6,682,444          7,375,503
                                                           -------------      -------------
  Total liabilities......................................    135,862,904        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; 13,684,872
      shares issued and outstanding at June 30, 2001
      and 13,351,694 at December 31, 2000................        136,849            133,517
    Additional paid-in capital...........................     68,921,619         62,723,667
    Accumulated other comprehensive income, net of
      income tax liability of $1,066,409 at June 30,
      2001 and $1,262,863 at December 31, 2000...........      1,986,221          2,351,065
    Deferred compensation................................       (176,354)          (135,041)
    Retained earnings....................................    155,508,428        134,758,276
                                                           -------------      -------------
  Total stockholders' equity.............................    226,376,763        199,831,484
                                                           -------------      -------------
  Total liabilities and stockholders' equity.............  $ 362,239,667      $ 328,376,603
                                                           =============      =============
</TABLE>

                             See accompanying notes.

                                       3
<PAGE>
                               TRIAD GUARANTY INC.
                         CONSOLIDATED INCOME STATEMENTS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                          Three Months Ended             Six Months Ended
                                                               June 30                       June 30
                                                     ---------------------------     --------------------------
                                                        2001            2000            2001          2000
Revenue:
<S>                                                   <C>            <C>             <C>            <C>
Premiums written:
   Direct..........................................   $21,998,302    $18,828,514     $43,791,164    $36,836,354
   Assumed.........................................           816          1,892           2,501          5,732
   Ceded...........................................    (2,222,327)    (1,112,400)     (4,205,132)    (2,060,808)
                                                      -----------    -----------     -----------    -----------
Net premiums written...............................    19,776,791     17,718,006      39,588,533     34,781,278
Change in unearned premiums........................       365,923        117,697         237,088        198,873
                                                      -----------    -----------     -----------    -----------
Earned premiums....................................    20,142,714     17,835,703      39,825,621     34,980,151
Net investment income..............................     3,657,140      3,067,447       7,133,806      5,993,440
Realized investment gains..........................       162,129         35,803         613,896        813,684
Other income.......................................        15,487          5,625       1,882,487         11,365
                                                      -----------    -----------     -----------    -----------
                                                       23,977,470     20,944,578      49,455,810     41,798,640
Losses and expenses:
Losses and loss adjustment expenses................     2,135,087      2,052,470       4,334,537      3,623,251
Reinsurance recoveries.............................         (798)          7,230           2,801         32,587
                                                      -----------    -----------     -----------    -----------
Net losses and loss adjustment expenses............     2,134,289      2,059,700       4,337,338      3,655,838
Interest expense on debt...........................       692,672        692,563       1,385,317      1,385,100
Amortization of deferred policy acquisition costs..     2,674,234      2,027,741       5,008,511      4,027,889
Other operating expenses (net).....................     4,292,969      4,002,720       8,644,472      8,113,902
                                                      -----------    -----------     -----------    -----------
                                                        9,794,164      8,782,724      19,375,638     17,182,729
                                                      -----------    -----------     -----------    -----------
Income before income taxes.........................    14,183,306     12,161,854      30,080,172     24,615,911
Income taxes:
  Current..........................................        92,631            208          92,659            208
  Deferred.........................................     4,260,933      3,675,384       9,237,361
                                                      -----------    -----------     -----------    -----------
                                                        4,353,564      3,675,592       9,330,020      7,478,132
                                                      -----------    -----------     -----------    -----------
Net income.........................................   $ 9,829,742    $ 8,486,262     $20,750,152    $17,137,779
                                                      ===========    ===========     ===========    ===========
Earnings per common and
   common equivalent share:
   Basic...........................................      $ .73           $ .64          $ 1.55         $ 1.29
                                                      ===========    ===========     ===========    ===========
   Diluted.........................................      $ .71           $ .62          $ 1.49         $ 1.25
                                                      ===========    ===========     ===========    ===========
Shares used in computing earnings per
   common and common equivalent share:

   Basic...........................................    13,444,388     13,313,293      13,399,891     13,311,647
                                                      ===========    ===========     ===========    ===========
   Diluted.........................................    13,939,338     13,674,441      13,885,145     13,665,191
                                                      ===========    ===========     ===========    ===========
</TABLE>

                             See accompanying notes.

                                       4
<PAGE>
                               TRIAD GUARANTY INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                 Six Months Ended
                                                                     June 30
                                                           -----------------------------
                                                                2001             2000
Operating activities
<S>                                                        <C>              <C>
Net income...............................................  $ 20,750,152     $ 17,137,779
Adjustments to reconcile net income to net
 cash provided by operating activities:
   Loss and unearned premium reserves....................     1,310,864         (346,174)
   Accrued expenses and other liabilities................    (3,578,073)      (2,098,623)
   Current taxes payable.................................        92,601              ---
   Amounts due to/from reinsurer.........................      (955,405)         244,158
   Accrued investment income.............................      (239,876)        (127,039)
   Policy acquisition costs deferred.....................    (7,072,651)      (5,353,963)
   Amortization of policy acquisition costs..............     5,008,511        4,027,889
   Net realized investment gains ........................      (613,896)        (813,684)
   Provision for depreciation............................     1,078,835          364,009
   Accretion of discount on investments..................    (1,305,253)        (583,941)
   Deferred income taxes.................................     9,237,361        7,477,924
   Prepaid federal income tax............................    (7,047,000)      (7,674,000)
   Unearned ceding commission ...........................     1,414,633        1,388,529
   Real estate acquired in claim settlement..............         1,072           (4,855)
   Other assets..........................................    (1,029,127)        (599,759)
   Other operating activities............................       127,171           45,038
                                                           ------------     ------------
Net cash provided by operating activities................    17,179,919       13,083,288

Investing activities
Securities available-for-sale:
    Purchases - fixed maturities.........................   (42,926,889)     (23,513,548)
    Sales - fixed maturities.............................    15,842,616        5,811,889
    Purchases - equities.................................    (1,895,622)      (1,089,501)
    Sales - equities.....................................     2,255,121        1,327,630
   Purchase of property and equipment....................    (2,593,093)      (2,159,423)
                                                           ------------     ------------
Net cash used in investing activities....................   (29,317,867)     (19,622,953)

Financing activities
Proceeds from exercise of stock options..................     2,797,360           75,876
                                                           ------------     ------------
Net cash provided by financing activities................     2,797,360           75,876
Net change in cash and short-term investments............    (9,340,588)      (6,463,789)
Cash and short-term investments at beginning of period...    18,524,658       14,124,219
                                                           ------------     ------------
Cash and short-term investments at end of period.........  $  9,184,070     $  7,660,430
                                                           ============     ============

Supplemental schedule of cash flow information
Cash paid during the period for:
   Income taxes and United States Mortgage Guaranty
     Tax and Loss Bonds..................................  $  7,032,057     $  7,674,208
   Interest..............................................  $  1,382,500     $  1,382,500
</TABLE>
                             See accompanying notes.

                                       5
<PAGE>



                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2001
                                   (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 and six month periods ended June
30, 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
                                  June 30, 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 25 times the total of statutory  capital
and surplus and the statutory  contingency  reserve.  The amount of net risk for
insurance in force at June 30, 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:



                                             JUNE 30,           DECEMBER 31,
                                               2001                 2000

Net risk............................    $ 3,946,265,333       $ 3,738,596,850
                                        ===============       ===============
Statutory capital and surplus.......      $ 103,844,609         $ 101,045,355
Statutory contingency reserve.......        171,212,493           150,762,722
                                        ---------------       ---------------
Total...............................      $ 275,057,102         $ 251,808,077
                                        ===============       ===============
Risk-to-capital ratio...............         14.3-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  $27,480,729  for the six months ended June 30, 2001 and $47,830,174 for the
year ended December 31, 2000.

     At June 30, 2001 and December 31, 2000,  the amount of Triad's  equity that
could be paid out in dividends to stockholders  was $20,128,681 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
                                  June 30, 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  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 June 30, 2001 and 2000,  the Company's  comprehensive
income  was $8.7  million  and $8.1  million,  respectively.  For the six  month
periods  ended June 30, 2001 and 2000,  the Company's  comprehensive  income was
$20.4 million and $17.8 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  six  months  of 2001  increased  21.1% to $20.8
million  compared to $17.1 million for the first six months of 2000.  Net income
for the second quarter of 2001 increased 15.8% to $9.8 million  compared to $8.5
million  for the  second  quarter  of 2000.  This  improvement  is  attributable
primarily to a 13.9% (12.9% in the second  quarter)  increase in earned premiums
and a 19.0% (19.2% in the second quarter) increase in net investment income. Net
income for the first six months of 2001 also included a nonrecurring  payment of
approximately $1.9 million related to the voluntary cancellation of an excess of
loss reinsurance contract. The payment was reported as other income in the first
quarter of 2001.

     Net income per share on a diluted  basis  increased  19.2% to $1.49 for the
first six months of 2001 compared to $1.25 per share for the first six months of
2000. Net income per share for the second quarter of 2001 was $0.71 on a diluted
basis  compared to $0.62 per share for the same  period of 2000,  an increase of
13.6%.  Operating  earnings  per share  were  $1.47  for the first  half of 2001
compared to $1.22 for the first half of 2000,  an  increase of 20.6%.  Operating
earnings per share for the second quarter of 2001  increased  12.7% to $0.70 per
share  compared  to $0.62  per  share  for the same  period  of 2000.  Operating
earnings exclude net realized  investment  gains of  approximately  $614,000 and
$814,000  in the  first  half of 2001 and  2000,  respectively.  For the  second
quarter of 2001 and 2000,  operating  earnings  exclude net realized  investment
gains of approximately $162,000 and $36,000, respectively.

     Net new insurance written was $4.4 billion for the first six months of 2001
as  compared to $1.9  billion  for the first six months of 2000,  an increase of
134.8%.  For the second quarter,  net new insurance written totaled $1.9 billion
in 2001  compared  to $1.1  billion  in 2000,  an  increase  of  73.3%.  Net new
insurance written for the first six months of 2001 included  approximately  $3.4
billion of traditional flow production and approximately $1.0 billion related to
a structured bulk transaction  occurring in the first quarter.  The Company also
produced  approximately  $183 million of new insurance written on seasoned loans
in the first six months of 2001  compared  to  approximately  $31 million in the
same period of 2000. The increase in new insurance written from traditional flow
production was primarily driven by new and expanding relationships with national
lenders, strong demand for risk-sharing arrangements,  and a lower interest rate
environment  which  increased  refinance  activity.  According to industry data,
Triad's  national  market  share of net new  primary  insurance  written,  which
excludes $1.0 billion in production  associated with Triad's bulk transaction in
the first  quarter  of 2001,  was 2.6% for the second  quarter  and 2.7% for the
first six months of 2001 as compared to 2.7% and 2.5% for the respective periods

                                       9
<PAGE>

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


in 2000. Total direct insurance in force reached $17.3 billion at June 30, 2001,
compared to $14.0 billion at June 30, 2000, an increase of 23.5%.

     Direct  premiums  written  were $43.8  million  for the first six months of
2001, an increase of 18.9% compared to $36.8 million for the first six months of
2000.  Direct premiums written for the second quarter of 2001 increased 16.8% to
$22.0  million from $18.8  million in the second  quarter of 2000.  Net premiums
written were $39.6 million in the first six months of 2001, an increase of 13.8%
compared to $34.8 million for the same period of 2000. Net premiums  written for
the second quarter of 2001 increased by 11.6% to $19.8 million compared to $17.7
million for the second quarter of 2000. Earned premiums increased 13.9% to $39.8
million  for the first six months of 2001 from $35.0  million  for the first six
months of 2000.  Earned  premiums  for the  second  quarter  of 2001 were  $20.1
million  compared to $17.8  million for the same period of 2000,  an increase of
12.9%.  The growth in written and earned  premiums was impacted by record levels
of new  insurance  written and the growth in  insurance  in force  offset by the
impact  of a  declining  persistency  rate  due  to a  high  level  of  mortgage
refinancings.

     Growth in written  premium  was  offset by the  increase  in ceded  premium
written.  Driven primarily by increases in risk-sharing  arrangements and excess
of loss reinsurance,  ceded premium written increased 104.1% to $4.2 million for
the first six months of 2001  compared  to $2.1  million  for the same period of
2000.  Ceded  premium  written  in the second  quarter of 2001 was $2.2  million
compared  to $1.1  million in the same  period of 2000,  an  increase  of 99.8%.
Approximately   41.8%  of  new  insurance  written  (56.9%  excluding  the  bulk
transaction)  during 2001 is subject to captive  mortgage  reinsurance and other
risk-sharing  arrangements  compared  to 41.1% of new  insurance  written in the
first six months of 2000. Management anticipates ceded premiums will continue to
increase as a result of the expected increase in risk-sharing programs.

     Refinance  activity was 30.6% of new insurance written (37.4% excluding the
bulk  transaction)  in the first  half of 2001  compared  to 12.8% of  insurance
written in the first half of 2000. Refinance activity was 40.1% of new insurance
written for the second  quarter of 2001 compared to 12.8% for the same period of
2000.  Persistency,  or the amount of insurance in force remaining from one year
prior, was 75.8% at June 30, 2001, compared to 83.2% at June 30, 2000, and 82.6%
at December  31, 2000.  The  increase in refinance  activity and the decrease in
persistency both reflect the current favorable interest rate environment.

     Net investment income for the first six months of 2001 was $7.1 million,  a
19.0% increase over $6.0 million in the first six months of 2000. Net investment

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

income for the second  quarter of 2001 was $3.7 million,  a 19.2%  increase over
the second quarter of 2000. This increase in investment  income is the result of
growth in the average book value of invested  assets by $36.2  million to $240.1
million at June 30, 2001,  from $203.9  million at June 30, 2000.  The growth in
invested assets is attributable to normal operating cash flow. The pre-tax yield
on  average  invested  assets was 5.9% for the first six months of both 2001 and
2000. The portfolio's  tax-equivalent  yield increased  slightly to 8.0% for the
first half of 2001  versus 7.9% for the first half of 2000.  Based on  amortized
cost,  approximately  70% of the Company's fixed maturity  portfolio at June 30,
2001,  and June 30,  2000,  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 was accounted for as other income
in the first quarter. 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 18.6% in the first six months of 2001 to $4.3  million  compared to
$3.7  million  for the same  period  of 2000.  Net  losses  and loss  adjustment
expenses  were $2.1 million for both the second  quarter of 2001 and 2000.  This
year-to-date  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 10.9% for the first half of 2001 as
compared to 10.5% for the first half of 2000 and 10.6% for all of 2000. The loss
ratio was 10.6% for the second  quarter of 2001 compared to 11.5% for the second
quarter of 2000.

     As of June 30, 2001,  approximately 72% 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 24.3% to
$5.0  million in the first six months of 2001  compared to $4.0  million for the

                                       11
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATION - - CONTINUED

first six months of 2000.  These costs were $2.7 million for the second  quarter
of 2001 compared to $2.0 million for the second  quarter of 2000, an increase of
31.9%. 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 half of
2001.

     Other operating  expenses  increased 6.5% to $8.6 million for the first six
months of 2001  compared to $8.1  million  for the same period in 2000.  For the
second quarter of 2001, other operating  expenses increased 7.3% to $4.3 million
from $4.0 million in the second  quarter of 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 half of 2001 was 34.5% compared
to 34.9% for the first half of 2000 and 33.7% for all of 2000. The expense ratio
for the  second  quarter  of 2001 was 35.2%  compared  to 34.0%  for the  second
quarter of 2000.

     The effective tax rates for the first six months of 2001 and for the second
quarter of 2001 were 31.0% and 30.7%,  respectively,  as  compared  to 30.4% and
30.2% for the  respective  periods 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 six months of 2001 of $17.2 million compared to $13.1 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.

     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.

                                       12
<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 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 $254.7 million at June 30, 2001, compared
to $232.0  million at December 31, 2000.  Fixed  maturity  securities and equity
securities classified as  available-for-sale  totaled $245.7 million at June 30,
2001. Net  unrealized  investment  gains were $996,000 on equity  securities and
$2.0 million on fixed  maturity  securities at June 30, 2001. The fixed maturity
portfolio  consisted of approximately  71% municipal  securities,  23% corporate
securities, 5% U.S. government obligations, and 1% mortgage-backed bonds at June
30, 2001.

     The Company's  loss reserves were $16.5 million at June 30, 2001,  compared
to $15.0  million at December 31, 2000.  Reserves are  established  for reported
insurance  losses and loss adjustment  expenses based on when notices of default
on insured  mortgage  loans are  received.  Reserves  are also  established  for
estimated  losses incurred on notices of default not yet reported by the lender.
Consistent with industry practices, the Company does not establish loss reserves
for future claims on insured loans which are not currently in default.  Reserves
are established by management using estimated claims rates and claims amounts in
estimating the ultimate loss. These reserve factors are periodically reviewed by
management  in order  to  provide  a  reasonable  estimate  of  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.  The
growth in loss  reserves is the result of the increase in reported  defaults and
the maturing of the  Company's  risk in force and also reflects  adjustments  to
estimated loss reserve factors.  The Company's  delinquency  ratio, the ratio of
delinquent  insured  loans to total insured  loans,  was 0.70% at June 30, 2001,
compared to 0.60% at December 31, 2000.

     Total  stockholders'  equity  increased to $226.4 million at June 30, 2001,
from $199.8 million at December 31, 2000. This increase resulted  primarily from
net  income  of $20.8  million  for the first  half of 2001 and from  additional
paid-in  capital of $6.2 million  resulting  from the exercise of employee stock

                                       13
<PAGE>
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATION - - CONTINUED



options and the related tax benefit.  These  increases were offset somewhat by a
decline in the  unrealized  gains and losses on invested  assets  classified  as
available-for-sale of $365,000.

     Triad's total statutory  policyholders' surplus increased to $103.8 million
at June 30,  2001,  from $101.0  million at December  31,  2000.  This  increase
resulted  primarily  from  statutory  net income of $27.5  million  offset by an
increase  in the  statutory  contingency  reserve  of $20.4  million  and by the
adoption of new statutory accounting principles that went into effect on January
1, 2001.  Triad's  statutory  earned surplus was $20.1 million at June 30, 2001,
compared to $17.3 million at December 31, 2000, reflecting, primarily, growth in
statutory  net income  greater  than the increase in the  statutory  contingency
reserve and the impact of the new statutory accounting  principles.  The balance
in the  statutory  contingency  reserve  was $171.2  million  at June 30,  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 June
30, 2001, Triad's  risk-to-capital ratio was 14.3-to-1, as compared to 14.8-to-1
at December 31, 2000,  and 11.2-to-1 for the industry as a whole at December 31,
2000, the latest industry data available.

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

     In July 2001, the Office of Federal Housing  Enterprise  Oversight  (OFHEO)
released  its  risk-based  capital  rules for Fannie Mae and  Freddie  Mac.  The
regulation  contains  a number  of  provisions  that  may  impact  the  mortgage
insurance industry.  In particular,  the regulation provides a more preferential
capital credit for insurance from a "AAA" rated private  mortgage insurer rather
than from a "AA" rated private  mortgage  insurer.  As a result,  Triad could be
adversely affected if the regulation were implemented as released. Modifications
to  the  regulation,   if  made,  could  potentially  reduce  or  eliminate  the
differential in treatment between a "AAA" and a "AA" rated insurer.  Because the
final  terms  of the  regulation  are not  known,  Triad is  evaluating  various
business  approaches and options  available to address the capital  differential
contained  in the rule.  What  response,  if any,  Triad makes and the  ultimate
impact of the regulation on Triad is unknown at this time.


                                       14
<PAGE>
TEM 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  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.

     New OFHEO  risk-based  capital  rules for Fannie Mae and  Freddie  Mac,  if
implemented  as released,  could  severely limit the ability of Triad to compete
with "AAA" rated private mortgage  insurers.  The new rules may be modified from
their current form prior to final implementation. The ultimate effect of the new
rules on Triad and the  mortgage  insurance  industry in general is not known at
this time.

     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.

                                       15
<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

     The  Annual  Meeting  of  Stockholders  was  held on May 10,  2001.  Shares
entitled to vote at the Annual Meeting  totaled  13,356,610 of which  12,013,226
shares were represented at the meeting.

     At the Annual  Meeting,  the following five  directors  were elected.  Also
shown are the  number of shares  cast for and  authorization  withheld  for each
nominee.


      Name of Nominee             Number of Votes for    Authorization withheld
      ---------------             -------------------    ----------------------
      Robert T. David                 11,790,976                 222,250
      Raymond H. Elliott              11,790,976                 222,250
      William T. Ratliff, III         11,790,976                 222,250
      Darryl W. Thompson              11,790,976                 222,250
      David W. Whitehurst             11,790,976                 222,250

     Additionally,  at the Annual Meeting stockholders  approved a resolution to
amend the Company's 1993 Long-Term Stock  Incentive Plan,  increasing the number
of shares of the Company's Common Stock, par value $.01 per share,  reserved for
issuance under the plan from 2,100,000 shares to 2,600,000 shares.

         ITEM 5.  OTHER INFORMATION - None

         ITEM 6.  A.  EXHIBITS - None


                                       16
<PAGE>






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














                                       17