27



                                    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, 2003

                                       or

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

                 For the transition period from ______ to _____


                         Commission File Number 0-22342

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

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


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

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

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

Number of shares of Common Stock, $.01 par value, outstanding as of May 1, 2003:
14,274,494 shares.
<PAGE>

                               TRIAD GUARANTY INC.

                                      INDEX
                                                                           Page
                                                                          Number
Part I. Financial Information:

         Item 1. Financial Statements:

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

         Consolidated Income Statements for the Three Months
              Ended March 31, 2003 and 2002 (Unaudited)....................   4

         Consolidated Statements of Cash Flow for the Three Months
              Ended March 31, 2003 and 2002 (Unaudited)....................   5

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

         Item 2. Management's Discussion and Analysis of Financial
              Condition and Results of Operations..........................  10

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

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

Part II. Other Information:

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

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

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

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

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

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

         Signatures and Certifications of the Chief Executive
               Officer and Chief Financial Officer of the Company.........   23



                               TRIAD GUARANTY INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                            March 31,      December 31,
                                                                              2003            2002
                                                                            --------       -----------
                                                                                  (Unaudited)
(Dollars in thousands except per share information)
<S>                                                                         <C>              <C>
Assets
Invested assets:
     Fixed maturities, available-for-sale, at fair value................    $322,354         $298,470
     Equity securities, available-for-sale, at fair value...............      10,152           10,808
     Short-term investments.............................................      27,214           35,303
                                                                            --------         --------
                                                                             359,720          344,581

Cash ...................................................................       1,337              233
Real estate.............................................................       1,059            1,561
Accrued investment income...............................................       3,909            3,088
Deferred policy acquisition costs.......................................      30,050           28,997
Prepaid federal income taxes............................................      78,722           77,786
Property and equipment..................................................       9,232            9,533
Reinsurance recoverable.................................................       1,343              396
Other assets............................................................      16,762           16,711
                                                                            --------         --------
Total assets............................................................    $502,134         $482,886
                                                                            ========         ========
Liabilities and stockholders' equity
Liabilities:
    Losses and loss adjustment expenses.................................    $ 23,066         $ 21,360
    Unearned premiums...................................................       8,567            8,539
    Amounts payable to reinsurer........................................       2,771            3,415
    Current taxes payable...............................................         919              598
    Deferred income taxes...............................................      99,036           94,241
    Unearned ceding commission..........................................       1,206            1,386
    Long-term debt......................................................      34,481           34,479
    Accrued interest on debt............................................         584            1,275
    Accrued expenses and other liabilities..............................       7,120            8,186
                                                                            --------         --------
Total liabilities.......................................................     177,750          173,479
Commitments and contingent liabilities - Note 4
Stockholders' equity:
    Preferred stock, par value $.01 per share --- authorized
       1,000,000 shares; no shares issued and outstanding...............         ---              ---
    Common stock, par value $.01 per share --- authorized
       32,000,000 shares; issued and outstanding 14,272,494 shares
       at March 31, 2003 and 14,159,601 at December 31, 2002............         143              142
    Additional paid-in capital..........................................      82,757           80,169
    Accumulated other comprehensive income, net of income
       tax liability of $5,185 at March 31, 2003 and $4,646 at
       December 31, 2002................................................       9,636            8,634
    Deferred compensation...............................................      (1,625)            (658)
    Retained earnings...................................................     233,473          221,120
                                                                            --------         --------
Total stockholders' equity..............................................     324,384          309,407
                                                                            --------         --------
Total liabilities and stockholders' equity..............................    $502,134         $482,886
                                                                            ========         ========
</TABLE>
                             See accompanying notes.

                                       3
<PAGE>
                               TRIAD GUARANTY INC.
                         CONSOLIDATED INCOME STATEMENTS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                                   March 31
                                                              2003           2002
                                                              ----           ----
(Dollars in thousands except per share information)
<S>                                                       <C>            <C>
Revenue:
Premiums written:
   Direct................................................    $34,026        $27,838
   Assumed...............................................          1              2
   Ceded.................................................     (5,887)        (3,348)
                                                             -------        -------
Net premiums written.....................................     28,140         24,492
Change in unearned premiums..............................         (8)            43
                                                             -------        -------
Earned premiums..........................................     28,132         24,535
Net investment income....................................      4,333          3,764
Realized investment gains (losses).......................        219         (1,499)
Other income.............................................         12             27
                                                             -------        -------
                                                              32,696         26,827

Losses and expenses:
Losses and loss adjustment expenses......................      5,268          2,521
Reinsurance recoveries...................................         (3)            (5)
                                                             -------        -------
Net losses and loss adjustment expenses..................      5,265          2,516
Interest expense on debt.................................        693            693
Amortization of deferred policy acquisition costs........      3,418          2,986
Other operating expenses (net)...........................      5,841          6,069
                                                             -------        -------
                                                              15,217         12,264
Income before income taxes ..............................     17,479         14,563
Income taxes:
   Current...............................................        171            160
   Deferred..............................................      4,956          4,365
                                                             -------        -------
                                                               5,127          4,525
                                                             -------        -------
Net income...............................................    $12,352        $10,038
                                                             =======        =======
Earnings per common and
   common equivalent share:
   Basic.................................................    $   .87        $   .73
                                                             =======        =======
   Diluted...............................................    $   .86        $   .71
                                                             =======        =======
Shares used in computing earnings
   per common and common equivalent share:
   Basic................................................. 14,221,218     13,834,467
                                                          ==========     ==========
   Diluted............................................... 14,398,800     14,197,999
                                                          ==========     ==========
</TABLE>
                             See accompanying notes.

                                       4
<PAGE>
                               TRIAD GUARANTY INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                              March 31
                                                                      --------------------
                                                                      2003            2002
                                                                      ----            ----
(Dollars in thousands)
<S>                                                                  <C>             <C>
Operating activities
Net income......................................................     $12,352         $10,038
Adjustments to reconcile net income to net cash
 provided by operating activities:
   Loss and unearned premium reserves...........................       1,734             229
   Accrued expenses and other liabilities.......................      (3,288)         (6,687)
   Current taxes payable........................................         321             375
   Amounts due to/from reinsurer................................      (1,507)         (1,237)
   Accrued investment income....................................        (821)            214
   Policy acquisition costs deferred............................      (4,471)         (4,591)
   Amortization of policy acquisition costs.....................       3,418           2,986
   Net realized investment (gains) losses.......................        (219)          1,499
   Provision for depreciation...................................         695             676
   Accretion of discount on investments.........................      (1,103)         (1,025)
   Deferred income taxes........................................       4,956           4,365
   Prepaid federal income tax...................................        (936)         (1,015)
   Unearned ceding commission...................................        (180)           (235)
   Real estate acquired in claim settlement.....................         502              98
   Accrued interest on debt.....................................        (691)           (691)
   Other assets.................................................        (135)            132
   Other operating activities...................................         146              94
                                                                     -------         -------
Net cash provided by operating activities.......................      10,773           5,225

Investing activities
Securities available-for-sale:
      Purchases - fixed maturities..............................     (37,375)        (25,551)
      Sales - fixed maturities..................................      19,142          17,464
      Purchases - equities......................................        (120)           (817)
      Sales - equities..........................................         210             417
   Net change in short-term investments.........................       8,089             531
   Purchase of property and equipment...........................        (394)           (673)
                                                                     -------         -------
Net cash used in investing activities...........................     (10,448)         (8,629)

Financing activities
Proceeds from exercise of stock options.........................         779           4,426
                                                                     -------         -------
Net cash provided by financing activities.......................         779           4,426
                                                                     -------         -------
Net change in cash .............................................       1,104           1,022
Cash at beginning of period.....................................         233             853
                                                                     -------         -------
Cash at end of period...........................................     $ 1,337         $ 1,875
                                                                     =======         =======
Supplemental schedule of cash flow information
 Cash paid during the period for:
   Income taxes and United States Mortgage Guaranty
      Tax and Loss Bonds........................................     $ 1,017         $ 1,228
   Interest.....................................................     $ 1,383         $ 1,383
</TABLE>

                             See accompanying notes.

                                       5
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2003
                                   (Unaudited)

NOTE 1 -- THE COMPANY

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


NOTE  2 -- ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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

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


                                       6
<PAGE>

                              TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2003
                                   (Unaudited)


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

                                             Three Months Ended March 31,
                                             ----------------------------
                                                 2003             2002
                                                 ----             ----

Net income - as reported                        $12,352        $ 10,038
Net income - pro forma                          $12,170        $  9,826
Earnings per share - as reported:
Basic                                           $   .87        $    .73
    Diluted                                     $   .86        $    .71
Earnings per share - pro forma:
Basic                                           $   .86        $    .71
    Diluted                                     $   .85        $    .69



NOTE 3 -- CONSOLIDATION

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


NOTE 4 -- COMMITMENTS AND CONTINGENT LIABILITIES

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

                                       7
<PAGE>

                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2003
                                   (Unaudited)


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


                                         March 31,             December 31,
                                          2003                     2002

(Dollars in thousands)

Net risk..........................     $ 5,698,892             $ 5,534,420
                                       ===========             ===========
Statutory capital and surplus.....     $   115,622             $   112,874
Statutory contingency reserve.....         258,541                 245,006
                                       -----------             -----------
Total.............................     $   374,163             $   357,880
                                       ===========             ===========
Risk-to-capital ratio.............       15.2-to-1               15.5-to-1
                                       ===========             ===========

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

     Net income as determined in accordance with statutory  accounting practices
was $16.5  million and $13.4  million for the three  months ended March 31, 2003
and 2002, respectively, and $61.8 million for the year ended December 31, 2002.

     At March 31, 2003 and December 31, 2002,  the amount of Triad's equity that
could be paid out in  dividends  to  stockholders  was $31.9  million  and $29.2
million,  respectively,  which was the earned  surplus  of Triad on a  statutory
basis on those dates.

                                       8
<PAGE>
                               TRIAD GUARANTY INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2003
                                   (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.
Reserves are established by management  using estimated claim rates  (frequency)
and claim amounts  (severity) to estimate ultimate losses. The reserving process
gives effect to current economic  conditions and profiles  delinquencies by such
factors as policy year, geography, chronic late payment characteristics and age.
Due to the  inherent  uncertainty  in  estimating  reserves  for losses and loss
adjustment  expenses,  there can be no assurance that the reserves will prove to
be adequate to cover ultimate loss development.

LITIGATION - A lawsuit has been filed against the Company in the ordinary course
of the Company's business. In the opinion of management, the ultimate resolution
of this  pending  litigation  will not have a  material  adverse  effect  on the
financial position or results of operations of the Company.


NOTE 5 - - EARNINGS PER SHARE

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


NOTE 6 - - COMPREHENSIVE INCOME

     Comprehensive income consists of net income and other comprehensive income.
For the Company,  other comprehensive  income is composed of unrealized gains or
losses on available-for-sale securities, net of income tax. For the three-months
ended  March 31, 2003 and 2002,  the  Company's  comprehensive  income was $13.4
million and $9.2 million, respectively.


NOTE 7 - - INCOME TAXES

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

                                       9
<PAGE>

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


RESULTS OF OPERATIONS

     Net income for the first quarter of 2003  increased  23.1% to $12.4 million
or $0.86 per diluted share, from $10.0 million or $0.71 per diluted share in the
first  quarter  of  2002.  This  improvement  in net  income  was led by a 14.7%
increase in earned premiums and a 15.1% increase in net investment  income.  Net
income for the first  quarter of 2003  includes  $219,000,  or $0.01 per diluted
share, of net realized  investment gains, while net income for the first quarter
of 2002  included  $1.5  million,  or $0.07 per diluted  share,  of net realized
investment losses.

     Operating  earnings for the first three months of 2003  increased  10.9% to
$12.2 million from $11.0  million for the first three months of 2002.  Operating
earnings  per share on a diluted  basis were $0.85 for the first three months of
2003 compared to $0.78 per share for the first three months of 2002, an increase
of 9.3%.  Operating  earnings  and  operating  earnings  per  diluted  share are
non-GAAP  measures.  The  Company  defines  operating  earnings  as  net  income
excluding  net  realized  investment  gains and  losses,  net of related  taxes.
Management  believes operating earnings and operating earnings per diluted share
are relevant and useful information,  and they are primary  measurements used by
management in assessing the Company's performance. Net realized investment gains
and losses are dependent on market conditions, and management believes that they
are not  strong  indicators  of trends in  operations.  Operating  earnings  and
operating  earnings per diluted  share  results  should not be  considered  as a
substitute  for net  income  prepared  in  accordance  with  GAAP and may not be
comparable to similarly titled measures reported by other companies.

     The  following  table  shows a  reconciliation  of net income to  operating
earnings, including per share data:

--------------------------------------------------------------------------------
                                       Three months ended     Three months ended
                                             March 31,           March 31,
(In thousands, except per share data)          2003                 2002
--------------------------------------------------------------------------------
Net income                                   $12,352              $10,038

Net realized investment (gains) losses,
    net of tax                                  (142)                 974
                                             -------              -------
Operating earnings                           $12,210              $11,012
                                             =======              =======

Diluted earnings per share                     $0.86                $0.71

Net realized investment (gains) losses,
    net of tax, per share                      (0.01)                0.07
                                               -----                 ----
Operating earnings per diluted share           $0.85                $0.78
                                               =====                =====
--------------------------------------------------------------------------------

                                       10
<PAGE>

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


     Total insurance written was $3.8 billion for the first three months of 2003
compared  to $2.8  billion for the first  three  months of 2002,  an increase of
36.1%.  Total  insurance  written  includes  insurance  written  attributable to
traditional  flow  production and insurance  written  attributable to structured
bulk transactions.

     Traditional  flow insurance  written in the first quarter of 2003 increased
31.2% to $3.6  billion  from $2.8  billion in the first  quarter  of 2002.  This
increase was  primarily  the result of  expanding  relationships  with  national
lenders,   strong  demand  for  risk-sharing   arrangements  and  other  product
offerings,  and a lower  interest rate  environment  that  contributed to a very
strong refinance market.

     Insurance  written in the first quarter of 2003  attributable to structured
bulk  transactions  totaled  $136  million.   There  was  no  insurance  written
attributable to structured bulk  transactions in the comparable  period of 2002.
Structured  bulk  transactions  are  generally  initiated by secondary  mortgage
market  participants who wish to use mortgage insurance as a credit enhancement.
The Company competes  against other mortgage  insurers as well as other forms of
credit enhancement provided by capital markets for these transactions. Insurance
written   attributed  to  structured   bulk   transactions  is  likely  to  vary
significantly  from  period  to period  due to the  relatively  small  number of
transactions  that  encompass  this market (as opposed to the  traditional  flow
market), competitiveness with other mortgage insurers, the attractiveness in the
marketplace of mortgage insurance versus other forms of credit enhancements, and
the changing  loan  composition  of the market.  The Company has  evaluated  all
segments of the bulk market - Prime  (predominantly  fully  underwritten  loans,
high FICO credit scores (a credit score  provided by Fair,  Isaacs and Company),
high percentage of low LTVs),  Alternative-A  (generally high FICO credit score,
low  to  moderate   LTV  loans  that  have  been   underwritten   with   reduced
documentation),  and Sub-prime  (generally fully  underwritten loans with credit
impaired  borrowers).  Approximately  9.2% of the insurance written in the first
quarter of 2003  attributable to structured bulk  transactions was on loans with
sub-prime  FICO credit score (scores less than 575). The Company does not expect
sub-prime  loans to become a  significant  portion of its inforce and  currently
only insures sub-prime loans with existing lender customers.

     Consolidation   within  the  mortgage   origination  industry  and  Triad's
continued  focus on national  lenders has  resulted in a greater  percentage  of
production  volume  being  concentrated  among  a  smaller  customer  base.  The
Company's ten largest  customers were  responsible for 74.7% of traditional flow
insurance  written in the first  quarter of 2003  compared to 72.7% in the first
quarter of 2002 and 73.0% in all of 2002.  The Company's  two largest  customers
generated  55.8% of traditional  flow insurance  written in the first quarter of
2003  compared  to 55.1% in the first  quarter of 2002 and 53.4% in all of 2002.
The  loss of one or more of  these  major  customers  could  have a  significant
adverse effect on the Company's business.

     According  to  industry  data,  Triad's  national  market  share of net new
primary  insurance  written,  which includes  insurance written on a traditional
flow basis as well as that attributed to structured bulk transactions,  was 3.9%

                                       11
<PAGE>

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


for the first three  months of 2003  compared to 3.6% for the first three months
of 2002. Triad's national market share of net new primary insurance written on a
traditional  flow basis was 4.8% for the first three months of 2003  compared to
4.2% for the first  three  months of 2002.  Net new  primary  insurance  written
excludes insurance placed upon loans more than 12 months after loan origination,
insurance placed upon loans already covered by primary mortgage  insurance,  and
insurance  placed upon loans where lender exposure is effectively  reduced below
defined minimums.

     Total direct  insurance in force  reached  $26.0 billion at March 31, 2003,
compared to $25.4  billion at December 31, 2002,  and $22.1 billion at March 31,
2002.  Significant  refinance  activity in 2002 and in the first quarter of 2003
resulted  in a high  level of policy  cancellations  that  partially  offset the
impact that the high level of  insurance  written had on in force  growth.  As a
result,  insurance in force  increased by only $625 million in the first quarter
of 2003, even though insuance written during the quarter was $3.6 billion.

     Total direct premiums written were $34.0 million for the first three months
of 2003,  an increase of 22.2% from $27.8  million for the first three months of
2002.  Net premiums  written  increased  by 14.9% to $28.1  million in the first
quarter of 2003, from $24.5 million for the same period of 2002. Earned premiums
increased  14.7% to $28.1  million for the first three months of 2003 from $24.5
million  for the first three  months of 2002.  This growth in written and earned
premiums  resulted  from strong levels of new  insurance  written  offset by the
impact  of a  declining  persistency  rate  due  to a  high  level  of  mortgage
refinancings and by an increase in ceded premiums.

     Driven  by  an  increase  in  insurance  subject  to  lender   risk-sharing
arrangements  and also by the  continuation  of the  Company's  $125  million of
excess of loss reinsurance  coverage,  ceded premiums written increased 75.9% to
$5.9  million for the first three months of 2003 from $3.3 million for the first
three  months of 2002.  The  Company's  premium  cede  rate (the  ratio of ceded
premiums  written to direct premiums  written) was 17.3% in the first quarter of
2003 compared to 12.0% in the same period of 2002.  The  Company's  premium cede
rate for captive  reinsurance was 14.5% in the first quarter of 2003 compared to
11.0% in the same period of 2002.  Approximately  48% of flow insurance  written
(47% of total insurance written including  structured bulk transactions)  during
the first quarter of 2003 is subject to  risk-sharing  arrangements  compared to
49% of flow  insurance  written in the first quarter of 2002.  Through March 31,
2003,  insurance  written  attributable to structured bulk  transactions has not
been subject to captive mortgage reinsurance or other risk-sharing arrangements.
Approximately  48.4% of direct  insurance  in force is subject  to  risk-sharing
arrangements  at March  31,  2003,  compared  to 38.7% at March 31,  2002.  This
increase in  insurance  in force  subject to  risk-sharing  arrangements  is due
primarily to the increased  market  penetration  of the  Company's  risk-sharing
arrangements  and the high level of  refinance  activity  during the past twelve
months,   as  policies  that  were   previously  not  subject  to   risk-sharing
arrangements  refinanced  and new policies  issued were subject to  risk-sharing
arrangements. Management anticipates ceded premiums will continue to increase as
a result of the expected increase in risk-sharing programs.

                                       12
<PAGE>

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


     The  Company  currently   participates  in  excess  of  loss  risk  sharing
arrangements  in which the reinsurer may elect a risk band with a flexible entry
and exit point. One of the Company's  competitors has announced that as of March
31, 2003, it will not  participate in excess of loss  risk-sharing  arrangements
where the net premium cede rate is greater than 25% ("deep ceded").  The Company
believes  that its  risk-sharing  arrangements  provide it valuable  reinsurance
protection  and  potentially  reduce  the risk of  volatility  in the  Company's
earnings.  The  Company  plans to  continue  to  participate  in  excess of loss
risk-sharing arrangements. It is uncertain at this time what impact, if any, the
competitor's  decision  to not  participate  in deep  ceded  excess of loss risk
sharing  arrangements  will  have on the  Company's  direct  insurance  in force
subject to risk-sharing arrangements and the Company's market share.

     Refinance  activity was 57.6% of total insurance  written (57.2%  excluding
structured bulk  transactions) in the first quarter of 2003 compared to 48.6% of
total insurance  written (48.6% excluding  structured bulk  transactions) in the
first  quarter of 2002.  Persistency,  or the  percentage  of insurance in force
remaining from 12 months prior, was 59.1% at March 31, 2003 compared to 60.9% at
December  31,  2002,  and 60.9% at March 31,  2002.  The high level of refinance
activity and the  resulting  decrease in  persistency  is  reflective of the low
interest  rate  environment  that has been in place  during the past  year.  Low
persistency  results in an acceleration  of the  amortization of deferred policy
acquisition costs and a reduction in renewal premiums.  The annualized quarterly
persistency  run rate for the first quarter of 2003 was 50.8%  compared to 57.1%
for the first quarter of 2002.

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

     Net investment  income for the first three months of 2003 was $4.3 million,
a 15.1%  increase  over $3.8  million in the first  three  months of 2002.  This
increase is the result of growth in the average book value of invested assets by
$57.1 million to $338.1  million at March 31, 2003 from $281.0  million at March
31, 2002, which is attributable to the investment of normal operating cash flow.
The  pre-tax  yield on  average  invested  assets,  calculated  on the  basis of
amortized cost, decreased to 5.1% for the first three months of 2003 compared to
5.4% for the first three months of 2002. This decrease reflects the low interest
rate environment for new money  investments made over the past several quarters,
the disposal of a number of higher  yielding  securities  during the past twelve
months to enhance the overall quality of the portfolio,  and a higher percentage
of the fixed income portfolio invested in municipal securities.  The portfolio's
tax-equivalent  yield-to-maturity  was 7.7% for the first quarter of 2003 versus
7.8% for the first quarter of 2002. Based on fair value,  approximately  84% and
75% of the  Company's  fixed  maturity  portfolio  at March  31,  2003 and 2002,
respectively,  was composed of state and municipal tax-preferred  securities. At

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


March 31, 2003,  based on fair value,  approximately  95% of the Company's fixed
maturity portfolio was either a U.S. government or U.S. agency obligation or was
rated investment grade by at least one nationally  recognized  securities rating
organization  compared to  approximately  94% of the  Company's  fixed  maturity
portfolio at March 31, 2002. U.S. government,  U.S. agency, and investment grade
securities  generally have a lower yield,  in return for less default risk, than
securities rated below investment grade.

     The Company reported $219,000 of net realized investment gains in the first
quarter of 2003 and net realized  investment losses of $1.5 million in the first
quarter of 2002. The Company actively monitors investment  securities considered
to be at risk for impairment.  When the Company determines that a decline in the
value  of a  security  below  its  amortized  cost is  other-than-temporary,  an
impairment  loss has occurred.  In the event of  impairment,  the Company writes
down the cost basis of the security to its fair value and  recognizes a realized
loss for the amount of the writedown.  Net realized gains of $219,000 during the
first quarter of 2003 included  approximately  $400,000 of impairment writedowns
on equity  securities.  Net realized losses of $1.5 million in the first quarter
of 2002 included a $755,000 impairment writedown on a bond held in the Company's
portfolio.

     Net losses and loss  adjustment  expenses (net of  reinsurance  recoveries)
increased  by 109.3%  in the first  quarter  of 2003 to $5.3  million  from $2.5
million  for the same  period of 2002.  This rise  reflects  an increase in paid
losses and  delinquent  loans as the Company's  insurance in force grows and the
condition  of the economy  remains  weak.  Net paid  losses and loss  adjustment
expenses were $3.6 million in the first quarter of 2003 compared to $2.3 million
in the first quarter of 2002.  The  Company's  loss ratio (the ratio of incurred
losses to earned  premiums)  was 18.7% for the first quarter of 2003 compared to
10.3% for the first quarter of 2002 and 13.4% for all of 2002.

     As of March 31, 2003, approximately 85% 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  insurance  written in
previous years has been quite favorable,  management  expects losses to increase
from current  levels.  The Company  expects its incurred losses to increase as a
greater amount of its insurance in force reaches its  anticipated  highest claim
frequency  years.  Furthermore,   changes  in  the  economic  environment  could
accelerate paid and incurred loss development.  Due to the inherent  uncertainty
of future premium levels,  losses,  economic conditions,  and other factors that
affect  earnings,  it is difficult  to predict with any degree of certainty  the
impact of such higher claim frequencies on future earnings.

     Amortization  of deferred  policy  acquisition  costs increased by 14.5% to
$3.4  million in the first three  months of 2003 from $3.0 million for the first
three months of 2002. The increase in  amortization  reflects growth in deferred

                                       14
<PAGE>

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


policy acquisition costs related to the expansion of the Company's  insurance in
force and accelerated  amortization due to higher  cancellations  from refinance
activity  in the first  quarter of 2003.  The  Company's  model  calculates  the
amortization of deferred policy acquisition costs separately for each book year.
The model  accelerates the  amortization of deferred  policy  acquisition  costs
through a dynamic  adjustment  when  persistency for a book year is lower than a
historical  baseline level in order to match the  amortization  expense with the
life of the policies on which the acquisition  costs were  originally  deferred.
Low  persistency  levels  during  the  past two  years  resulted  in  additional
amortization of deferred policy  acquisition  costs through dynamic  adjustments
totaling $297,000 in the first quarter of 2003 and $126,000 in the first quarter
of 2002.

     Other  operating  expenses  decreased  3.8% to $5.8  million  for the first
quarter of 2003 from $6.1  million for the same  period of 2002.  The decline in
other  operating  expenses is primarily the result of  operational  efficiencies
achieved  through  the use of  technology.  The  Company  has  made  substantial
investments in technology that allows  increased  insurance  writings  without a
proportional  increase in operating  expenses.  The expense  ratio (ratio of the
amortization of deferred policy  acquisition costs and other operating  expenses
to net  premiums  written) for the first  quarter of 2003 was 32.9%  compared to
37.0% for the first quarter of 2002 and 34.6% for all of 2002.

     The  effective  tax rate  for the  first  three  months  of 2003 was  29.3%
compared  to 31.1%  for the first  three  months of 2002.  The  decrease  in the
effective  tax rate is due  primarily  to an  increase  in  tax-exempt  interest
resulting  from a higher  percentage of assets being  invested in  tax-preferred
securities.  Management expects the Company's  effective tax rate to remain near
current levels or decline  slightly as long as yields from new funds invested in
tax-preferred   securities   remain  favorable  in  relation  to  fully  taxable
securities.

LIQUIDITY AND CAPITAL RESOURCES

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

     The Company generated positive cash flow from operating  activities for the
first  quarter of 2003 of $10.8  million  compared to $5.2  million for the same
period of 2002. The increase in operating cash flow in the first quarter of 2003
reflects  the  growth in  premiums  and  investment  income  and a  decrease  in
underwriting  expenses paid offset  partially by an increase in losses paid. The
Company's business does not routinely require significant  capital  expenditures
other  than  for  enhancements  to  its  computer   systems  and   technological
capabilities. Positive cash flows are invested pending future payments of claims
and expenses.  Cash flow  shortfalls,  if any,  could be funded through sales of
short-term investments and other investment portfolio securities.

     The parent company's cash flow is dependent on interest income and payments
from Triad including  management fees and interest payments under surplus notes.

                                       15
<PAGE>

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


The Illinois  Insurance  Department permits expenses of the parent company to be
reimbursed by Triad in the form of management fees. Payment of dividends is also
permitted, although none have been paid to date.

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

     Consolidated invested assets were $359.7 million at March 31, 2003 compared
to $344.6  million at December 31, 2002.  Fixed  maturity  securities and equity
securities classified as available-for-sale  totaled $332.5 million at March 31,
2003  compared to $309.3  million at December  31,  2002.  Contributing  to this
increase in invested assets and securities classified as available-for-sale  was
an increase in net unrealized  investment gains on fixed maturity securities and
a  decrease  in net  unrealized  investment  losses  on equity  securities  from
year-end levels.  Net unrealized  investment gains on fixed maturity  securities
were $15.1  million at March 31, 2003  compared to $13.7 million at December 31,
2002. Net unrealized  investment  losses on equity  securities  were $245,000 at
March 31, 2003  compared to $458,000 at December 31, 2002.  Based on fair value,
the  fixed  maturity   portfolio   consisted  of  approximately   83%  municipal
securities,  14% corporate  securities,  and 3% U.S.  government  obligations at
March 31, 2003  compared  to a  composition  of 81%  municipal  securities,  15%
corporate securities, and 4% U.S. government obligations at December 31, 2002.

     The Company's loss and loss adjustment  expense reserves were $23.1 million
at March 31, 2003 compared to $21.4 million at December 31, 2002.  Loss and loss
adjustment  expense  reserves are  established for all insured loans reported as
delinquent to the Company by the loan  servicer.  Reserves also are  established
for  estimated  losses  incurred on notices of default  not yet  reported by the
servicer.  Consistent  with industry  practices,  the Company does not establish
loss  reserves  for future  claims on insured  loans that are not  currently  in
default.  The growth in loss  reserves is the result of the increase in reported
defaults and the maturing of the Company's  risk in force.  The Company  expects
loss  reserves  and the number of flow and bulk loans in default to  continue to
grow, reflecting the growth and aging of its insurance in force.

                                       16

<PAGE>

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

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

                               DEFAULT STATISTICS


                                                        March 31,   December 31,
                                                           2003         2002
                                                        --------     ----------
Number of insured loans in force.......................  195,928      190,480
Number of loans in default.............................    3,009        2,379
Percentage of loans in default (default rate)..........    1.54%        1.25%
Number of insured loans in force excluding bulk loans..  178,868      171,723
Number of loans in default excluding bulk loans........    2,280        2,120
Percentage of loans in default excluding bulk loans....    1.27%        1.23%
Number of bulk loans in force..........................   17,060       18,757
Number of bulk loans in default........................      729          259
Percentage of bulk loans in default....................    4.27%        1.38%


     The number of loans in default includes all reported delinquencies that are
three or more  payments  in  arrears  at the  reporting  date  and all  reported
delinquencies  that were  previously  three or more payments in arrears and have
not  made  payments  to the  current  due  date.  While  the  default  rate  for
traditional flow business remained relatively flat between periods, the increase
in the default rate for bulk loans is partially due to a change in servicers for
certain bulk policies that resulted in a delay in the reporting of delinquencies
to the Company in the fourth  quarter of 2002.  The Company had  established  an
incurred  but not reported  reserve  amount for this  estimated  exposure in the
fourth quarter of 2002.  Also  contributing  to the increase in the default rate
for bulk  loans is the  decline  in the  number of bulk  policies  in force as a
result of significant refinance activity. The number of policies in force is the
denominator in the default rate calculation and, all else being equal, a decline
in this number  results in a higher  default  rate.  The  default  rate for both
traditional  flow  business and  structured  bulk  business is  consistent  with
management's expectation.

     Reserves  are  established  by  management   using  estimated  claim  rates
(frequency)  and claim  amounts  (severity)  to estimate  ultimate  losses.  The
reserving process  incorporates  numerous factors in a formula that gives effect
to current  economic  conditions and profiles  delinquencies  by such factors as
policy year, geography, chronic late payment characteristics,  and the number of
months the policy has been in default. Because the estimate for loss reserves is
sensitive to the estimates of claims frequency and severity, management performs
sensitivity  analyses to test the  reasonableness of the best estimate generated
by the loss reserve process.  These sensitivity analyses allow management to use
alternative  assumptions  related to claims  frequency  and claims  severity  to

                                       17
<PAGE>

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


develop a range of reasonably possible loss reserve outcomes that can be used to
challenge  the  best  estimate.  The loss  reserve  estimation  process  and the
sensitivity  analyses  support the  reasonableness  of the best estimate of loss
reserves  recorded  as a  liability  in  the  financial  statements.  Management
periodically  reviews the loss reserve  process in order to improve its estimate
of  ultimate  losses on loans  currently  in  default.  Adjustments  to  reserve
estimates are reflected in the financial  statements in the periods in which the
adjustments are made.

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

     Total  stockholders'  equity  increased to $324.4 million at March 31, 2003
from $309.4 million at December 31, 2002. This increase resulted  primarily from
net income of $12.4  million for the first  quarter of 2003 and from an increase
in unrealized gains on investments, net of tax, of $1.0 million.

     Triad's total statutory  policyholders' surplus increased to $115.6 million
at March 31, 2003 from $112.9  million at December 31, 2002.  Triad's  statutory
earned  surplus  increased to $31.9 million at March 31, 2003 from $29.2 million
at December 31, 2002. The increase in Triad's statutory  policyholders'  surplus
and statutory earned surplus resulted,  primarily,  from statutory net income of
$16.5  million  which  exceeded  the net increase in the  statutory  contingency
reserve of $13.5 million.  The balance in the statutory  contingency reserve was
$258.5  million at March 31,  2003  compared to $245.0  million at December  31,
2002.

     Triad's  ability  to write  insurance  depends  on the  maintenance  of its
financial  strength  ratings and the adequacy of its capital in relation to risk
in force. A significant  reduction of capital or a significant  increase in risk
may impair Triad's  ability to write  additional  insurance.  A number of states
also generally limit Triad's  risk-to-capital  ratio to 25-to-1. As of March 31,
2003,  Triad's  risk-to-capital  ratio was  15.2-to-1  compared to  15.5-to-1 at
December 31, 2002,  and to 11.1-to-1 for the industry as a whole at December 31,
2001,  the  latest  industry  data  available.   The  risk-to-capital  ratio  is
calculated  using net risk in force,  which takes into  account risk ceded under
reinsurance  arrangements  including captive risk-sharing  arrangements,  as the
numerator and statutory capital, which includes statutory policyholders' surplus
and the balance in the contingency reserve, as the denominator.  The decrease in
Triad's  risk-to-capital  ratio  is due to a  higher  growth  rate in  statutory
capital than that in net risk in force.

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

     Fannie Mae is in the  process of revising  its  approval  requirements  for
mortgage  insurers.  The new  requirements,  which have not yet been  finalized,
would require prior  approval by Fannie Mae for many of Triad's  activities  and
new products,  allow for other  approved  types of mortgage  insurers rated less

                                       18
<PAGE>

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


than  "AA," and give  Fannie  Mae  increased  rights to revise  the  eligibility
standards of mortgage insurers.  The final form the eligibility  guidelines will
take is unknown  at this  time,  but new  guidelines,  if issued,  could have an
adverse effect on the Company.

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

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

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

     o    interest rates may increase or decrease from their current levels;
     o    housing  transactions  requiring  mortgage  insurance may decrease for
          many  reasons   including   changes  in  interest  rates  or  economic
          conditions;
     o    the  Company's  market  share may  change as a result  of  changes  in
          underwriting criteria or competitive products or rates;
     o    the amount of insurance  writtencould be adversely affected by changes
          in federal  housing  legislation,  including  changes  in the  Federal
          Housing  Administration  loan  limits  and  coverage  requirements  of
          Freddie Mac and Fannie Mae;
     o    the Company's  financial  condition and competitive  position could be
          affected by  legislation  impacting  the  mortgage  guaranty  industry
          specifically and the financial services industry in general;
     o    rating agencies may revise methodologies for determining the Company's
          financial  strength  ratings and may revise or withdraw  the  assigned
          ratings at any time;
     o    decreases in persistency,  which are affected by loan  refinancings in
          periods of low interest rates, may have an adverse effect on earnings;
     o    the amount of  insurance  written and the growth in insurance in force
          or risk in  force as well as the  performance  of the  Company  may be
          adversely  impacted  by the  competitive  environment  in the  private
          mortgage  insurance  industry,  including  the  type,  structure,  and
          pricing  of  products  and  services  offered by the  Company  and its
          competitors;

                                       19
<PAGE>

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



     o    if the  Company  fails to  properly  underwrite  mortgage  loans under
          contract underwriting service agreements,  the Company may be required
          to assume the costs of repurchasing those loans;
     o    with consolidation  occurring among mortgage lenders and the Company's
          concentration  of insurance in force generated  through  relationships
          with significant lender customers,  the loss of a significant customer
          may have an adverse effect on earnings;
     o    the  Company's   performance   may  be  impacted  by  changes  in  the
          performance of the financial markets and general economic conditions;
     o    economic  downturns in regions where Triad's risk is more concentrated
          could  have  a  particularly   adverse  effect  on  Triad's  financial
          condition and loss development;
     o    OFHEO  risk-based  capital  rules could  severely  limit the Company's
          ability  to  compete  against  various  types  of  credit   protection
          counterparties, including "AAA" rated private mortgage insurers;
     o    changes in the  eligibility  guidelines  of Fannie Mae or Freddie  Mac
          could have an adverse effect on the Company.

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





                                       20
<PAGE>

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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


ITEM 4.     CONTROLS AND PROCEDURES


     Within  the 90 days  prior to the filing  date of this  report the  Company
evaluated  the  effectiveness  of the design  and  operation  of its  disclosure
controls and procedures  pursuant to the Exchange Act of 1934, Rule 13a-15.  The
evaluation was conducted  under the supervision  and with the  participation  of
management,  including the Chief  Executive  Officer  (CEO) and Chief  Financial
Officer (CFO). Based on that evaluation,  management, including the CEO and CFO,
concluded that the Company's  disclosure controls and procedures were effective.
Disclosure  controls  and  procedures  are  designed to ensure that  information
required to be disclosed in the Company's  reports filed or submitted  under the
Exchange Act is recorded,  processed,  summarized  and reported  within the time
periods specified in the Securities and Exchange Commission's rules and forms.

     There have been no significant  changes in the Company's  internal controls
or in other  factors  that could  significantly  affect the  Company's  internal
controls subsequent to the date management carried out its evaluation.











                                       21
<PAGE>


PART II

ITEM 1. LEGAL PROCEEDINGS - None

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None

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

ITEM 5. OTHER INFORMATION - None

ITEM 6A. EXHIBITS AND REPORTS ON FORM 8-K

        (a)  EXHIBITS

             99.1   Certification  of Periodic  Financial  Report Pursuant to 18
                    U.S.C. Section 1350

        (b)  REPORTS ON FORM 8-K

              On April 28, 2003,  the Company  filed a current report on Items 7
              and 9 of Form 8-K  relating  to  the  issuance  of its  results of
              operations  for the first  quarter   ended  March  31,  2003 in an
              earnings release.


Signatures and Certifications of the Chief Executive Officer and Chief Financial
Officer of the Company


                                   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, 2003

                                             /s/ Michael E. Crow
                                             -------------------------
                                             Michael E. Crow
                                             Vice President and Controller,
                                             Principal Accounting Officer



                                       22
<PAGE>


Form 10-Q

                                 CERTIFICATIONS


I, Darryl W. Thompson, certify that:

     1.   I have reviewed this  quarterly  report on Form 10-Q of Triad Guaranty
          Inc.;

     2.   Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;

     4.   The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and have:

          a)   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               quarterly report is being prepared;

          b)   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

          c)   presented  in this  quarterly  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit committee of registrant's board of directors:

          a)   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data

                                       23

<PAGE>

               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          b)   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

     6.   The registrant's other certifying officer and I have indicated in this
          quarterly  report whether there were  significant  changes in internal
          controls or in other factors that could significantly  affect internal
          controls  subsequent  to the  date  of  our  most  recent  evaluation,
          including   any   corrective   actions  with  regard  to   significant
          deficiencies and material weaknesses.



May 14, 2003
                                          /s/Darryl W. Thompson
                                          -----------------------------
                                          Darryl W. Thompson
                                          President, Chief Executive Officer

























                                       24
<PAGE>

Form 10-Q
                                 CERTIFICATIONS


I, Ron D. Kessinger, certify that:

     1.   I have reviewed this  quarterly  report on Form 10-Q of Triad Guaranty
          Inc.;

     2.   Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;

     4.   The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and have:

          a)   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               quarterly report is being prepared;

          b)   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

          c)   presented  in this  quarterly  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit committee of registrant's board of directors:

          a)   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's

                                       25
<PAGE>


               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          b)   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

     6.   The registrant's other certifying officer and I have indicated in this
          quarterly  report whether there were  significant  changes in internal
          controls or in other factors that could significantly  affect internal
          controls  subsequent  to the  date  of  our  most  recent  evaluation,
          including   any   corrective   actions  with  regard  to   significant
          deficiencies and material weaknesses.



May 14, 2003
                                          /s/Ron D. Kessinger
                                          -----------------------------
                                          Ron D. Kessinger
                                          Executive Vice President and
                                             Chief Financial Officer












                                       26